XRP - The Standard

jcollinsEconomics, Geopolitical28 Comments

USD, SDR, Economic Collapse, Sovereign Debt, China, Russia, SWIFT, and SAP 

JC Collins

The fear of an economic collapse is a constant emotion which spans across financial demographics and business news cycles.  Everything from sovereign debt pressures to currency wars, with trade wars sprinkled in for good measure, are leveraged as potential sparks for the next crisis.  

Over the last five years, I have made a reasonable case that central bank monetary policies around Quantitative Easing (QE), and the subsequent Quantitative Tightening (QT), or normalization of monetary policy, would not lead to the dollar collapse and economic turmoil that so many had been predicting. There has been much written about the QE response to the financial crisis of 2008 and the inevitable normalization of those policies which would follow.  So let’s just focus on the basic economics to help us understand the broader impact of these policies and the direction the world now appears to be taking as a response to the last crisis.

Economist Robert Triffin developed an economic theory around the inherent conflict which develops when a national, or political credit-based currency, such as the US dollar, is used in an international reserve function.  The domestic and international responsibilities of such a currency are in opposition to one another and create an ever-escalating monetary imbalance which has an impact on the entire global structure.  Triffin stated that America would have to carry a current account deficit in order to maintain the dollars de facto global reserve position. When we consider that America went from having the world’s largest trade surplus at the end of WW2 to now having the world’s largest trade deficit, we can’t help but follow Robert Triffin’s reasoning to the same conclusion.  

There could be more to the story though, and Triffin’s theory may have been flawed.  On a base fundamental level, the theory is stable and proven accurate when correlated with real-world events. But on a more complex level, the theory may not be as applicable. We will explore this later in the article when we consider the re-alignment on trade deals being mandated under the Trump Doctrine.  

The Triffin Paradox, as it became known, has been one of the most widely cited bodies of economic theory in the last half-century. Triffin accurately predicted that a widening international use of the USD, along with a gold shortage, would eventually lead to a run on US gold holdings.  The fact that this indeed happened in the 1960’s and eventually led to President Nixon closing the “gold window” in 1971, gave the Triffin Paradox foundational support with most economists.  

The original Bretton Woods agreement was a partial gold standard (non-domestic convertibility) and in essence, ended in 1971, but the international role of the USD only increased further as OPEC agreed to transact all global energy sales in American dollars.  The International Monetary Fund [(one of the institutions created at Bretton Woods in 1944, alongside the World Bank (WB) and World Trade Organization (WTO)], created a supra-sovereign asset called Special Drawing Right (SDR) in 1969.   The SDR was developed as an alternative measure to provide financial assistance, or liquidity, to nations who found themselves on the wrong end of the growing global imbalances.

The Bretton Woods institutions and the monetary and financial policies which followed were purposed with the task of managing the USD centered framework. The institutions worked hand-in-hand with the Federal Reserve and other central banks around the world to ensure the imbalances were managed through exchange rate arrangements and domestic interest rate policies which more served the international objectives as opposed to the domestic needs of any specific nation.  

The SDR from inception was built as a value-composition of the top global reserve currencies.  This is an important distinction.  The SDR is not supported by a basket of currencies.  It is, in fact, the basket.  No basket - no SDR.  It is an alternative reserve asset which is not a currency, but it does serve as a claim on currency held by IMF members.  We will come back to the SDR further down.

On December 11, 2001, China was admitted to the World Trade Organization (WTO). America’s growing trade deficit with China began to increase at a faster pace from this point.  Outside of the Federal Reserve itself, China is the largest holder of US debt.  Most economists and financial analysts consider this to be an advantage which China holds over America, but such is not the case.  This widely misunderstood dynamic between both extreme spectrums within the global system of imbalances has caused the People’s Bank of China to explode a domestic credit market which could implode under a strengthening USD.  

The best method of understanding this situation is to use a simple example.  If I owe you $100 dollars, that is my problem.  But if I owe you over a trillion, that is your problem.  China has a huge problem which is straining its domestic capital markets and preventing it from fully opening those capital markets to international investors.  The internationalization of the renminbi (RMB), or yuan, needs to progress in order for China to strengthen the foundations of its huge economic growth.  The continuation of the “Chinese miracle” is not a guarantee, and the domestic economy could implode and cause a revolution within the country.

Does that sound far-fetched?  Consider that the Chinese people have a regular history of rising up and overthrowing dynasties and incompetent rulers.  The centralized government in Beijing is aware of this and has built its socioeconomic model around the need to develop its vast rural population into a middle class which can consume material goods.  The expansive “ghost cities” of China which have been built around the country were meant to house 100 million rural peasants as the new middle class.  This could still happen but it will depend on the outcome of the trade re-alignment taking place with America.  More on that soon.

On March 23, 2009, as a response to the financial crisis, the Governor of the People’s Bank of China Zhou Xiaochuan published a paper titled “Reform the International Monetary System”.  Zhou Xiaochuan was putting forward the idea of reforming the IMF and SDR as an alternative to the Bretton Woods USD based framework.  From the paper:

“The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.”

“Though the super-sovereign reserve currency has long since been proposed, yet no substantive progress has been achieved to date. Back in the 1940s, Keynes had already proposed to introduce an international currency unit named “Bancor”, based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may have been more farsighted. (Readers can reference the POM article The Geopolitics of XRP for additional information on ”the White approach”. - JC) The IMF also created the SDR in 1969, when the defects of the Bretton Woods system initially emerged, to mitigate the inherent risks sovereign reserve currencies caused. Yet, the role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system.”

“A super-sovereign reserve currency not only eliminates the inherent risks of credit- based sovereign currency, but also makes it possible to manage global liquidity. A super-sovereign reserve currency managed by a global institution could be used to both create and control the global liquidity. And when a country’s currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.”

The better part of POM’s history has been spent understanding these proposed reforms, as most of the major players, including some within the US Treasury Department, were promoting the same.  The major challenges with elevating the SDR to a true global currency status involved structural changes to the IMF governance framework.  These changes would have reduced American influence over IMF governance, which some within the American establishment disagreed with.  

As a response to the 2009 paper by Zhou Xiaochuan the members of the IMF developed the 2010 Governance and Quota Reforms.  Though the Obama administration agreed on the reforms at the beginning, America stalled on implementing the changes.  A version of these reforms was finally enacted in 2016 around the same time that the Chinese renminbi was added to the SDR composition.  The addition of the RMB to the basket was controversial as some felt that the Chinese currency had not yet reached a level of internationalization which would provide it the necessary reserve status of other member currencies.  The addition should be considered a political move by the IMF against American interests. 

China desperately needs to diversify its foreign exchange reserve holdings of USD denominated debt.  The development of RMB denominated financial securities and assets is a strategy to move forward this de-dollarization and internationalization.  The on-shore and off-shore RMB serve as a barrier to protect China’s domestic financial markets from speculation while it promotes international expansion. 

The New Silk Road Initiative serves as a vehicle for China to expand its influence across the Eurasian Continent (See The Great War for Eurasia) while building corridors for RMB liquidity. But the New Silk Road Initiative, like the continuation of China’s domestic growth, is not a guarantee.  Emerging nations who have signed on with the New Silk Road Initiative have been burdened with debt to China, and as the USD strengthens under the Trump Doctrine, it’s not just China which is under risk of experiencing a major credit crisis. A strong US dollar can unravel the whole Eurasian geopolitical strategy which China and Russia have been engineering for years.  It is unlikely that Russia is unaware of this.

One of the largest challenges with unwinding the dollar standard, or the Bretton Woods framework, involves the existing exchange rate arrangements.  For the most part, it is these very arrangements which have been the biggest contributors to the global imbalances which have developed.  The Bretton Woods institutions have structured the exchange rates around the world to accommodate and promote a stable USD.  As the international supply of USD increased it was the currencies of the emerging markets which carried the bulk of the inflation.  This imbalance became so large that American made goods became expensive to other nations.  American companies moved factories overseas and shifted the whole global supply chain management framework to the emerging nations.

It is this global supply chain management framework which Trump is now attempting to bring back to America through the re-negotiation of trade agreements.  

Over the years I have stated that the answer to correcting the global imbalances would be to devalue the USD to make American made goods more affordable to the rest of the world.  This would increase US exports and lead to an overall improvement in GDP.  While many focus on the amount of the debt, the larger challenge is debt management.  As an example, at the end of WW2, the American debt-to-GDP ratio was substantially higher than it is today.  The chart below from the Congressional Budget Office projects the debt-to-GDP ratio out to 2047 but does not consider the substantial increases to GDP under the Trump Doctrine.  We should anticipate that this ratio will begin to trend downward in the coming years, which will put America in a stronger position against China.  

The flip side of this argument is that the Chinese renminbi would have to appreciate to reduce exports and decrease its trade surplus.  America decreases its trade deficit and China decreases its trade surplus through depreciation and appreciation of domestic currencies.  Eventually, the imbalances adjust to a level which accommodates global growth and the expansion of liquidity. But that is only part of the issue.

The largest problem in the existing monetary structure is the accumulation of foreign exchange reserves.  In particular, it is the large accumulation of USD in the foreign exchange reserve accounts of central banks around the world, with China being the largest.  Everything written above is a symptom of this one aspect of the existing dollar standard.  These reserves are used to support the USD monetary standard and provide the asset off-set for a central banks liabilities.   

The composition of these FX reserves vary from nation to nation, but the largest percentage of accounts around the world is made up of USD.  Over the last few years some nations, such as Russia, have been dramatically reducing their holdings of USD.  China, for its part, needs to be careful how fast it diversifies its reserves while maintaining a parallel momentum with RMB internationalization.  The Trump strategists know this and just about have China in a checkmate position on trade.  Beijing will make a deal to prevent a domestic credit implosion and unrest amongst the population.  

Under the IMF Sovereign Debt Restructuring Mechanism (SDRM) there are multiple paths forward which can be taken.  Nations such as Greece have taken loans from the IMF which have riddled the country with more restrictions on domestic policies and growth potential.  The allocation of SDR quota amounts from member nations was one of the items on the table for reforms back in 2010, as suggested by China and Zhou Xiaochuan.  

The alternative to the SDRM is Collective Action Clauses, or CAC’s.  Both the SDRM and CAC are highly debated by monetary and financial policymakers around the world.  The laws governing CAC’s differ from New York to London, with no agreeable alignment on the application of those laws.  While CAC’s would benefit the USD standard and American interests, the SDRM would serve the interests of the IMF (and in turn China) and a broader use of the SDR.  (See Global Debt Consolidation Under New York Law)

Before moving on we need to have a clear understanding of a reserve currency.  A domestic currency, as an opposing example, is used for banking and commerce within the economic framework of a nation.  It serves the needs of the that domestic economy and interest rate adjustments can be used to expand or contract the money supply as needed to maintain inflation and a sustainable level of growth.  

Reserve currencies, with the USD being the dominant and primary reserve asset, need to meet those domestic accountabilities while also maintaining international responsibilities.  As we’ve discussed, this is where the problem begins.  These international responsibilities include the following:

  1. Serve as a cross-border payment settlement system.
  2. Provide global liquidity through financial assets and investment products.   
  3. Provide a pricing benchmark for raw commodities.
  4. Establish an exchange rate pegging mechanism for global trade and commerce.

Each of these can be broken into more detailed aspects, but for our purposes here this simple overview will suffice.

The USD standard has served all four since the Bretton Woods agreement of 1944.  The institutions built around the agreement have developed and enacted policies to support the framework, including admitting China into the WTO.  Even the SWIFT system of international payments was created to facilitate the dollar standard and its cross-border payment settlement requirements.  

Evolving the SDR to replace the USD standard was always a possibility, but the widespread agreements required to get all the major players moving in the same direction is extremely difficult and will continue to slow the reforms needed to prevent another financial crisis.  As we can still see today, the strengthening USD is putting extreme pressure on the currencies of the emerging nations, and another Asian currency crisis like in 1998 could be developing. 

The global imbalances of the USD standard framework have contributed to a sovereign debt crisis in many nations around the world.  Interestingly enough, Russia is one of the few nations with no sovereign debt concerns and is leveraged to replace China as the dominant economic powerhouse on the Eurasian continent.  It’s early, but we could be witnessing the transition of primary Eurasian economic and geopolitical power from China to Russia.  The Anglo-American establishment (remnants of the British Empire aligned with American business and banking interests - reference The Anglo-American Establishment and Tragedy and Hope by Prof. Carroll Quigley), which Trump has politically overthrown in America, has invested considerable capital and assets in the rise of a dominant China.  The reversal of this strategy would be devastating to the long-term interests of this establishment.  The Brexit process and separation of Britain from Europe (a Eurasian peninsula) should also be considered a reversal of this strategy. But that’s a story for another time.

As we can see from the above four points regarding the functions of a reserve currency, there isn’t a single asset today that effectively and efficiently meet all of those accountabilities without causing further imbalances.  China, itself has stated that it does not want to replace the role of the USD for the same reasons that have negatively impacted the American domestic economy. 

The SDR can evolve to accommodate some of the reserve functions but would not be able to provide the level of liquidity needed to meet global growth needs.  This is where the emerging new crypto asset class will integrate with, and eventually surpass, the traditional monetary system built around the central bank model.  

The central bank model began with the Bank of Amsterdam in 1603 and continued with the Bank of England in 1693.  The new central bank liquidity funded the Industrial Revolution and spurred economic growth for centuries.  This model is built around the expansion and contraction of credit based money supplies, or fiat currencies.  The last reiteration of this model can be found in the Bretton Woods dollar standard, and as multiple crises over the decades attest, the model is no longer capable of providing the liquidity required to drive global growth in the 21st Century.  

The four functions of a reserve currency should be segregated and given to different supra-sovereign assets.  As an example, the function of providing a cross-border payment settlement standard is now incrementally being shifted towards a more effective and efficient model developed by the company Ripple.  Ripple has built a blockchain distributed ledger technology which can leverage its native digital asset XRP to facilitate a cost-effective and almost immediate transaction of cross-border payment settlement.  Central banks, large commercial banks, global institutions, and cross-border payment service providers are all beginning the transition to the Ripple technology.  

The broad integration of XRP into the cross-border payment settlements function would remove a tremendous amount of international pressure from the USD.  This would allow for an increased reduction of USD denominated foreign exchange reserves and begin the process of correcting the monetary imbalances.  The moment I grasped what Ripple was building with XRP and the Interledger Protocol was the moment I understood how it would fit into the international monetary system, and why its ascension was inevitable.  

But this still leaves three other reserve currency functions which need to be considered. Providing global liquidity through financial assets and investment products is still likely to remain with political credit-based currencies, as each nation will continue to promote financial products denominated in its own domestic asset.  This is how it should remain for the foreseeable future, as a nation's growth and interaction with the international system will be the largest contributor to both global growth and liquidity.  

Neither the SDR or XRP, by themselves, or with each other, would be able to provide the gigantic amount of global liquidity which will be required to drive 21st Century growth.  National currencies, presumably in a new digital version, will interact seamlessly within the new decentralized crypto-based monetary and financial systems.  XRP and Interledger will provide the bridge to transfer value from asset to asset within the system.

The SDR could be used to provide the other reserve currency functions which are currently the responsibility of the USD.  Providing a benchmark for raw commodities and serving as an exchange rate pegging mechanism to handle the accounting function of global trade and commerce is something which a broader and more reformed SDR could accommodate.  Managing Director of the IMF Christine Lagarde has even suggested that a digital version of the SDR could provide greater benefits to the global economy, and for sure, she is right.  Based on what we have broken out above, a digital SDR would be the natural evolution for the multi-currency value composition and would integrate within the new crypto-based framework, but its function would be separate from that of XRP.  SDR, like other digital assets, would also use XRP and Interledger to transfer value.  

It should be noted that the architecture for this new crypto-based monetary and financial standard is being built now as I type these words.  Large commercial banks, stock exchanges, central banks, global institutions, amongst others, are all developing crypto-based extensions of their existing services and products.  It’s no longer a question of maybe, or hopefully, it is just a matter of developing, validating, and implementing the services and products.  With each passing week and month, the world is moving that much closer to the moment of the greatest fulcrum.  With the development and validation of the central bank model throughout the 17th Century, few of the average mass population knew what was happening, or could even have understood it.  A similar pattern is taking place today, as over 90% of the population either does not understand what is taking place or has never even heard of the things we have just reviewed.  That should stand as a statement on our failure as a civilization to educate the mass population on the fundamental and structural components which sustain our shared world. The computer and smartphone are the new printing presses.  With so much information available and shared, its troubling that we find ourselves in such a position of educational deficit.  

We have covered a lot of ground in this article.  It is difficult to make a reasonable argument without building context and a functional understanding of the basics behind the contributing factors.  There is one last important piece we must cover before closing the article, and this is around the sovereign debt challenges and the potential use of IMF substitution accounts to address those challenges.  

An aspect of the SDRM (Sovereign Debt Restructuring Mechanism) is the use of SDR denominated substitution accounts to reduce the pressures related to sovereign debt.  The basic principle is that a nation would exchange its large holdings of foreign exchange reserves for an allocation of SDR.  Considering that America holds the largest amount of debt in foreign accounts, the use of substitution accounts would consolidate America’s debt within the IMF itself.  This is the core reason why American policymakers, and legal experts, prefer the use of Collective Action Clauses (CACs) over the SDRM.  But that is not to say that there couldn’t be a combined use of both strategies.  

Trump recently made a statement that America could provide loans to other nations.  This is a substantial statement and provides an indication of the direction America may be going on sovereign debt restructuring.  Like with the shift from trade surplus to trade deficit, America went from being the worlds largest creditor nation at the end of the war to being the worlds largest debtor nation.  The Trump doctrine is attempting to unwind that as well, and once again put America in the lead as a stable nation making loans to others.

The parallel consideration of this strategy is that America may want to keep the dollar strong and retain all reserve functions outside of the cross-border payment settlement standard.  To be sure, it is the cross-border function which puts the most strain on the dollar as it contributes to the large expansion of the dollar money supply within the global system and the ever-increasing accumulation in the foreign exchange reserve accounts.

This is where the theory of Robert Triffin breaks down.  How applicable can the deficiencies as defined in the Triffin Paradox be when the functions of the reserve currency are segregated?  As a whole, the theory is sound, as we described at the beginning, but when considered under the premise of everything we have covered above, aspects of the theory are not as accommodating.  

As such, I see a continuation of the back and forth between America and the IMF on reforming the SDR and the governance and quota systems. While the expectation was that America would depreciate the USD to increase exports and grow its GDP, the Trump doctrine has started to achieve the same under trade re-negotiations. Dollar depreciation is Trump’s greatest card, and he will be unlikely to play it until the last moment.  A strong dollar gives America a lot of negotiating leverage as the strain on China and other nations is immense.  Played strategically and at the right time, dollar depreciation, which in essence would be a re-negotiation of the exchange rate arrangements, could spur the American economy to even greater heights of economic growth.  Increasing GDP means a more manageable debt-to-GDP ratio, which means a reduction in America’s debt challenges.  No need for fear, an economic crisis is not around the corner.  At least not for America.

Unproven claims around developing integrations between Ripple and Swift, the existing cross-border settlements service, provide a logical path forward on the transition components of global settlement.  We should anticipate that Swift will become just one of the thousands of Ripple customers who use XRP and the Interledger Protocol to improve efficiencies and lower costs.   Eventually, Swift may find itself redundant and losing its own customers, but by that time the whole crypto architecture itself will be functioning at a much larger volume than it is now.  The normalization of monetary policy around the existing traditional system, being Quantitative Tightening (QT), or the incremental increase of interest rates and the reduction of central bank balance sheets, will facilitate a contraction of the traditional money supply while the new crypto money supply expands.   

Another unproven claim which has come about recently, and actually began back in 2016, is a possible integration between corporate enterprise giant SAP and Ripple.  The world’s supply chain management system functions on the SAP platform.  Consider that Trump is attempting to shift the world's supply chain management function back to America, alongside reducing the role of the USD in the cross-border settlements, and we can begin to see a larger strategy coming into focus around a new standard built on XRP and Interledger.  We can speculate with our broad understanding and education, but we will need to wait for further confirmations before making additional connections.  Though there is no denying a clear pattern is unfolding around both the unwinding of Bretton Woods and the development of an expansive XRP architecture.  One not being the replacement of the other of course, as both are very much different beasts serving very different purposes.  - JC

JC Collins can be contacted at jcollins@philosophyofmetrics.com

This article is copyrighted by POM Media©2018. As non-Premium content, it can be shared and reposted without further permission.

28 Comments on “XRP - The Standard”

  1. Worth the wait JC, thanks. Lots to think about and to comment on when time allows.
    "over 90% of the population either does not understand what is taking place or has never even heard of the things we have just reviewed. That should stand as a statement on our failure as a civilization to educate the mass population on the fundamental and structural components which sustain our shared world. The computer and smartphone are the new printing presses. With so much information available and shared, its troubling that we find ourselves in such a position of educational deficit."

    I agree it is troubling; it has been suggested though that this is absolutely deliberate. The elites running the game no doubt consider it, far from a failure, indeed it's the secret of their success. But you are doing you best to reduce the deficit and for that we are grateful.

  2. As always spot on I have a comment do you think that my comments below are being used as a 'Big Distraction' to bring about the necessary changes to our Global Trade, Governance, Religious Beliefs and Monetary reform especially in the USA?

    We have become accustomed to personal shenanigans from politicians – Truman, Eisenhower, JFK, LBJ, Clinton, Obama, etc. – We do not expect flagrant lying, obstruction of justice, conflicts of interest and violations of law from our checks and balances / constitution and professional bureaucrat’s & overseers at the CIA, FBI. DOJ, FISA court & NSC. And yet in the last year of the Obama Presidency, they we’re unleased to use illegal means to destroy a candidate(threat) assured that a Democratic Clinton Presidency would provide de facto amnesty?
    Unequal Application of The Law- For every crime, collusion, perjury, obstruction, fraud – Mueller seeks to delegitimize Trump, there is a comparable or greater crime in plain sight that he ignores? The asymmetry is not insignificant and involves not the often-disreputable political class as much as the professional bureaucratic hierarchy!

    Deluding the FISA court, planting spies in a political campaign, unmasking and leaking names of surveilled citizens, not reporting campaign expenditures funneled through such as Perkins Cole & Fusion/GPS to citizens, to employ a foreign national to smear a political opponent. The onus is on Mueller’s team to explain by what criterion a losing presidential candidate gains immunity form legal exposure while the winning one(Trump) earns legal scrutiny?

    Elections Have No Consequences? If the Democrats regain the House, Senate & Presidency - they should fear the precedent that they have set - To thwart a liberal progressive agenda, some conservatives might in the future adopt the successful 2016-2019 Democratic playbook on the principle simply it worked?

    Mr. President you need to declassify all FISA warrants, 302 FBI notes and other documents relating to the FISA, Hillary Clinton Emails, and Russia Gate Investigations – I would say to you legal counsel I would not be afraid of setting precedent by releasing the documents - since all the above our crimes, collusion, perjury, obstruction, fraud that need to be investigated those tried for the appropriate crimes!!! Respectful, Phillip Pfeiffer

  3. This was simply Brilliant JC as always, Thank you so much for your wisdom,

    I read your fantastic article yesterday a couple of times (and very slowly) to absorb and appreciate the implications of what's happening right now worldwide in relations to USD, Geopolitics, etc. From an esoteric perspective, however, I would like to recommend the following speech by Ramtha and hope it gives a different perspective on events right now:

    "Ramtha's Prophecies
    Excerpt from the live teaching on December 8, 2016"

    This speech is for the esoteric minded POM family members and anyone with non-biased, objective and filter-less mindset. The content of the speech is extraordinary and Ramtha is a "Channeled entity" (whether one believes in that or not!), but regardless, the content and delivery are flawless and shockingly accurate.

    http://www.ramtha.com/prophecies/

  4. Hi JC ,

    Once again a good paper ,describing the actual monetary landscape and the necessity of a real transformation for those who wants to understand what's really going on , behind the curtains and the classical theater of news .
    I just want to give another link for the debt/GDP ratio , which is maybe more accurate than the one you use , but it doesn't change at all the facts and analysis you provide about all the process.

    https://fred.stlouisfed.org/graph/?id=GFDGDPA188S,

    It will take a few years before XRP could reach that status of a new standard in an international monetary frame , but I am sure this is just a question of time.
    From another perspective , I think the global crypto bubble is now achieving his bursting cycle and should stabilize during the next quarter . One of the best moment to buy or complete a position in XRP , when blindfull optimism has been replaced by fear and desperation.
    Just my opinion , nothing more !

  5. JC,
    Thanks for pulling in a lot of your analysis and theories from past writings such as the SDR, SDRM, debtor/creditor nations, China, RMB, IMF, etc. That makes me feel a lot better about your macro view and the role of Ripple/XRP as the standard bridge currency.
    There is still FUD in the crypto space relative to SEC governance, crypto legitimacy, exchange custody, etc. Once those clouds dissipate, we should see money movement into the space through institutional investors. Certainly, lots of upside in the major coins like XRP. I'm looking forward to the Swell conference on 10/1-2. That should generate some momentum by clearing some of the aforementioned clouds. As promised in a previous reply of mine, I do believe that XRP hit bottom at $.2530 level on 9/18. I think we will test $.27 to $.26 levels in near term as the news gristmill does its' thing to shake shares from weak hands. But, an uptrend in price should start occurring in the near future.
    Thanks for all that you do. I hope all is well with you and yours.
    Best,
    RJZ33

    1. RJZ33,
      "an uptrend in price should start occurring in the near future"
      Nice one, it certainly did! Indeed the uptrend started on the actual date that you mentioned! You got a crystal ball or what? 🙂

  6. I saw this the other day, and saved it for ya'll. My pressure is the link works.

    Proof Swift will use Ripple's xRapid to Process Payments Using XRP
    https:// youtu.be/iKmt6y3hZ0

    If you can't get there on my link , go there on your own. It will be time and money well spent.

    It goes to something JC said about, one day it will be here, like the fip of a switch. there will be no anouments , fanfare or otherwise . It will just be here.

    The POM has worked this path for several years, teaching the dif between money and currency. How one is one thing one the other something else. It was drilled into our heads with a great patience as a secret told from a member of a ancient mystery school. Let out to us plebs as if to to say, you need our help, and we need yours.

    No man is an island onto himself. Strong and tough as we may think we are. There is a magic to the mystery, and I firmly believe it is in the channels that we watch. The channels, be they our fave's on the tv or net, or what we pick up just a walking down thru there. They are all opportunites for us to channel.

    The world is a channel, so is the universe. How you treat it, what you accept as dream or reality is just your own biz. We are getting there.

    PTM

  7. Good morning POM, I would like to take a moment or two to attempt to explain some fresh thoughts and feelings I have been experiencing as of late. I referred to it as channeling in my previous comment.

    Ok I'm not saying that I'm at any level as the Helena Blavatsky, Emma Britten or a host of other famous channelers. No, no not by any stretch of even my wild imagination. My idea of where I'm at today is more of just recognizing and being much more aware of the possibilities of the world and it's universe.

    I have started to attempt to monitor my dreams, interestingly enough I have had a few XRP dreams, but my memory of them is not clear enough to me to make me feel like I received any info that I didn't get from JC, or the POM. And that is what I was trying to say about channeling the POM. I feel like the POM has been akin to or something like a channeled download to me, I just do.

    What I find particularly intriguing is this feeling that what I have learned about the workings of the world of international banking systems has been taught kind of from the top down. It has not been like a download of instant knowledge. But more of a four year education, almost like earning a degree, which my imaginings can relate or equate to an initiate in an mystery school.

    JC and the POM to my minds eye is playing out along those lines.

    So I wanted to take this time and space to attempt to explain myself. I wasn't satisfied with my previous comment, after rereading it, I felt it fell short and a bit arrogant or even flippant which was not my intention.

    There I don't know if this comment is better or not, but it feels better to me.
    PTM

      1. Well, hells bells buddy I'm flipping that coin thru the air using my best thumb, spinning it 500 rpm not caring if it lands heads or tails. all but willing to accept either consequence knowing my duality is but two fools meeting on a level playing field willing to play two out of three.. So it is pigs assholla's, someone shit in my victrola, shit, piss, corruption snot, 24 asswholes' tied in a knot.

        My man Dane, you will be proud to know,
        I fought them tooth to nail
        And heads to tail
        I fought them thru the light the dark
        and the pale
        I fought them almost into jail
        I fought them

        You should to be proud to know, I have a appointment with a banker at 10:00 in the morning in order to set up the bank account you recommended I set up months ago. You know why.
        Thanks
        PTM

  8. "China desperately needs to diversify its foreign exchange reserve holdings of USD denominated debt."
    Yes, one would think so. But do the Chinese see it that way? If they do, what is stopping them from diversifying into other FX by selling/exchanging the USD bonds? Maybe they are doing, but at a rather slow pace. Alternatively, do they perhaps concur with the mainstream economists' view, rightly or wrongly, that it is indeed a form of leverage over the US?
    It seems like an extremly high stakes poker game between Trump and Xi. I might be misunderstanding the dynamic here but, as mentioned later in the article, Trump's dollar depreciation card is the one he's holding back until the timing is right. And maybe Xi thinks his best card is the dumping of dollar bonds on the market. In theory this might well cause the USD to tank - so both players can force a similar outcome, it is about who dictates the timing. And crucially, whether it's orderly or chaotic.
    No doubt the above is massively oversimplified, I imagine both sides have huge teams of their best quants constantly running economic wargame simulations on state-of-the-art supercomputers! Still, it's fun to play the armchair geopolitical strategist 🙂

  9. "China, for its part, needs to be careful how fast it diversifies its reserves while maintaining a parallel momentum with RMB internationalization. The Trump strategists know this and just about have China in a checkmate position on trade. Beijing will make a deal to prevent a domestic credit implosion and unrest amongst the population."
    I presume the need to be careful mainly stems from the fact that crashing the dollar would damage the value of their own investments. But there may come a point where they feel it's the best/only move. To hell with their investments, they may lose a few hundred billion but can probably afford to take the hit.
    According to Jack Ma, the trade war could go on for decades. I'm not that pessimistic, but I don't see a deal being done in the immediate future; I think Beijing will wait and see the how bad the effects get and what countermeasures they can take. But eventually yes I expect they will find themselves in a checkmate situation. This may be why their latest retaliation has been timid.
    Interesting comments from Premier Li the other day too, words to the effect of "China will never competitively devalue the yuan to boost exports (to counter tariffs)." Folks may not believe him but I don't think he's lying. He (having a PhD in economics) knows it would severely set back their progress on internationalisation. So that option seems to be off the table.
    It is challenging (to me at least) to understand how the tariffs impact the USD. The dollar has been rallying so far as Trump has been turning up the heat. But there was no surge in the dollar as he announced the latest massive tranche. A case of buy the rumour, sell the news? Fascinating to see what happens if and when he applies the next 267 billion.
    The thought occurred to me that one thing China could do next (somehow, I don't know how) is to try and crash the US stock market. If they could achieve this covertly, it would probably slow down or stop Trump pressing his advantage.

  10. "As we can still see today, the strengthening USD is putting extreme pressure on the currencies of the emerging nations, and another Asian currency crisis like in 1998 could be developing."
    Indeed, there was a ZH article on this last week, based on analysis by SocGen. They concluded that Turkey, South Africa, Malaysia, Indonesia and India are the most at risk of a currency crisis:
    https://www.zerohedge.com/news/2018-09-12/whos-naked-ranking-most-vulnerable-emerging-market-currencies
    South Africa actually appear intent on bringing it upon themselves with the policies they are implementing!

    1. Redjon ,

      I am OK with you . In a certain way , we are probably on the verge of a new version of the 1998 currency crisis . As you say , the strenghth of the $ is the main culprit , or better said , will be the trigger of this coming crisis .
      There are many reasons for that .
      - Too many emerging countries have been piling on increasing debts labeled in USD . Unsustainable....
      - US Yields are going higher and higher each quarter . The yield spread between Europe and USA is growing wider and directing liquidity flows to the US , adding upward pressure on the USD.
      - A huge corporate cash flow is returning to America , thanks to Trump's tax cuts .

      https://www.cnbc.com/2018/09/10/chart-shows-surge-in-corporate-cash-brought-home-since-tax-cuts.html

      https://ftalphaville.ft.com/2018/06/25/1529934938000/Buybacks--repatriation-edition/

      But what's happening now will have different consequences . We're not anymore at the end of last century . Things have changed . A lot......
      It's important to realize that in 20 years we have seen the rise of China and of some of the emerging nations , on the economic and monetary playground .
      At the end of last century , China was hoping to become part of the WTO , and had no real influence on stock markets and monetary matters.
      Now , China is on board of IMF , and emerging markets are directly interconnected with world markets . The New Silk Road is a reality , so as the Chinese AIIB , projects to circumvent western influence in the IMF , WorldBank , etc.....
      So, even if it's not sure , a currency crisis could open the way to a shock of deeper concern , paving the way to a real monetary crisis , questioning the place of the USD in the system .
      May be this is what China ( and some others ) are hoping for , simply quietly waiting for the dominoes to fall and the crisis to unfold .
      China ( and Russia ) have long term vision and governance , while western nations are changing of leadership each five or six years .
      I could be totally wrong , but I think that Big Changes never comes without a warning . So , if we are at the cusp of a big monetary change on the world level , I consider that
      - 1997 asian crisis and 1998 LTCM crisis were the first warning
      - 2007/2008 subprime and financial crisi was the second shot
      - the next one will be the monetary crisis , whenever it happens , could it be in 2020 to 2025 . Things move slowly , and then all of a sudden , there is a trigger .......

      If I am correct , this will be THE Crypto Moment , when faith in the old monetary architecture and sovereign currencies will be questionned , and when a new system could be implemented , based on technology , decentralisation ( at least partially ) and instantaneity .
      May be that's also why XRP is actually on a vertical rise since a few days ........

      1. I am OK wth you too dude, many thanks for the reply! Yep, something (it could well be an EM currency crisis) is probably going to trigger the liquidity crisis that JC has mentioned before, which will lead to a solution being sought. And XRP is well placed to be a key part of such a solution. Not sure what is behind the recent spike in XRP but I am just guessing it's likely that something big will be announced at the upcoming conference....
        By the way, this may be completely irrelevant but the Swell conference is being held whilst China is having a week's public holiday. Just saying....

    1. Hey Steve. Thats a long video man 🙂 I think I get the gist of it though. We've kind of thrown the idea around here from time to time. Personally I don't give people who claim to be insiders much credit because they usually aren't. So that reasoning pretty much collapses a lot of what this video is presenting because it's the foundation for some if not most of the hypothesis. Sure there is a "new" world order being put in place. The old order is dead...or has run its course...so there needs to be a new one to replace it. One that is able to handle what we have evolved to. It's just a common set of rules that the world runs on though not such a cynical diabolical thing that most think it is. There is always an order or set of rules to do business by. XRP may end up being the one currency the world uses down the road but in the near future it seems it will just be a sort of exchange mechanism to facilitate cross border business transactions between the regional/state/country currencies of the world. That is a position that is in contradiction to the video. We see a lot of countries using wording like republic and such so it would seem to reflect more like each country having their own currency. With the developing digital currency world and corporations and institutions having a larger revenue than many small countries they may even develop their own currencies. All these currencies will need to exchange across borders and XRP will be the one to rule all coins in this regard. Hope this helps pal.

  11. Thanks Dane, yeah very long, I'm new to the space and trying to get my head around it so when I invest I at least feel comfortable with my research and decisions. Thanks for taking the time to answer my question. Steve

    1. Hello Steve,

      Thanks for posting the clip on XRP. Dane said almost everything I wanted to say but I will only say that the narrator sounds almost like the Liverpudlian comedian Alexei Sayle who was famous in the 80's. I was watching the clip and after 20 minutes my wife complained about the "angry" voice of the narrator which made me laugh but in all honesty, the perspective of the gentleman behind the clip was rather negative and somewhat of a doom and gloom side of the world perspective.

      Anyway, to cleanse the air of doom and gloom, I leave a clip of the younger Alexei Sayle in one of his TV shows of the late 90's. 🙂

      https://www.youtube.com/watch?v=RE8b_e16brc&ab_channel=LostinTransmission

  12. Thanks Carpe Diem I could have done with this after the long YouTube clip. It seems quite difficult to get good opinions on this space without the doom and gloom or to the moon comments... a little confusing for a newby. Any other commentary you can recommend other than POM would be greatly appreciated. Cheers Steve.

    1. Hi Steve,

      I just wanted to say that we are all "Newbies" and no person holds the ultimate truths and we are all adding our own perspective in many subjects. Regarding how the Cryptocurrencies will end up, that is whether it's going to enslave humanity or otherwise, it is impossible to know. However, we can all speculate as to how things will turn out after a large scale implementation of cryptos. One thing that that would be helpful to bear in mind is that every new invention or technology will have benefits as well as side effects or even negative effects. To make my point, if we consider that the power and influence of mobile phones, Google, Facebook, Twitter and other forms of the social media on human consciousness and society at large was never discussed and yet, we know now that all of the above have caused anxiety and even depression on people who use them almost religiously. On the other side, all of the above have given us so much access to information and it had allowed people to talk to each other about all kinds of topics. so there is negative and positive to everything and coming to a conclusion is a very subjective act but we all take others perspective into account and by watching hundreds of hours of YT and reading an equal number of articles, one is not able to come up with a definitive answer on anything. In the end, it is our own subjective judgment only we can rely on. In fact, watching too many YT clips and too many articles may make one more confused.

      What I can tell you is that I am an absolute "Newby" and even though I may have an opinion about any subject, my thinking is subject to change and adjust with new realities that are happening every day in this world. What's important is a balanced view that is neither negative nor positive, just balanced. That way we can see both sides of the argument and to hopefully be able to come up with a personal and rational thinking over that matter.

      Wish you a great day.

    1. This is a remarkable statement from Mercury FX one of the financial institutions now using RippleNet (Xrapid).

      "We believe that the more established blockchains will eventually replace the SWIFT network alongside other frankly clunky payments networks. Cryptos will be used as a conduit to replace fiat eventually."

      "Cryptos will be used as a conduit to replace fiat eventually."

      https://www.mercury-fx.com/market-news/announcements

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