Fear Not the Death of the Dollar

Dollar Depreciation and Investment Safe Havens

By JC Collins

With so much fear mongering and predetermined analysis surrounding the so-called “demise, or death of the dollar”, it can be frustrating for the average person and investor to step back and reflect on the totality of what the multilateral effects will be on the American currency. What is certain amongst the international financial institutions and central banks is the reduction in reserve currency usage of the dollar.

This reduction will have an effect on the international valuation of the USD and the domestic economic performance of the United States, some of which will be positive and will lead to actual job creation growth.

There are multiple angles from which the macroeconomic analyst can view the transition away from the dollar as the primary reserve currency. The obvious and factual originating point of change comes with the reduction of liquidity in the USD asset market, and the rise of a multilateral source of international liquidity, in this case represented by the SDR of the International Monetary Fund.

Continue reading Fear Not the Death of the Dollar

More Confirmation of SDR/RMB & Upcoming POM Announcement

Updates from the IMF Spring Meetings

By JC Collins

During a live question and answer session at the Spring Meetings of the International Monetary Fund and World Bank, Managing Director Christine Lagarde once again reiterated that China has formally requested the inclusion of the renminbi currency in the SDR basket composition.  She also stated that Chinese efforts towards economic reforms, such as opening up capital accounts, has been supporting the case for the yuan.

The expansion of the membership list of the Asian Infrastructure Investment Bank and the growing framework of the Eurasian Development Bank, with probable regional currencies, is creating additional leverage on both America and the IMF to ensure that quota and governance reforms are implemented and that the yuan is included in the upcoming SDR review.

Continue reading More Confirmation of SDR/RMB & Upcoming POM Announcement

The (Un)Inevitability of War Between China and America

And the Destabilization of North Korea

By JC Collins

As the world continues the shift from a unipolar American dominated world to a multilateral world based on the fair political and economic representation of all countries, there remains flashpoints of tension and possible conflict in regions of the world which have acted as hinges, or gateways, for American hegemony.

The war and political back and forth taking place in Ukraine is one of these regions. The area acts as a natural divide between the Russian geopolitical sphere and the American hegemonic European sphere, a sphere which is now slowly moving away from US dominance and into the multilateral framework.

Continue reading The (Un)Inevitability of War Between China and America

Hume’s Multilateral Adjustment Mechanism

By JC Collins

As the Special Drawing Right (SDR) rises to its position as primary reserve asset used in global trade, other countries outside of the current 4 which make up the composition, will seek to have their own domestic currencies added to the supra-sovereign asset basket.  China’s yuan is the obvious inclusion on this 2015 go around, but India, and other emerging economies, will likely be internationalizing their own currencies over the next 5 years to ensure they are included in the 2020 adjustments which will be made to the SDR basket composition.

As the USD is replaced with the SDR, we are likely to see the progressive implementation of a Multilateral Effective Exchange Rate Structure (MEERS) as both high income countries and low income countries will promote the benefits of pegging their domestic currencies to the SDR.

Continue reading Hume’s Multilateral Adjustment Mechanism

SDR Fundamentals & Future Announcements

By JC Collins

This post is specifically structured to help readers, who may be unfamiliar with the SDR and how it works, to become more educated on the history of the SDR, and what it’s future characteristics and functions will be.  As we move through the year and to the ultimate restructuring of the global monetary system, it will be important for people to understand what they can do, and how they can do it, to protect their wealth and remain viable throughout the multilateral transition.

Many times I have been asked what the average person could do to protect themselves during this transition, and just as many times I’ve given broad statements about diversification.   Within the coming weeks there will be an announcement on PoM containing information on what options are available.  There has been much going on behind the scenes which has been building on the realities of the multilateral transition, which, based on the events and announcements over recent weeks, can no longer be denied.

Continue reading SDR Fundamentals & Future Announcements

When Will China End the Dollar Peg

The Last Year of American Hegemony

By JC Collins

Update:  The IMF and China sign agreement on strengthening fiscal institutions and capacity development.  China is now heavily involved with the integration of its financial and monetary architecture within the macro multilateral framework.  This should eliminate any remaining doubt as to the validity of the transition. – JC

http://www.imf.org/external/np/sec/pr/2015/pr15141.htm

One of the biggest questions which we need to consider as the world moves closer to the full implementation of the multilateral financial system is when will the RMB end its managed peg to the USD?  Now that the official request has been made to the International Monetary Fund, for the yuan to be included into the SDR basket composition, it is only a matter of time before the ending of the peg occurs.

There are a few time frames we are working with.  One is the May meeting of the IMF where the first formal discussions around the new SDR composition will take place.  The second is in October, which is when the new composition will be confirmed.  Finally, the new basket will come into effect on January 1, 2016.

There are some key indicators and trends which we can use to build a case for the time frame of this event(s).

Continue reading When Will China End the Dollar Peg

China Officially Requests Yuan in SDR

As expected, China has made the official request to the IMF.

Chinese Premier Li Keqiang on Monday asked the International Monetary Fund (IMF) to include the Chinese currency in the special drawing rights (SDR) basket, endorse the yuan as a global reserve currency alongside the dollar and euro.

Full article can be read here:

http://thebricspost.com/li-vows-reforms-to-help-yuan-be-worlds-5th-reserve-currency/#.VRE4I-FE5f0

Follow

Get every new post delivered to your Inbox.

Join 712 other followers