This is the sixth and final installment — of a hopefully fictitious scenario — of what the global financial system could find itself as a result of the oncoming economic depression.
Wednesday’s session opened as if Tuesday was a distant memory. The Chinese had but one change to the debt jubilee proposal that Treasury chief Jack Lew submitted to them.
Where as the western countries were looking for a 50% hair cut on sovereign debt and a reset on all currencies being set a par — to give western banks a trading cushion at the beginning to bring in quick profits on shorting weaker currencies that would fall after the reset.
The Chinese finance minister opened the discussion. “Mr. Lew, the world paid your banks a king’s ransom in 2008-2009. We were told by one of your predecessors, Hank Paulson, at the time that you could not go it alone in keeping the banking system alive. Trillions were spent keeping your bond market yields artificially low so you could jump-start the system,” he continued.
“Now you come here and wish to slap us in the face for doing that, by telling us that what we did to help you is now worth half of what it was worth yesterday if we agree to this. And then you want to add pain by telling us our currency must be reset? Mr. Lew what do you take us for? Idiots?”
“Mr Lou,” this was the first time Lew spoke directly to the Chinese Finance Minister, “We all share in this, as your economy has seen prosperity as well from all the spending. We cannot point fingers, we all want to get the world back to functional working banking system as quickly as possible. This plan we have laid out does that but provides long-term growth ability by slashing the world’s sovereign debt.”
“Mr. Lew, I read the Book of Leviticus last night, since that is what you cited yesterday as your guiding light for intervention,” Lou said.
“I read and read the pages of Leviticus and then I read the next chapter — the Book of Numbers — figuring I would read there that the banks were helped during the Jubilee. Mr. Lew, nowhere in those books did the banks or the sovereignties were relieved of their debt. No the people’s debt was pardoned and slaves were freed,” Lou continued.
“Mr. Lew, Why do you cite this biblical text as a precedent for your actions?”
“Sir, it’s the concept of debt forgiveness, it’s not a blueprint for the plan, since it is well over 5,000 years ago and banks did not exist as they do today.”
“No, Mr. Lew, We feel it is a blueprint — while I do not treat the text as sacred as you do — I believe we have the power to grant this debt forgiveness to the people of world.”
“These banks are dead, they are zombie companies that can never be brought back from the dead. We have seen this since 2009, with all our actions the banks were never going to stand on their own without central banks largess at the expense of the world’s population.”
“Our thoughts are the only way we will sign off on a plan, is that we grant 100% debt cancellation for the citizens of the world and close these banks and start anew.” “That’s what we propose,” Lou finished.
The meeting was over all the participants parted ways, with the idea of reconvening once all signees have the approval to pass this revolutionary concept.
Needless to say the US and its counter-parties never spoke of the plan, and began working on refunding the banks so to reopen the banking system in order to kick the can down the road.
A plan that has not worked for years.
Thank you for reading this exercise. Feel free to drop me a comment.