On Europe, Inflation, And Gold.

Tyler Durden's picture

Via GoldMoney.com,

In this video Philipp Bagus, Assistant professor of Economics at Madrid’s Universidad Rey Juan Carlos and author of The Tragedy of the Euro, and Alasdair Macleod of the GoldMoney Foundation talk about the eurozone facing the problem that is characterised in the “tragedy of the commons” analogy. Bagus explains this phenomenon by way of an example of overfished and over-exploited oceans due to a lack of property rights on oceans. In Europe, governments run larger deficits than their “competitors” in order to externalise the costs to all users of the currency. Knowing these incentives, the Stability and Growth Pact was put in place as per the early 1990s Maastricht Treaty, capping budget deficits at 3% of GDP and the debt to GDP level at 60%. However there was no enforcement of these rules which is why there have already been more than 80 infringements to this stability pact without any repercussions.

They talk about possible solutions to the euro crisis. Bagus points out that there are basically three different ways to go about it. Firstly, governments could make drastic cuts in public spending and privatise public assets in order to balance their budgets. However, there will be – and is – strong political resistance to such proposals. Secondly, the eurozone could disintegrate, driven by a reluctance of German citizens to pay for other countries’ expenditures. And lastly, central banks and governments could decide to print their way out of the crisis, leading to high inflation.

Bagus says that as long as the incentive for running deficits exists there won’t be an increase in countries’ savings rates. Macleod points out that there is great institutional resistance to breaking up the euro. Bagus explains that the official opinion towards the euro is positive in Germany; however the sentiment on the streets looks quite different. But as long as there is no political party devoted to this issue this mood is not likely to gain traction at least as long as inflation remains moderate.

Amid the ongoing expansion of the money supply and persistent deficits, Bagus can’t see the dollar gaining in value over the medium to long term. He also says that ECB policies are a lot more pragmatic than the ones undertaken by the US Federal Reserve. Talking about sound money, Bagus explains different ways to go about its introduction. One way would be to back all the money in existence by gold, adjusting the price of gold accordingly. Another would be to take away legal tender laws and have competing currencies. However this would require the governments to impose dramatic reforms, which is partly why they will oppose such measures.


This interview was recorded on November 15 2011 in Madrid.

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hazek's picture

Gold bitches!

SAT 800's picture

"The tragedy of the Euro" is an excellent book; highly recommended. It's introduction was based on the blackmail of Germany to enable that country to re-unite. The prime instigators were a pair of life-long Socialists. They have now reached the point referenced by Maggie Thatcher; "The problem with Socialism is that you run out of other peoples money to spend."

strannick's picture

A gold standard is the last thing central banks would want. As it is, there is nothing controlling their idiotic academic powermongering schemes. 'Let me control a nation's currency, and I care not who makes its laws'.

If one presumes central banks and politicians want a fiscally responsible system, gold is the obvious answer. If one believes instead that they want power and control over the economy and citizens livelihoods, then the current system of chronic deficets will be continued.

GetZeeGold's picture


"Adjust the price of gold"




If I hear one more idiot state there isn't enough gold....blood is going to shoot from my eyes.

akak's picture

Then I suggest you refrain from reading Jon Nadler, which would undoubtedly cause multiple and copious stigmata to spontaneously erupt over your body in response --- most likely accompanied by an involuntary and spasmotic release of your bowels. 

(Come to think of it, the latter much resembles everything ever written by Jon Nadler in the first place.)

Irelevant's picture

Another, in 1997: "You should not think they are dumb! Invest in gold mines, will you? Notice how quick the Australian CB hinted at taking "gold in the ground" if needed. This was said after their sale! The nature of the coming crisis will make the taking of investor property a piece of cake. You see, because gold is a commodity, you will be compensated at the commodity price of return + a fair profit, of course.".

GetZeeGold's picture


I was there in 97 when ANOTHER was making his posts. I did a rough calc on the true value of gold and about hacked a fir-ball.

People used to laugh at me for buying gold back then......they don't anymore. Math is your friend.....got math?

Irelevant's picture

He wasn`t just one guy, thats for sure. The postings were probably written by some asians. However they tend to be accurate, when you look at how events unfolded!

GOLDEN CHEESEHEAD ( @ANOTHER SHOCKING POST! ) ID#431263: All paper gold will be worthless just like stocks and bonds! Am I right? If not please correct!

Mr. GCH, You may be more right than wanted to be. For some it is a long torturous wait to go without paper gains. For ones outside the west, it is not hard. Days pass easily as a thousand years of history give backing TO OUR investment. "For what I hold is not an empty promise. Nor is it a major thought of debt. I am now today, paid in full!".

Asian 100%

Irelevant's picture

Also from another:


One new day gold will begin a rise that will end it's use as a trading medium. This reevaluation will end a tradition in London. No gold house will make a market that has no sellers, official world gold trade will end for many years! And with it will go the last true value to trade for oil. Oil will skyrocket in all currencies. Those who have metal will learn it's value in oil. All things in life change, the world will not be the same.


All these were written during the asian crissis. Oct 31 1997:

THE MARKET TURMOIL: THE TRADING; Aftershocks From Asia Hit Wall St.


Also from another:

Many wait for the next great bull market in gold to begin before they buy. Why buy now and lose interest or stock market gains? They will miss the greatest investment ever to come in ones lifetime! The powers of this world have already begun this motion. People of simple thought have but to buy physical gold and make low as the financial wars begin! You see, gold was cornered this year. It is done. No Central Bank will sell it's 50, 100, 200 million ozs gold when 600 million is needed! I ask you, how can currency price gold? Indeed, no price will work! You think any form of "paper gold" will stand this fire? Can we do battle with lions? When oil will not take currency without gold the havenots will not sit still!

"When a thousand hungry lions fight over one scrap of food, small dogs should hide with whats in their belly".

He uses alot of quotes. He is just a messenger.

Irelevant's picture

Another: Mr. C.B.,
The future will look back at us with respect, as we knew not what was happening! A day will come, sir, when no paper dollar will pry gold from your hands! In that day, you will be too smart for such foolishnes

The world has changed and the gold market has changed with it. We are going back in time much further than many will accept. A time when men, such as I, will take what is yours! If you hold your value in a public way, it will be taxed or taken for the good of all. Such are the ways of extream times!

Only time will prove all things. - repeats this obsessively. Probably he was writing some posts, and had someone write others. Some have no quotes, others are all quotes.

Michael's picture

"TV Channels are in close relations with corporations and with the government."

Starts around 3:00. Really trashes the MSM pretty well. 

I found this ZH piece to be extremely intellectually entertaining. Its really brilliant, yet so simple, even a cave man can understand what the assistant professor has to say. The guy is brilliant.

Michael's picture

Lets spice things up;

Israel Caught Selling 69 US Patriot Missiles to Red China


I love this comment at Daily Paul;

Do you actually think that CBS, et all is going to tie Submitted by freedom express on Mon, 12/26/2011 - 22:35.

this to Israel? The Israeli's could shoot 20 Palestinians, bulldoze a whole villiage, and the MSM et all, will report how Hamas sent 6 'rockets'(oversized fireworks) at Israel. If these Patriot missiles were going to ROK, don't you think the people on the ship, even if they didn't know what was contained in containers, would know they were to be sent to the ROK? The real question which should be asked, if these are secret technology weapons, why the hell would they send them on a cargo freighter, and not a US Navy vessel? Wouldn't they want military protection of these, and avoid the chance of pirating and capture of the contents? People need to start using common sense, instead of just reading the propagandist diversion reporting, because 95% of reporting is pre-scripted by the controlled editors.
Read this article, as even Fox, before selling out, pointed to this right after 9/11 http://www.veteranstoday.com/2011/12/26/sayanim-%e2%80%94-is...


Michael's picture

The guy in the topic being interviewd reminds me of this guy;

Aldous Huxley interview-1958 (FULL)


Michael's picture

Who is the leader of the Ron Paul Grassroots movement? They've raised more than 20 million for Dr Paul even without the doctor's involvement. Surely there must be a leader of the grassroots movement. Who or what can raise that much money for him without a leader? I want to know who or what that person may be?

q99x2's picture

$32.50 per ounce then adjust for inflation. Couple hundred tops. That is if they don't have to fly over with gold detecting drones and force you to hand it over. If you are not in the U.S. you might get a better deal.

GetZeeGold's picture



If you can get it for that.....I'd say go for it.



economics1996's picture

Dude here is a link to the Fed monetary base.  Fricking use it for Gods sake.


Max Fischer's picture



How, exactly, am I suppose to use the Fed monetary base?    

Max Fischer, Civis Mundi

OldTrooper's picture

Wallpaper, paper airplanes, toilet paper, oragami, cat box liner...the uses are limited only by your imagination.

Oh regional Indian's picture

Hmmmm....what about the folks who say there might be too much gold?

It's the kicker that is coming. Disclosure moments abound. The Dragon Family case may be tin-foil nirvana, but yet, it has been filed and cannot be frivolous. 

So, in this time of no absolutes, I'd shy away from making gold one such. 

And it's scarcity is a key "Freegold" lynch-pin.



theMAXILOPEZpsycho's picture

...but where is all this gold going to come from??

Sudden Debt's picture


We need a kick ass army like the US has. We have almost double the amount of citizens so plenty of canon meat! We build kick ass weapons which we sell but don't use....

Let's just build 20 aircraft carriers, train 10 million seals, 10 million drones, and lets just kill the chinese and the arabs!


GetZeeGold's picture



You may have something. Only those in the military in the US are allowed to retire at 50.

10 Euro Münze's picture

Liebensraum = Love room  !  :)

Lebensraum = spave to live in.

SAT 800's picture

Cut him some slack; he's Belgian. they speak two languages poorly. And neither one of them is German.

achmachat's picture

trivia of the day: German is one of the three official languages in Belgium

SAT 800's picture

Oh, dear, my bad. sorry.

Amish Hacker's picture

This is even worse than we thought.

Sudden Debt's picture

Exactly, make love and than go to war in the Liebensraum :)

No eh.... What is "spave"?

SAT 800's picture

I have no idea; but I'm on your side, honest.

TheGardener's picture

And thus spew Zarathustra...

I got your Liebensraum sorted out below.

P.S. : How should I reference to you when using your
intellectual property rights ? SD ? Like in Sicherheitsdienst or the executing branch of the Reichssicherheitshauptamt as in homeland security ?

wandstrasse's picture

Make war in the Liebesraum, not love!

10 Euro Münze's picture

I see that "C" and "V" are next to each other on the keyboard...my bad..

Monedas's picture

Liebenstraume = Wet dream !

10 Euro Münze's picture

Just like an Alptraum is a dream of the Alps!   :)


(In German Albtraum is a "nightmare" but it sounds like "Alp")

SamAdams1234's picture

But Americans breed Meat-muppets: easier to control.

SAT 800's picture

De-caf. De-caf is good; it really tastes alright. You need to calm down.

TheGardener's picture

Stop your rants, you might be misunderstood.

500,000 standing army as Poland had for provocating against
the 100,000 Reichswehr guard ,this time well trained and equipped would be enough to stage off the muslim invasion,
just as the Poles saved us Europeans just short of Vienna
last time around.

Reverse crusade, but with your "Liebensraum" attitude, no harm to anyone, just back to each others tribe.

q99x2's picture

You can use our army. Everybody uses our army. Bankers use our army. Drug dealers use our army. Al Queda uses our army. Prostitutes use our army. Local stores use our army. Manufacturers use our army. How much you offering?

q99x2's picture

Biotech companies use our army. Oil compainies use our army. In fact we just passed the NDAA so we can use them against ourselves. If you need an inside number to discuss price let me know.

q99x2's picture

Sorry for the reckless rant. A bit of indigestion from the markets being closed.

Smiddywesson's picture


"A gold standard is the last thing central banks would want. As it is, there is nothing controlling their idiotic academic powermongering schemes. 'Let me control a nation's currency, and I care not who makes its laws'.

If one presumes central banks and politicians want a fiscally responsible system, gold is the obvious answer. If one believes instead that they want power and control over the economy and citizens livelihoods, then the current system of chronic deficets will be continued."



I quoted your entire comment because it was flawlessly logical (you are my guy) but unfortunately, Ben Bernanke doesn't agree with you.  He lays out his plans in his 11/21/2002 Helicopter speech and his 10/31/2003 Japan speech.  They will link fiat to gold, ramp gold prices, devalue fiat, engage in gold purchases, print like crazy, and set price targets.  That will ramp stocks and hold off the inevitable for a while.  

They will link to gold in some way, but you are not at all wrong Strannick, because there's no way in Hell they will handcuff themselves.  Gold can be manipulated to any price that suits the powers that be, a basket of currencies cannot without ruining droves of industries.  So you are absolutely right, they won't handcuff themselves, but a tad bit off in thinking they only have the option to go to a pure gold standard.  That isn't going to happen.

The game was gold was money, and they controlled gold.

The game is now paper is money, and they control paper and gold.

The game has only one place to go, back to gold and they will control the gold.

The problem is to view gold as a safe and sound economic basis.  The central banks run a shell game and it doesn't matter whether they use gold or paper as the pea, the game is won by manipulating the pea.  Don't be a sucker and think a gold standard will solve all our problems.  It's like having a crook run your company and thinking a different method of accounting is going to keep him from stealing from you.

We are going to a gold referrenced system from a paper system because there is nowhere else to go.  That doesn't mean the vampires latched to our throats are going away, but it does mean that anyone with gold, and with the intestinal fortitude to hold their PMs throughout the long road ahead, will win in the end.


Marco's picture

Gold doesn't ensure fiscal responsibility ... countries were defaulting long before they could do it through fiat devaluation.

Oops, replied to the wrong post ...

tmosley's picture

Sure, but the point is that those who held the currency, which was gold, didn't suffer like those who went through hyperinflation.

Gold does force honesty.  The banks can't do anything to force gold holders to suffer, save for forcing them onto a quasi-gold standard or onto fiat.

AnAnonymous's picture

Another epic US citizen moment.

Cheap propaganda as good US propaganda is.

When holding money, the question is always the same: owning enough of it. Gold as a currency is not different.

tmosley's picture

Really?  How many Zimbabwe dollars was "enough"?

No, idiot.  Owning gold is about preservation of purchasing power, and keeping said purchasing power in your nation when the monetary authorities spaz out and sell their people down the river.

cranky-old-geezer's picture



Good points. 

This is why mere gold backing is meaningless.   They can change the "backing rate" any time they want. 

Today it's ...oh say... $100,000 per ounce.  Tomorrow they can change it to $120,000 per ounce, no problem ...and wait 6 months to announce it publicly.

Gold redeemable is the only thing that shackles the bankers

...assuming they put the redeemability rate on the currency so they can't change it later on.

No, not "one dollar of gold".  That won't work.

It has to be "0.XXXXX ounce of gold .999 fine", something like that.

A gold coin is a defacto gold standard.  It has a fixed amount of gold  that doesn't change.

Paper currency has to do the same thing to be a true gold standard.  It has to be redeemable for a fixed amount of gold that doesn't change.

disabledvet's picture

How about a simple currency board then? It's worked well for Hong Kong for decades now--and it would appear that thing ain't going anywhere anytime soon. Enter the Baggus? I say...."Enter the Haggis" instead!