Michael Pento continues:

“The excuse being given for the upcoming assault on fiat money is the crumbling economies in Europe, which have taken down emerging markets economies as well.  For example, China’s exports to the EU (17) dropped 16.2% in July, as sales to Italy plunged 26.6% from a year earlier. 

The stumbling world economy has sent prices for base metals like iron ore falling 33% since July, which is the lowest level since October 2009....

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“And now the nucleus of Europe, and Germany, is starting to split.  German unemployment increased five straight months in August to reach 2.9 million.  Factory orders fell 7.8% in June YOY as manufacturing output contracted further in August.

And listen up all you lovers of the Phillips Curve and inflation atheists; Spain’s unemployment rate has just reached another Euro-era high of 25.1% in July.  However, inflation is headed straight up, rising from 1.8% in June, to 2.7% in August.  But this is just the beginning of rising unemployment and soaring inflation.  Just wait until the ECB and Fed launch their attack in September.

The European Central Bank and Federal Reserve are both about to announce, this very month, an incredible assault on the Euro and the dollar.  The European Union said on August 31st that it proposes to grant the ECB sole authority to grant all banking licenses. 

This means the ECB would be allowed to make the European Stabilization Mechanism—if sanctioned by the German courts on September 12th--a bank, which would allow them an unfettered and unlimited ability to purchase PIIGS’ debt.  This is exactly what Mario Draghi meant when he said he would do “whatever it takes to save the euro.”

Not to be outdone, Fed Chairman Bernanke gave a speech on the same day indicating that open-ended quantitative easing will most likely be announced on September 13th.  Fed Presidents Eric Rosengren and John Williams spelled out what open-ended QE means.  The Fed would print about $50 billion per month of newly created money until the unemployment rate and nominal GDP reach target levels set by the central bank.

Incredibly, Mr. Bernanke said in his speech at Jackson Hole, WY that previous QEs have provided “meaningful support” for the economic recovery.  He then quickly contradicted himself by saying that the recovery was “tepid” and that the economy was “far from satisfactory.”  He also said, “The costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.” 

He continued, “…the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor-market conditions in a context of price stability.”  Mr. Bernanke actually believes he has provided the economy with price stability, despite the fact that oil prices have gone from $147 to $33 and back to $100 per barrel in the last four years—all due to Fed manipulations.

Therefore, the Fed believes their attack on the dollar has helped the economic recovery and that it has been conducted with little to no negative consequences.  Of course, you first have to ignore the destruction of the middle class.  And incredibly, Bernanke also believes the $2 trillion worth of counterfeiting hasn’t quite been enough to bring about economic prosperity, so he’s going have to do a lot more.

What the Fed and ECB don’t realize is that their infatuation with inflation, artificial low rates and debt monetization has allowed the U.S. and Europe the ability to borrow way too much money.  Their debt to GDP ratios have increased to the point that these nations now stand on the brink of insolvency. 

And now these central banks will embark on an unprecedented money printing spree that will eventually cause investors to eschew their currencies and bonds.  Therefore, they have managed to turn what would have been a severe recession in 2008, into the current depression in Southern Europe and a U.S. currency and bond market crisis circa 2015.

The only good news here is that the failed global experiment in fiat currencies may be quickly coming to an end.  In the interim, investors that have exposure to energy and precious metal commodities will find sanctuary.”

To learn more about Michael Pento’s financial management services CLICK HERE. 

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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Eric King

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rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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