What they don’t want you to know about the euro crisis
Prudent investors should maintain a healthy skepticism about everything we read in the mainstream media. What you see on news programs, in my opinion, represents what corporate interests, a term I use in its broadest sense to include governments, want us to believe.
The main economic story for the last month or so has been about the fall of Europe, the impending collapse of the euro, blood on the streets of Europe, etc. Now I am the first to admit that European finances are in terrible shape and that the European Monetary Union might not have been a good idea from the start … but I think there is an untold story behind the headlines. Things don’t get so excited by sheer chance.
“You know you said something to me Peter about a year ago that really stuck with me because it made a lot of sense to me,” a close friend told me last week. “You said that if central banks could make the dollar, the euro, the pound and the yen fall at the same time, no one would realize that a devaluation is taking place.”
I have pointed out many times that, regardless of the circumstances, I do not expect to see overnight devaluations of major currencies in the way that we have seen in places like Argentina and Venezuela. First world central banks are more sophisticated than that. They certainly are not 100% in control of the situation, but they are not going to allow the dollar, euro or yen to fall freely either. Doing so would be completely against your interests. Instead, they seek a stealth devaluation.
Stealth devaluation means gradually taking away purchasing power in such a way that most people don’t realize it. They will not see large variations in their retirement account statements. They will have the same amount of dollars or euros or pounds. So that people don’t complain too much. They will sit in front of their televisions ready to be distracted by the next fad, blissfully unaware that each month the purchasing power of those units of fiat money drops.
In the meantime, governments will have effectively gotten away with it. Theft of pension plans, retirement accounts and savings of ordinary people. Or put another way, a hidden form of tax (which is why it is still a robbery).
The dollar is crashing … recently it has been increasingly difficult to place US Treasuries, because despite the US triple-A credit rating, foreign investors have a clear feeling that Treasuries are not as safe as they are supposed to be. . Hence the race by sovereign and institutional investors toward gold, the only debt-free currency, which continues to rise.
Look at the recent decline in the value of the euro from this perspective. The United States is prepared to play hard to maintain confidence in the dollar. On May 12, my friend, economic commentator Frank Suess, wrote about a secret meeting held under the ominous title “High-level Conference on the International Monetary System, Zurich.” This meeting involved the who’s who of international finance, including the head of the IMF. Herb Stein, George Soros, and Masaaki Shirakawa.
Like it or not, Frank said, “the global financial system is always a mirror, a reflection of what is happening in America. The US dollar is at the epicenter, NOT the yuan, NOT the euro, and certainly not Greece.”
Then a few weeks later, when Frank’s predictions came true, he commented further, saying what we see now is the United States defending the dollar’s position as the world’s number one reserve currency. And the United States “is playing smart and tough. When you are not able to solve your own problems and clean up your finances, what you have to do is denigrate and weaken your closest contender, in this case the euro.”
Of particular interest is the Treasury Secretary Timothy Geithner’s travel program. He has toured the world from China, London, Germany and Spain. Everywhere it stopped, it pushed for ‘quantitative easing’. Europe, according to Mr. Geithner, is expected to “contribute and support the global economic recovery”, or in other words, to run deficits like the US.
And that is precisely what Europe is doing now: printing large sums of money to fund bailouts strongly opposed by European voters. And that is, of course, lowering the value of the euro.
But if we look at the bigger picture, the US deficit remains the biggest problem. Other currencies need to be put into shape so that the American people and investors around the world are not aware of their currency’s devaluation.
Greece, in the global scheme of things, is insignificant. Greece’s GDP is approximately US $ 76 billion a year. That’s less than 3.8% the size of the California state economy. And have you looked at the shape of California finances lately? Food for thought …
