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Synopsis of The Big Reset: Now five years after the near fatal collapse of world's financial system we have to conclude central bankers and politicians have merely been buying time by trying to solve a credit crisis by creating even more debt. As a result worldwide central bank's balance sheets expanded by $10 trillion. With this newly created money central banks have been buying up national bonds so long term interest rates and bond yields have collapsed. But 'parking' debt at national banks is no structural solution. The idea we can grow our way back out of this mountain of debt is a little naïve. In a recent working paper by the IMF titled 'Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten' the economist Reinhart and Rogoff point to this 'denial problem'. According to them future economic growth will 'not be sufficient to cope with the sheer magnitude of public and private debt overhangs. Rogoff and Reinhart conclude the size of the debt problems suggests that debt restructuring will be needed 'far beyond anything discussed in public to this point.' The endgame to the global financial crisis is likely to require restructuring of debt on a broad scale.
How would nations and corporations invest our newfound wealth differently if we all started from a clean slate? Problems like global warming and extreme poverty would instantly become financial drops in the bucket—easily tackled with fair contracts and forward-looking investments. The structural debts of entrenched subsidies, invested capital, tax havens, and trade agreements that keep them from being addressed would simply no longer exist.
Sounds too good to be true, doesn’t it? Well just such a fantasy used to be standard practice in the Hebrew Tradition throughout the early days of their civilization. They held a great Jubilee every seven years to erase all debt and end economic slavery. Accounts kept on stone tablets were broken. Those stored on papyrus were burned to ash. Slaves were returned to their families. Everyone was given a fresh start.
(This tradition is being revived today through the Occupy-inspired project, Rolling Jubilee, that has already abolished more than $9,000,000 in US debt for everyday citizens.)