April 18, 2019 — A barely noticed report published by the staff of the International Monetary Fund in February 2019 suggests that financial authorities are considering a devaluation of money in order to save the financial system from the impending collapse. The report, titled Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money proposes to depreciate physical money (and not only bank deposits) in order to allow an ample margin for negative rates.
The same people who denied the existence of a systemic crisis in 2007 are now telling anyone who will listen that the financial markets are doing just fine, no danger of a meltdown. Sure, there were major losses on the stock markets in 2018, they say, but each had its own specific cause, unrelated to the others. For example, the Dow Jones lost about 10%, but that was due to Donald Trump’s so-called “trade war” with China; London was down by 12.4%, but only as a result of Brexit uncertainties, while Frankfurt’s 18.3% drop had to do with problems in the auto industry and at Deutsche Bank, and Milan lost 16.5% because of the “populist” government in Rome. For the biggest drop of all — Athens with 24.7% — there was no obvious cause, so it was attributed it to a “contagion” efffect.
If too hard-pressed, the Italian government could play the Glass-Steagall/bank separation card, as financial meltdown threatens.
Thirty years ago, on Oct. 19 1987, the biggest stock market crash in one day occurred on Wall Street. On that “Black Monday”, the Dow Jones dropped by a spectacular 22.6% in panic sales. Many articles were published on the occasion of the 30th anniversary, but virtually all failed to correctly answer the question generally raised: “Can it happen again?”
The past weeks have seen an outpouring of warnings that the transatlantic financial system is about to crash again, taking the speculative bubbles and toxic debts, which are much larger today than in 2008, down with it. From the International Monetary Fund to the Bank for International Settlements and Deutsche Bank, alarm bells have been set off.