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SDR’s and the New Bretton Woods – Part Five

 

Our friend JC Collins is sharing more info, Thanks. 

February 12, 2014 Leave a comment

Pattern Recognition and Rent Seeking Limitations

By JC Collins

Pattern-Recognition

At first there was nothing but an absolute whiteness.  It was an endless emptiness of infinite possibility.  With a whisper there appeared a single black dot in the middle of the white vastness.  The dot was less than – but would become more.  The whisper echoed throughout the absolute and the dot smeared outward from both sides becoming a line.  The single line filled the void with purpose and direction.

 

The line eventually duplicated itself followed by the two opposing ends turning inwards and outwards until they touched each other forming a letter “L” shape.  The whisper sound returned but louder this time.  The “L” shape also duplicated itself with only one of the two turning itself opposite until all four ends of both shapes connected forming a square.

The square sat in the whiteness of the absolute.  It was both large and small at the same time.  An impossible translucence that was almost solid.

My first thought was one of curiosity as I studied the square.  Time was of no relevance so I do not know how long I stared at the shape before it also began to transition into something more than.  I watched as the square duplicated itself five times.  This made a total of six squares which floated in the absolute. All seemed to change size from small to large before finally positioning themselves into a conjoining shape.

The cube solidified in my mind’s eye as I began to differentiate patterns in the sound of the whisper.  Some patterns made me feel sad while others brought feelings of security and comfort.  As the whisper became a voice, and the voice a language, I felt the cube pull me into its center.  There in the center of the cube I waited and watched as other shapes and colors formed outside the cube.

One by one the cube pulled the other shapes into its confined vastness.  All the shapes of varying sizes and colors became a blur of motion.  The motion also took on patterns which I slowly began to recognize as things of importance.  The sensation of heaviness enveloped me.

There was hunger and tears.

Seeking out pleasure I roamed around in my heaviness, grabbing at objects, touching, smelling, and hearing distant sounds of satisfaction.  Always one object became another until there was a chorus of material piling up around me.  But always the pattern repeated.  Endless, back into the infinite possibility from which it came.

In my early years I knew on a deep level that the world was not as it was presented to me by others.  Giants walked around inside my world planting seeds from which truth would eventually blossom.  But the truth would never come.  The giants became smaller and smaller as I grew larger and larger.  And the truth seemed to be lost within the geometric shapes that made up the material world around me.

It would take many years for the truth to be extracted from the patterns. And at times the truth would hide itself within false truths and sink back into the patterns.  Many would waste valuable time and energy to pull forth false truths while the true truths lay embedded deep within the subconscious of our minds.  The greatest true truth of all is the infinite possibility of the absolute just before the black dot materialized.

Like the black dot, fiat currencies are a false truth.  Yet they are what we collectively gravitate towards in times of massive centralization.  History proves this pattern.  So what will it take for the world to back away from the fiat currency and transition to a more stable shape?

In the other parts to this series, we have discussed the 2010 Code of Reforms as agreed upon by the members of the International Monetary Fund.  Though the agreements were made, the United States Congress has yet to pass the supporting legislation required to restructure the Executive Board of the I.M.F.  The obvious reason for this is that once the reforms are passed and the board restructured the quotas for each country will change and the dollar will be stripped of its reserve currency status.

Congress knows this all too well and is pushing negotiations into dangerous territory as the world is threatened with currency collapse and sovereign debt defaults.  As such many countries have been developing workarounds to the dollar by way of currency swap agreements.

The intention is not to repeat what we have already stated in previous posts. A quick refresher on some of the information will help as a lead in to the additional information contained within this part.

In part one we were introduced to the 1913 Chinese Gold Reorganization Loan bonds.  A final payout on these bonds is indeed in the works and is one part of the overall 2010 Code of Reforms process.  Every time a deal was to be finalized with the bonds it corresponded to the debt ceiling debate and Code of Reforms within Congress.  They hopscotch each other onward until we find ourselves here today with no resolution on either.

It’s important to know that by China honoring the 1913 bonds, they will be able to access their full gold reserves, including the portion that was used to support the 1913 bonds.  This is the same gold the Chinese government after the communist revolution denied having.  They couldn’t now all of a sudden materialize said gold without explaining where it came from, or honoring the bonds which they supported.

With that being said, the bonds will not be honored at their full face value.  These bonds will be considered a part of the overall sovereign debt of China and will be integrated within the SDR composition of the renminbi and re-allocated as securities through the BRICS Development Bank.

Like any debt consolidation, all sovereign debt most be included.  The owners of the Chinese bonds will get their payout.  The payout itself, is based on a flat amount already set for the historical bonds.  This amount is specifically valued within the renminbi’s SDR composition.  The more bond holders that come forward will decrease the individual payout for each bond holder.  This is what has been agreed and implementation of the buyback program is simply waiting for the 2010 Code of Reforms to be passed through Congress.

Since most countries have sovereign debt and outstanding historical bonds, it stands to reason that other situations like the Chinese bonds will be handled in a similar fashion.

Another pattern that emerges as we study the history of reserves currencies is that with each reserve currency the centralization has become tighter and tighter.  The reserve status of the U.S. dollar has brought this centralization to a whole new level.  In simple terms the dollar has exported inflation to other countries.  But when we realise that inflation is in fact a mechanism for further centralization the more complete picture comes into focus.  Through increased centralization the countries of the world have sunk deeper into sovereign debts from which even more centralization will be offered as the solution.

The SDR solution, with a focus on further centralization, may have been the intended plan back in its inception.  Hard to imagine, but perhaps the collective mind of the rent seeking small elitist group of organized special interests has unknowingly pushed forward on this path.

The International Monetary Fund is riding fast and hard on getting these reforms passed through Congress. Even to the point where Christine Lagarde is calling a new multilateral economic system non-negotiable.  Sovereign debt restructuring is something the I.M.F. is taking extremely seriously.

usCongress_large

Within America the Treasury is in favor of the reforms and is also putting pressure on Congress.  The important question to answer here is why is there a division between the Treasury and Congress on the 2010 Code of Reforms?  The Treasury is saying yes to the dollar losing its reserve currency status and Congress is saying no.  Make no mistake about it, the power the United States has experienced since 1944 and the Bretton Woods Agreements has come from the reserve status of the dollar.  After the reforms are passed and the Executive Board restructured, the U.S. will become a regular country like every other country in the world.

This of course will leave a huge void in the geopolitical world which will be filled by a consortium of foreign countries.  We can see the anticipation of this opportunity by measuring the military buildup in other regions of the world.  Especially in China.

But it’s not only geopolitical ramifications.  There are profound cultural consequences to America as its stature in world affairs is minimized to that of a regular participating country.  It’s a humble pie that perhaps some members of Congress, and other industrial and banking interests, are yet prepared to suffer.

Moving forward the potential threats posed by delaying the implementation of the SDR system are real and measurable.  The reforms could come too late for effective sovereign debt restructuring.  Or the debt restructuring, when finally implemented, could be insufficient to meet the expanding debt contracts under which the economies of the world toil.  Banks exposed to debtors could see the confiscation of their assets.  We are already seeing this as China has and will continue to purchase banks within the United States.

The rest of the world will not wait for Congress.  But it’s my prediction that Congress will in fact pass the 2010 Code of Reforms and allow for the restructuring of the I.M.F. Executive Board.  Its matter of timing, planned or unplanned. From the moment the reforms are implemented, the dollar will see multiple devaluations staged to coincide with a multi-staged restructuring of the debt.

It’s important to mention that with the passage of the reforms, the world will not see an overnight immediate response.  The new system will take time to fully integrate.  The Global Currency Reset will happen in levels as currencies are allowed to free float within the parameters as set forth by the SDR composition of each country.

As stated previously, this composition will include the following economic fundamentals:

  1. GDP – Self Explanatory
  2. Human Development – Research how China engineered a middle class to fill the empty cities they built over the last ten years.
  3. Ecological Sustainability – Programs through the United Nations make more sense now.
  4. Concentration and Diffusion of Assets – Investigate precious metal price manipulation.
  5. Income – Examples include the growing middle classes of not only China, but also Vietnam and other emerging economies.
  6. Demographics – Immigration and the mass movement of people are directly related to the planning of the new system.

The economic system as it stands today is out of balance and will be corrected by a supra-sovereign reserve currency by way of the SDR mechanism.  Between the time the reforms are implemented and the year 2018, the currencies of the world will slowly adjust and fluctuate as their true SDR composition weight settles out.

As another pattern of note, the Basel 3 regulations from the Bank for international Settlements are also set to be fully implemented by 2018.  They were originally scheduled to be completed by 2014 but also had to be pushed out because of the delays within Congress in regards to the I.M.F. Code of Reforms.  This is not a coincidence.

As we touched on in a previous post, the SDR compositions will be segmented into different regions.  Based on what I’ve learnt and what information is publically available, it is my best estimate that these regions are going to be as follows:

  1. Asia and Pacific Region
  2. Europe
  3. Lower Middle East and Northern Africa
  4. Upper Middle East and Central Asia
  5. Western Hemisphere
  6. Southern Africa
  7. South America

Right now the Ukraine is the hinge between Central Asia and Europe.  Syria is the hinge between the Upper and Lower Middle East.  The border area between both will become major trade zones with Lebanon regaining much of its past glory.

The hinge between the Western Hemisphere, comprising Canada, Mexico, and the U.S., along with some Central American countries, will find its hinge in the Nicaragua region as the Chinese funded alternative canal project takes form.  This new canal through the center of Nicaragua will include two international airports, one at each end, oil and gas pipelines, and a shipping lane almost ten times the length of the Panama Canal.  It will take eleven years to complete and is considered the largest construction project in the history of the world.

Nicaragua_canal_proposals_2013

The SDR compositions themselves will be based on both macro and micro weights and measures.  The macro breakdown of each country’s currency composition will be as follows:

  1. 25% Production Commodities (such as oil, gas, rice, wheat, iron ore, etc…)
  2. 25% Foreign Reserves and Precious Metals
  3. 50% Fiat – Pegged to increase and/or decrease based on the fluctuating values of the above 2 factors.

How the SDR composition system is setup will in essence work as a form of self-limiting rent seeking for the purpose of economic balance between the small elite organized group and the larger worker disorganized group.  For a more detailed explanation of rent seeking and what is being proposed here, read the post “What Are Conspiracy Theories?”.

It was my intent to also discuss the cultural impact that the New Bretton Woods will have on the world.  But I have stretched this post out too long I’m afraid.

In parting, I’d like to close this essay off by saying that every manner of concept and design can be implemented into the world economy.  Like the black dot which limited the possibility in the white world of the absolute, all systems will invariably self-corrupt and begin anew the process of centralization or the movement towards decentralization, which is collapse.  The world has seen complete decentralization on all levels, both macro and micro, before in the era of the so called dark ages.  This came after the gradual collapse of the Roman Empire.  There was nothing organized and semi-centralized to take its place.  Though there were “pockets of prosperity” sprinkled throughout the world.

What I ultimately propose is a system of balance between micro decentralization and macro centralization.  The New Bretton Woods which I have been attempting to describe could be such a system.  It’s an opportunity for regions and economies of the world to earn a composition value through local energy expenditure and production while safe guarding a new method of energy storage from rent seeking groups.  It is my belief that the SDR composition system holds the potential for such energy storage and economic efficiency.  We can be more than.    – JC Collins

SDR’s and the New Bretton Woods – Part One

SDR’s and the New Bretton Woods – Part Two

SDR’s and the New Bretton Woods – Part Three

SDR’s and the New Bretton Woods – Part Four

 

http://philosophyofmetrics.com/2014/02/12/sdrs-and-the-new-bretton-woods-part-five/#more-173

SDR’s and the New Bretton Woods – Part One

Some real heavy duty writings from this writer, JC Collins.  Link to part 2 in the bottom.

 

BRICS Inject Capital into I.M.F. Basket of Currencies

Jan 21, 2014

By JC Collins

In my previous post I briefly explained how China was in the process of assuming the liabilities of the Federal Reserve, in addition to their already held liabilities of the U.S. Treasury.  Such a strong statement will require even stronger evidence.  This I will attempt to achieve over this multi-part essay. 

one-world-currency

“The legislative process is underway right now. We want the reforms to be adopted expeditiously. It’s really the U.S. Treasury, Jack Lew and his team that’s taking the lead on getting these measures through the U.S. Congress that are required to implement the 2010 reforms.”

“Just to remind you what those are, the 2010 reforms do a couple things. One, they bring four dynamic emerging market countries into the top 10 shareholder ranks or what we call quota ranks of the institution. China, Brazil, Russia, India. It also doubles our permanent capital, the quota. And it also creates a fully elected Executive Board.” 

                          – William Murray, I.M.F. Deputy Spokesman, Jan 9, 2014.

“The IMF is explicit in its antidemocratic leanings, what it calls “political considerations”.  The SDR blueprint calls for the appointment of “an advisory board of eminent experts” to provide direction on the amount of money printing in the new SDR system.  Perhaps these “eminent experts” would be selected from among the same economists and central bankers who led the international monetary system to the brink of destruction in 2008.”

                                   – James Rickards, Currency Wars, Penguin Group, 2011

 _______________________________________________________________________________

G. Edward Griffin’s mind altering “The Creature from Jekyll Island” introduced many of us to the somewhat hidden history of the U.S. Federal Reserve.  It told of how the Federal Reserve Act was passed in Congress during the Christmas break in the year 1913.  It was insidious.  And it changed the course of human history, as it planted the seed of what would slowly grow to become the world’s reserve currency.

 

Though the U.S. dollar didn’t become the official reserve currency until the Bretton Woods Agreement of 1944, it is commonly accepted that the dollar had already usurped the British pound of this title well before it was officially acknowledged. As I believe the U.S. dollar has now already been usurped by another.  We’ll get back to that in a while.

There was another event which took place in the year 1913 which has been little understood or known at all in the western world today.  After the collapse of the Manchu Dynasty in 1911, the remaining Government of the Chinese Republic issued bonds to foreign investors for the purpose of raising capital to rebuild the country.  These bonds were titled the 1913 Chinese Government 5% Reorganization Gold Loan.  Emphasis on the word gold for later reference.

These bonds were pegged to the price of gold as a hedge against future inflation and were denominated in four currencies.  The underwriting banks for the bonds reflect the four currencies which the bonds were interchangeable with at the time, which are now known as HSBC, Deutsche Bank, the Bank of Tokyo-Mitsubishi UFJ, and Caylon – Credit Agricole Corporate and Investment Bank.

Keep in mind that these bonds were issued in the same context as the U.S. Treasury Bonds which the world’s central banks have been gobbling up since 1944. These bonds had a yield.  These bonds have never fully been acknowledged by the Chinese government.  As a part of the deal with the British government for the return of Hong Kong, the People’s Republic of China did honor 10% of the outstanding bonds at about 62% of the face value.  And what I can say at this time is that there is in fact a deal in the works for a final payout on the remaining bonds.  We’ll get back to that in a while.

10323072_1

In 1944, as a part of the Bretton Woods system, the International Monetary Fund and the World Bank were created.  These were western dominated institutions whose sole purpose was organizing foreign markets for the acceptance of U.S. dollars.  We will leave the full explanation of these institutions and their role in structuring our current debt based system for another essay series, but for our purposes here, it’s important to understand that they propagated the exporting of dollar inflation to what we now call the “emerging markets”, or the BRICS countries.

Since the initial printing of the Federal Reserve Note (U.S. dollar) in 1913, the “dollar” has lost 95% of its value.  We see this devaluation of the dollar as inflation, or the increase of costs for items we buy.  This devaluation of the dollar has had a few milestones.  One is after the Bretton Woods Agreement when the dollar became the primary reserve currency of the world.  The second came when President Richard Nixon uncoupled the dollar from its peg with gold.  This was in 1971.  A third milestone can be argued to be in 1973, when the so called “petrodollar” was created with agreements between the U.S. and Saudi Arabia, and later all the OPEC countries.  This “petrodollar” scheme ensured that all oil trades were completed internationally in U.S. dollars.  This was a slight-of-hand from the Bretton Woods arrangement to the “petrodollar” arrangement.

A fourth milestone was obviously the onset of Quantitative Easing after the financial crisis of 2008.  The chart below clearly shows how with each milestone the amount of debt (money printing) by the U.S. Treasury and Federal Reserve tag team has been multiplied dramatically leading to inflation.  This is shown by an increase in the red line, which represents CPI – Consumer Price Index, the amount you pay for stuff.

20131212_Fed1

The only end to this pattern is an end to the dollar as the world’s primary reserve currency.  Just like the British pound before it.  In the chart below you’ll notice the same gradual downward pattern as the U.S. dollar.

BritishPound1791-2004NOTES

The central banks of the world were buying up U.S. treasuries before the British even accepted that there was a problem with the pound.  The same is happening today with the dollar.  In fact, most of the world outside the United States has already accepted the demise of the dollar as fact.  But the idea is unfathomable to the average American.

The International Monetary Fund issues a currency called SDR – Special Drawing Rights.  The SDR’s are valued on a basket of currencies.  In essence, it’s a true to life multiply reserve currency system.  It has been slowly built up since the early 1970’s, at the same time the U.S. dollar started its serious devaluation.  Could the plan have been in place since 1971 to end the dollar system through hyperinflation before implementing the SDR as a true world currency?  Perhaps.

On January 9, 2014, I.M.F. Deputy Spokesman William Murray was giving a press briefing.  With zero coverage of this briefing in the western media, it’s important to relay what happened when the questioned was asked about the implementation of the 2010 Code of Reforms, or Governance Reforms.  Mr. Murray answered by stating:

“The legislative process is underway right now. We want the reforms to be adopted expeditiously. It’s really the U.S. Treasury, Jack Lew and his team that’s taking the lead on getting these measures through the U.S. Congress that are required to implement the 2010 reforms.”

It seems both the U.S. Treasury and the I.M.F. are very anxious about these reforms.  So what are they?

“Just to remind you what those are, the 2010 reforms do a couple things. One, they bring four dynamic emerging market countries into the top 10 shareholder ranks or what we call quota ranks of the institution. China, Brazil, Russia, India. It also doubles our permanent capital, the quota. And it also creates a fully elected Executive Board.” 

This tells us a few important things.  One, the influence of the BRICS countries within the structure of the I.M.F. is going to be greatly expanded.  As stated, they will be in the top 10 shareholder ranks.  These are positions previously dominated by western financial and U.S. dollar interests.  The gravity of this statement cannot be understated.

Second, it’s telling us that the BRICS countries are bringing capital with them.  Enough capital in fact, to double what the I.M.F. presently holds on reserve.  The BRICS countries will be injecting a huge amount of capital into the SDR system.  One only has to research the amount of gold being exported to the BRICS countries, especially China, to understand where this capital, or worth, will come from.  We’ll get back to that in a while.

Thirdly, expanding the influence of the BRICS countries within the structure of the I.M.F. also “creates a fully elected Executive Board”.  The Executive Board of the I.M.F. is responsible for SDR allocation.  Let that sink in for a moment.  The BRICS countries are going to have an equal say on SDR allocation.  The SDR is being built up as the world’s reserve currency.  The value of the SDR will be based on a basket of currencies.  And the U.S. Treasury is pushing congress to make this happen.

On August 5, 2013, the Peoples Bank of China called for a “New Bretton Woods” system where the U.S. dollar would be removed as the world’s primary reserve currency.  It also called for an expanded usage of the SDR and for the new system to be supported by gold.

In Part Two, we will explore how the U.S. debt, being the liabilities of both the Treasury and the Federal Reserve, will be consolidated with the treasury bonds held by China and rolled into the new SDR system.        – JC Collins

Continue to SDR’s and the New Bretton Woods – Part Two

http://philosophyofmetrics.com/2014/01/21/sdrs-and-the-new-bretton-woods-part-one/

IS THE INTERNATIONAL MONETARY FUND HINTING ABOUT AN ECONOMIC RESET?

 

So, let’s see what happens by Jan 28th, 

 

It has been rumored for quite some time that the economic powers in the world, namely the Bank for International Settlements, The International Monetary Fund, and the World Bank have been working closely with most of the worlds countries on an economic reset.

The idea behind the reset is to prevent a complete collapse of the banking industry worldwide.  When one calculates the amount of debt in the world today, the instability of the whole system is obvious.

So the main components of a reset will consist of a global currency revaluation, a new gold trade settlement system, and improved banking regulations to increase a banks assets and decrease their liabilities.  The Bank for International Settlements has been slowly and quietly implementing these new regulations, Basel 1, Basel 2, and Basel 3.   So banks decreasing their liabilities (less leveraging) means a contraction or reduction in the credit supply.

Since credit is another way of saying debt, we can reason that the plan is to have less debt in the world economy.  So what happens when every dollar in circulation is a debt dollar?  How do you reduce debt without decreasing economic growth?

Christine Lagarde, Managing Director of The International Monetary Fund, speaking from Nairobi today, said that they will be revising upward their forecast on global growth.  This new forecast will be made public in 3 weeks.  She stated that it was premature to say anything more.

It was only this past October that the I.M.F. issued their last global growth forecast and it was downward for 2014.  So what has changed in the last 3 months for the I.M.F. to revise the forecast upward?

If the plan is less leverage, how can we expect growth when the system of money creation is a debt based system?  We can micro analyse endless charts and money velocity forever.  The fact is our money creation method is debt based and debt is increasing at alarming rates.  So what gives?

A global currency revaluation is one of the main components of an overall macro economic reset.  The consensus is that the world’s currencies will become partially asset backed and will be revalued to reflect each countries capacity to produce and bring those assets to market.  In essence, it will be a bastardized version of fiat currencies and commodity currencies. It will be a Frankenstein monstrosity which will lumber around the country side dreaming of becoming real money, like gold or silver.  And like the sad and ill-fated beast, it will eventually die the tortured death of things that wanted to be but never could.

That death will most likely occur 10 to 15 years after the currency revaluation, so we need not worry too much about it right now.

A currency revaluation will also mean a downward revalue of the U.S. dollar, which has been the world’s primary reserve currency since 1944.  This will leave a geo-political and military hole in the world.  In fact, we are already seeing this vacuum being filled in by Russia, China, and the rest of the emerging economies.  Remember how suddenly the U.S. backed down on their Syria threats, and started making peace with Iran shortly after.  And there are rumors of secret negotiations with Cuba, Hezbollah, and even North Korea.

This rumored reset would have to be one of the most complicated and intricate systems ever attempted.  In fact, if one knows where to look, you can see this new system being created just underneath the surface of the old.  And like new flesh crawling upwards to cover the bones of the old, the economic reset will happen.  The monster will be given a new body and new life, if only temporarily.

Perhaps the I.M.F. just gave us a hint of what is too come.  Commodities may be a great place to transfer some wealth.  Especially into the very affordable Silver.       – JC

Link to the Economic Times of India article on todays announcement:

http://economictimes.indiatimes.com/news/international/business/imf-to-revise-upwards-global-growth-forecast-christine-lagarde/articleshow/28525415.cms