What is wrong about the euro, and what is not

Photo of Angela Merkel

Every Monday morning the readers of the UK’s Daily Telegraph are treated to a sermon on the benefits of Keynesian stimulus economics, the dangers of belt-tightening and the unnecessary cruelty of ‘austerity’ imposed on Europe by the evil Hun. To this effect, the newspaper gives a whole page in its ‘Business’ section to Roger Bootle and Ambrose Evans-Pritchard, who explain that growth comes from government deficits and from the central bank printing money, and why can’t those stupid Europeans get it? The reader is left with … [Read more...]

The triumph of politics

Richard Nixon

On August 15, 1971, President Richard Nixon declared that the United States would no longer honour its promise to exchange US dollars held by foreign central banks for gold at a fixed price of $35 an ounce. The innocuous term 'Nixon closed the gold window' that is now widely used to describe this act does not quite convey its significance. (Was something to be stopped from going out or from coming in through the window? Can the window be reopened again?) What Nixon did was cut the last remaining official link between the … [Read more...]

Does the ‘recovery’ matter?

green shoots among coins

I was thinking of starting this blog with a cynical comment along the lines of, last week equity markets came off, I think we need another EUR1 trillion from the ECB! - Okay, maybe it wasn't the greatest joke but you get the idea. But then the Wall Street Journal beat me to it, and they weren't even trying to be funny. In an article on weaker data in the Euro Zone one could find this remark: "The unexpected drop in the purchasing managers' index survey suggests more stimulus from the European Central Bank through … [Read more...]

Deceits and delusions – Some thoughts on the euro-crisis and democracy

Eurotower In Frankfurt

Anybody with any knowledge of economics should feel uneasy at the sight of a country where half of recorded economic activity is conducted by the state. Are such semi-socialist societies operable, and if so, for how long? That complete socialism is impossible and that any attempt to establish it must fail, we know for sure since Ludwig von Mises explained it in detail in 1922 with his masterly Die Gemeinwirtschaft (Socialism). The only reasons that the Soviet Union did not collapse earlier but managed to drag out its … [Read more...]

The nightmare after Christmas

Christmas motive

 The pathetic state of the global financial system was again on display this week. Stocks around the world go up when a major central bank pumps money into the financial system. They go down when the flow of money slows and when the intoxicating influence of the latest money injection wears off. Can anybody really take this seriously? On Tuesday, the prospect of another gigantic cash infusion from the ECB's printing press into Europe's banking sector, which is in large part terminally ill but institutionally protected from … [Read more...]

Last week in Europe – Some thoughts on the ongoing crisis

Euro banknotes

 Apologies to my readers that no new contributions have appeared on the Schlichter Files for two weeks, and in particular that I did not get around to responding to some of the questions and comments on my blog.  I hope to rectify this shortly. I was committed to a few speaking engagements in connection with my book Paper Money Collapse - The Folly of Elastic Money and the Coming Monetary Breakdown. Also, the brokerage firm CLSA was so kind to arrange a whole string of meetings with their clients in London and in Milan on … [Read more...]

The short of the century – The bubble in government bonds is finally bursting

Government bonds

"The government can always pay." This is a statement that has no basis in fact. Any rational analysis will quickly expose it to be a fallacy. Economic theory, economic history, and plain good old horse sense can demonstrate effortlessly that this statement is an illusion. Yet, it is today a widely held and deeply cherished illusion in the world of finance (and, incidentally, the world of politics). In fact, it has become one of the defining myths of the modern fiat money era. It has for decades provided portfolio managers … [Read more...]

What should Obama do? – Interview with Detlev on ValueWalk.com

Picture of Detlev Schlichter

Jacob Wolinsky of the US website ValueWalk.com conducted an extensive interview with me that covered a wide range of topics, from my own background and the appeal of Austrian School Economics to what I think Obama and Bernanke should do. You can read it here or here. … [Read more...]

Europe’s future is coming into focus: hyperinflation

Hyperinflation In Hungary

As you know, my expectations were low to begin with. I did not expect the EU summit on the debt crisis to provide a solution. There is no solution. The situation is beyond repair and the crisis will continue to unravel. What struck me most when reading the first responses to the EU summit was this: most of what you get from the mainstream media pundits or from the financial economists on Wall Street or in the City of London not only misses the relevant points, it usually gets things completely the wrong way round. What … [Read more...]

Tonight: Webinar at the Mises Institute on the Fiat Money Crisis

Fiat Money Crisis

The Ludwig von Mises Institute in Auburn, Alabama, has kindly invited me to host a webinar for the Mises Academy on the topic of  "The Fiat Money Crisis: The Market, the Central Banks, and the Coming Monetary Breakdown" tonight at 6 pm U.S. Eastern time (11 pm British Summer time). If you are interested in joining in, please click on the picture on the left for a link to the Mises Academy. … [Read more...]