Greatest Threat to the World Economy

Economics, Premium POM13 Comments

There are two threats which could merge to create one great threat.

First, diverging mandates of central bank policies around the world are developing as one of the greatest threats to the world economy.  The systemic nature of this threat is in direct correlation with the imbalances which have grown within the international dollar based framework and the national responses to those imbalances.

As an example, while the Federal Reserve in America has started down the road of monetary policy normalization, other central banks, such as in Europe and Japan, are still struggling with recession economics and remain on the quantitative easing path.   China is still struggling with deflating its massive credit bubble while at the same time broadening the internationalization of the renminbi.

All other nations are somewhere between these oppositional monetary forces.  Interest rate increases in the United States serve to strengthen the dollar which puts additional strain on all nations holding USD denominated debt.  This amounts to a large segment of the world.  Such rate increases only enhance the problems facing other nations and puts up further road blocks to normalizing monetary policy.

It’s interesting that the Trump administration has been attempting to talk down the value of the dollar while the ongoing political drama and turmoil in Washington is creating the same depreciating effect.

The pressure building across the monetary and financial worlds is increasing with further divergence of central bank policies.  This core issue is not openly discussed but the symptoms are.  The symptoms are what will be used to hammer out talking points and force the directional movement towards monetary policy enhancements.

Monetary policy enhancements will represent the foundational transition points to re-balancing the global framework.  Discussions around using the Special Drawing Right (SDR) as a tool for rebalancing are increasing.  But there is only so much which can be accomplished without huge foundational changes.

The depth of the USD liquid market, somewhat offset by the growing RMB liquid market, will not be enough to force a realignment and rebalancing of the full international monetary framework.  Something other than a dollar crisis will have to be implemented in order to create the demand for a deeper and broader change.

The SDR market is new and does not provide enough liquidity to offset the dollar imbalances.  But if a swap agreement was made between central banks and the International Monetary Fund to utilize substitution accounts a liquid SDR market could develop faster than anticipated.

The use of substitution accounts have been covered on POM in previous articles and still represent the best path forward for an increased timetable on rebalancing.  The threat posed by diverging central bank policies will serve as one of the catalysts for shifting towards the SDR and the use of substitution accounts.

The argument will be made that a realignment of central bank policy can be achieved through the use of the SDR and substitution accounts, both of which will release the pressure which is currently building in the global system.

But I believe there is a second part to this threat which needs to be considered.  The recent worldwide hack on computer systems, and computer virus in general, have gotten a lot of press.  This is a part of a growing problem in the world.

The exposure and risk associated with such hacking programs and viruses are real, even though it may seem scripted and over-saturated at times.  Over the last few years there have been increasing attacks on central banks around the world.  Both the central banks of Russia and Bangladesh have had money stolen through hacks.  Even SWIFT was hacked at one point.

The trend in hacking, and specifically the hacking of central banks, aligned with the recent threats posed by leaked NSA hacking programs, has set a very real stage for a more intense hacking threat to central banks and as such the international monetary system.

A hacking program which was targeted to take advantage of the diverging policies of the central banks could evolve as a massive threat to world financial markets.  There would be no need for a direct hack against financial markets as the same effect could be achieved by attacking one central bank or multiple central banks at the same time.

The SDR and a broader IMF framework could very well be presented as a means of protected against both diverging policies and the threat posed by hacking as central banks around the world are likely to have varying and different protections and systems put in place.  This creates more areas of opportunity for hackers.

Some of this is speculation but trends associated with diverging policies and exposed systems have been developing in tandem.  Both coming together under one strategy to derail the global system, or create a problem, reaction and solution scenario which leads to further consolidation and transition to an SDR framework, would cause sudden and dramatic changes.  – JC

This article is copyrighted by POM Media©2017. As Premium content permission is not given to be copied and re-posted.

JC Collins can be contacted at jcollins@philosophyofmetrics.com

13 Comments on “Greatest Threat to the World Economy”

  1. JC – Not sure if you have every touched on this in previous articles but there are theories floating around the internets about how blockchain and cryptocoin technology (bitcoin, ripple, etherium, etc) could be an additional option in handling the imbalances you mention above. Thoughts on this?

      1. After having followed your blog for the past few years, I think you will find the technology and motivations to be interesting, at the least. Possibly even a missing piece to the very large and very complicated puzzle that you and your readers are trying to put together. I personally believe that we will all be hearing more and more about cryptocurrencies and the technology moving forward as more and more companies, banks and possibly even the IMF adopt. IMF press release 17/84 from March 15, 2017 references an Advisory Board on FinTech with some interesting board members.

        Total cryptocurrency market cap just surpassed an all time high of $60 Billion. A drop in the bucket in relation to the imbalances between countries, but this could be just the beginning…looking forward to your thoughts!

  2. Hi JC,

    Thanks again for another interesting article. My apologies if my understanding of your final point is muddled. In the event of a systemic crises will this benefit the transition to an SDR framework. despite the shocks, or could it work against the transition?

    On a side issue, but I feel still relevant, the last few articles have been superb, and the comments have added to the debate. The reason why I feel it is relevant is that I am currently reading The Silk Roads by the academic, Peter Frankopan. For those who are unaware of the book, I suggest them to take a look, it is a very easy read. I have had a few “wow” moments when engrossed in the book, and then had a few “wow” moments engrossed in POM. The Silk Roads is as relevant to the modern world today, as it was to the world and its empires a thousand years ago.

  3. This sounds like stage construction for the i9/11 to iPatriot Act hypothesis. In this case, the resulting legislation would help to facilitate the transition to the SDR. Certainly not outside the realm of possibility.

  4. Is it conceivable that the Anglo establishment would attempt to strengthen the dollar in order to crash emerging markets in a kind of ‘it hurts us but it hurts you more’ type of rebellion against the current transition taking place in the world, or would this ultimately play into the hands of the SDR and its advocates?

    Regarding crypto currencies, it’s been suggested that Bitcoin is a beta test for a coming global digital monetary system that will be neither decentralised nor private and will hand an even bigger advantage to the bankers. Could the SDR be officially launched in this format? But following on from talk about the cyber world, as firewalls improve so do the skills of hackers and in a similar sense we could see advanced block chain technologies emerge to rival the bankers centralised system, if that is indeed the case…

  5. The Hegelian Dialect is being played out, but not too artfully. But, if the end goals are total economic domination of every remaining human on the planet, then what does it matter? Now that the end goals are closer and within plane sight, the predacious miscreants are just in a fevered pit.

    It is all problems, reactions, solutions. The central bankers intentionally screw up the economic systems of the entire planet, then declare that all can be fixed if they just have more centralization, controls, and powers. The plan is to replace the $USD and the Federal Reserve with the SDR facilitated and managed by the IMF and the world bank is only just the next step towards the ultimate goals of cashless society and complete world domination by the select few. The eye of Ra atop the pyramid on the $USD was intentional.

    Global facilitating of the SDR and a broader IMF are just planned steps closer to the depopulation of humans on this planet and the enslavement of those spirits allowed to remain expressed in a human body. If one studies the countries about the planet that are presently demonized and under attack by the Zionists, DC, and The City, then one will notice that those same countries do not have Zionist controlled central banks.

    The creation of the Federal Reserve specifically opposing the US Constitution (aka; The Third Central Bank of the US) was very carefully planned via international banksters (as Paul Warburg.) The subsequent illegal implementation of the federal income tax was very carefully planned via international banksters (as Paul Warburg.) The illegal implementation of the IRS was very carefully planned via international banksters (as Paul Warburg). WWI was started and funded by international banksters as the Warburgs. (Paul Warburg headed the Federal Reverse in the USA while his brother Max Warburg manager the central bank of Germany. The overthrow and murder of the last Czar of Russia by the central banksters (via Max Warburg) funded Bolsheviks was not a coincidence.

    On February 17, 1950, James Paul Warburg confidently declared before the Senate of the United States that, “We shall have World Government, whether or not we like it. The only question is whether World Government will be achieved by conquest or consent.”

    A world government without borders, individual liberties, or national sovereignty results in the establishment of a slave/master environment. Within such environments the banksters will control everyone and everything via laws that they draft to be enforced at gun point by the state or through starvation that they control.

  6. “The recent worldwide hack on computer systems, and computer virus in general, have gotten a lot of press. This is a part of a growing problem in the world.”

    Agreed. Here is some supporting documentation.

    “The Internet of Things Will Be Even More Vulnerable to Cyber Attacks”

    “But what if devices were even more vulnerable, running with no built-in security and no opportunity to patch? This is the problem that that the so-called internet of things (IOT) presents. With an anticipated 22.5 billion devices due to be connected to the internet by 2021, the opportunity for holding these devices to ransom will present significant opportunities to criminals and will have serious consequences for providers and users of these devices.”

    “While there is research being done into the security implications of the IOT, many devices are already on the market and in people’s homes. Even when obsolete and out of use, the sensors may still present vulnerabilities that can be exploited by those who wish to hack into networked systems. Standards for security need to be enforced before a major hack that has more serious consequences for the consumer is perpetrated through the IOT. If that happens, public trust in this booming economy will likely be undermined.”

    ???? “One approach to driving up standards in cyber security is through the insurance industry.” ????

    “Firms such as QBE and AIG have been examining the role that they can have in protecting consumers and companies against cyber threats, contributing to the development of a required culture of cyber security that ceases to prioritize the affordability of products over security. This means the mainstreaming of cyber security in all aspects and throughout all strata of business, industry and services.”

    https://www.chathamhouse.org/expert/comment/internet-things-will-be-even-more-vulnerable-cyber-attacks

    “Journal of Cyber Policy”

    https://www.chathamhouse.org/publications/journal-cyber-policy?promoblock1

    1. Another interesting tidbit.

      “Roundup Of Internet Of Things Forecasts And Market Estimates, 2016”

      “Bain predicts that by 2020 annual revenues could exceed $470B for the IoT vendors selling the hardware, software and comprehensive solutions.”

      “McKinsey estimates the total IoT market size in 2015 was up to $900M, growing to $3.7B in 2020 attaining a 32.6% CAGR.”

      “General Electric predicts investment in the Industrial Internet of Things (IIoT) is expected to top $60 trillion during the next 15 years.”

      “IHS forecasts that the IoT market will grow from an installed base of 15.4 billion devices in 2015 to 30.7 billion devices in 2020 and 75.4 billion in 2025”

      https://www.forbes.com/sites/louiscolumbus/2016/11/27/roundup-of-internet-of-things-forecasts-and-market-estimates-2016/#4cb888b292d5

  7. Two additional bits of info. Mark Carney seen visiting the White House:

    http://www.zerohedge.com/news/2017-05-19/ex-goldman-banker-taking-over-fed-boes-carney-spotted-white-house

    Brandon Smith says a cyber attack could be the excuse needed to ‘explain’ an economic ‘reset’ for the financial system.

    http://www.alt-market.com/articles/3192-cyber-attacks-are-the-perfect-trigger-for-a-stock-market-crash

    My main concern with crypto currencies is that they are potentially vulnerable to being ‘hacked’ (the ransom recently demanded was in bitcoins) and there have been reported thefts of bitcoins. If the Internet either in part or the whole of it went down, just how could anyone retrieve their ‘assets’? I don’t see that as any safer than the current ‘money’ in a bank account that is just a number in a computer.

  8. JC, I noticed that Russia and China Treasury holdings significantly increased in March. I was surprised by this news, as it seems to run counter to your thesis (of countries like Russia/China diversifying out of Treasuries). I’m curious to hear your interpretation of this development.

Leave a Reply