TAYLOR COMPARISON BERNANKE WITH HITLER AND WHAT PRECEDED THE SECOND WAR

Below is an article of John Taylor that was published in FT alphaville  afew months ago

After the Phoney War, Things Really Got Nasty

"Not too many traders remember ‘the phoney war,’ or the Sitzkrieg, as it happened 71 years ago. After Hitler invaded Poland on the first day of September 1939, Poland’s European allies France and England declared war on Germany, but nothing significant happened on that front until the following May when the German Army rolled through Luxembourg, the Netherlands, and Belgium and into France. Although the horror started in Poland in the fall of 1939, for a few months, the rest of Europe was spared that horror, which eventually lasted through the next five years. Strangely, this past September (2010), the US equity market rose by about 8.8%, its best return for that month, since that same September (1939). To me the parallels are ominous. What were those people thinking back in 1939? Could a coming world war have that positive an impact on the economy and on markets? They must have been crazy – of course equities gave up their gains and were cratered in May 1940 when Germany invaded the west. But, what are we thinking of now? A war has just begun.

Didn’t Bernanke and the Fed announce in late August at Jackson Hole (and multiple times since then) that the US was going to enter QE2 and debase its currency setting off a currency war. Bernanke, like Hitler seven decades ago, had been warning everyone who would listen for years. On November 21, 2002 he said that he would debase the US dollar if the American economy looked as though it would go through the same lost decades that the Japanese have recently endured. Now, it is clear that he has been true to his word and the currency war has begun.

….

Capital controls are likely to spring up in Asia and in other attractive economies during the next few months, but the really destructive war begins when tariffs appear. This should happen next year – maybe in May, mirroring 1940 – because by then the next recession should be in full force in both the US and in Europe, forcing many millions more out of work. The political pressure for raising tariffs in the US is intensifying and the new Tea Party supported Congressman will help tip the political scales in that direction. This war will not be fought for territory, but for markets and wealth, and when tariff walls are raised the destruction of livelihoods and property will be almost as dramatic as in the old fashioned shooting wars. With the loss of economic value, the global debt structure must collapse and entitlement promises will not survive."