I have been yesterday to a conference here in Switzerland with the headline Our Money, Our Banks, Our Country hosted by the GDI. Find the details here.
The list of speakers is stuffed with who is who around the monetary system from US, UK, Germany and Switzerland. Here an excerpt
- Uli Kortsch, Author, Economist and Expert on Monetary Policy
- Martin Wolf, Chief Economic Commentator, Financial Times
- William White, former Chief Economist, Bank for International Settlements, Basel, Switzerland,
- Larry Kotlikoff, Professor of Economics, Boston University, former Snr. Economist, President’s Council of Economic Advisers, USA
- Joseph Huber, Chair of Economic and Environmental Sociology, Martin Luther University, Germany
- William Dunkelberg, Chief Economist, National Federation of Independent Business, former Chair, Economics Dept., Temple University, Philadelphia, USA.
That attracted me. I wanted to listen what the expert have to says how the future of the monetary system can look like and how humanity should deal with the debt level which is increasing rapidly.
If something cannot go on forever, it will stop.
― Herbert Stein, What I Think: Essays on Economics, Politics, and Life
Can our current debt based monetary system go on forever?
The quote as obvious as it seems - it makes a very clear point: "it" will stop.
My opinion is for about 20 years - "no, the monetary system can't go on forever" but I excepted this is something worth debating about and experts will have different opinions on it.
But here I got totally surprised: on that conference everybody - I really mean everybody - was in total agreement that this system is going to "stop" sooner or later. Sooner than later I probably have to add. It was quite strange to hear that - so many experts and no one was even slightly in favor of the current system. And it seems for years.
That stroke me like a lightning. The whole governments and financial experts are all aware that the monetary system is doomed.
But aren't they those who should be able to take influence and change it?
That leads to the question: To what end should the system be changed? And here everybody had a different idea. There was intense debates about how a perfect system should look like an absolutely no chance to find a common ground. It shows the topic is so complex that you cannot determine a perfect solution and therefore you always have a lot of opponents pointing to the weaknesses of that system and stopping a possible change.
It is not clear how a future monetary system should look like.
If we found a new systems we want to strive for - how do we get there?
That was even more amazing - with the working assumption we just pick one of the presented solutions for a monetary system - how could a transition towards that system look like?
That question none of the experts was able to really answers. At least not in a way that would be feasible. William White spoke than out what probably all other didn't want to say.
There are basically only two ways for the transition possible: Hyperinflation or debt cuts
My conclusion
So for me that means: The leaders of the world are aware that the current system is doomed and needs to either be changed or it will just stop by itself (crash). There is no clear common picture on where we need to go (at least not yet) and probably there won't be a feasible way to get there. Hyperinflation (your wealth buy power gets significantly reduced) which probably leads to the introduction of new money like "world currency" or so. Debt restructuring leads to social problems, would need to globally coordinated and would make a few win a lot.
And if you put that into context that the divergence between rich and poor gets bigger and bigger (see also picture below showing that a lot of people earning less than 2005) this gets a very toxic cocktail.
So the outlook is grim and in my opinion we won't find a solution in time. This made me even in this "bloodbath" more bullish on cryptocurrencies on the long term and makes me think about crisis scenarios...