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About the banking system

About the banking system

The Federal Reserve Board of Governors in Washington DC.

When chaos comes, destruction will affect everyone. No one will escape by force or devotion.

The financial, economic and moral devastation that is about to descend upon the world will, for more than 99.5% of people, appear suddenly, like a flash in a clear sky.

Interestingly, of the nearly 200 countries in the world, each country has its own rules for dealing with covid. If all of these rules were based on science, one would think that the rules would be the same for all 200 countries.

The effect of this constant changing of rules and stoppages would clearly be devastating to an already very fragile world economy and financial system.

So if academics and governments don't know how to deal with Covid, we can at least assume that central banks and governments have the economy and financial system under control.

Since the creation of the Federal Reserve System in 1913, central and commercial bankers have successfully managed the financial system to their advantage. But what really gave them carte blanche to print unlimited amounts of money was in August 1971, when Nixon closed the gold window.

We must remember that the Fed is a private bank with complete control of the U.S. financial system. And while the U.S. dollar remains the world's reserve currency, the Fed also controls major parts of the global financial system.

The current financial system is now entering a phase of inflation, which will likely lead to hyperinflation, as I have said many times before.

But before this financial system disappears, completely worthless debt must be destroyed by a deflationary implosion of not only debt, but also the assets of the bubble financed by printed money created out of thin air.

Thus a deflationary depression would probably be the end of another failed experiment with the paper money system that was doomed the day it was created on Jekyll Island 111 years ago.

If history teaches us anything, it's that no one learns lessons from history, and everyone thinks things are different today because we're here.

The collapse of the financial system, and therefore the world economy, will clearly have serious consequences for life on earth.

We must remember that NEVER IN HISTORY has there been a global debt crisis of this magnitude.

Never before have debt bubbles at this level in Europe, North and South America, Asia, Africa and Oceania synchronized with the levels we are seeing now. In 1971, it took several thousand years to reach $1.5 trillion in global debt. And 29 years later, the debt had risen 66 times to $100 trillion.

So when the shackles were thrown off, closing the gold window in 1971, bankers and governments were allowed to create unlimited amounts of money for everyone. And by golly, they succeeded! Global debt has grown 200 times since Nixon stripped the dollar of its gold backing.

The final stage of this monetary era began in 2006 with the Great Financial Crisis. Tens of trillions of dollars printed, borrowed and guaranteed managed to temporarily patch up Humpty Dumpty.

Back in September 2019, the financial system was under severe pressure, and central banks panicked as they tried to rescue the bankrupt banking system with massive liquidity. The banks were comfortable because they had an excuse for this money printing, since Covid launched a few weeks later.

Usually governments HAVE to start a war in order to have an excuse to print serious money. But a pandemic is also a good excuse. No one knows for sure how COVID originated, but recent evidence clearly points to a lab somewhere...

The world is now in completely uncharted and very unreliable waters. It doesn't take more than a small storm to do irreparable damage to a ship in such peril.

What will happen, no one can predict, because we have nothing to compare this crisis with. But it is very likely that the creature (from Jekyll Island) created by the bankers will suffer a terrible fate, a fate that only future historians can tell the world about.

According to BIS in Basel (Bank for International Settlements), global derivatives issued in the mid-2000s amounted to $1.4 quadrillion. In the late 2000s, the BIS lowered that figure to $600 trillion by netting positions.

The problem with netting is that when counterparties fail, gross risk remains gross.

Derivatives have been the most incredible source of income for banks and other financial institutions.

Today there are so many opaque ways of creating and hiding derivatives from official reporting that no one has any idea of the real amount owed. But it could well have been in the quadrillions of dollars.

Remember that virtually every financial instrument created today consists of derivatives, whether it be stock or bond ETF funds, interest rate swaps, currency swaps, mortgages, etc., the list is endless.

Derivatives work very well in a managed orderly system when there is constant demand. But when the music stops and liquidity dries up, only then will we know the real amounts owed

So, if we look into the next 5-10 years and paint a picture of what might happen to the financial system, the world faces a terrifying risk.

World debt is bound to grow from 300 trillion to at least 500 trillion. That figure is a gross understatement.

We add to that global unsecured liabilities (pensions, health care, etc.), which is easily $500 trillion.

Finally, we add $2 quadrillion worth of derivatives, also too conservative.

When counterparties fail, central banks will have to print all that money to prevent bank failures.

So if my assumptions are correct, global debt will grow from $300 trillion to $3 quadrillion in the next 5-10 years.

But I'm probably wrong in many ways, as if it won't take the whole 10 years. We know from history that hyperinflation happens very quickly.

Since all monetary systems in history have come to an end, we have to assume that the biggest global bubble in history will also disappear.

And as this painful system affects every corner of our lives and has led to a decadent world in which moral and ethical values have all but disappeared, the world needs a forest fire purge so that new green shoots can resume.

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What we do know is that the risks are probably greater than at any time in history. So, prudence tells us to get out of the asset bubble, such as stocks, bonds and speculative property. Once the fall starts, these assets will probably lose 90% or more in real terms, which means compared to gold.

Most stock investors will probably buy all of the declines as the market falls, not realizing that they will ride the decline all the way to the bottom. And this time the market won't recover for years, maybe decades.

Also, it is important to get out of debt, except for conventional residential mortgages.

Own physical #Gold, #Silver and especially #XRP. This will be your insurance against a rotten financial system.

Finally, we are going to have hard times in the world. That's why it's important to help your family and friends.

And remember that many of the best things in life are free - friendship, music, books, nature and many hobbies ...

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Timeline

November 30, 2018
Nathaniel C. J. Rothschild (@NCJRothschild) | Twitter

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