The Approaching Reset of International Currencies
By JC Collins
It has become increasingly clear to even the most patriotic analyst that
the last days of American dominance and hegemony are unfolding within the
geopolitical reality of Ukraine. All but the most blind amongst
the wasted western hordes, comprising America, Canada, and the European
Union, can see the approaching thunderclouds on the horizon.
Never has the structure mechanisms and operational methodologies of the
west been so exposed and obvious than in the desperate attempts to retain
dollar dominance in a world that has become openly opposed to
continuing its own subjugation.
Even the propaganda being directed at the western masses is a sad and
pathetic simulation of what use to pass for patriotic fervor. The
obvious contradiction between the facts and the fallacies is a thorn in the
minds of those who pay attention to such matters. Plausible deniability
is born from such diametric inconsistences and the western populations have
been well seeded.
What isn’t so obvious is that the simplicity of the unfolding
events are manufactured by the complexity of a much larger and almost
undetectable engineering.
This engineering is directing the flow of events to the ultimate
conclusion of dollar fault and a reversal of dominance. There are
some obvious giveaways to this scenario, the first of which is the United
States refusal to support the agreed upon International Monetary Funds 2010
Quota and Governance Reforms.
There has been much discussion about these reforms on this blog in the
series SDR’s and the New Bretton Woods. Many of the
readers here have participated in the collection of supporting
documentation and evidence to support the thesis that a method of
Hegelian Dialectic is being used to herald in a supra-sovereign
replacement to the dollar.
This replacement comes in the form of the SDR – Special Drawing Rights –
as issued by the IMF. We have covered how both China and Russia have
called for the implementation of an SDR system. We have watched as
the expected problem/reaction/solution technique has unfolded
in the Ukraine and elsewhere.
April has come and gone with no passing of the required Congressional
legislation to support the 2010 Reforms.
The G20 has issued a collective statement giving the United States until
the end of this year to enact the legislation. Yet both Russia and
China, who are implementing currency swap agreements and trade
agreements with other countries in an effort to bypass the dollar, are also
G20 members.
The actions of Russia and China fit the overall pattern of the
IMF’s vocal approach to using aggressive measures to bypass the dollar and
remove the American veto power on the Executive Board.
So what are we to think when the G20 gives America a life line?
More importantly, what are we to think that the IMF just pushed Ukraine
into action in the eastern region of the country by stating if they didn’t
get control of the country than the IMF loan would have to be restructured?
What are we suppose to make of the fact that the central banks of all
the countries, including America, Russia, China, Britain, etc., are all
controlled by the Bank for International Settlements? See the post “The Bankers Midwife”.
And now we have announcements coming from the BRICS countries that they
are in the process of setting up an alternative to the International
Monetary Fund.
It all seems like madness and chaos.
Yet it is anything but.
The IMF has been consistently sold as being an American institution born
out of the Bretton Woods Agreement at the end of World War Two. It is
said that the IMF has always been the tool of western nations to control
and direct the economic policies of the undeveloped countries.
Point of note being that the IMF has never had a non-European Managing
Director.
The 2010 Reforms proposed a restructuring of the Executive Board and a
change to the quotas of all 188 participating countries. But
what isn’t openly revealed or discussed is the ineffectiveness of the board
itself. In actuality the board is too large for any effective
group decision making. The 24 permanent members representing all 188
countries is something of an American stooge with the US having majority
voting power. If the US doesn’t agree than it doesn’t happen.
The 2010 Reforms were not going to make any significant changes
to this veto power.
From this we can determine that the warmongering appearance of the IMF
this week over Ukraine will ultimately be blame shifted back on
America. This will be one of many realities used to strip the US of
its power position within the institution.
In essence, the 2010 Reforms were always meant as a red herring which
would lead into an even greater restructuring of the IMF to the acceptance
of all other countries, including the BRICS. They were never meant to
be passed but only to draw the worlds attention to the inherent
deficiencies within the institution and the American reluctance to give up
power.
The BRICS threat to counter the IMF with their own version is simply one
part of the bigger “reaction” process of the Dialectic.
Two opposing versions of the IMF is not competition but economic
dysfunction. As stated previously, the two institutions may run
parallel for a short period of time but the partition will only lead to a
tighter resolution on consolidation of sovereign debt and the
implementation of a new fixed exchange rate system based on the SDR as an
anchor.
Let’s step back for a moment before moving forward.
The Bretton Woods Agreement of 1944 was set up as a means to
economically rebuild the world after the war. All countries
agreed to use the American dollar as the reserve currency by which trade
would be balanced. A fixed exchange rate regime was put in place and
all appeared right with the world.
By the 1950′s it became obvious that the Bretton Woods arrangement
really only benefited the western world. The West saw the highest
economic growth, full employment, and relatively modest inflation. As
covered in the previous posts titled “The New Exchange Rate System” and “Why the Vietnamese Dong Will Reset”, dollar inflation
poured into undeveloped countries as a form of dumping grounds.
The disparities and level of dollar printing eventually lead to the
threat of other countries moving away from the dollar arrangement.
Without getting into all the details, as I’m sure most readers already have
a basic understanding of the sequence of events, in 1971 the US removed the
dollars peg to gold and by 1973 their was a floating exchange rate system
in place. This was the end of the Bretton Woods as agreed upon in
1944.
Floating exchange rate regimes lead to extreme shifts in rates.
This effect is multiplied dramatically when the dominant currency has the
ability to use institutions like the IMF and World Bank to their advantage.
Also with floating exchange rate systems there is an increase in capital
mobility across borders. On the surface this appears beneficial to
all economies and is sold as being dynamic and competitive, but in reality
it is anything but.
Before explaining that statement further we need to understand two
important terms, which also tie in with the conclusion of this essay.
Microprudential Risk is the level of threat to the solvency or economic
viability of individual financial institutions.
Macroprudential Policies are implemented to reduce the extreme risk in
aggressive financial sector environments.
Most of the readers here will not be surprised that I have introduced
two more micro and macro terms, as the opposing paradigms are a major
component of what is written on this blog, whether economic or esoteric.
Since floating exchange rate systems lead to an increase in
international capital flows, it can be further determined that an
increase in capital flows lead to an increase in macroprudential risk,
which without offsetting policies, will lead to extreme credit booms and
asset bubbles.
This is what the world has experienced under the floating exchange rate
system dominated by the American dollar. And all central banks and
economies have fallen victim to the regime.
The coming of a new international financial system can no longer be
denied. We are now seeing the beginnings of restrictions on cross
border capital movements and additional tightening of bank and capital
regulations as detailed in the Basel 3 regulations of the Bank for
International Settlements. These restrictions and tightening of
regulations are the forbearers of a return to a fixed exchange
rate regime.
After the 2008 financial crisis the G20 countries conveniently asked the
BIS and IMF to develop the framework for a macroprudential policy to
reduce risk and implement a new fixed exchange rate system.
It has been my proposition that this new fixed exchange rate system,
though likely volatile at first, we eventually settle into the SDR
supra-sovereign system. The process of all currencies and commodities unpegging
from the US dollar and pegging to the SDR will in all probability
happen piecemeal with the Eastern regions quickly jumping on the BRICS
bandwagon. The Western regions will eventually be dragged along as
both Eastern and Western regimes are consolidated under one massive
agreement.
This agreement will also include the restructuring of sovereign debt
through the IMF’s Sovereign Debt Restructuring Mechanism, or SDRM.
At some point throughout this process we will see the modification of the
International Monetary Fund to more fairly reflect the economic reality
of the international community. The IMF will see its first
non-European Managing Director, most likely the current
Governor of the People’s Bank of China, Zhou Xiaochuan.
Russia is taking the lead role in the dollar destruction script so China
can maintain a level of approachability for the restructuring.
Some of the challenges to having an SDR reserve system is encouraging
the private markets to trade in SDR denominated assets. This is where
the overall allocation of a countries or regions SDR composition will come
into play. The inevitability of oil, gold, coal, wheat, rice, etc..,
being priced in SDR’s will become more obvious as the new system
emerges further.
Another challenge to the SDR system will be in getting sovereign
countries to give the IMF the authority to issue SDR’s as it sees fit too
when needed. This is the quintessential movement towards
a method of global governance.
There has been much conversation on the internet of a forthcoming Global
Currency Reset. What we have covered in this essay is in fact
what is being referred to as the reset. So many people have been
attempting to describe this process in both the simplest terms and
complex terms.
On some deep level we all know that the US dollar will not be the
reserve currency of the world forever. Our efforts to
understand what is coming is giving birth to urban legends
and internet conjecture about how it will happen and when it will
happen.
Some predict that it is going to happen tomorrow. And its always
tomorrow.
Some are certain that we are at least 10 years away from the
transition.
Somewhere in the middle I reckon will be the actual event. If
indeed there is one specific event which we can point at and say, there,
that was the great global currency reset.
Many are so obsessed with what certain currencies are going to be worth
after they unpeg from the dollar and peg to the SDR that they are missing
out on the most exciting transition that we will ever see in our lifetime.
What will the Iraqi Dinar be worth? What will the Vietnamese Dong
be worth? How will all that money in circulation be taken out so that
the currency can actually be revalued at something worthwhile?
I get many questions on this all the time and I’ve answered it already
to the best of my ability in the post “The New Exchange Rate System”. A large portion
of the M1 money supply of all countries will be restructured through the
SDRM. This will fix both the sovereign debt crisis and currency
crisis with one move. The money left in circulation will be revalued
based on each countries SDR composition and defined allocation, determined
by economic indicators and fundamentals.
Perhaps cross border restriction on the movement of capital will prevent
mass transfers of wealth from one end of the spectrum to the other.
The common denominator to all events, countries and institutions is the
Bank for International Settlements. From that observation we can
assume that the unfolding world drama is a well scripted stage play to
direct populations and industries into accepting the SDR dominance.
The involvement of the United States in the coup which overthrew the
democratically elected and pro-Russian government of Ukraine, as well
as its manufactured control and abuse of the international
institutions which it has dominated since 1944, will soon serve to
isolate the dollar. America’s friends will soon turn their backs and
join the larger union of emerging economies.
Historians will look back and say that American hegemony died in
Eastern Europe. Ukraine is the last American Alamo.
In closing I would like to state that being a Canadian has created
strong associations with America for me. Countries are, like global
financial institutions, tools of the international bankers. Whether
Canadian or American, or Chinese for that matter, we are all victims of
a larger process by which our very existence is engineered and sold to
us as the only reality.
Patriotism is one of the strongest tools to divide and
conquer masses of humanity. This method is very much at play
in world events right now. With that being said, with all
its probable faults and unfairness, if the new international financial
system doesn’t emerge as another fixed exchange rate regime, the world will
fall once more into the destructive pattern of a floating exchange rate
regime, which will lead to more credit booms and asset bubbles.
The inherent fault in fiat currencies is another matter entirely.
Perhaps the SDR composition will eliminate some of this risk, as the
macroprudential policies could potentially reduce or eliminate the unfair
transfer of wealth, which we call rent seeking, practiced by the small
organized elite.
Nevertheless, the dollar is on the way out. – JC
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