The Real Financial Reset
By: Gunther Sonnenfeld
Tags: Economics, Technology, Ecology, Bitcoin, Finance

The Real Financial Reset

While the details are complex, resetting to a “new, better normal” is a lot simpler than you might think. Gunther Sonnenfeld Follow Feb 12 · 10 min read

SUMMARY

Eradicating debt and re-establishing a highly functional financial system is well underway.

The core question is: For what, and for whom?

We have a few key scenarios to consider.

A new currency war between a reflated US Treasury dollar and Bitcoin’s meteoric rise

What has historically controlled commerce since 1885

The real math behind finance and financial instrumentation

What this all means going forward

THE NEW CURRENCY WAR

There are two main battle lines being drawn.

The first is a digital Treasury note.

In March of last year (2020), the U.S. Federal Reserve was fractionalized, with 13 underwriters set against the 12 regional banks.

What this means is that the Reserve is now separate from these Treasury notes.

The Reserve is “cloning” its own debt notes (the new quantitative easing) in an attempt to buy up assets in the equities market — rising stocks, etc. That isn’t going so well, for many reasons. The main reason is that capital is being used to inflate stock prices, while liquidity is quickly moving out of the market.

Just a few days ago, the first gold bond in 87 years was issued to subscribers, further circumventing the Reserve. So, it appears that gold and other precious metals will back the U.S. Treasury note in a new standard handbasket.

A new gold standard? (image source: The Epoch Times)

The 20%+ depreciation of the Treasury-backed USD is a reflationary adjustment so that spending power can be revitalized.

It is likely that this “full transition” to the Treasury-backed USD will happen on April 1st of this year (2021), which will be the 50 year anniversary of the Nixon Shock, when the FIAT/petrodollar was instituted, and gold certificates no longer backed those notes.

At this time, bank account holders will be given the option to accept these new Treasury-backed notes, by way of a basic digital permission offered by their banks.

We’ll see how this plays out.

The second battle line is Bitcoin.

Is Bitcoin as “decentralized” as we would like to think it really is? (image: Bermix Studio)

Bitcoin is not only being traded as a speculative commodity, but it is being centralized in an attempt to circumvent US Treasury-backed notes (not Reserve notes, which are irrelevant in this context).

This is why major corporations like Mastercard, Amazon and BNY Mellon, along with various institutions, are buying up inventory and taking huge positions. In short, these corporations are attempting to become their own lenders.

Further evidence of this is PayPal’s assessment that it wants to “shape the future financial system and central bank digital currencies (CBDCs) are a part of its vision”, as per CEO Dan Schulman.

BTC instruments are also being pegged to gold and other precious metals.

Exchanges like Gemini are paying people to rehypothecate their BTC as loan-outs to other customers. Rehypothecation is a practice whereby banks and brokers use, for their own purposes, assets that have been posted as collateral by their clients. Essentially, it is a way to redistribute debt in the form of a digital instrument (a “cryptocurrency”).

Even with pegs to stave off volatility, BTC’s price may go to the moon, but it cannot be fractionated and hold value for the “average person”. Not without centralized control, that is.

Additionally, SHA-256 (the BTC blockchain) cannot replace SWIFT as the global ledgering system, for many reasons which this author has written about.

Net-net: This author loves BTC as an invention, but it is not a stable investment. It also cannot possibly become a global reserve currency because it already doesn’t function as sound money or currency.

If this is the case, then what’s the alternative that “exists in the middle”?

Unbeknownst to the vast majority of the population, the entire system has been governed by maritime law, or more formally, “postal law”, for the last 136 years.

Maritime or admiralty law is a body of law that governs nautical issues and private maritime disputes. Admiralty law consists of both domestic law on maritime activities, and private international law governing the relationships between private parties operating or using ocean-going ships.

So, we have been operating in a system that essentially bypasses constitutional mandates, to include unwieldy taxation and restrictions on civic rights.

Hard to believe? Here’s the proof.

The original Treaty of Lisbon was signed in 1878 by the U.S. and all other first world governments. It was updated in 2009 to reflect the advances in international trade law.

The updated Treaty of Lisbon fact sheet released this year by EU parliament (2021).

The Universal Postal Union or UPU was founded in 1885 as an “Additional Act”, meaning it is a standalone treaty signed directly by all nations at the time with an economy worth controlling.

Page 1 of the original UPU modifying convention of The Treaty of Lisbon.

Therefore, the UPU has been in control of all commerce (all shipping and trade globally), and the designated proprietor of the international “court system” as well. The Postmasters for the UPU are the “authoritative assignees” of all commerce globally.

Which means that a postal construct has been used as the “law of the land” or more specifically, the “law of the land by sea”, to control global trade, across nations, and across geographies.

The UPU’s summer of 2020 brochure which details the governance of trade and eCommerce around the world.

Here’s the kicker: The UPU had to be “ratified and approved” by the Postmaster General of the United States, and then “approved” by the sitting President of the United States.

So, a “one world government” has been in existence since 1885.

Sobering, yes?

Let’s unpack what this means in fundamental finance terms.

THE REAL MATH BEHIND TRADITIONAL FINANCE

As important to a centralized trade and (e)commerce operation are the financial mechanics behind it.

Also unbeknownst to the vast majority of the population, financial maneuvering in a centrally controlled economic system actually boils down to some very straightforward math.

There are, of course, basic formulas around compound interest, or what are commonly understood to be interest rates based on inflation.

There are also more sophisticated formulas around average interest, which basically take compounding interest and bundle it into a median value such that financial instruments can “hide” the debt that assets carry.

What all of this produces are two important variable sets, the first being debt to asset ratios, and the second being cash to asset ratios.

Here are the common parameters that are used to make these calculations in more complex scenarios. These are based on time, frequency and the projections of growth per the rates of compounding interest.

What you end up with is a scenario where your cash and assets can achieve a 1:1 balance, or, a scenario in which your cash to asset ratio is upside down, which is more often the case.

In more optimal situations, smarter operations adhering to these common parameters will determine outcomes which have you “well into the black”, or with your cash reserves greatly exceeding the debt you might carry, along with the valuation of your assets.

Until, of course, market conditions change.

What this ultimately means for common people (“citizens”) is that their time, their labor and the things they acquire as “wealth” are not actually owned by them — they are “borrowed”. They essentially borrow against assets they are already entitled to, per constitutional charter.

They also do not own the government notes they use for money, nor are their taxes more commonly used for things they perceive to be benefits or subsidies.

Those have been going to the Corporation of the United States, along with other corporate government structures. These legal codes outline the definitions in understanding these implications.

You might be asking yourself at this point how much has been “stolen” from us, the “common people” around the world. This author calculates the number to be somewhere in the range of $23 quadrillion.

Yes, you read that right.

And as with all things unjust, there are silver linings.

RESTRUCTURING FINANCIAL MATH

Now we have to consider that any asset we purchase or borrow against with cash or credit immediately loses its inherent value as it enters the market.

This is even more glaring in how companies today are then overvalued to increase stakeholder profits, oftentimes without having revenues, or cash to asset ratios that can substantiate their share prices.

This means that its value is either speculated on, or, that its valuation is inflated considerably to increase the margin in yield, while incurring costs to the resources used (otherwise known as externalities, or side effects).

There are ways around this, such as a framework this author has developed for calculating externalities, called natural risk amortization.

A non-linear calculus for natural risk amortization developed by Gunther Sonnenfeld.

Reality is, there is no need for interest rates or interest rate adjustments, if the assets themselves are properly ledgered, and if their risk parameters are amortized.

In other words, if we know what the actual risks are in developing an asset, we don’t need to create imbalances in how we financialize the asset.

Keep in mind that the real-time amortization of risk is perhaps the most important element in assessing economic health.

Along these lines, this author has written about the blockchain’s role in amortizing risk as an “alternative” to operationalizing and capitalizing resources toward more independent means.

In the simplest of terms, what this really comes down to is a way to restructure basic math such that there is little inherent risk and therefore the most inherent value to preserve during the lifecycle of the asset’s use, or if it goes dormant.

The basics of this can be seen as follows.