Friday, May 22, 2009

Murray Rothbard The Prophet

"The important point here is a basic charge that has occurred in the psychology of the market and of the public. In contrast to the naive and unquestioning faith of yester-year, everyone now realizes at least the possibility of collapse of the FDIC. At some point in the possibly near future, perhaps in the next recession and the next spate of bad bank loans, it might dawn upon the public that 1.5 percent is not very safe either, and that no such level can guard against the irresistible holocaust of the bank run. At that point, ignoring the usual mendacious assurances and soothing-syrup of the Establishment, the commercial banks might be plunged into their ultimate crisis. The United States authorities would then be faced with two stark choices. One would be to allow the entire banking system to collapse, along with virtually all the deposits and depositors in that system. Since, given the mind-set of American politicians, and their evident philosophy of "too big to fail," it is certain that they would be forced to embrace the second alternative: massive, hyper-inflationary printing of enough cash to pay off all the bank liabilities. The redeposit of such cash in the banking system would bring about an immediate runaway inflation and massive flight from the dollar."
This was written by Murray Rothbard September of 1991 in a preface for his essay The Case For A 100 Percent Gold Dollar. We have seen the US government printing trillions of dollars to cover the bad loans, and we now await to see if the United States will suffer from hyper-inflation. A flight from the US dollar is in the works. The US Dollar index hit a high of 89.292 on March 9th and has since dropped to 80.262, a drop of 10% in two months.

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