Trichet Under Pressure To Outline Plan For Deflation
There was a time not too long ago that the European Central Bank was praised and the Fed was ridiculed by most. When the Fed started cutting rates some of my favorite financial industry personalities including Marc Faber were talking the Euro up as a sound currency versus the deleterious dollar. Most mistook the massive commodity bubble for inflation. And very inaccurately reported it was because the Fed was printing massive sums of money. Remember those lies? Our position was that the commodity bubble was signaling deflation. And, when the Fed started cutting rates rapidly that the U.S. was the only central bank that got it.
The Fed's quick action also allowed the U.S. to raise substantial sums of money from investors and countries that were unaware of the shifting earth beneath their own feet. Money that is now unavailable to anyone. Money, that were it to be repatriated today, would be at massive losses. Can you say sovereign wealth funds? Don't worry. In time most of those sovereign wealth funds will likely be selling their investments back to us at a very lucrative price when their forced selling begins.
Wrong way Trichet has damaged the reputation of the ECB and has significantly contributed to harming the European economies. More than ever, I think there are reasonable probabilities the ECB will not survive. If they do, they are going to have to modify the membership requirements. Downward, that is. There goes that race to the bottom of the barrel again. I never underestimate the ability of a bureaucracy to survive so even though the ECB has been a failure and will continue to earn that title, it won't go quietly. It will take political will from sovereign countries. And, that political will will only come from the people. Just like in China. Just like in the Soviet Union. Just like in the USA. The people drive change. Not the bureaucracy.
Trichet is now under the gun to prepare a plan to fight deflation. Trichet's bias will die a slow death. That will very likely continue to economically damage member countries.
The Fed's quick action also allowed the U.S. to raise substantial sums of money from investors and countries that were unaware of the shifting earth beneath their own feet. Money that is now unavailable to anyone. Money, that were it to be repatriated today, would be at massive losses. Can you say sovereign wealth funds? Don't worry. In time most of those sovereign wealth funds will likely be selling their investments back to us at a very lucrative price when their forced selling begins.
Wrong way Trichet has damaged the reputation of the ECB and has significantly contributed to harming the European economies. More than ever, I think there are reasonable probabilities the ECB will not survive. If they do, they are going to have to modify the membership requirements. Downward, that is. There goes that race to the bottom of the barrel again. I never underestimate the ability of a bureaucracy to survive so even though the ECB has been a failure and will continue to earn that title, it won't go quietly. It will take political will from sovereign countries. And, that political will will only come from the people. Just like in China. Just like in the Soviet Union. Just like in the USA. The people drive change. Not the bureaucracy.
Trichet is now under the gun to prepare a plan to fight deflation. Trichet's bias will die a slow death. That will very likely continue to economically damage member countries.
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