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Saturday, July 27, 2013

Much Ado About the Euro



March 1, 2010 by · Leave a Comment 

By Howard S. Katz, GoldSeek

Part of the explanation for the Dec.-Jan. decline in gold is the attack on the euro which is now going on in the media.  Indeed, the euro topped out very close to the exact day of the top in gold.  The market is thinking: decline in euro = rise in dollar = decline in gold.

First, let us ask what is the euro and how did it come to be?  Here there is a little historical background.  After we beat a little sense into them in 1941-45, the Germans gave up their attempt to become the master race and rejected all of the thinking which had led to the Hitler victory in 1933.  In 1949, they elected as chancellor a man who admired America, Conrad Adenauer, affectionately called der Alte or the Old Man,

Germans back at that time remembered the depreciation of the German mark in 1923, which had wiped out the middle class and destroyed their savings.  Adenauer admired America, in part, because of the stability of her currency.  The American dollar had kept its value from 1793 to 1933, meaning that average wholesale prices were the same in 1933 as they had been 140 years before.  In 1949, the depreciation of the U.S. dollar had only just begun, and America was regarded, at that time, as a relatively sound money country.

So Conrad Adenauer set up a German money system modeled on America.  In 1957, he created the Bundesbank.  The Bundesbank did print money, but it was committed to a policy of printing it in a very stingy fashion.  And then Germany, which had been bombed into rubble and overrun with foreign armies, emerged as the best economy in Europe.  German tourists stirred up resentment as they visited other countries in Europe.  “Hey, didn’t we just beat those guys?  How come they can afford to tour here, and we can’t afford to tour there?”

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