The Achilles Heel: The End of the Monetary System?
Posted: Wednesday, January 19, 2011
by Maurintius
Information Awareness Office
Is it possible that the end of the monetary system is near? If it is, how exactly will the system come to its end?
I am going to explain why I think the end of the financial system is near.
This is an opinion of mine! It doesn't necessarily have to be this way.
If you ask me, the foundation for the next crisis was long ago established. And it's not going to wait long before it shows us it's true nature. There's a good chance that this time the financial crisis will ensure that the entire monetary system will collapse.
To show you what I mean, I'm going to take Greece as an example.
Greece has a debt of more than 130%. This means their debt exceeds the value of all the goods and services produced in the country. It exceeds the GDP (gross domestic product). This is the main reason why Greece has so many problems. People, al over the world, lost their confidence. Especially the banks and investors. Everybody lost their trust in Greece because they are doubting if the country is ever going to be able to pay of their debt.
To whom do they have to pay al this debt?
First of all they have to pay their debts to the European central bank and not only to the ECB, they also need to pay off some of their debt to other financial institutions spread around the globe. Not only the central banks provide money to countries, also the regular banks as we know them, from around the corner give credit to countries.
Let's assume Greece is only going to pay of 70% of their debt. This means that the banks, who act as creditors, will not receive all their money. They will have to cut some losses, which they have to take up in their books. The balance sheets of these institutions get worse, their solvency declines, investors get nervous, people begin to lose their trust and before you know it we are back on the same road as we are know.
If people lose their trust in a bank and investors start selling their stocks the problem of the bank gets even bigger. The people will run to the bank to get their money back, which the bank doesn't have cause they are only obligated to have a 5% reserve of all the money they have received.(yes this is legal) This will lead to total chaos!
You have seen the past few years what effect it has if the banks lose money, especially when it's a lot of money. You have seen what effect it has on the economy and our lives. The crisis we are in now originated out of all the money that the banks lost. As a result, the whole system and economy were on the edge of a total melt down. If the governments all over the world didn't inject so much money in the banks, they would have been bankrupt and the money system would have crashed like we had never seen.
Why do banks loan money to countries?
They do this because it's easy money. It's money which is guaranteed by the citizens of that country. The more debt your country has, the more debt you have. These are pretty much risk free loans with a good return and fast repayment. Or that's what they thought, cause as you can see, most countries can't even pay off their debts and are very close to bankruptcy.
If a country declares itself bankrupt, they will drag every financial institution and every bank along with them and we as a people will end up being the victim. There's not a single government on earth who can afford to spend again so much money to save all the others from bankruptcy. They just don't have the resources and they'll have no choice to let the whole system go down.
This is the reason why I believe the end of the monetary system as we know it , will end very soon. It's almost unavoidable. There's no way around, sooner or later there's going to be a country who trows in the towel, declaring their self bankrupt and setting the domino-effect in motion. We could look at this as the Achilles heel of the monetary system.
They are trying to make us believe the worst part of the crisis is over but I'm convinced the worst part has yet to begin. Governments will have no other option then to cut their expenses and save money. Peoples social Security will decline, unemployment will rise, people won't be making so much money cause there are not enough jobs and they will have to pay more for the stuff they need. Especially for the basic necessities like water, food, milk, bread, grains, et cetera. Probably the taxes will go up, the government won't invest as much as they use to, et cetera. Bottom line is, prices will go up and the money supply will shrink.
This is the main reason why people in Greece are protesting. Their government is looking for all kinds of things to decrease their budget so they can pay off some of their debt but it's at the cost of the the people and they won't take it. They won't take it because it's not their fault there in this mess, it's the government's fault and the banks fault. It's them who took to much risk investing their money and now they want to decrease the life standard of the citizens. So they are right for not keeping up with it and I can understand they are all protesting. Probably you and I would do the same.
I took Greece as an example, but there are other countries going down the same road, having the same problem.
For instants Iceland, Ireland, Belgium and Italy. Belgium and Italy are the second in line with the highest debt in Europa. You can see it for yourself by clicking on the link which will bring you to a web page of the economist. Here's the link: http://www.economist.com/node/21011544.
The Economist keeps a record of all the debt of the world, of every country on the planet, which you're able to compare, but believe me it ain't a pretty sight.
If one country goes down, the rest will follow. First Europe will collapse and some time later the rest of the world. Money as we know it today, will stop existing.
Does it have to be like this? No, all I'm saying there's a chance it will and the way it's going lately, well the economy just can't absorbe anymore debt!
Is it undoubtedly going to happen? No, they will do anything in their power to make sure it doesn't.
Is there a solution? Yes, there is.
Only thing the government has to do is to take back the issuing power of money, so they're able to print their one money, debt free and stimulate the economy whenever it's necessary.
Debt free money is the solution!
Money without interest can save us from totall collapse and is therefore the solution to our problem and if it's used wisely, it would even increase our life standard.
That's it for me.
I wish you al the best and let us all hope it doesn't come this far.
Kind regards,
Maurintius
Member of the Information Awareness Office
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