السبت، سبتمبر 03، 2011

Comments on: Collective Currency Devaluation

I realize that global inflation cannot be avoided with this strategy. But that is what a collective currency devaluation means. Like issuing a new currency or so. In fact, in order to avoid inflation, the few rich countries should stack cash from weaker currencies such that they reduce inflation. Why should China, Canada or Switzerland do that? Because we are all connected. Because almost every other state today is nearly bankrupt. If the US or EU economies collapse because of the debt problem, financial chaos will be unprecedented - the entire world economy could collapse.

This collective currency devaluation is a nice way of saying to lenders, we are all bankrupt, so it is better you accept some discount, in the form of  a collective devaluation, than wait for us to be bankrupt with all the chaos that may lead you to lose all your savings. When a state is bankrupt, a new currency is issued - in this case almost ALL states are bankrupt. Lenders and savers have to deal with it because declaring all states bankrupt will hurt everyone - even a worse situation will occur when a chain reaction takes place. You can view this as a collective bankruptcy and restructuring. The lenders should accept the consequences in the hope of avoiding a global meltdown. After all they contributed to the problem - just like in the real estate bubble.

Printing cash happens and will happen anyway – we are just suggesting it is done within a PLAN of global restructuring and new rules, including shift from USD as currency of reserves to something like SDR or Bancor or ECO. The global economy is really - in the sense that it needs collective action and common rules.

Several countries before went into bankruptcy - now almost every state is bankrupt -can we learn from what happened in the past? Well - perhaps the answer is a new currency - what did Germany do after WW2 for instance - can we learn from that? So perhaps just issue a new global currency backed by G20 or something ? In 1971, US President Nixon floated USD & ended its convertibility into gold, bringing to an end the Bretton Woods.
World leaders, better to cooperate now before it is too late - Most of you know already better than anyone else that your governments are bankrupt

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