Your Assets Are On The Line

Carefully consider this closing statement from an article on Zerohedge:

Over almost a century, we have witnessed the slow and progressive destruction of the best global mechanism available to cooperate in the creation and allocation of resources. This process began with the loss of the ability to address flow imbalances (i.e. savings, trade). After the World Wars, it became clear that we had also lost the ability to address stock imbalances, and by 1971 we ensured that any price flexibility left to reset the system in the face of an adjustment would be wiped out too. This occurred in two steps: First at a global level, with the irredeemability of gold: The world could no longer devalue. Second, at a local and inter-temporal level, with zero interest rates: Countries can no longer produce consumption adjustments. From this moment, adjustments can only make way through a growing series of global systemic risk events with increasingly relevant consequences. Swaps, as a tool, will no longer be able to face the upcoming challenges. When this fact finally sets in, governments will be forced to resort directly to basic asset confiscation

The articles title is “A Short History Of Currency Swaps (And Why Asset Confiscation Is Inevitable)”. Although I encourage you to read the article and study the associated graphs, the conclusion is inevitable. Once the debts come due, payment will be made in direct asset confiscation. We have already seen this “legal confiscation” by MF Global and Cyprus. More indirect methods are inflation by the Federal Reserve and negative interest rates on bank deposits. The current administration is in the planning process of “confiscating” retirement accounts by offering an upfront restitution of stock losses in the 2008 crash.

Consider this term: bail-in. Two months ago, no one had ever heard of it: today it is a reality that is spreading. But the point is clear: all debts always come due ins some form or fashion. Confiscation is on the table. The only other alternative that history has shown us to settle accounts is also on the table: war. And this will be a world war with weapons of mass destruction. Either way (or both), your assets are on the line.

David DeGerolamo

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