Re-Mandating the Bank for International Settlements

Economics, Premium POM15 Comments

Unwinding the Euro Experiment and the Ascension of SDR

An interesting experiment was done with the euro.

The workings of the international monetary system and its capital flows in relation to trade balances are not as complex as one is lead to believe. There are complex methods of measuring and tracking the data which is produced, but the actual mechanisms which function under the surface are fundamentally simplistic.

A nation with a positive capital flow will experience a trade surplus. This surplus develops because the capital investments coming into the country exceed those of the capital investments leaving the country. When exports (positive capital investment) grow and surpass imports (negative capital investment), a nation will have a trade surplus.

This trade surplus accumulates as reserves in the foreign exchange reserve account of the nations central bank, who, for the most part, serve the purpose as creditor nations to the debtor nations.

Nations like America, which have a large trade deficit, import more than export. This negative capital investment expands sovereign debt. In the case of the United States, the negative capital investment, or large capital outflows, take the form of USD denominated reserve accumulation in the foreign exchange reserve accounts of those nations who trade with America.

The USD has been used as the dominant reserve currency since the end of the last world war. The accumulation of USD around the world as caused a massive imbalance in the system. This imbalance grows further as the dollar is continued to be used in the capacity of primary reserve currency.

This isn’t new information for most readers, but is worth revisiting before we consider the experimental role of the euro currency.

Monetary engineers considered that maybe the imbalances between debtor and creditor nations could be minimized and eliminated if all nations used a common currency both domestically and internationally. The euro was born from the European Currency Unit (ECU), which was a basket of currencies, much like the Special Drawing Right (SDR) of the International Monetary Fund is a basket of currencies today.

The weighting of each European nations domestic currency in the ECU was measured and locked-down at a pre-determined time to create the euro. EU nations who signed on to use the euro did so both domestically and internationally. This means the citizens of each nation carried euro in their wallets and collected them in their bank accounts. The euro was also used to balance trade amongst the member nations, with the euro becoming one of the core reserve currencies used in the SDR composition.

But an interesting thing happened.

The imbalances which developed and grew with the larger and macro dollar based system started to happen within the euro based system. The hope of eliminating or reducing imbalances and reserve accumulations through the dual use of the euro, being the domestic and international trade use, were not being realized.

The imbalances which had developed between the debtor (trade deficit) nations and the creditor (trade surplus) nations began to replicate within the EU framework. It began to dawn on the monetary engineers that using a supra-sovereign currency, like the euro, in a dual domestic and international role was not the ultimate solution which would balance the international monetary system and contribute to the reduction of reserve accumulations, which is the required objective to remove the imbalances.

Everything was connected and flowed in and out of itself.

Having nations accumulate and use the domestic currency of one nation, such as the USD, was not the answer. Nor was creating a supra-sovereign currency, like the euro, and having nations use it both domestically and internationally.

Something different would be required to reduce and eliminate reserve accumulation while re-balancing the system itself.

The obvious next thing to experiment with is the SDR. The SDR does not belong to any one nation, and will not be used domestically. It will not be used for commerce by the citizens of nations.

It will be used to balance trade between nations, but not at the central bank level. International trade clearing will be completed at the supra-sovereign level, through the IMF itself, or some alternative institution, like the Bank for International Settlements. Its name in fact provides evidence of its true nature.

It is somewhat predictable at this time to expect that each nation will re-allocate a pre-determined amount of its foreign exchange reserves into SDR. This amount will be determined by level of sovereign debt and trade balance, correlated with optimum capital flows. Each nation will hold a certain amount of their own domestic currency within their foreign exchange reserve account. This amount will be determined by the allocation of SDR.

Gold reserves are also likely to be placed on deposit with the IMF for allocations of SDR. This would follow a similar legal framework to that of the dollar, and how nations placed their gold on deposit with the Federal Reserve when the dollar was placed at the apex of the international monetary system in 1944.

Though such a system is fraught with the dangers of socioeconomic totalitarianism, the emerging nationalism which is beginning to sweep the world, and the spread of the self-regulation of rent-seeking, provides some glimmer of hope that the forces of good and right-mindedness in this world can hijack the very systems designed by the Crown Beast for the betterment of humanity.

The international institutions, such as the United Nations, World Bank, IMF, and Bank for International Settlements, among others, will need to be “re-organized” and “re-mandated” with promoting the sovereignty of nations and removing the agents of human weakness from within their ranks. Such has been accomplished in times past, and such can be accomplished now. – JC

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JC Collins can be contacted at jcollins@philosophyofmetrics.com

15 Comments on “Re-Mandating the Bank for International Settlements”

  1. Mr Collins:

    If the gold reserves are placed on deposit with the IMF for allocations of SDRs, then within 20 years I suspect that the controllers of the IMF will abuse the issuing of SDRs in a similar manner as the issuing of $USD and US Treasury Notes has been abused.

    I do not wish to belittle the point again, but unless physically threatened with torches, tar, feathers, poles, pitchforks, and ropes I cannot envision the rent-seeking elites actively becoming self-regulating. Other than eminent fear of harm and death, I regretfully have not discovered. observed, or witnessed anything in the nature of the financial elite that would retard or regress their inherent pernicious greed and evil. I have not discovered any evidence or history which indicates that altruism is a compelling emotion in the elite’s nature.

    Also, with the threat of revolution or an actual revolution, I cannot envision the international institutions, such as the United Nations, World Bank, IMF, and Bank for International Settlements, “re-organizing” and “re-mandating” themselves to remove the agents of human weakness from within their ranks. Removing the ranks of human weakness from the ranks of these institutions is equivalent to removing the supporting columns of the buildings within which some of the predaceous miscreants gather.

    Ozymandias

    1. “I cannot envision the rent-seeking elites actively becoming self-regulating. Other than eminent fear of harm and death, I regretfully have not discovered. “

      Then let me share a dream with you Oz (lol), where the rent-seeking elites have a fear of getting caught for rent seeking in an unknown monetary system that has many new surveillance tools to catch them.

      Just a possibility but perhaps enough to give rise to self regulating.

  2. The cycles renew after each bitter “winter” in four seasons of 20-25 years each, after the forces of greed and rent seeking culminate in a bitter destructive “winter”. Careful analysis of the past 800 year Anglo-American history provides ample evidence of such a cyclic behavior as documented by Strauss and Howe in the “fourth Turning”, the last “spring” started in 1946, after WW 2.

  3. If I can venture a guess, the SDR will only ameliorate the problem, ultimately imbalances will continue to accrue. The SDR may very well alleviate the situation by eliminating imbalances due to reserve accumulation in any national currency, however it will not change the dynamic of underlying phenomenon that incentivizes the accrual of capital imbalances. The existing monetary arrangement with the USD is just a imbalance multiplier, a magnitude amplifier. You need to come up with an arrangement that prevents independent actors from having the incentive to accrue capital. Ultimately, there will always be imbalances due to the varying productivity and utilization level of the independent actors taking part in the “game”, imbalances are unavoidable side effect of the existing economic paradigm, which is effectively, a slavery to harvest human energy.

  4. “Though such a system is fraught with the dangers of socioeconomic totalitarianism, the emerging nationalism which is beginning to sweep the world, and the spread of the self-regulation of rent-seeking, provides some glimmer of hope that the forces of good and right-mindedness in this world can hijack the very systems designed by the Crown Beast for the betterment of humanity.”

    When we first discussed this many thought it wouldn’t happen. The idea was fraught with the same inability to see it happen. Yet here today some months down the road low and behold it is happening. It took the crown beast 70 years to get the world to where it is today, it should take some time to right the errors of of our ways.

    While many watch how absurd Trumps last tweet was or how evil Russia is or how North Korea is threatening the world with nukes or even how devastating the weather has become with all this global warming; the world has been moving into this nationalism little by little without as much as a raised eyebrow. It’s amazing to see how humanity as a whole reacts, overcomes, compensates as changes are made as the wellhead. Cause and effect, action and reaction just like a chess game.

  5. Given the track record of the IMF, World Bank and BIS, I do not believe these institutions will ever have national sovereignty as a goal. (In fact the opposite) The same people who run these institutions behind the scenes are the same people who have been building the globalist banking empire. You can read their own white papers and memoirs boasting about the coming world government run by bankers.

    1. meierfire:

      The intentions of the miscreants that direct and manage the daily operations of these international institutions are for the most part operating in plane sight. Their memos, memoirs, transactions, and white paper inform the readers of their desires, opinions, and plans. The trick is, the backers, organizers, and publishers of such documents are keenly aware that only a microscopic few of the dumb masses (aka; disorganized masses) and their intended host, prey, and victims of their actions and plans do not read what they write. As such, these psychopaths can smile with glee when they declare, “But, we told you so!”.

      Ozymandias

  6. Mr. Collins:

    Given the recent revelations in the Washington Post (A swamp rag) concerning the kildabeast, the FBI, and the contracted Russian Dossier on Trump, the rent seeking elites might be limiting themselves or just throwing Queen Jezebel and her aid and enabler Slick Willy to the horses and dogs.

    Oz

    1. Yes, but only temporarily!

      Evil can, will, and does run unabated when good men remain silent and do nothing. Hence, the causes of imbalances.

      There has always been light and dark; good and evil in the third dimension on this planet.

      The magnitude and intensity of each has always been a balancing game based on the choices that we make and the actions we support individually and collectively.

  7. I see that link doesn’t work either, I wasn’t sure if I really wanted to share this or not, but because I can’t get the links to work I’m getting stubborn about it. I made this you tube video almost a couple of years ago, it’s just me having fun.
    Anyone curious about seeing the world famous Pieter Segar aka pedrofalls in action you can find me at, My movie Hillary walks in a bar.

    I’m the one with the beard. There now that is my last effort on this.
    PYM

  8. So I have re-read the post 3 or 4 times now and the way JC lays out the really rather simple principles, if a couple of things happen or go right like,” the emerging nationalism’ and “the spreading of self regulation of rent seeking.” Stir in some “highjacking,” Hey this thing could work.

    The other side of the coin would seem to include slaying the golden goose. They do need customers don’t they?

    Whether it dose or not remains to be seen. Still the “glimmer of hope,'” has my optimistic nature in a fine state of mind, at least for the moment.

    PTM

  9. Then there is this from Thierry Meyssan. Trump; “He is trying to take back his country institutions from the ruling class and make them his peoples once again. Thus he communicates thus by changing his mind like he changes his shirt.”

    For the rest of the article, “Trump takes up again the fight against the US establishment.’
    http://www.voltairenet.org/article19848.htlm

    PTM

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