LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
Economic Outlook Darkens


 -- Published: Thursday, 17 April 2014 | Print  | Disqus 

An article by Alasdair Macleod, Head of Research, GoldMoney

Many decades of Keynesian-inspired economic and monetary corruption have left advanced economies with a legacy of debt and low savings. In a nutshell, that is the problem which is driving us into another financial crisis. That moment could be drawing upon us, signalled by the recent collapse in bond yields.

This nearly happened in 2008. It was bought off by an open-ended central bank guarantee of infinite quantities of cash and credit, initially by the Fed, rapidly followed by all the other major central banks. Six years later, monetary medicine is still being applied globally in unprecedented quantities. And in some countries bank credit has finally begun expanding more rapidly than before.

The counterpart to bank credit is debt, which is fuelling economic growth wherever it can be found. Even exports are on tick, with the ultimate buyers around the world also heavily dependent on credit. Indeed, the more one looks at the current business cycle, the more its current state resembles 2007-8 and 2000-01 before that.

Credit cycles unbacked by substance start like this: print some money to inflate asset prices. Collateral values then increase, stimulating bank lending. Borrowers buy property and stocks, increasing prices and spreading the feel-good factor. Now that personal balance sheets are “repaired”, they buy new cars, new holidays and second homes, all on tick. Welcome to this point in time: the accumulation of debt has stopped us from increasing demand any further. The progression of events from here varies but the end result is easily predicted: it runs out of steam and turns into a financial crisis.

So how do we get away from this depressing and predictable cycle of events? The answer is simple: stop relying on the expansion of money and credit. We have forgotten that before Keynes told us to borrow to spend, debt was only taken on by entrepreneurs and businesses for very specific purposes as a last and not a first resort, and certainly not for everyday consumption.

This was the reasoning behind Says Law, which states very simply that people produce things so that they can buy other things. Keynes replaced this logic with a different story: there’s no need to make things in order to spend, so long as the state ensures you have the money available.

Understanding Keynes’s mistake is the key to changing course away from repetitive cycles of economic destruction. Instead of printing money and encouraging borrowing, people should instead be encouraged to save. The truth of Say’s Law can then operate, with people only spending what they can truly afford. Instead cash-strapped governments are likely to increase taxes on savings when they should be dropping them altogether.

After six years of monetary and tax policies that could have not been better designed to destroy savings and the savings ethic, you’d think governments might have learned some sort of lesson. They are having none of it. Instead Japan is hell-bent on monetary kamikaze, and the ECB is now warming us up for negative interest rates and/or QE.

The problem is far from being understood: if anything the destruction, even confiscation of savings, and the creation of yet more money are set to accelerate in a futile attempt to buy off the inevitable. And bond yields are telling us to batten down the hatches for the next crisis: it could be worse than 2008.

Ends

NOTES TO EDITOR

For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney is one of the world’s leading providers of physical gold, silver, platinum and palladium for retail and corporate customers. Customers can trade and store precious metal online easily and securely, 24 hours a day.

GoldMoney has offices in London, Jersey and Hong Kong.  It offers its customers storage facilities in Canada, Hong Kong, Singapore, Switzerland and the UK provided by the leading non-bank vault operators Brink's, Via Mat, Malca-Amit, G4S and Rhenus Logistics.

Historically gold has been an excellent way to preserve purchasing power over long periods of time. For example, today it takes almost the same amount of gold to buy a barrel of crude oil as it did 60 years ago which is in stark contrast to the price of oil in terms of national currencies such as the US dollar.

GoldMoney is regulated by the Jersey Financial Services Commission and complies with Jersey's anti-money laundering laws and regulations. GoldMoney has established industry-leading governance policies and procedures to protect customers' assets with independent audit reporting every 3 months by two leading audit firms.

Visit www.goldmoney.com.

 


| Digg This Article
 -- Published: Thursday, 17 April 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.