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dom1971
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How to stop the Depression

- Antal E. Fekete - Gold University

A manual financial reset like this? I'm no expert but I can't imagine such a move would be wise.

Firstly, anybody with prior knowledge of such an event would be able to accumulate free assets limited only by their borrowing capacity. We would have a cacophony of corruption and abuse preceding the "event" that dwarfs what we're seeing nowadays. This can't just be "sprung" on the world economy, it needs discussion and planning and that means some people will know beforehand. For interests sake lets imagine that it can.

Effectively this move instantly transfers all wealth from the creditors to the debtors. Every creditor would almost certainly be facing bankruptcy, while every debtor would find themselves instantly wealthier. Everywhere from the mega (international) scale right down to the individual.

A century or so of absolute financial idiocy would likely ensue. At the private level we've taken all the assets from financially experienced individuals and entrepreneurs and put it in the hands of monetarily-challenged folks who need to borrow to survive. On the international level its the same. Taking wealth from hard-working nations and giving a clean slate to nations with poor productivity/consumption ratios - or worse still making them the new creditors (at least for a time).

What of the people? The poor would of course remain poor, since they do not (and cannot) hold much debt - they stand to gain little but will lose much in trying to survive the crisis. The middle classes will get their home loans written off so there will be little motivation for them to be productive - they'll retire early on masse and create a serious gap in the educated workforce worldwide. The rich will remain rich because they have capital. The banks would mostly perish in flames or close up shop and flee such catastrophic turmoil.

But that's OK... the new world order will free up capital and make it available to the poor... how? We just destroyed every bank and lending facility on the planet by stripping them of their debt assets. What's more the very idea of "investing" into creating new ones becomes incredulous - who the heck would ever want to start a lending business in a world where financial resets are the new norm?

But lets step back even further and look at the new global system as a whole. The current (albeit hugely flawed) system of fiat currencies is based on debt. Money is born in debt because a promise is made to (create the productivity to) eventually repay it. The "promise to pay the bearer..." printed on each note, well that was written off with all the other debts too. Not to mention the reserve bank making that promise is quite possibly insolvent/dead too. Without the platform of debt there is nothing holding up the "value" of the paper currencies floating (pun intended) around the world. Dollar bills, Deutschmarks, Francs etc. become (even more) meaningless pieces of paper. When people realise that then it will matter not what preceded it. Debts denominated in currencies of no value have no meaning, no matter who holds them.

We may as well just cut to the chase and just implement a gold standard. The fiat currencies will die a slow death as it gathers momentum. The fiat debt will die with them, only without the turmoil of an "overnight reset". The parasites that sucked the world dry through the fiat system will detach from their host and die.

Commented 2631 days ago

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Beginning of the headline :Capital erosion is not natural nor is it inevitable. Rather, it has been inflicted upon the world economy by the unmindful and irresponsible monetary policy of the United States in deliberately driving the rate of interest to zero... Read More

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