SDR’S AND THE NEW BRETTON WOODS – PART TWO

This is part 2 of the SDR article series, interesting that they are using the same template as before including the Keynesian model that got us where we are now.  If too big to fail didn't work in the USA, how is even bigger than too big to fail going to solve the problem?  

What if the problem IS the central banks hoarding vast stores of value (and the mountains of time-displaced hypothecated value that borrows from your grandchildren value via inflation)?  Banks operating under an antiquated centrally planned economic model are doomed to failure.  If central planning didn't work for the Soviet Union, how is it supposed to work under a capitalist model with a system as complex and organic as an economy?  

We are already seeing and hearing about de-facto currency controls worldwide.  People with money are having issues transfering even minor sums like $5000 without weeks of delay.   Even people working in the banking industry are finding their accounts mysterious frozen, or wire transfers sent to locations they did not authorize.  The banks are in very serious trouble and they are about to confiscate everyone's value, or deny access to the value that is currently stored in banks.  If you can't access your money, what good is the banking model?  These dinosaurs from the 17th century would rather choke the planet than give up their power to parasite humanity.  -AK

Reblogged from:  http://philosophyofmetrics.com/2014/01/23/sdrs-and-the-new-bretton-woods-part-2/

SDR’S AND THE NEW BRETTON WOODS – PART TWO
JANUARY 23, 2014
By JC COLLINS

The Renminbi SDR Composition and the Great Consolidation

By JC Collins

“The creation of an international currency unit, based on the Keynesian proposal, is a bold initiative that requires extraordinary political vision and courage”. – Governor of the People’s Bank of China

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The father wiped the dirt from his hands and reached into his pocket.  Keeping his hand inside for a few moments, he knowingly glared down at the boy.  The air was still, the boy eager, eyes wide, dancing back and forth on his feet.

“Come on Dad, my friends are waiting”, explained the boy.

Slowly the father withdrew his hand and paused before dropping a few coins into his sons waiting hand.

“Are you going to spend it all at the corner store?”

“Yes,” said the son.

“Money isn’t easy to come by boy.  It takes hard work to make money.  You kids don’t know the value of money. “

“I just want some pop and chips Dad, and maybe a comic book if I have enough.”

“When I was you’re age I could buy all that for a dime and a nickel”, said the father.

The boy, perplexed, thought for a moment, “Why does it cost so much now Dad?”

The father leaned down and picked his shovel back up.  “I don’t know boy.  Things just keep getting more expensive.  I work harder but get less for my money.  I’m tired.”

The boy shrugged his shoulders and ran off to meet his friends.  The father, disturbed deeply by something that he couldn’t quite put his finger on, stared off into the distance.  The faraway clouds were dark.  It hurt his heart not to be able to answer the boy’s questions. He pushed the shovel into the pile of dirt with a grunt.  This dirt wasn’t going to spread itself and the day was getting short.

The father in our brief story need not feel bad.  What it is he doesn’t understand is in fact a very complex system of social and economic engineering designed to maintain the most functional equilibrium between the balance of nature and desire, or brain and consciousness, logic and dreams.

The absolute board upon which reality is drawn has borders, and until such a time as consciousness is capable of expanding those borders (think of a balloon expanding) we are left with a system that can and will maintain the status quo, which is the system represented by the father above, spreading the dirt with a shovel, over the board of his reality.  He senses a much bigger reality and bigger possibilities, but his limited capacity and reference point keep him from understanding the full scope of what surrounds him.

The system that surrounds all of us is still a mystery.  Yet the economic portion of that system is slowly revealing itself.  And it reveals itself through patterns.  There are patterns everywhere.  For the sake of argumentation, let’s call them philosophical patterns.  The obvious example in our lives of a philosophical pattern would be the connection between two of the largest events in our lives.  These events are the birth and death of each one of us.  We are born.  We live a life.  And we die.

This pattern is very similar to another pattern in our life.  And that is sleep.  We wake in the morning. Go about our day, and go back to sleep at night.  This is why death is referred to as the great sleep.  Sleep is the micro pattern of the macro death.

I will be expanding upon these sort of philosophical patterns in the future essay series titled the Grand Man.  But for our purposes here, this example will suffice.

The patterns are everywhere and in everything.  The complex system of economic and social engineering is no different.  Remember the saying, “there is nothing new under the sun”.  It’s true.  There never is anything truly new.  Everything in reality (and non-reality) is in transition, or motion.  One thing gradually becomes something else.

Let’s take the fall of the Roman Empire as our example here.  There is no one specific time or date which can be defined as the moment the empire ended.  Like the U.S. today, Rome degraded their currency through a slow process of minting contamination until full debasement of the Gold Aureus led the regions outside of Rome to use other forms of exchange.  Once this happened, the barbarians slipped through the gates of the former empire one at a time, slowly debasing the population of the regions once controlled by Rome, before moving on to Rome itself.

Can we not see this same pattern with the increase of immigration in the western world?  There are more than just philosophical patterns visible regarding this as well.  Such as the inflation of the western world currencies being exported to the countries from which we import people back.  Logically, there is a balancing of accounts taking place here.

So when we are attempting to understand the economic system that is being built up underneath the structure of the old one, we only need but look at what exists today to discern what is coming our way shortly.

The first thing to understand is how the Federal Reserve System actually works.  There are many resources on the web to help you understand this if you don’t already, so I will not explain it in detail.  This is not a book, only an essay.

So in brief, the U.S government decides on a debt limit.  They then issue Treasury Bonds of different yields to meet that limit.  These Treasury bonds are purchased by the Federal Reserve (and China, Japan, etc..) and the money used to purchase them is created out of thin air and lent back to the government at the interest rate as defined on the yield of each bond.  The government then prints the money and puts it into circulation.

So, say you were the government and you needed money to run your household.  You go to the bank and borrow $10,000.00.  The bank lends you this money at a yield, or interest rate.  You have a predetermined number of years to pay this loan back.  Your real money, being your labor and time, pays this loan back by creating the “energy” from which the value of the loan is extracted.  Think of the human resources department at your local corporate office.

So in essence, the Federal Reserve System is the macro of your micro local bank.  It works the same way.

Since there is nothing new under the sun, it can be reasoned that any new economic system will be the macro of, what now becomes, the micro Federal Reserve System.   So for clarity, the Fed has been the macro pattern since 1944.  But, like Rome, it has slowly been converting into the micro since 1971.  Now we are in the final stages of this transition and the new macro is becoming visible for those with the eyes to see.

The new macro is of course the SDR (Special Drawing Right) issued by the International Monetary Fund.

So, we will attempt to keep this simply.  Before the Federal Reserve there was still a system of debt creation.  What the Fed system did was consolidate the debt in the country into a new system by which bonds were created and issued to banks, insurance companies, etc…  After the Bretton Woods agreement of 1944, the Fed went international.  It’s this process of becoming international (becoming the primary reserve currency for international trade) that is now transitioning into the larger pattern through the I.M.F. and the SDR’s.

Not only the Federal Reserve, but all central banks of the world have created too much debt.  And like before, the I.M.F. will now consolidate this sovereign debt into a supra-sovereign reserve currency by way of SDR securities, or otherwise SDR bonds.

Let us investigate this further.

The present value, or composition (get use to this term) of the SDR is determined by only 4 currencies.  They are the U.S. dollar, the Euro (think basket of currencies micro pattern), Japanese Yen, and the British Pound (the old girl just won’t quit).

With the implementation of the 2010 I.M.F. Code of Reforms discussed in part one of this series, this composition is about to change.  The currencies of the BRICS countries will soon be added to this composition, along with other major economies.  Perhaps Vietnam will be added to the composition.

The weights used to determine the value of each composition will also change.  These changes will consist of the economic fundamentals, such as GDP, as well as other metrics, like human development, ecological sustainability, concentration and diffusion of assets and income, as well as the demographics of populations. Research each of these and apply what you learn to the overall social and humanity programs being injected into school curriculums.  Remember the micro and macro patterns which endlessly weave through everything.

Also with the 2010 Code of Reforms, there will be no more western veto power within the Executive Board of the I.M.F.  The geopolitical world will be balanced in preparation for the “great consolidation”. SDR allocation (get use to this word also) will be controlled by those with the largest interest in the system.  This large interest is no longer the micro Fed.

Part Two of this essay series is starting to get long so let’s begin to wrap it up.

We know that through debt creation we are subjected to inflation.  The more currency we print the less valuable that currency becomes.  Like the father at the beginning having to pay more for goods and services.  Like each micro to macro pattern before it, debt eventually needs to be consolidated and repackaged as new securities instruments - bonds.  Sovereign debt will be consolidated and repackaged as SDR bonds.  These offer new potential for energy storage.  And remember energy (your time and labor) is real money.

But before these bonds can be issued, accounts require balancing.  This is what we are seeing in the world right now.  The gold is going east to China.  New oil and gas deals are being brokered.  Wealth is on the move, shifting and splashing around upon the sea of international understandings.  Inflation is being sent back from whence it came.  Currencies and commodities which have been artificially suppressed to support the now old micro will be expanding to reflect the new macro realities.

Debt balances will settle into new account holders before the system is locked down.  Those with greater capacity for composition will swallow the old sovereign debts.  The U.S. owes a great debt to China and because of this China is allowed to import all the gold.  This gold will ensure the transfer of Fed liabilities to the Renminbi composition.  The Renminbi will be international, the Yuan in house.  Just like the dollar will be split into an international exchange and an in country exchange. The Treasury being severed from the Federal Reserve.  The micro being severed from the macro.

All old sovereign debts, including historical bonds, like the Chinese 1913 Gold bonds, will be balanced before consolidation.  All the countries of the world have been explored and their resources catalogued.  Processes have been designed to produce those resources and bring them to market.

Central banks are increasing their holdings of Canadian and Australian dollars.  These are two resource rich countries.  Foreign reserves can also add to the composition of any one currency.

In Part 3 we will venture into the pipeline mechanics of SDR compositions, including historical bonds, resources and commodities, and the inevitability of the great consolidation.  We will see how the U.S. market is beginning to open itself to the idea of SDR denominated bonds.  It simply has no other choice.  And we will learn how the SDR bonds will be issued by the Federal Reserve, the World Bank, the European Central Bank, and what will become the monster allocator of the Renminbi SDR composition – the BRICS Development Bank.     – JC Collins

SDR’S AND THE NEW BRETTON WOODS – PART ONE

Interesting data, seems there are at least 3 schemes out there to try and phoenix the existing systems... -Bill


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

SDR’S AND THE NEW BRETTON WOODS – PART ONE
JANUARY 21, 2014 JC COLLINS  T
BRICS Inject Capital into I.M.F. Basket of Currencies

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.

“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

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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.

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.

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.

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