THE BLOG
07/05/2008 11:34 am ET Updated Dec 06, 2017

What is 'Monetary Extremism?'

I was on France24 Friday talking about oil, the dollar, and gold.

part 2

Key to the rise in oil and gold prices is what I call 'monetary extremism.' In other words, in response to the so-called terrorists the Fed in Washington has embarked on its own jihad by expanding the money supply at 18% - one of the largest percent increases in history. The results are near catastrophic and about to get a lot worse. Also in this piece is a discussion of France's president Nicolas Sarkozy and his prescription for the current global economic problems.

The topic of the second half is the role central bankers play in the current inflation.

Host: Max, you blame Greenspan and Bernanke, don't you?

Me: Greenspan. Bernanke. They've done horrible damage to the economy. It's a shambles. You've got the housing market in freefall. You've got breadlines in the United States. You've got duress. People can't drive to work because the price of oil is too high. This is the direct result of monetary extremism. I would say he's a monetary extremist. Bernanke and Greenspan. They're right up there with the worst extemists anywhere on the planet. And they've done horrible damage.

Guest: Frogs will fall from the sky.

Host: Eventually. Maybe?

Later. The discussion turns to the trillions of dollars being held by Gulf and Asian nations and Sovereign Wealth Funds. The other guests suggest that the buying up of US assets with the excess US dollars (due to our overconsumption of oil and imports) is a good thing, it is just a mere 'velocity of capital' - you have to keep the capital moving.

I respond:

Me: That's an insane argument. You're selling the cow and now you're going to be buying the milk. How does it make sense for Americans to sell their infrastructure, sell their roads, sell their tunnels, sell their valuable assets to foreigners if they're going to be charged through the teeth and that money goes out to foreigners? It doesn't stay within the United States. It doesn't help the US dollar, it doesn't help the US consumer, it doesn't help the US citizen. You're saying that selling US sovereignty to foreigners is a good idea. Well, I'm not sure that Americans would agree with you.

Guest (a Bloomberg reporter): I'm not saying it's a good idea. And quite clearly even Obama has used the word 'cautious' when the word 'Sovereign Wealth Fund' has come up. But what you're seeing right now and I don't think there is doubt about this is that foreigners - both individuals and corporations - are starting to spend those dollars acquiring assets in the United States. Whether they are doing it personally, individually or through the Sovereign Wealth Funds which will go in and buy up positions in big investment banks.

Me: As Warren Buffett said, 'America is becoming a nation of sharecroppers.' And that's exactly where we are headed, indentured servitude.