Paper Hangers
John Browne
Feb 18, 2010
At a time when more and more offices
are going paperless, governments in most of the developed world
are doing the opposite. Finance ministers from Washington to
London, Tokyo, Madrid, and, most pointedly, Athens, are attempting
to paper over gaping financial chasms in the global economy by
issuing ever greater quantities of currency and debt. But paper
can only stretch so far.
The key problem facing the western world is the 80-year decline
in central banking discipline. In truth, these banks have become
little more than the private piggy banks of their parent governments.
Often furtively, central banks have "bought" ever larger
amounts of government debt, which has allowed a consequence-deferred
spending spree. The result has been decades of apparent economic
growth and prosperity.
To close these gaps, it is widely agreed that governments need
to curtail spending, but that inclination is nowhere evident.
In a television appearance last week, former Fed Chairman Alan
Greenspan explained the predicament bluntly: "[Public] spending
is untouchable."
It is increasingly evident to ordinary Americans that big government
demands big spending, financed by big taxes and big issues of
government debt, ultimately cleared by big printing presses.
They want it stopped, but the politicians won't budge.
Although this is clearly a problem, some have found a way to
bury their heads in the sand. Early this week, Nobel Prize-winning
economist Joseph Stiglitz said, "The likelihood of a default
is so small, particularly in the United States, because all we
do is print more to pay it back." Never does Stiglitz even
consider that printing in such magnitude could have a downside.
It is hard to imagine a more irresponsible view.
In the United States, the paper cascade has been dizzying. Paper
debt from the originators of sub-prime mortgages, like Countrywide,
became paper liabilities of larger institutions, like Bank of
America, which, in turn, were rescued by yet more paper, issued
by the U.S. Treasury. In addition, a growing number of irresponsible
states, like California, are looking to the Treasury to issue
still more paper, with which to rescue them.
America is not alone. In Europe, governments such as Portugal,
Italy, Greece, Spain, France, and the United Kingdom have spent
excessively and financed it with paper debt and debased currency.
Now, there are urgent pleas for yet more paper to cover the cracks!
There seems to be no end to the amount of paper that politicians
are prepared to print to fend off reality. But, in both America
and Europe, financial markets and the people are rumbling.
Fifteen years ago, European bureaucrats introduced the euro currency
on a fraudulent prospectus. Now, the people of Germany, and even
Great Britain (which guaranteed an opt-out on the euro), are
being pressured to pay for a bailout of the reckless Greek government.
Needless to say, the citizenry is peeved. With additional sovereign
bailouts likely, this popular reluctance may turn into civil
opposition, if not unrest.
In America, recent Democrat reversals and the growth of the Tea
Party movement indicate burgeoning popular discontent. In addition,
last week's difficult Treasury auction of 10-year bonds could
indicate the beginning of resistance in the international financial
markets, as the U.S. government loses both political and financial
credibility.
It appears that ordinary people in America and Europe increasingly
believe that the paperless society should extend to their governments.
Let's hope the politicians come around - before we're buried
up to our necks.
###
Feb 17, 2010
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John Browne
Senior
Market Strategist
Euro Pacific Capital, Inc.
1 800-727-7922
email: jbrowne@europac.net
website:
www.europac.net
 John
Browne is the Senior Market Strategist for Euro Pacific Capital,
Inc. Mr. Browne is a distinguished former member of Britain's
Parliament who served on the Treasury Select Committee, as Chairman
of the Conservative Small Business Committee, and as a close associate
of then-Prime Minister Margaret Thatcher. Among his many notable
assignments, John served as a principal advisor to Mrs. Thatcher's
government on issues related to the Soviet Union, and was the
first to convince Thatcher of the growing stature of then Agriculture
Minister Mikhail Gorbachev. As a partial result of Browne's advocacy,
Thatcher famously pronounced that Gorbachev was a man the West
"could do business with." A graduate of the Royal Military
Academy Sandhurst, Britain's version of West Point and retired
British army major, John served as a pilot, parachutist, and communications
specialist in the elite Grenadiers of the Royal Guard.
In addition to careers in British politics and the military, John
has a significant background, spanning some 37 years, in finance
and business. After graduating from the Harvard Business School,
John joined the New York firm of Morgan Stanley & Co as an
investment banker. He has also worked with such firms as Barclays
Bank and Citigroup. During his career he has served on the boards
of numerous banks and international corporations, with a special
interest in venture capital. He is a frequent guest on CNBC's
Kudlow & Co. and the former editor of NewsMax Media's Financial
Intelligence Report and Moneynews.com. He holds FINRA series 7
& 63 licenses.
321gold Ltd
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