Thanks My Ladies for letting us share from your private chatroom
MEMPHIS: Yesterday (or was it the day before) I wrote a bit about the inherent problems that always arise with a reserve currency that also serves as a domestic currency. Armstrong has today written directly on the topic and I would be remiss in not pointing to it.
It is well known to those here that the world is slowly transitioning away from it's dependence on our currency and so my intent is that we have an appreciation for the "why" for it is in this level of understanding that we can appreciate the vastness of what is taking place.
In so doing we can hopefully discern some of the effects that this will have on us personally for this shift away from the USD is a planned one. It is being carried out with great intent and purpose and in further study we can (I believe) draw some conclusions as to what the future will hold by looking back to history!
Recall a basic tenant that I shared earlier that is so very important to be held onto:
"In the extremes, any nation will always do what is in their own best interest."
This has an important application to the discussion of the USD as a world reserve and if anyone does not accept the above as being a basic truth then we ought to pause and talk about it!
This is certainly not easy stuff to convey in a few words but if you'll bear with me what follows is some quotes taken from today's blog with my attempt to illuminate them.
[Here we see evidence of domestic pressure to do what's best for America]
"...the Fed is in a box and unless they raise rates, the next crisis in pensions will wipe out far more than most people anticipate."
[Now we look at external forces pulling the opposite]
"...everyone from the IMF to most other countries are begging the Fed not to raise rates for there are some $9 trillion dollar shorts out there."
[Compounding the problem we now read of other issues constraining the FED such as the servicing of our debt which is now tilted heavily to short term paper]
"...It is also true that cash is rushing into the short-term government paper (flight to quality) and raising rates will escalate the federal budget..."
[now we point to the real culprit: the USD being the world reserve]
"This entire problem illustrates that this is not merely a dollar and Sovereign Debt Crisis; this is also a RESERVE CURRENCY crisis."
"The IMF and other nations are pressuring the Fed not to raise rates because of external economic conditions. The Fed is caught in a real crisis where domestic policy objectives are being influenced by international policy of other nations — the INTERCONNECTIVITY. This is starting to peel back the layers of the global economy that are like an onion with everything connected."
to read in it's entirety:
MEMPHIS: it's quite the corner that the FED has painted themselves into! Years of low rates have favored the bankers and now it is soon to be time to come clean and raise rates or else sacrifice the entire pension system.
In my mind I have equated a decision (to not raise rates) to that of waving the white flag of surrender. We do not want the FED to wave this flag and yet the alternative causes the world at large to suffer at the hands of our domestic policy decisions.
Either way we can (and should) expect....consequences...
MEMPHIS: Although I discount opinions in forming our model of the world it is helpful at times to use them for the purpose of forming an hypothesis to then be either proven or disproven (think geometry here).
One extreme possibility would be that the FED raises rates to protect any hope of the politicians maintaining order domestically and this then opens up (IMO) the possibility of a sudden and quite turbulent shift away from the USD.
"Sudden" and "turbulent" are words that the men (and women) behind the curtain generally avoid at all costs and so we are left to think further.
Here's a question that needs answering:
Is the IMF positioned to roll out the SDR as a global reserve in the near term? I do not profess to know the answer.
There have been hints that many debts have been denominated in SDR in recent years and yet this does not prove anything as there would need to be GREAT liquidity available for any SUCH quick and sudden "calling up to duty" of the SDR.
HearingGod: My guess is that these people are not stupid and that the IMF is ready .... Mary has always said that the USD is not in near danger of sudden or drastic collapse .... In not sure that I agree and I think that if others don't realize the imminence of the sudden changes that could take place then the swing could be rapid. Just my thoughts
MORE NEWS TODAY:
Princess DD: Zarif: Iran Sanctions' Removal to Eliminate Barriers for Trade With Russia
The lifting of sanctions against Iran will eliminate all barriers for trade and economic cooperation between Iran and Russia, including in the oil and gas sectors, Iranian Foreign Minister Javad Zarif said Monday. Read more: http://sputniknews.com/politics/20150817/1025828136.html#ixzz3j49X3bjp
Princess DD: Currency war set to continue – Danske Bank https://www.fxstreet.com/news/forex-news/article.aspx?storyid=574fa0be-7a84-4b51-a699-5be7331056b4
Princess DD: Chinese Yuan remains in the spotlight – Societe Generale https://www.fxstreet.com/news/forex-news/article.aspx?storyid=a4639a56-59df-49dd-a0a3-732747f9d551
Princess DD: Markets keep vigilant on the PBoC – Deutsche Bank https://www.fxstreet.com/news/forex-news/article.aspx?storyid=f76e66f5-c00d-493f-bc55-ef91cd3f4cd5
Princess DD: China – New exchange rate mechanism triggers global turbulence (From Friday) https://www.fxstreet.com/analysis/week-ahead-erste-bank/2015/08/14/
Princess DD: Broad based USD strength extends in Asia, Greece back in focus https://www.fxstreet.com/news/forex-news/article.aspx?storyid=a96969e8-647e-4139-9f95-d26f5c75bf86
Princess DD: Eight reasons why China’s currency crisis matters to us all http://www.theguardian.com/world/2015/aug/16/china-currency-crisis-yuan-devaluation-why-it-matters
Princess DD: China's devalued currency, blood and windfalls http://www.jamaicaobserver.com/columns/China-s-devalued-currency--blood-and-windfalls_19223835
Princess DD: Edward Chancellor: The cost of China’s devaluation http://blogs.reuters.com/breakingviews/2015/08/17/edward-chancellor-the-cost-of-chinas-devaluation/
Princess DD: Renminbi is now a global story: Zeti Read More : http://www.nst.com.my/node/96520
Princess DD: Exclusive Forex Broker Financials Revealed China Devalues Nenminbi Forex Weekly Look Back http://leaprate.com/2015/08/exclusive-forex-broker-financials-revealed-china-devalues-renminbi-forex-weekly-look-back/
Princess DD: The Chinese currency will soon be global http://www.arabnews.com/news/792286
Princess DD: RMB's entry to SDR basket comes at a political price: commentary….The IMF executive board will next meet in November to review the SDR compsition and its valuation. http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1101&MainCatID=11&id=20150817000044
Princess DD: IMF set stage for China currency shift http://www.ft.com/intl/cms/s/0/47b51b80-42d9-11e5-9abe-5b335da3a90e.html#axzz3j4BcPROq
Princess DD: How debate on the renminbi devaluation is missing the bigger picture http://splash247.com/how-debate-on-the-renminbi-devaluation-is-missing-the-bigger-picture/
Princess DD: [Andrew Sheng] Joining SDR club gives yuan reserve currency status http://www.koreaherald.com/view.php?ud=20150817000988
Princess DD: MORGAN STANLEY: The RMB is going to weaken to 6.60 and China will need more stimulus http://www.businessinsider.com.au/morgan-stanley-the-rmb-is-going-to-weaken-to-6-60-and-china-will-need-more-stimulus-2015-8
Princess DD: RMB’s depreciation is another step toward market-oriented exchange rate system http://www.dailytimes.com.pk/business/16-Aug-2015/rmb-s-depreciation-is-another-step-toward-market-oriented-exchange-rate-system
Princess DD: New RMB regime: halfway house before free-float http://www.ft.com/intl/fastft/376341/new-rmb-regime-halfway-house-before-free-float
Princess DD: How others view China's move to devalue the renminbi http://www.scmp.com/news/china/policies-politics/article/1849055/how-others-view-chinas-move-devalue-renminbi
Princess DD: China can, and should, aim to achieve an effectively floating exchange rate system within 2-3 yrs: IMF http://www.knnindia.co.in/global/china-can,-and-should,-aim-to-achieve-an-effectively-floating-exchange-rate-system-within-2-3-yrs:-imf/33-10601.go
Princess DD: US experts, IMF support China's move to improve FX formation system http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20150814000002&cid=1102
Princess DD: Why Beijing Reformed Its Exchange Rate System Now
The move is China's way of telling the IMF – which is mulling adding the yuan to the Special Drawing Right basket – that it wants to cooperate http://english.caixin.com/2015-08-12/100838849.html
Princess DD: IMF Turnaround on the Yuan
The fund no longer sees China as a currency manipulator, a change that could provide leaders in Beijing with an incentive to reform an ossified financial system http://english.caixin.com/2015-06-12/100818787.html
Princess DD: China hoarding gold in move to challenge dollar
'I wouldn't be surprised if they have 15,000 tons' Read more at http://www.wnd.com/2015/08/china-hoarding-gold-in-move-to-challenge-dollar/#hTlScRswQJ4Yc21g.99
Princess DD: Fitch: China's Yuan Depreciation Highlights Economic Challengeshttp://www.business-standard.com/article/news-cm/fitch-china-s-yuan-depreciation-highlights-economic-challenges-115081700598_1.html
Princess DD: China kills 3 birds with yuan stone: QNB http://www.gulf-times.com/eco.-bus.%20news/256/details/451346/china-kills-3-birds-with-yuan-stone:-qnb
Princess DD: IMF warns of 'disorderly correction' if China reform progress slows http://www.hindustantimes.com/business-news/imf-warns-of-disorderly-correction-if-china-reform-progress-slows/article1-1380320.aspx
Princess DD: ACADEMIC OPINION: China’s Three Devaluations In A Row – Its Impact http://fijisun.com.fj/2015/08/15/academic-opinion-chinas-three-devaluations-in-a-row-its-impact/
Princess DD: China’s SPDR Gold Trust (GLD) Stash Rises 1.1% As IMF Backs Currency Devaluation
Bidness Etc takes a look at the reasons as to why China increased its bullion reserves https://www.bidnessetc.com/50226-chinas-spdr-gold-trust-gld-stash-rises-11-as-imf-backs-currency-devaluation/
Princess DD: Greece bailout deal: Angela Merkel expects IMF involvement
German chancellor tries to reassure sceptical MPs ahead of Bundestag vote by saying IMF will take part in €86bn bailout http://www.theguardian.com/business/2015/aug/16/greece-bailout-deal-angela-merkel-expects-imf-involvement
Princess DD: IMF Participation in Greek Bailout Is 'Critical': Fuchs http://www.bloomberg.com/news/videos/2015-08-17/imf-participation-in-greek-bailout-is-critical-fuchs
Princess DD: Indonesian Rupiah's Pace of Depreciation Will Slow http://www.bloomberg.com/news/videos/2015-08-17/indonesian-rupiah-s-pace-of-depreciation-will-slow
Princess DD: Emerging Currencies Extend Worst Selloff Since Turn of Century http://www.bloomberg.com/news/articles/2015-08-17/emerging-stocks-fall-to-four-year-low-as-ringgit-extends-decline
Princess DD: China's long march to currency reform takes a step forward https://news.yahoo.com/chinas-long-march-currency-reform-takes-step-forward-103301894.html
Princess DD: Market Talk - Currency: Another shot fired in the global currency war http://www.nbr.co.nz/article/market-talk-currency-another-shot-fired-global-currency-war-jw-177283
Princess DD: Peso is putting pinch on shoppers …It has fallen more than 20% this year
Princess DD: The Troubled Economy of Brazil by the Numbers http://247wallst.com/economy/2015/08/17/the-troubled-economy-of-brazil-by-the-numbers/#ixzz3j4TSLSCR
Princess DD: Merkel defends tough line on Greece, hails will to reform http://www.pressexaminer.com/merkel-defends-tough-line-on-greece-hails-will-to-reform/38720
Princess DD: Its interesting that everyone is working on reforms lately.
Princess DD: The Yuan's Wild Ride towards SDR Status http://www.actionforex.com/analysis/weekly-forex-fundamentals/the-yuan%27s-wild-ride-towards-sdr-status-20150815246548/
The Yuan Devaluation is more likely a sign of market reforms http://knowledge.ckgsb.edu.cn/2015/08/17/finance-and-investment/yuan-devaluation-is-more-likely-a-sign-of-market-reforms/
Princess DD: Making Sense of China’s Currency Devaluation https://www.trefis.com/stock/spy/articles/310131/making-sense-of-chinas-currency-devaluation/2015-08-17
Princess DD: China May Have Given US Fed an Excuse to Delay Rate Rise http://www.newindianexpress.com/business/news/China-May-Have-Given-US-Fed-an-Excuse-to-Delay-Rate-Rise/2015/08/17/article2978764.ece
Princess DD: Yuan slide: A silver lining for gold? http://www.newindianexpress.com/business/news/China-May-Have-Given-US-Fed-an-Excuse-to-Delay-Rate-Rise/2015/08/17/article2978764.ece
Princess DD: Zambia backs plans to make Chinese currency part of IMF SDR http://www.coastweek.com/3833-focus-03.htm
Princess DD: Asia must be ready for RMB's increasing role: Malaysian central bank governor http://www.globalpost.com/article/6632134/2015/08/17/asia-must-be-ready-rmbs-increasing-role-malaysian-central-bank-governor
Princess DD: How cheaper yuan is affecting Hong Kong http://www.ejinsight.com/20150817-how-cheaper-yuan-is-affecting-hong-kong/
Princess DD: Market expected to have a volatile week http://vietnamnews.vn/economy/274543/market-expected-to-have-a-volatile-week.html
Sager: The Turkish lira collapse, foreign debt and banking risk
Geopolitics is now another source of risk for the Turkish lira, government debt and Istanbul equities.
Turkey faces its worst currency and banking crisis since the failure of Lehman Brothers, HSBC and Citigroup's exit is a vote of no confidence in Turkish banking (Wall Street and the City of London CEOs cringe at Erdogan's "international interest rate lobby" tirades), the risk of a sovereign debt downgrade and external debt crisis is all too real.
The lira can well fall below three to the US dollar in the next interest rate cycle. Sadly, this means Gulf and Arab investors with billions of dollars in Turkish financial exposure face crippling losses as economic, geopolitical, sovereign, banking, inflation and funding risk will only escalate this autumn.
Princess DD: Foreign firms scramble to fix Iran's refineries once sanctions end https://news.yahoo.com/foreign-firms-scramble-fix-irans-refineries-once-sanctions-125647966--finance.html
Princess DD: Once-ascendant BRIC economies hit the wall http://www.ocregister.com/articles/china-677386-brics-india.html
Princess DD: Putin suggests establishing group visa-free exchanges as part of tourist cooperation between BRICS countries http://rbth.com/news/2015/08/17/putin_suggests_establishing_group_visa-free_exchanges_as_part_of_tourist_48550.html)
Princess DD: SPECIAL DRAWING RIGHT REVIEW
IMF Work Progresses on 2015 SDR Basket Review
Princess DD: Get ready for yuan in IMF basket
Princess DD: Central bank revises yuan-dollar rate
Princess DD: Get ready for yuan in IMF basket (different source)
Princess DD: Other Asian Currency Devaluations Drove China’s Currency Down
Experts claim that China’s devaluation of the yuan was dwarfed by the massive upward valuation of the trading currency over the past few years, and had to be taken match similar reductions in the levels of other East Asian currencies. Read more: http://sputniknews.com/analysis/20150815/1025774302.html#ixzz3j5Qqqy2R
Princess DD: CURRENCIES: Dollar Inches Higher As Yuan Stabilizes http://www.nasdaq.com/article/currencies-dollar-inches-higher-as-yuan-stabilizes-20150817-00507
Princess DD: Emerging markets currencies pummelled by renminbi ripples http://www.ft.com/intl/cms/s/0/23394044-44da-11e5-af2f-4d6e0e5eda22.html#axzz3j4BcPROq
Princess DD: Behind the Top Ten 'Troubled' Currencies http://www.bloomberg.com/news/videos/2015-08-17/behind-the-top-ten-troubled-currencies
Princess DD: Is Oil Heading as Low as $15 or $20 a Barrel? http://www.bloomberg.com/news/videos/2015-08-17/could-lower-for-longer-oil-mean-12-per-barrel-
Princess DD: Emerging currencies extend longest selloff since 2000 (36 min ago) http://www.livemint.com/Money/Dw8aPDLYZ4zXjam6X2rONI/Emerging-currencies-extend-longest-selloff-since-2000.html
Princess DD: Global Stocks Lower as Markets Turn to Fed
Investors turn focus to timing of U.S. interest rate rise http://www.wsj.com/articles/global-stocks-boosted-by-steadier-yuan-progress-on-greeces-bailout-1439799273