Good news? Bad news? Or just another chapter in the power struggle between nations. Is this a kind of replay of 1933 when Roosevelt confiscated gold; all private gold that was in the possession of American citizens had to be turned over to the Federal Reserve Board, the centralized banking warehouse of the Western financial system. The result would be a massive devaluation of the dollar. This confiscation of personal gold stores was resisted by many in America and around the world as well as many Asian families; It can be considered as one of the catalysts that helped kick-start the onset of World War II and reveals the role of gold in world politics. Is paper currency a sham that could crash and burn, and are even gold certificates a derivative product, without the assets to give them credibility? Maybe some things have not changed too radically since King Solomon’s time….
( see link at end) …It’s because Germany, it appears, wants to make gold the effective currency of the euro zone before the region plunges to the bottom of the seas like a concrete U-boat.
The weakest euro zone countries are tapped out financially and economically. But a few of them are brimming with gold reserves. Take Italy, the euro zone’s third-largest economy. The Italians love gold and it’s stashed everywhere, in their central bank and in their jewellery and safe deposit boxes. At last count, the central bank had 2,451 tonnes of gold, valued at close to €100-billion ($128-billion). That’s not a fortune compared to Italy’s €1.9-trillion national debt, but it’s not bad when Rome is raiding the pantry to pay its ever-rising debt….
…Germany’s idea is coyly named the European Redemption Pact and it is nothing if not creative. While details are scant, here is roughly how this gilded baby would work. Countries with debts greater than 60 per cent of gross domestic product – the (ignored) limit under the European Union’s Maastricht Treaty – would transfer those debts into a redemption fund, which would be covered by joint bonds. The scheme has been called “euro bonds lite.”…
…Here’s the catch. Countries using the scheme (most would, including Germany, because of generally high debt-to-GDP ratios) would have to cover 20 per cent of their debt with collateral, payable in gold or currency reserves. Default on the payments and you lose your gold. The “sinking” fund would retire the debt over 20 years.
Italy set the precedent in the 1970s, when it was in the midst of one of its blandly regular financing crises and resorted to a gold-backed loan. The loan was quickly paid off, because there was so much political pressure to do so. If the finance minister had forfeited the Italian family jewellery, the entire government would have been embarrassed and humiliated, then turfed from office.
There’s a lot to like about the European Redemption Pact, politically and economically, and a lot not to like if you’re worried that this German-inspired fund is the mother of all potential loot grabs.
On the positive side, the gold bricks are piled up like Lego in central bank vaults. They are unpledged and devaluation-proof, meaning the gold-backed loans would be ultra-cheap – probably 1 per cent. Politically, a gold-backed loan is defensible, in the sense that it’s cheap. The alternative is trying to flog sovereign bonds at crippling yields – 5 to 7 per cent. That, in turn would mean ratcheting up the austerity programs in an attempt to restore enough investor confidence to bring yields down.
The downside, of course, is potential default, which would mean transferring a huge chunk of a country’s hardest, most gorgeous assets – and hence economic power – out of the country. You would have to presume, howevehat any country would be ultra careful to make sure it gets the gold back, as Italy did.
The political consequences of the European Redemption Pact are one thing; what the gold-backed loans say about the common currency is quite another. The underlying message is not pretty. Germany, the supervisor of the pact and presumed inheritor of the gold if the loans are not repaid, seems to be saying: We don’t trust the euro as it is; it’s too weak, so give us a stronger gold-backed euro. Doubts about the health of the euro only increased on Friday, with more reports that Spain would formally seek a European bailout for its gutted banks as early as this weekend.
If the ailing European countries accept the gold deal, it would strengthen the euro. If they were to reject the deal, it would hurt the euro. Why? Because rejection, in effect, would state that they can’t muster the fiscal discipline to ensure they get their gold back….
The European Redemption Pact is a psychological biggie. If it were to happen, it would say that gold is a key central bank reserve and that it can be an effective crisis management tool.
Two questions. If Europe goes for the gold-backed deal in an effort to save its sorry butt, what does this say about the credibility, or lack thereof, of fiat currencies around the world? And would it save the euro from extinction? Desperate times require desperate measures. We can all agree the euro is a pig. A pig stuffed with gold is an entirely different beast.Read More:http://www.theglobeandmail.com/report-on-business/international-business/european-business/a-golden-idea-to-save-or-doom-the-euro/article4243556/
( see link at end) …planned wealth distribution and resource allocation, struggle for elimination of economic and political inequalities and class privileges, utilization of human potentials, dominance of the interest of the immediate producers at the workplace and of working people in all spheres of society including control over politics and ideas. Secondly, a Dengist China that is returning to market capitalism based on privatization of ownership, marketization of the means of production and resource distribution, acceptance of economic inequities and political privileges, emphasis on science and technology as the primary productive forces, promotion of the interests of the privileged, professional and entrepreneur classes, and commercialization of welfare and social security benefits.
…This historical transformation from Mao to Deng represents a sharp departure from the past as to national objectives, political agenda, economic development, and, more importantly, ideological convictions. In the era of Mao’s socialism, depending on how one assesses its successes and failures, China was characterized by a historically unique experiment to skip over the stage of capitalism and to bring about a socialist transformation of both the social structure and the consciousness of its people in ways that defied conventional ideological and political norms in established capitalist as well as socialist states. In the current era of Dengist market socialism, China is undertaking a modernization process by embracing capitalist practices, while at the same time incorporating itself into the existing world system. The profound differences between revolutionary socialism’s emphasis on state ownership and welfare, collectivism and egalitarianism and market socialism’s increasing capitalist characteristics: privatization, marketization, class polarization, regional disparities and increasing inequality, have brought about serious contradictions which will have to be tackled sooner or later.
It is observable that events and changes taking place in China since 1976 have resulted in a situation in which the history that my generation
had learned and experienced is being totally rewritten: the Chinese Revolution (1921–1949), which founded the new China, has been assessed by radical reformist intellectuals as a mistake which prevented China from becoming as “developed” as major Western industrial powers. Mao
Zedong, who used to be praised as a great leader, is criticized by them as a “dictator” who created only disasters and was responsible for China’s
backwardness. “Mao Zedong Thought” is often described as being political “madness” or “irrationalism.” The cult of Mao is now viewed as “proof of the persistence of the traditions of oriental despotism or a manifestation of The Chinese Cultural Revolution Revisited feudal-fascism,” and the Cultural Revolution (hereafter the CR), which not long ago was widely praised as an innovative and revitalizing socialist alternative for China’s development, is described as a “ten year disaster” that was responsible for causing a political and economic catastrophe and for the severe setbacks and the heaviest losses suffered by the party and the country. Chinese socialism, which a short while ago was seen as a revolutionary model worldwide and as an ideological menace by both the US and the USSR, is deemed to be a failure for delaying China’s catching up with the advanced nations, and the history of socialism in China has been “little more than a story of impractical, utopian dreams born from conditions of backwardness.” Read More:http://www.chineseupress.com/promotion/China%20Review/5-Li.pdf