| November 17, 2008 at 05:10:40 Headlined on 11/17/08: by Stephen Lendman Page 1 of 8 page(s) |
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Worse Than the Great Depression? - by Stephen Lendman
It's a minority but growing view, including from 86-year old former Goldman Sachs chairman, John Whitehead, at the November 12 Reuters Global Finance Summit in New York. As disturbing evidence mounts, he said: "I think it would be worse than the depression. We're talking about reducing the credit of the United States of America, which is the backbone of the economic system. I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America.
Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S & P will announce a downgrade of US government bonds. Eventually (they'll) no longer be the triple-A credit that they've always been. I've always been a positive person and optimistic, but I don't see a solution here." Powerful words from a man who "want(s) to get people thinking about this, and realize (we're on) a road to disaster."
A subject writer, precious metals analyst, and Safe Money Report editor Larry Edelson also comments on. Most recently on November 13 in an article titled: "The G-20's Secret Debt Solution." He's quite dire in saying short-term fixes won't be discussed at its November 15 summit. A "far more fundamental fix is being (secretly) discussed - the possible revaluation of gold and the birth of an entirely new monetary system." It's a topic Edelson has spent much time on previously.
Given the speed and severity of the current crisis, he believes something big is planned and puts it this way: "If we can't print money fast enough to fend off another deflationary Great Depression, then let's change the value of the money." In other words, devalue it, but do it globally. "It would be a strategy designed to ease the burden of ALL debts - by simultaneously devaluing ALL currencies (or at least all that matter) and re-inflating ALL asset prices."
Edelson thinks G-20 officials will discuss this seriously. Essentially, the idea of "a new financial order that includes new monetary units that (will help) wipe clean the world's debt ledgers." At best, it will be a tough sell given that the US, by far, is the world's largest debtor and the one most in need of help. The urgency for all others is that if America sinks, it'll drag down all world economies with it, so it's possible some kind of solution will be arranged. But it's not assured, nor can it be ruled out that the summit will be stalemated as every nation has its own concerns and its own constituency to serve.
Edelson believes that key US officials, including Fed chairman Bernanke, Treasury secretary Paulson, and president-elect Obama back the idea, and (most but not all) key world central bankers and politicians agree that a new monetary system is needed.
Consider a historical precedent at a previous dire time - the Great Depression. In April 1933, Roosevelt issued Executive Order (EO) 6102 that stated:
....a "national emergency still continues to exist (and) by virtue of the authority vested in me....(I) do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations...."
The EO required the delivery on or before May 1, 1933 "to a Federal Reserve Bank or a branch or agency thereof" all such holdings other than amounts used in industry, profession or art and other listed exceptions. Failure to comply carried a fine up to $10,000 (adjusted for inflation today would be 16 times or more that amount), up to 10 years in prison or both. This EO is called the Gold Confiscation (act) of 1933. It's price at the time was $20.67 an ounce. Shortly thereafter, it was raised to $35 an ounce for an effective US dollar 41% devaluation.
What Edelson is suggesting is that world economies together will do the same thing - "a simultaneous and universal currency devaluation" without confiscating gold. They don't have to and instead can "raise the current official central bank price from its booked ($42.22) value an ounce - to a price that monitizes a large enough portion of the world's outstanding debts."
If this happens, debts will be reduced to a fraction of re-inflated asset prices "led higher by the gold price." Further, Edelson believes, in place of the dollar as a reserve currency, "three new monetary units of exchange (will emerge) with equal reserve status" - a new dollar, euro and "a new pan-Asian currency" with the Chinese yuan likely surviving and linked to a basket of the other three.
With devaluation, new currencies will be worth less than the old ones by a considerable amount. For example, "10 new units of money (may then equal) one old dollar or euro." They'll have new names as well, and new "regulations and programs would be designed and implemented to ease the transition to a new monetary system" - if it happens and it's by no means assured.
But if it does, central banks and governments would run things along with the IMF that's had contingency plans for such an eventuality since it was established in 1944. According to Edelson, a new monetary system will include the following:
(1) A new fixed-rate currency regime
Once the price of gold is increased and new currencies introduced, "a new fixed exchange rate system" will be introduced. The floating one and old currencies will be eliminated to reduce market volatility.
I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.
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