(As featured on Business World Online, Philippines, 24 March 2013)
In 2013, we find many financial markets around the world still immersed in the depths of an economic crisis. A crisis that will see central banks in battles amongst themselves, going forward into the year.
Today’s unbacked fiat currencies are at the root of an emerging global monetary problem. While the talk of “recovery” in recent months now populates headlines, the desperate actions of politicians and central bankers show the contrary.
The Federal Reserve (Fed), European Central Bank (ECB) and the Bank of Japan (BOJ), cannot stop creating new base money. Central Banks want to present confidence to the markets. Where the risk lies for monetary policymakers is in the value of the debt on bank balance sheets, and the value of the debt across the broader economy. This debt is being held at par because interest rates should be much higher. All of this has led to a situation where interest rates do not reflect true inflation.
There is a saying “the further back you look into the past, the more certain you can be about the future.” History has shown that currency debasement ALWAYS leads to inflation and ultimately hyperinflation. This happened to the Roman Empire, the Weimar Republic in Germany, Argentina and most recently Zimbabwe where inflation peaked at 7.96 billion percent.
You would think that people would learn from history. Well, apparently not.
