Marc Faber "I Would Commit Suicide In View...Of the Governments We Have Nowadays," Merkel Caves, and Michael Maloney on Money

Got home from work today, turned on CNBC, and to my great pleasure the great Marc Faber was being interviewed.  Good thing I caught it because it was a doozy of an interview, see below:

Like any Faber interview, this one was full of great quotes with this being the standout:

“I think I’m very constructive and I’m a great optimist in life. Otherwise I would commit suicide in view of the kind of governments we have nowadays...For sure they will take wealth away from the well-to-do people one way or the other, and from the middle class they will take it away through inflating the economy and lowering the standard of living.”

You can hear both awkward silence and amusement from the interviewers after this wonderful insight.  Faber sees the financial system for what it is: a collusion of elite financial interests who have Washington D.C. locked to their teets sucking campaign donations and guaranteed employment positions after their terms, all of which is run with a printing press and guns.

“When you print money everything goes up at different times, different asset classes...I think that stocks may still continue to go up, and I would rather own equities than government bonds for the next 10 years.”

In reality Bernanke has three children: his first two with his wife and the stock market.  He showers the Dow with more love than his actual kids with every hint of QE.  Like Faber said, the "print our way out" solutions will continue and German Prime Minister Angela Merkel confirmed it today:

As Merkel ends her speech to the Bundestag on her way out to the Euro Summit, here are the main rhetorical conclusions:

• MERKEL SAYS JUSTIFIABLE TO MAXIMISE EFSF FIREPOWER
• MERKEL SAYS GERMANY `IS NOT THE NAVEL OF THE WORLD'
• MERKEL SAYS EURO CAN'T BE ALLOWED TO FAIL
• MERKEL CITES 'HISTORIC DUTY' TO PRESERVE EUROPE, EURO

And like Lemmings marching toward a cliff, German politicians have followed suit:

BERLIN (MNI) – Germany’s lower house of parliament, the Bundestag,
on Wednesday approved with a large majority the broad outlines agreed to
at the EMU leaders’ summit last weekend to enlarge the capacity of the
European Financial Stability Facility (EFSF) without extending the
guarantees underpinning the E440 billion fund.

No mention of the Supreme Court decision that was supposed to put an end to more bailouts but if the Germans have any spine at all, they will be handing pink slips in mass to the 503 bought-and-paid-for politicians who voted to enlarge the EFSF.  Ambrose Evans-Pritchard over at the Telegraph really let it rip on Merkel:

Dr Merkel has won her vote. She secured an "own majority" for proposals to leverage the €440bn bail-out fund (EFSF) into the stratosphere, with the support of some very sheepish looking law-makers from posturing Free Democrats and Bavaria’s Social Christians.
But what a price she paid. The credibility of her team is shattered. Europe has all but destroyed her, even if she manages to limp on to the next crisis.

The unpleasant truth is that the EFSF leverage proposals are idiotic, the worst sort of financial engineering, legerdemain, and trickery. (my emphasis)
As countless economists have pointed out, it concentrates risk. Germany’s €211bn commitment to the fund is not technically breached but the risk of suffering large and perhaps total loss is vastly increased. Creditor states switch from protected senior status on Greek, Portuguese, or Italian debt to the bottom rung on new slabs of sub-prime structured credit. The bluff might well be called.

Far from preserving the peace of Europe for another fifty years, her policies are more likely to bring about the very mischief and grief she warns against.

And of course such a move isn't without a nice chunk of political posturing:

"Shameless abuse of the truth," was the verdict of SPD (Social Democrats) leader Frank-Walter Steinmeier. The government had acted "tactically" at every turn, "misled the people", "held back information", "crossed every red line", brought Europe "to its knees" with botched policies, and lied blatantly about EFSF leverage.

I find it hard to believe the Social Democrats, if in power, wouldn't pursue the same course.  It all makes for great political theater.

Dr. Pippa Malmgren, an economic advisor to George W. Bush, President to Principle Asset Management, and overall banking insider, is speculating Germany will eventually return to the Deutschemark:

If the ECB under the new leadership of Mario Draghi buys so-called PIG bonds or attempts to print money, Germany will feel it has a central bank that has no "rules" and which simply serves as a blank check to the other member states. This means permanent price instability. If the ECB refuses to monetize the debt and no other white knight can be found (the IMF cannot fill the hole, Germany and China won't fill the hole, Tim Geithner would love to but the American public won't permit it, and the idea that the G20 can do it provokes howls of laughter from G20 government officials), then multiple sovereign defaults will occur well beyond Greece. The Greek default will continue with new haircuts leaving investors lucky to get 20 cents on the Euro. That would mean a substantial fall in the Euro and no possibility of recovery until the last element of default was done. That will feel like permanent price instability to the Germans.

A return to the Deutschemark will not mark the end of Europe, the European Union or the effort to enhance integration. Instead, Germany has already begun to emphasize the need for a new EU Treaty that would compel fiscal harmonization, penalties for those that break the Maastricht Treaty rules and other undertakings that would harden Europe's defenses against economic default risks going forward.

Replacing one printing press with another would only bring short term relief and would likely be a boon to Germany's large export market but it would create many unintended consequences like any fiat intervention does.  The guillotine of diminishing living standards known as central banking is just as damaging in the hands of someone else; the goal should be to set fire to it and not replace the owner.  The powers that be will fight tooth and nail to stop such from occurring however. 

Michael Maloney explains the core issue with government currency creation and fractional reserve banking in this great excerpt of a recent speech give at Casey Research's "When Money Dies" Summit:

He does a pretty good job summarizing the practice of creating money out of thin air though delves into Modern Monetary Theory toward the end.  While he is technically correct that government debt must be continually enlarged to pay off previous debt and that the stopping of such behavior would be highly deflationary and destructive for those who rely on cheapened currency, he hardly touches on the morality of such a system and the need for such a correction.  The whole issue of ethics with state-run fiat systems is never addressed by MMTers (I am not saying Maloney is one) because if they had to deal with such an issue, they would sound like fools.  Who really thinks it's a good thing that a small number of people in society use the threat of theft and coercion to dictate the money legally allowed to be used in a country?  But that's precisely what MMTers use to justify fiat currency systems.  Because the government forces the citizenry to pay taxes in dollars, euros, yen, etc., then that in turn dictates such currency be used as a unit of exchange.  If you think salvation through coercion is a moral system, than you clearly wouldn't have a problem with a gang or organized crime unit putting a gun to people's head, handing out slips of paper with numbers on them, and then promising to provide protection as long as they give those slips of paper back in return as payment.  Oh, and you can only use those slips of paper for all commercial transactions.  If you refuse, well there is a metal cage waiting for you.  Sounds like paradise.