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Ear to the Ground

Soros Sounds a Warning on the Future of EU

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Posted on Jun 26, 2011
Flickr / World Economic Forum

George Soros speaks at the World Economic Forum annual meeting in Switzerland in early 2010.

George Soros issued a dire warning to the European Union recently, stating that fundamental flaws in the design of the euro are preventing economically distressed nations like Greece from getting back on their feet and threatening the very existence of the EU.

Because EU member nations cannot print their own money, they are not able to bail themselves out of a financial crisis by simply making more cash and distributing it among their citizens, as Ben Bernanke did with U.S. banks in 2008. As a consequence, they are forced to either increase the taxes of those who can pay them or impose austerity measures on citizens who are dependent upon social services. —ARK

Reuters via The Huffington Post:

“The euro had no provision for correction. There was no arrangement for any country leaving the euro, which in the current circumstances is probably inevitable,” he [Soros] said.

While he called survival of the European Union a “vital interest to all,” he said the EU needed structural changes to halt a process of disintegration.

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By radson, June 29, 2011 at 6:32 pm Link to this comment

Paulie thx for the response :The predicament that the majority is in at the moment is rather ugly and going to become worse before it gets any better.The USA for all its merits -I am
referring to its citizens - has been waylaid by a bunch of crooks .This is no longer the America that the soldiers returned home to after the second world war and their desire to live
in peace amongst their neighbors.It was unfortunately supplanted by the ruling class that understood that a new leadership was possible due to America’ new found dominate role on the global stage and its been more or less downhill since then.War after war for whatever reason that could be found in a dictionary of lies ,although the threat from Stalinism was real until about the first ‘thaw ‘of the Khrushchev era .The new-fangled Deal is about Globalization and a Central Government along with a central bank and the ICC for good measure ,yet there remain certain obstacles before this Ideology can be implemented and that of course is the question of Russia and China .One of which is basically self-sufficient
in natural resources while the other is very similar to the USA in their lack of Oil.Interestingly China is becoming more open and capitalist while the US is becoming more Sovietized ,in its state of paranoia fueled by this so-called war on terror.

You’re alluding to the possibility that the European Monetary Union is not such a brilliant idea and that countries should perhaps retain their own form of currency .In Greece’ case
it would have eased the turmoil,but that is not the purpose of the EU ,in essence its about relinquishing sovereignty and being controlled from a central administration ,hence easier to
control and manipulate ,that is why England has not agreed to join although some analysts may claim that England is party to this new banking establishment.The prospect of having
Americans further indebt themselves in order to rekindle the economy has its merits ,since debt has been a fiscal reality in America for so many years now .Although the type of growth
must be taken into consideration when limited Global resources are calculated.I agree that the average citizens must be encouraged to participate in the renaissance of the country
but a new lode star must be the guiding factor .The opportunity to have changed the existing status quo was neglected during the latest economic crises ,when the crooks of the establishment decided to bail out the banks at the expense of the populace and not only rob them but guarantee that the tax payers will also have their children indebted to the bankers ;a despicable double whammy.There more than likely will be another bubble bursting in the near future ,this time the American citizens must let the ‘too big to fail’ collapse as they have proved their uselessness and support the smaller banking institutions that can ,if given the capital -even if it is Fiat -in promoting the rebuilding of the American infrastructure
but within an environmentally friendly theme.

PS Dave I appreciate your honesty

Cheers

Report this

By paulie46, June 29, 2011 at 5:11 pm Link to this comment

@DaveZx3

I knew when I voted for Obama that he wasn’t a progressive, but I had no idea
that he would immediately be co-opted by the very forces that he campaigned
against.

I will have to return to my previous practice of holding my nose no matter who I
vote for. One in a hundred may care about the ordinary citizen.

I was hoping for more for my kids and grandkids.

Nowadays I feel like a citizen of the world, not an American. I have no pride of
country left. I only have something in common with the working people of the
world. It’s us against the elites - they don’t care what happens to us, but we
out-number them 100 to one, so maybe there’s a chance.

Hopefully the young are smarter about it than we were.

It’s been a pleasure chatting with you.

Good luck

Report this

By DaveZx3, June 29, 2011 at 4:31 pm Link to this comment

Paulie,

Yes, interesting.  I went on medicare a year ago.  I find that it sucks.

I spent most of my earlier life neutral and naive to politics, voting for the candidate with the coolest hair.  But I always considered myself of the common man’s party, which used to be the Dems.  I could not stand Reagan when he was in office, not necessarily for political reasons, but for Nancy and for the fact that he seemed like someone with alzhiemers all the way back then.  I now have some respect for him, because I actually understand his politics.  As you said, at least Republicans explain how they are going to screw you, and I appreciate that, because I can take some measures to avoid the screwing. 

The political part of my brain woke up when I saw the way the Democratic party was hijacked by mostly academic elites and took a sharp turn to the left.  My major problem with them was they were pushing a type of communist, godless agenda.  I was not someone who actually went to church, but I did have a belief in God. 

I realized very young, hearing all the scary nazi stories from my dad and uncles, who fought the Nazis in Europe, that freedom was something very precious and never to be taken for granted.  I was taught by my family to appreciate the language of the founders, that “all men were created equal, endowed by their CREATOR…..”  They told me that freedom was a birthright, but men would ALWAYS try to take it away. 

That never left me.  I have never trusted men, their governments, their economic systems, their educational systems, every freakin’ system they invent, I don’t trust. The elite have perverted them all for their own gain. 

So to my mind, that only leaves God, who I don’t claim to understand, but I see God as a far more reasonable bet than men, and that includes the fraudulent religions of men, which do not confom to Christian teaching. 

Does it show that I don’t trust their fiat monetary system?  I respect your obviously deep understanding of it, and I have no doubt that it is probably not inherently evil, but to a simple man, anything that requires more than 5 mintes to explain is probably something which is going to be used to screw him good. 

I had no use for 2000 pages of health care either.  My version of healthcare would have been a few words “go to the doctor and send us the bill, PERIOD”  By the time it got to 2000 pages, you know you were going to be screwed.  The easiest way to screw the average joe is to make up rules he doesn’t understand.  Not because he’s not intelligent, but because the rules are ignorant.  But that is my mentality, and I don’t bother to apologize for it.

There is no left and right in my mind anymore, I evauate everything by whether it enhances liberty or it causes some sort of bondage.  Those are the two poles of the political spectrum, freedom and slavery, not left and right.  Left and right are both on the slavery end of the pole, IMHO

I don’t care what type of political system you want to put in place, but I reserve the absolute right to vigorously oppose the idea that I am obligated to be a subject of it.  I am not a subject of the collective, no matter what flag it flies.  I consider myself a voluntarily participating sovereign individual citizen of the United States of America, but only as long as the words of freedom don’t change, “endowed by their Creator”.

I’m kind of out of place on this progressive blog, but as I said, I appreciate knowing upfront how I am about to be screwed, so this is a good way of keeping up to what these people are saying and doing.  The problem with the progressive left is they say one thing and do another, evidenced by Obama.  So you really have to stay on your toes when they have their finger on the trigger.

Take care.

Report this

By paulie46, June 29, 2011 at 3:50 pm Link to this comment

@ radson

I believe that government should be used to promote public purpose.

The solution for Europe (and us) is pretty simple…force the banks to take the haircuts
they deserve and deficit spend until the economy can come back. There is no one else
that will spend us back to a functioning economy. The people that normally spend don’t
have any more money and few prospects to obtain any without the government pumping
up the economy by building infrastructure, cutting payroll taxes to zero and creating a
job guarantee for anyone that wants to work in lieu of unemployment.

Increase demand and businesses will have a reason to expand and hire.

Non-sovereigns should exit the Euro and re-adopt their own currency so they can invest
in their own public purpose.

Follow the lead of Iceland.

Otherwise force the EU into a monetary union more like ours, which is probably a non-
starter since they don’t have the cultural ties that we have between the states. Zero-
interest rate loans to countries for investment in public purpose and infrastructure so
that the small business has an environment in which to thrive.

We will all probably have to get along with less as the less-developed countries catch up
and put greater and greater pressure on the Earth’s limited resources.

There’s nothing stopping us but politics.

We don’t need the big banks and we don’t need the bond traders - they need us through
our governments voluntary policies enriching them at our expense.

I say let them get a real job.

Report this

By paulie46, June 29, 2011 at 3:33 pm Link to this comment

@DaveZx3

“You may continue to explain the complexities and technical methods of fiat
with which the elite have accomplished that theft, but to know how you were
robbed is little comfort.”

It’s the monetary system we have and we have to work within the system. At
least being a sovereign with a floating currency puts us in a better position to
right things if the message ever gets through.

The problems with monetary systems is that their implementations become
driven more by politics than by sound economics. The solution must be
political, but driven from the grass roots.

At least in my case I feel like if I understand whats going on (and I rely on my
own understanding, not other peoples opinions) I will have a better map to
move forward.

Every monetary system in history has been gamed by the money-changers.

Hell, they were talked about in the Bible.

Report this

By paulie46, June 29, 2011 at 2:45 pm Link to this comment

@DaveXz3:

Interesting! I too am long in the tooth (will be on Medicare by the end of the
year) and am an Engineer (Mechanical) currently pretty much out of work
because I worked mainly in the construction industry.

I also self-described myself as a Conservative, in fact voted Republican my
whole life until 3 years ago when I came to realize I was (extremely) liberal at
heart.

Imagine my disappointment when I then realized the Democratic Party has been
captured by Corporate/Financial interests just like the Republicans, if not quite
as brazen about it. At least one can admire (kind-of) that the Republicans are
now open about it. But ignorance of what makes the economy go is becoming
very dangerous with all of the talk about spending cuts.

Spending = Income.

So after a few years of feeling like I was learning the answers I now feel like it
doesn’t matter whether you’re right or left poor which party you vote for, If you
care about the well-being of the working man and the poor all of the forces of
power are allied against you.

I know I have much more in common with poor people than I do rich people.

Discovering the economic framework of MMT (Modern Monetary Theory) I
found that is meshed with my training as an engineer because of my comfort
and trust in math and systems. Numbers don’t lie - liars lie.

The economy is not magic, it behaves in a predictable way but not in the ways
of neo-liberal (free-market, supply-side) theories that have been in favor over
the past 30 years or so, which are just that, theories that are not supported by
empirical evidence.

It may not end up helping me or my kids/grandkids in the end but at least I
know what’s killing us.

And I have a better reason to throw stuff at the teevee.

Report this

By radson, June 29, 2011 at 1:20 pm Link to this comment

A very interesting conversation to say the least ,but what is the main reason for money .Is it to create a better living arrangement for the populace ,is it to build a great nation and therefore promote patriotism ,does it have Nationalistic Ideology ,is it to spread the wealth or is it to maintain primacy and control. A country or group of elites -bankers -if you
wish can only expand their influence and or control if they have the means of doing so.Since the start of the industrial age banking became a force to be reckoned with ,not because
of the money that they held,but rather through the acquisitions of natural ‘raw ’ materials that were convertible into tangible ‘items’ such as weaponry that oftentimes dictated the
terms .As the arms race gained momentum in Western Europe and the resources that the competing nations had in their own lands became depleted the quest for other raw materials became paramount.At one point it was lumber ,later to be replaced by coal and finally the conundrum that we are all faced with today Oil. As the primary source of energy
changed and evolved ,so did the industries and the weaponry designed to protect /promote them ,which in turn led to many wars , and the creation of many new technologies ,some
for the benefit of humanity yet many towards the detriment of humanity.During the race for natural resources ,many corporations were created and this in turn created a demand for
labor of diverse kinds .The bankers were aware that a monetary system was highly desirable to maintain control not only of the industries that they controlled but more so of the
‘ones’ that they didn’t.The formation of the ‘Central’ bank along with the application of ‘usury’ better known today as ‘Fiat’ enabled the bankers to create enormous wealth through the
manipulation of the masses and in most cases collusion of well positioned Government officials. Hostile takeovers and mergers is but one way of expanding ones assets with the
new found wealth of the Central banks;perpetual poverty in third world countries exists only because it is more profitable .When the front page news is about a third world country
that cannot pay its debt especially countries in Africa ,it is not because the countries in question are devoid of natural resources ;its closer related to the fact that they don’t have the
extraction capabilities and or the technology.When the third world is encouraged to borrow the lender knows full well that the debt will become unpayable especially if that country seeks greater sovereignty ;so the debt is restructured and the country in question becomes mired in more poverty ,while paradoxically the corporations and banks increase their
profits due to austerity and the buyouts of prime resources for bargain prices ;its a win win situation.Why would the banksters intentionally wreak the American Economy ,is it
to destroy the Middle class and therefore have a class of rich and a class of poor ,is it to create a cheaper workforce to become more competitive and profitable in the global
market or was it a ploy to accumulate real liquid from the real economy by flooding it with monopoly money.Greece is about to be fleeced and Germany must assist in this austerity
scam,how many EU countries are next in line and will Germany help to bail them out,its interesting to note that the Chinese Government offered the Germans monetary assistance in this matter.

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By DaveZx3, June 29, 2011 at 1:06 pm Link to this comment

Paulie,

I am not doubting anything you say, just railing about it.  You are speaking in macro terms about a subject which I think is better handled with micro solutions. 

I, being long of tooth and fiscally responsible, (I quit using the word conservative) having spent the majority of my life dedicated to electrical engineering, do not pretend to be savvy about exactly how this fiat money is manipulated.

And yes, I am all over the map, because that is what railing is.  But if there is a main point to my ranting, you, yourself alluded to it when you confirmed that the elite take the average man to the cleaners, because the elite know how the money system works and the average do not.  And so, all true wealth is funneled to the elite because they know how to play the game.  Which should be of no surprise, since they invented the game.  And the game is called FIAT.

So in spite of all the high level technicalities which you do so gracefully explain about how our money system works, I say, “so what”.  We could talk about how Sharia Law works also, but does that mean we want to live under it? 

Sharia Law enables oppression against women, (amongst other things)  Fiat systems enable oppression against those who can’t comprehend the complexities of what used to be just money. 

In all fairness, oppression could be accomplished with any money system.  But fiat just makes it easier.  If nothing else, it has allowed outrageous amounts of money to circulate, literallly or figuratively, which in and of itself makes corruption easier.  It is a lot easier to steal a million dollars during a transaction amounting to 5 trillion dollars, than it is during a transaction amounting to 5 million. 

Fiat is of the elite, by the elite and for the elite.
It is about excess consumerism, debt and living beyond one’s means.  Not because these are inherent with it, but because it enables them. 

My proof is the current state of the working class, who must protest around the world because of the breaking of the paper promises that were made to him, while the elite have, without doubt, pocketed every red cent of that cash that the average joe as lost.

You may continue to explain the complexities and technical methods of fiat with which the elite have accomplished that theft, but to know how you were robbed is little comfort.

Report this

By paulie46, June 29, 2011 at 10:45 am Link to this comment

Sorry, bad link in last post…

http://www.ft.com/intl/cms/s/0/28e2d3e2-a1b5-11e0-b9f9-00144feabdc0.html

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By paulie46, June 29, 2011 at 10:37 am Link to this comment

@DaveZx3 and diamond - an FYI

Martin Wolf has an interesting post from the MMT perspective today in his
column at The Financial Times.

……

“Now turn to the yet more debated question of fiscal policy. The question I have
is this: does the BIS know that every sector cannot run financial surpluses at
the same time?

Few doubt there is excessive private sector debt in a number of high-income
countries. But how is it to be reduced? The BIS notes four answers: repayment;
default; higher real incomes; and inflation. Let us rule out the last and focus on
the first. Repayment means spending less than one’s income. That is what is
happening in the US private sector (see chart). Households ran a financial
deficit (an excess of spending over income) of 3.5 per cent of gross domestic
product in the third quarter of 2005. This had shifted to a surplus of 3.3 per
cent in the first quarter of 2011. The business sector is also running a modest
surplus. Since the US has a current account deficit, the rest of the world is also,
by definition, spending less than its income. Who is taking the opposite side?
The answer is: the government. This is what a controlled depression means:
every sector, other than the government, is seeking to strengthen its balance
sheet at the same time.

The BIS insists this is not good enough: highly leveraged countries are running
structural fiscal deficits, which must be eliminated as soon as possible. Fair
enough, but where are the offsetting adjustments to occur?”

Read the whole post at:

http://www.ft.com/intl/cms/s/0/28e2d3e2-a1b5-11e0-b9f9-
00144feabdc0.html

Report this

By paulie46, June 29, 2011 at 10:21 am Link to this comment

@DaveZx3

You’re all over the map, i’m having a hard time keeping up…

“So you are describing a theoretical system whereby sovereign governments can
create wealth out of thin air with the ability to avoid almost all future penalties. 
And you are trying to pass it off as “the way our economic system works”.”

It’s not a theoretical system, its a description of how our current system works
operationally, in real terms, without magic economic mumbo-jumbo. Doesn’t
mean we don’t have to spend responsibly. Inflation could occur if we create
demand greater than our ability to produce, but inflation is relatively easy to
control. To get hyperinflation it would take willful mismanagement of our
resources.

“The government might be able to create wealth out of thin air, but it never,
ever actually has an impact on the poor which is lasting.”

The government does create money out of thin air - where else can it come
from? The Dollar store? As far as impact on the poor, are you saying the
government should give money to the poor? That’s a political choice that has
nothing to do with the monetary system.

“The poor are allowed to play with the fake money (fiat), while the rich are
allowed to own everything which represents real wealth.”

The rich buy the real wealth you are talking about with their accumulation of
fiat money, the same money the poor get to use. They even buy Treasuries,
which are a safe place to park money if you need liquidity.

“And the way the elite suck all real wealth to themselves is through the fiat
system.”

Now, this I tend to agree with but this occurs largely because they understand
what I am trying to explain to you, and the vast majority of everyone else does
not.

We get distracted by the shiny object of “OH MY GOD THE DEBT IS GONNA KILL
US IN OUR BEDS!!!!!!!!!!!!!!! while they continue business as usual and pick our
pockets.

“Real money is self evident.”

Apparently not.

“And if a poor guy has an old $20 gold piece in his pocket, it can’t disappear
through a click of the mouse.”

A poor guy can buy a $20 gold piece with $20 of fiat currency any time he likes.
He just can’t use it to pay for his groceries or buy a happy meal at McDonalds
until he converts it back to dollars.

Gold is still available as a store of wealth if you think that is a safe investment,
but seems I read recently that Treasuries are out-performing gold right now in
the markets.

There is a reason why every country in the world has abandoned the Gold
Standard and why hard-money monetary arrangements are rare.

No matter what the system, if you don’t understand it you will end up getting
rolled.

The answers are in plain sight.

I don’t expect to change anyones mind about monetary issues, they’ve been
internalized into our thinking since the day we were born and one has to make
a real effort to figure out how things work in reality, You almost have to forget
everything you learned in the past (I don’t mean things like arithmetic, which is
one of the things you can always count on) to move forward.

People need to be curious.

Remember, the elites already know these things about the monetary system,
they are just counting on the rubes never figuring it out.

it’s really not that complicated.

Paul

Report this

By DaveZx3, June 29, 2011 at 9:17 am Link to this comment

Paulie,

So you are describing a theoretical system whereby sovereign governments can create wealth out of thin air with the ability to avoid almost all future penalties.  And you are trying to pass it off as “the way our economic system works”.

But what I see is a system that doesn’t work at all, and never has.  Its major malfunction being that it continues to funnel money up the chain to the fat cats, while the lower classes are never quite capable of holding onto anything of any lasting value.

The government might be able to create wealth out of thin air, but it never, ever actually has an impact on the poor which is lasting.  As was written a long time ago, “the poor will always be with us” 

The poor are allowed to play with the fake money (fiat), while the rich are allowed to own everything which represents real wealth. 

And the way the elite suck all real wealth to themselves is through the fiat system.  While the liberals believe the fiat system is helping the poor, in fact it enslaves them into a system which they can never seem to climb out of, like gambling on the slots at the casino.  You cannot ever win in the long term, because the house controls the game.  In economics, fiat is the game, and the government along with the elites are the house. 

Real money is self evident.  You don’t need a 50,000 word essay to desribe how it works.  It may not be perfect, but anything that has a chance of representing lasting wealth is better by far than paper promises never kept.  And if a poor guy has an old $20 gold piece in his pocket, it can’t disappear through a click of the mouse.  You have to actually mug him to get it.

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By paulie46, June 29, 2011 at 6:27 am Link to this comment

@diamond

“It sounds to me, Paulie46, as if you believe America’s economy is exceptional
and not to be compared.”

No. I don’t believe in American Exceptionalism. All economies are
driven/constrained by the same forces. We (along with Canada, Australia, UK,
Japan just happen to have a monetary system that is unique in comparison to
say that of the Eurozone. That is, we are sovereign in our own currencies. That
means we have capabilities that the other countries don’t have.
“America is trillions of dollars in debt and how is it being remedied? By printing
more and more money”

All government spending is printing money. A government that controls its own
currency doesn’t have to borrow to spend.

“Eventually the debt has to be paid or some of it does or America will be
bankrupt and will have to default on its debt.”

Debt that can’t be repaid won’t be re-paid. We have been carrying debt since
the beginning of the Republic and it has gotten continuously larger. No serious
attempt has ever been made to repay it. We have run deficits in 64 of the past
81 budgets, meaning deficits are the norm not the exception.

At any rate growth eliminates the burden of “debt” over time. You will come to
understand that what we call “debt” re the federal government is not debt by
the normal definition, and there is no prior intent to ever pay it back. It is just
an accounting entry at the Fed level with no real-world meaning.

Sorry it took three posts to respond to your last one…

Continued below out-of-order unfortunately because I’m new to this

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By paulie46, June 29, 2011 at 6:23 am Link to this comment

@diamond

“Germany had to pay massive war reparations to France after World War I, and
also to shut down the Ruhr, its industrial heartland. The war reparations were
greater than Germany’s gross domestic product and Ruhr was shut down - how
to pay?”

Here you have defused your own argument. The key is that the Ruhr was
occupied by foreign nationals which cut off the Weimar Republics main
production capacity. The needs of the citizens remained the same but Germany
could not produce what was needed to meet demand. Even without printing
money inflation would have occurred. With no options the government made
the decision to print more and more money just trying to buy time, but there
was no way out. The reparations were due and payable in Gold but Germany
didn’t have Gold and no way to buy it short of starving its citizens. A sure way
to force a country into war. Now it’s happening in Greece, Ireland, Portugal and
if we let our leaders have their way here in the US. Not war per se but financial
war, the modern way to slay a population.
The US (and other sovereigns) are not in this position. We are operating well
below capacity with the people that are working. Add to that the lost capacity
of the unemployed/underemployed and it is obvious that we can produce a
great deal more than we are presently.

The only thing missing is capital willing to mobilize those resources. The Private
Sector can’t because we are over-leveraged - Industry will not invest in new
capacity unless the consumer is both willing and able to consume their
production. It will be many years, maybe decades before we will be out of debt
(private debt) enough to begin spending again based on our current policy
positions.
There is nowhere for the consumer to get that capacity other than government
spending ie. “printing money”. As long as we don’t consume more than we are
able to produce inflation should not be a problem. But if it became a problem
the remedies are simple - after all, whenever we have had inflation it was
quickly cured.

I think of government spending as “gas” required to make the economy grow
when private investment will not, however, private investment cannot spur
growth without the govt. printing money into the system - it has to come from
somewhere. After all it ends up on private-sector balance sheets, and it
represents growth in the economy. That money which is spent into the
economy will never have to be repaid, it has become an integral part of the
private sector’s balance sheets. The only way to reduce it is taxation, and that is
how the govt. destroys money and ultimately controls inflation. Thus taxation
would be the “brake” on the economy. The net however must always be in favor
of spending, or deficits, because the economy must grow (at least for the near
future).

The problem with our current situation is that nearly all remedies that have
been implemented to stimulate the economy have been skewed in favor of the
rich and financial interests. The Fed and our government is controlled by the
needs of these special interests at the expense of the middle/working/poor
class. Giving rich people more free money is not going to trickle down to us.
Value is created by labor, not by financial engineering, but they have apparently
decided they don’t need us anymore.

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By paulie46, June 29, 2011 at 6:15 am Link to this comment

@diamond

Again, in a long post like your last one there is a lot to agree with but you’ve
said some things that are off the mark. The trouble is, without at least a basic
understanding of how our monetary system works and is manipulated by the
financial elites, you and others will never be able to identify the problem let
alone look for solutions to it.

Economics is an engineering problem in the sense that economies are
constrained by certain basic principles that have to hold by identity - simple
arithmetic in the form of accounting relationships between the Private Sector,
Government Sector and the External (Import/Export)) Sector. The relevant
equation is thus:

Domestic Private balance + Government balance + Foreign balance = 0

or

(I-S) + (G-T) + (X-M) = 0 where

G = Government (Federal) Spending
T = Taxes (Income Taxes)
I = Investment
S = Savings
X = Exports
M = Imports

This relationship must hold at all times by definition - it’s not a theory.

It is an accounting identity of the relationship between the National Accounts.

All money flows (transactions), regardless of whether they are caused by
consumer demand, confidence or lack thereof, magic economic theories or
whatever will always be constrained by that relationship.

In order to analyze the relationships, a knowledge of the mechanics of our
money system must be had, otherwise one doesn’t have the tools required to
solve a problem.

I suggested several inks in a previous post where to learn about these things.
Here is a good place to start re what I have just posted:

http://neweconomicperspectives.blogspot.com/2011/06/modern-money-
theory-primer-on.html

I need two posts to complete my response.

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By diamond, June 28, 2011 at 10:18 pm Link to this comment

It sounds to me, Paulie46, as if you believe America’s economy is exceptional and not to be compared. Just another form of American exceptionalism as far as I’m concerned. America is trillions of dollars in debt and how is it being remedied? By printing more and more money. This is the equivalent of someone being unable to pay their bills and using their credit card to pay them. In the short term, yes, it will stave off absolute disaster but in the long term it just won’t work. Eventually the debt has to be paid or some of it does or America will be bankrupt and will have to default on its debt.

The situation with America and the Weimar Republic is quite similar: Germany had to pay massive war reparations to France after World War I, and also to shut down the Ruhr, its industrial heartland. The war reparations were greater than Germany’s gross domestic product and Ruhr was shut down - how to pay? Well, they couldn’t pay so they just printed more and more money which eventually created hyperinflation. America is also paying for wars, which is what essentially created its massive debt, and is printing more and more money because it can’t pay. I fail to see how this is different and I also fail to see how getting Greece or any bankrupt country to print money is going to do anything but make a bad situation worse. The debt Greece has is now being passed on to the taxpayers and they are ‘mad as hell and they’re not going to take it any more’ - because after all, it’s not their debt. It was created by bankers and politicians, just as America’s was. After the Vietnam war the whole world paid for it with inflation and unemployment and the world will pay for America’s wars and recklessness yet again. Preaching from Soros is definitely not going to make anyone feel as if progress is being made since he is part of the system that is the problem.

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By paulie46, June 28, 2011 at 5:14 pm Link to this comment

@diamond

“Unless the super rich start paying their taxes and the banks, corporations and
financial institutions are regulated, I fear the disease will be terminal”

I agree completely with this but it has little to do with our monetary system…

The bankers know where money comes from and how to get it at the source.

They don’t want us to know, or their game will be over. And our leaders must
be in on it.

It would behoove you to learn how our monetary system works, then maybe
you’ll know when you’re being rolled.

These are the best places to start:

http://moslereconomics.com/

http://bilbo.economicoutlook.net/blog/

http://neweconomicperspectives.blogspot.com/

http://mikenormaneconomics.blogspot.com

Regards,
Paul

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By diamond, June 28, 2011 at 1:54 pm Link to this comment

“We can’t run out of dollars unless we run out of numbers first.

So, we are in control of our own destiny.”

Riiiiight. And you actually believe that nonsense do you? Saying Weimar Germany is nothing like the United States is like saying that one person with AIDS is nothing like another person with AIDS. Fact is, they both have AIDS. Throwing history in the garbage is a big mistake. The United States has a form of financial AIDS of which people like Soros are a well-known symptom and all that remains to be seen is if America dies from it or not. If the debt ceiling is not raised you’ll soon find out but raising it will only solve the immediate problem. Unless the super rich start paying their taxes and the banks, corporations and financial institutions are regulated, I fear the disease will be terminal. Soros should not give advice to Greece or anyone else: standing atop the dung heap that is American finance he should just shut up.

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By DaveZx3, June 27, 2011 at 5:58 pm Link to this comment

Paulie,

My question, “who is running the country, bankers?  was rhetorical, but thanks for confirming.

Have to get back to you on the other questions tomorrow.

Radson,

You got a pretty good handle on it, yourself. 

Cheers, and good night.  Up and at ‘em early in the am.

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By radson, June 27, 2011 at 5:48 pm Link to this comment

Dave and paulie:what you both have stated is so true ,economics 101 in a ‘nutshell’ .The predominate observation is rather simple in itself and that is Globalization ,but not for the benefit of the masses ;rather the contrary .The Magnates play their power and control ‘game’ and will not relinquish their power for any reason ;which includes fomenting a War to maintain the status quo .This has nothing to do with morality it is simply about maintaining primacy within the families that have the Power ,which is achieved through money of which
Fiat is that main conveyor,but of course land or self-sufficiency is in essence the greatest threat to the Barons ,yet at the same time it is their strength ,because very few countries have the ability of achieving ‘self-sufficiency’ .That is why the old motto of divide and conquer applies so well ,just for an example ,how many countries in Europe can actually meet that
criteria? Perhaps one; Russia, and maybe that is why it has become somewhat of a pariah state for the global elites.The fact of indebting people and or countries is a tactic in compliance hence all the economic sanctions and embargoes used as leverage against nations during times of dispute or lack of genuflection if you wish because once again the
inability of nations to withstand this pressure on their own .If any of you could find a way to convince the masses that their money is ‘useless’ and actually start from scratch I am all
ears.

cheers

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By paulie46, June 27, 2011 at 5:33 pm Link to this comment

Oh, and yes the bankers are leading the country (and the world).

It’s only going to get worse if we don’t figure out how to fight it.

Maybe everyone should just stop making their mortgage payments.

Or something.

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By paulie46, June 27, 2011 at 5:31 pm Link to this comment

Dave,

You have made no attempt to describe the system you are talking about ie, one
that is least likely to be abused by the powerful. Please enlighten us.

“A fiat money system is the most easily abused by a dishonest leadership,
(government and/or corporate)  How can this not be more obvious? “

Stated as if it is fact but it’s not obvious to me.

Explain what I am missing.

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By DaveZx3, June 27, 2011 at 4:56 pm Link to this comment

I am not blaming the failures on the fiat economic system.  Honest people can make any economic system or political system work.  Capitalism is not inherently evil, it is only manipulated by evil people, and the same could be said for socialism, or almost anything else.

We constantly argue about systems, but the real fault is with the individuals who manipulate them for selfish reasons.  It makes sense then to put systems into effect, which when manipulated to the utmost by the powerful, causes the least trauma upon the citizenry.  Counting on government to regulate systems is apparently not working, nor will it ever work, imo.  This has become historically obvious. 

A fiat money system is the most easily abused by a dishonest leadership, (government and/or corporate)  How can this not be more obvious? 

Let’s say I am holding a $10,000 fiat nest egg.  Can a dishonest leadership steal that from me with the stroke of a pen?  Absolutely.  If that was a $10,000 stash of canned food, it is going to take a lot more than a stroke of a pen to steal it. 

The folks need something valuable for their labor.  Not just value for the balance sheets sake, but everyday usable value.  Land is the only thing of true value.  It is the source of everything. 

Home ownership by every citizen is an idea which can significantly cripple the efforts of manipulation of systems by the elite, at the expense of the citizenry.  Instead of giving me a promise (social security) give me a house, right now.  And I will pay for it with the money you have been stealing from me and my employer which you call payroll taxes. 

The people get something real, now, not a promise, which disappears with new legistation.  Ownership breeds pride, at least in honorable people.  Pride breeds responsibility and increased effort. 

Homes are wealth.  You don’t have to steal them from the rich.  Hell, they should have been being built by all those 9% of the population who are unemployed.  “Build houses for your neighbors and receive your own free”.  The perfect works project.
Nobody should ever be unemployed, when there is so much to do. 

Who is leading this country anyway?  Bankers?

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By paulie46, June 27, 2011 at 3:53 pm Link to this comment

Dave,

I can’t say that I disagree with anything you have said, with the exception of
your blaming our economic failures on our monetary system.

As a matter of fact, I think we’re pretty much on the same page, although I
consider myself very liberal, or progressive if you will, definitions
notwithstanding.

I believe the problem is not the fiat monetary system but the fact that the
system, along with our representative government, have been captured by the
financial/ banking interests, along with elites in the top 0.1% of the income
distribution.

This would happen regardless of our money system, just look at history for
examples like the Great Depression.

You mentioned Greenbacks like they were a bad thing. Lincoln tried to borrow
from private banks to finance the Civil War - They wanted somewhere around
36% interest. Feeling depressed about that Lincoln determined he could issue
his own fiat currency and bypassed the banks. They didn’t like it at all and
eventually got control of the currency again.

If you look at what is happening all over the world, especially in Europe and the
US you can see that the common theme is that the poor/working/middle class
are being told that these huge debts to private banks that were brought about
by their irresponsible gambling with the taxpayers money must be paid back by
accepting lower wages and a lower standard of living.

No mention is made of the rich having to lower their standards though - they
are doing better than ever. And so it shall continue until we wrestle control of
our political system away from the corporate elites.

It may be too late, but we have no choice but to try.

A properly-managed fiat monetary system is a beautiful thing to behold when
looked at as a means to further public purpose. That is the last thing the
financial elites want, is to have the lowly serfs benefit from their own
productivity.

I suggest further reading on how this can work starting with this site:

http://moslereconomics.com/

Download his free book (pdf) and read “The 7 Deadly Innocent Frauds of
Economic Policy”. It’s an easy read and is non-idealogical.

Also, what Amon Drool said…

Regards,
Paul

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By Amon Drool, June 27, 2011 at 3:09 pm Link to this comment

DaveZ…i’m trying to figure out the point of your
posts.  you seem to be saying that most of us are
going to get screwed by either using fiat or
commodity money, but it’s gonna happen easier/faster
with fiat so let’s go back to commodity money.

well, getting screwed is getting screwed, right?  i’d
personally prefer to have a government issue fiat
that would meet the needs of the populace.  if the
gov’t printed too much, the citizenry of a
representative democracy would then hopefully vote
their inept/corrupt representatives out of office.  a
gov’t also has the option of removing an over-supply
of money through taxation.

what we have now is a private cartel which is allowed
to create money through fractional reserve banking
and which is backed since 1913 by the federal gov’t. 
this has allowed a small slice of the earth’s
populace to control the earth’s wealth.  i’d much
rather have our gov’t create money interest free and
spend it into the economy to meet the people’s needs. 
you’re right…there will always be a threat of
inflation/debasement under such a system.  until we
learn to be citizens and just not consumers, we are
gonna continue to be jacked around by an
international banking elite.

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By DaveZx3, June 27, 2011 at 2:16 pm Link to this comment

Paul,

With a silver certificate, there was a chance of redeeming it for something which had historical intrinsic value behind it. 

This is not to say that silver certificates could not also be overprinted based on the amount of silver actually in reserve.  But there was a chance for redemption.  I, personally redeemed a lot of them, and accumulated a lot of Morgan dollars in the early sixties.  Sold them during the Hunt Bros silver fiasco at about $35 each.  A decent profit only because the silver market also can be manipulated, and I was in the right place at the right time. 

I am not necessarily advocating precious metals, as they are only marginally more valuable than a political promise.   

The source of all true wealth is the land.  There is no excuse for every family not to be able to live in their own home on their own land, mortgage free. 

Of all the billions and trillions of dollars we spend on every godforsaken thing, nothing is more important than families living in their own home, mortgage and tax free.  It is an entitlement even a staunch conservative, (but political outcast) like myself would get behind, with only national healthcare being of near importance. 

I am not really an advocate for socialized healthcare, but I would admit that a decent system along with guaranteed home ownership, (with some considerations) would put a stake in the heart of the beast which siphons the blood (wealth)from the masses. 

And then just educate the people that federal reserve notes and other paper promises are just that, promises, not intrinsic value.  You could put warning signs on the dollar, like the signs they are putting on cigarette packs real soon, of people suffering for utilizing the product without regard for their personal well being. 

Then, let the fed do whatever it wants.  People would no longer be fearful and in a state of being easily terrorized.  All they would need is a garden, a few chickens, and they would have a chance of getting through the bullshit that the elite put them through over and over with each manipulated, money funneling crisis.

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By paulie46, June 27, 2011 at 1:18 pm Link to this comment

DaveZx3…

My previous post apparently got eaten by the system. I have registered to make it
easier to post. (was Paul))

I asked “what do you propose as an alternative to a fiat monetary system”

Also, since your last response mentioned Silver Certificates vs Federal Reserve
Notes, why do you consider Silver Certificates superior?

Paul

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By paulie46, June 27, 2011 at 1:13 pm Link to this comment
(Unregistered commenter)

@DaveZx3…

my last comment was apparently eaten by the system.

I asked “what is the alternative to a fiat monetary system?”

Also, re your comment about Silver Certificates vs Federal Reserve Notes, why are
Silver Certificates superior?

Paul

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By DaveZx3, June 27, 2011 at 12:58 pm Link to this comment

By Paul, June 27 at 7:40 am

“Good thing we never had any problems with the elites cumulating wealth when the
country was on the Gold Standard…”
———————————————————————————

“Economic sin” was a poor choice of words which I carried over from a previous poster.  By use of the word sin, I was not insinuating a religious tenet.

Elites will always accumulate wealth.  That is what elites do.  They do it on the gold standard, and they do it on the fiat system.

The difference with Fed paper, or any paper, is that it simplifies the process of the elite stealing all the money.  The unsuspecting, thinking that they have set aside a nest egg, can see it disappear through political action, or other “crises”. 

After the Civil war, what were Confederate notes worth?  Yet, if a man owned a couple of 1 carat gem diamonds, he still had a nest egg. 

If I borrow your nest egg of paper money, and use it to buy 1 carat diamonds, or barrels of oil,  and then through “circumstances” of some sort, the dollar crashes, or hyper inflation hits, and I pay you back in significantly devalued dollars, who gets the better deal?

A simplified scenario, I admit, but variations of it are used to funnel real wealth upwards while letting the rest of us hold Confederate notes, and other “promises on paper”. 

It is why the percentage of the population who can own a home, and actually manage to pay for it through all the crises, has gotten smaller and smaller over the years.  The elite will not be happy until they own or control everything, and the average person only rents things.

The illusion that fiat currency has value, among many other financial lies and distortions, enables the elite to work the process more easily.  The fiat system has allowed the process of widening the divide between rich and poor to speed up dramatically. 

Simplified, yes, but there is no denying this is what has happened since the dollar has become a federal reserve note instead of a silver certificate.

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rico, suave's avatar

By rico, suave, June 27, 2011 at 11:56 am Link to this comment

diamond, Schmuck:

what Paul said

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By Paul, June 27, 2011 at 11:20 am Link to this comment
(Unregistered commenter)

@ DaveZx3

So what’s your alternative to a fiat monetary system?

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By DaveZx3, June 27, 2011 at 10:53 am Link to this comment

Daye, June 27 at 8:57 am Link to this comment

You can’t produce a trillion dollars worth of gold overnight, but you can produce a trillion dollars worth of paper overnight.

Whether anyone believes either one has value is not the point.  It is the fact that is so easily producible and is assumed to have value or be converttible to value. 

Paper can be more easily managed, as you say, which is another way of saying easily manipulated. 

But, no one is speaking of gold.  It cannot be considered absolute true wealth either.  (though I would much rather have a closet full of gold than a closet full of paper) 

There is such a thing as true wealth, and common men are robbed of it daily by the manipulation of paper.  Common men don’t even comprehend true wealth.  It is not in their vocabulary.  They are merely slaves to the wealth of others.

The fiat currency system is currently the main tool which keeps the masses in bondage and dirt poor.

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Daye's avatar

By Daye, June 27, 2011 at 8:57 am Link to this comment

Whether money be paper or gold, its value
exists only by virtue of two things, the first of
which is human interest in it, & the second of
which is consensus regarding what use it is
good for. The supply of both paper & gold
money is manipulable, the one by digging for
more or by changing its ‘price,’ & the other by
effectively the same though cosmetically
different means. Of the two - gold & paper -
paper is the simpler to manage, is better suited
to the welfare of citizens in & between complex,
growing societies in changing times, & it does
not make holes in one’s trouser pockets nor
make handbags too heavy for rich ladies to
carry.

Perhaps there are mountains of gold in the
constellation of Taurus. If so, it possesses no
value - which is to say it is a means to no end -
unless there are living beings there who have
some use for it. The value of any thing exists
not in the thing, but only in the interest living
things have for it.

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By Mike3, June 27, 2011 at 8:46 am Link to this comment

It is indeed heart warming that a fully fledged vulture (Soros) should have the welfare of the Europeans at heart. It brings a tear to my eye. But it wasn’t so long ago that Soros and his thugs were after the euro and made serous raids upon it. But the Europeans are on to the bastard now. They can smell a rat now. He could have speculated against California, but even vultures don’t shit in their own backyard. So what’s the difference between the financial mess in California and that of Greece? About the same. Both get plenty of sun and have nice beaches, perhaps the food is a little better in Greece. Not so much junk.

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By Paul, June 27, 2011 at 7:40 am Link to this comment
(Unregistered commenter)

per DaveZx3…

“Printing fiat currency is the activity which enables economic sin”

Sounds like a religious tenet.

Good thing we never had any problems with the elites cumulating wealth when the
country was on the Gold Standard…

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By DaveZx3, June 27, 2011 at 6:56 am Link to this comment

By Daye, June 26 at 11:19 pm Link to this comment

“printing money was not the cause of
German hyperinflation, & printing it - which is
necessary for various reasons & purposes - is
not in itself an economic sin”
—————————————————————————

Printing fiat currency is the activity which enables economic sin.  IF money represented true wealth, it would be impossible to control enough to do the damage which the elite are responsible for. 

It is through the printing of trillions of dollars that the outrageous corruption that we experience is made possible.  It is the unilateral creation of enormous power, which can be controlled by a very tiny fraction of the populace. 

Fiat money is the primary mechanism which will enable the global elite to eventually control all wealth and all power.  You are watching it happen right in front of your eyes. 

I am sure you understand how the powerful can use fake money to buy up real money on credit, and then create inflation and other instability to never have to pay that debt.  Essentially, that is what is going on.  That is how they control the people.  That is how they steal our wealth.

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By DaveZx3, June 27, 2011 at 4:54 am Link to this comment

The concept of fiat currency enables governments, financial institutions and speculators to manipulate economics for the purpose of funneling all true wealth up to the elite. 

The concept, and the methods used, virtually ensure that the common person will never own or control anything of real value, at least not for long. 

If money was real, everyone would have a chance at having a little of it, that no one could manipulate away from them.  Like it or not, wealth represents power, and the only way the common people will be free is to share in the wealth, not by stealing from others, but by learning how to actually own, control and build on their personal wealth. 

Instead, the masses have been led down the road of consumerism, credit and self gratification, and worse yet, relying on government to help them share in the wealth.  This is what keeps them in this state of bondage to the elite.  The answer is for the people to come together for the purpose of beating the big boys at their own game.

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Daye's avatar

By Daye, June 26, 2011 at 11:19 pm Link to this comment

The comments below are insufficiently complete
to reveal what the writers fully presume.
However, whatever they believe, it must be
noted that printing money was not the cause of
German hyperinflation, & printing it - which is
necessary for various reasons & purposes - is
not in itself an economic sin.

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By Paul, June 26, 2011 at 5:33 pm Link to this comment
(Unregistered commenter)

diamond,

What happened in Weimar Germany has no similarity to the situation we face
now.

Nor does Zimbabwe, or Greece, or Ireland.

The EU periphery countries have problems because they owe debt in a currency that they don’t control, so in order to finance their operations they have to borrow from the ECB or bond traders. Because there is a high chance of default, the interest rate they can borrow at is exorbitant. If they printed their own currency it wouldn’t cost them anything to borrow.

The US doesn’t hold any foreign-denominated debt and we don’t owe China
diddly. China has no choice but to be paid in and to buy our stuff in US Dollars. Dollars that we had to create before they could get them. We are their biggest customer by far, what are they going to do, shut down their economy?
You think Europe or the rest of the world will pick up the slack?

Wal-Mart, Apple Computer, Dell, etc. pay CASH to China by making an
electronic transfer of funds from their accounts to China’s account at the Fed. In
Dollars.

China has large holdings of US Dollars which it got by selling more of their
“stuff” to us than we sell them, (in Dollars by the way that have no intrinsic
value).

All voluntary.

The fact that they like to earn interest on some of that money (by buying
Treasuries) in no way makes us indebted to China just because we moved the
money from their checking account at the Fed to their Savings account at the
Fed.

We are doing them a favor by paying interest on their dollar holdings.

Japan has been selling us cars for 60 years and are satisfied in holding Dollars,
even though they have declined substantially in value over that time.

We don’t use those “savings” (Treasuries) to fund anything.

Nor do private-sector banks use savings to fund their loans.

Private sector banks can always make any loan they wish to credit-worthy
borrowers, regardless of their reserve position at the moment.

The reserves are always increased after the fact if needed by the Fed by
creating money out of thin air.

That’s how a fiat monetary system works and people like yourself that think we
have to borrow or tax to fund our spending need to get a clue.

All Federal spending is “printing money”, all Federal taxation is “destroying
money”.

It’s that simple, it’s been like that since at least 1971 but probably goes back to
when we went off the Gold Standard around 1933.

And, hyperinflation doesn’t happen because a government prints a lot of
money, it happens because a country is consuming way more stuff than they
can produce.

We can’t run out of dollars unless we run out of numbers first.

So, we are in control of our own destiny.

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By Schmuck, June 26, 2011 at 4:20 pm Link to this comment
(Unregistered commenter)

what diamond said.

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By diamond, June 26, 2011 at 1:39 pm Link to this comment

Print their own money? What a disastrous idea. That’s what Germany did after the crash in 1929 and eventually they needed a suitcase full of money to buy a loaf of bread. But why should Soros care? He and his kind make money out of other people’s misery and I recall reading somewhere that he was at one stage heavily speculating on the Euro, himself. Soros is part of the problem, not the solution and his advice will only help the EU dig itself into a hole, which is what America wants them to do anyway.

The United States hates and fears both the Euro and the EU, knowing that if China asked to be paid its massive debt in Euros instead of dollars the economy of the United States would completely collapse no matter how much money they printed, and the EU sets a ‘bad example’ by having workers get good pay, good working conditions and social services that American Scrooges call ‘luxurious’. None of what’s happening in the EU is accidental and is not being caused by structural flaws either.

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