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Dr. Joseph Salerno Explains Everything You Ever Wanted to Know About Money (But Were Afraid to Ask)
Introduction: Dr. Joseph Salerno is a well-known American Austrian School economist and an active scholar and author in the areas of monetary theory, comparative economics, the history of economic thought and banking. Joseph Salerno is editor of the Quarterly Journal of Austrian Economics; a professor of economics at the Lubin School of Business at Pace University in the Finance and Economics Department and Academic Vice President of the Ludwig von Mises Institute. Dr. Salerno is also a research associate for the Foundations of the Market Economy at the New York University economics department as well as a policy expert at the Heritage Foundation. Dr. Salerno has been interviewed on many radio shows and he lectures widely across the United States and internationally on economic topics.
Daily Bell: You’ve just published a new book. Can you tell us about it?
Dr. Joseph Salerno: I would be happy to. The book is entitled Money: Sound and Unsound and was published in 2010 by the Ludwig von Mises Institute. It is a collection of essays on monetary topics that I have written over the past twenty-five years. It features a new introduction in which I relate these essays to recent monetary and financial developments and assess what I believe to be their specific contributions to Austrian monetary economics. The essays were originally published in a wide variety of academic journals, scholarly and popular books, periodicals, and web publications. Some are more technical than others but all of the essays are written in straightforward English and are accessible to the literate and interested non-specialist.
The range of topics covered by these essays is broad. I will mention a few that may be of special interest to your readers as well as a few that have had some influence on other scholars. There is one that formulates a specifically Austrian definition of the "true" money supply based on insights by Murray Rothbard and applies it to calculating the U.S money supply. There is another essay that describes and classifies the different kinds of deflation – and argues that most kinds are economically and socially benign. A related essay argues that there is no empirical link between deflation and depression. How inflation generated by central bank money creation conceals the true cost of war is the subject of another essay.
There are four essays dealing with the gold standard. These essays: explain the operation of a pure, 100-percent gold standard; refute common objections to a gold money; distinguish between "true" and "false" gold standards; and analyze various proposals for re-establishing a modern gold standard. There is an essay that defends Murray Rothbard’s characterization of the 1920s as an inflationary decade against the criticisms of Richard Timberlake, a prominent monetarist and monetary historian. A follow-up essay challenges Timberlake’s claims that the Fed pursued a deflationary monetary policy throughout the 1930s and that this policy was responsible for prolonging the Great Depression. Finally, I might also mention two essays originally published in the first half of last decade in which I criticize Alan Greenspan, then at the peak of his fame as the monetary "Maestro," as a clueless and dangerous inflationist who policies were driving the U.S. economy toward an economic disaster.
Daily Bell: Where can your book be found?
Dr. Joseph Salerno: It can be purchased online either at the Mises Institute bookstore (Click Here) or Amazon (Click Here). Addittionally, there is a free ebook version available at Mises.org – Download Here. – Click here.
Daily Bell: What do you think laypeople would find most compelling about it?
Dr. Joseph Salerno: The fact that it is written in plain English and that it deals with topics and events that do or will affect their daily lives.
Daily Bell: What are some other books you have written or edited?
Dr. Joseph Salerno: I have edited and written introductions or epilogues for several important works by the Austrian masters, most notably: F. A. Hayek, Prices and Production and Other Works on Money, the Business Cycle and the Gold Standard; Murray N. Rothbard, A History of Money and Banking in the United States; Rothbard, The Mystery of Banking; Rothbard, Man, Economy and State with Power and Market (Scholar’s Edition); and Ludwig von Mises, Economic Calculation in the Socialist Commonwealth.
Daily Bell: Are you happy with the growth of free-market thinking in the 21st century?
Dr. Joseph Salerno: I am thrilled with the rapid expansion of free market thinking and scholarship in the new millennium. What especially impresses me is that much, if not most, of it has been inspired by the writings of Mises, Hayek and Rothbard via the multi-media efforts of the Mises Institute – through its books, journals, instructional and professional conferences, Daily Articles, podcasts and so forth.
I am especially gratified that students, business and finance professionals, a few maverick journalists and media commentators, and just plain ordinary people who have real careers and jobs in the private sector have been the ones in the vanguard of this resurgence of interest in free market ideas in general and in Austrian economics in particular. It has been this sea change in "public opinion" that has compelled establishment pundits and intellectuals and even mainstream economists to confront Austrian arguments against the Fed and fiat money and to try to engage the Austrian theory of the business cycle.
This development must be credited in no small part to the influence of Ron Paul and his unique ability to bypass and short-circuit the media elites and communicate directly with the public. This is especially true in the case of the spontaneous growth of anti-Fed sentiment and the questioning of the Fed’s policies and profoundly undemocratic "independence" that has spread so rapidly throughout society, even making inroads into the mainstream business media. So great has been the damage done to the Fed’s reputation, that Chairman Bernanke felt compelled to descend from the Olympian heights to sit – quite uncomfortably it appears – for an interview on 60 minutes, a popular TV news magazine. Credit is also due to the Mises Institute whose efforts to broadly disseminate sound economic ideas to all sectors of society have been instrumental in raising public awareness of the true nature of the Fed and its culpability for the economic events of the past decade.
It is also important to realize that this remarkable resurgence of interest in sound money and free markets has vindicated the view of political and social change expressed by Mises and Rothbard. Both men emphasized that the only means to radical social change was for free-market economists and other libertarian scholars to directly convey knowledge of the benefits of a free society to the productive classes, who are being systematically misled and bamboozled by the intellectual and media elites. A number of contemporary Austrian economists and libertarians have been surprised by the spontaneous libertarian movement that has grown up around a popular figure like Ron Paul. Some are even skeptical of its beneficial effects precisely because it is a populist movement whose ideas have not been properly vetted by intellectuals ensconced in universities, think tanks and media firms.
Indeed the intellectuals have been among the very last to recognize the popular groundswell of anti-government, anti-Fed sentiment. But the skepticism of these Austrians and libertarians is not well grounded and stems from a misinterpretation of Friedrich Hayek’s views on the strategy of transition to a free society. According to their flawed reading of Hayek, social change occurs very slowly and is a trickle-down phenomenon. That is, free-market experts and scholars who somehow have gradually ascended to positions in establishment ivory towers first formulate abstract ideas and theories that are then developed in a form that appeals to the ordinary citizen. This is necessarily a long drawn out process because it next requires that a class of lesser libertarian intellectuals be reared up to take positions of influence in our opinion molding institutions, i.e., media outlets, publishing firms, schools, churches, think tanks, and so on. These intellectuals are then tasked with developing these ideas and theories into concrete positions on social and economic issues that are palatable to the clueless masses.
This pseudo-Hayekian view was further distorted and rendered even sillier by ripping out of proper context Hayek’s useful metaphor of "the structure of production" to represent the production of ideas. Briefly, the story here is that the scholars and experts are the original factors of production that formulate the basic ideas and theories of social and economic interaction that are passed along to the "lower-order" intellectuals and transformed step-by-step through time into an ideology ready-made for popular consumption. But this is not Hayek’s story at all. In his brilliant article "The Intellectuals and Socialism," Hayek portrays the intellectual class as almost invariably statist and prone to adopting and propagating only socialistic ideas and schemes for social reform, while suppressing free-market ideas. Hayek refers to intellectuals as exercising "their censorship function." So opposed was Hayek to these intermediaries in ideas that he raised the issue of economically liquidating this class by eliminating copyright law. But he wondered whether a critical view of the social benefits of the law of copyright and "the expression of doubts about the public interest in the existence of a class which makes its living from the writing of books" could ever be openly stated in a society in which intellectuals control the media.
Daily Bell: Let’s ask some slightly more technical questions. What is money in your view?
Dr. Joseph Salerno: I hold a fairly conventional theoretical definition of money as the general medium of exchange, meaning the good in the economy, which is routinely and universally accepted in exchange for all other goods and services. Less orthodox is my view of what things constitute the money supply in our current system of central bank-monopolized fiat money. I follow Rothbard’s rule that any item that is either itself money or is redeemable at par on demand for money should be included as a component of the money supply. Thus, for the U.S., I would count Federal Reserve notes held by the nonbank public, which is the basic "cash" of the system, plus all checkable deposits plus all deposits classified as savings deposits as the main elements of the U.S. money supply. This monetary aggregate is what I call TMS for "True Money Supply."
Let me briefly explain. Savings deposits are identified as part of TMS even though they cannot be directly used in payment, because they represent instantaneous and FDIC-insured claims to immediately spendable dollars, for example, through ATM machines, cashier’s checks, and personal withdrawal. The fact that they are not checkable and are less convenient to physically access than demand deposits is a mere technical detail and does not affect their status as money. Analogously, no one would deny that Fed notes left at home in a safe or buried in the backyard are any less money just because Fed notes carried in one’s wallet are more conveniently spendable.
In contrast to savings accounts, shares in money market mutual funds (MMMFs) are excluded from TMS because they are not redeemable at par. They are not federally insured and are not claims to a fixed quantity of currency. Rather they are titles to shares of a managed portfolio of highly liquid, short-term securities. The value of these shares, typically maintained at .00 per share, could decline below .00 (called "breaking the buck") depending on the performance of the fund’s portfolio. Thus the equity share owner (not depositor) in the fund bears the burden of interest rate and default risk. By the way, in fall 2008, during the financial crisis, the U.S. Treasury established a temporary program to guarantee MMMF shares giving them the character of bank demand deposits, but this program expired in 2009, so we can continue to comfortably omit them from the money supply.
For those who may be interested in a full explanation of TMS, they should read my article on the "The ’True’ Money Supply" reprinted in my book Money: Sound and Unsound. I should note that, based on the same Rothbardian theoretical considerations that I used to construct TMS, Frank Shostak developed a narrower monetary aggregate, which he named the "Austrian Money Supply" or AMS. Michael Pollaro has labeled these aggregates TMS1 (Shostak’s) and TMS2 (Salerno’s) and has written an insightful article, "Money Supply Metrics, the Austrian Take," comparing and contrasting them which is available on line.
Daily Bell: Do you believe in private fractional banking or should it be illegal?
Dr. Joseph Salerno: I am neither a philosopher nor a legal theorist, but I believe in the absolute right of individuals to enter into any voluntary contract that they choose. But a contract must be meaningful to be enforceable. If I pay you for a promise to paint my house red and green all over, this is not a contract but an absurdity. Likewise if I pay you (or even if you pay me) to store my motorcycle in your garage so that it is always available for me to use it and I grant you the freedom to rent it out at will. My point is that the deposit contract as modern free bankers conceive it, is a meaningless fiction. It implies that a sum of money can be both maintained on deposit for instantaneous withdrawal by the depositor and lent out to a borrower.
Now I am not saying that a free banking deposit contract can never be formulated in a meaningful way. But then it would not be a "deposit" contract at all, but a short-term credit transaction. In fact, some free bankers have admitted that bank deposits are actually "call loans" which are extended to brokers by banks and which mature daily. This being the case, it would be explicitly stated in the contract that the "depositor’s" funds were being lent or invested by the "banker" and that immediate withdrawal is contingent upon the liquidity position of the bank. There would also have to be explicitly stipulated in the contract the recourse available to the depositor and the banker’s obligations in the case of temporary suspension of withdrawal privileges. It is highly unlikely that, under these circumstances, the short-term financial instruments – no longer masquerading as immediate claims to fixed sums of money – issued by free bankers would gain much circulation as currency.
There now appears to be some empirical evidence on this last point. One of the summer fellows under my direction here at the Mises Institute, Malavika Nair, is working on a very interesting study of a genuine free-banking regime, which operated in India and Burma in the late nineteenth and early twentieth century. Unlike the alleged free banking systems in Scotland and the U.S., this regime was not propped up by central bank or government loans and bailouts and by legalized suspensions of gold and silver payments to their depositors and note-holders. In the Indian case the silver and British pounds were lent to the free bankers by "depositors" who wanted to earn a return while holding a portion of their wealth in highly liquid financial instruments, i.e. the banker’s promises to pay that matured daily. The bankers then lent the silver and pounds directly to farmers, merchants, and businessmen and did not issue any currency. The depositors, for their part, were able to access their invested (not deposited) funds at any time with the explicit option reserved to the bankers to delay payment for a day or two. The depositors also had the right to have their funds transferred to third parties by a draft on their banker. From this preliminary research on the Indian case it appears that in the actual free market, as opposed to the speculative construction of academic free bankers, the financial institutions that arise to supplement commodity money would operate very much as money market mutual funds do today.
Thus to answer the question you posed: I do not believe that "private fractional-reserve banking," as it is commonly understood in debates among libertarians and Austrians today, should be illegal. It is a self-contradictory concept that could never be formulated into a meaningful contract on a free market. Meaningful contracts would result in true financial intermediaries which did not issue currency and create money but simply invested and managed people’s short-term savings in a portfolio of highly liquid assets while offering a payments mechanism to transfer funds to third parties. In fact, I am all in favor of modern money market mutual funds as well as historical "free banking" arrangements as exemplified in the Indian case.
Daily Bell: Do you believe that Real Bills ought to be allowed in a private money system, or should Real Bills be illegal?
Dr. Joseph Salerno: I see nothing wrong with people creating and transferring bills of exchange, which are simply a short-term negotiable credit instrument that facilitates payments mainly in international trade. These instruments are completely consistent with a society based on free contract. What I vigorously reject is the age-old fallacy, known as the "real bills" doctrine, that when a bank issues currency or bank deposits to discount a trade bill it is not causing inflation. If sound monetary theory, both classical and Austrian, has taught us anything, it is that a bank creates money whenever it makes a loan or investment of any kind whatsoever. Whether a fractional-reserve bank buys a government security, provides mortgage finance, makes a credit card loan or discounts a "real" bill of exchange, it must increase its demand deposit liabilities to finance this expansion of its assets. In doing so, it increases the money supply and puts upward pressure on prices. Moreover, if banks persisted maintaining the rate at which they discounted real bills below the "natural" rate of interest (that is, the rate of return on investment), they would confront an unending supply of trade bills to discount causing an inflationary spiral of money creation and price increases.
Daily Bell: Let’s get some background. Where did you grow up?
Dr. Joseph Salerno: I grew up in New Jersey within an hour’s commuting distance of New York City, where I still reside today.
Daily Bell: How did you decide to become a hard money economist?
Dr. Joseph Salerno: As an economics major in college and already a libertarian, I came across a reference to Murray Rothbard and the Austrian school in a New York Times article on the new political philosophy of libertarianism. An acquaintance subsequently gave me a copy of Murray Rothbard’s small booklet on Depressions: Cause and Cure. I learned more about inflation and depression in the 45 minutes I spent perusing that booklet than from the two semesters that I endured in Principles of Macroeconomics and Intermediate Macroeconomics courses. I subsequently sought out and devoured all the works I could find by Rothbard, Ludwig von Mises and Friedrich Hayek. These works stimulated my interest in monetary topics and inspired me to pursue an academic career focused on a sound money research program.
Daily Bell: Have you experienced scholastic prejudice?
Dr. Joseph Salerno: Yes, only once. When I came up for tenure and promotion at my second teaching position, I was denied tenure by the Provost despite the fact that the economics faculty, including the department’s hardcore Marxist, had voted unanimously in my favor (11-0) and that my teaching evaluations and the reports of external reviewers of my research were extremely positive. It seems that the Provost and the Dean of Arts and Sciences did not like what they perceived as the rightward slant of the economics department, most of whose members were center to slightly right-of-center mainstream economists. They contrived to reallocate economics department "lines" (faculty positions) to the left-leaning "soft" social science (sociology, political science) and humanities departments. Because I was hired specifically for my specialty in Austrian economics, I was number one on their hit list. I filed a grievance on the basis that the tenure process deviated from the formally specified procedure and I won my case. It was no coincidence that the grievance committee who ruled in my favor was made up mainly of members of the hard science departments. I was awarded the right to re-enter the tenure and promotion process but was denied a second time. Once again proper procedure had been violated and my colleagues urged me to file a second grievance, but by then I had found a better paying job at a higher rank in a much nicer (and safer) location.
Daily Bell: Should the US pass an anti-discriminatory law against those who exhibit prejudice against free-market scholars?
Dr. Joseph Salerno: Absolutely not! Sound economic ideas will only triumph in a process of free and open discussion. Invoking government’s oppressive and fascistic anti-discrimination laws on either side will only stunt and divert this process.
Daily Bell: (Sarcasm off.) Why is it so hard to be a free-market scholar?
Dr. Joseph Salerno: I do not find it very difficult at all to follow this vocation. It may be hard to find a position at a top research university here in the U.S., but small liberal arts colleges and mid- and lower-tier universities are increasingly open to Austrian scholars and some are even seeking them out. Another heartening development is that more and more aspiring Austrian economists are attending mainstream Ph.D programs and acquiring the technical knowledge and skills required to land jobs at these colleges and universities. Current and former Mises summer fellows and other young scholars who have attended Mises programs are enrolled in or have recently graduated from Ph.D. programs at the following universities: Ohio State, Indiana, Boston College, Missouri, California–Berkeley, North Carolina State, Suffolk, SUNY-Albany, and the London School of Economics.
Daily Bell: How did you find a berth at Pace University?
Dr. Joseph Salerno: Pace University is a large private university with campuses located both in New York City and suburban Westchester County. I teach at the Manhattan campus, which is hard by the Brooklyn Bridge and a few blocks away from both Wall Street and the New York Federal Reserve Bank. It is primarily known for its business school and has a large MBA program. It places its graduates quite well in the New York metropolitan area. It emphasizes a combination of teaching and research.
At the time I was in the market for a job, the graduate economics department in Pace’s Lubin School of Business was looking for someone whose research specialty was macroeconomics and monetary economics and who was also a good teacher. The chair of the department, William Freund, who interviewed me first, was Vice President and Chief Economist at the New York Stock Exchange. Although I did not flaunt my Austrianism at that or the subsequent interview with the search committee, I certainly did not hide it. It was decided that I was the most qualified candidate and I was hired. I won the Lubin School’s research prize my first year for a paper I published on the operation of the classical gold standard and have been happily ensconced at Pace ever since.
Daily Bell: Is the Internet making free-market scholarship more available and mainstream?
Dr. Joseph Salerno: Yes, without a doubt. The Mises Institute in particular has had spectacular success in broadly disseminating free market ideas through its website, Mises.org. It has made an astounding amount of online resources available online to scholars, students, investors, business professionals and to anyone else who might be interested in broadening and deepening their knowledge of the economics of the free society. Perhaps most importantly, it has an enormous number of heretofore unobtainable books on economics and other disciplines available online.
Daily Bell: Is the Internet like a modern-day Gutenberg Press, changing the way society interacts with secret knowledge?
Dr. Joseph Salerno: I am not sure I fully understand your question here. But the Internet is certainly comparable to the printing press in disseminating knowledge to the ordinary people and increasing their awareness of the schemes and misdeeds of the ruling elites.
Daily Bell: Has the dollar reserve system collapsed?
Dr. Joseph Salerno: I would say that the dollar-reserve system is going through a slow motion collapse, much as the Bretton Woods monetary system did in the 1960s culminating with President Nixon’s ignominious closing of the gold window in 1971. With the continuation of trillion-dollar Federal deficits into the foreseeable future and the relentless and accelerating accumulation of the U.S. national debt in foreign hands, it is difficult to see how the American state can avoid defaulting on its debt or attempting to inflate it away by continuing its reckless monetary expansion. But long before this occurs it is likely that foreign holders of U.S. dollar assets like China will begin to reduce their holdings and replace their dollar reserves with other currencies or even precious metals. At this point the dollar reserve system and with it the U.S. government’s privileged access to international credit markets will disappear. This day cannot come too soon for the long-suffering American citizen who is on the hook for the interest and principal payments on this endless foreign borrowing used to finance reckless military adventures abroad and wasteful and oppressive programs at home like the "War on Terror."
Daily Bell: Are central banks going out of business?
Dr. Joseph Salerno: Just as no politician ever resigns, no central bank ever goes out of business, except in the most extreme circumstances. In the case of central banks operating under a fiat-money standard, their core business is literally creating money from nothing, so there is no chance of them ever becoming insolvent. Indeed the very notion of a central bank’s balance sheet listing its assets and liabilities is a hollow accounting fiction designed to conceal its true nature. That said, central banks might go out of existence when they destroy the currency through hyperinflation, which is hardly a desirable prospect. It is better to look at the Fed, despite its much-touted independence from politics, as simply a particularly destructive branch of government, which should be targeted for abolition as one of the first steps in the transition to sound money.
Daily Bell: Dr. Peter Boettke, whom we have interviewed, uses some of your material. Where do you stand on the split between GMU and the Mises Institute? Is there a split? Does it matter?
Dr. Joseph Salerno: All very good questions that I am happy to answer because there is a great deal of rumor, speculation, and misinformation – even outright falsehoods – in circulation about a supposed split between the two institutions. Let me preface my answer with an anecdote. I once saw a television interview with Mick Jagger, lead vocalist of the Rolling Stones, in the early days of the so-called "British Invasion" in rock music. It went something like this:
Reporter: How do you compare the Stones to the Beatles?
Jagger: I don’t. We do different things.
Reporter: But who is better?
Jagger: We are good at what we do and the Beatles are good at what they do.
Reporter: But do the Stones do what they do better than the Beatles do what they do?
Jagger: [Exasperated laughter].
What Jagger was getting at was that the Rolling Stones were a band with its roots in the black American blues tradition, while the Beatles were inspired primarily by 1950s American rock and roll. In any case the point of the story is that there are deep differences between the organizational structure, financing, and mission of George Mason University and the Mises Institute. Like the Beatles and the Rolling Stones, the two cannot really be compared.
The GMU "Austrian" program is located in the economics department of a public university and its various programs and graduate fellowships are funded by private money from a few, large institutional donors. Its mission is twofold. First, it seeks to train graduate students in eclectic and heterodox political economy traditions with a general market-oriented thrust. As it says on the GMU website, "graduate programs in economics are noted for their emphasis on comparative institutional analysis and their concentration on the relationships among economic, political, and legal institutions.
This distinction is illuminated by the fields of study associated with the department: experimental economics, Austrian economics, public choice, constitutional political economy, law and economics, and new institutional economics." The second goal of GMU is to place their new Ph.Ds on the faculty of colleges and universities, particularly ones that also receive grants from the same institutional donors to run free-market programs and that usually already have one or more GMU Ph.Ds on its faculty. There are several of these so-called "cluster" schools in the U.S., both private and public. These programs in turn serve to identify and cultivate free-market undergraduates who may be inclined to pursue a Ph.D in economics and steer them to GMU. Thus the cluster schools are both feeder programs and employment outlets for GMU. The GMU program and its associated faculty do what they do very well.
Given the diversity of traditions taught in the GMU program, its faculty can hardly be expected to be monolithic and most would probably not classify themselves as "Austrian." Indeed the faculty includes several very good economists, some of whom are Austrians and some not. A few of my favorites, who I also count as friends, are Richard Wagner, Larry White and Dan Klein. Bryan Caplan is also an interesting thinker and a committed libertarian, although I do not always agree with what he writes.
In contrast to GMU, the Mises Institute is a private educational and research institute funded primarily by individual, as opposed to institutional, donors. Its mission is to disseminate and teach the economic theory and political economy of the "Austrian" tradition to the public as well as to promote academic research in this tradition. This it does through numerous conferences, publications of books and journals and one of the world’s leading economics websites, Mises.org.
The economists associated with the Mises Institute are employed in a wide variety of public and private colleges and universities in the U.S and Europe and have received their graduate training in mainstream universities from Rutgers and Columbia to VPI (now Virginia Tech) and California-Berkeley. Given their diverse training, the Institute’s economists are hardly monolithic in their interests or their views on specific theoretical or policy issues. They disagree on such things as the time preference theory of interest, the usefulness of the "structure of production" concept, the consequences of open immigration, whether private, unregulated fractional-reserve banking is consistent with a purely voluntary society, to name only a few.
However they are united in their view that economics is a truth-seeking vocation. They also share the view that sound economic theory can only be advanced by using the causal-realist approach, which characterizes economics as the search for the true causal laws that explain real market prices and interest rates as well as the more complicated, but no less real, phenomena of business cycles and financial crises. This approach was developed in the works of the Austrian economists such as Menger, Böhm-Bawerk, Mises, and Hayek and in the works of eminent British economists such as Philip Wicksteed and the LSE economists of the 1930s and of the American psychological school of J.B. Clark, Frank Fetter and Herbert Davenport. Rothbard synthesized and considerably advanced this paradigm in his great treatise Man, Economy, and State. Institute scholars seek to educate the public while pursuing research within the causal-realist paradigm.
As someone closely associated with the Mises Institute, I like to think that the Institute and its affiliated economists and scholars do what they do very well.
As far as whether any split exists between MI and GMU, it is a meaningless question because they have very different missions. Comparing the two institutions would be like comparing apples and oranges, or the Stones and Beetles. However, I do concede that there is a certain unavoidable tension between the two because they both lay claim to the name "Austrian" as a descriptor of their very different goals, strategies and, especially, approaches to economic theory. But engaging in semantic controversy over whom or what is an "Austrian" has proven to be vain and futile, especially since the problem now seems to be spontaneously resolving itself.
Most of the Institute economists have begun referring to their approach to economic theory as "causal-realist." This term summarizes Menger’s original description of the proper method and goal of economic theory, which were adopted and pursued not only by his Austrian followers but, as Rothbard has shown, by many Anglo-American economists. I also like the term "mundane economics," coined by Peter Klein, to characterize the project of the Institute economists to avoid esoteric meta-economic sermonizing and instead to apply economic theory to analyze real-world issues such as the causes of the financial meltdown, the nexus of entrepreneurship in modern corporations, the effects of the Fed’s quantitative easing programs, etc. GMU economists have used terms such as "coordination-problem" or "spontaneous-order" economics to identify the collection of heterodox methods and traditions that they embrace. All in all, not a bad solution, and one that avoids silly and wasteful conflicts.
Daily Bell: Why do you think so highly of Hans Sennholz? Why was he under-appreciated?
Dr. Joseph Salerno: I greatly admire the work of the late Hans Sennholz because he embodied so well the virtues and skills of a vocational economist. Sennholz did his Ph.D under Mises and attended Mises’s NYU seminar in the company of prominent Austrians such as Rothbard, Kirzner, and Hazlitt, among others. He was therefore intimately acquainted with causal-realist economic theory. During his long and illustrious teaching career and in his voluminous writings he aptly employed this theory to elucidate and analyze the causes and solutions of the economic problems of the day as well as the dire consequences of all manner of interventionist economic policies, which have been the outgrowth of the modern American Welfare/Warfare State.
Not only did he educate and enlighten generations of students and lay readers, Sennholz was also an accomplished scholar and innovative thinker who made important contributions to economic science and the sound money program. He published articles contrasting the Austrian with the Chicago (monetarist) theory of money and explaining the operation of the classical gold standard and why its restoration was the only alternative to inflation. These and other contributions on the theory and history of money and business cycles are integrated in his book Age of Inflation. He also wrote valuable scholarly essays on Menger’s monetary theory and Böhm-Bawerk’s capital and interest theory. Perhaps his most important publication, however, is his book Money and Freedom, which has been neglected even by hard-money Austrians. In this slim volume of less than 100 pages, he presented an innovative and eminently practicable transition plan to end the Fed’s monopoly of the money supply and to introduce an inflation-proof regime of monetary freedom.
In answer to the second part of your question, Hans Sennholz has been ignored by the mainstream, and even by some who call themselves Austrians, for two reasons. First, he wrote in plain English and did not mince words. As in the case of the great 19th-century French Liberal economist Frédéric Bastiat, clarity of writing style was mistaken for superficiality of thought. Second, Sennholz invariably focused on real-world problems and policies and never wasted a word analyzing contrived paradoxes and puzzles or arcane historical minutiae. Furthermore, he consistently applied the tried and true causal-realist method in his analysis and avoided the technique-driven fashions of game theory, experimental economics, behavioral economics, computable general equilibrium models, etc.
Daily Bell: What do you think of the work of such "neo Austrians" as Dr. Antal E. Fekete?
Dr. Joseph Salerno: I have very limited familiarity with Dr. Fekete’s writings, so I am not in a position to comment on his work as a whole.
Daily Bell: Dr. Fekete recently wrote an open letter to Ron Paul, which you can find online. In it he used some confusing terminology, referring to the Federal Reserve when he may really have been speaking of dealer operations. He wrote that, "Most people believe, and the media confirm them in that belief, that the Fed can legally create dollars ’out of the thin air’ in any quantity, and can do with them as it pleases. This may well be the pipe dream of Dr. Bernanke who is quoted as saying that the U.S. government has given the Fed a tool, the printing press, to stop deflation – but it hardly corresponds to the truth. The Fed can create new dollars only if some stringent legal conditions are satisfied, and then, it can only dispose of them in certain ways prescribed by law." Can you comment on the "stringent legal conditions?" Dr. Fekete then writes, "The law does not allow the F.R. banks to purchase Treasury paper directly from the Treasury because that would make money creation through the F.R. banks a charade, reserve requirements a farce, and the dollar a sham" He also writes, "The fact is that the Federal Reserve banks can purchase Treasury paper only if they pay with F.R. credit that has been legally created." Can you explain this? Is the Fed truly subject to such stringent rules? Doesn’t the Fed print money from nothing or is this just a modern myth?
Dr. Joseph Salerno: Assuming that Fekete has actually said these things, then he is confused, to say the least. I cannot explain exactly what he means, but I will respond to some of his statements.
The Fed is certainly not now constrained in its money-creating activities by "stringent legal conditions," if it ever was. Since World War 2, and especially since 1980, the Fed is able to create money at will by purchasing assets on the open market. It exercises this power every day three blocks from my office in New York City where the New York Federal Reserve Bank with its "trading desk" is located. The Fed is legally authorized to buy and sell U. S. government as well as many other types of securities for its own account on the open market. It trades exclusively with 20 or so "primary dealers," consisting mainly of Wall Street investment banks and other large securities dealers. When the Fed wishes to increase the money supply, it simply holds a computer auction where it offers to buy Treasury securities from these firms. It will purchase from the firms offering the best selling prices and will pay with checks written on itself. Actually payment is not in the form of literal paper checks, but in the form of electronic transfers of funds to the sellers’ bank deposits.
But where does the Fed obtain the funds from that it transfers to the sellers? It literally and instantaneously creates them out of thin air – or in cyberspace – by the stroke of a computer key. Say the Fed purchases 0 million in bonds on a given day (usually in the morning during so-called "Fed time" from 9:00 am to 11:00 am). The newly created dollars that are paid out to the sellers now swell the reserves of the banks in which they are deposited. The Fed now has 0 million dollars worth of additional assets in the form of U.S. Treasury securities offset by 0 million dollars of new liabilities represented by the increase in reserve deposits that it holds for the banks.
While some of a bank’s reserves are held as currency in its vaults and ATM machines, most are held as insubstantial cyber-credit entries in their deposit accounts on the books of the Fed. The 0 million of reserves, a component of "base money" or "the monetary base," thus created by the Fed, can fuel a multiple expansion of the money supply as the banks create new checking deposits for businesses and households by lending and relending these added reserves subject to a legal reserve requirement of 10 percent. Thus from 2001 through 2005, the Fed orchestrated a trillion increase in the U.S. money supply on the basis of open market purchases that swelled base money by 0 billion. In effect, during the period when the financial and real estate bubble was forming, the Fed was wildly creating new money at the rate of billion per day! Again in 2008-2009 the Fed doubled the monetary base and bank reserves in a matter of four or five months by creating money to buy up not only government securities but also almost every kind of private security it could lay its hands on.
So Fekete is dead wrong in claiming that the Fed is somehow subject to rigid legal constraints in conducting monetary policy. As to his claim that the Fed is not legally permitted to purchase new issues of Treasury securities from the Treasury, it is true but beside the point. The law is a sham and does not restrain the Fed from creating money at will by simply buying previously issued Treasury securities on the open market.
Lastly, Dr. Fekete’s argument that the Fed can purchase government securities "only if they pay with F. R. credit that has been legally created" proves nothing. "Federal Reserve Bank credit" merely refers to the asset side (minus gold) of the Fed’s balance sheet, which can be expanded without external control or limit by the Fed itself using the dollars it creates via open market purchases.
Daily Bell: It seems to us even by setting interest rates that central banks affect the quantity and value of money.
Dr. Joseph Salerno: Yes, that is true. But the Fed does not directly set interest rates. This is the great modern myth, which was designed to conceal the Fed’s true modus operandi. The Fed influences interest rates by creating and injecting dollar reserves into the banking system. The additional reserves increase the supply of loanable funds relative to the economy’s demand and thus induce banks to offer loans at lower interest rates in order to attract borrowers for the additional funds. So causation runs from the increase in Fed–created base money to reduced interest rates. Lower interest rates are just one of the distortions caused by the Fed’s unrestrained power to create money ex nihilo.
Daily Bell: Is every law and regulation a price fix? Do price fixes always distort the economy?
Dr. Joseph Salerno: Every attempt to fix prices from apartment rents to the prices of kidneys and other cadaveric organs for transplant distorts the economy and causes long run consequences that most of the supporters of the regulation do not foresee and do not desire. In the case of the futile attempt to fix interest rates, these consequences are particularly devastating: inflations, bubbles and recession or depression.
Daily Bell: What would be the best kind of money?
Dr. Joseph Salerno: The best kind of money is sound money. By this I mean money whose supply is completely divorced from control by the government or its central bank and whose value is therefore determined exclusively by market forces and not by the whims and connivings of politicians. In practice this means money based on a useful commodity produced on the market, historically gold or silver or both.
Daily Bell: Is the best money system simply one that allows for money-competition?
Dr. Joseph Salerno: Absolutely. The production of the money commodity, its transformation into convenient shapes like coins and bars, its storage in deposits banks that issue notes and checking deposits – all of these functions should be undertaken by unregulated, competitive firms. Likewise, the entire panoply of protectionist and monopolistic regulations on financial institutions like investment banks, business and mortgage lenders, mutual funds, hedge funds, insurance companies, and so on would also be removed and the gales of rivalrous competition allowed to sweep away the rotten and inefficient firms and restructure the entire industry to serve consumers.
Daily Bell: Where is gold headed?
Dr. Joseph Salerno: In my estimation ever skyward, along with, U.S. deficits, national debt, money supply, and asset and consumer prices. Every fiat-money regime in history has been inflated away or collapsed and has given way to a gold standard sooner or later. I see no reason why the U.S. dollar, the Euro, and the other postwar fiat currencies will not suffer the same fate.
Daily Bell: Where is silver headed? Is silver a better buy than gold right now?
Dr. Joseph Salerno: I think silver will track gold but with more volatility, but I am not an investment adviser and hesitate to make a more specific prediction. But I do believe that silver will have an important role in the sound monetary system of the future.
Daily Bell: What are you working on currently?
Dr. Joseph Salerno: I am finishing up a few articles. One is on the sociological and political effect of the German hyperinflation on human personality and political developments in Germany; another deals with a restatement of the Austrian theory of the business cycle that fortifies it against some recent criticisms from mainstream economists.
I am also working on a book tentatively entitled, The Spending Illusion: Inflationism from John Law to Ben Bernanke. The book will argue that macroeconomics is a very old inflationist doctrine that predates scientific economics and developed independently and in opposition to it, at least until the late nineteenth century when the two became tragically intertwined by the emergence of the quantity theory. The main tenet of macroeconomics is that the spending of money determines the "level" of prices and/or drives real economic activity, a doctrine that is today accepted by almost all mainstream economists and even some economists who consider themselves Austrians. But this is an illusion that gets things precisely backwards. In fact, the amount of money that changes hands ("spending") is a trivial outcome of the dynamic pricing process.
The causal factors that determine the structure of money prices are the existing stocks of money and of the various kinds of goods and their relative rankings on people’s value scales. These factors together simultaneously determine the sum of money that exchanges for each unit of a given good (the "price") and the number of units of each kind of good that is exchanged (the "quantity"). Thus the so-called "level" of prices (better terms are the "height" or "scale" of prices) is determined, as part of the same process of individual exchange that determines "relative" prices and the two cannot be conceived separately.
The amount of money spent is simply an arithmetic sum, computed after the fact, of the products of the quantity of each good sold and its price and is therefore causally irrelevant. This was recognized implicitly by the classical economists and then later explicitly by the Austrian economists and you would be hard pressed to find the use of the term "spending" in their works. The concept of spending, however, very definitely played a central role in the works of the eighteenth- and nineteenth-century monetary cranks (i.e., macroeconomists) whose doctrines were refuted time and again by the classical economists. Unfortunately, monetary crankism became the dominant orthodoxy with the advent of the quantity theory during the bimetallic controversy of the late nineteenth century and eventually gave rise to the popularity of the Keynesian Revolution and the doctrine of modern macroeconomics.
Daily Bell: Do you have any books or articles you would like to recommend?
Dr. Joseph Salerno: Yes, I do. I highly recommend Deep Freeze: Iceland’s Economic Collapse by Philip Bagus and David Howden and The Tragedy of the Euro by Philip Bagus. Both of these volumes do a wonderful job of applying causal-realist theory to analyzing and explaining momentous real-world events that have an impact on the economic welfare of many nations and people. And both books are clearly written and accessible to non-economists as well as indispensable sources for serious scholars in the field. These are examples of the kind of work that the Mises Institute encourages its young scholars to pursue.
Daily Bell: Any other comments you want to make? Any points we’ve missed in terms of your interests or goals?
Dr. Joseph Salerno: No, I think we have pretty well covered the field.
Daily Bell: Thank you for your time. It’s been an honor.
Dr. Joseph Salerno: It has been my pleasure.
Daily Bell: Thank you for your time and a very interesting interview.
We thank Joe Salerno for providing us with such a concise and thorough portrait of what money is and how central banking interacts with the larger modern economy. Dr. Salerno and other economists who share his sentiments are on the cutting edge of a kind of courageous monetary truth-telling, a healthy and necessary revisionism.
In fact, we live in an exciting age. Telling the truth is always something of a revolutionary act and via the Internet, especially, more and more truth is being told every day. Dr. Salerno is one of many truth-tellers but an extraordinarily erudite one.
What do we learn from him? It turns out that almost everything that is taught about money in mainstream Western education is something of a lie. The biggest lie of all, of course, is that a central bank run by a handful of wise men can successfully guide an economy toward prosperity. In fact, only the Invisible Hand can do so, animated by human action.
Nonetheless, there has been an explosion of central banks in the past 100 years. These days almost every country has one, and about 100 of them apparently are directly supervised by the Bank for International Settlements. This gives the BIS enormous power and basically creates an international banking community supervised out of Switzerland. Unbeknownst to most, there already is a kind of "one-world order."
But size has little or nothing to do with competency. Central banking is built on the fraud that a handful of wise men can determine what money is contriol its value and price. This is nothing but a methodology of clear impoverishment and ruin. The history of the 20th century should prove this beyond doubt.
Central banks fix the price of currency. Price fixing is ALWAYS an economic distortion, removing wealth from some and placing it in the hands of others who will use it less well because they did not generate it in the first place.
You would think that mainstream economists and mainstream media would point this out. But they never do. It seems curious until one realizes that the mainstream media is almost entirely controlled by what we call the "power elite," a nexus of mostly Anglosphere banking families, corporations and other facilitators that operate in a loose confederation throughout the Western world.
These people evidently and obviously seek world government and central banking is an extraordinary tool in their quest to achieve it and mainstream media (mind control) is a necessary too as well. They have funded their economic manipulations, their wars and their propaganda through the facility of money printing. If one controls the ability to print money – as Dr. Salerno explains in his interview – then one can virtually purchase the world. This continues to occur today.
Dr. Salerno mentions he is reading Ralph Raico’s book Great Wars and Great Leaders: A Libertarian Rebuttal. Most leaders of the 20th and 21st century have evidently and obviously been controlled by Money Power. Thus, it is not surprising that the narrative regarding their personalities and great deeds is false. Almost everything one learned about the 20th century – when control of information was at its height – is something of a lie.
Today, the Internet Reformation has virtually exploded the elite’s information monopoly. Dr. Salerno, who would otherwise reach mostly the students in his class, is afforded the ability via the Internet to reach tens of thousands. His ideas may reach millions more. That’s some serious knowledge leverage.
Because of such courageous and learned individuals, the lies of the 20th century are rapidly being swept away by a kind of tide of truth-telling. The last time this happened in our view was during the era of the Gutenberg Press. The Internet is the new Gutenberg Press and it is having a convulsive impact on society in general and the Money Power conspiracy in particular.
The powers-that-be use dominant social themes – fear-based promotions – to frighten middle classes around the world into giving up wealth and power to globalist institutions. These manipulations and the great propaganda mills that make them possible – Tavistock Institute comes to mind – are funded in large part by central banking mechanisms. The ability to print money-from-nothing is what funds the one-world depredation.
But thanks to the work of Dr. Salerno and his colleagues at the Mises Institute and elsewhere, the economic lies of the 20th century are being swept away. Ludwig von Mises and the Austrian community have been resurrected and over time we have no doubt that free-market economics will triumph over Keynesian nostrums and leveling fallacies.
This was just what the Germans feared when they took to calling Carl Menger and the rest "Austrians" – meaning the term derisively. Instead, those so-named adopted the term and used it defiantly. Today "Austrian" is synonymous with free-market thinking. The Internet is alive with Austrian concepts and we would not be surprised if eventually the entire system of central banking that looks impregnable today founders and eventually collapses.
Once people understand there is no justification for it, it becomes difficult for those invested in it to support it. People need to believe. Without belief, there is no reality. Such are the powers of ideas. We thank Dr. Salerno and others, including those at the Mises Institute, for bringing us their reality. We encourage readers who believe that the broadcast of interviews such as this are important educative step in helping people better understand the truth of our world and how to improve it, to make a donation to the Foundation for the Advancement of Free-Market Thinking (FAFMT). We surely can use your help! Click Here to help make a difference
The ocean of uncertainty and problems
Rafael MontaVista, business consultant
04/07/2011 - 15:18
Recently the writer and journalist Vicente Verdú one of his articles titled "Welcome to a world without certainties," can not be more accurate definition of the world situation today.
That all changed so that nothing changes, complicated situations, or call them, are cyclical crisis and eventually reappears, more virulent and less time involved. The good times are like a small blanket to cover us but we always found somewhere to stop, cover and uncover another site. The current situation, we are solving the prescription of the debt, more and more debt, and when the system can not but break out the debt crisis and slip back into another debacle greater and back again.
We are so perched on the short-term vision of the important things that the solutions proposed are mere patches well-intentioned help stabilize emotionally to people, but that serve little more. Do not approach the problem of substance but we enjoy a welfare state that can not pay with our current resources and go into debt to have a bad solution in the long and short term. The uncertainty in decision making, clarifying the problems and, above all, global action makes the situation a permanent headache.
The same people who created the crisis are the same as trying to solve it, the same as they were at their birth are the same that charge exorbitant bonus-of-but the problem is still there. We are moving in concentric circles, shot by decisions that surround the problem but it will attack and, like cornered animals, is enhanced.
What can you think of a ransom to Greece, where the brainy economists put in an amount, and a few months after this amount is useless, having to resort to a second bailout and more importantly, NOR WILL SERVE TO Hellenic NOTHING because the country can not pay the enormous debt he has incurred, or selling the country inch by inch Who are they kidding? The same is true of the accounts of our country, it is perfectly extrapolated.
The disparity of interests to each other and the differences in values make it difficult to solve this problem, because there is a common interest in providing a solution and every one snuggles the coal to its sardine.
In the sixth edition of Global Risk, within the Forum of Davos 2011, states that the world is not able to return to suffer major disruptions. The financial crisis has weakened the strength of the global economy and increased geopolitical tension in all aspects, no more than read the press.
Detailed in this sixth edition, there are also two cross-global risks of particular importance, economic inequality and poor governance. And these in turn affect the evolution of many other global risks and limit our ability to respond to them effectively and needs, the weakness is installed and take a naturalization certificate. It's like the farmer who is spreading a blanket and see the water is overflowing into an area and solves it, then by another and then re-solve, but it is weakening the entire irrigated area and there comes a moment that can not go to all sites. That's when everything falls apart and crashed into a system.
As more union or relationship in the world, so do the distances. It seems a paradox, but a reality. That gap is increasing every day and is a threat to global stability.
Globalization has generated sustained economic growth for a generation: reduced and reshaped the world and increased their degree of interconnectedness and interdependence, but on the other hand, its benefits are unevenly distributed and a minority would have reaped the fruits of a disproportionately and disproportionate.
Follow the appropriate forum and an emphasis on three groups of global and cross-cutting risks are:
A group of risks including macroeconomic imbalances and exchange rate volatility, fiscal crises and the collapse of asset prices. Arises from the tension between the growing wealth and influence of emerging economies and high debt levels of advanced economies. On the one hand, countries like China and India, increasingly accumulating reserves and on the other hand, advanced countries can not sustain their standard of living, causing a voltage increase.
The newsletter of January 2011 the Bank of Spain and his article "The reform of economic governance in EMU", states that "lessons from the crisis that began in August 2007, are driving profound changes in various fields, among which the reforms in regulation and supervision of the financial system aimed at restoring adequate controls and develop macro-prudential policy, which prevents the buildup of systemic risks. "
Area illegal economy
The area of the illegal economy. This group includes risks fragile states, illegal trade, organized crime and rampant corruption, the interrelationship of the world, poor governance and economic disparity creates opportunities for activities to flourish outside the law These groups of strength, occupy areas installed everywhere increasingly important, especially where governments show serious shortcomings.
Food and water-energy
The world's rapid population growth and increasing economic prosperity exert unsustainable pressure on resources: estimated demand for water, energy and food to grow between 30% and 50% in the next 20 years, meanwhile, encourage economic inequalities short-term responses in the areas of production and consumption, which are all counter-point to the long-term
"When we thought all was prosperity, we were surprised poverty" and seems to want to install comes with a few years, to reappear in another form and manera.l game is like the rope in which depending on the strength of one either way, go for a site or another.
Rafael Molina MontaVista
Germany's judges hold the euro's fate in their hands ... Whether or not Europe's monetary union survives in its current form, shrinks to a Carolingian core, or shatters, depends as much on abstruse legal arguments put forward on Tuesday in Germany's constitutional court as it does on the parallel drama unfolding on Greek streets. Germany has warned that Greek bankruptcy would have set off epic contagion. If the eight judges in Karlsruhe rule that Europe's €500bn bail-out machinery breaches of Germany's Basic Law – or Grundgesetz – in any significant way, they risk knocking away the central prop beneath the debt edifice of Southern Europe. – UK Telegraph
Dominant Social Theme: As these bailouts are working, German justice is irrelevant.
Free-Market Analysis: The Telegraph's Ambrose Evans-Pritchard has returned to the fold after a long absence to remind us that the real action regarding a united Europe lies not in Brussels but in Germany. In an article entitled "Germany's judges hold the euro's fate in their hands" (see above excerpt), he reports on hearings just held in Germany on the constitutionality of the ongoing "bailouts" now taking place in Greece, Portugal, Ireland, etc.
The bailouts, in fact, are not constitutional by any measure, though the German judges charged with hearing the case will likely downplay in their final verdict the full impact of the unconstitutionality of what is now occurring. But Evans-Pritchard seems to believe they'll set strict parameters going forward as regards the further propping-up of Europe's Southern PIGS. Since the PIGS sovereign debt crisis is an ongoing one, the decisions the German judges reach in September (when the verdict is to be delivered) will have significance.
According to Evans-Pritchard, issues before the judges as regards the Greek, Irish and Portuguese bailouts include the complaints that the loans subvert the Bundestag, violate the "no bail-out" clause of the Lisbon Treaty and amount to fiscal transfer by stealth.
Such a transfer of funds without changes in fundamental German law regarding the EU is simply and clearly unconstitutional. This is not an academic point. The Germans generally were loath to lose their Deutschmark and in order to gain acceptance, very specific language accompanied the move to the euro.
European leaders are putting the best face on all this that they can. There are at least three points of view about what is going on. The first is that top Eurocrats are determined to hold the union together. The second is that they are merely extending the inevitable dissolution until their various banks can dig their way out from under the PIGS debt.
The third possibility would be that the concern is a ruse and the dissolution of the EU is actively sought because it will provide an excuse to implement a genuine world currency. A collapse in China, which in our view is certainly a possibility, would add to the chaos. It is certainly possible such a collapse could be initiated via the upcoming German court case. Here's some more from the article:
The judges know the risks. They will bend a long way to find a formula that does not set off a banking collapse, or threaten Germany's strategic investment in post-war Europe. But will they bend enough to satisfy the bond markets when they issue their verdict, probably in September? Andreas Vosskuhle, the court's president, noted acidly that the hearings were not about the "future of Europe or the handling of the debt crisis". They are a matter of law.
Greece cannot borrow its way out of this debt crisis. This is the same court that stunned EU elites with its volcanic ruling on the Lisbon Treaty in June 2009, cautioning Brussels that the EU is a club of sovereign states, not a state itself; that national parliaments are the only legitimate fora of democracy; and that certain fields "must forever remain under German control" – including budgets.
According to Evans-Pritchard, the court is not merely dealing with the problems of the present day as regarding the euro. It is mindful of history as well and is "über-vigilant because it knows where pliant judges went wrong in the 1930s." Pierre Lellouche, France's Europe minister, claimed that last year's deal with Greece was a "constitutional coup." He may have spoken too soon.
Up to perhaps 70 percent of Germans now doubt the long-term viability of the euro according to polls. In Greece some 80 percent are opposed to taking money either from the EU or IMF. In any event, loans are not going to save Greece as it is likely mathematically impossible for the Greek government to pay down its debt by taking on more debt. "Greece's public debt will rise to 161pc of GDP by next year, up from 120pc when the crisis erupted," Evans-Pritchard points out. Greece is headed in the wrong direction and its economy continues to erode as well.
So what's the solution? Perhaps a kind of Marshall Plan for Europe's PIGS. It might include zero-percentage loans or outright subsidies and a frank default as well. Of course such a solution presupposes that the German populace is amenable to an emergency plan benefiting Europe's PIGS. There is, unfortunately for the EU, no reason to think so.
At the moment, EU authorities simply seem to want to elongate the crisis in the hopes that banks will find ways to offload Southern European debt or that the economy picks up. This has led to the spectacle of one failed solution after another.
According to Jean-Claude Juncker (see yesterday's article), Greek sovereignty will be "massively limited" and Germany will basically oversee a massive sale of the Greek national portfolio.
This will not sit well with the Greeks. Anger is the predominant emotion in Athens currently. "Greece blasts ratings agency 'madness' as Portugal downgraded to 'junk'," reads another Telegraph article. Foreign minister Stavros Lambridinis is angry about the 'madness' of ratings agencies, saying their moves currently had "the wonderful madness of self-fulfilling prophecy."
What Lambridinis meant was that rating agency downgrades only made it more difficult for countries like Portugal and Greece to raise the capital needed to pay down sovereign debt. (It is interesting that European politicians are making this point, as millions of European and American consumers have often voiced similar sentiments as regards their personal finances.)
Moody's Investor Services, one of the agencies involved, made the ironic point that Portugal's long-term prospects had been damaged by the international efforts to rescue Greece. The Royal Bank of Scotland and Barclays were banks most affected by the ratings changes, as these two banks had high exposure to Portugal's sovereign debt.
Moody's evaluators now claim Portugal will need a second bail-out before its bankers can raise money in the capital markets. Based on the conditions imposed on Greece, it was likely that "private sector participation would be required as a precondition" to a second cash injection, said Moody's.
French banks, pressured by French President Nicolas Sarkozy, recently offered to roll over 70pc of debt maturing by the end of 2014. This deal would seem more unlikely now given that ratings agencies have made it clear such a "voluntary" rollover would likely still be considered a default.
Nearly a year into the sovereign debt crisis, the solutions seem as murky as ever. Growth might cure many of the problems afflicting the Southern PIGS but the kind of economic growth that is needed is not likely to occur. It's hard to see how the EU survives in its current condition.
Conclusion: The dominant social theme of the EU as an inevitable force in the lives of Europeans is under sustained attack. The Germans, whose support is vital to the EU's continuation, may deal it a terminal blow when the court rules on the constitutionality of the bailouts now implemented or being planned. An implacable force may soon meet an immovable object. If the EU situation does not resolve itself before then (one way or another) stay tuned for September.
En Exclusiva | Carlos Sánchez 12/07/2011 (06:00h)
El punto de no retorno está más cerca para la economía española. ¿A qué distancia? Nadie lo sabe, pero lo que está fuera de toda duda es que se han cumplido los peores pronósticos que situaban en julio un nuevo episodio de la crisis financiera. Hasta el punto de que en Londres, ayer, según una fuente solvente, ya no había contrapartidas para adquirir deuda pública española. O dicho en otros términos, la aversión al riesgo se ha disparado y nadie quiere comprar títulos del Reino de España en los mercados secundarios, lo que ha empujado al alza las rentabilidades. Hoy España paga el doble que Alemania por colocar una obligación a diez años.
Lo peor es que la tormenta amenaza con quedarse. El diferencial con Alemania se ha disparado este martes hasta los 370 puntos básicos ; la Bolsa cae a plomo arrastrada por los bancos y el contexto macroeconómico se deteriora de forma relevante. Tanto los recientes datos de empleo en EEUU como la inflación china (el mayor nivel en tres años) sugieren un enfriamiento económico mundial. Y todo ello en un contexto político muy complicado. Zapatero y Berlusconi están de retirada y sus partidos en caída libre. El tópico diría que estamos ante la tormenta perfecta.
Pero lo que realmente preocupa ahora es la exposición de la banca europea a la crisis soberana. En particular en Italia, donde los grandes bancos cayeron ayer hasta un 7%. En España las cosas fueron algo mejor, pero aún así Santander y BBVA se dejaron entre un 3% y un 4% y hoy siguen por el mismo camino. Aunque para agujero el que tendrá que torear el Tesoro, que ha visto como el bono español a diez años se ha ido hasta el 6,09%. Mientras que el de más largo plazo, el de 30 años, cotiza ya por encima del 6,35% en el mercado secundario.
La consecuencia no puede ser otra que un deterioro adicional de los balances bancarios, que se hincharon a comprar deuda pública barata en los primeros años de la crisis (con dinero del BCE) y ahora ven como esos títulos se deprecian a ritmo de vértigo. Rentabilidad y precio dibujan trayectorias distintas. Cuando sube la rentabilidad baja el precio de los activos, y vicerversa. Y lo que sucede ahora, como sostiene el consejero delegado de un importante grupo financiero, es que “se está erosionando” de forma acelerada los recursos propios de la banca italiana ante la imparable subida del diferencial. Y el efecto contagio está ahí.
No es, desde luego, ninguna novedad. Es lo que sucedió en la crisis del Sistema Monetario Europeo en los primeros años 90, como sugiere el último informe anual del Banco de Pagos Internacionales (BIS, por sus siglas en inglés). Recuerda el banco de los bancos centrales que las pérdidas de valor de los títulos de deuda pública “afectan directamente a la solvencia crediticia de las entidades tenedoras y reducen el valor de las garantías que estas pueden utilizar para tomar prestado”. Y eso es, precisamente, lo que está penalizando el mercado. Las tripas de los bancos se han llenado de activos que cada vez valen menos. Y como recuerda el BIS no es un asunto baladí.
Problemas de solvencia
El BIS pone un ejemplo. Si una institución financiera cuenta con activos por valor de 100.000 millones de dólares y 5 000 millones de dólares de capital, tiene un coeficiente de apalancamiento de 20, de forma que una caída del valor de sus activos del 1% conllevaría una caída del 20% en el valor de su capital. Ya no es, por lo tanto, un problema de liquidez, sino de solvencia, la palabra mágica’ del sistema financiero.
En este sentido, el hecho de que el próximo viernes a partir de las seis de la tarde se vayan a conocer los resultados de las pruebas de esfuerzo (stress test) a 91 bancos europeos no ha hecho más que alimentar la tormenta. Se da por seguro que algunas entidades no pasarán el examen, y eso explica en parte el aumento de la aversión al riesgo. En particular, la banca alemana, con problemas de capitalización en algunas entidades de ahorro ligadas a los länder.
Esto es precisamente lo que parece estar sucediendo en Grecia, cuyos bancos han tenido crecientes problemas para obtener financiación como consecuencia del temor de los inversores a una reestructuración de la deuda pública del país. Aunque sea parcial, como ya se da por hecho. Y hay que tener en cuenta que el déficit fiscal y externo griego es aproximadamente tres veces más grande, y el nivel de deuda acumulada es más del doble del que tenía Argentina antes del default.
En el caso italiano, la ventaja es que la mayior parte de la descomunal pública (el 129% del PIB) está en manos de residentes, lo que facilita su financiación. Mientras que un país como España, con todavía amplio déficit de balanza de pagos, necesita importar capitales para financiar su desequilibrio fiscal. Y por eso, el hecho de que el mercado de Londres esté prácticamente cerrado para el Tesoro Público es una muy mala noticia. Como sostiene el BIS, los países con menor deuda privada tendrán más capacidad para devolver su deuda pública y, cuando ésta esté en manos de residentes, puede existir mayor disposición a efectuar su devolución.
No es, desde luego, el caso de España, donde la tercera parte del endeudamiento público está en manos de bancos y cajas, y si estas sufren en sus balances por la depreciación de sus activos, la única salida es que el Estado ponga más dinero, toda vez que los niveles de deuda privada son también muy elevados.
Eso es lo que temen los mercados. Que nuevos problemas de solvencia obliguen a aumentar los ya de elevadísimos niveles de deuda. Y hay que tener en cuenta que ya este año sólo el Estado –sin contar las administraciones territoriales- ha presupuestado gastar 27.420 millones en el servicio de la deuda. Esto supone que por cada punto que suban los tipos de interés tendrá que desembolsar 274 millones adicionales. Y el diferencial se ha ido ya claramente por encima de los 330 puntos básicos. Lo nunca visto desde que España ingresó en el euro.
Egypt’s benchmark stock index drops for 3rd consecutive day on fears over new unrest
CAIRO — Egypt’s benchmark stock index extended its decline for a third consecutive day on Tuesday, pulled lower by an escalation of tension in the country over the pace of reforms and accountability of police and former regime officials.
The decline came as protesters laid siege to a key government building and threatened to expand their demonstrations, drawing a stern warning from Egypt’s military rulers against “harming public interests.”
Brokers attributed the declines to investor fears about the new round of protests in Cairo and other Egyptian cities by demonstrators calling for the removal of police officers implicated in the deaths of more than 900 people during the 18-day uprising that began on Jan. 25.
“The sales pressure shows that people are unloading because of fears about the protests,” said Ahmed Hanafi, head of research at Gothour Trading.
Hundreds of protesters have camped in Tahrir Square since a demonstration on Friday that was one of the largest outpourings in the capital since the former leader handed over control on Feb. 11 to the military.
“If there’s a decision showing that people will get their rights, ... this could stabilize the market,” said Hanafi.
Foreigners dominated the selling, as did institutional investors, brokers said, and the declines covered a range of sectors.
The latest declines came a day after the Finance Ministry for the first time set a new public sector salary cap of 36 times the minimum wage — a step aimed at addressing one of the many complaints of striking workers and protesters who maintain that consultants in government ministries were pulling in exceedingly high salaries.
Egypt’s market, and its broader economy, have been hit hard by the protests. Labor strikes and general demonstrations have continued five months after Mubarak’s ouster, undercutting productivity and manufacturing in the country while a general collapse in the security situation has battered tourism — a sector that generates billions of dollars in foreign currency for the nation.
“The initial expectations of a rapid economic transformation were premature,” said London-based Capital Economics in a research note. “The Egyptian government is stuck between the public’s demands and market expectations.”
“While the latter may be looking for greater economic openness and structural reforms, the average Egyptian is after an improvement in living standards, holding the previous administration accountable and greater political freedoms,” wrote Said Hirsh, Capital’s Mideast economist. “These interests may clash in the near term especially since current economic conditions are deteriorating.”
Egypt’s caretaker government and the military rulers are trying to accommodate a host of protester demands, many of which center on improving the livelihood of citizens of a nation in which, according to the World Bank, about 40 percent live on or below the poverty threshold of per day.
Spending on social services has been boosted in the budget for fiscal 2011-2012 and a new minimum wage has been set at about 700 pounds (8) per month for the public sector.
The Finance Ministry said in a statement that the salary cap of 25,200 pounds, or ,270, had been set. The statement said a cap had also been placed on incentives or bonuses, but did not specify how much. Such incentives and bonuses often more than doubled or tripled the core salary.
The step is a key part of the government’s efforts to narrow an income gap that mushroomed under Mubarak’s regime.
Egyptians complained that the core salary paid in the public sector was so low that government workers either balked at performing their jobs, or do so only with a boost in the form of bribes.
Others claimed that consultants hired at the various ministries or government offices were paid salaries that would have Wall Street brokers envious.
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Carlos Sánchez & Mateo Mathaus
Robert Skidelsky, probably the best known living economist Keynes's work (not as suspicious of liberalism) has recently written a delightful article that says things platitude, but often forgotten by policy makers. Remember that Skidelsky has long been associated with life indebtedness wasteful and apathy, and if a person is in debt, was considered a badge of honor to settle the obligation by selling assets, reducing consumption, working more or a combination of the three things. In fact, they used to pay debts not satisfied by imprisonment. Not through bankruptcy proceedings in which both parties agree on the amount returned.
The same rule was in force for the institutions. Banks were born of a procedure by which gold and silver smiths accepted deposits for safekeeping in exchange for a small fee. When lenders became its oldest rule was to maintain cash reserves equivalent to almost 100% of their deposits. Bankers, thus, avoid being out of funds in the unlikely event that their clients withdraw their money at once. Not at all went to the massive debt (now called leverage).
Such practices, as is known, fell into disuse for some time, but in his writings and Monetary Locke warned that there are only two ways to enrich a country without natural resources (he said 'no mine') through the conquest of territories or through trade. As the first is not always possible (fortunately, we should add), the English thinker recommended the second option. Unfortunately, however, that politicians still think there is a third choice, which is nothing to raise the apparent wealth of the citizens by increasing the debt to unbearable limits.
This is by far the worst of decisions. And not for purely economic reasons, it has to do with the actual quality of the democratic system. When a ruler to his country borrows more than is reasonable (it would be absurd to think that all debt is bad) they really do is defer the tax payment time. Not only that. Hides the nature of public spending, which is profoundly undemocratic.
Through recourse to borrowing, there is no real debate on the amount of taxes to be paid to the State at any time to fund the services needed to meet public demands the community. The paradox can be given even decide that a ruler to cut taxes to win elections by creating a wealth effect among citizens and at the same time, for the backdoor, increase borrowing, which in practice means an increase in the tax burden, but not noticed.
The debt is, in this sense, a painless remedy for the generation that enjoys a level of life that does not apply, and benefits from a volume of benefits is not proportional to the amount of taxes they are willing to pay. Everyone knows that someone will have to repay these debts, but hides that fact to win elections. The story is further complicated when a ruler instead of going to the capital markets to finance, which requires some fiscal discipline borrows money directly to the bank or savings bank in question, preferably if the same political orientation. The Spanish regions know much about this window of last resort.
Most surprising, however, is that these truths are hidden to public debate, undermining the democratic system. It is curious that those who criticize the behavior harder 'speculative' markets are precisely those who are fed protein that provides the public debt.
We, therefore, to a nonsense that leads inexorably to an economic neocolonialism. And if nothing done, it will end up being political
Figures like Krugman are, in this sense, pathetic. Not to mention some of their bad imitators in Spain. In recent years, the Nobel prize has not tired of attacking markets and arrogant by their nature speculative, but at the same time calls for greater public spending to cope with falling demand and economic activity, which has come to Now create a monster that devours the economies of peripheral countries. The markets are, and how would Herman Melville, the specter of horrible roar which lies between the grunt of the Leviathan and belching Vesuvius.
Dominate, as everyone knows, the political scene. To the extent the Eurogroup agreement on the restructuring of the Greek debt is just a kick to the democratic foundations of the European Union itself. Greece is a nation involved (a figure that does not appear in any of the basic texts of the EU) for a non-democratic government that is not presented to the elections. And the same goes for Portugal, Ireland and even Spain, whose room for maneuver in economic policy is irrelevant.
The shocking case, however, is that the medicine that you have provided to Greece creditor countries is precisely the same that has brought the country to ruin. The European Council has tested new aid equivalent to 109,000 million euros. However, if Greece is unable to repay 328 588 000 euros today owe to your creditors (excluding private debt) does not seem reasonable to think that adding another hundred billion to the account can solve the problem.
We, therefore, to a nonsense that leads inexorably to an economic neocolonialism. And if nothing done, it will end up being political. Indeed, and here's the contradiction, because those who believe that increasing public borrowing will solve the problems. The problem is not markets but governments and the European central bank itself have fed the beast with cheap money and enough to shake the foundations of the euro.
It seems clear, however, that survival of the single currency can only be articulated through the integration of the tax systems of the eurozone. Without coordination of budgetary policies, there is nothing to do. But it is obvious that the process of construction (including the creation of a pan-European Finance Ministry) should be made through democratic procedures. Otherwise the EU runs the risk of ending up being the opposite to what he was born. An area of freedom in which all members are equal. It is not a trivial matter. It is the essence of democracy itself. The euro, as someone said, is and will become a currency without a state, but avoid a currency that is also without democracy.
Spain: The solution to high unemployment is a "progressive single contract" not new "contract garbage" featuring Rubalcaba ..
Enrik Vázquez & Mateo Mathaus
The current Spanish labor system eliminates the meritocracy and a system that rewards meritocracy is over, at least in the competitive world in which we live.
But if things are as they are for something is not that the Spanish do bad things on a whim. Why protect the worker? On the one hand it is obvious that the power relationship between employee and employer is asymmetrical. But that’s not the most important, at least not from my point of view, since that’s where the problem lies is the lack of productive and existing business culture that tips the balance to one side, a problem that should be covered from another perspective. In my view the protection of workers is also due to the effects of past legislation, it is fair, or I see it, if a worker has helped "build" a company also will be rewarded for it. On the other hand could give examples relating to the "life development" of the person, as it could be more helpful is it to be the father of a family who is not?
We are a young and old, nobody looks at us as "suspects", but recognize that is not the same as a 20 or 30 years lying down, that the protagonist is 50 or 60 and is responsible a great responsibility. It is not the same. Surely there are those who think that person must be 50 to 60 years to save for what might happen, and it is true, but if everyone in Spain was loose at the end of the month and we had high salaries then there is a debate the labor market because everything would be great, but it is not.
Ultimately severance payments are nothing more than a part of wages, so how easy is to simplify, to request the removal, and to increase wages. The problem is that while some workers would benefit, there is an important profile that would not. I do not know if you agree with me but the vital development or merit should not be made conditional on certain profile. However, the measures taken may not be as "brutal" to create a real duality in the labor market and break the meritocracy. In this case all lose because no one standing will be fine.
We need a system to meritocracy, which is not dual, which benefits who do well regardless of their profile. Is there? The current proposals are in two directions. Some propose some sort of hopping single contract, first with "zero" protection and then "low" protection. The other proposed arising from the current failed model without substantial changes to avoid seeing that this is one of the worst systems in the world labor market.
There is a third way, and is now wanted to present: the progressive single contract. From FEDEA long being promoted this concept, I recommend reading what they say about it. And it matches my prior diagnosis or not, opinions are for everyone, it seems to be some consensus on the solution, which is as follows.
As you can guess, the only progressive contract is one where all workers are treated the same, but in which who remains on the company performance is rewarded and who does not (other discussion is the mobility, the Austrian model , etc). Thus, compared to the current situation where some enjoy the benefits and others suffer the consequences, anyone here would have the maximum rights to eight years old, with a great benefit to seniors. The system "does not reward the dismissal" in the first year there would be 12 days per year worked, at 15 seconds if someone is "good" would not pay him out and hire someone simply because they acquired "too many rights "or too much for what the company could afford. This system rewards the hiring, rewards those who remain in the company (and will if he does well) and not cut right. In short this is a model that eliminates the duality and the meritocracy rewards without this is the worker who has to suffer the consequences. Or what is the same, a model that fits perfectly in today’s Spain, the question remains whether he can implement this opinion. Hopefully it.
The Anti-Jihad Bloggers and Intellectuals Are Responsible.
The Norwegian government’s refusal to deal with the reality of hostile, separatist, un-assimilated, and violent Muslim enclaves in its midst is what finally forced Breivik’s hand. The proof is that Breivik did not murder Muslims. His was a mainly Caucasian-on-Caucasian, infidel-on-infidel, Norwegian-on-Norwegian massacre. Breivik turned on what he viewed as a fifth column, the Norwegian elite. They had the power to insist that Muslim immigrants speak Norwegian and embrace European Enlightenment values. They refused to do so. His message to Norway’s “progressives” is chillingly clear. Their teenage children, already well indoctrinated, will not live to carry out what Breivik viewed as their parents’ failed multi-cultural policies.
Writers work with words; killers write in blood. Breivik could have read all our anti-jihadic work. Like the Dutchman, Geert Wilders, he could have run for public office or launched an educational campaign. True, he would have had to live with being demonized as a racist and criminally sued; ironically, Breivik’s violent approach has led to a similar outcome. Breivik could have made a film about the normalized violence against Muslim-European girls and women at the hands of their families or about the honor killing of Muslim-Norwegian women— but Breivik might have risked the Dutchman Theo van Gogh’s fate and been butchered by an Islamist. Breivik could have penned some fairly innocuous “Mohammed” cartoons, as the Swede Lars Vilks did — but he would have had to live in hiding and with round the clock security. Or, like Lars Langballe, a Danish parliamentarian, he could have spoken his truth and been prosecuted for “hate speech,” just as Elisabeth Sabaditsch-Wolff was in Austria.
There are other ways to “run with” the anti-jihadic expose of how Islamic gender and religious apartheid has penetrated Europe, why this is important, and what is at stake.
CAM intervention by the Bank of Spain led by Miguel Angel Fernandez Ordonez socialist (aka MAFO) has set a very bad international investors. Sources in the City of London, which has outraged the big funds and investment banks is not the intervention itself, but the supervisor has expected that the IPO cumpletara Banki to act.
"They knew for months but have been keeping such a problem until they have managed to get Bankia bag, which was all that mattered. Spain as a country has been fatal," said one of these sources. He added that statements by Fernández Ordóñez that no entity needed capital before the CAM intervention have exacerbated the damage.
As reported by The Confidential, the Bank of Spain Alicante inspected the box in December and has since had ample evidence of his state, the breakdown of the Bank Base, the refusal of any entity to purchase the CAM no guarantees, commissioned by the due diligence Ernst & Young FROB and the results of stress tests. However, it has chosen not to do anything at all that time until Bankia was quoted.
"The image we give to foreigners is that we go ready for life and we take them for fools," says a Spanish banker living in London. But clearly no 'school' in the light of the renewed confidence in the accounts of the financial sector, which is leading to more attacks on Spanish banks in exchange.
The sources explained that the City does not explain why Spain did not nationalize their financial system (or at least the boxes) in 2008-2009, like the rest of the world. And the fact that in 2011 we continue intervening entities will show that the problem has been solved and that the only thing that has made the Bank of Spain is a waste of time. One thing that experts agree as reputable as Aristobulus Spanish John.
Investors faced Roldán
The intervention of the CAM is the straw that broke the camel's discrediting of the Bank of Spain to investors, but last Saturday it was clear at a meeting of director general of regulation, José María Roldán, with analysts to explain the stress test . One analyst says the meeting was very tense because analysts snapped at Roldán not believe MAFO statements and needs to inject more capital into the system.
And not just about the savings but also banks, particularly the median, which was not considered able to absorb their losses in brick with current resources. "In Italy, Unicredito all banks have expanded less capital, and no one believes that the Italians and the Spanish capital need not," says a banking analyst.
This distrust has also shown very little in foreign demand in the IPO Bankia and Civic Banking (about 100 million in the first and 72 in the second). A lack of interest is repeated in the case of CAM. "There have been funds that have looked at the box Nomura's hand, but after the stress test and that he expected to Bankia MAFO to intervene CAM, nobody is interested," concludes one of the sources.
Henryk M. Broder: "I'm not a critic of Islam, but a critic of the European policy of appeasement towards Islam."
Since it became known that the Oslo-bomber quoted in his muddled manifesto Henryk M. Broder, the journalist is attacked violently. In the interview, defiantly: "I do what I want."
© DPA Henryk M. Broder Thilo Sarrazin He is next to the most prominent critic of Islam in Germany. With his polemical articles pointed to the 64-year-old makes a stir regularly. He has inter alia for "mirror", "World Week" and "Daily Mirror" written since 2011 Broder is the "world" working group. Especially on his own blog, "The Axis of Good" Broder repeatedly denounced the creeping Islamisation in Germany. A few days ago it was announced that the Oslo-bombers Behring Anders Breivik tangled in his manifesto quoted Broder. Since then, the publicist of parts of the press is accused of intellectual arson. Robert Misik called him about the "Taz" an "intellectual complicity."
Broder is currently waiting in Bavaria, where he new episodes of the satirical ARD series "Either Broder - The Germany-safari" around.
Mr. Broder, since it was revealed that the assassin of Oslo has quoted in his manifesto also confused you, you will be attacked in many media and as a "spiritual arsonist" means. In a stern.de article says, they showed "every, of whatever kind complicity in the attacks in Norway on its own." Furthermore you have very excited. Why?
The question is already looking deeply. Is the star a tribunal? You do not need more people's court, if one has the star? What does "He rejects any blame from themselves"? Have you ever wondered also a militant German anti-Zionists like Norman Paech, whether he accepts responsibility for the massacres in Palestine?
Bothers you that you will be taken in connection with the attacks in Norway?
No. What bothers me is that I will explain to the Stooges and copyright. In context, one can do anything.
They hardly shy away from a public debate and are accustomed to being criticized. Have reached the animosity against you in the past few days, a new dimension?
Selectively I know that already. In this ferocity that is new. There are some people who pay the old bills with me. This is legitimate, fine. The second group needs in their distress and despair a major opponent. And do not sit in Oslo in prison, but lives in Germany. This is something which happens frequently in this society: that we must reduce a complex relationship. You need a scapegoat. When I belonged to a tribe, who invented Christianity, Marxism and psychoanalysis, I am willing to assume the responsibility for it. A few names come before the other hand did not, I have my friends with Leon de Winter and Hamed Abdel-Samad said recently, the two are injured because they are mentioned in the whole complex is not appropriate. Why do all kaprizieren on me, I do not know.
They are after all the most prominent critic of Islam besides Thilo Sarrazin, Germany.
I'm in the Islam debate forward fairly involved, so far there was no way I attach something. Now these mad bombers quoted the Norwegian blogger Fjordman, who in turn quoted me. None of the people who now descend on me, make the effort to perform even a single proof that I said something, the same content as the blogger. I have nothing against mosques and I have nothing against equal rights for immigrants. I would have voted in Switzerland against the ban on minarets. That now all I have to let off steam, some collective psychosis. A portion of the public is simply disengaged. Since each ratio has exposed.
There is also a rational component: Many see the anti-Islamic discourse in Germany generally discredited.
That people who criticize Islam, to be complicit in the assassination, so when I would accuse the star that he was complicit in Palestinian attacks, just because he occasionally friendly reports about Palestinian resistance fighters. This is exactly the same analogy.
However, they hit for years in the same line always: If you have not thus to the hysterization - contributed to the problems of Islam - exist without doubt?
If the other party ceases to pursue cartoons and commit honor killings, then the critics of Islam will cease to criticize Islam. Of course that's always the same line.
Her former colleagues Alan Posener writes: ".. Ideas have consequences Words have consequences not see who wants this relationship, is now not even in leftist circles as to take really seriously." What follows from the set for you?
Of course, words have consequences. The more one knows, but only retrospectively, whether they had consequences. Most words have consequences. Should we therefore say nothing at all - so it is misunderstood in any case? The words of the chairman, Gerhard Schroeder had no consequences, which had by Chairman Mao Tse-tung consequences. But you know, unfortunately, only afterwards. Alan Posener has written a book about the Pope and called him to be dangerous. If you want, you could understand this as a call by Pope assault anyone.
Meanwhile, some newspapers called for moderation in this overheated debate: Your critics should stop, you push the blame for the attacks in the shoes, but you should other critics of Islam and moderate the tone somewhat.
I had to make a suggestion: We do it in a magazine empire chamber, and will set the cornerstone of the debate, may make what is and what is not. As long as this did not happen, I do what I want.
When you write again soon a text on the subject of Islamization in Europe: Will you have a pair of scissors in the head, a little censor who urges more caution in the choice of words?
That's a good question. I hope not.
So far you've been dealt in confrontations and plugged. We never had the impression that you take it personally. Has this changed now?
No, it will not. I sleep well, have continued healthy appetite. Even my sciatic pain has subsided. That must have to do with adrenaline. Incidentally, I'm not a critic of Islam, but a critic of the European policy of appeasement towards Islam.