"Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere 'haircuts.' There is no point in devaluing, unless 'to excess' – that is, by enough to actually change trade and production patterns.
That is why Franklin Roosevelt devalued the US dollar by 41% against gold in 1933, raising its official price from $20 to $35 an ounce. And to avoid raising the U.S. debt burden proportionally, he annulled the “gold clause” indexing payment of bank loans to the price of gold. This is where the political fight will occur today – over the payment of debt in currencies that are devalued."
Michael Hudson, The Coming European Debt Wars
"Whatever truths or fables you may find in a thousand books, it is all a tower of Babel, unless love holds it together."
Johann Wolfgang Von Goethe
I liked this quote from Michael Hudson today, although the beginning of the very first sentence is patently not supported by history. Few sovereign nations have the 'right' to legislate their own debt terms to their external creditors, or even to issue their own fiat currency in any manner that they may choose without limitation, to the extent that they wish to have commerce with any other nations and groups not under their direct political control.
In this case, modern monetarists tend to conflate the power of exceptional 'force' and with the rights of any and all sovereigns. In other words, might can make right, but only in exceptional circumstances. A nation that is large and powerful enough certainly does have the ability to enforce some of its judgements, and not just those regarding debt and money, on the rest of the world, at least for some period of time that it is tolerated.
This is not incidental in any way, but cuts to the very heart of the matter. Power to make arbitrary declarations of value by a central authority and have them accepted generally are the ultimate reach in political power. This is the goal of every tyrant, every despot, and every empire, even if they do not consider themselves to be so as they justify this sort of power in their own minds.
Putting that qualification to Hudson's quote aside, and most intelligent people will agree that the power to set valuations cannot be purely arbitrary and without limit, he makes a very good observation that the devaluation of unsustainable debt loads and currencies overhangs by half measure has not been historically effective.
The Western nations, through their central banks and some of their financial dreadnought institutions, are seeking to devalue their currencies and increase the money supplies in what they consider to be a controlled manner. And as most human endeavours seem to go, they are attempting to manage its effects and the distributions of its benefits and consequences, the rewards to those whom they favour, and the deprivations to those whom they do not.
They have been at it for some time. This is a portion of what is called the 'currency wars.'
And to that end, they have been colluding to varying degrees over the price of gold, silver, oil, and a number of other essential, internationally traded items, including global workforce compensation and composition, in order to engineer their holy, grail, a financial solution to the problems of debt and national sovereignty within a largely unrestrained capitalist globalized financial system overseen by an 'enlightened few.'
This may seem more appropriate for Hudson to say, as I believe he adheres to more of a Marxist interpretation of economics than I do, being largely 'unschooled' in the literal sense. But to the close observer this does seem to be the point of the recently very fashionable system of globalisation and conforming of nations, even if by force, to a singular template of governance that certain people within the Western powers have decided is optimal for everyone.
I do know that they have a very hard time to admit their mistakes, and the flaws in their reasoning. The usual response is to keep blaming the limitations of their power, and to seek to keep extending their control more and more, further and further.
They fall into what I have called 'the credibility trap.' They cannot admit their error without impeaching their own behaviour and superiority, their right to rule as a superior person.
This latest experiment in empire building also appears to be failing for all the human reasons of pride and overreach and short term personal greed that one has come to expect from this sort of self-defined, progressively naked power grab designed to bring other people into line with a certain perspective fueled by a particularly insular form of thought.
One thing is for certain is that if you judge it by its works, there is no love, no compassion for others, and the common good of most ordinary people, in it. Even at its best, its seemingly high minded goals are as self-serving and self-referential as the justification used by any pillagers of a weaker people.
And gold seems to be at least one of the perennial canaries in the coal mine, again.
Well, it certainly will prove to be an interesting time for most. Let's see what happens.
Have a pleasant evening.
