THOUGHTS ON “CHINA OFFICIALLY REQUESTS YUAN IN SDR”
Cramley MARCH 24, 2015 AT 11:13 AM China intends to give up the right of veto in the Asian investment bank aims to attract European countries
daneackerman MARCH 24, 2015 AT 12:02 PM Looks like your right on the money JC. Once again great job! Here’s a statement from Christine from the IMF site.
From the same article,
“China’s ongoing reform efforts, strengthening the partnership between the IMF and China, and China’s upcoming presidency of the G20 in 2016.”
Michael Glenn MARCH 24, 2015 AT 2:13 PM Where’s the beef ? It still looks like a debt instrument and distributed risk to me. Where’s the bullion based stabilizer ?
Dripfood MARCH 24, 2015 AT 2:15 PM
JC, the above 2011 paper on SDR development mentions on page 13:
“Another alternative [for mitigating exchange rate fisks during the use of substitution accounts] would involve having a willing subset of the Fund’s membership pool (part of) their official reserves into a Trust managed independently (within or outside the Fund), and agreeing among themselves on risk-sharing rules.
This could achieve both reserve diversification and supply of a new kind of SDR-denominated security (issued by the Trust), and would therefore seem the most promising route if members with large enough reserves were interested in pursuing it.”
Is the creation of the AIIB (working through the Chiang Mai Initiative Method) an implementation of the above metioned alternative?
thomas18z MARCH 24, 2015 AT 3:08 PM Below is a link to a short article from “The Diplomat” that i think puts the creation of the AIIB in context with other financial institutions but also poses an interesting notion regarding future options for China.
cramley MARCH 24, 2015 AT 4:35 PM There is something going on behind the scenes the English media is ignoring. http://news.gscn.com.cn/system/2015/03/24/010962171.shtml
Hong Kong joining http://finance.ifeng.com/a/20150323/13573062_0.shtml
Look at what I found here: http://www.nbd.com.cn/articles/2015-03-21/904567.html
Such a huge demand for funds, both US-dominated World Bank or the Asian Development Bank, Japan dominated, are currently unable to fill. Asian investment bank is targeting a piece of treasure, hoping to use China’s financial strength and ability to integrate resources, and lead us together, “Gold Rush.”
JC Collins MARCH 24, 2015 AT 5:49 PM Great links Cramley. There are many parts in motion now. Stay vigilant and attentive to not just the slant in the news, but as you stated, what is missing from the western news.
And not just the mainstream media either, also the alternative media. There is not one mention of China’s official request to have the RMB added to the SDR composition on ZeroHedge, and other large alternative sources. Very strange indeed, considering the gravity of that request.
Speedspirit MARCH 24, 2015 AT 7:30 PM JC maybe not reported on Zerohedge but it has been reported on SilverDoctors
I think since Koos has picked up on your site and written articles posted on SD about SDR the Silver Doctors give SDR and RMB information a closer look.
deejj87 MARCH 24, 2015 AT 5:59 PM Hey JC! I’m wondering if adding the Yuan to the SDR composition will help export their inflation while decreasing their GDP from 7% to something more sustainable in order to balance their monetary policy and expand credit to their citizens and create more of a middle class (someone should be using those ghost cities).
What will happen to China’s official and blackmarket debt? Will it be reatructured through the SDRM?
“Driven by the vast shadow-banking sector (which contains at least $6.5 trillion of debt) and a construction boom fueled by local officials, China’s debt buildup accounted for a third of all borrowing globally since 2007.
In that period, total Chinese debt quadrupled to $28 trillion by mid-2014 from $7 trillion. China’s public debt now stands at 282 percent of gross domestic product — a far higher debt ratio than that of advanced economies like the U.S., Germany and Australia.”
JC Collins MARCH 24, 2015 AT 6:10 PM You’re right on target Dee. You may have missed the post The Redback Revolution. If so, it’ll fill in a few blanks for you.
I would suspect that only official debt will be considered for the SDRM process. The shadow banking sector will likely be allowed to simply adjust down and out of existence as the required slow down accelerates. A slowdown which even the IMF is calling for:
deejj87 MARCH 24, 2015 AT 10:29 PM Thanks, I’ll check it out.
daniel grig (@gelingrig) MARCH 24, 2015 AT 7:47 PM J.C. This is the true day for brain 1 year of existence of this blog. The day of yesterday when came the news official, on the inclusion of the yuan in it casasta DEG. I, it celebrated today and I’m glad that not have lost the time here.
Thanks for the message and the explanations in the article above.
Honestly not see output real of the system current that is transforms, by much that the people expected the miracle.
The situation of the human being is conditioned genetically and from the EXOPOLITICS… but… at least not are idiots. This blog, today deserves the respect that is it has won.
JC Collins MARCH 24, 2015 AT 7:52 PM Thank you Daniel. You are one of few dear friends I have made during this initial process. There is much more to come my friend.
Cramley MARCH 24, 2015 AT 11:55 PM The Basel Committee wants to work with the AIIB if necessary
I’m not sure if this whole AiIB movement is a beard for the same ole bosses. We may indeed have a new sheriff in town.
~GetReal MARCH 25, 2015 AT 12:24 AM JC, Thanks for the post and keeping us in the loop, as always.
Cramley MARCH 25, 2015 AT 2:06 AM Michael Hudson: Young Chinese bank Importance
“The New Asian Investment Bank Infrastructure, we call Chinese Development Bank is to help other countries to escape this kind of neoliberal economic philosophy of the extreme right, to work on the plan of democratic governments, government-to-government, and help others governments to develop the infrastructure itself, so that local states can provide basic services at lower prices or at subsidized prices or even free…
The new bank, in particular, is being built to finance two things: (1) to finance the development of infrastructure in China and elsewhere. Surely it is better to see get the big US contractors, charging exorbitant prices to build roads and airports whose construction always more interested to own than to local contractors. Much better come the Chinese.
But there is another reason for the China-Russia union, this new database: (2) the US has started a cold war against financial China, Russia and the BRICS. Are advancing, one country after another…
The Chinese Bank is also a means to protect Chinese investments abroad, and loans that China make governments to develop local infrastructure. In the case of banks controlled by the US, where the debtor country can not pay in dollars, the IMF come and lay austerity,
and provides the dollars for the country to pay the banks … Americans, increasing the country’s debt until a new round of ‘recovery’. There is no indication that China implication with respect to impose the same kind of crippling austerity that the World Bank and the IMF impose on countries live.”
Here’s further perspective on the new gold regulations:
Gold export qualification will pave the way for expansion of the influence of the gold price promotion
“In the opinion of many people in the industry, management practices have little effect on the amount of short-term domestic and export gold, but the long-term influence is bound to raise prices in the Chinese market.
“Once more companies import and export licenses, especially with foreign companies directly involved in the Chinese market in depth, through the Shanghai Gold Exchange trading platform out of the spot price is bound to increase acceptance, pricing influence will continue to expand.”
Insiders pointed out that an open, transparent and more representative of the broad participation of the gold market must be the proper meaning of the future price of gold center.”
My gut impression so far is that gold will NOT be included in the SDR this year. The SDR is going to be used as a means to internationalize the RMB, but the SDR is probably not the end game, only a bridge to help correct global imbalances. I think China has other plans for gold. It understands gold’s function.
We will never find out its true gold reserves. A good portion will be held off the PBoC books. Oh it’ll announce some big official number north of 5000 tons, but it will keep a lot hidden. China is thinking many Kondratieff cycles ahead.
China’s Zijin Mining now has 10% stakes in Ivanhoe and Pretium. Funny how the price of gold was dropped to 200 dollars above AISC just enough to keep the producers viable and whenever usual sources of capital aren’t available, a Chinese sugar daddy pops up.
Don Juankey MARCH 25, 2015 AT 7:29 PM Hi Everyone, Don here with a little contribution. Such a cool site, thanks to J.C. Collins and contributors.
Ok, so my brief overview is that we, for the first time in history, have a Global Fiat economic/financial system set up, as J.C says, by the Global PTB (so called ‘elite’) which grew out of a (fixed) Gold standard fiat system, with the US $ replacing Gold as the international reserve asset.
Gold itself was attempted to be removed from the financial system and we have been conditioned that it is now merely a commodity like any other. Why was this done?
since gold, and to a lesser extent silver, has historically been, since before recorded history, and for very good reasons, considered the store of value par excellence. (silvers monetary role IMO has been permanently degraded in that it now, because of technology, is greatly consumed and lost to industry applications).
So now, for the sake of this discussion lets hypothetically imagine that I am the chief economist at the Bank for International Settlements (BIS in Basil) which is the central bank of all individual country central banks. My team and I have been given the task to design the new Global Monetary System (GMS) WOWSERS, hey.
We know that we must account for three needed monetary facilities, namely a means of exchange, a unit of account and finally a reserve asset store of value (SOV).
The first two are relatively easy, as we can continue with country currencies, while expanding and enhancing the current IMF Special Drawing Rights (SDR) system which already has had much work done towards implementation. What about the reserve asset.
Maybe we could just throw some commodities into the SDR for that? To find out we examined what qualities are needed by a reserve asset(s). Firstly, it must be stable and trusted to retain its value under financial/economic duress (that’s why it is held in reserve, after all).
It must be robust, of limited and known quantity (relatively rare) and at the same time widely held, easily divisible and fungible, have no counter party risk, be impossible to imitate and (relatively) easily determined as to purity, not used for much else as it will be stored (hoarded),
must not be able to be PRINTED/CREATED OUT OF THIN AIR, easily transported and traded globally, have a very high stock to flow ratio, have inherent value imbedded, (given by the expense of finding, mining, refining and distributing,) and finally ideally it would already be held by central banks!
Surely our task to find something that has even most of these qualities that could serve as our global SOV will be very difficult, not so? The SDR fails in that it being made up of fiat currencies which can be printed at will won’t be trusted under duress, as it has counter party risk.
Lets see, most actual things, including commodities, are used up relatively quickly. But just wait a minute, low and behold, as it happens there is one thing that amazingly meets ALL the requirements potentially perfectly, isn’t there? Yes – GOLD! Why do I say ‘potentially’.
That’s because although in the long term it has generally maintained its currency value, Gold has been relatively volatile in price since being officially unfixed and the conversion window to the US dollar closed by Nixon in 1971. How could this be solved?
Golds price is currently set by the paper futures market in London and the in the COMEX in the USA. Unlike other commodities, there turns out to be No Good Reason for a Gold futures market.
And in fact, that unnessary market actually creates price volatility through making available NAKED SHORTING of paper Gold futures with No Physical Gold Backing!
So why not simply close the Gold futures market and replace it with physical only markets? Voila, instant REAL price discovery.
Although Gold can (and has) acted as a currency and a unit of account, paper is better suited for for those roles. Golds main value is as a store of value (SOV).
Other things can accomplish that critical and necessary role also, like land, real estate, rare antiques and art, etc, but not nearly as well as Gold, as they all lack one or more of the ideal properties listed above.
So considering all the above facts, why was Gold removed (as far as THEY could) from fulfilling it’s critical financial role (as a SOV) from the current global credit based fiat system.
THEY say it is because it was seen to be a key factor in fostering/supporting the Great Depression, in that it prevented or blocked the ‘printing of currency’ which THEY say could have greatly limited that terrible situation. (as we all know, that position is being tested as we speak)
Well, I have to say that was likely the case, but it was so because of the faulty design of the system and not the fault of Gold, per se. and there are many who would agree with that.
The key flaw was that of officially FIXING the price of gold. I don’t have time here to get into the reasoning behind that but will just address it by pointing out the following: The designers of the latest large economic/financial currency iteration, the EURO, having long and carefully studied history and being deeply knowledgeable of finance and the current system, specifically require any prospective country to HOLD 15% of their reserves in Physical GOLD before being allowed to join.
In addition, the Gold as listed on the EUR balance sheet is regularily MARKED TO MARKET and NOT FIXED as it was under the Gold Standard!
The EURO designers were well aware of what is coming, (as it is a necessary design feature of credit based fiat), which is collapse due to exponential credit growth caused by interest compounding on the ever expanding credit (no debt settlement ever, but rather never ending rolling over of principal/interest)
And they selected freely floating Gold as their reserve asset protection. The other critical element is that serious and severe problems are increasingly coming to light due to the current global reserve asset, the US dollar, being ALSO at the same time the currency of a country (called Triffins Delemma). So the reserve asset Must Be Separate from any currency in use!
Will Gold be included in the SDR? Perhaps. As J. C. is pointing out so well and thoroughly, the PTB are working massively behind the scenes and also in plain sight towards a ’new’ Global Monetary System which continues with debt based fiat, modified as necessary for the next higher level. Will THEY succeed. Perhaps, but I have strong doubts.
The internet, (with sites like this one) is hopefully shedding too much light on the evil debt slavery system with it’s corruption and lies, which if such light is strong enough may prevent its continuance.
We must all do what we can to foster that light. On the material level it is my position that Physical Gold is anti – Debt based fiat (hence why it is so suppressed by the PTB) and by purchasing it we help bring down the evil system. I’m sure that THEY are trying to harness the power of Gold into their ‘new’ system.
May the ‘Force’ be with us ‘peasants’ this time. Truth and Goodness will win out eventually – lets work harder than THEM and bring their downfall forward, for the good of all.
Of course, as has been pointed out here many times and in many ways, the evil fear/desire projections are in each of us and we must work hard to shine the Light within or the without will not transform.
Not easy but entirely necessary. My personal motto is “Feel the Pain”. We have been ’taught’ to seek pleasure and try to avoid pain.
That process creates the psychology of misusing the holy present by mentally projecting the psychological ‘future’ where fear/desire reside.
TPTB support that debilitating process through making the present physicality painful through the monetary pressure of ‘earning a living’ within a debt soaked competitive pressurized environment, while controlling all the physical ‘means of production’ needed to provide for our biological necessities of food, clothing and shelter.
The only way out that I have found is to slowly build up ones pain tolerance so as to be able to gradually avoid succumbing to the ‘pressure’. Arduous but necessary.
I won’t attempt to address what value Gold will have under the new coming monetary system, but will only say that IMO physical gold holders will be very pleasantly surprised, lol.
I also need to point out that the Gold price ‘on this side’ of the ‘Reset’ is irrelevant except that its suppression allows for us ‘small fry’ to acquire some, and in so doing play our part in bringing forward the absolutely necessary alchemical monetary Transformation! Blessings to all GOT GOLD? Get ye some!
JC Collins MARCH 26, 2015 AT 1:28 AM Thanks Don. Great contribution.