(PROUT Globe, September 2012) – A major US investor warns that further rounds of quantitative easing will be disastrous, and predicts the world’s leading economy will return to the gold standard.
“QE3 is coming. You know we’ve got a phony recovery, so it’s going to fail,” Euro Pacific Capital chief Peter Schiff argues. “We are headed for a currency crisis, and the only way we’re going to stop it is by putting real value back into the paper dollar. So we have to tie it to gold. The sooner we do it the better because the sooner we start to repair the problems the easier it is,” he said.
The Fed are gambling on supplying inordinate amounts of fresh capital to the defunct capitalist system. They seem to pin their hope on the idea that economic stabilization will precede a veritable tsunami of inflation. According to PROUT, it is a losing game. PROUT founder P.R. Sarkar offered:
“It must be borne in mind that both inflation and depression result from the ailments of staticity. Suppose the production in a country is abundant and the gold bullion reserves are in proportion to the country’s economic position, there is no possibility of inflation.
“However, if the circulation of the capital decreases as a result of staticity and the quantum of production also goes down, inflation is bound to take place. If a country has a constant deficit in foreign trade, in that case also there is the possibility of inflation.
“In addition, if foreign trade is not conducted on a barter basis and if the country has to import foodstuffs and export raw materials, inflation will certainly occur. On the other hand, if there is sufficient production and adequate supply, but suddenly the quantum of demand falls, then the value of money suddenly increases for the buyer. This is called negative inflation or deflation.”
Stagnation is sure to come wherever some are allowed to accumulate capital infinitely. The results of such concentration of capital are particularly bad in a global market characterized by doubt and low confidence. Such insecurity is bound to crop up when there is unbridled competition for raw materials, consumer markets, etc. among vested interests.
PROUT holds that concentration of wealth and the resulting lack of circulation of money are the two main causes of economic depressions, and that such types of economic stagnation and depression occur only under capitalism.
Proutist writer Susmit Kumar has documented the causes of the imminent global economic collapse. According to him, the US has already dug its own grave by printing dollars to pay its bills continuously for decades:
“Until the 2008 economic downturn, the administration was able to finance the twin deficits, i.e. budget and trade deficits, by printing dollars, taking the advantage of the dollar being the global currency. During the 1980s and early 1990s, it was mainly Japan who financed the [US] deficits and during the 2000s it is mainly China who is financing the deficits. Now the debt has grown to an unsustainable level.”
The Gold Standard
PROUT supports a return to gold as a standard of the financial system. PROUT's gold standard is not a pillar of international monetary trade and economic speculation. By establishing gold as a standard of the financial system, PROUT secures the people's economy and other parts of the economy. The present exploitative system cannot be saved by returning to an earlier mode of exploitation, say the pre-WW2 financial system where currencies were pegged to gold. Gold as a finaicial standard will only work well in economic democracies focused on local needs and guided by sound ethics and not by vested interests:
"In capitalist economies, production is for the profit of the capitalist and the profit goes to individuals, groups and the state exchequer … whenever fresh financial investment is required, inflation takes place.
"In a Proutistic economy, production will be solely for consumption. As there will not be any profit motive, there cannot be any fresh inflation, and the existing inflation will gradually die out.
"In Proutistic production or consumption, in the first phase the money value remains constant and full-fledged purchasing capacity will be guaranteed to the people. In the second phase, when production increases in the revised economic order, money will get back its natural market value.
"Finally, after consumption, money will get back its actual value. Inflation will be checked and purchasing capacity and the minimum requirements of life will be guaranteed to the people. The second phase will continue for ten to fifteen years.
"After the expiry of this period, that is, in the third phase, minimum requirements of life will increase and people will acquire more purchasing power. This power will increase at an accelerating rate.
"The printing and issuing of monetary notes having no bullion value must stop immediately, and new notes having bullion value should be issued in new colors and shapes. No monetary notes should be issued by the government from then on without a clear assurance that it is prepared to pay the requisite amount of money in gold coins. This can only be implemented by a Proutistic government."
3 "Stop Blaming China – It is the Structural Failure of the Global Trade System", Dr. Susmit Kumar, 1 July 2010.