Post From Philosophy of Metrics
Reader Thoughts On “Regional War, Crude Production, And A Depreciating Dollar ”
Susan: Thanks for this, JC. But you didn’t mention Israel’s hopes and fears – surely they have some interest in this matter?
JC Collins: Susan, Israel has been staying relatively quiet about this whole mess. Though a framework for a trade agreement between Russia and Israel has recently been reached.
Here’s an article from last Sept which shows a growing relationship between both countries.
Israel is protecting its regional interests by aligning itself with the new power base. Iran may not like it, but Russia will provide Israel with a level of geopolitical protection. Everyone is hedging relationships and strategies.
Joan: Hi JC. Started reading your freepoms recently and I think they’re brilliant! I would like to question you regarding the current strenght on the USD that began mid 2014.
Naturally, the monetary policy divergence between the Fed and the ECB and BoJ triggered it, however, it’s difficult for me to believe this divergence has not been deliberate.
But anyway, deliberate or not, how do you fit the fact that the Fed let the USD get so strong after mid 2014 within your transition to multilateral framework theory? I can see several reasons for that, that can still fit in your theory, but would like to know what you think of that, if that’s possible of course. Thanks very much in advance!
JC Collins: Joan, thanks for coming on board and reading. There has been a lot of information presented on this site about the dynamic between the USD and Chinese renminbi.
The strengthening of the dollar was a strategy for sure. It has placed the US in a much better monetary position in the lead up to other changes. As growth numbers would suggest.
But the underlining problem is the account imbalances in the system itself. The only way to correct these imbalances is to diversify the foreign exchange reserves. Currently these reserves are predominantly dollars. The internationalization of the RMB will work towards that goal.
The strengthening of the dollar fits perfectly with the multilateral transition for the simple reason it is creating the necessary political momentum to shift towards a multicurrency framework based on the USD, RMB, and euro. Nobody wants a stronger dollar. Not even the US monetary authorities.
I have stated here over two years ago that it would be the normalization of monetary policy by the Fed which would begin the monetary transition process. That is exactly what has happened. First QE ended, and then there was the first of many interest rate increases.
Now pressure is building to shift the exchange rate regime to accommodate and promote global growth. Does this answer your question?
Tony: Greetings Mr. Collins; There is an interesting divergence of opinions about what is going to happen with China’s currency & the USD..
It appears you are projecting the depreciation of the Dollar, and an upward revalution of the Yuan/Reminbi …. While some bankers are forecasting otherwise…
Raoul Pal of Global Investors Fund is projecting a 50% devaluation of the Yuan…
It will be interesting to see what will happen…..IF ANYTHING.. Take Care Tony
Muad'Grumps: Sources said China will launch a new April 19 RMB price of gold
Tony: Greetings Mr. Grumps; To tell the truth, I banking on China to follow thru on a launch of RMB gold price in April…….It was supposed to have been done last October…But something happened along the way…
The London, Ny gold ‘fix’ has capped the precious market for several decades now…While China ‘consumes’ more than an estimated 80% or more of all the gold in existence and still having NOTHING to say about the price…
Some how, I wish that China would link [fix] the RMB to the price of gold rather than to a basket of currencies which they seem to be attempting to do…
Oddly enough, gold happens to be doing very well in some Emerging Market Currencies and a few Developed Market currencies as well..
So…China could indirectly link its currency to gold thru some of these other currencies that are depreciating to gold in the ‘basket’…
It all sounds to complicated for me to understand…. Just a thought Take Care Tony
Muad'Grumps: I don’t expect China to peg to gold. It will let it float as an adjustment mechanism for the reserves of itself and trading partners after the Eurasian/BRICS trading bloc devalues against gold en masse as the SGE wrests pricing power away from NY and the City.
Afterwards gold will be managed at a much higher level as suits China. The official gold reserves listed at SAFE are but a fraction of what it really has if “hidden gold to the people” is counted.
John John: Important Situation Update, actions to decrease the importance of petrodollar, a.o.,
And is one step closer towards introducing gold standard:
In Switzerland, unconditional basic income could become reality if Swiss people vote for it: