Eric King: “What is the great danger facing the world as we head into 2015?”
Dr. Malmgren: “There is a risk that this period of history might end up being parallel to 1922 – 1923 in Germany. As you recall, that was a period when the central banks started really expanding the money supply and thinking they could control the outcome at a later date. It turned out they couldn’t and it really got out of control in a couple of years. Then we had the dreadful hyperinflation that we refer to in the Weimar Republic…. "The overwhelming consensus is that the effort to create inflation has failed and therefore it will never work. That’s exactly what they thought in 1922, and that’s when they said, ‘We better really do something now.’ That’s when all hell broke loose.
Most people are not thinking about this but that’s where the world is right now and it’s incredibly important to be aware of what the dire consequences are of these types of radical policy-making decisions.
Inflation is also ripping through Russian society. So people are deceiving themselves when they say, ‘It will never work.’ It (the effort to create inflation) is working. In fact, it’s working too well. When everybody says, ‘It’s a no-brainer, that will never happen,’ that’s almost always when it happens.”
Eric King: “We are really talking here about a loss of confidence. And when you talk about a loss of confidence, it comes like a thief in the night — out of nowhere. That loss of confidence leads to collapse like we saw in Weimar Germany. I was fortunate enough to interview the legendary Dr. Anna Schwartz when she was 92 years old — at the end of her remarkable career. Of course she co-authored the book ‘A Monetary History of the United States’ with Nobel Prize winner Dr. Milton Friedman. Schwartz warned that there was a tremendous risk we would experience a loss of confidence and runaway inflation because of the reckless policies of Western central planners. Are we in danger of seeing that loss of confidence that Dr. Schwartz was warning about?”
Dr. Malmgren: “That’s what Paul Volcker says, and I trust Paul Volcker. I’m not sure there is another policymaker alive today whom I would trust more. That’s exactly what he has been warning about more and more aggressively in the last few years. He has been warning that the world is engaging in a truly historic experiment to create inflation, and we should think carefully about what will happen if we get what we wish for.”
