Tuesday, February 26, 2013

"Trust Me - This Time It's Different ??"

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"Trust Me - This Time It's Different ??"
Posted By: Lion [Send E-Mail]
Date: Tuesday, 26-Feb-2013 21:01:18

Sovereign Man
Notes From The Field
Date: February 26, 2013
Reporting From: Santiago, Chile
By 1789, a lot of French people were starving. Their economy had long since deteriorated into a weak, pitiful shell.
Decades of unsustainable spending had left the French treasury depleted. The currency was being rapidly debased.
Food was scarce, and expensive.
Perhaps most famously, though, the French monarchy was dangerously out of touch with reality, historically enshrined with the quip, "Let them eat cake."
The Bourbon monarchy paid the price for it, eventually losing their heads in a 1793 execution. But it took the French economy decades to finally recover.
Along the way, the government tried an experiment: issuing a form of paper money. It didn't matter to the French politicians that every previous experiment with paper money in history had been an absolute disaster.
As French Assemblyman M. Matrineau put it in 1790, "Paper money under a despotism is dangerous. It favors corruption. But in a nation constitutionally governed, which itself takes care in the emission of its notes [and] determines their number and use, that danger no longer exists."
Translation: This time is different. We're different. We're smarter. We won't suffer the same fate. TRUST US.
Within a few years, hyperinflation had taken hold in France. A measure of flour that sold for two francs in 1790 was selling for 225 francs by 1795. Everything soared. Carriage hires. Butter. Sugar. Everything.
Naturally, the French government decided to fix this problem by printing even more money, doubling the money supply from 7 to 14 billion units in a six-month period.
When these measures also failed, the French government imposed every control in the book-- price controls, capital controls, information controls, people controls. They confiscated lands, they filled the prisons, they waged genocide against their own people.
History shows there are always consequences to entrusting a paper money supply to a tiny handful of men. The French experiment is but one example. Our modern fiat experiment will be another.
Like the French, our politicians think this time is different. Our central bankers think they're smarter. And they want us to trust them. After all, what could go wrong?
Ben Bernanke, a man who has expanded the Federal Reserve balance sheet by nearly 300% during his tenure as central banker, just wrapped up Congressional testimony downplaying the risks of his own money printing:
"We do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery..."
It's also quite interesting that the Federal Reserve Chairman is discussing the 'stronger' economy, especially when by the government's own numbers, US GDP contracted in the 4th quarter of 2012. Meanwhile the price of everything from food to fuel keeps getting higher.
Simultaneously, politicians in the US are racing to avoid imminent 'sequestration' budget cuts. They've created a problem caused by excess spending, and their solution is to ensure they can keep spending.
The French were in the same boat in the 18th century. During the time of Louis XV, no one could imagine how French society could possibly function if they cut the welfare system or defense budget. So they kept spending... kept going into debt... and kept debasing the currency.
We know what happened next.
The US already must borrow money just to pay interest on the money they've already borrowed. The political elite is dangerously out of touch. This time is not different. Assuming otherwise is really dangerous.
Until tomorrow,
Simon Black
Senior Editor, SovereignMan.com


Anonymous said...

the article said
"By 1789, a lot of French people were starving. Their economy had long since deteriorated into a weak, pitiful shell.
Decades of unsustainable spending had left the French treasury depleted. The currency was being rapidly debased."

This is true. One of the reasons was the large amounts of aid that the French were giving to the rebelling American colonialists. Much money, soldiers, ships, 80% of the gunpowder, etc. On some battlefields there were more French soldiers than colonialist soldiers.

Without the largesse of the French king, the American revolution would have failed miserably.

Next time you are subjected to propaganda about the French being against America for not wanting to participate in an illegal invasion of Iraq or another country, reject the nonsense of renaming French fries to freedom fries or pouring French wine onto the street. This is pure propaganda for the uneducated.

Most unfortunately, Chirac is gone and now the French are participating in illegal actions against other countries.

Anonymous said...

In Germany at the height of ww-2, a wheel barrow of PAPER money was used to buy a loaf of bread. The shop keeper took the wheel barrow in exchange. The paper currency was near worthless because of over printing and not backed by anything but "faith" Two years earlier a young bell hop was given a one ounce gold piece as a tip from a patron of a hotel. This young man kept it and was able to buy not only the hotel where he once worked, but the ENTIRE city block surrounding the hotel!! What are the rich buying right now? Do what the smart and rich do. Most know what is right around the corner. As Drake would say---"Think About It"

Anonymous said...

"Paper money under a despotism is dangerous. It favors corruption."

Does this phrase ring any bells?
Our paper (fiat) money system is what our problem is. Jefferson warned us; Lincoln and Kennedy paid the ultimate price for their attempts to circumvent the fraud they tried to stop. Time to wake the flock up.