Weimar - Zimbabwe - Great Britain??
posted on
Mar 09, 2009 05:58AM
Golden Minerals is a junior silver producer with a strong growth profile, listed on both the NYSE Amex and TSX.
As you probably know, on March 5, the Bank of England (BoE) cut UK controlling interest rates in half - from 1.00 percent to 0.50 percent. That was widely expected, and regarded as unremarkable since the European Central Bank (ECB) also cut rates by 0.50 percent on the day. What garnered global headlines is the other step taken by the BoE. The Governor of the BoE, Mr Mervyn King, has decided to throw the bank headlong into the process of "quantitative easing" by obtaining permission from the Chancellor of the Exchequer to "print" 150 Billion UK pounds. Most of this new money would be injected into the system by means of the BoE printing up "money" and using it to buy the debt paper of the UK government, ironically known as "gilts". This is the one step which the US Fed has been reluctant to take, even though they have been publically considering it since last December.
Your Captain was "startled", to put it mildly, when the move by the BoE was explained by a newsreader on our local (Australian) evening news as follows. Please note, this is a paraphrase, not a quote. "It didn't work in what was called the 'Weimar Republic' in 1923. It didn't work in Robert Mugabe's Zimbabwe. But Bank of England Governor Mervyn King is going to try it anyway. He is going to start printing money to rescue Britain from its worst recession since the 1930s." It is not every day that you see and hear a TV news story like THAT!
Even more piquant were reports from Bloomberg the following day. Here are some quotes:
"We're groping in the dark. Ultimately we'll know it works if the economy turns around, and that we won't know for a couple of years."
"It's effectively printing money, but because all the other government policies haven't worked, I don't think the Bank of England was left with any other choice."
"While UK officials are at pains to deny similarities with the economic policies of Robert Mugabe's Zimbabwe, where printing money has fuelled hyperinflation, some economists argue that the Bank of England hasn't much of a choice left."
My word, we are getting right down to it now. The most surprising thing is not that the BoE has now bitten the bullet and embarked on out and out debt monetisation by creating the money to "buy" the government's debt paper. The remarkable thing is that this has been reported quite bluntly in news media all over the world without any kind of response at all.
Well, perhaps that's not quite true. After all, the $US Gold price did do an abrupt turnaround after the BoE announcement, regaining all of its losses earlier in the week over the last two days of the week.
The most hilarious, and potentially tragic, aspect of the entire desperate situation is simply this. No matter how drastic the actions of the "regulators" and the "authorities" become, the same justification has been offered every step of the way. That is simply that the alternative was to do "nothing", and that would have been worse than the situation that we now all confront.
This is, of course, utterly false.