Spelling Out The Big Reset

Written by LK in Hong Kong, Courtesy of Bullionstar Blogs

Spelling Out The Big Reset

As economies age, debt builds up. Advanced economies – those with the highest borrowing ratings by the reputable agencies they developed – have it clogging up inside all their arteries. The Big Reset will finally become inevitable, as has been acknowledged by the IMF head Largarde, mentioning the year 2020. But what must an Armageddon debt reset necessarily involve? Few have spelled it out, not even in the famous book with the same title “The Big Reset” by Willem Middelkoop.

Revision on money creation mechanics: unwrapping the meaning of ‘Reserves’

At the center of it all, wrapped by layers of secrecy and protected on the outside by purposefully confusing jargons is this concept of Reserves. Let’s understand it to mean ‘net worth’, ‘collateral’, or whatever a banking entity’s ‘really worth’, because what banking entities do, is to use this asset as backing to create instruments and derivatives, like loans, or even money, and expand the money supply. In long tradition, the ultimate reserve asset is of course gold. When the bank’s (or central bank’s) worthiness comes into doubt (like to many gold-deposit receipts flying around), people come for the ‘reserves’. If the reserves satisfy the claims, then it’s good.

In our fiat currency world since 1971, countries hold each other’s currencies as legitimate reserves. The country’s central bank can then go create the country’s own currency. The justification is simple: there is this unsaid assumption that when the worthiness of a country’s money becomes in doubt, one would not question the worthiness of the other currencies held as reserves, and, hence, as long as the country’s central bank can supply the ‘safe’ reserve currency to meet with the country’s currency being sold, all is well. As we approach it from this angle, we know to ask the question, “what then gives the other reserve currencies their value?” Note, this process enables country A to expand the money aggregate in foreign country B also, if only country B is happy to have currency A in its reserve to create some more currency B at will.

Money creation is a happy process. Everyone likes it, from businesses to banks to governments to the everyday wage earner who is happier even if his salary only rises by the same amount as inflation. And this is so even for our debt-money system, in which money is very much ‘loaned into existence’ as a debt is created. The temptation is strong, and this is fundamental.

As the Devil has it, there are two issues with this that are necessary consequences:

(1) With debt comes interest, and if one keeps expanding the borrowing, one day the interest requirement will exceed earning power, and this is where the ‘advanced economies’ are today.

(2) If the money supply grows faster than the amount of goods and services it can be traded for, this leads to inflation. It is important to have people believe that their money is good so they do not have the tendency to convert their money into real assets. Hyperinflation is the currency event in which faith is lost in money and when people rush to buy real assets, they find that there is not anywhere near enough physical assets to satisfy money claims.

Looping back to the concept of reserves, the central idea to a stable banking system is to have people believe that the reserve of the system is good – in sufficient quantity as an ‘end product’.

The Sure-fire way to Reset

Now, our ‘advanced economies’ have already passed the point where interest service is manageable. In an effort to perpetuate the illusion for as long as possible before stage (2) when the quality of the debt papers is called into question, our money masters have launched outright money printing to maintain service of debt interests. They cranked up the power of their mind-influencing machines, and will do “whatever it takes” to avoid their game being called. Clearly this can only exacerbate the onset of Stage (2).

“The Fed’s balance sheet is a pile of tinder, but it hasn’t been lit … inflation will eventually have to rise.”

China Made Military History Three Times Last Week

Last week, a group of initially unidentified foreign troops disembarked in the Yemeni port city of Aden which is currently under siege by Iran-backed Rebels seeking to capture one of the last remaining major holdouts still controlled by fighters loyal to President Hadi. When the mystery soldiers arrived, the media made the somewhat logical assumption that a Saudi-led ground incursion had indeed begun. Surprisingly, the soldiers turned out to be Chinese and were in Yemen to ensure the safety of more than 200 civilians evacuating the city in an “unprecedented” move that at least according to one Chinese professor, makes China “look really good.” Here’s Reuters:

A Chinese naval frigate evacuated 225 foreign citizens from strife-torn Yemen, its foreign ministry said, marking the first time that China’s military has helped other countries evacuate their people during an international crisis.

Cuba seeks foreign investment as it shores up increased diplomatic ties

Improving relations with the US has led to business delegations visiting the island nation to explore possibilities of better ties

It may have been hard to imagine in Fidel Castro’s heyday, but Cuba’s trade minister made a high-profile pitch for foreign capital at a meeting of corporate executives on Thursday as the island nation sought to reap the economic benefits of improved relations with the United States.

Following Facebook’s Mark Zuckerberg and the bosses of Walmart, CocaCola and Citibank on the podium of the CEO Summit of the Americas in Panama, the Cuban foreign trade and investment minister Rodrigo Malmierca D