QBAMCO’s Paul Brodsky On ‘Gold Monetization And The Big Reset’

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Brodsky On “Gold Monetization And The Big Reset” (ZeroHedge, June 8, 2012):

Macroeconomic Problems

1) The global banking system is functionally insolvent and will fail without exogenous policy action*

  • There is one, interconnected global banking system linked by global financial markets and coordination among currency boards and central banks
  • In the current banking system model, debts due tomorrow are serviced by newly-incurred debts today (which create deposits)
  • Stagnant or declining nominal global asset prices since 2008 have stressed bank balance sheets
    • Loan book marks remain at substantial premiums to:
      • The present value of their cash flows in real terms
      • Liquidation prices at current or higher interest rates
  • Central bank easing and asset purchases to date have only tempered the rate of asset price declines
  • Current adversity among European banks directly impacts global commerce and finance

*Bank balance sheets can deleverage either via nominal write-downs of assets, (leading to outright failure/insolvency as tangible equity is extinguished), or through nominal increases in system reserves via base money inflation (provided by central banks as they expand their own balance sheets)

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