Yesterday in Paris, Axel Weber, chief of the German CB , in a WSJ interview said something like “if the 750 billion in the bailout fund should not be enough, we will fill it up. An attack on the Euro has no chance to succeed.” French business daily La Tribune reported a while ago that Sarkozy is opposed to Weber’s ascent to the ECB helm when Trichet’s term ends next autumn.
Just 4 weeks ago Weber called for the end of the bond buying program – a.k.a money printing – by the ECB. Apparently Mr. Sarkozy can be very convincing. I wonder how Mr. Weber is going to mop up all this liquidity when he will be in charge.
Great video for people who would like to understand our fiat money system. Whether his predictions come true is another story, imo it wont be deflation first, as he does predict. I believe we will go straight into hyperinflation from here but I also believe it is going to happen within this decade.
The history of the Weimar Republic teaches that real estate prices offered only limited protection against hyperinflation and only if one was living in his own home. Maintaining a house during periods of high inflation becomes very expensive due to constantly rising material cost. Of course a house usually survives a currency crisis whereas cash in a bank account does not.
In 1922 apartment rental prices were capped by the government and adjusted for inflation, rentals were only a fraction of what they had been before WWI. Consequently house prices were falling. However, rates and taxes on real estate sales were raised.
- Berlin raised the capital gains tax on real estate sales to 30%.
- In July 1924 home prices had dropped about 80% since 1918.
- From about 1935 to 1950 rental prices were “frozen”
- In 1952 “debt profiteers” had to pay a “mortgage gains tax”
RE offers wealth preservation in a currency crises, albeit one must be able to pay for maintenance and government levies and taxes. Moreover I assume that RE prices in a hyperinflation scenario are not increasing as much as gold and silver, if at all.
The world was still in order until the summer of 1920, from there on CPI accelerated within 3.5 years from 10.2 to 1,247,000,000,000.00 !
red = stock market, yellow = cpi, blue = USD/ Reichsmark
Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.” Finance & Development, September 2010 – A Hidden Fiscal Crisis
“Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
“Data from the U.S. Congressional Budget Office (CBO) long-term alternative fiscal scenario confirm the IMF’s findings. Based on the CBO data, closing the fiscal gap requires an annual fiscal adjustment of roughly 12 percent of GDP. This is based on a 3 percent real discount rate. Using a 6 percent real discount rate lowers this figure to about 8 percent of GDP. The comparable figures for Greece are slightly lower than those for the United States, according to unpublished calculations by Stephan Moog, Christian Hagist, and Bernd Raffelheuschen of the University of Freiburg.”
… and the American household, on average, is also over $100,000 “poorer” in terms of net worth from the 2007 bubble high.
WASHINGTON, Oct 19 (Reuters) – Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday that further easing by the Fed has to be large enough to help boost demand ( demand for what ???) , and purchases of $100 billion of securities a month would be a possibility.
‘If we’re going to pursue another round of quantitative easing, it has to be a large enough number to make a difference,’ Lockhart said in an interview on CNBC.
‘As a monthly number ($100 billion) is fairly consistent with what we did before, and so I think it would certainly be in the range of numbers one might consider … but if you were talking about $100 billion as simply the overall program, I think that’s too small,’ he said.
(Reporting by Mark Felsenthal, Editing by Chizu Nomiyama) Keywords: USA FED/LOCKHART
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