...The warnings have special resonance since Mr White was one of the very few voices in the central banking fraternity who stated loudly and clearly between 2005 and 2008 that Western finance was riding for a fall, and that the global economy was susceptible to a violent crisis...
The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability...
"Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief," he said.
"It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something,"...
"The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians."
And ye shall hallow the fiftieth year,
and proclaim liberty throughout all the land unto all the inhabitants thereof:
it shall be a jubile unto you;
and ye shall return every man unto his possession,
and ye shall return every man unto his family.
...In the year of this jubile
ye shall return every man unto his possession.
The next task awaiting the global authorities is how to manage debt write-offs - and therefore a massive reordering of winners and losers in society - without setting off a political storm.
According to Leviticus, slaves and prisoners would be freed
and debts would be forgiven
...Europe's creditors are likely to face some of the biggest haircuts. European banks have already admitted to $1 trillion of non-performing loans: they are heavily exposed to emerging markets and are almost certainly rolling over further bad debts that have never been disclosed.
The European banking system may have to be recapitalized on a scale yet unimagined, and new "bail-in" rules mean that any deposit holder above the guarantee of €100,000 will have to help pay for it.
..."Emerging markets were part of the solution after the Lehman crisis. Now they are part of the problem too,"...
...A Chinese devaluation clearly has the potential to metastasize.
"Every major country is engaged in currency wars even though they insist that QE has nothing to do with competitive depreciation...
Mr White said QE and easy money policies by the US Federal Reserve and its peers have had the effect of bringing spending forward from the future...
brought "spending forward from the future"
and we will pay the price
while those at the top will walk with riches
at everyone else's expense
It becomes a toxic addiction over time and ultimately loses traction. In the end, the future catches up with you. "By definition, this means you cannot spend the money tomorrow,"...
..."Policy makers were seduced into inaction by a set of comforting beliefs, all of which we now see were false. They believed that if inflation was under control, all was well,"...
...the Fed is now in a horrible quandary as it tries to extract itself from QE and right the ship again. "It is a debt trap. Things are so bad that there is no right answer. If they raise rates it'll be nasty. If they don't raise rates, it just makes matters worse,"...
...it would be a good start for governments to stop depending on central banks to do their dirty work.
One way or another,
we are going to experience some kind of debt jubilee,
whether voluntary or otherwise
..."It was always dangerous to rely on central banks to sort out a solvency problem when all they can do is tackle liquidity problems. It is a recipe for disorder, and now we are hitting the limit,"...
"There’s the old biblical idea of a jubilee - a national cancellation of private debts.
Renowned economist Stephen Roach, currently non-executive chairman of Morgan Stanley Asia, has gone a step further, calling for Wall Street to get behind what others have called a “Debt Jubilee” to forgive excess mortgage and credit card debt for some borrowers. The notion of a Debt Jubilee dates back to biblical Israel where debts were forgiven every 50 years or so. In an August appearance on CNBC, Roach said debt forgiveness would help consumers get through “the pain of deleveraging sooner rather than later.”
we’ve built an unsustainable economy built on consumer debt. That debt has propelled the growth we’ve seen in recent years, acting as a sort of perpetual Keynesian injection into the economy. Now we’re paying the price.
A debt forgiveness program is a great idea, but it won’t go far enough if we don’t find ways to breathe life back into real wages, fix our lousy healthcare system, and propel our economy into the 21st century."