Will the synchronized rate cuts solve the problems in the international financial system? Our correspondent in Buenos Aires wants to know.
“Developed economies spent the last decades criticizing decisions made by developing economies in the midst of crisis,” notes Horacio Pozzo. “Today, the world’s leading countries take the same measures without considering the consequences…”
And here we return to the scene of a crime that has not yet been committed. An explanation: all sovereign governments have the power to steal. They do it openly – through taxation. They also do it clandestinely – by means of inflation. Each country controls its own money (with the exception of the countries of Europe, who have decided…perhaps temporarily…to use a common currency). Since this paper money can be created at negligible cost to the creator, countries are tempted to create more of it than they should – especially in times of war or financial crisis. Historically, what has kept this from happening was that the paper currency was tied to gold. More recently, currencies are tied to the dollar. And since countries trade with one another, a sin by one country – printing too much money – is punished by the others. They mark down its money.
But now, all the world’s major countries are conferring, colluding, and conspiring. They’re all going to do the same thing. They’re all going to take over their banking systems, support their financial industries, bail out important businesses and rescue their citizens from their own mistakes. Where will they get the money for all this? Will they borrow it from each other? Don’t be silly; they will print it.
for The Daily Reckoning Australia