In short, it is its history which is precisely what the single currency was supposed to fix.
Greece’s still pending bailout has already cost a few lives in riots that occurred in Athen’s a few months ago.
More bloodshed inside of Western Europe would make a horrific end for this single currency which is the, grandest of grand, post-war projects. It was to be the crowning achievement of Europe’s longest-ever period of peacetime.
But thanks to history, and it is the very same history that built the Euro, Germany cannot inflate. And the rest of Europe cannot do anything else.
Sharing one printing press was always unwise and it is making former UK Prime Minister Gordon Brown look smart for staying outside and not adopting the Euro currency.
No single currency could ever reconcile history because Europe’s monetary politics over the past 100 years has been divided right down the middle.
Germany initially suffered hyperinflation, with wheelbarrows overflowing with bank-notes, and then madness, with cattle-trucks packed full of people, before they were able to banish the shame they had by promising “Never again!”
The rest of Europe, in contrast, and especially the PIIGS of the south got things the other way around. Deflation came first thanks to the Gold Standard. Victory in Europe was then followed by the victory of soft money and devaluation worked its magic to rescue over-spent nations from ever settling their debts.
When the Germans look back, they see catastrophic inflation, followed by the sins of the Fuhrer, and finally by a five-decade boom built on sound money.
Greek, Spanish, and Italian civil servants fondly recall an insane and repeated scramble for cash over the past 50 years and the money was only made available by default and debasement of their currency.
The hyper-inflation of 1919-1923 is scorched onto Germany’s collective conscience and Germany’s alone. To the west of the Rhine and everywhere south of the Alps, a very different 20th century applies. Their only memory of tight money was the disaster of the Great Depression.
Come 1931, the world’s monetary anchor, the international gold standard, was cut loose from the Great British Pound. This forced everyone else to do the same, sooner or later. Inflation worked and so did WWII. Just ask Paul Krugman or Ben Bernanke.
Recently, the mayor of Athens made claims to the Eurozone bankers (specificially the European Central Bank) that “you owe us 70B Euros for the ruins you left behind.” The Deputy Prime Minister of Greece cuts nearer to the heart of the matter by adding, “the Nazis took away the Greek gold that was in the Bank of Greece. They took away the Greek money and they never gave it back.”
In short, they should cough up for the sins of the Fuhrer. Which is kind of correct since Hitler’s greatest achievement today is a welfare state that neither the Allies or Axis could ever afford.
Denied a knock-out blow on the WWI battlefield, the French and British sought victory at Versailles with crushing demands for more money from Germany than existed in the form of gold bullion.
Today, the Greek civil servants are suffering because they, or their parents, voted themselves a cradle-to-grave welfare state that has not stopped paying … such as demanding 16 months of wages for each year they work.
To date, the plan for bailing out Greece and thus preserving the Euro means giving Athens enough money to save Greece from having to ask the markets for funding until 2014.
Wheeling out the printing press in Frankfurt (home of the European Central Bank) to do what was done in 1920 means Europe can pay its pensioners the same way the Weimar Republic tried to pay Britain and France after Versailles; and the outcome will inevitably be the same.
Just like British and French pride in 1919, today’s heroic welfare promises are just too expensive. Whether it happens sooner or later … with or without hyperinflation … trying to pay off the costs of the pensioners and civil servants, negotiated in the past, just can not be paid from tomorrow’s money.
Their costs are just simply too big!
What should you do? Obtain more financial education and learn how to protect yourself during these trying times of massive money printing, fiat currency, and soon-to-be runaway inflation. Purchase precious metals, including gold, to hedge or protect your net worth against the decreasing value of the US Dollar, which is just paper money.
I favor a quote from Steve Forbes … Forbes says that pursuing additional financial education and the resulting increase in our financial literacy will open our eyes to being savvy with our money and using alternative wealth creating strategies; this will be they key to resolving our financial crisis.
To gain the necessary financial education, it is best to pursue association with, access to, and membership in, a wealth creation community. As a result, you will learn about alternative wealth creating strategies and consider investments in non-dollar denominated assets … perhaps emerging markets … perhaps energy assets that are inherently useful like oil rigs, hydropower, or methanol plants … perhaps precious metals, rare earths, water rights, oil, natural gas, potash mines, or gold mines … things hard to build, difficult to replace, and costly to substitute … definitely not financial stocks, definitely not retail stocks, definitely not commercial property.
For those wanting protection of their purchasing power in gold, there are several ways that may be appropriate to obtain this protection. These include direct ownership in minted coins, use of gold exchange traded funds, gold mutual funds, and junior gold stocks. Many are investigating having part of their IRAs in gold, silver, precious metals, and non-dollar denominated currencies.
In addition, for those that truly believe default of sovereign debt is the greatest risk we all face, it is wise to learn how to implement a multiple flag strategy to diversify this risk or provide protection against higher taxes, capital controls, hyperinflation, civil unrest, erosion of personal liberty, and the rise of a police state. With a multiple flag system, you consider taking preparations like, but not limited to, establishing a foreign bank account, purchasing some real estate overseas, seeking alternate sources of income, dual citizenship, and carrying multiple passports.
I will continue to provide examples of things we need to learn, the secrets of the insiders, as part of being savvy with our money, and introduce alternative wealth creating strategies, in future articles and updates at my blog over the next few weeks.
Finally, I want to thank Adrian Ash of BullionVault and contributing editor of Whiskey and Gunpowder published by Agora Financial, as he was the source of some of the material mentioned in this post.
In closing, be sure to Meet Me at my website, WhoIsMikeFarrell; Read Posts about my Internet Marketing Business at myaspenIbizBlackBox website; and Obtain Some Tips About Being No 1 on Google at aspenIbiz My Go-To-Market Partners website; and Learn How to Live Longer at aspenIbiz My Life’s Advantage Today site.
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