Monday, December 7, 2009

A Moneychanger Interview: Mr. John Exter

H/T Value Investing World

 

 This interview appeared in the June, 1991 Moneychanger, and I reprinted it again in October 1998. I’ve posted it permanently on my website, too.  When I reprinted this in the midst of the 1998 LTCM crisis,  it appeared that after all these years, John Exter’s vision of the final debacle of fiat money is now unfolding.  When we first did this interview in 1991, the monetary system, still in the throes of the S&L crisis, already was showing signs of unravelling, but it recovered for yet another bigger bubble in the US and the world. Today that bubble has burst but not yet deflated  I have slightly edited this version to remove certain references current then but obscure now.  Its timelessness, however, endures. 

Our present fiat monetary system always tends to excess.  Because it has been granted a legal monopoly to create money out of thin air, subject as a system to a mere 0.85% reserve requirement.  It is in the interest of the holders of this monopoly, and everyone who can wield its power through leverage, to use that leverage to the hilt.  Absent government regulation or a collapse of confidence, it will always expand leverage and debt until it collapses.

Now we are ending a period of exuberant faith in this system.  It is no surprise that faith, expressed as “globalism” and so-called “free markets,” has been busily dismantling the institutional controls & regulations established in the wake of the last global collapse, the Great Depression.  In a 10/1998Esquire  article CFR foreign policy expert Walter Russell Mead wrote, “The faster capitalism goes, the more dangerous it gets.  For 25 years, the US has been using its international influence to make the global economic system more like the laissez-fair free market system of the Twenties, and now we’ve got what we want:  a system that is free to grow rapidly.  And – surprise, surprise – free to crash & burn.”  In February, 2002, those words bite even more sharply

Read the interview