Charlie & DS Member Chat Reserve Currency Part 1
"So What Does Unemployment Or GDP Have To Do With My Dinar?'
Charlie: i'm going to start out tonight by pointing to what's going on around us
Charlie: i started adding some more forums to the site so you can take your time to read and watch, these areas will be chock full of stuff very soon
tudor: I looked at some today, your amazing
Charlie: i would encourage all of you to watch the video in the banking section called century of enslavement
Charlie: thanks tudor, there is so much more to add!
Charlie: i run the risk of losing some of your attention spans in the first week or two as i paint out the landscape
Charlie: please stick with this, it will be very much worth it to you
tudor: paint away Charlie
Charlie: things are moving very fast in this world, its accelerating, we are already witnessing major geopolitical moves, unlike we have seen in our lifetime
Charlie: we are going to start seeing more false flags (as i will explain tonight), we will see black swans, we will see violent changes to our financial markets, and lets pray we don't see war anytime soon
Charlie: it's difficult to keep up with these changes but i will do my best to keep up
Charlie: we are not getting this information from mainstream media - which we can no longer trust - it is no more apparent than the numbers that the media markets are reporting to us from our "trusted" gov't agencies
Charlie: unemployment numbers are not real
Charlie: unemployment and gdp are the most fabricated numbers we see and hear about
Charlie: you will see how when i introduce to you tonight a series of videos that you can watch at your leisure
tudor: yes it is, lies is what they want us to believe
Jade: Hey, Tudor ... are we still limited to like 11 participants?
Charlie: YOU NEED TO LEARN HOW THE SYSTEM TRULY WORKS SO SEE WHAT'S GOING ON
tudor: no Jade 250
Charlie: they float in and out, but the system will allow more - the old chat will be back by tomorrow
Charlie: so what does unemployment or gdp have to do with my dinar?
Charlie: last chat, we discussed the peg of the dinar to the dollar
Charlie: from this point forward, understand that everything the dollar does, so does the dinar
Charlie: until the time is right for the dinar to DE-PEG from the dollar
b1955: Hi Charlie
Charlie: in it's infancy, the dinar could not have been de-pegged
Charlie: hi b
Charlie: the main reason is that iraq belongs to the US in certain ways that we simply do not see on the 1st level chess board
Charlie: we all understand the oil connection, but we usually don't connect it properly
Charlie: we think oil consumption, but that's not the financial reality to our relationship with iraq and the entire middle east
Charlie: we discussed the petrodollar last night, a simple introduction, so much more to follow in that regard
Charlie: we understood how the purchase of oil in dollars increases the demand for dollars and how it allows us to increase dollar supply infintum (or at least the Fed thinks) without inflationary pressure that would ultimately destroy our economy
Charlie: i didn't go into the finer details of how petrodollars are recycled and drives up markets to our advantage, but that is coming
Charlie: tonight i want to present to you the dollar as the reserve currency of the world -
Charlie: a little cut and pasting will help me open up the topic
Charlie: A reserve currency is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves.
Charlie: The reserve currency is commonly used in international transactions and often considered a hard currency or safe-haven currency
Charlie: the safe haven part is very important
Charlie: remember that when you get money, it loses value if you simply hold it because inflation is almost always present
Charlie: in the video series i will post, you can see that inflation is a symptom of increasing money supplies that really have no where to go
Charlie: the use of the dollar as the petrodollar and a reserve currency helps to offset the inflationary pressure
Charlie: more on that another time
Charlie: big bonus for being a reserve currency: People who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than people in other nations because they don't need to exchange their currency to do so.
Charlie: By the end of the 20th century, the United States dollar was considered the world's most dominant reserve currency, and the world's need for dollars has allowed the United States government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year
Charlie: However, the U.S. dollar's status as a reserve currency, by increasing in value, hurts U.S. exporters. <--- more on this another time
Charlie: After World War II, the international financial system was governed by a formal agreement, the Bretton Woods System.
Charlie: this system the United States dollar was placed deliberately as the anchor of the system, with the US government guaranteeing other central banks that they could sell their US dollar reserves at a fixed rate for gold.
Charlie: that all changed when Nixon changed the dollar from gold-backed to fiat
Charlie: here is a picture of the distribution of reserve currencies in the world
Charlie: The United States dollar is the most widely held currency in the Allocated Reserves today. Throughout the last decade, an average of two thirds of the total Allocated foreign exchange reserves of countries have been in US dollars.
Charlie: For this reason, the US dollar is said to have "reserve-currency status", making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact or even postponing a currency crisis.
Charlie: Central bank reserves held in dollar-denominated debt, however, are small compared to private holdings of such debt. In the event that non-United States holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, there could be serious consequences for the US economy.
Charlie: that last sentence is the scary part
tudor: yes it is
Charlie: it is followed by this: Changes of this kind are rare, and typically change takes place gradually over time; the markets involved adjust accordingly.
Charlie: I would agree but we all learned about Black Swans
Charlie: US dollar dominant position in global reserves is very much challenged currently, because of the growing share of unallocated reserves, and because of the doubt regarding dollar stability in the long term.
Charlie: The dollar's role as the undisputed reserve currency of the world allows the United States to impose unilateral sanctions against actions performed between other countries.
Charlie: This is what's happening among other things: In 2014 Beijing and Moscow signed a 150 billion yuan central bank liquidity swap line agreement to get around American sanctions on their behaviors.
Charlie: now you could have simply read all this on wiki and i encourage everyone to do as much research as you can, but remember, it's about connecting the dots
Charlie: important article content: The Threat To The Dollar As The World’s Primary Reserve Currency
Charlie: but does it really matter?
Charlie: My answer is that, “Yes”, it really matters. And that is why we need to take action today to protect all of our interests. The source of the threat may surprise you.
Charlie: We refer to the dollar as a “reserve currency” when referring to its use by other countries when settling their international trade accounts.
Charlie: For example, if Canada buys goods from China, China may prefer to be paid in US dollars rather than Canadian dollars.
Charlie: The US dollar is the more “marketable” money internationally, meaning that most countries will accept it in payment, so China can use its dollars to buy goods from other countries, not solely the US.
Charlie: Such might not be the case with the Canadian dollar, and China would have to hold its Canadian dollars until it found something to buy from Canada.
Charlie: Multiply this scenario by all the countries of the world who print their own money and one can see that without a currency accepted widely in the world, international trade would slow down and become more expensive.
Charlie: ok we get all this, so what?
Charlie: Its effect would be similar to that of erecting trade barriers, such as the infamous Smoot-Hawley Tariff of 1930 that contributed to the Great Depression.
Charlie: There are many who draw a link between the collapse of international trade and war.
Charlie: The great French economist Frederic Bastiat said that “when goods do not cross borders, soldiers will.”
Charlie: No nation can achieve a decent standard of living with a completely autarkic economy, meaning completely self-sufficient in all things.
Charlie: If it cannot trade for the goods that it needs, it feels forced to invade its neighbors to steal them.
Charlie: Thus, a near universally accepted currency is as vital to world peace as it is to world prosperity.
Charlie: OK SO HERE'S THE BIGGIE..
Charlie: However, the foundation from which the term “reserve currency” originated no longer exists.
Charlie: Originally the term “reserve” referred to the promise that the currency was backed by and could be redeemed for a commodity, usually gold, at a promised exchange ratio.
Charlie: The first truly global reserve currency was the British Pound Sterling.
Charlie: Because the Pound was “good as gold”, many countries found it more convenient to hold Pounds rather than gold itself during the age of the gold standard.
Charlie: Note: we will be discussing MONEY and WHAT IT REALLY IS someday this week
Charlie: without granular knowledge of our money system, it's hard to understand the system
Charlie: we all think we know what money is, but you will be surprised when you see what money actually is today
Charlie: so i move on
Charlie: The world’s great trading nations settled their trade in gold, but they might accept Pounds rather than gold, with the confidence that the Bank of England would hand over the gold at a fixed exchange rate upon presentment.
Charlie: Toward the end of World War II the US dollar was given this status by treaty following the Bretton Woods Agreement.
Charlie: The US accumulated the lion’s share of the world’s gold as the “arsenal of democracy” for the allies even before we entered the war.
Charlie: The US still owns more gold than any other country by a wide margin, with 8,133.5 tonnes to number two Germany with 3,384.2 tonnes.
Charlie: the only question about that gold is how much is actually leased (and that illegally)
Charlie: Gold, silver and precious metals will be a conversation at some point, but that's not our focus right now. lets just say that the dollar competes directly with the value of each because gold and silver are also held in reserves througout the world
Charlie: we want the dollar to be preferred and to the extent that it's easier to move over computer lines (than gold shipments), it's much more preferred
Charlie: BUT THAT'S ONLY IF THE VALUE OF THE DOLLAR IS "AS GOOD AS GOLD"
tudor: so true
Charlie: The International Monetary Fund (IMF) was formed with the express purpose of monitoring the Federal Reserve’s commitment to Bretton Woods by ensuring that the Fed did not inflate the dollar and stood ready to exchange dollars for gold at $35 per ounce.
Charlie: Thusly, countries had confidence that their dollars held for trading purposes were as “good as gold”, as had been the British Pound at one time.
Charlie: BUT, AND THIS IS A BIG BUT...
Charlie: the Fed did not maintain its commitment to the Bretton Woods Agreement and the IMF did not attempt to force it to hold enough gold to honor all its outstanding currency in gold at $35 per ounce.
Charlie: During the 1960’s the US funded the War in Vietnam and President Lyndon Johnson’s War on Poverty with printed money.
Charlie: The volume of outstanding dollars exceeded the US’s store of gold at $35 per ounce.
Charlie: The Fed was called to account in the late 1960s first by the Bank of France and then by others. Central banks around the world, who had been content to hold dollars instead of gold, grew concerned that the US had sufficient gold reserves to honor its redemption promise.
Charlie: During the 1960’s the run on the Fed, led by France, caused the US’s gold stock to shrink dramatically from over 20,000 tons in 1958 to just over 8,000 tons in 1970.
Charlie: At the accelerating rate that these redemptions were occurring, the US had no choice but to revalue the dollar at some higher exchange rate or abrogate its responsibilities to honor dollars for gold entirely.
Charlie: To its everlasting shame, the US chose the latter and “went off the gold standard” in September 1971.
Charlie: It is calculated that in 1971 the US would have needed to devalue the dollar from $35 per ounce to $400 per ounce in order to have sufficient gold stock to redeem all its currency for gold.
Charlie: Let's pause for a minute
tudor: cuting our own throats so to speak
Charlie: THEY WENT AGAINST THEIR WORD
Charlie: REMEMBER THIS, THAT THE GOVERNMENT'S WORD IS NOT BETTER THAN THE FINANCIAL NEED TO CHANGE COURSE
tudor: what a shame
Charlie: so what does this have to do with the dinar????
Charlie: as i said, the dinar is pegged to the dollar <--- so much more coming on all this but not tonight so hang in there my fellow dinarheads!
Charlie: tudor is now printing dinarhead shirts - they will be on etsy tomorrow!
Charlie: ok the story...
tudor: hahahaha yours for only 1 ouce of gold
Charlie: smart gal!
Charlie: Nevertheless, the dollar was still held by the great trading nations, because it still performed the useful function of settling international trading accounts.
Charlie: There was no other currency that could match the dollar, despite the fact that it was “delinked” from gold.
Charlie: There are two characteristics of a currency that make it useful in international trade:
Charlie: one, it is issued by a large trading nation itself, and, two, the currency holds its value over time
Charlie: These two factors create a demand for holding a currency in reserve.
Charlie: Although the dollar was being inflated by the Fed, thusly losing its value vis a vis other commodities over time, there was no real competition.
Charlie: The German Deutschemark held its value better, but the German economy and its trade was a fraction that of the US, meaning that holders of marks would find less to buy in Germany than holders of dollars would find in the US.
Charlie: Of course, psychological factors entered the demand for dollars, too, since the US was the military protector of all the Western nations against the communist countries.
Charlie: BIG MUSCLES HAVE A SAY IN WHAT YOU PAY!
Charlie: If the story ended here, we could have some hot chocolate in baked goods and share our gardening stories huh!
Charlie: well those days are gone
Charlie: Today we are seeing the beginnings of a change.
Charlie: The Fed has been inflating the dollar massively, reducing its purchasing power and creating an opportunity for the world’s great trading nations to use other, better monies. <----- can we say YUAN?
Charlie: This is important, because a loss of demand for holding the US dollar as a reserve currency would mean that trillions of dollars held overseas could flow back into the US, causing either inflation, recession, or both.
Charlie: For example, the US dollar global share of central bank holdings currently is sixty-two percent, mostly in the form of US Treasury debt. (Central banks hold interest bearing Treasury debt rather than the dollars themselves.)
Charlie: Foreign holdings of US debt currently total $6.154 trillion. Compare this to the US monetary base of $3.839 trillion.
Charlie: HOLD ONTO YOUR SEATS
Charlie: Should foreign demand to hold US dollar denominated assets diminish, the Treasury could fund their redemption in only three ways.
Charlie: One, the US could increase taxes in order to redeem its foreign held debt.
Charlie: Two, it could raise interest rates to refinance its foreign held debt.
Charlie: Or, three, it could simply print money.
Charlie: Of course, it could use all three in varying amounts.
Charlie: If the US refused to raise taxes or increase the interest rate and relied upon money printing (the most likely scenario, barring a complete repudiation of Keynesian doctrine and an embrace of Austrian economics), the monetary base would rise by the amount of the redemptions.
Charlie: OKAY SOME BIG WORDS IN THERE, DON'T LET THEM SCARE YA LIKE THEY DID ME!
tudor: hahaha they are big lol
Charlie: we will look at these economic theories later on down the road
Charlie: For example, should demand to hold US dollar denominated assets fall by fifty percent ($3.077 trillion) the US monetary base would increase by eighty percent, which undoubtedly would lead to very high price inflation and dramatically hurt us here at home.
Charlie: remember that inflation is just the symptom of a large money supply
Charlie: more money chasing the same goods
tudor: all because the US got greedy?
Charlie: remember the mortgage bubble? it was lots of credit thrown at the market increasing the prices of houses
Charlie: yes tudor, and the greedy ones are in the banking system <- don't forget to watch Century of Enslavement on the site in the Banking chessboard
tudor: ok I will
Charlie: so with inflation, our standard of living is at stake here.
Charlie: So we see that it is in America’s interest that the dollar remain in high demand around the world as a unit of trade settlement in order to prevent price inflation and to prevent American business from being saddled with increased costs that would derive from being forced to settle their import/export accounts in a currency other than the dollar
Charlie: The causes of this threat to the dollar as a reserve currency are the policies of the Fed itself.
Charlie: There is no conspiracy to “attack” the dollar by other countries
Charlie: There is, however, a rising realization by the rest of the world that the US is weakening the dollar through its ZIRP (Zero interest-rate policy)and QE (quantitative easing) programs
Charlie: Consequently, other countries are aware that they may need to seek a better means of settling world trade accounts than using the US dollar.
Charlie: One factor that has helped the dollar retain its reserve currency demand in the short run, despite the Fed’s inflationist policies, is that the other currencies have been inflated, too.
Charlie: there is a full blown currency war, with a race to the bottom!
Charlie: as i asked yesterday, did you see the dinar rise last year vs the dollar? no. the euro? YES!
Charlie: being pegged to the dollar, the dinar rose against the euro because the dollar did
Charlie: the dinar's big day will be a dollar drop and a de-peg from it - what that will mean NO ONE KNOWS but it means a big rise for the dinar
tudor: glad we are holding dinar
Charlie: remember we are one the dollar-dinar seesaw but it's locked
Charlie: in fact we are on the same side of the dollar vs all others
Charlie: de-pegging will create the dollar-dinar seesaw
Charlie: part of what we need to be looking at is not the dinar, but the dollar itself
Charlie: at what point iraq abandons ship? if it did it today, we might see some serious trouble brewing
Charlie: when there are bigger fish to fry (russia, china), it would not receive the same response
Charlie: maybe some of you are starting to understand what i meant when i said we are looking in the wrong places
tudor: starting to
Charlie: we are staring at iraq, when the truth is, all currencies have two sides
Charlie: it all depends what other currency you are comparing with
Charlie: if you bought gold in USD last year you lost money
Charlie: if you bought in rubles, you made a boat load
Charlie: most of us, if not all, bought dinar in dollars
Charlie: that is our base point
Charlie: 700, 800, 900, 1,000 dollars per million
Charlie: some more even
Charlie: but you have a defined entry point
Charlie: the question will be the exit point and that in dollars
Charlie: many doubt the rise of the dinar but don't understand that you need to examine BOTH SIDES of that equation
Charlie: while the dinar is pegged to the dollar, it does not serve as a hedge, like say gold
Charlie: lets get back to the reserve part for a minute
Comments may be made at the end of Part 2 Thank You