Thursday, March 18, 2021

FT - Time for a Great Reset of the Financial System

The Financial Times publishes this article calling for a great reset of the present monetary system. Just about every issue raised in this article has been covered here for years, so there is nothing new or surprising in the article for readers here. Below is a brief summary of bullet points from the article and then an added comment.


  • On average monetary systems last 35-40 years before a new system is required
  • The Bretton Woods system based on the gold standard broke down in the 1970's
  • The replacement system based on an unanchored US dollar has "reached the end of its usefulness"
  • The current system is plagued by a 30-year debt super cycle and "unending liquidity created by commercial and central banks"
  • The massive increase in mortgage debt has driven up housing prices and contributed to income inequality
  • Now is a good time to devise a new monetary system to replace the current one
  • Included should be "widespread debt cancellation" and perhaps even a "debt jubilee"
  • Policymakers should negotiate some form of "anchor" to the currency or currencies
  • The easy money policies of the present system have created asset bubbles that are not sustainable
  • Growth should become less reliant on debt creation and more on productivity and innovation
  • A new monetary system with an anchor and not based on ever expanding debt can restore fairness
My added comment: I am pretty sure that on this page and this page of this blog we have tried to cover just about every issue in the bullet point list above for many years. I would wonder if those running the present system agree with the premise of this article in the FT that their policies are the big reasons why the present system "has reached the end of it's usefulness" and now must be replaced with a new system. 

If they do agree, it's fair to ask why they have allowed this to go on and on for years all the while assuring the public these kinds of problems are not really problems we need to be concerned about and everything is under control. If they do not agree with this premise, why should the author of this article expect any of his proposals to go anywhere as everything is fine and those in charge have done a great job, right?

Here is another question for all of us to ponder. If those running the present system have implemented such poor policies that we must admit defeat and replace the current "unfair" and "unsustainable" system as described in this article, why should we just blindly trust those whose policies created the mess to fix it? Maybe someone else should get a chance to offer up some new ideas. Just a thought.

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