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Tuesday, May 18, 2010

The End of the Euro?

After the Greek bailout, I noticed an interesting trend. Some people are saying "Is this the end of the Euro?"

Greece won't be allowed to drop out of the EU for the same reason that Texas isn't allowed to secede from the USA. Once a central government is formed, State insiders don't voluntarily give up their power.

Once the EU Constitution was ratified, there's no provision for un-ratifying it. In the USA, the Constitution was never put to a direct vote by the people. Even if people 200 years ago approved it, that doesn't make it valid today. Even if 51% or 75% or 99.99% approve a Constitution, that doesn't give State parasites the right to steal via taxes.

Both the Euro and the US dollar are fiat debt-based currencies. However, there's an important difference. The dollar is controlled by the US Federal government. No single government controls the Euro.

The Federal Reserve is the central bank for the dollar. The ECB is the central bank for the Euro. Like the Federal Reserve, the ECB insiders get to do whatever they want with no public disclosure or accountability.

When the US Federal government has deficit spending, they're undermining their own money. No single government controls the Euro.

When the Greek government had deficit spending, they were causing inflation for everyone using Euros. People in Germany had more Euro inflation, due to deficit spending in Greece. There was immediate inflation as Greece's government had deficit spending.

Here's how Greek deficit spending caused inflation. Greek politicians sold their bonds to a bank. That bank borrowed brand new Euros from the ECB and lent them to Greece. There was inflation as these Euros were spent. Some of these new Euros made it to Germany, causing inflation there.

Some people are predicting that the Euro will fall apart. People in Germany are angry that they're financing the Greek bailout. The US financial bailout was passed over the objection of most Americans. Governments in Europe are the same. Via the IMF and Federal Reserve "currency swaps", people in the USA are financing the Greek bailout. (In a Federal Reserve currency swap, the Federal Reserve lends brand new dollars to European banks or the ECB, taking Euros or Euro bonds or Greek bonds as collateral. This causes inflation for the US dollar.)

The idea that government debt is sacred is a lie. The Greek bailout really is a bailout of whoever owns Greek bonds. The banksters own the Greek debt. They lobbied for the bailout. They bought Greek debt at junk rates. After the bailout, the bonds are AAA rated. Via the crisis and bailout, the banksters made a huge profit in a short period of time.

A year ago, the dollar was crashing relative to the Euro, and people were saying "It's the end of the dollar." Now, the Euro is crashing relative to the dollar, and people are saying "It's the end of the Euro."

This illustrates the fallacy of buying foreign fiat currencies as an inflation hedge. All fiat currencies are subject to theft by inflation. The inflation is not uniform, which helps cover up the scam. The only true inflation hedge is buying gold or silver, and taking physical delivery.

This led to a debate with a pro-State troll in the comments of another post. I never said "People should be forced at gunpoint to use gold as money." just like "People should not be forced at gunpoint to use paper as money." My point is that, given the free choice, people will tend to use gold or silver as money. If any other form of money is widely used and decent, I'd be able to convert it to gold/silver if I want to. In the USA, gold and silver are not very liquid, due to State regulation and taxation of gold/silver dealers. In a ZOMFG/SHTF/TEOTWAWKI situation, the only useful thing will be tangible goods, food, water, guns, bullets, tools, etc. If there is a more gradual collapse, gold and silver will retain their purchasing power. Investing in gold protects your savings from theft via inflation, even if the State does not collapse.

Historically, gold and silver are excellent at preserving their purchasing power over time. For anything where there's an apples-to-apples comparison, prices quoted in gold are close over time.

Every fiat currency has a different interest rate and a different inflation rate. This is a huge profit opportunity for currency speculators. Governments are willing to lose money to traders, when manipulating exchange rates. This enables currency speculators to make huge profits, without doing any real work.

It is misleading to say "It's the end of the Euro." or "It's the end of the dollar." It's more accurate to say "It's the end of fiat money." Some people are starting to realize that State paper investments are a scam. Intelligent investors are moving their savings to physical gold.

The final end of the corrupt State financial system is still about 20 years away. Rising gold prices are an indication of the true inflation rate.

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