A World Financial Reset

Timothy Birdnow

We knew someone would suggest this sooner or later.

Time for a great reset of the financial system

Here is the kicker:

With a new US administration, and the end of the Covid battle in sight with the vaccination rollout under way, now is a good time for the major economies of the west (and ideally the world) to sit down and devise a new international monetary order.

As part of that there should be widespread debt cancellation, especially the government debt held by central banks. We estimate that amounts to approximately $25tn of government debt in the major regions of the global economy.

Whether debt cancellation extends beyond that should be central to the negotiations between policymakers as to the construct of the new system — ideally it should, a form of debt jubilee.

The implications for bond yields, post-debt cancellation, need to be fully thought through and debated. A normalisation in yields, as liquidity levels normalise, is likely.

High ownership of government debt in that environment by parts of the financial system such as banks and insurers could inflict significant losses. In that case, recapitalisation of parts of the financial system should be included as part of the establishment of the new international monetary order. Equally, the impact on pension assets also needs to be considered and prepared for.

This is nothing short of a call for socialism and world government. Who is going to simply forgive government debt? How many people hold bonds, or other such debt mechanisms? If we simply cancel debt we ruin everyone; pension funds, private investors, whole nations that lent us money. This would lead to a total collapse of the world economy.

Do this and we have to completely rebuild the world economy from scratch. And governments will no longer be able to borrow, meaning an international government will be needed.

Makes me wonder if this wasn't the whole idea in the first place.

Posted by: Timothy Birdnow at 11:17 AM | Comments (3) | Add Comment
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