News from the Financial Casino

Former Chief Economist of ECB Warns of Financial Crash. EU countries have basically already lost their fiscal sovereignty, and are in the midst of a profound systemic change in financial policy, according to former ECB chief economist Jürgen Stark. “In my view, the erosion of national sovereignty in terms of fiscal policy has already occurred,” he assessed, according to Tichy’s Einblick website.

In his view, every step taken in what is euphemistically called the EU “integration progress” has undermined national sovereignty in the years since 2010. By the first quarter of 2022, Stark charges, the ECB will have provided under the PEPP program, which started in 2020, an unbelievable total of €1.8 trillion, which has had the net effect of decoupling the bond markets from the real economy –with fatal consequences: “I do not want to provoke a crash, but it cannot be ruled out,” he warned.

Stark furthermore denounced the Next Generation scheme, presented by the EU as a “recovery program” following the Coronavirus outbreak. This has “nothing, really absolutely nothing, to do with the consequences of the pandemic”, he said, but is designed to expand the powers of Brussels.

No, Today’s Inflation Is Not “Transitory”. The Federal Reserve governors’ claim of “transitory hyperinflation” (see SAS 20/21) are humorous –hyperinflation, after all, can’t last very long before its destruction of wealth is done –but they are dead wrong. Arthur Burns who, as head of the Fed in the 1970s, began the destruction of the government’s pricetracking system trying to prove that the severe inflation of that decade was “transitory.”

According to a May 26 op-ed in MarketWatch by economist Stephen Roach, who worked for Burns at the Fed during that period, sometimes called “The Great Inflation” (in American terms of reference), Burns was so determined to prove that Fed monetary policy had nothing to do with the growing inflation –rather, that it was “transitory factors” –that he demanded the removal from the price indexes of, first energy, then food, then homes, then cars, etc., until only 35% of the original Consumer Price Index was left, the “core” free of “transitory factors.”

Today, Roach points out, the Fed “is insisting that recent increases in the prices of food, construction materials, used cars, personal health products, gasoline, car rentals, and appliances reflect transitory factors that will quickly fade with post-pandemic normalization. Scattered labor shortages and surging home prices are supposedly also transitory. Sound familiar?”

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