Former Bundesbank and ECB banker: “The System is Out of Control”

Posted: 26th May 2014
Author: Willem Middelkoop


It is very rare that a (former) central banker tells it like it is. Jürgen Stark, former vice president of the Bundesbank and also former chief economist of the ECB confirmed is a recent conference that “The System is Out of Control” and is “pure fiction”. According to Stark  ‘The problem is the monetary model itself. That is, the printing of paper currency without real backing.”  Of course the main stream media (MSM) are ignoring these strong warnings by financial expert Stark.

These quote can be found in a report by ;

Stark, until recently one of the big hawks central bank of Germany for his fierce defense of monetary orthodoxy, resigned in late 2011 for his outright rejection to the purchase of government bonds by the ECB launched the president of the institution Jean Claude Trichet. Since then, Stark has used his rare, but valuable public appearances to warn of the risks associated with the current policy of central banks to the crisis.

In a conference organized by the Ludwig von Mises Institute in Germany, recommended to protect the attendees directly against a probable collapse of the global monetary system. Stark spoke openly.

Stark noted that central banks, including the ECB, “have completely lost all ability to control and perspective on the economic situation.”

The monetary system was saved in 2011 through concerted action by major central banks worldwide. But, according to Stark, the whole system is “pure fiction”. The monetary authorities have been groping since 2008 to avoid a second Lehman Brothers, but if happen, “the system will not survive,” he warned.

The problem is the monetary model itself. That is, the printing of paper currency without real backing and the multiplier by which the commercial banks can expand credit-uncontrolled without prior savings. Stark recommended allocating part of this fictional savings to investment in traditional “safe havens” such as gold or silver.

Also, in another lecture delivered last week in Paris, Stark noted that the fragile recovery in Europe is not due to the absence of monetary and fiscal stimuli (low rates, debt purchase, etc..) and (more government spending) but the slow deleveraging and lack of structural reforms.

Far from helping, the loose monetary policy of the ECB is hampering the recovery, as advanced free market on multiple occasions. The key to growth, create jobs and end the crisis on solid foundations, as Stark, is to increase competitiveness. And to do so, “we must continue gaining flexibility. Progress has been made, but still not enough. The situation has improved, but the crisis is not over.”

“the probability of default, as is reflected in the markets are too low,” he added. The expert was critical of the downside risks caused by the fall in spreads and insurance against default (CDS), as attributes, especially the artificial ECB action.

“Capital appreciation has grown stronger euro. But the crisis markets are distorted. We should not be too happy with what happened,” he mused


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