Book contents
- Frontmatter
- Dedication
- Contents
- Prologue
- Introduction
- Chapter 1 The History of Money
- Chapter 2 Central Bankers: The Alchemists of our Time
- Chapter 3 The History of the Dollar
- Chapter 4 A Planet of Debt
- Chapter 5 The War on Gold
- Chapter 6 The Big Reset
- Epilogue
- Appendix I Demonetized Currencies (1700-2013)
- Appendix II Wall Street Fines (2000-2013)
- Bibliography
- Register
Chapter 4 - A Planet of Debt
Published online by Cambridge University Press: 12 December 2020
- Frontmatter
- Dedication
- Contents
- Prologue
- Introduction
- Chapter 1 The History of Money
- Chapter 2 Central Bankers: The Alchemists of our Time
- Chapter 3 The History of the Dollar
- Chapter 4 A Planet of Debt
- Chapter 5 The War on Gold
- Chapter 6 The Big Reset
- Epilogue
- Appendix I Demonetized Currencies (1700-2013)
- Appendix II Wall Street Fines (2000-2013)
- Bibliography
- Register
Summary
Fiat money can only flee into one direction and that is gold.
– Alan Greenspan, former Chairman of the Federal Reserve Board (2010)The process by which banks create money is so simple that the mind is repelled.
– John Kenneth Galbraith, economist (1975)The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.
– Ernest Hemingway in Esquire (1935)By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.
– John Maynard Keynes on inflation (1920)To destroy a bourgeois society, you must debauch its money.
– LeninINTRO
The decoupling of gold and money made creating new money very simple. As a result, with the end of the gold exchange standard in the 1970s, an unprecedented credit bonanza was allowed to take off. In order to understand the build-up of debt, we must go back in time to 1981 when Fed Chairman Volcker was forced to raise interest rates to 20% in order to save the dollar’s position as the world's reserve currency.
The dollar recovered as a result of Volcker's interest rate hike, and with inflation tamed, interest rates started to decrease sharply. The decline in interest rates after 1981 made it possible for governments to issue more debt. The same held true for companies and individuals. This period of unprecedented private debt build-up lasted until the start of the current credit crisis. Since then, the balance sheets of governments and central banks in particular have expanded significantly.
Countries with debt issued in their own currency cannot go bankrupt. They can always switch on the printing press to create as much money as is needed to pay off their debts. There is one drawback, however: when too much money is created, their economy can become paralyzed due to (hyper)inflation. At some point in time, even governments have to get rid of their debts. This will happen either through inflation, debt defaults or debt cancellations. Such monetary resets have been the solution many times in the past.
- Type
- Chapter
- Information
- The Big ResetWar on Gold and the Financial Endgame, pp. 105 - 149Publisher: Amsterdam University PressPrint publication year: 2015