Reader Comments & Thoughts On “REVERSING BRETTON WOODS” Part 1
Matt McBride (@MattMhmmcbride) JANUARY 7, 2015 AT 1:06 AM Great post JC!
I did not foresee the fracturing of the Euro, but it makes a lot of sense in the scheme of things. It sure has much more benefits over the long run if considered in a multi lateral IMF world…it would certainly be one hell of a black swan.
The upcoming ECB meeting and Greek elections this month will provide more clarity with how the dots are connecting.
I have been doing a lot of reading on the SDR substitution system proposed in the 1970-80s.
It will work well…so long as the U.S. looses its veto and can’t reject it (like they did when it was suggested over 40 years ago)
tristero888 JANUARY 8, 2015 AT 7:07 PM thanks for those links in the last post, matt.
“…but also sovereign wealth funds, private and commercial banks, and multi national corporations.” which links right up to that G20 communique about “Public-Private Partnerships” and “new innovative methods of equity financing” for infrastructure projects, etc.
if i was a CEO of a large multinational right now, i’d be buying UST’s like they’re going out of style to ensure a seat at the table when those Global Public Goods begin to be handed out for a no-bid “bid”.
also, if you read to the end of that CH doc, at the end, it notes that Gold –> SDR should be a one-way exchange only — countries should not be able to exchange their SDRs back into Gold.
Welcome to the Hotel California.
Matt McBride (@MattMhmmcbride) JANUARY 8, 2015 AT 8:38 PM Thanks for the reply Tristero.
The TBTF have been taking on large amounts of USTs. I can’t see the likes of JPM not being included in the SDR substitution party. Hotel California indeed :)
A partially (if only 2-5%) backed gold SDR will definitely give PMs a turbo boost once the basket review and reliquification begin.
Have you noticed the timing of the new CME collars on PMs. This will help stabilise price for such basket inclusion
Bruno de Landevoisin JANUARY 7, 2015 AT 3:36 AM Interesting piece J.C. Although, I still believe the transition will only take place after a great deal of fracture and dislocations.
Desperation will need to be present before monetary sovereignty is voluntarily handed over to the IMF, and the currency basket will only be created and accepted under dire circumstances. Remember necessity is usually the mother of invention.
Tsipras, Le Pen, Grillo and Farage will help fracture the EZ, and serious economic pain and strife will follow.
In the end, Mr. Gold will be at the head of the table handing out the breadstick to make up the new basket………………same as it ever was Just my two cents.
BTW, great piece by JHK: http://zirpqe.wordpress.com/2015/01/05/forecast-2015-life-in-the-breakdown-lane/
JC Collins JANUARY 7, 2015 AT 2:02 PM Bruno, the dire circumstances are being created and you are correct gold will play a role, as it could very well be included in the SDR valuation in the coming adjustments to that basket.
Bruno de Landevoisin JANUARY 7, 2015 AT 3:37 AM One last comment. When the trust between the parties is gone, Gold becomes the common denominator……………same as it ever was.
irrelevant111 JANUARY 7, 2015 AT 3:47 AM Brilliant Deceivers… As always, follow the $$.
2015 will be an interesting time…
P.S. Don’t know if we’re Blessed or cursed as we adapt to those that hold the reins…
Bruno de Landevoisin JANUARY 7, 2015 AT 3:55 AM One final note on the fascinating subject, if I may;
It took the aftermath of WW2 to fashion the Bretton Woods agreement. Nations only typically ceed monetary sovereignty out of necessity and/or forced coercion. My best guess is that it will take some very grave events and ensuing near cataclysmic conditions before all the parties confer and agree.
Just my three cents brother Best, Bruno
Roger Parness JANUARY 7, 2015 AT 9:59 AM Much higher percentage of traitors in power this time around. Sovereign treason will proceed relatively easily.
Bruno de Landevoisin JANUARY 7, 2015 AT 4:36 PM Perhaps, but disenchanted hungry crowds have a way of throwing the governing bums responsible out, especially during depressions…….
Bring on Tsipras, Grillo, Le Pen, Lucke and Farage!
Along with the privilege of leadership comes responsibility. Appreciate your comment brother…
irrelevant111 JANUARY 7, 2015 AT 4:17 AM Why not?
Onrgaia JANUARY 7, 2015 AT 4:58 AM JC, please clarify whether there was a misspelled word in the following paragraph:
“When viewed through the lens of the multilateral framework and SDR basket adjustments which are coming this year, the fragmentation of the Euro currency makes sense as a basket of currencies in a basket of currencies situation is unworkable and adds deeper layers of dysfunction.”
Instead of “Euro currency makes sense…” should it have been “Euro currency making sense…”?
I re-post some of your articles (with full credit of course and link-backs). I’d like to re-post this article but I need to verify if this was a typo. ‘Makes’ vs ‘making’ gives the paragraph 2 different meanings. i.e. ‘makes’ doesn’t jive with ‘unworkable’ whereas ‘making’ does. Thanks. You rock.
JC Collins JANUARY 7, 2015 AT 2:00 PM No spelling mistake, perhaps I should have put a comma at the end of “makes”. A basket of currencies (euro) inside a basket of currencies (SDR) when the SDR will be used as the reserve unit of account is problematic.
aamichael666 JANUARY 7, 2015 AT 5:16 AM Even the German Banking Sector cannot agree with Draghi on how to keep a fiscal union together with the nations of the EuroZone,
so if you are correct Mr Collins, that the big players such as China and the US are really going to consider an SDR solution, then my take is that it won’t work anyway.
Definition of insanity is repeating the same bad experiment expecting a different solution.
Every large player in the world sitting at the same table integrating their economic policy when all the bankrupt ones want to QE and the solid economies are all Austrian and want deflationary austerity?
I can’t see it, but if you are correct then they are more insane than I thought before.
If you look at Russia and the sanctions for instance, how could any Russians really want to give the US a softer landing via an SDR compromise rather than simply letting the USD rubber band snap allowing the US to experience what the 1990’s in Russia was like?
The Russians are quite on board with IMF Quota Reform, but all they are interested in is removing the US veto, which would mean that the WRC status is toast and that band would snap anyway a lot quicker than the US could handle; the military budget would be the first to be majorly scaled back, and this is in Russia and China’s short term wish list.
Also, if China is all on board with the US to engineer an SDR solution, then why would they save the Ruble (which they have been) when the Russians are interested in destroying the value of China’s USD Reserves?
It is possible that the Russia-EU-US friction is totally engineered together with the Chinese acting as an intermediary shock absorber in order to sell a tale of potential world financial chaos, only for the SDR white horse to be the solution … it is possible.
However I believe the Russians have legitimately been effecting a revolt against the Petro-Dollar system, because they also don’t want to see Arabian Oil and Gas kill their Euro market,
in which case the Chinese actions to help out Russia when they are also teetering with internal problems is a little hard to understand, especially seeing that the Russian natGas into China will not start running for quite a while, requires large capex, and China’s new larger Ruble reserves cannot be offloaded directly into Russian goods and services.
Granted, the Chinese may not want to depreciate their USD reserves all in one hit, but if they are truly working with countries such as Russia to create a Yuan trade conveyor with the new bilateral swap facilities,
then the back story is that the Chinese are merely using this power as an insurance policy to drag out the pain on the US without triggering a war;
they know the US has great capacity to play dirty, and prefer the dirty attention and resources to be expended on Russia’s western flank rather than in South China Sea shenanigans perhaps.
It will definitely be an interesting year, but the thing to watch out for IMO is the Paris 2015 Climate Talks, because London and New York need a Carbon Derivatives and Credit Trading system to solidify a world government that they still wield the most power over; and the Chinese have been playing rope-a-dope up until now.
If they walk out of the 2015 talks and try further delay tactics like at Copenhagen 2009, then the fireworks will start. Controlling the CO2 content of the totally international zone known as the Air is the framework for a technocracy and a eugenics platform on the scale that Himmler would only have dreamed about.
John Kerry spends more time talking about Climate Change than banking and financial concerns, and there is a good reason for this, because the new carbon trading framework is actually a new economic paradigm for the world, so he is in fact talking about finance and not environment.
The US and UK are trying to trap developing nations in a trap, and the missing piece is China where free trade has sent all the industry (high CO2 output).
It cannot be done without China, but perhaps China would prefer simply bilateral swap agreements with these countries to displace Anglo-America, and to hell with participating in London and New York Carbon Credit frauds?
China is simply ‘pissing in the ear’ of the US and UK if you ask me, and all they really want is to do their own thing whilst the western world destroys itself, with China coming out on top with a stronger hand in developing nations which will keep these leaders at the steps of the Eternal City. Delay tactics while a wounded competitor bleeds out.
JC Collins JANUARY 7, 2015 AT 5:09 PM A few things Michael, the reform and structure of the IMF quota system will be operationally different than how cooperation between the Euro countries has been organized. Will it work? Maybe. Maybe not.
Russia is not interested in hurting America, only in establishing its position within the multilateral system. I don’t see Russia being interested in “destroying the value of China’s USD Reserve”.
And the US has been reducing its military spending already, even stating that they will reduce the size of the military to WW2 levels by 2020.
China has been internationalizing the RMB to have it included in the SDR basket. The motivating factor is not to weaken the USD but strengthen the RMB for equality against the dollar.
In regards to climate talks, I would recommend rereading the post The Engineering of Global Public Goods, as the environment is one of the main components of the multilateral framework.
No part of the world can be destroyed without taking the rest with it. China has been very vocal about their support for the international institutions, and the IMF and G20 in particular.
Everything is so interconnected that the multilateral is the only real solution, outside of complete economic collapse.
This will become more apparent and visible in the coming months. The structure we discuss here remains the same from month to month. Watch for the subtle changes in the conspiracy stories as they attempt to continue fitting the facts on the ground. Whether we like it or not, the multilateral system is emerging from the chaos of the USD system.
aamichael666 JANUARY 8, 2015 AT 4:04 AM Thank you for the reply, and I do value this opinion, my point of disagreement with it however is only marginal, in that a multilateral system while being the only way to avoid chaos, is preferable to all players until the current major player starts to play too dirty.
When you say “Everything is so interconnected that the multilateral is the only real solution, outside of complete economic collapse.”, this only holds firm until a major player such as the USA, UK and Arabian compact tries to cause an actual economic collapse (chaos) in Russia, and at this point the power players in Russia will discard this as a valid law of the current jungle.
Russia sees its Oil and Gas access to the EU market as the skeleton that it’s entire Russia 2.0 is built upon (there is no Russian economy outside of this in reality), and the West (US & UK mostly) is not trying to simply weaken this at the moment,
they are trying to fully resurrect a Berlin Wall in economic terms, or to depose Putin and place a Beresovsky type into power, who will sell off Gazprom and Rosneft to the Seven Sisters who still sit behind the boards of their splinter sisters … in connection with Arabian fossil fuel dictators of course.
Your thesis in my opinion revolves around the world ‘elite’ consensus that chaos is undesirable, but time and time again, throughout history we see that National pride and security, when threatened by this same destructive force, is more willing than not to project chaos externally rather than bend over and accept it domestically;
I see this as the dominant force still at play today rather than any submission to Western Finance built on a fear of war; this is in contradistinction to your thesis. The Russian mind does not work this way, where fear overrules Nationhood, and thank God it doesn’t.
I’m not simply holding this opinion to have an argument, I see *currently* the USDollar-or-Toast scenario taking centre stage, which is now the option being played rather than the Multilateral scenario which is it’s antithesis.
Of course you are correct that the Russians very much want a multilateral scenario to play out, and it would have, if only the City of London had not been blocked from being a Euro clearer for derivatives and securities …
*this single event*, where the EU Courts are now being controlled by a ‘Continental’ finance mentality, rather than the up until now ‘Atlanticist’ status-quo, can explain why the IMF Quota Reform was not even tabled in 2014 in Congress.
It sounds strange that an eventuality regarding the City of London could dictate policy in DC, but this stems from the fact that people do not fully understand what London truly is;
the hub for the worlds biggest dark pool of finance, from which all major regional cartels have been dove-tailed into; conspiracy theory? absolutely not …
there is a reason that the DTCC which has a monopoly over the clearance of ALL USD Derivatives created and traded for the US is *domiciled in the City of London* and NOT New York City,
and it is because USD Derivatives are NOT under the purview of FINRA et al. US TBTF’s are reliant on the City of London, and their Crown Tax Haven (more correctly a secrecy haven) system,
and the plan was to swap the lions share of created USD denominated Derivs to Euro denominated Derivs, then to move to multi-lateralism (you would then have been correct),
and thus burn down the US *slowly* into a 3rd world country, swapping USD denominated paper into SDR (etc…) and transferring US military prowess to a newly rising Europe ….
but the hiccup is that powerful elements within the EU and Russia are considering a Eurasian mentality, and this means the City of London is being ousted via the EU Courts, thus the IMF Reform cannot be passed, and the USD cannot now be dumped by this dark pool system and its rulers.
This is a Financial Hegemonic Block vs Financial Anti-Hegemonic Bloc battle; the peoples are simply chattel property and of no real consequence.
The major block is Anglo-American Finance, and it lives ‘spiritually’ in the City of London; if domiciled in the EuroZone then it becomes visible to the overt finance system, and it only lives now because it does its business in the dark-pool.
The multilateral option was only desirable to the owners of this Block whilst this Block were to be the hegemonic *Rulers* of the new system, the centerpiece being the Euro,
however the multilateral system being championed by the likes of Russia and China are trying to diminish this Block in power as to render them out of dominance, and this Block is not a Silver Medalist;
it is Gold or nothing; thus the multi-lateralism is a schizophrenic pipe dream where chaos is the unwanted but inevitable outcome … a self fulfilling prophecy where the love of money only ends with war … IMO.
Like I said, I’m not trying to have an argument, but people need to look to this EU Court action against the City, and also look into entities such as the DTCC to find the back story that rules the front pages of the mainstream press.
2014 was not a ‘magic year’ for Lagarde, because in Mid 2014 the EU Court ruled against the City of London, and then an appeals process started … the only way out now for these dark pool offshore rulers is war.
JC Collins JANUARY 8, 2015 AT 12:24 PM I’m assuming you’re referring to the same DTCC which does the clearing and balancing for China as well. See following links:
There are thousands more.
And could you please provide some links or references to support your claim of a court case filed against the City of London by the EU. Outside of pollution and emission cases there is nothing that I can find.
The whole storyline appears improbable. Sorry pal.
aamichael666 JANUARY 8, 2015 AT 12:47 PM I’ve posted these links about the EU Court and City of London before on your site;
Here is one again.
As for the DTCC serving China; of course they do, because China has USD investments and needs to keep them in the DTCC depository for trading purposes, everyone does.
As for Dark Pool Finance … improbable? Eveyone knows that more Derivs are unaccounted for than those that the BIS reports on … same for Securities. Pal? What, because I have an alternative theory?
Comments may be made at the end of Part 2 Thank You