Empire of Dunces


Greek bailout

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I have been asked, if I approve of the Greek bailout, in light of my earlier comments with regards to the politics of the situation. Pardon me, but you have to be joking…

The German chancellor, though undoubtedly a smart woman, doesn’t have the first clue about economics. She is a physicist, who used to be the leader of the East German socialist youth league (FDJ). But she very clearly understands the politics of the situation. That Merkel actually bought into the threat of withdrawal which that megalomaniacal Gallic midget made is simply too much to believe. People have gotten used to Europe being payed for by Germany, and run by France. I believe that Merkel simply adhered to long standing policy in Germany, which is that European needs always come before German ones. And it would be naive to believe that this will mean punishment at the ballot box. There is a broad political and media consensus in these questions. While she personally may lose, on the key questions, the opposition is perfectly aligned with her. Partially excepting the Socialists. This is standard in most of Europe in fact. There are some smaller parties in other countries that stand against the status quo, but for the most part these parties are – justifiably – hung up on immigration.

From the perspective of our rulers, there is really only the one thing that they could have done – bailout Greece. I have no doubt that they are fully aware that this is not a solution, but only a stalling gesture. The hope is that this crisis will enable them to finally throw out the last vestiges of national sovereignty and establish full governmental control through Brussels and, eventually the UN/IMF/World Bank. First step would be control over all the member states budgets. This is clearly in reach, and when the crisis advances further very soon, they will have it no time. Second step would be the establishment of a new global currency in the form of the IMF SDR. Witness here in the official statements from the IMF meeting on May 11.

This could even work, at least for a while. If they ever get that far. The problem, however, is that things are moving a bit too rapidly right now. The bailout did not have the desired effect for very long, of calming down the markets. And next in line are waiting Portugal, Spain and Ireland. Just for starters. There simply isn’t enough money to go around right now.

There is a question as to how much of this is staged. After all, one of the most ardent and enthusiastic proponents of a new global order – George Soros – is also one of the main players destabilizing the Euro right now. Maybe they will be able to slow down the current crisis enough to get all their ambitious plans finalized, before things fall apart. But like I have said elsewhere – at some point this crisis becomes too big, the market forces to immovable for anyone to still do anything about them. And we might very well already have passed that point. In which case all the current brouhaha is nothing more than rearranging the deck chairs on the Titanic.

What they should have done, is let Greece withdraw from the Euro, go bankrupt, re-establish the Drachma as a freely traded currency, and let the market forces play themselves out. But they could never have done that. Not just out of a visceral, deeply held fear and hatred of the market on the part of the politicians. But also because it would destroy their grand project. That being not just European unification, but the establishment of – at least for now – a limited global government. This is not some conspiracy theory either. It is their own words that are showing this to be the case.

While we as individuals may fight against this – which we should – we must be under no illusions as to our ability to actually affect a different outcome. As investors, however, there are a myriad of opportunities to profit from this. Short- to mid-term currency traders can and should play the Euro-USD angle, and not just in the one direction either. Anticipate at some point in the next few weeks a sharp fall in the British pound possibly. Cameron is going to have to come out at some point with the dire straits of UK public finances. Also, the IMF may decide to sell part of its gold reserves, which would depress the gold price for a while. One can only hope. If they do, start buying. In fact, use any retrenchment of the price of gold to increase your holdings. Same with silver. In general, invest in hard assets, and diversify geographically. Do NOT limit yourself to one country or even just one continent. Selected real estate in Brazil and southeast Asia and parts of Latin America. Possibly in parts of the USA and the UK as well. Think about investment in some agricultural lands. Jim Rogers, who has been on top of this from the beginning, as far as I can see, has also spoken at length about this. But stay away from commercial real estate, at least in North America and Europe. There is still trouble coming our way from that direction. Also stay away from most government bonds. Like I said in an earlier post, the Norwegian Krone and – to a lesser degree – the Australian and Canadian Dollars are also possible short- to mid-term parking places for your funds.

We will talk in more specific terms about our investments in our meetings soon.


Written by gloege

May 17, 2010 at 21:41

Posted in Economics, Politics

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