From Volume 37, Issue 39 of EIR Online, Published Oct. 8, 2010

Global Economic News

British Hyperinflation Policy Creates Chaos, Ship-Jumping

Sept. 30 (EIRNS)—British-demanded hyperinflationary policies have unleashed financial chaos around the globe—as Lyndon LaRouche warned they would—along with vituperative finger-pointing and threats to jump ship from among the guilty parties themselves.

As demanded by London, a large number of central banks—including Ben Bernanke's Federal Reserve—have been engaging in frenetic "quantitative easing" and other forms of hyperinflationary bailouts. "So far this year, Japan, Brazil, South Korea, Taiwan, Peru, Argentina, and Switzerland have engaged in quantitative easing or similar measures," the economic blog correctly notes. "And who knows how many central banks have fired up the printing presses? In his last meeting, Bernanke announced that the Federal Reserve is on the verge of joining this curious activity."

As a result, commodity prices have soared this year, including corn, +54%; wheat, +57%; and soybeans, +21%. The currencies receiving the greatest speculative inflows, such as Brazil's real, have also risen dramatically: by 25% since the beginning of 2009.

"If this activity strikes you as absurd," SeekingAlpha wrote, "it is. Desperate would be another apt description. It's like trying to push down all the bumps in a carpet that is too big for the room.... The more funny money is printed, the better gold will do"—a point noted by LaRouche in his Sept. 29 discussion with diplomats in Washington, D.C.

The day after his Sept. 28 de facto confession that LaRouche's warnings about hyperinflation had been right all along, City of London mouthpiece Ambrose Evans-Pritchard, writing in the Daily Telegraph, warned that the hyperinflationary binge that he, among others, had demanded, was threatening to unleash currency interventions, capital controls, and other forms of protectionism—which London considers anathema. Brazilian central bank head Henrique Meirelles, for example, who is a London loyalist, warned, in a Sept. 28 speech in London, that "some countries" were engaging in competitive devaluations, and Brazil was considering doubling its tax on incoming capital flows from 2% to 4%, to try to stop the real's whirlwind rise. "This is not necessarily a war," he said, "but Brazil is not going to pick up the tab" for the mess.

IMF managing director Dominique Strauss-Kahn jumped into the fray, to warn that nothing good ever comes from intervening on exchange rates.

How much of these violent speculative capital flows are actually dirty money from the black economy, including drug trafficking? Probably a lot.

Suggestive, for example, were additional remarks made in London by Brazil's Meirelles, where he promised his audience of investors that Brazil would eliminate remaining obstacles to full convertibility of the real. But, he warned, "what people see as restrictions on capital flows, are actually laws against money laundering, which are rigorously applied in Brazil."

Ireland Exporting Its People To Pay Off Banks' Bailout

Oct. 1 (EIRNS)—Commenting on the latest Irish bank bailout, an Irish economic source told EIR that he does not see "how the government can shoulder the EU50 billion bill of the bank bailout."

The answer is simple: It can't. The EU50 billion is one-third of the nation's annual income, and brings the deficit from 13% of the gross domestic product, to 32%. The European Union is demanding that Ireland come up with a four-year plan for bringing its budget deficit down to 3%, in line with the EU's Maastricht Treaty criteria. With a 19% approval rating, it is not certain whether the current government will last four weeks, let alone four years. Labour Party spokesman Michael Noonan warned that any future Labour-led government would not necessarily be bound by the current government's four-year plan.

The Irish economy is all but collapsing. The British daily the Guardian reports today that 100,000 workers are expected to leave Ireland by the end of next year, to seek work. This is close to 5% of the nation's 2.2 million workforce. Unemployment is now at 13.6% and is expected to go up when more budget cuts are implemented, as the government has promised.

A big exposition taking place in Dublin, on Oct. 3, is on the new export product of Ireland: its people. Called "The Working Abroad Expo," it is a recruiting event for New Zealand, Australia, and Canada. While younger and more skilled workers may find work, less-skilled workers, particularly those in construction, will not find work in Great Britain or on the Continent, since the collapse of the real estate bubble has all but ended construction.

Peter Bunting of the Irish Congress of Trade Unions warned, "A lot of Irish workers in the past got jobs in publicly funded projects like building motorways, schools, and hospitals. The manual laborers and semi-skilled workers from Ireland are the most vulnerable to an economic downturn at home ... and are the ones least likely to get a job if they emigrate to Britain for work."

The trade unions have warned that these unemployed could be exploited by dissident Irish Republican terrorists.

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