The continuing financial crisis should not be blamed on excessive risk-taking by bankers who had an unbridled desire to make money in mortgages. The crisis is indeed  a monetary crisis, rooted in the lending of money created out of thin air. This is what leads to economic booms and busts. [...]
Healthy economic growth is supported by savings, rather than newly created money. People and businesses save and invest the money they don’t need to consume right away. They make loans and investments that create computer equipment, copper mines, retail stores, and new homes. These loans and investments need not be cut off suddenly by a Fed worried about rising prices, as is the case when the Fed induces business activity by simply creating money. (1)

Central banks of four Gulf countries will therefore halt their lending operations next week in line with their landmark agreement to launch the world’s second major monetary union, a Saudi newspaper reported yesterday. (2)

Ivo Cerckel
honestmoney@maktoob.com
http://twitter.com/ivocerckel/

NOTES

(1)
Central Problem: the Central Bank
By ROBERT KLEIN AND GEORGE REISMAN
MONDAY, DECEMBER 28, 2009
http://online.barrons.com/article_email/SB126167814839704681-lMyQjAxMDI5NjIxNjYyNzY4Wj.html

(2)
Four central banks to halt lending next week   
Emirates Business 24-7, 27 December 2009
http://www.business24-7.ae/Articles/2009/12/Pages/26122009/12272009_1cb3df2c0efa4c60afd623eb25e8d69b.aspx