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Friday, January 2, 2015
Former White House Official Warns The World Is Dangerously Close To Collapse
Dr. Philippa Malmgren
Former presidential adviser and member of the U.S. President's Working Group on Financial Markets
Today a former White House official and Plunge Protection Team member warned King World News that the world is dangerously close to collapse. Former presidential adviser and member of the U.S. President's Working Group on Financial Markets, Dr. Philippa Malmgren, also discussed why the world is so dangerously close to collapse and what can trigger it at any time.
Eric King: “What is the great danger facing the world as we head into 2015?”
Dr. Malmgren: “There is a risk that this period of history might end up being parallel to 1922 – 1923 in Germany. As you recall, that was a period when the central banks started really expanding the money supply and thinking they could control the outcome at a later date. It turned out they couldn’t and it really got out of control in a couple of years. Then we had the dreadful hyperinflation that we refer to in the Weimar Republic….
King World News note: The Weimar Republic hyperinflation chart below shows one gold Mark collapsing in value from a level of one Mark for one gold unit in 1918, all the way to an astonishing one trillion Marks for the same unit of gold by 1923.
Dr. Malmgren continues: “Central banks are now wanting the inflation rate to rise and they are willing to let the money supply be at abnormally large levels and even continue to expand. So you have to start thinking about the possibility that they succeed, which right now virtually nobody thinks is possible….
Continue reading the Dr. Philippa Malmgren interview below…
“The overwhelming consensus is that the effort to create inflation has failed and therefore it will never work. That’s exactly what they thought in 1922, and that’s when they said, ‘We better really do something now.’ That’s when all hell broke loose.
The equivalent today is the Fed saying, ‘We won’t actually raise interest rates as quickly as we originally said. We won’t raise them without warning and we won’t raise them by very much. This is going to take a long time, and by the way we are not selling any assets.’ So, effectively, they continue to monetize the debt in this way and the speed of it is faster than any normal environment.
Most people are not thinking about this but that’s where the world is right now and it’s incredibly important to be aware of what the dire consequences are of these types of radical policy-making decisions. The problem is there is a degree of arrogance among central bankers today that parallels the arrogance of the period in the early 1920s — an overconfidence that they can control outcomes.
We have this historic effort by multiple governments to engage in efforts to create inflation. Governments are desperately attempting to debase their currencies through inflation. The extraordinary danger here is that they won’t be any good at controlling the amount of inflation once it erupts. And when I look around the world, many countries are already experiencing it — Belarus, Argentina, Brazil, South Africa, etc.
Inflation is also ripping through Russian society. So people are deceiving themselves when they say, ‘It will never work.’ It (the effort to create inflation) is working. In fact, it’s working too well. When everybody says, ‘It’s a no-brainer, that will never happen,’ that’s almost always when it happens.”
Loss Of Confidence And Collapse
Eric King: “We are really talking here about a loss of confidence. And when you talk about a loss of confidence, it comes like a thief in the night — out of nowhere. That loss of confidence leads to collapse like we saw in Weimar Germany. I was fortunate enough to interview the legendary Dr. Anna Schwartz when she was 92 years old — at the end of her remarkable career. Of course she co-authored the book ‘A Monetary History of the United States’ with Nobel Prize winner Dr. Milton Friedman. Schwartz warned that there was a tremendous risk we would experience a loss of confidence and runaway inflation because of the reckless policies of Western central planners. Are we in danger of seeing that loss of confidence that Dr. Schwartz was warning about?”
Dr. Malmgren: “That’s what Paul Volcker says, and I trust Paul Volcker. I’m not sure there is another policymaker alive today whom I would trust more. That’s exactly what he has been warning about more and more aggressively in the last few years. He has been warning that the world is engaging in a truly historic experiment to create inflation, and we should think carefully about what will happen if we get what we wish for.”