Detlev Schlichter's Blog

“But there is no inflation!” – This is a statement I hear quite often, sometimes from people who are, in principle, sympathetic to my arguments, sometimes from people who are less so. In either case, those who state “but there is no inflation” consider it to be a statement of fact and one that they assume must pose a challenge for me.

We are now five years into the Great Fiat Money Endgame and our freedom is increasingly under attack from the state, liberty’s eternal enemy. It is true that by any realistic measure most states today are heading for bankruptcy.

In a truly remarkable piece for the Financial Times yesterday, Wolfgang Münchau took another swipe at the Euro-sceptic and ECB-critical community in Germany, which he accuses of inflation-paranoia and of simply not getting ‘modern central banking’.

There was a beautiful symmetry to last week’s policy announcement by the Fed. Precisely a week after the ECB had pledged its commitment to unlimited purchases of Euro Zone government bonds, the Fed declared that its new round of debt monetization – ‘quantitative easing’ or QE3 – would be open-ended.

Yesterday, the ECB pronounced itself the official lender-of-last resort to all Euro-Zone governments. To assure that the state can always borrow at conveniently low rates has been declared an essential component of ‘maintaining financial stability’ and thus a standard plank of modern central banking.

I am not holding my breath over the Republicans’ plans for another gold commission to investigate the possibility of returning the USA to a gold standard in the case of the Romney-Ryan ticket winning.

Last month we entered the sixth year of this crisis, although parts of the media seem determined to continue calling it a ‘recovery’. Wishful thinking. We have been in continuous crisis for half a decade. Doses of Valium and Prozac – called QE among central bankers – have calmed nerves occasionally and given the false impression of healing.

Since 1971, the number and intensity of banking crises around the world has gone up markedly, according to Carmen Reinhart and Kenneth Rogoff, hardly anti-establishment economists. Debt levels exploded.

On page two of today’s Wall Street Journal Europe you will find the result of a readers’ poll from last Friday: Question: Will the ECB’s rate cut help restore confidence in the bloc’s economy? Answer: 81 percent of readers say no, 19 percent yes.

In my view, there is no escaping the fact that things are not getting better. If anything, they are getting worse. Following the large swings in financial markets this past week and reading the commentary in the press, it strikes me that there is still a surprisingly strong belief out there that our fate is in the hands of the policymakers, who presumably still have it in their power to make things better for the economy.