Deutsche Bank: ‘Debt cancellation being the end game’

Posted: 23rd Nov 2014
Author: Willem Middelkoop

Deutsche Bank’s Jim Reid is quite an influential commentator. His research is send to many insiders of the financial industry. Zerohedge last week reported on Reid’s comments about his clients talking aboutdebt cancellation being the end game’. Because this subject is not reported in the MSM (mainstream media) we quote from his report;

I had a few meetings yesterday and one of the biggest surprises I had was that for the first time in a long time people were talking about helicopter money and debt cancellation being the end game. This was a major theme of our 2013 long-term study but one that we’ve struggled to get much traction with over the last year.Perhaps there’s an increasing weariness that more QE globally whilst inevitable, is a blunt growth tool and that stopping it will be extremely difficult (let alone reversing it) without a positive growth shock. Maybe Japan’s move this week in delaying the further sales tax increase and the economy’s adverse reaction to the first increase reminds the market how difficult it might be to actually pay the bills with real money. As we said earlier this week it could be that the last few days marks the first steps towards monetization. Anyway, this is not something for today or tomorrow but the fact that different clients brought it up independently of each other makes me think that’s its starting to get into people’s thoughts.’

These comments clearly show investors are becoming fully aware of the possibilities of a sovereign debt restructuring down the road, after years of money printing. We aren’t surprised at all since sovereign ‘debt cancellations’ and ‘the financial end game’ are two important components of our Big Reset thesis.

Here some quotes from the book from to illustrate;

Page 58:  ‘A global debt restructuring will probably be needed, and could be part of the Big Reset.’

Page 89: ‘At some point in time, even governments have to get rid of their debts. This will happen either through inflation, debt defaults or debt cancellations. Such monetary resets have been the solution many times in the past. It could well happen again. ‘

Page 114: ‘According to an assessment by the Boston Consulting Group, the excess of debt in the EU amounts to $ 6,000 billion and $ 11,000 billion in the US. These debts need to be restructured before a sustainable recovery can be achieved.’

Page 117: ‘In both the Jewish and Christian traditions, one can find a so-called ‘year of Jubilee’, a year of universal pardon. In Hebrew Mosaic law, each fiftieth year was to be celebrated as a jubilee year when land would be returned to its former owners, slaves would be set free and debts would be remitted… Most countries simply pretend they will repay their debts. But if history is any guide, when the mountain of debt becomes too large, a default will occur. The debt then has to be restructured or refinanced. This has happened again and again. The US has defaulted in different ways three times in the last 220 years – in 1790, 1933 and 1971 – and borrowed more after each default. Switzerland is the only country that has always repaid its creditors.’

Page 119: ‘In 2013, US Congressman Alan Grayson proposed that the Fed could cancel the Treasury debt it owns. The Fed owned roughly $ 2 trillion out of a total of $ 17 trillion of Treasury debts.’

Page 120: ‘Former BBC Chairman and Goldman Sachs partner Gavyn Davies wrote an important article about this subject in the Financial Times, 14 October 2013, entitled ‘Will central banks cancel government debt?’

page120image608In This Time is Different: Eight Centuries of Financial Folly (2009), the most important study on the history of financial crises, Carmen M. Reinhart and Kenneth S. Rogoff show debt restucturings were part of almost all post financial crisis periods in the past and propably will be in coming years.



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