When assets become liabilities, it is time to reshape the system in favor of citizens

by Jun 19, 2020Thinking outside the bottle0 comments

profit-loss-risk-wallpaper-preview.jpg

(Paulo Pinto

Alti Wine Exchange founding member)

Dear reader,

I’m happy to be back to you writing not only about fine wine investment, but also hopefully raising debates about the economy and the society as a whole.

A few months ago, we launched the idea of a Central Bank of Social Security (in a wine blog, what an irony) as a solution for the monetary system we have today. A system that is saturated with debt and is causing evident financial and economic problems.

The reason is simple: debt is a liability to all of us, but for the financial system it’s an asset. Therefore, our liabilities are their assets. Debt — there is too much of it: private debt, public debt, corporate debt. And all this debt is losing its ability to increase economic growth.

The saturation of debt is starting to cause cracks in the system. For instance, we learned that assets like oil can become liabilities when their price goes negative. Cash has become a liability too, given negative interest rates.

Abolishing the present system is the best solution to its problems.

So we started trying to answer only two questions:

1. Where we would want to go?

2. How to plan to get there?

Our thesis is the creation of a Central Bank of Social Security (CBSS) to replace national central banks. The goal to replace as much debt as possible by equity in order to put the necessary inflows of liquidity in the market and the system.

The CBSS will have two main responsibilities. The first one is to guarantee minimum basic income (as we have recently argued), and the second is to manage pension and social security (as explained here).

The rationale is because there is less risk entailed for the investor than it would have to when creating a private pension portfolio.

moneywine ed.jpg

INVESTING ON the BEHALF OF CITIZENS

Applying MMT (modern monetary theory) to the CBSS, they would guarantee the future responsibilities of pensions and social security.

A CBSS could create money and use the proceeds to guarantee minimum basic income and invest in equity investments with a value that rises and falls with the market, which would be held in individual Social Security Investment accounts.

The Bank of England, the European Central Bank and the Federal Reserve already own assets in excess of 25 percent of their countries’ GDPs, and this is done only to the benefit of banks and governments; So there is no reason not to invest those assets on behalf of the citizens.

The alternative to our suggested Central Bank of Social Security is raise taxes and cut benefits – which I see as a way to probably lead only to more societal dysfunction.

* * *

In the meantime, I will be sure to keep investing in fine and rare wines. As you may know by now, real, tangible assets are an excellent refuge for the pessimistic scenario ahead if debt and monetary inflation keep piling up. Fine wine is a valuable choice among these alternative investment class because it appreciates due to its rising quality and lessening supply.

You can read more about this in the articles on the gallery below.

Until then.

Paulo


More articles by Paulo Pinto

 

Explore More from Our Blog

Alti Wine Exchange Indexes: 2021 overview and trends for 2022

Sergey Glekov Senior financial analyst The Alti Wine Exchange Indexes are a family of equal weighted indexes which trace price performance of fine and rare wines and shows equal weighted average returns on them. The indexes are subdivided by most important wine...

They have created the perfect storm for controlled demolition of money

I’m glad to be back talking financial insights, one glass of wine at a time. First they shut down the economy, to save lives. With the closure of the economy, production ceased. To compensate for non-production or reduced production, people were paid not to lose...

Spanish Cava Sparkling Wine: What You Need to Know!

Spanish Cava Sparkling Wine: What You Need to Know!

What is a Port Wine?

DEAR READER, Let’s start February off with a simple question: Good morning, Mr. Ferdinand, What is a Port wine? -Jacques Thank you, Jacques, for your brevity. Let’s get down to business! Ports are an underrated, very particular type of wine made in the Douro Valley,...

What to Expect for Fine Wine Investments in 2022

Let’s face it, between an ongoing COVID pandemic, erratic markets, fires, floods and major humanitarian crises, 2021 was exhausting. And though none of us can be sure what to make of 2022, we can say with confidence that fine and rare wine investments are looking...

Holiday Gift Guide for Fine Wine

It’s that time of year again! And so begins the search for the perfect holiday gift. Something unique, something that shows you truly care. How about a gift that keeps on giving? An investment. Imagine their surprise when you tell them that their gift is resting...

FAMILY-RUN WINERIES

DEAR READER, As I grow immensely in popularity, I’ve noticed more of you interested in my personal life. I didn’t begin e-blogging with this in mind, but I don’t mind indulging every now and then. I imagine my intellect intimidates a lot of you, so maybe shedding some...

The Truth about Fine Wine

Fine wine. What does that really mean? The truth is, as words, they don’t mean much. There is no official classification system for the title “fine wine.” It’s not like the regulated usage of “Premier Cru” or “Grand Cru Classé,” for example, rather anyone can throw it...

Maipo Valley Reds

DEAR READER, I am again-and-again charmed by my readers’ curiosity! It reminds me of being a young sommelier, ready to take on the world one glass at a time. I know far too much to feel that way again—but at least I can experience a shred of it through you all! Dear...

Liquid Harmony

Harmony. Think Crosby, Stills, Nash & Young. Think Picasso's The Old Guitarist. It’s that moment when various elements come together to create magic. And magic really is the word, no? Wine can also sip in harmony, and I can think of no better example than the...

Where Does the Phrase “Aging Like Fine Wine” Originate?

DEAR READER, I received this charming question from an inquisitive reader last week. Dear Sommelier Ferdinand, Where does the phrase “aging like fine wine” originate? It’s so fun! -Imani I just love your question! What a lively spirit you have, Imani! I’m more of a...

NOSTALGIA AND THE ADELAIDE DOURO RED

DEAR READER, Let’s get down to it! Dear Sommelier Ferdinand, I respect your point of view, but I must ask: don’t you think worshipping wines is partaking too mightily in the past? Wouldn’t you rather create your own memories than indulge in nostalgia? -Ethan Ethan,...