Resolving The Global Bailout Problem

Today under uncertain financial times we see an ever increasing global crisis growing out of funding continual debt. Fiat currencies are scrambling on the global market to maintain their existence and insure their liquidity.

Then there is the debt ridden nations globally floating their debt through the issuance of temporary payments with bailouts. Resulting in deeper currency declines and further instability to financial sectors and banking institutions.

Where does this end and who bails out the bailouts? That is the decades old question that continues to get unanswered through nations globally continuing to provide temporary payment to banks. To answer this question we need to look into the entities that provide the bailouts.

Various financial schemes are implemented to stabilize banks through lending money from Federal Reserves or national Central Banks like the European Central Bank (ECB). To allow a credit to post to the member bank and make payment on the debt. So the money that is provided or bailout had to come from somewhere. Where did the money come from to create the bailout for banks?

In the U.S. repaying federal debt with other federal money is a bailout practice. But only shifts debt to other budgets. So it is a money and debt shuffling practice that only shifts debt or increases it. In Europe the ECB acquires the additional debt out of the creation of loans to its central banks.

With the shifting and increasing of debt there is a solution to repayment and decrease the debt standard plaguing nations. It is called the Gold Standard. Paying a debtor in gold means the debt is repaid, done, end of the problem. No additional bailouts or loans need to be created. At the same time, global financial services can regain some stability on the world market with investments and banks can receive relief from the threat of insolvency.

Former Fed Chairman Alan Greenspan wrote an article about this called Gold and Economic Freedom. But there is a plaguing problem that exists with the Gold Standard solution. Namely, the current gold price is not high enough to extinguish the global debt problem. The precious metal would have to significantly increase to levels 2 to 3 times its current pricing in order to handle the level of debt globally. Current U.S $1,500 or 1,200 LBMA levels will not accomplish that. Will gold rise to such levels in order to make that happen?

Gold from a historical perspective has increased its price during all major conflicts globally, and even during extreme economic times (Great Depression and Great Recession). With mining production up, precious metal market pricing on the rise, nations increasing gold reserves, all at the same time of increasing hyperinflation, bank insolvencies, and fiat currency declines on the world market.

The end result is as we know it. Waiting for a economic collapse globally to resolve uninsured debt would be catastrophic and ill advised. The solution needs to be applied now and not after a collapse of a currency. Globally there is an honest solution to inflationary debt, however, there is the continual damming problem to its solution, and governments globally have politically stymied the solution.

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