A
Traumatic August Crisis in Italy and Spain and a Future Potential
Great Explosion?
by
Robert Wenzel
Economic
Policy Journal
Recently
by Robert Wenzel: The
Vicious Attacks on Murray Rothbard
Ambrose
Evans-Pritchard is out with an
important piece in The Telegraph. I have been harping
away in the EPJ
Daily Alert that in recent weeks the U.S. money supply has been
exploding. Pritchard makes the same point:
We have
a glimmer of hope. The key indicators of the US money supply are
at last firing on all cylinders, a dramatic turn for the better
that would normally signal recovery or even a mini-boom within
the next six to 12 months... data from the St Louis Fed show that
America’s M2 money supply grew at a 6.4pc annual rate in
the second quarter, accelerating to 12.2pc in June.
What Pritchard
fails to point out, however, is that the coming manipulated-boom
is a Trojan horse that will contain within it major accelerating
price inflation.
On Europe,
Pritchard warns of a possible 1931 scenario:
My recurring
nightmare ever since the Western debt edifice began to crumble
four years ago is that the denouement would track the events of
mid-1931, when leaders failed to reform a destructive fixed exchange
system (Gold Standard) and the fuse finally detonated on Europe’s
banking system. It was when political blunders turned recession
into the Great Depression, and ideology intruded with a vengeance.
The narrative
of 1931 is already well-known to readers. France sabotaged a rescue
of Vienna’s Credit Anstalt because of strategic disputes
with Germany. This set off a financial chain reaction. Frightened
markets tested the weak links of the Gold Standard. They withdrew
funds from Britain after naval ratings “mutinied” over
pay cuts. Contagion spread back to New York. By October 1931 the
international system had collapsed, though the full horror did
not become evident until the next year. A string of countries
retreated into variants of autarky, or fascism, or both. Communists
and Nazis together won more than half the seats in the Reichstag
election of July 1932.
It is far
from clear that the international order is more secure today than
it was in the seemingly calm days of May 1931...
Read
the rest of the article
August
2, 2011
©2011
Economic Policy Journal
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