Peak Debt + central banks buying gold -> potential currency reset?

SpacePete

SpacePete

Well-Known Member
Silver Stacker
A bit of a crazy theory here, but let me know what you think.

Central banks are getting diminishing returns from monetary stimulus and lowering interest rates, and eventually we may hit peak debt where consumption hits zero as all income is being spent to service interest on debt.

So what is the end game here? At some point we'll hit peak debt and will have zero growth.

If all the while in the run up to peak debt, central banks have been accumulating gold with fiat, then could this point towards a currency reset that would simultaneously wipe out debt and reignite inflation and growth?

Probably many things wrong with this theory, but could there also be a grain of truth in it?
 
If consumption hits zero and all income goes to servicing debt, we've effectively returned to slavery and growth/inflation becomes irrelevant.
 
Are you talking about a Debt Jubilee?

It's nothing new and has been discussed at length by people like Prof. Steve Keens and others.
 
David Stockman: The Global Economy Has Entered The Crack-Up Phase

Few people understand the global economy and its (mis)management better than David Stockman -- former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier.

David is now loudly warning that events have entered the crack-up phase, which he predicts will be defined by the following 4 developments:

* Increasingly desperate moves by the world's central banks
* Increased market volatility and losses
* Deflation in industrial and commodity prices
* Decreasing demand due to Peak Debt

As the crack-up phase gains momentum, he predicts an increasing number of "financial breaks" that will add to the unpredictability and instability of the environment for investors. Even 'dancing close to the door' sounds excessively risky at this point.
And then, finally, clearly, demand has run smack up against peak debt -- I think that's the right word for it. We had a tremendous study come out in the last week or so from McKinsey, who do a pretty good job of trying to calculate, track and total up the amount of credit outstanding, public and private, in the world. We're now at the $200 Trillion threshold. That's up from only about $140 Trillion at the time of the crisis. So we've had a $60 Trillion expansion worldwide of debt just since 2008. During that same period, though, the GDP of the world saw a little more than $15 trillion from $55 or mid-$50s, roughly, to $70 Trillion. So we've generated, because of central bank money printing and all of this unprecedented monetary stimulus, we've generated something like $60 Trillion of new debt in the world and have barely gotten $15-17 Trillion of new GDP for all of that effort. And I think that is a measure of why the fundamental era is changing. That the boom is over and the crackup is under way when you see that kind of minimal yield from the vast amount of new debt that has been generated.
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http://www.zerohedge.com/news/2015-02-15/david-stockman-global-economy-has-entered-crack-phase
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[youtube]http://www.youtube.com/watch?v=-VYAzxHcQLM[/youtube]
 
When you see the term "crack up" it's referring to "crack up boom or minksy moment". It's what Steve Keens keeps raving about.
 
Miloman said:
Are you talking about a Debt Jubilee?

It's nothing new and has been discussed at length by people like Prof. Steve Keens and others.
Click to expand...
Not a debt jubilee as such where debt is explicitly forgiven, but a full blown currency reset -- with potentially a new currency replacing existing fiat. By default, debt in the old currency could largely disappear.
 
Miloman said:
When you see the term "crack up" it's referring to "crack up boom or minksy moment". It's what Steve Keens keeps raving about.
Click to expand...
If they (banks, gov officials, etc.) know of a debt jubilee in advance, I imagine they will increase hard asset purchases substantially, and especially gold in the case of the introduction of a new currency. Maybe that's a signal we should be on the lookout for?
 
More from the ZeroHedge article:

One of these days, the central banks are going to falter and the market is going to reset violently to prices that reflect the true risk on all this sovereign debt and the pretty cloudy outlook that's ahead for the world market.

We now have something like four trillion worth of sovereign debt spread over Japanese issues, the major European countries that are trading at negative yields. Obviously, that is one, irrational and second, completely unsustainable. And yet, it's another characteristic of what I call these disorderly markets. Investment is now coming home to roost. It will be driving a huge deflation of commodity and industrial prices worldwide. You can see that in iron ore, now barely holding $60 from a peak of $200. Obviously, it's seen in the whole oil patch. Look at the Baltic Dry Index. That is a measure, one, of faltering demand for shipments and, two, massive overbuilding of bulk carrier capacity as a result of this central bank driven boom that we've had in the last 10 to 20 years. So that is going to be ripping through the financial system, the global economy, in ways that we've never before experienced. And so therefore, in ways that are hard to predict what all, you know, the ramifications and cascading effects will be. But clearly, it's something that we haven't seen in modern times or ever before the degree of over investment, excess capacity, and everything from iron ore mines to dry vault carriers, aluminum plants, steel mills, and on down the line.
Click to expand...
 
So my conjecture is, rather than waiting for the markets to "reset violently", central banks and governments will engineer the reset to ensure they profit from it and maintain a position of power and global dominance.



.....
 
Sounds like a deflationary depression where the debt can't be service, liquidity and velocity diminish.

GREAT DEPRESSION.

Cash will be king.
 
It would only be the 1% who would have the debt wiped, none of us would have debts wiped, it would just be carried over to new system.
 
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