Below, please find the English translation of the article “El antiguo economista jefe del BCE advierte de un colapso en el sistema monetario mundial”, por Javier Santacurz Cano de la webpage OroyFinanzas.com, courtesy of maalamalama. We apologize if there are some minor errors in translation as we are not fluent in Spanish but conversational enough to provide the below translation. You may not republish this translation but you may link to this translation at this website.
The former head of the European Central Bank ( ECB) and vice president of the Bundesbank, Jürgen Stark, an economist gave a remarkably important speech to those attending his lecture at the Bayerischer Hof in Munich, last Saturday. In his lecture Stark recommended to protect against a possible global monetary system collapse. The framework where the conference was delivered was suitable to make speeches of this type. The organizer was the Ludwig von Mises Institute in Germany, and therefore, one can use direct language about the risks that embodies the present system. According to Stark , the central banks “have completely lost all ability to control and any perspective on the economic situation.”
The current monetary system was saved “in extremis” in 2011 through concerted action by all major central banks. According to Professor Stark, “the whole system is based on pure fiction , struggling since 2008 to avoid a second Lehman , which if it were to happen, the system will not survive .” The bottom line is not the sequence of events in recent years but the same system that is being called into question . Paper money, printed without a real backup such as the production of goods and services in the economy, can grow without control due to the Central Banks’ mechanisms of monetary policy and the monetary multiplier. Commercial banks, at any time and under any circumstances , can create money by issuing bonds.
In this sense, Stark warns that this “pure fiction” [of the global financial system] can be addressed with proper portfolio diversification for investors , allocating a portion of one’s investment in “safe havens” like gold and silver , among others. Returning to support the monetary system with a reserve asset is an essential task today that the central banks are not willing to perform. Despite the avalanche of cash and plenty of it at this time, we should not believe that we have a solid system. Is it enough for Deutsche Bank to sneeze, after receiving a capital infusion of 8 billion euros from the Qatari Royal Family, for all other EU banks to catch pneumonia in the stock market? All major bank stocks slumped yesterday starting with Commerzbank , UniCredit , Société Générale , BBVA and Barclays.
