Reducing American Influence Over Global Institutions (FREEPOM)

The Trump Doctrine and the Promotion of Free and FAIR Trade

By JC Collins

It would appear that even International Monetary Fund Managing Director Christine Lagarde is picking up on the Trump language and doctrine when she recently stated that “the IMF has always been a supporter of free and fair trade”. This comes as no surprise as the Donald Trump Presidency has in essence hijacked the international process through its strategic take-over of one of the world’s largest economies and contributors to the Funds financing arrangements.

The use of the word “FAIR” alongside “FREE” in the recent references to international trade stems from Trump’s speeches in the primaries and campaign season of 2016. While giving massive rallies across the United States he would express the need for free and fair trade, always with an emphasis on the word “FAIR”.

The fact the the IMF is now using that term in its official statements is very telling of the trend moving forward. But it could also be an example of how much of this global monetary transformation is being scripted and talking points issued beforehand for use in a specific and strategic manner.

Such a thing does not require a conspiracy of vast proportions or even that much orchestration. Political campaigns and politics in general use such talking point strategies as a matter of routine. This can be observed across the nightly news spectrum as political surrogates march forth with common messages and alignments meant to spread their parties vision to the masses. Large corporations also use such methods in order to maintain one message and one face to potential investors and business partners.

The international institutions which have governed the world since 1944 are on the verge of some fundamental changes on how they operate and function in relation to one another. The suggested mandates and policy changes are being issued from the think-tanks and working groups across the political, corporate and banking broad-bands. The message from Madame Lagarde is loud and clear – the Trump mandate is the direction in which the world framework needs to shift.

This shift is not the design of Trump alone. The new American President is the salesman for the implementation of the multilateral monetary and financial frameworks which are meant to re-organize and re-balance the global monetary system.

Some new readers may not understand exactly what this entails but its core mandate is the reduction of the USD denominated foreign exchange reserves which are held in central banks around the world. The accumulation of USD denominated reserves is the number one concern which needs to be addressed before broader and more systemic matters can be managed and minimized.

The People’s Bank of China is the largest holder of USD denominated debt outside of the Federal Reserve itself. The relationship between the American dollar and the Chinese renminbi is the pivot point for a large portion of these monetary adjustments and changes. America has the largest trade deficit and China has the largest trade surplus. Both nations are the two largest economies in the world with all others caught in the twisting and tightening motion which exist between both opposing positions.

As China is attempting to shift its economy from the traditional trade exporting model to a consumption based model like the West it finds the renminbi currency in an inconvenient position. The peg it maintains against the USD ensures that a strengthening American dollar will put increased downward pressure on it and any attempts to keep the RMB from depreciating requires the PBoC to unload American dollars in it’s foreign exchange reserves.

While this is in fact the end goal, China finds its reserves slowly depleting while no appreciation of the RMB takes place. The objective in Beijing is to decrease the export of cheaply made goods and invest more in domestic consumption and renminbi denominated financial instruments. This requires the renminbi to appreciate, not depreciate, in order to become more attractive to foreign investors.

The role of trade between the worlds two largest economies, and those caught in the middle, which amounts to everyone else, is the fundamental mechanism which will contribute to the transformation of the international monetary system from the existing unipolar USD based system to a more “FREE” and “FAIR” framework based on the use of multiple currencies and the slow integration of a supra-sovereign asset, such as the Special Drawing Right (SDR) of the IMF.

A new set of governance reforms are being rolled out by the IMF Board of Directors over the next few years with a focus on 2019 for approval and implementation by 2022. This builds on the 2010 Quota and Governance Reforms which were agreed upon in 2009 but were not implemented and enacted until 2016. The dominate role of the United States within the Funds operating framework will be discussed as a part of these “negotiations” with the expectation that Trump will demand a decrease in financial contributions to the IMF arrangements.

This will correspond with further decreases in American contributions to other international institutions, such as the G20, World Bank, NATO, and even the United Nations. This is where salesman Trump operates in his sweet spot as the quintessential business-political personality who will package and sell America’s changing role in the international community.

The reduction in USD denominated assets around the world will assist in this transformation in that America will no longer be able to contribute the majority of funding to these institutions. This lower demand for the dollar will allow for it to depreciate against the currencies of its largest trading partners, which in turn will make American made goods more affordable and increase exports. This translates into more domestic jobs and increased GDP which in turn lowers the debt-to-GDP ratio making debt more manageable.

China is in the exact opposite situation, as described above. It needs to have the renminbi appreciate so it can reduce its exports.

Let’s not forget the rest of the world churning in the middle. The changes to currency arrangements and trade deals are the fundamental tools which will be used to re-organize and re-balance the world. This is why the addition of the term “FAIR” has now been added to the global trade lexicon alongside “FREE”. Both are meant to shift our perception of world trade and how nations begin to interact with one another on a different platform.

The corresponding reduction in American contribution and participation in the global institutions will align with these broader monetary and financial changes. Other nations will be able to increase their own contributions and participation as the Trump doctrine leaves behind a well strategized and scripted vacuum. – JC

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22 thoughts on “Reducing American Influence Over Global Institutions (FREEPOM)”

  1. I agree with your Salesman image – why can’t more people see it? It’s pretty obvious, and I have assumed that he’s kept on a tight leash because of skeletons in his closet that he doesn’t want getting out – which is probably why the other perpetrators of horrendous crimes will never go to jail either.

    Honey pots set by the Tribe keep most people in order.

    Good article, however, if we want to see the broad sweeps of the BIS’ policies.

  2. Highly informative and possibly the best analysis there is regarding the shape the of the superstructure and concepts of the new order of the multilateral world. Thank you as always JC, a masterpiece of an intellectual genius.

    Could it be assumed that such a system will entail less wars and military confrontations based on domination and wholesale theft, since the cash-cow is no longer the military industry but trade?

    I sense there is a rejection of the legacy of Mrs Thatcher and what she had in mind in the 80’s, i.e. Finance and services ONLY and no manufacturing in UK, specially since Fiat currency(s) may not be played like a casino game! I also hope manufacturing will return to UK and elsewhere and away from China!

    Also, the reduction in China’s production of everyday goods, may jump start the awful economy of Southern Europe in partcular, which the EU politburo did nothing about!

    The real test will come when people in the US will not see eggplants from Holland, Kiwifruit from Italy and Garlic and raisins from China, and instead will only buy products cultivated or made locally.

    The importation of fresh fruit from the EU to US, is beyond duplicitous, since importing of perishable items is only possible by air. I wonder if Al Gore fan club complained in the past 20 years and requested a “carbon footprint” calculation for the imported eggplants, where it could have been cheaper and easier planted in the sunny USA!

    Interestingly, as a proof of the Soviet central management of agriculture of EU, Holland produces eggplants for warm climate countries such as Spain and Portugal! Holland does not have the climate suited for such agricultural products and all is done under plastic “Greenhouses” at great expense, all quite visible when flying over Schiphol airport! Is there a surprise the EU is falling apart!

    There is a definite logic behind the correction that is going on in the world governance system since the previous one was designed by some leftist lunatics. It is hoped that sanity shall return as part of the the new order of things…

  3. If China is to scale down its exports does this mean a lower GDP, and if so won’t their debt then become more difficult to service? Officially China’s debt to GDP looks healthy at little over 40% though speculation abounds over the true figure with some estimates at more than 250%.

    Obviously China has huge investments in various sectors and regions but with nationalism being the order of the day aren’t some of these foreign investments susceptible to nationalisation or sell offs, especially if the Chinese were to struggle to service their debt?

    Maybe this is where gold comes in to even the balance.

    1. Its public debt is manageable even with a higher valued currency. The private debt could cause some issues but that will have little affect on the government and its sovereign debt.

  4. On Friday, during a visit from the Prime Minister of Japan, Trump said in reference to China’s currency devaluations, “I believe that we will all eventually and probably very much sooner than people understand or think, we will be all at a level playing field.” I immediately thought of your posts about the SDR.

      1. Really, this makes sense. However it could only have started this process with reassurance from others – another point in favour of the Trump sales team.

  5. JC – Do you envision an IMF substitution fund draining the global USD supply and replacing it with SDR? That is the impression I get from several of your articles. What if the US government just told US banks (private & central) to buy and hold the USD / Treasuries? Would that have the same result as an IMF substitution fund?

    1. The substitution funds would be primarily used to exchange USD assets in the foreign exchange reserve accounts around the world. The intent isn’t to drain USD liquidity but balance it between multiple currencies. You will see decreasing USD liquidity alongside increasing RMB liquidity with the SDR slowly beings used to incrementally replace both as the international reserve asset. It will be slow process with periods of sudden movement as responses to crisis and volatility.

    2. The USD supply is draining all on its own or more specifically the EuroDollar supply. It helps think of the problem in terms of credit extension not so much currency supply. What’s been happening since 2007 and it has really picked up steam since 2014 is that the EuroDollar banks can’t find anybody to rollover their USD debts organically.

      It’s been up to coordinated CB action entailing FX swaps to keep the EuroDollar banks from imploding and that might not work much longer. Jeffrey Snider over at Alhambra is all over this.

  6. A balancing act, not like a set of scales on a level table doing some teeter-tottering, but more like a multiple plates spinning on sticks, high wire act.
    PTM

  7. http://www.alhambrapartners.com/2017/02/13/a-new-frame-of-reference-is-really-all-that-is-necessary-to-start-with/

    By looking through the EuroDollar lens, one can see why the SDR has been on the sidelines since its inception. The supra-sovereign currency has always been with us…the EuroDollar stole its thunder.

    Much to the chagrin of the new-world-order doomers we have already lived through a one-world currency as it now enters senescence. The SDR missed the party.

    1. By “Euro Dollar” you mean USD held in banks outside the USA, correct? If yes, then you are saying this “Euro Dollar” will slowly be replaced by SDR, correct? That is how I interpret JC’s writing.

  8. I’m not too sure but this could be an abstract call for an “SDR type solution”

    “KUALA LUMPUR: Building connectivity in the Asean bond market requires addressing challenges such as the different currencies, legal regimes and foreign exchange control policies.

    Securities Commission Malaysia chairman Tan Sri Ranjit Ajit Singh said there was also no mutually-acceptable Asean rating scale nor Asean bond asset class for investors as guidance.

    “Asean countries use different currencies, follow different legal regimes, and have different foreign exchange control policies,” he said in his speech at the opening of the Asean Fixed Income Conference 2017: Riding the Wave of Asean Bond Market Integration here yesterday.”

    http://www.thestar.com.my/business/business-news/2017/02/15/sc-address-challenges-to-build-asean-bond-market-connectivity/

  9. This seems to be a form of getting privatized funding started.

    “The Asian Infrastructure Investment Bank has signed a wide-ranging agreement with the IFC, a member of the World Bank Group, to expand infrastructure investments across Asia.

    The International Swaps and Derivatives Association (ISDA) master agreement will allow both organizations to increase investments in emerging-markets projects with a focus on improving connectivity throughout Asia.

    “Our partnership with AIIB will enable us to offer more efficient infrastructure financing through the broader use of capital markets tools. Modern infrastructure is essential for lasting growth and prosperity. Yet the financing gap in this sector is huge, totaling trillions of dollars a year in emerging markets alone,” said Andrew Cross, IFC deputy treasurer for Asia.”

    http://www.breakbulk.com/aiib-ifc-expand-asian-infrastructure-plans/

  10. This is an excellent interview of Professor Ted Malloch tipped to be Trump’s pick for EU ambassador. He talks about Russia and US relations, as well as EU and Britain.

    As all the other Trump team, Professor Malloch is wise and has interesting views and his knowledge of the EU and Britain will be a great credit to the US. Perhaps the Europeans will learn to be less Russophobic and anti-American and instead sort out the mess at home!

  11. President Trump has been talking about “auditing the Federal Reserve” almost from day one. There are even voices and wishes about “closing the Fed” and transferring the assets (Gold) back to people!

    This article was written in 2011 but it possibly contains ways and means available to President Trump for such groundbreaking act:

    “People who think of themselves as free market people often are not. The tax-funded public schools and the state-regulated and accredited university faculties have taught that the modern system of intrusive civil government is necessary for an orderly society. People cannot imagine a market-based society.”

    This is yet another sign of the deep effects of the “Demoralization, Destabilization, Insurgency, Normalization” process as explained by the ex-KGB agent Yuri Bezmenov as discussed before to manipulate and coerce the collective psyche into a line of thinking. The purpose is so that the masses lose the logic to see reality as it is. This process have worked since 1913, but things may become different in 2017!

    https://www.lewrockwell.com/2011/03/gary-north/how-the-fed-can-be-abolished/

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