Friday, August 12, 2016

Paul Brodsky:
Back To Square One,
Why The Financial System Needs To Reset
"There’s been a divergence over the last 20 years between the financial economy and the producing economy. This is something I think is being manifest currently not only in our economies and markets but also it’s starting politically, and that’s what we’re seeing in the system. That’s something that’s clear to me but may not be clear to other political economists .. Over the last 40 years, debt has not been extinguished. And now, we’re looking at record debt to GDP ratios during non-war times. But more importantly, debt to base money ratios which is the ultimate measure of leverage, that is a 45-year phenomenon. That’s not something that we’ve seen previously when we had fixed exchange rates because as a currency you couldn’t get away with that .. Zero interest rates and negative interest rates and Europe and Asia are a huge signal that we are almost at the point where central banks have lost their tools to perpetuate a sense of confidence, that things are cyclical .. Central banks lost the ability to control the credit cycle .. I think the more politically expedient way is to let the market finally try to correct itself and then come in and save the day. I think the real structural issue I see in jeopardy today is this potential for sudden debt deflation .. My sense is that it’s going to be a market event .. If you were to apply the Bretton Woods model for valuing money today, the number would be up to $15,000 an ounce."
LINK HERE to the reference

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