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August 28, 1992
By week's end, mortgage rates were recovering a little from five straight bad days, all triggered by a rapid decline in the value of the dollar.
Economic reports show a stalled economy, but not a contracting one: Existing Home Sales jumped 3.9%, Durable Goods Orders slid 3.4%, and Initial Jobless Claims fell below 400,000 for the first time in two years.
The popular press did a pretty good job explaining the impact of the dollar dive on interest rates and inflation fears, and even figured out that events in Germany were the cause, not some American collapse.
But the media completely missed the conspiracy angle. It's easy to find people worried about the Trilateral Commission, or Kennedy assasins, or IranContra, or Iraqgate, but not many worry that central bankers are secretly running the world.
The central bankers (our Fed, the Bank of England, the Bundesbank, etc,) don't exactly run things, but they do get the super secret cleanup jobs that are too messy or painful for daylight review in a democracy.
Two years ago, West Germany began to absorb the flat broke German Democratic Republic. There was a serious problem: all 16 million citizens of the former GDR were ready to move to West Germany to find a job.
The political solution was to give them a lot of money by granting artificial value to the wallpaper Ostmark. The Bundesbank warned that even one real Deutschemark for every three Ostmarks risked serious inflation trouble.
The politicians decided on a onetoone exchange, immediately, noting a shortage of housing and jobs for 16 million flat broke immigrants.
Guess who got to clean up. The pols? Not a chance. Raise taxes to pay for the exchange windfall? You must be kidding we have to get reelected!
Ever since the deal was cut, with no public debate or vote, the Bundesbank has been sucking the excess cash out of the German economy. How? Just like here, with astronomical interest rates. A German TBill equivalent has triple the yield of an American one: no wonder investors prefer Dmark securities to dollar ones.
West Germans are enraged: no exodus, but lots less money and jobs. Capital is being siphoned from the whole rest of the world, chasing high German yields. Europe is being driven into recession, and we are having a harder time getting out of ours.
If your mortage cost more this week, blame the Bundesbank. Though, somebody out there might note that dumping political problems in the secret lap of central bankers is not a practice limited to Germany.
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