The world's largest gold coin

The world's largest gold coin

Can Gold Trade Over 10,000? - Jim Rogers

Gold back in the ‘70s had not gone up ten years in a row. It gone up two years, three years, four years max. So things are all a little bit different now than what they were then. Can gold trade at over 10,000? Of course it can and it might. But not this year. - in GoldSeek radio  

Bernanke Hints At QE3

By Jeff Harding, on September 29th, 2011

Fed Chairman Ben Bernanke said today the very thing I hoped he would not say:

Federal Reserve Chairman Ben Bernanke on Wednesday signaled he is prepared to take more unconventional policy steps if the weak U.S. economy worsens too much.

Mr. Bernanke stressed the Fed is watching price trends very closely. “If inflation itself falls too low or inflation expectations fall too low, that would be something we’d have to respond to because we don’t want deflation,” Mr. Bernanke said in a question-and-answer session after a speech in Cleveland.

The Fed chief didn’t say he sees deflation — or a debilitating decline in prices — as a risk right now. Prices have actually been rising above the Fed’s 2.0% comfort zone in recent months. Mr. Bernanke said inflation expectations currently indicate that price increases will average around 2% over the coming years, which is where the central bank wants to see them.

Highlighting his concern over the economy’s weakness, however, Mr. Bernanke said the high unemployment rate was “a national crisis” that required attention from the White House and Congress.

“We’ve had close to 10% unemployment now for a number of years, and of the people who are unemployed, about 45% have been unemployed for six months or more. This is unheard of,” Mr. Bernanke said.

The Fed chief has shown a strong determination to do what is needed to fix a persistently weak economy.

Chairman Bernanke is the ultimate economic tinkerer. He, like many of his econometrician Monetarist neo-Classical economist colleagues believe they can control the direction of the economy by tinkering with things like money supply, interest rates, and reserve requirements for lenders. In fact in the speech referred to in the article, he chides China for not spurring more internal consumption and relying too heavily on exports. It is a rather arrogant statement for him to make, since he has shown himself incapable of doing anything right at the Fed. None of his forecasts have been accurate and when he has to rely on silly tricks like Operation Twist to “do something” you know he’s run out of ammo in the much vaunted Fed’s “suite of tools.” 

We at the Daily Capitalist continue to believe that the  Fed will be pressured to “do something” to solve the “unheard of” unemployment problem he refers to. And that will be the “unconventional policy” he refers to, or QE3, price inflation or no. 

Read it here:

http://dailycapitalist.com/2011/09/29/bernanke-hints-at-qe3/#more-14220

The Journey Along The Investment Road Is An Arduous One - Marc Faber

I seldom go to see doctors but when I do, I like to be ideally with a doctor who is a friend, understands my unhealthy lifestyle and in whose judgement I can trust. I have no doubt that trusting a doctor will significantly accelerate the healing process. 

In the world of investments people’s investment results would be better if instead of trading online day and night they would have a close relationship with a capable and honest financial planner who could provide them with advice and occasionally with a second opinion. What really amazes me is that people want to see the best and most expensive doctors (ok, the government or the insurance company pays) , buy the highest quality products, but will use the cheapest possible way to transact and invest their funds. 

The journey along the investment road is an arduous one and it is very important that you have a good companion who comforts you when “bad luck” strikes and who is at the same time a reliable guide that helps you find the way. Less affluent investors will of course argue that the access to top financial advisors is only open to high-net- worth individuals. That is unfortunately the case and I wished I could change that because small investors need more help than already very well to do people. - an excerpt of the GBD Report

Gold & Silver Correction: It`s Good For Markets - Jim Rogers

Silver and gold - you know, gold has gone up ten years in a row. That’s extremely unusual in any financial asset. Silver skyrocketed here in the last several months. So yeah, it’s a combination of things - financial panic, market re-quals, etcetera. But I don’t see this as any problem.It’s good for markets. Back in the 1970s gold went up 600 percent and then gold went down 50 percent, scared everybody off. A lot of people gave up on gold. And then as soon as they gave up and sold, gold turned around and went up 850 percent. That’s not a typo - 850 percent.So this is nothing unusual. Oil has gone down almost 50% three times since the bull market started in 1999. I don’t pay too much attention to these things. I try to be smart enough to buy when it collapses some. - jimrogersblog.com

Salivating at the Upside Potential of the Gold Market

By The Mogambo Guru

03/25/11 Tampa, Florida – Not long ago, as I recall, a pension fund in some foreign country, one of those Scandinavian ones I think, was ordered to invest no more than about 3% of its custody assets in gold, meaning that the fund had too much gold, and to sell part of its gold holdings in order to comply.

Personally, I think that the 4,500-year historical record shows that being 100% invested solely in gold over the long-term is almost always a Very, Very Good Idea (VVGI), while the 4,500-year record of being solely invested in stocks, bonds and housing over the long-term is almost always a Very, Very Bad Idea (VVBI).

Thus, even to a really stupid guy like me, it doesn’t take a lot of brain-horsepower to quickly see that to arbitrarily limit gold in one’s entire retirement holdings to a measly 3% is, in a word, stupid, whereas 100% invested in gold is not, again in a word, stupid, but, rather, in yet another word, intelligent, in that gold soars while the debasement of a fiat currency is always complete and catastrophic.

Or perhaps the word, in a word, could be “erudite,” as in referencing the Mogambo Book Of Economics Stuff (MBOES) under “Erudite: at least glancing at the entire 4,500 years of history and seeing very clearly that to not be 100% invested in gold and silver over the long-term, especially when your government is allowing such frightening increases in the money supply, is stupid and ultimately ruinous. See also ‘Broke, Why, Stupid, People’ and ‘Catchphrase, We’re Freaking Doomed (WFD)!’”

After all this talk of erudition, I am embarrassed to admit that I don’t know the word for “stupid” in any of those Nordic languages. I don’t worry, however, because the word for “stupid” in Spanish is “el Stupido,” so I figure that if any of those Scandinavian guys speak no English but they savvy a little Spanish, they can easily translate it for everybody else so that everybody can know that they are, you know, stupid, in case they didn’t know.

Unfortunately, this translation thing will not convey how I laugh at them with an undisguised Mogambo Sneer Of Contempt (MSOC), and/or how I, following the proud tradition of Monty Python, fart in their general direction to show my scornful disdain at their limiting ownership of gold to 3% of holdings.

So, my Timely Mogambo Tip (TMT) is that if you are some dumb-ass Scandinavian who is letting these morons manage your retirement money, then you may be interested to know that you are, as would seem to be inferred by this time after the foregoing paragraphs which is one long indictment of the level of laughable ineptitude of these losers, also stupid.

Of course, the stupid British let their stupid prime minister, the stupid Gordon Brown, sell all Britain’s gold at less than $400 an ounce, so it is not that there is no precedence for this kind of idiocy! Hahaha!

I bring it up because it fits perfectly with the essay titled “The Driver for Gold You’re Not Watching” by Jeff Clark of Casey Research.

He says that “the elephant in the room is pension funds. These are institutions that provide retirement income, both public and private.”

The “elephant in the room” part refers to size, not smell or any of the other huge downsides to owning an elephant in an urban, apartment-dwelling environment, as “Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint.”

He calculates for us that this staggering $31.1 trillion “is more than twice the size of last year’s GDP in the US ($14.7 trillion)”!

That exclamation point was put there by me, for dire reasons that I only vaguely suspect, as even a piddly 3% of that $31.1 trillion pile of retirement money, invested in gold, is a whopping $933 billion invested in gold!!

“Why the double exclamation points?” you ask. Have I got some weird reason why I am always using so many exclamation points, like maybe I am being paranoid and weird, plus be a full-time lunatic and part-time father?

Well, probably yes, for one thing, but also because, “The market cap of the entire sector of gold stocks (producers only) is about $234 billion,” while “If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward.”

He goes on “According to estimates by Shayne McGuire in his new book Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector.”

My excitement rising, he goes on, “And let’s not forget that this is only one class of institution. Insurance companies have about $18.7 trillion in assets. Hedge funds manage approximately $1.7 trillion. Sovereign wealth funds control $3.8 trillion. Then there are mutual funds, ETFs, private equity funds, and private wealth funds. Throw in millions of retail investors like you, me, Joe Sixpack, and Jiao Tsingtao, and we’re looking in the rear view mirror at $100 trillion”!

And this $100 trillion mountain of money trying to get into a market of gold and gold stocks that is currently valued at less than $1.5 trillion makes me, and him, too, salivate at the prospect, as he concludes, “I thought of titling this piece, ‘Why $5,000 Gold Is a Conservative Forecast.’”

And with numbers like that, and the last 4,500 years of history showing that people eventually stampede into precious metals in a panic, what can you say except, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Investing in Silver Instead of Toilet Paper Currencies

By The Mogambo Guru

03/04/11 Tampa, Florida – I was intrigued by an essay titled “What You Need to Know About Buying Silver Today”‘ which came as the result of Jeff Clark, of Big Gold, being interviewed by The Daily Crux.

Of course, Mr. Clark knows all the reasons to buy silver, and deftly ticks them off, one after another, as I would do if they ever asked me, instead of everyone always rudely shouting at me, “Hey! You can’t come in here!” and “Don’t eat that!” and, “Stop yelling at me to buy gold, silver and oil stocks as protection against the suicidal lunacy of the Federal Reserve creating so much money!”

Mr. Clark never actually gets to the point of hysterical raving that people should buy, buy, buy silver, silver, silver, and calling people idiots – idiots! – if they are not buying silver, which is convenient for me because that is exactly what I do. Idiot! You’re an idiot if you are not buying silver! See?

Anyway, The Daily Crux asks the Big Question On Everyone’s Lips (BQOEL), which is, “Just how high do you think silver could go?”

I was hoping that he would, as I would, immediately launch into “attack mode” and say, “What kind of stupid question is that to ask? The whole thing depends on the purchasing power of the dollar, which is literally headed towards zero because of the constant, massive, unbelievable over-creation of dollars by the evil Federal Reserve, which would mean that the price of an ounce of silver would be, literally, infinity dollars! That’s how high silver will go, you moron, as will the prices of everything go to infinity, when the dollar has zero purchasing power left, and is, finally, like all fiat currencies, worth Exactly Freaking Zero (EFZ)!”

I could mention Zimbabwe because Zimbabwe is a very recent example, of the thousands and thousands of fiat currencies through history that have gone to zero value because of over-creation, of a currency that went to zero value because of its over-creation.

As a case in point, and in a particularly pointed-yet-distasteful way as befits the whole subject of currency destruction, massive inflation, bankruptcy and ruination, I remember a photo of a sign posted in a Zimbabwe toilet, advising users as to what could be properly be used as toilet paper in this particular crapper.

It read, “No cardboard. No cloth. No Zim notes.” How disgusting! Money that is not even usable as toilet paper!

So, the question for today’s Mogambo Pop Quiz (MPQ) is, “What is the price of an ounce of silver, priced in Zimbabwe dollars?”

Well, since the Zimbabwe dollar is now officially worth zero, the MPQ is an easy one: The price, in Zim notes, is, literally, infinity!

This means that one ounce of silver – one lousy ounce of silver! – now costs more than all the Zimbabwe dollars ever printed! Ever!

And, more horrifically and closer to home, since the American dollar is on the same sorry path, the fate of the US dollar will be that of the Zimbabwe dollar, making silver a screaming bargain, and if you are not buying it, then you are an idiot!

At this point, I would usually degenerate into a Patented Mogambo Brand (PMB) of raw, in-your-face aggression on how the American dollar is a Big Piece Of Crap (BPOC) because of the Federal Reserve creating so staggeringly many of them, or a rant about how we Americans are a big bunch of idiots, or how the ultimate price of one ounce of silver is, like Zimbabwe, more than all the American dollars ever printed, making silver, at less than $35 an ounce, such a screaming bargain that to not buy silver is to proclaim yourself an idiot.

Mr. Clark, sensing my underlying motive, appeals to our greed! “Good choice!” I say!

He says, “Many people don’t realize this, but silver rose 3,646% in the 1970s, from its November ’71 low to its January 1980 high. If you were to apply the same percentage rise to our current bull market, silver would climb another 500% from here, and the price would hit $160 an ounce.” Wow!

Of course, all of these fabulous gains in silver presume a dollar with a relatively consistent buying power, which ain’t going to happen, and instead the dollar will continue to fall in purchasing power and thus everything will become more and more expensive, all the time more and more expensive, all because the despicable Federal Reserve is continuing to create So Freaking Much Money (SFMM).

But you won’t care! Your buying gold, silver and oil stocks all along the way, as the evil Federal Reserve kept creating so much money, will have made you rich, rich, rich! And so what is a horror of life-or-death misery for others is of no consequence to you, and you just say to yourself, “Whee! That investing stuff was easy!”

The Mogambo Guru
for The Daily Reckoning

Buying Silver to Combat the Vampire Craze

By The Mogambo Guru

03/28/11 Tampa, Florida – Dominic Frisby of Money Morning newsletter quotes Nick Laird of Sharelynx as saying that the situation in silver is such that “since 1950, almost 925,000 tonnes have gone into demand with 570,000 tonnes of this having come from production. This leaves a shortfall of 350,000 tonnes, which has come from central bank sales, stockpiles and scrap. This deficit equals approximately 16 years of production.”

Even more surprisingly, as statistics go, the deficit in silver “is equal to the entire global production of silver in 1982!” which you’ll notice is already punctuated with an exclamation point, as everybody can see the exceptional, startling, scary nature of the statistic!

Jeff Clark, in his essay “How Much More Demand Can Silver Handle?” here at The Daily Reckoning, notes that “The numbers for silver demand are starting to make some market-watchers nervous. The US Mint sold over 6.4 million silver Eagles in January, more than any other month since the coin’s introduction in 1986.”

Well, playing the devil’s advocate, I say that “Maybe it’s because economic things are worse than at anytime since 1986, and there are so many more vampire-related things in the popular media than there were in 1986, so it is only natural to expect more people to be buying silver!”

Mr. Clark, obviously having been instructed to ignore me, ignores me, and goes on to trump my stupid theory with the awesome fact that “China’s net imports of silver quadrupled in 2010, to 122.6 million ounces, roughly 13.7% of global production.”

Already “mine production can’t meet worldwide demand,” and since I never hear of central banks dis-hoarding silver, nor of any stockpiles of silver being drawn down, maybe that is why he says, “the only way demand gets fulfilled is from scrap supply.”

As to what this means in precise dollars and cents, I don’t know, but he may be giving us a hint when he reminds us to “Remember that silver rose over 3,646% from trough to peak in the last precious metals bull market; it’s up about 630% in our current run. A return matching the 1970s advance would push the price to $152.”

From $33 an ounce to $152 an ounce? Wow! That seems like investing at its best, while the truth is that the gains in silver just get better from there, because the evil Federal Reserve is going to keep creating more and more money from there, which explains why I was spending more and more time alone in the Mogambo Big, Bad Bunker (MBBB) a few weeks ago, nervously watching the Federal Reserve creating another $28 billion in credit, which means that the Fed is creating more inflation in prices, which means that the time when people get desperate is not far away.

And this $28 billion in bank credit turned, seemingly magically but actually just a coincidental accounting thing, into $26 billion in cash with which to buy $26 billion in government debt! All in One Freaking Week (OFW)! Astounding!

The reason I bring this up is because it means, We’re Freaking Doomed (WFD) to die a horrible, horrible economic death because of inflation in prices that must necessarily result from all this creation of new money, which is obvious once you strip away all the confusing jargon, acres of spreadsheets and idiot editors rejecting your work with caustic comments like, “Utter trash” and, “Thank you for your recent submission. However, we have no present need for worthless ramblings of a paranoid lunatic.”

Paranoid lunatic, eh? Ha! Sharp Junior Mogambo Rangers (JMRs) are instantly on alert at a “dog that didn’t bark” – as in this case the sentence fragment “to die a horrible, horrible economic death because of inflation in prices that must necessarily result from all this creation of new money” did not end with an exclamation point, or two, or three, as would seem to be indicated.

The reason is that the long-forecasted inflation, which the use of an exclamation point would indicate as an impending calamity, is not only impending, but it is here, which does merit an exclamation point thusly!

I involuntarily looked around the bunker in a kind of scared paranoia when I read The 5-Minute Forecast boiling it down to, “Wholesale prices jumped 0.8% in January, according to the Bureau of Labor Statistics. The Producer Price Index has now jumped 3% over the last four months. And no, that’s not an annualized figure.”

Suddenly feeling nervous and paranoid again, The 5 continues, “Note that the PPI headline number is for ‘finished goods’ – stuff that’s ready to be sold direct to consumers. In the category of ‘crude goods,’ the figures are far worse – up 3.3% in January, and up a staggering 15.8% over the last four months.”

This is the ugly start of the price inflation horror that results from the horror of the Federal Reserve creating so excessively much money, and if ever there were a clearer signal to buy gold and silver with the last of your Federal Reserve Note money, I never heard of it.

And I am a guy who has heard many, many things over his lifetime that will curl your hair, or, if already curled, straighten, and I am not even talking about any of that REALLY scary stuff about genetic mutants being manufactured for the Pentagon (which is under control of UFOs from outer space) that are computer-controlled and can shoot laser beams (“zzzzt!”) out of their eyes.

And if that last stuff turns out to be true, too, then it will be just one more reason, on top of the other thousands of reasons, to buy gold, silver and oil, and which would perhaps add just that little bit extra jollity to your jaunty step as you realize, as you walk along, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Living Well on Gold and Silver

By The Mogambo Guru

04/12/11 Tampa, Florida – Naturally, I bristle at people ignoring me except to say hurtful things, like, “Eww! Gross! Eat with your mouth closed!” and who then turn right around and say, “Shut up about buying gold and silver!”

But how do I not eat and talk? Man, it has been said, cannot live on bread alone! Unless, of course, it is made into a nice, big sandwich with all the fixins, maybe with a tall, cool beverage and a fresh bag of potato chips, you’re bent over the plate like some kind of starving Neanderthal, noisily shoveling it in your mouth with both hands, perhaps while you are watching TV, necessitating changing channels by hitting the remote control with your elbow.

In polite deference to the easily offended, I swallow the last of a sandwich, whereupon I take up my one-sided conversation to say that buying gold and silver is the smartest thing you can do when the Federal Reserve is creating So Freaking Much Money (SFFM), as it creates horrific inflation in prices, with the historical evidence strongly indicating that the long-term percentage increase in prices matches the percentage increase in the money supply, which, if true, means that We’re Freaking Doomed (WFD)!

And since the Federal Reserve is creating more and more money with mindless abandon, you can see how the resultant inflation in prices rising with similar mindless abandon is enough to make one want to run, pell-mell, to one’s Mogambo Bunker Of Go Away (MBOGA) in a kind of nervous panic, seeking the security of locked doors, defense systems on “armed,” holding gold coins in one hand and the trigger of something large-caliber in the other.

I don’t personally know if Doug Noland, the author of the Credit Bubble Report at Prudent Bear.com, is in his bunker or not, or even has one or not, and if not, then I salute his courage, because he has the necessary facts to proclaim a Full-Alert Mogambo Response (FAMR) when reports that “Federal Reserve Credit jumped $13.9bn to a record $2.582 TN (19-wk gain of $301bn). Fed Credit was up $174bn y-t-d and $284bn from a year ago, or 12.4%”! Yikes! Big percentages!

And this Fed Credit is the “out of thin air” first step to making new money, and which is multiplied many, many times over by the fractional-reserve multiplier when this new Fed Credit hits the banks. Free money! Whee!

Of course, that “Whee!” at the end was intended as sarcasm, and I see that “Whee!” really “doesn’t work,” mostly because it is so far away from the origin of all the misery, which is the Federal Reserve in creating the new credit in the first place, and for whom I reserve a special, dark place in my heart where I put dreams of revenge.

And since “living well’ is, they say, the best revenge, I have now decided to live well! In this case, I will find out where a few of these Federal Reserve morons live, drive by their houses at 3:00 a.m., and honk my horn exactly 79 times to signify gold’s atomic number on the periodic table, so that they know it’s me – the guy who knows they are idiots for not insisting on a gold standard, which they would do if they were competent economists, instead of insisting on a fiat currency made of electronic digits, which is the Exact Wrong Thing To Do (EWTTD).

Then, after going out to a late dinner at a fabulous restaurant, I’ll have a wonderful time doing it again on the way home a few hours later! Hahaha!

“Ahh!” I sigh to myself as I think of it. “Sweet revenge!”

Before you get all agog that I remembered that the atomic number of gold is 79, I have to admit that a Google search took me to webelements.com to verify that the atomic number was, indeed, 79, as I had remembered, surprising nobody more than I, and which I hope to remember the next time anybody says, “Can’t you remember anything anymore, you worthless old fart?”

But I learned, as a result of the site, that the group of elements of the periodic table that contains silver and gold is named the “oinage metal” group and that the group also contains roentgenium, whatever in the hell that is.

But it sounds radioactive, and it is (in spades!), it doesn’t exist in nature, it has a half-life of around ten minutes, gives off no x-rays when it decays, and has the symbol Rg, which sounds like the sound you make (“Urgg!”) when you are so stinking drunk that you are puking up your guts in the restroom of some stupid bar where you suddenly realize that your boss already ate and left to go back to work, and you just want to die, die, die, but you don’t.

The point is that we know enough about roentgenium not to make coins of it, even though it is in the “coinage metal” group of elements. Oddly enough, there are not many people who know to buy gold and silver, which are also in the coinage metal group, when it seems obvious from the name “coinage group”!

I mean, how easy does this have to get before you say, “Whee! This investing stuff is easy!”?

Read more: Living Well on Gold and Silver http://dailyreckoning.com/living-well-on-gold-and-silver/#ixzz1ZNHziJ1R

The destiny of mankind hinges upon gold - Hugo Salinas Price

28/September/2011

Hugo Salinas Price

I must have read fifty accounts, in the FT and others of that ilk, about what went wrong with the Euro. I have yet to read one that comes out with the plain, unvarnished truth. The whole bloody Establishment of bankers, politicians, economists and journalist whores sings the same song: “The euro came to grief because there was no fiscal union”. Therefore, the solution to be inferred is that fiscal union would remedy the case of the European Union’s imminent collapse.

Let’s face it: the euro is a fiat currency and fiat always ends up in disaster.

Our civilization is in evident decline. If it weren’t, we would find several eminent economists of the stature of Jacques Rueff in the halls of power; he was the French economist who wisely counseled General Charles de Gaulle to remove France’s gold from the cellars of the NY Fed and transfer it to France.

Jacques Rueff was a man capable of understanding the fundamentals of how the world works. His vision was clear, and his intellectual scope was capable of taking in the details of local commerce as well its international workings. Men and women of his capacity are still around today, but they are not welcome in the higher reaches of politics.

Rueff wrote a little book in 1963, “L’Age de L’Inflation”  (“The Age of Inflation”) made up of some articles he had written. He wrote an “Introduction” to his book, and the very first words are these:

“LE SORT DE L’HOMME SE JOUE SUR LA MONNAIE”

A loose translation, taking into account the content of his book, would be:

“THE DESTINY OF MANKIND HINGES UPON GOLD”

Europe is a great mess today because those in power made the wrong choice when deciding what currency the European Union should use. They chose a fiat currency instead of the Gold Standard and currency redeemable in gold at sight. That is the Original Sin of the euro.

Rueff was also active when the European Union was being forged. His book’s fifth essay ends with these prophetic words:

“L’ EUROPE SE FERA SUR LA MONNAIE, OU NE SE FERA PAS”

Translated loosely and considering Rueff’s views, this would be:

“EUROPE WILL BE BUILT UPON GOLD,
OR IT WILL NOT BE BUILT”

Indeed, United Europe is falling apart. By the time you read this, it may already have collapsed. But it is falling apart not because of a lack of “Fiscal Union”. It is collapsing because of the absence of the fundamental means for free international collaboration, based on the realities of each nation of Europe: there is no gold standard at work.

Somewhere in his books, Ludwig von Mises states that the beginning of the end of the Austrian Empire came when the gold coin stopped circulating in the Empire. It was this stable and trustworthy money that had held together an Empire made up of several nations with very different cultures. When the gold coin disappeared, the unifying factor was gone as well.

Gold is the money for societies made up of men and women who wish to live in the real world.

This is part of the trouble in our declining civilization: men and women in these times wish to live in illusions, and the politicians, the bankers and their economist lapdogs have been providing those illusions for many decades now. Those illusions were enabled by the “Welfare State”: Comfort and security from cradle to grave, with no requirement of hard work to merit them. On the other hand, it would also be reasonable to say that men and women today live in illusions, because they were forced to do so by the fiat money they had to use. Once fiat money is in place, all becomes illusion and gambling and people give up trying to make sense of life. Pretty soon they take illusions to be realities.

Wolfgang Münchau in the FT of September 26 writes in the editorial page: “I have never seen Europe’s politicians as scared as I saw them in Washington last week”.

Europe’s politicians have good reason to be scared stiff; if the euro cracks up and the European Monetary Union collapses then the viability of the Welfare State is in question. Without the perpetual deficits that the Welfare State entails, how will it be possible to maintain the populations of Europe in their illusion of perpetual untrammeled bliss?  If the peoples of Europe are to wake up one morning to find themselves once again in the real world, where survival means hard work and personal privations, the political upheaval will be gigantic. This is why the politicians are scared.

If the continued existence of the Welfare State is in question, then so is the Democratic State, because Democracy – or what passes for it - can only be simulated where the voting population is constantly appeased with ever greater hand-outs from the Welfare State, the Siamese twin of Democracy.

If the euro cracks up and the European Monetary Union goes the way of all fiat we can expect a political convulsion of the first order in Europe as the ingrained illusions vanish. Perhaps that would not be a bad thing. Bill Bonner has written, with his usual wry humor, “Give Collapse a Chance”.

The world is not coming to an end just because illusions have vanished. The world will adjust, individuals will adjust, the behavior of multitudes will adjust. Those intellectual and moral midgets, who think that the world ends if their particular plans for the world are scrapped, will go to the dustbin of history – at least for a while. That would be a healthy relief.

Central Banks were invented with the express purpose of eliminating volatility in the business of banking. That was a mistake, because today, instead of relatively small bankruptcies of imprudent banks we have the menace of wholesale collapse of banking systems. Unfortunately, no one on the global political scene seems to have grasped this insight.

So we continue to watch the evolution of this European crisis – by implication also a world crisis – with great interest. If a convulsion besets Europe, authoritarian régimes are not out of the question. Authoritarian régimes, despite the bad name given to them by the so-called partisans of “Democracy”, are not necessarily bad. After all, the family is an authoritarian organization, and it functions well - when it is allowed to function. Every private business concern is an authoritarian organization. An authoritarian régime oriented to order, property rights, the rule of law and sound money is actually more stable and viable than an authoritarian régime that wishes to install a socialist society. Incidentally, the Founding Fathers of the US did seriously consider establishing a Monarchy…

The present crisis will offer possibilities that can be either good or bad. Let us remember that the Chinese symbol for “crisis” means “Danger/Opportunity”.