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Articles, Authors


15.01.2013
Switzerland and the monetary crisis in Europe
Author: Prof. Antal E. Fekete

Preamble
In this paper, I describe how Switzerland can play a positive role in the present unprecedented monetary and financial crisis in Europe, in helping stabilize the currencies of European countries by remobilizing gold. After all, the Swiss franc is also in jeopardy because the collapse of the euro would adversely affect the Swiss economy as well. The inevitability of reintroducing gold is discussed in this preamble in a concise manner. If 300 words could not convey the idea, even 300,000 would.

This crisis is a debt crisis: a crisis of uncontrollable exponential proliferation of global debt that started in 1971 prompted by the action of President Nixon. Defaulting on the international debt of the United States made the dollar irredeemable for the first time in 37 years. It is also a gold crisis that started the same year with Milton Friedmans selling Keynes idea to the world to discard the fixed exchange rate system based on gold in favor of floating, based on the irredeemable dollar. Variable exchange rates were officially embraced as a disguise to take the shame out of fraudulent dollar-devaluation. Thereafter default on international balances through floating has become an indispensable tool of monetary policy. The problem of stabilization has been solved by destabilization. Ignored is the fact that, in effect, floating is a ratchet downward to worthlessness. Just look at the loss of purchasing power of all currencies since 1971.

On Friedmans advice Nixon made virtue out of vice. He lionized the dishonored dollar. He did that in the mistaken belief that the irredeemable dollar can replace gold as the ultimate extinguisher of debt. As it has turned out, it cannot. Arguably, this was the greatest mistake ever made in the history of money. Payment in dollars does not extinguish debt. It is merely shifted to the bank on which the check is drawn. By contrast, when paid in gold, debt is extinguished on the spot, as can be seen from the fact that total outstanding debt is simultaneously reduced by the same amount.

In 1971, the international monetary system was abruptly deprived of its ability to reduce total debt which thereafter could only grow, never shrink. The root cause of the problem facing the world today is the loss of ability to cull bad debt. We must address the problem of orderly debt retirement. No monetary reform can succeed that does not rehabilitate gold and silver so that they can resume doing what they have been doing all through history before the watershed year 1971: to eliminate unwanted debt.

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