Asset value reset?

[AlbertaFarmer5]

Our irredeemable fiat currency is at the root of our economic crisis. What we call money is merely a bond which accumulates interest exponentially and can never be paid off. We need to replace this IOU and start using gold as money again. Not central bank dollars denominated in gold, but a system where goods and services are priced simply in a weight of gold.

The way forward is this: tomorrow morning, put an end to government entitlement programs. Once the spending is halted, convert existing government debt into bonds with interest and principal payable in gold. Governments will have to sell assets and buy gold, but only debt denominated in gold can actually be paid off. Once that process starts, the economy will get a chance to breath again.

Ending capital gains on gold and allowing it to be enforced as payment for debt is also a requirement. Gold needs to circulate in the credit markets again. It's no good if it just gets hoarded.

So in that case, growth becomes limited by the reserves of, and arbitrary value of gold instead. Trading one problem for another.

[helmsdale]

All true, but do you see any other way for this to end?

I think im at a similar point... I simply cannot see where this all goes but utter flaming disaster!

Credit markets are done no matter which avenue I take.

If we stick to the official rules of the game and enforce repayment of all this credit, we destroy the banking system as we know it.

If we make debt meaningless we destroy the monetary system as we know it.

All industry groups, national treasuries, and consumers are highly levered and they've all hit the wall!

Who is sitting around with dry powder? A quote that's stuck with me off agriville, "everyones rich, but nobody's got any ****ing money!" Who drops cash into a loan of any significance anymore? So, banks cant bump up their reserves by calling someone's collateral, and re-signing a new loan with more collateral. I see no avenue for them to start calling loans to better their situation, so then what... they take loans from the government to ensure they dont go under from their own debt obligations? So who the hell buys the government bonds then when everyone is screaming for bailouts? This thing is going to go nuclear and I only see two ways out.

1) debt forgiveness/jubilee
to-do we go back to normal afterwards? Who takes it on the chin? No-one? Wheres the enforcement mechanism going forward if debt Carrie's no risk? I guess we just tell everyone: "we really mean it this time."
-isnt this wildly inflationary?

2) massive defaults the likes of which we've never seen before. Personal, corporate, sovereign, the works! This is what they're trying their damndest to avoid, but simply piling more debt on top of debt to prevent this simply leads to #1.

Is there some outcome other than the uncontrollable extremes I'm envisioning?

[farming101]

Our irredeemable fiat currency is at the root of our economic crisis. What we call money is merely a bond which accumulates interest exponentially and can never be paid off. We need to replace this IOU and start using gold as money again. Not central bank dollars denominated in gold, but a system where goods and services are priced simply in a weight of gold.

The way forward is this: tomorrow morning, put an end to government entitlement programs. Once the spending is halted, convert existing government debt into bonds with interest and principal payable in gold. Governments will have to sell assets and buy gold, but only debt denominated in gold can actually be paid off. Once that process starts, the economy will get a chance to breath again.

Ending capital gains on gold and allowing it to be enforced as payment for debt is also a requirement. Gold needs to circulate in the credit markets again. It's no good if it just gets hoarded.

Existing Canadian Gov't debt is 1.54 trillion. World gov't debt is 69 trillion.
Gov't has to sell assets? What assets? Who will buy the assets and with what? What will the gold that the Gov't has to buy be priced at keeping in mind that some estimates are that there is about 165,000 tonnes of gold in the world and that there has only been about 190,000 tonnes ever mined. What percentage of the world's gold could the gov'ts buy? How much an ounce would they have to bid to get it? Notice I said bid. Or will the gov't force individuals to sell it the gold it needs and put a self determined value on it?

[Daylate]

Hmmmm. China is looking fairly unscaved. Will they buy more debt? How much more control will they have after this.

[errolanderson]

Even at a 20 percent plus recent haircut, stock valuations still remain too high . . . This is a train-wreck from central bankers spoon-feeding investors artificially over the past decade.

[farming101]

Even at a 20 percent plus recent haircut, stock valuations still remain too high . . . This is a train-wreck from central bankers spoon-feeding investors artificially over the past decade.

I have some investments that are down in value 25% since Feb 20 and I feel fine. I must be a farmer. Welcome to volatility

[Austrian Economics]

So in that case, growth becomes limited by the reserves of, and arbitrary value of gold instead. Trading one problem for another.

Quantity of gold in existence is not a problem. The fact that it exists as a well known and transparent quantity is actually an advantage. It has the best stocks to flow ratio of any commodity. That is why it evolved as money.

Growth is not limited by the quantity of gold. In the 19th century, almost all world trade was financed by about 150 tons of gold in the London Gold Exchange.

What limits growth is the ability of politicians to erect barriers to business innovation and development. Take away those barriers and growth will soar.

What also limits growth is the burden of the welfare state. Politicians don't like gold money because it puts a firm brake on spending. No more "free" stuff for the masses. There's no magical "third way" here. Either you institute sound money and stop the welfare state or the division of labor slams into reverse, as it is doing right now, and you wind up with total economic collapse.

[Austrian Economics]

Existing Canadian Gov't debt is 1.54 trillion. World gov't debt is 69 trillion.
Gov't has to sell assets? What assets? Who will buy the assets and with what? What will the gold that the Gov't has to buy be priced at keeping in mind that some estimates are that there is about 165,000 tonnes of gold in the world and that there has only been about 190,000 tonnes ever mined. What percentage of the world's gold could the gov'ts buy? How much an ounce would they have to bid to get it? Notice I said bid. Or will the gov't force individuals to sell it the gold it needs and put a self determined value on it?

Stopping the current levels of spending is the key. After that, your taxes will be levied mostly for the purpose of purchasing gold at whatever price gold holders will accept. Convert existing debt into long term bonds with interest and principle payable in gold. When a gold bond is paid off, the debt is extinguished. Fiat cannot do this.

The alternative is total societal collapse. You cannot have 80% of the population on welfare. The other 20% will simply stop working before long.

[farming101]

Stopping the current levels of spending is the key. After that, your taxes will be levied mostly for the purpose of purchasing gold at whatever price gold holders will accept. Convert existing debt into long term bonds with interest and principle payable in gold. When a gold bond is paid off, the debt is extinguished. Fiat cannot do this.

The alternative is total societal collapse. You cannot have 80% of the population on welfare. The other 20% will simply stop working before long.

This will need to be enforced. No one will do it willingly
https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102

[Austrian Economics]

This will need to be enforced. No one will do it willingly
https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102

You misunderstand FDR's intentions. His order was not intended to save the currency, but rather to destroy it. Holders of gold were forced to become creditors to the central bank, so that FDR could force down the rate of interest to very low levels to finance his runaway spending plans. The result was the Great Depression.

If we return to gold, governments need to purchase their gold honestly, trading whatever assets they have to obtain it. If they attempt to seize it, the economy will lock up completely.