It seems that we are all in for a very rough ride. Based on the evidence to-date, the US seems determined to reset its economy. But since misery loves company, many nations of the world have been drawn into the same sorry boat. There are some benefits in resetting the global economy, and three of them follow.
The First Benefit – Relief from Despots
Many despots around the world have stolen and hidden money that was intended for their countries. Many of them are well known, but the governments of other nations appear unwilling to confront them. This money should have been circulating in the nation to invest in their companies, provide employment to their citizens, and to enable the general population to pay for their basic necessities and other property. Since this money is out of circulation, then the masses become a burden to the state.
If the state is governed by a despot, then history has shown that only the military and the politically favored will be cared for. Resetting the global economy can eliminate this practice if a single global banking authority, issuing a single global currency in digital form, is used.
The Second Benefit – Relief from those who Hoard Money
When people hoard vast sums of money in safety deposit boxes and other non-investment instruments, then the money is removed from the economic system and it cannot circulate.
I believe that money is an economic tool that should be used, not laid aside to be idle for long periods of time. Property can be hoarded, but our current economic system depends on everyone purchasing and selling property using the same tool called money. Therefore, money is not property. Rather, money is a tool of the economic system and it must circulate if the system is to work for everyone.
People should purchase physical assets with the (not their) money, so that this money can return to the system for others to use. People should be free to accumulate as much property as they wish, and to hold a reasonable amount of money to pay for their transactions. But removing large sums from the circulatory system can hurt everyone. Therefore, resetting the system can solve the problem of persons who hoard the tools of the economic system, whether by greed, spite, or ignorance.
The Third Benefit – Relief from Counterfeiters
Resetting the economy can provide an opportunity to solve the massive monetary counterfeiting problem, which can increase inflation if the counterfeited money is circulated.
Challenges with Resetting the Economy
The problems with resetting the economic system so that everyone starts with the same amount, is that the currency must become worthless. One way of achieving this is by printing money that is not backed by an equivalent value of assets. The most recent example of this is Zimbabwe, whose currency has essentially failed. The US President and Congress appear set to print trillions of dollars, increase social services, and increase taxes, while encouraging other nations to do the same. So far, Europe is resisting. We should all pay attention to the G20 meeting in London next month.
The greater consequences of resetting the economy have to do with the likely national social upheaval, and the nation-to-nation conflicts.
National Planning for the Resetting of the Economy
With proper planning, a country can make the reset-transition less painful. As the value of the currency declines, the Government can selectively nationalize major banks, private sector businesses, and personal property. Therefore, by embarking on a massive house building and government expansion program before the economic crisis, the Government can both employ and house its desperate citizens following the crisis.
The principal challenge with resetting the economy is dealing with other nations who are holding your now worthless currency. Iceland is a recent example. When the Government of Iceland stated that they could not guarantee the UK investors’ 3 billion pounds, the UK Government seized 4 billion pounds of Island’s assets until an agreement could be reached. Previous amicable relations between nations mean little if one party cannot fulfill their financial obligations.
China currently holds US$3 trillion in US assets, most of which will become worthless if the economy is reset. Should the US not provide satisfactory guarantees to China and other nations in a similar predicament, then we should prepare for some hostile relations.
Come now, you rich, weep and howl for your miseries that are coming upon you! (James 5:1)