Masking the SDR with a New Gold Standard

JcollinsEconomics, FREEPOM8 Comments

Is there a snake in the wood pile?

A recent article in Forbes has suggested that the Trump Presidency has three options regarding the international monetary system. One option is to continue with the dollar as the primary reserve currency. Most readers will be aware of the challenges from such a continuation. The growing imbalances within the existing system are creating the need for a structural change. So this is not a option worth considering.

The second option which Forbes suggests is to use the Special Drawing Right (SDR) of the International Monetary Fund (IMF) as the global reserve asset. This concept has been thoroughly reviewed and explained here on POM and does provide a viable path forward pending what solutions and protections are put forward to address concerns over loss of sovereignty.

A third option which Forbes puts forward is the return to a new gold standard. This option has also been discussed and reviewed here on POM in the article The Greatest Deal of All Time – A Trump Gold Standard and on the Republican Party of Canada site with the article An Incremental Return to Gold-Backed National Currencies – And Why A Supra-Sovereign SDR Reserve Asset May Just Make That Work.

Both articles taken together provide a focused picture on the possible solution of gold-backed national currencies being used in conjunction with the SDR to re-balance the international monetary framework.

There are some key people in the Trump Administration, as discussed in the first article, who are positioning policies which will facilitate the transition to a partial gold support for the dollar. This will be called a new gold standard regardless of the percentage or depth of gold support.

It has been noted that the recent communiqué from the IMF no longer mentions the need to resist protectionism. This is revealing in that it aligns with the previous discussions we have had since 2015 about the Trump platform representing a “New Modern Nationalism” which will be used to sell the transformation of the international monetary system and manufacture the domestic support for major policy changes back home in America.

These changes include everything from devaluing the dollar and forcing the appreciation of the Chinese renminbi. Both of these have been openly discussed in the last few months and will continue to be discussed as more of the geopolitical challenges of this transformation are sorted out on the international stage.

Where Forbes defines option two and three as an either /or decision, I would suggest that it will be a combination of both. The new nationalism which is sweeping across the world will enhance a re-negotiation of trade deals and encourage fundamental changes to the existing dollar based exchange rate arrangements. This will force a drastic shifting of wealth and access to resources in the world. It is that reason more than anything else which is the source of the ongoing geopolitical tension in the world.

Readers can reference the POM article The Great War for Eurasia for a better understanding.

The number one concern with the concept of using the SDR as the international reserve asset in place of the USD is that it would mean the loss of sovereignty for nations. The SDR system taken to its ultimate corrupted form would mean that once sovereign nations no longer have control over their domestic money supply. This is not necessarily true as discussed in the linked articles above. Though it could be true if proper controls and policies are not put in place through re-negotiated trade deals and exchange rate arrangements.

For many this risk is too great and the SDR framework would have some huge hurdles to overcome. This will also depend on how it is sold to the mass populations of each nation. Some countries will absorb the change without little hesitation as they would stand to gain and be better positioned.

But there are nations, such as America, where an SDR system could be perceived as detrimental based on the fact that the US dollar has in essence been the international reserve asset since at least the end of the last world war. This “loss of power and influence” is being packaged and sold as Trump’s new nationalism and the BREXIT vote. Their is a high probability that Marine Le Pen will also be elected in France this weekend as previously predicted here on POM.

Behind the scripted media presentations on a possible new gold standard will be the fine print on the role of the SDR in the international monetary system. The use of domestic currencies, such as the USD, to balance global trade, will need to be avoided.

When Trump said in a speech that he is against a “global currency” and a “world government” most alternative media interpreted that to mean that he is against globalization. But globalization is only changing hats and will continue under the new modern nationalism with re-negotiated trade deals and the use of the SDR to balance global trade.

This has been the objective all along.

Such a role for the SDR could be presented as not being a global currency because it is only used for trade purposes and no one is walking around with SDR in their wallet or in their bank accounts.

The realities of a Trump Presidency are now settling in on the American people. There has been some flip-flopping and the continuation of the existing American foreign policy, which is evident in the bombing of Afghanistan and the missile strike in Syria. Outside of which establishment people are holding the reins, it would appear that not much has changed regarding Anglo-American policies and strategies.

The post How Rothschild Inc. Saved Donald Trump provides some explanation for the emerging Trump realities. Taken at first by many as wrong, the article itself is proving extremely accurate considering it was written last summer and before people were named to the Trump administration. Wilbur Ross, former Rothschild Inc. executive who was discussed in the linked POM article, is now the Secretary of Commerce and will be instrumental in forming the new American economic and trade policies.

That should be the biggest clue to all that the ongoing international strategies are continuing with the Trump Presidency. There is no reason to think that this will also not apply to the call for a larger role for the SDR.

A partial gold standard for the USD and other major currencies acting as the front man could very well direct attention away from the SDR background and deeper changes to the international monetary framework. Understanding the fundamentals of this transformation is the best thing we can do to grasp and predict what is to come next. – JC

JC Collins can be contacted at jcollins@philosophyofmetrics.com

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8 Comments on “Masking the SDR with a New Gold Standard”

  1. Another excellent one and thank you JC. I recall madam Le Pen stating that she will keep Euro as exchange currency for trade but she wants the French Franc back as the national currency which is an evidence of the way USD and others will evolve.
    Kudos to you noble JC for your wisdom and astute observation but more so for creating a community of truth seeking and super smart people on this wonder site. It’s an honour for me to be a member of this truly high culture fellow travellers on the path of Truth.

    God bless you Sir.

  2. “Amid the rise of populism and nationalism, some are asking if revamping the SDR could re-energise multilateralism”

    “Areas of focus would include using the SDR for some bond issuance and trade transactions, developing market infrastructure (including payments and settlement mechanisms), improving valuation methodologies and gradually developing a yield curve for SDR-denominated loans and bonds. This would also help to leverage the inter-connectedness of the SDR’s roles, in order to reach critical mass quickly and have a foundation for further incremental gains.”

    https://www.theguardian.com/business/2017/apr/24/imf-populism-nationalism-sdr-reserve-currency

    1. Use the SDR for some bond issuance…already being done!
    2. Trade transactions…being negotiated?
    3. Developing market infrastructure…pretty much done with “Basel III: international regulatory framework for banks” right?
    4. Improving valuation methodologies…waiting on China to depeg from the USD so the dollar and renminbi can normalize? Maybe waiting to see the exchange rate formulas?
    5. Gradually developing a yield curve…would this be interest on the SDR itself?

  3. Consider the rise of the internet.

    The internet is a network of networks. Protocols like trade agreements allowed computers or nations to communicate and exchange with another. The world wide web much like money is the medium of the internet or network of nations. No one really manages the internet, but there are those who refine existing protocols.

    The internet allow resource sharing to a degree never known before. This paradigm shift seems to be translating to trade. As the internet is to trade as the web is to money.

    I am reading a book by Thomas Greco. His core idea is to take back the credit commons thru credit clearing exchanges.

  4. A very interesting read. I have some digesting to do on this one. But I do smile when I think back to a radio debate just after the 2008 crash. An “expert” was thrashing gold and calling it a barbarous relic, it had no place in a modern financial system and only fools would invest in it. Funny that, then why is it to be part of the SDR basket. The Chinese have been buying tons of the stuff for quite a while. JC has alluded to this in a previous article. Other sites have also made reference over the years to their large purchases. I wish I had remembered the “expert’s” name, because I would love to ask him what he thinks now. The Great Game goes on.

  5. The Forbes article touches on the paper-gold problem [I have asked you about that in the past] and hints at steps that are taken to be addressed
    Regards
    Vasiles

  6. Thank you Mr. Collins for another insightful post.

    I support the return of the gold (and silver) standards. A gold and silver standard tends to restrain the spending of politicians. It also keeps trade honest.

    The world is tired of receiving worthless paper for their exports to the USA.

    The removal of the $USD as the world reserve currency should also restrain the use of the US Military to destroy those who oppose the use of the $USD and US hegemony.

    I want to see the Federal Reserve abandoned and its officers and directors in jail for fraud and grand theft. I have similar opinions concerning the BIS. All banksters should be kept on a very short rope.

    Oz

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