Steen Jakobsen, chief economist at Saxo Bank in Denmark has a few thoughts via email I would like to share.

Steen writes …

The German “near miss” failed auction yesterday has set off several new developments and pressures – This is a major thing clearly, and some media even speculate it could change the mighty Bundesbanks’ perception of reality.

Close to home, Germany now trades ABOVE Denmark on 10 year government debt by 10 basis points! However, there is reason to believe this more a function of the illiquid markets than an endorsement of the Danish economy, where the fiscal imbalances continues to expand negatively (Unlike Sweden!)

Spread difference 10 year Denmark minus 10 year Germany

It has also increased the pressure from France to get the ECB more involved – I fail to see link between the German auction and this, but never the less the French political machine is always firmly behind the concept of “Dirigism” and in today’s meeting between Merkel, Sarkozy and Monti the topic surely will be touched again.

It’s important in historic context to remember that the only true role a central has is to … print money – why else have it?

I remain committed to my Chapter 11 concept as one of the few ways to break this deadlock.

Safe travels,


For a discussion of the “Chapter 11” concept, please see Perfect Storm the Most Likely Scenario; Is Europe Set to Declare a Chapter 11 in Early 2012?

Steen is correct regarding the only true role of central banks. It is precisely why they they should be eliminated. Far from being “inflation fighters” they are the very source of inflation.

More correctly: Fractional Reserve Lending and Central Bank Printing do not “cause” inflation, they “are” inflation.

Deflation is the destruction of credit and debt from the preceding boom.

Mike “Mish” Shedlock
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