Revisiting the Reversal of Bretton Woods

JcollinsEconomics, FREEPOM4 Comments

Reflecting on a 3 Year Old Post and Measuring its Accuracy

The post Reversing Bretton Woods was first published in January of 2015.  It’s almost 3 years old and is worth revisiting so we can take stock of the overall POM thesis and the accuracy of the unfolding events. Reading the article now and measuring against the events which have unfolded, and continue to unfold, is an important part of understanding the events of tomorrow.  From the original:

With so much happening on the economic front over the last few weeks its important to ground ourselves and take stock of just what is actually taking place. The continued depreciation of oil and the beginnings of depreciation of the stock markets are the result of the end of Quantitative Easing and the beginnings of the deflationary correction which will build the case for the economic transition from the unipolar USD Bretton Woods based system to the multilateral SDR based system.

There is much talk in the media, both mainstream and alternative, that the return of QE is imminent and the Federal Reserve will not be able to raise interest rates. These proclamations are not considering the reality that deflation and depreciation is exactly what is being engineered, and has been since 2008.

Due to the level of USD in the foreign reserve accounts around the world there is not one single government or central bank that is willing to allow the dollar to collapse.  Nor is there any one country that is willing to submit their domestic currency to the pressure inherent in the status of global reserve currency.  Anyone who suggests otherwise simply does not understand the fundamentals of macroeconomic frameworks and the Triffin Paradox, which has been proven factual by 70 years of USD historical data.

The Triffin Paradox, or dilemma, is defined by the pressure exerted upon a domestic currency when it is used as the global reserve currency.  As the currency accumulates in the foreign reserve accounts of central banks around the world, it creates depreciation pressure on the home economy.  The United States has exported this depreciation though exchange rate imbalances.

The preliminary framework of the multilateral system has been carefully constructed over the last few years with only IMF reform left on the table.  The overt political tension which will soon surround these reforms and the deflation which is now taking place will soon merge into one socioeconomic paradigm which will push the international monetary system in the direction of the multilateral.

As stated in previous posts, 2015 will be a year of transition and implementation.  While alternative analysts have been weaving tales of economic collapse and war, we have been studying and reviewing the actual mechanics of the multilateral framework.

The obvious conclusion that fits the actual metrics and situation which is unfolding is that the original Bretton Woods Accord is being reversed in preparation for the SDR based system, a supra-sovereign unit of account that will not be burdened with the challenges as presented in the Triffin Paradox.

The movement and repatriation of gold which has been much lauded as signs of dollar collapse have in fact been the reversal of the Bretton Woods framework which placed allied gold in the reserve account of the Federal Reserve to support the USD system which was agreed back in 1944.

The dollar has been appreciating while the currencies of the emerging economies have been depreciating because that is the imbalance in the exchange rate system which is inherent in the USD Bretton Woods system.  In addition, the appreciation of the dollar supports the exchange of USD liquidity for SDR liquidity through the substitution accounts which are designed to facilitate a decrease in dollars in the foreign reserve accounts of central banks around the world without depreciating those assets in the process.

Those who promote the idea that China will dump the dollars they hold are spreading misleading information and likely have ulterior motives.  The USD which China holds is an investment which they have made and it is more probable that they will attempt to exchange that investment for an alternate investment as opposed to intentionally depreciating their own assets.

It would be like any of us purchasing shares of a specific company and then implementing a process to devalue those shares.  It would make no sense.

The volatility which is now building in the Euro zone also fits with the mandates of the multilateral framework.  The probability of a fracturing of the Euro is building and I would suspect that the currency basket itself will be fragmented leaving the European Monetary Union itself intact.  Each country in the European Monetary Union will revert to its own domestic currency with Germany and perhaps the Russian ruble representing the two European seats on the IMF Executive Board and in the SDR basket.

When viewed through the lens of the multilateral framework and SDR basket adjustments which are coming this year, the fragmentation of the Euro currency makes sense as a basket of currencies in a basket of currencies situation is unworkable and adds deeper layers of dysfunction.

There is no doubt that this year will be explosive with dramatic changes and devaluation across the macroeconomic spectrum. Which means its all the more important that we remain grounded and continue to build our understanding of the transition which is taking place.

The amount of USD in the foreign reserve accounts around the world has given the United States leverage on how the transition progresses, but progress it will and the USD will become one of many currencies in the SDR basket, and the SDR will become the global reserve unit of account, minus the problems as presented by the Triffin Paradox.

Since this post was published in January of 2015, I have presented a case for the rise of Trump and the purpose surrounding selling a waning American influence in the world to the American people as a new modern nationalism.  This is in fact exactly what has been happening, as domestic interests are measured against foreign monetary interests, and the whole world system shifts with a clunk or two.

Reversing 7 decades of Bretton Woods is not a small task.  But nevertheless, this reversal is proceeding as planned.  – JC

JC Collins can be contacted at jcollins@philosophyofmetrics.com

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4 Comments on “Revisiting the Reversal of Bretton Woods”

  1. JC , As well as there is no where else to go? What causes me great concern was that it seems no one in the USA was willing to rise above “each one for himself” mentality throwing all under the bus . While the money men of old were self interested at least they had a care for consequences having a modicum of integrity , knowing what ramifications and what their progeny would think?
    Every man for himself is the construct of the life of the man who has no Self. Have you noticed creativity in films , arts music is in ongoing downward spiral? I believe it’s not because I’m getting old , but really due to the fact it is! Please, anyone here correct me if you feel that it may be to getting older ! Ill be 53 this month!

    1. Dear Cypress7, No, it’s not because you are 53 this month! There are cycles in human creativity as there are in anything and everything else that exists whether in physical or in abstract forms. According to the German philosopher, Oswald Spengler, the Western civilization is in a decline stage which he calls it the Autumn (Fall). The fascinating 11-minute long clip will absolutely depict the cycle that began 500 years ago. Nevertheless, a decline always implies a future potential rise again!

      https://www.youtube.com/watch?v=FsaieZt5vjk

    2. cypress:

      If you follow the money and the actions of evil miscreants who have funded, directed, and controlled Hollywood, the lame stream media, “arts”, and “music industries” you see common denominators.

      It is not so much that you have or are becoming “old” as your developed awareness and length of time on this planet has presented you with opportunities to see clear and distinct patterns and trends. Flashiness, ludicrousness, rudeness, and vulgarity are just some of those physical characteristics and have not been promoted to be acceptable by accident.

      The specific intents of these nefarious and predacious miscreants and their ilk and minions are not to create, but to destroy. Hence, the slow decay and clear downward spirals to baseness. The Luciferians and the followers of Beelzebub and Molech have specifics in mind and it is not creation, but instead destruction, consumption, and replacement.

      The Tempters have not been “creating” distractions and temptations without purposes or directions to their desired state.

      I suggest that you research the origins of the word, “Hollywood”. This selected name was no accident or coincidence.

      Eyes wide shut.

      Oz

  2. Hi J.C,

    It is incredible, as you stated in one of your posts, that North Korea being a puppet state of Anglo-American Establishment, or in a wider-context, a useful and expendable pawn in the eyes of all-controlling supranational bankers is voiced by no other platform except POM. But once again, a London connection seems to be found for the support of North Korea’s nuclear programme that solidifies your claim.
    http://www.independent.co.uk/news/uk/home-news/north-korea-nuclear-weapons-programme-fund-london-home-blackheath-a7697931.html

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