Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Germany Faces Political Isolation

Politics / Euro-Zone May 16, 2012 - 01:47 AM GMT

By: John_Browne

Politics

One month ago it appeared that Germany held the whip hand in its titanic struggle against those seeking to cure all economic ills with the snake oil of currency debasement. Now, it appears that the ground beneath its feet is being swept away in a flood of popular unrest and political exploitation. The recent elections in Europe, which highlight both the strong grass roots revolt against Germanic demands in Greece and France show that the cause of sound money and fiscal prudence to be a lonely and difficult endeavor.


The political isolation will likely weigh on the Merkel administration to abandon their monetary obstructionism. Unfortunately, Merkel has suffered recent election losses at home that seriously undermines her grip on power (see last week's column). Having suffered the chaotic, and socially destructive consequences of a collapsed currency in the early 1920's, the German people are firm believers in hard, effective work and sound money. Despite having one of the strongest currencies, Germany had been the world's leading exporter, until only recently having been overtaken by China. But this preference does not appear to be shared by the nations in which she is bound by monetary union.

Germany accepted the formation of the eurozone on the condition that the euro would remain a sound currency. To her credit, France has largely honored her pledge to support this aim. However, the recent election of Francois Hollande as France's President has placed continued French support in question creating severe political problems for the German government. To make matters worse, the recent elections in Greece threaten to dissolve the budgetary demands that Germany imposed on Greece in exchange for bailout funds. These agreements took months to negotiate and now may not be worth the paper upon which they are written.

Germany's belief in sound money mandates that wasteful government spending must be reduced. Furthermore, the Germans believe that, despite recession, it is better to endure economic and social pain now to achieve real growth, sound money and social stability over the long-term. The Anglo-Americans believe the contrary, that austerity will create unacceptable social unrest and that governments should increase spending even if they have to borrow massively, recklessly expand the money supply, risking high inflation to do so. But as the teeth of these policies inflict short term pain, as they are designed to do, rank and file voters revolt.

In Greece, the right wing parties of LAOS, Golden Dawn and the Conservatives lost heavily, with their share of the vote shrinking by more than half in some cases. Even the Socialists lost heavily as votes flowed leftwards to the Democratic Left, SYRIZA, led by Mr. Tsipras, and to the Communists. As no party seems able to gather a majority coalition, most likely there will be further elections in June, when it is expected that the left will consolidate and increase its gains. All three of these left leaning parties have declared austerity to be dead on arrival.

Most Eurozone banks and governments hold Greek government paper. If the Greeks default, the Eurozone, the EU and possibly some major U.S. banks will be put at risk. In addition, if other Club-Med countries see this happen they may be tempted to join the ranks of Greece and Iceland as preferring default to foreign-imposed austerity.

If Italy or France were persuaded to default, the Germans would have to consider leaving the Eurozone. The euro would be in danger of collapse and with it possibly the EU superstate, reverting to its originally declared form of a free trade area. The collapse of the EU, now the world's largest economy with a GDP of some $17.4 trillion and the euro as the second currency, would be potentially devastating to the world economy and to the international fiat currency system.

Doubtless, massive diplomatic pressure is now being put on the German government to ignore its peoples' wishes for a sound currency and to join the Anglo-American led Keynesian club of monetary debasers. It's hard to imagine if the German's longstanding aversion to money printing can be overcome in order to maintain the status quo.

Should Germany succumb, the world probably will experience a short-term boom before sliding into a long and severe period of depression, hyperinflation and ultimately stagflation. From my perspective, this could lead to a renewed global polarization with some countries drifting toward Communism while others drift towards the stability of a new international gold standard

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, John Browne, and other Euro Pacific commentators delivered to your inbox every Monday!

Pre-order a copy of Peter Schiff's new book, The Real Crash: America's Coming Bankruptcy - How to Save Yourself and Your Country, and save yourself 35% off!

By John Browne

Euro Pacific Capital
http://www.europac.net/

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John_Browne Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in