After the SDR Announcement – Now What? (FREEPOM)

JcollinsEconomics, FREEPOM46 Comments

Widening of the Trading Band, US Yuan Clearing, and Increasing Interest Rates

By JC Collins

A major piece of the POM analysis has fallen into place. As has been predicted here for the last two years, the Chinese renminbi has been added to the Special Drawing Right basket of the International Monetary Fund. This fundamental change in the composition of the SDR will allow for a more sustained and balanced adjustment to the international monetary system.

This first step towards stabilizing the global system will spur renminbi liquidity growth and begin the process of foreign exchange reserve diversification. This diversification will ease the international pressure which has been fostered upon the US dollar in its role as primary reserve currency.

China’s New Crude Benchmark

JcollinsEconomics, Geopolitical, Premium POM9 Comments

How Iranian Oil & Saudi Dollar Peg Will Change the World of Energy

By JC Collins

At some point in the first quarter of 2016 China will introduce their version of London’s Brent and the WTI crude futures contracts. The Shanghai International Energy Exchange (INE), a third international crude benchmark, will price energy in renminbi and will serve as an alternative to the western dominated contracts.

Alternative benchmarks have been attempted before, and Russia is attempting to develop its own benchmark based on the ruble. The challenge which any new and alternative benchmark will face is one of sustained liquidity. The internationalization of the Chinese currency and its inclusion into the Special Drawing Right basket of the International Monetary Fund will create a yuan liquidity market which can support the INE through the initial start-up phase.

Hedging the Coming US Dollar Depreciation

JcollinsMultilateral Investment Strategies, Premium POM3 Comments

Strategies for Central Banks & the Average American

By JC Collins

The terms depreciation and devaluation are often used in an interchangeable context. Though this is not always a big issue, as the intent for the average layperson is clear, it is worthwhile to take a moment to clarify the terms and ensure we understand the difference.

Depreciation is brought about when there is a change in the supply and demand side of a currency’s exchange. When there is less demand for a currency, that currency will depreciate in value, like any other asset.

Introducing POM Multilateral Investment Strategies (FREEPOM)

JcollinsMultilateral Investment Strategies, Premium POM2 Comments

By JC Collins

With so much written and documented regarding the multilateral monetary transition, and the reality of such a transition becoming more apparent by the day, many readers have begun asking for detailed information on multilateral investment strategies. As with the POM thesis itself, I will approach this request with nothing but the most committed of efforts, with a strong focus on getting the information as accurate and honest as possible.

The personal wealth of readers is something which I do not take lightly, as our wealth is the accumulation of our time and labor. Knowing how hard I work on producing the virtual library of information which is available on POM, I do not intend on providing distorted information which others will use to invest and protect their own time and labor.

FREE E-Book Now Available (Re-Engineering the Dollar)

JcollinsEconomics, FREEPOM9 Comments

The POM e-publication series THE ECONOMIC TRANSITION PAPERS will now be offered for free. The first installment titled “Re-Engineering the Dollar” can be read here or downloaded as a PDF. The second installment titled “Reserve Diversification” will be available by Christmas, 2015.

Readers who have subscribed for the e-publication only will be upgraded to a 3 month subscription at no additional charge. -JC

How Gold and the USD Can Depreciate in Tandem

JcollinsEconomics, Premium POM10 Comments

By JC Collins

The post I wrote the other day on selling gold now while it’s high has created a lot of interest. While there is a lot of good information out there on gold, there is also a lot of bad information. It is not my intent to add bad information, so I wanted to take some time to review the POM position and perhaps bring more clarity on why I’ve come to the conclusion which I have.

Many readers find it somewhat contradictory that I would suggest the dollar and gold depreciate in tandem. The traditional, and accepted correlation between the two, is that one will depreciate while the other appreciates. This correlation, though somewhat empirical, could also represent a non-empirical set of data points which we have not yet recognized.

The Year of the Monkey

JcollinsEconomics, Premium POM11 Comments

Interim Reform Solutions & the Beginning of a New Commodities Super Cycle

By JC Collins

Next year China will host the leadership of the G20. The timing is extremely fitting as the Chinese currency will become a part of the Special Drawing Right basket and the internationalization of the renminbi, along with its growing liquidity markets, will mark the beginning of a new era in international finance.

In China the Year of the Monkey represents cleverness and good fortune in business and wealth, and 2016 is set to offer exactly that. The symbolism of this is not lost on the Chinese as their currency rises to the status of reserve and joins the US dollar, British pound, euro, and Japanese yen in the SDR. The one area of contention has to do with the 2010 Quota and Governance Reforms of the IMF which were agreed upon by all members of the G20.

Get out of Gold Now While It’s high (FREEPOM)

JcollinsEconomics, FREEPOM126 Comments

And Get Into Other Commodities at the Bottom

By JC Collins

As the price of gold continues to get hammered the purveyors of fear porn have become acutely quiet on the reasons for the collapse. The script of $10,000/oz gold has likely ran its course as the larger segment of the population no longer believes the grandiose script of imminent dollar collapse and the end of the financial world as we know it. The losses which have accumulated since 2011 for those heavily invested in gold are massive and the wealth bleed continues every day and week.

As of this writing the price of gold is $1077/oz and dropping. The last high was in August of 2011 when gold was $1900/oz. That is a 17% drop in the price of gold in just 4 years. Keep in mind that this drop in price has transpired at the same time that so many alternative analysts and fear based writers have been telling you that gold will skyrocket into the atmosphere.

So how did so many get it so wrong?

Global Economy on the Verge of another Crisis (FREEPOM)

JcollinsEconomics, FREEPOM18 Comments

Canada Crashes, 2010 Plan B Reforms, Asian Monetary Fund, and the SDR2

By JC Collins

The world is only about four weeks away from the first Federal Reserve interest rate increase in ten years. While many have proclaimed that increasing rates in the current debt ridden world is impossible, the increasing odds of such an increase (now over 70%) would suggest that the majority of economists and investors feel differently. It wasn’t that long ago that so many said the Fed could never end Quantitative Easing. The fact that QE ended has passed without much fanfare or notice by those promoting such conclusions.

The same will happen with the “Fed can never raise interest rates” crowd. Fortunately the focus will shift from whether rate increases are possible, to the effects which a rate increase, and subsequent rate increases, will have on the global economy. The negative effects of increases will put strain on the emerging economies and create additional exchange rate volatility. The dollar may initially strengthen, but will likely begin to depreciate in the weeks and months after the first rate increase.