Is The Greek Economy More Efficient Than The American Economy?
Gold news makes the best news lately. News related to paper money is in contrast to that. When money is printed by Central Banks, explanations concerning the value of national currency being changed without it effecting in inflation are added but these analyses are contradicted by facts.
Analysts have explained Quantitative easing, a method to circumvent financial crisis based on the Keynesian economic model. If money is printed by the central bank and government bonds are bought up, this would lower the interest rate on government bonds. In turn, the yield of all other bonds referenced to government bonds is going to be affected. All this is supposed to outcome in lower mortgages and borrowing costs for individuals and businesses, allowing them to save up with these and spend more elsewhere.
Money in excess has already been printed twice by the Federal Reserve since 2008. This has been aimed at lowering the interest rates and winded up doing the opposite, as the rates went up. And interest rates went down significantly thrice after 2008, when the Federal Reserve ceased issuing out money.
Despite the Keynesian model not being functional any more, printing has been decided again. This gap between theory and practice will probably trigger hyperinflation in the U.S. and Europe.
And even more issues concerning government bonds have been revealed with the case of Greece. A loan from a bank or a bond investor to a government is transaction implying commitment on both sides. The incapacity of a borrower to return loans leads to money loss in case of the investors.
Governments borrow on behalf of their states. Such debts are regarded as lower risks because states are long lived entities and payment terms can be renegotiated. Greece has been credited for this reason, irrespective of bad management of these credits. But another problem arises now with the case of Greece: a government has created a debt which would burden several generations but the citizens of the country may refuse to identify themselves with that government.
As borrowers, states are subject to the same rules of capitalism as individuals and companies. But Greece, a member of the newly formed European Union, credited by different European economic entities, seems to obey different economic laws. The prevention of default in the case of Greece is the reflection of European political interests conflicting with economic laws.
Private investors in search for better ways without paper money being involved should go on watching out for more gold news, while the collapse of paper money will compel the European politicians to be more pragmatic and the American economy to locate more effective solutions than that of government bonds. If they fail doing so, the situation of Greece can resurface somewhere else.
You will be able to make the right choices concerning your investment by reading the best gold news.
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