“Believe” is the title of Justin Bieber’s most recent album. “Believe” is the theme of the European Union’s economic policies. There is evidence that more faith is placed in the 18-year-old singer than in the European Stabilization Mechanism - and certainly a lot more enthusiasm.
While many investors have rejoiced in the establishment of the European Stability Mechanism, all is not well with the new program. Financial Times reporters Robbin Wigglesworth and Ralph Atkins noted that “the ESM could partly crowd out other European borrowers if investors view it as a better bet than the debt of some weaker continental borrowers. For example, the EFSF’s 10-year bonds offer higher potential returns than comparable bonds of Austria and France, and only slightly lower than worse-rated Belgium.”
Wall Street Journal editorial board member Matthew Kaminski wrote: “Public unease in Germany over the price tag for the rescues grew this month after the ECB unveiled a plan to purchase the debts of troubled governments and the German constitutional court blessed the bailouts. Ms. Merkel's approval rating promptly rose to 61%, which suggests formidable political savvy, some say a Machiavellian genius.”
Economists around her grumble that endless bailouts are planting the seeds of future trouble, and the political advisers worry about a popular backlash in Germany one day. Yet no consensus exists in the EU for any other approach - either for fatter German checks for the bankrupt "Club Med" countries or for a cold cutoff of aid, starting with the dilatory Greeks. And no alternative exists to Ms. Merkel's leadership. Britain stays out of the euro mess by choice; the French are preoccupied by their economic troubles. Ms. Merkel's ability to navigate the crisis and handle her domestic public pressures makes her indispensable.
Ambrose Evans-Pritchard wrote in the London Telegraph that all is not well with the International Monetary Fund: “The IMF is evolving from a liquidity mechanism into a bank. This is neither in keeping with the legal and institutional role of the IMF or with its ability to handle risks,” said the Bundesbank in its monthly report. The bank said the Fund was right to help rescue Greece, Ireland and Portugal but said monitoring levels were slipping and there had been a “watering down” of standards. The scale of loans risks “overwhelming the IMF’s institutional structure.”
The unprecedented attack came as the IMF’s chief, Christine Lagarde, called for urgent measures across the world to head off a fresh global slump. While praising the latest emergency measures of central banks in the US, Europe and Japan, she said this was not enough to secure recovery.
The Europeans must activate their new machinery, while the US must prevent a “dramatic tightening” of fiscal policy later this year. Failure to act “would effectively plunge the country off a 'fiscal cliff'", cutting US growth by up to 2%. She said this would pose a “serious threat for the global economy”.
The problem for the European Stabilization Mechanism (and indeed for the impact of QE3) is that belief must be renewed every day. And belief based on fiat money is evanescent. A monetary system needs to be based on something more substantial, something real…a gold standard. Then perhaps, central bankers can sing with Justin Bieber:
It didn't matter how many times I got knocked on the floor
George Gilder, whose new book publishes today, is one of the original pillars of Supply Side economics. As stated by Discovery Institute, which he co-founded, “Mr. Gilder pioneered the formulation of supply-side economics when he served as Chairman of the Lehrman Institute’s Economic Roundtable, as Program Director for the Manhattan Institute….”
He was the living writer most quoted by President Reagan. And he is back with his most brilliant work yet — one of potentially explosive importance if taken to heart by our political and policy thought leaders. It is a radical guide, with surprising insights on almost every page, to the creation of a new era of vibrant prosperity.
As reviewer Paul Brodsky, a professional investor in New York City, perceptively notes,
"Lewis Lehrman is one of a very small group of contemporary gold advocates able to successfully bridge the gap separating practical conservative intellectualism from fleeting, half-baked idealism. His CV lists great success across many fields including education (degrees and teaching fellowships from Yale and Harvard); industry (past president of Rite Aid); politics (narrow loser to Mario Cuomo in the 1982 New York governor’s race); finance, (past Morgan Stanley managing director); private sector entrepreneur (founder, L. E. Lehrman & Company); public sector advocate (founder, Lehrman Institute); historian (author, Lincoln at Peoria: The Turning Point); and recognized philanthropist (awarded the National Humanities Medal by George W. Bush in an Oval Office ceremony). ... Only someone erudite and elegant in demeanor could hope to pull it off . In an irreconcilably over-leveraged world where irritated bond vigilantes question economic sustainability and angry Tea Partiers protest the immorality of it all, Lehrman’s views are considered and his convictions carry weight. He brings gravitas to his cause, and he does so from within as a member of the club."
Before the Fed: JP Morgan Summons the Bank Presidents
"Finally, on the night of Sunday, November 2, Morgan summoned the presidents of the major New York banks to his new library, at the corner of Madison Avenue and Thirty-sixth Street, an Italian Renaissance-style palace he had built next door to his house to showcase his collection of rare books, manuscripts, and other artwork. Its marble floors, frescoed ceilings, walls lined with tapestries and triple-tiered bookcases of Circasian walnut, crammed full of rare Bibles and illuminated medieval manuscripts, made it an incongruous setting for a meeting of the banking establishment. Once the moneymen had gathered, Morgan had the great ornamental bronze doors to the library locked and refused to let anyone leave until all had collectively agreed to commit a further $25 million to the rescue fund."
— Liaquat Ahamed, Lords of Finance (Penguin Books, 2009, p. 54)
Lately we have been engulfed by headlines reporting financial turmoil on every continent, in almost every nation, large and small. The commissars of central planning who so marred the history of the 20th century have been replaced by central banks in the 21st. In Cyprus, the new leadership now dares to confiscate citizens’ wealth with a one-time tax of up to 60 percent on bank deposits above 100,000 euros. Self-interested prime ministers blame continental monetary policies for instigating the currency wars that they themselves surreptitiously carry on.
America recently celebrated — well, maybe we didn’t celebrate – the 80th anniversary of Franklin Roosevelt’s action to end to the gold standard. But America is also celebrating – well, maybe not everyone is celebrating – the 100th anniversary of the legislation creating the Federal Reserve System.
As Lewis E. Lehrman...
Constitution.org provides an extensive and thoughtful Memorandum of Law by Larry Becraft, Esq., of Huntsville, Alabama, on Article I, Section 10, clause 1 of the US Constitution.
Sir William Blackstone courtesy of Wikipedia
One of many interesting matters the Memorandum treats is Blackstone's Commentaries, a book that was a fixture in the...