” Hi Martin, thanks for your steady flow of valuable market comments and economic comments. I see that one option during a monetary reform likely facing us in the next 8 years is the launch of a new currency to replace the current or “old” one. If this were to occur, wouldn’t all debts in the “old” or existing currency be converted into the new much weaker currency hence providing a windfall for debtors ? Or am i missing something? What has happened to debtors in all cases where a new currency has been launched to replace a current currency – is it a windfall for debtors or do they get hit hard ? I think North Korea was a country who did this recently if i recall correctly.
In most cases the lender gets nothing. That is what destroyed capital formation during the great depression. People hoarded gold and money was eradicated by the permanent defaults. It is how government always gets out of paying off its debt. This is why there will NEVER be a return to the gold standard. You then have to pay the debt in gold? All the debts of former governments go to ZERO.
The reason there is plenty of Continental Congress currency around is because the USA defaulted. The Constitution promised to pay all those debts and notes. They never did. A team of lawyers & I got together to see if we could buy up that currency and then demand the government pay it off. The conclusion was a Federal Judge would deny the claim unless you could show your family personally had that money and was harmed. This is the way debt is always resolved – bug off! This is the essence of the shift between private and public. It is why Adam Smith said nobody ever pays. So those who take the National Debt, divide the purported gold reserves, and then announce to the world everyone is an idiot because gold has to be $60,000 – get real! That assumes the debt game keeps going and there is some guilty conscience that says they will pay it off in gold. Sorry – I go to Capitol Hill regularly and meet behind closed doors on these topics – it ain’t gonna happen! They will default. The new currency will be electronic for they see this as your fault and if you paid every time of tax there would be not debt crisis. What makes you think these people actually believe they are responsible?
Europe has cancelled its currency plenty of times and war always wipes out previous debt unless you are the victor – and then you use inflation to devalue it. The idiot is not the guy who questions $60,000 gold, but the guy who thinks they will honor that debt so gold has to be $60,000. It will never happen! Buy gold physically for it will help make the transition from the current currency to the next. It will probably hit $5,000 by 2017 BEFORE the currency changes so it is impossible to say even what that $5,000 means in purchasing power today. So will real estate, and of course shares, collectibles from coins & stamps to fine art & antiques. This is why people HOARD in a crisis. They instinctively see something is wrong. In Greece, leading into the elections, more than 1 billion euros were being withdrawn from ATMs each day. That was the hedge to hoard cash just in case!