The Monetary End Game

Economics, Geopolitical, Premium POM

The Division in America on the Middle East and Monetary Reform

By JC Collins

As the value of gold continues its wild ride of increases and decreases, the latest US jobs report is less than stellar.  A lower amount of jobs were created than expected, and wage growth is almost non-exist.

What this means for interest rate increases is anything but good.

There is a very real possibility that the Fed missed the best opportunity it would have had last month when it declined to raise rates a miserable quarter of a point.  But to think that rates will never increase again is delusional.

The problem the Fed, and other central banks are now facing, is a growing risk of a loss of faith in fiat currency.  The aging structure of the current monetary framework, based on the supreme unipolar role of the USD, has ran its course, and will soon be replaced with a multilateral framework which will more equitably represent the economic realities of the financial world.

The reluctance of the US to ratify monetary reforms which were agreed upon back in 2010, and the on-going geopolitical tension in the Middle East has a very problematic and consistent undercurrent of similarity. The Republicans in Congress have refused to ratify the IMF 2010 Governance and Quota Reforms.  It is also the Republicans who have been vocally speaking out against the Iranian nuclear deal, and pushing for the complete overthrow of Assad in Syria.

Considering it is the Democrats, supported by the Treasury and the Executive Branch, who have been pushing for the ratification of the reforms, as well as the peace deal, is likely not a coincidence.  Add to that the growing awareness that the Obama administration has willingly lost the Middle East to Russia, and it becomes painfully obvious what is playing out on the theatrical political stage.

The political spectrum is always dominated by two opposing spectrums.  The engineered opposition between both parties, and in some countries three main parties, the disorganized masses are herded and corralled on socioeconomic mandates.  The conditioning is emotion based, such as the use of terms like freedom and family, while anything but those ideologies are actually what is considered in the overall conditioning.

The socioeconomic balance between the classes is maintained through multiple levels of control and influence.  There is always some flex built into the system, but the cyclical wealth transfers from the bottom to the top take place at frightening, and obvious, intervals.

The good cop bad cop script works on any domestic population like a charm.  The disorganized masses have not yet found an effective way to psychologically and emotionally defend themselves against this powerful dialectic.

But we will in time.

Obama has not been a big supporter of Israel, and as such, considering the shared vision and goals of both Israel and Saudi Arabia, we can determine, based on a full understanding of what is taking place, and correct understanding of the actions of the main players, that the US Executive Branch, along with the Treasury, are supporting the recent moves by Iran and Russia in Syria to turn the tide and sway the balance of the power in the Middle East from Saudi Arabia and Israel towards a more balanced representation.

The role of Saudi Arabia in the petrodollar scheme is extremely representative of the need to shift this balance of power in order for the US dollar to be depreciated in order to make room for alternative reserve currencies, such as the Chinese renminbi and the euro.

Perhaps there are some reluctant American partners who do not wish to see their economic leverage be diversified amongst others, such as large oil producers like Iran.

There is no doubt that the geopolitical tension taking place in the world is directly connected to the monetary transition which is beginning.  What is not so obvious is the division within the United States on this transition.

The division becomes somewhat consolidated when we consider that the Republican candidate Donald Trump is running his highly successful campaign with the slogan “Make America Great Again”.

As I’ve covered in previous post the only way to make America great again is to depreciate the dollar and increase American exports.  This will create new domestic jobs and allow for interest rates to begin the needed increases.

The catch right now is that if the Fed increases rates it will cause turmoil for the emerging markets, like China.  If they continue to delay the increases, the loss of confidence will grow and so will market volatility, like were seeing in gold.

If they raise rates there will be a negative reaction.

If they don’t raise rates there will be a negative reaction.

This is why I continue to promote the concept of reserve diversification as a viable solution, and one that is growing in probability.  This diversification of US denominated reserves around the world is something all countries want, including the United States.

Without the structural changes to the SDR to accommodate a more operational reserve status, reserve diversification through sovereign wealth fund investment is becoming the more probable path forward.  There could of course be a onetime massive issuance of SDR through substitution account diversification.

This could be coordinated with the interim 2010 reforms which increase the quota amounts of the emerging markets, which would essentially bypass the American veto and allow for the funding required to address the growing financial crisis, and any deepening of the crisis which would follow the normalization of monetary policy in the United States.

We’ve laid out a few different scenarios on how this could play out in the coming months.  There could only one of these which is implemented, or a combination of these.  Perhaps there will be a solution which we haven’t even thought of yet.

We have covered the possibility that China could transfer gold reserves to the IMF in exchange for additional reserve diversification through SDR substitution, and to support a larger issuance of SDR, like the one in 2009 in response to the financial crisis of that time.

Whatever the cause of this division within America, the rest of the world is beginning to move forward without them.  This is apparent in the forward movement on monetary reforms without the US, and the sudden change in momentum in the Middle East.  – JC