Economics, Free Pom
The New SDR Is Here!
October 1, 2016
And Why Philosophy of Metrics is the most Accurate Source on the Internet
By JC Collins
The historic moment which we have long discussed has arrived. As of October 1, 2016, the Chinese renminbi is a part of the weighting composition of the Special Drawing Right (SDR) of the International Monetary Fund (IMF). The RMB joins the USD, British pound, euro, and Japanese yen in the SDR basket, and will see its international status develop even further as the once unipolar USD dominated international monetary system begins its transformation into a multilateral framework.
Researching and presenting information on this process has been one of the core tenets of Philosophy of Metrics (POM).
There are many who would deride me for this post. I don’t care. Let’s call a spade and spade and not mince words when it comes to such important matters as your financial knowledge and understanding about how the monetary world functions.
From the moment I began writing about the transformation of the international monetary system the approach I took was one of accountability and integrity. If I was to be writing about such important matters it was vital that the information presented was accurate and well researched. Boomerang karma was not something I was interested in.
As such, it became a personal responsibility of mine to ensure the information was accurate and all predictions could in time be proven and validated.
After almost three years of researching and writing I stand here now feeling fantastic about both my approach and my intent. It was never my desire to attempt getting rich of POM or continue to grow a readership based on lies and misleading fear based presentations. As others continued to promote fear and destruction surrounding these important topics, I stayed grounded and continued on the course of logical and provable conclusions.
Every once in a while I would push the boundaries of my own morality and write a post with a touch more flare and excitement. Such posts were often picked up by larger sites such as Zero Hedge. At times I would even bait certain online demographics with posts such as “Why You Should Stop Listening to Jim Willie”. I did these things with the full knowledge that the thesis which I was presenting here on POM was accurate and would in time validate my other semi-pompous pronouncements exposing the promoters of fear and ignorance.
Many expressed their dislike when I turned the site into a subscription based service. Such concerns are understandable but also stand in stark contrast to the ideals of human worth and capitalism. Should I research and labor for free? The small amount of remuneration which the subscriptions accumulate is nothing compared to what I could have gained if I had succumbed to the temptations of fear promotion and developed misleading scripts for personal gain and increased readership.
The accuracy of the information which I have worked hard to research and present here for those interested stands as the validation of my intent and purpose. The large majority of the online alternative financial and economic community have continued to follow the falsifications of those who promote a fear of what isn’t easily understood. I have attempted to shed light and bring understanding, and I thank all of you who have traveled thus far with me.
With that being said, below is a short list of the major predictions and aspects of the POM thesis which have been validated over the last three years:
1. The Chinese renminbi has been added to the SDR composition effective October 1, 2016. This has been predicted here for three years and has been a staple of the POM thesis.
2. International institutions, such as the World Bank and the China Development Bank, are issuing SDR bonds, with more to come. This has also been a staple of the POM thesis since the first installment of the SDRs and the New Bretton Woods
3. The long delayed IMF 2010 Quota and Governance Reforms were ratified by the US Congress. When so many said it would never pass, POM maintained that the script moving forward would suggest that these reforms would eventually be implemented, and they were.
4. China created an alternate composite exchange rate for the renminbi within the Bank for International Settlements. This amounts to a partial de-facto unpeg from the USD. We have reviewed on multiple occasions the strategy which China will need to follow in order to effectively adjust the exchange rate regime which it maintains against the USD.
5. Against the predictions of so many, the Federal Reserve began the process of increasing interest rates. No doubt there has only been one moderate increase so far, but further internationalization of the renminbi and reserve diversification will allow for additional increases in the months and years to come.
6. China International Payment System (CIPS) was launched last October and is now entering into the second phase of its implementation. Phase Two will allow for a further widening of the trading band between the RMB and USD, which will in turn give the Federal Reserve additional room to raise rates.
I predicted almost two years ago that CIPS would not overthrow or compete with the USD dominated SWIFT. I suggested that both platforms would share a base code and would work together to transform the monetary framework. That is exactly what is happening.
7. China strategically stated their gold reserves for the first time in 6 years in the lead up to the SDR announcement last year. This exact strategic announcement by China was predicted here on POM.
8. The BRICS institutions are moving forward on integration with the World Bank and IMF. This particular prediction is loaded with insight as the majority of the alternative media covering financial matters and the international monetary system completely rejected the idea that China, and to a larger extent the BRICS nations, would align with the “western dominated” institutions.
All of those who openly expressed such a conclusion did not, and do not, have a functioning understanding of the mechanisms which were, and continue to be built, to support the multilateral framework.
9. Renminbi internationalization and liberalization has picked up pace and will continue to be a driver of global growth in the months and years to come. RMB bonds and liquidity will continue to contribute to the rebuilding of global growth.
10. China continues to shift away from a trade exporting model and towards a trade services model based on renminbi denominated products and increased domestic consumerism. This is now being openly stated in both western and eastern media. One need only Google the shift in China’s economic strategy for the 21st
11. The US dollar has not collapsed and died as so many widely known names have predicted, and in fact is being slowly re-engineered as stated here for the last 3 years. The US ending the 40 year crude export ban signaling the end of the petrodollar arrangement is further evidence of this re-engineering.
12. We are in another October now and still the financial world has not completely crashed and World War Three hasn’t started. As predicted here.
13. Another staple of the POM thesis is that the internationalization of the renminbi, and subsequent RMB and SDR liquidity, would contribute to a new commodities boom. So far in 2016 we have seen commodities begin to turn and an upward trend is now clearly defined.
14. From the moment Donald Trump announced his candidacy for President of the United States I have expressed the opinion that he would win. When most considered it a joke or thought it was a longshot, we were discussing how the Trump script on ‘Making America Great Again” was completely aligned with the multilateral script unfolding in the international monetary system.
These are just the broad strokes and represent the major points which we have discussed. The USD has had a moderate fluctuation throughout the year but will soon begin to experience scalable devaluations. This is the other core tenet of the POM thesis, as it is based on the logical transition points which are required to shift the intentional monetary system towards a multilateral framework.
Once the composition of the foreign exchange reserve accounts around the world begin to be diversified with renminbi and SDR bonds the USD will be able to depreciate. Demand for dollars has remained high because there has been no viable alternative which could help take some of the international burden.
The rise of the renminbi, and broadening of the SDR, has created the opportunity for this reserve diversification to take place. As demand for the USD decreases the fundamentals will exist for moderate depreciations.
The overall depreciation will be in the 20% to 30% range. This depreciation will take place against the major trading partners of the United States, and will allow for the eventual increase of American exports. Increased exports means more domestic manufacturing and job growth.
As an interesting side note, Chinese investors have been busy over the last few years purchasing shutdown American factories and refurbishing old ones. It’s almost like they’re anticipating an explosion in American manufacturing.
Donald Trump is right on mark when he says he will be the greatest jobs president the world has ever seen. The status of the USD as primary reserve currency for the last 8 decades has put tremendous strain on the domestic economy. Now that the RMB, and to a larger extent the SDR, will be taking some of the load, the American monetary authorities can allow the dollar to depreciate and begin the process of rebuilding jobs and the nation.
The other Trump talking points, such as having NATO and other allies begin to pay their fair share, is also a testament to the reality of this monetary transformation. Once reserve diversification begins to take hold, the US will not have the additional dollars to contribute to international organizations like it has in the past.
The vast majority know nothing of this transformation of the international monetary system from what has existed since the end of WW2. October 1, 2016 will come and go with little fanfare. Some may begin to sense that something has changed, but exactly what that change is will not be well defined. Hidden in the marsh of online commentary, and ignored by the mainstream media, can be found the monetary truth. A truth which can no longer be denied. – JC