This post was published at Silver Bullion TV
I have recently posted some select slides relating to the background to the U. S.-China latest standoff in the WTO. Here is the full set of slides detailing U. S.-China battle for hegemonic dominance in post-Bretton Woods institutions:
This post was published at True Economics on Tuesday, December 5, 2017.
“The Trump administration has lambasted China’s bid for recognition as a market economy in the World Trade Organization, citing decades of legal precedent and what it sees as signs that China is moving in the opposite direction under Xi Jinping. The US move to oppose China’s longstanding efforts to be recognised as a market economy in the WTO came in a legal submission filed last week and due to be released publicly on Thursday in a case brought by Beijing against the EU.”
Here are background slides to the dispute from my recent lecture @MIIS :
First, what’s behind the WTO dispute: the fight between the U. S. and the EU against China and other emerging economies in core Bretton Woods institutions – the IMF and the World Bank
This post was published at True Economics on Thursday, November 30, 2017.
As the transition towards a blockchain based economy continues, the established financial powers are desperately trying to stay relevant. In an attempt to boost their credibility, analysts at Deutsche Bank are finally admitting that state-run fiat currencies are becoming obsolete. For years, blockchain entrepreneurs and other critics of central banking have been branded either conspiracy theorists or criminals. But recently, those controversial opinions about the inevitable changes coming to the world’s financial system are being echoed by mainstream pundits.
Deutsche Bank’s top strategist, Jim Reid, recently articulated a view on the economy that is shared by many but rarely talked about:
‘Central banks and governments which have ‘dined out’ on the 35 year secular, structural decline in inflation are not able to prevent it rising as raising interest rates to suitable levels would risk serious economic contraction given the huge debt burden economies face. As such they are forced to prioritise low interest rates and nominal growth over inflation control which could herald in the beginning of the end of the global fiat currency system that begun with the abandonment of Bretton Woods back in 1971.’
This post was published at The Daily Sheeple on NOVEMBER 15, 2017.
The 1944 Bretton Woods international monetary system as it has developed to the present is become, honestly said, the greatest hindrance to world peace and prosperity. Now China, increasingly backed by Russia – the two great Eurasian nations – are taking decisive steps to create a very viable alternative to the tyranny of the US dollar over the world trade and finance. Wall Street and Washington are not amused, but they are powerless to stop it… Now, ironically, two of the foreign economies that allowed the dollar an artificial life extension beyond 1989 – Russia and China – are carefully unveiling that most feared alternative, a viable, gold-backed international currency and potentially, several similar currencies that can displace the unjust hegemonic role of the dollar today.
The above is an excerpt from William Engdahl’s essay, ‘Gold, Oil, Dollars, Russia and China.’ The essay is a must-read if you want to understand how the dollar was cleverly forced on the world as the reserve currency and how it is about to be cleverly removed and replaced with a trade system that reintroduces gold into the global monetary system.
Unfortunately, the U. S. educational system presents a fraudulent account of world financial and economic history from Bretton Woods to present. Fed on a steady educational diet of U. S. propaganda, anyone raised and educated in the U. S. will wake up one day to an economic cold shower and eventual poverty unless they’ve taken the steps necessary to protect their savings (if they have any).
This post was published at Investment Research Dynamics on October 7, 2017.
Jim Rickards is on record forecasting $10,000 gold.
But is China about to provide the catalyst to send gold even higher? And by how much?
Today, we fare forth in the spirit of speculation… follow facts down strange roads… and arrive at a destination stranger still…
China – the world’s largest oil importer – struck lightning through international markets recently.
According to the Nikkei Asian Review, China has plans to buy imported oil with yuan instead of dollars.
Exporters could then exchange that yuan for gold on the Shanghai Gold Exchange.
Not only would the plan bypass the dollar entirely… it would restore gold’s role in international commerce for the first time since 1971, when Nixon hammered the last nail through Bretton Woods.
This post was published at Gold Core on September 30, 2017.
In a move that was little noticed outside of the financial world, China announced the creation of an oil futures contract (open to international traders) that will be denominated in Yuan and convertible into gold. This move provides the first official linkage of oil to gold, and more importantly a linkage between the Chinese currency and gold. While the contract volumes that will be traded on this new platform will certainly be minuscule in comparison to those in the dominant markets of New York and London (at least initially), I believe the move is the latest, and perhaps most significant, step that China has taken down the path that could lead to a global economic system that is not fully dependent on the U. S. dollar. The move amounts to a direct challenge to the dollar’s privileged reserve status and could threaten U. S. dollar price erosion.
The move comes at a time when the U. S is particularly vulnerable to an economic challenge. Given the bold, but not particularly diplomatic, efforts of the Trump Administration to push an America First agenda, the U. S. finds herself somewhat isolated. Add to this the widening political polarity in the U. S., which will make it that much less likely that Washington can take needed action in passing economic reforms to prevent a looming debt crisis. The dollar has been neglected far too long, and its strength may be far more tenuous than many imagine.
By way of background, the United States emerged from World War II as the world’s undisputed economic, financial and military leader. In 1944, at Bretton Woods, the U. S. dollar, convertible into gold exclusively by central banks, was adopted as the world’s main reserve currency. This status meant that the dollar was used to price most commodities, used to transact nearly all international trade. This status further strengthened the dollar and helped make Americans the richest people in the world.
This post was published at Euro Pac on September 28, 2017.
As recently noted by Holger Zschaepitz @Schuldensuehner, new research from Deutsche Bank shows that “Post Bretton Woods (1971-) system vulnerable to crises. Frequency of Financial Crises increased since then. Growth of finance encouraged trend”.
This post was published at True Economics on Thursday, September 21, 2017.
Fed vice-chair Stanley Fischer’s surprise announcement of early retirement triggers the obvious question as to whether this could be the fore-runner to a serious market and economic deterioration ahead. Monetary bureaucrats, even if signally bad at counter-cyclical fine tuning, sometimes have a reputation for intuition about how to time their own career moves ahead of crisis. In this case, such suspicion may be wide of the mark given the personal circumstances. Even so, the exit of a Fed Vice-Chair, who in many respects has been the pioneer and the dean of the prevailing doctrine in the global central bankers club, is pause for thought.
The Early Years When Professor Fischer published his famous paper ‘On Activist Monetary Policy with Rational Expectations’ (NBER working paper no. 341, April 1979), the fiat money world was well into the third stage of disorder following the collapse of the international gold standard in 1914. But things were at a temporary resting point where the skies seemed to be getting clearer. After the violent terminal storms of the gold exchange standard (early 20s to early 30s), and then of the Bretton Woods System, it seemed to many that the ‘monetarist revolutionaries’ had found a better practical monetary navigation route. The Bundesbank, the Federal Reserve, the Swiss National Bank, and even the Bank of Japan were pursuing an ersatz gold rule of low percentage increases in the monetary base or a related aggregate.
This post was published at Ludwig von Mises Institute on Sept 10, 2017.
China recently announced they will trade oil for yuan ‘backed’ by gold. The story has gotten some press (none of it mainstream mind you), and many have questions as to what it really means. While quite complicated as a whole, when you break this down into pieces I believe it is a quite simple and logical end to Bretton Woods.
For a background, China has had an exchange open for about a year where gold can be purchased with yuan, though the volumes so far have been miniscule to this point. China has also been all over the world inking trade deals (in yuan) and investing in all sorts of resources from oil to gold to grains, they have made no secret about this. With the most recent example here. They have trade arrangements and treaties with Russia, Iran and many other non Western nations. They have also ‘courted’ many Western nations privately (remember their meeting with the King of Saudi Arabia?) and actually lured many with their ‘Silk Road’ plans via the AIIB which was huge news last year (but nearly forgotten by Americans at this point?). We also know China has been a huge importer of gold for the last 4-5 years and done so publicly via Shanghai receipts and deliveries.
So what exactly does ‘oil for yuan’ mean? In my opinion, China is basically leading a ‘mutiny FOR the bounty’ (we’ll explain this shortly). The only things holding the dollar up from outright death for many years has been the oil trade (and other trade commerce) between nations and settled in dollars. Anyone wanting to buy oil had to first buy dollars in order to pay for the trade. Anyone getting out of step and suggesting they would accept currency other than dollars was dealt with swiftly and harshly (think Saddam and Mohamar). In other words, the U. S. military ‘enforced’ the deal Henry Kissinger made with the Middle East (lead by Saudi Arabia) where ALL oil was settled in dollars. International trade settlement alone supported the dollar after the Nixon administration defaulted on its promise to exchange one ounce of gold for $35.
This post was published at JSMineSet on September 6th, 2017.
I started observing the slow-motion train-wreck in process in 2001 – a year removed from my perch as a junk bond trader on Wall Street and living several thousand miles away from NYC and DC in the Mile High City, where the view is a lot more clear than from either coast.
The United States has been in a state of collapse for several decades. To paraphrase Hemingway’s flippant description of the manner in which one goes bankrupt: two ways: slowly than suddenly (‘The Sun Also Rises’).
The economic decay was precipitated by the advent of the Federal Reserve; then reinforced by FDR’s executive order removing gold from the citizenry’s ownership, the acceptance of Bretton Woods, and the implementation of what is capriciously termed ‘Bretton Woods Two’ – Nixon’s completely disconnecting the dollar from the gold standard. If you study the monetary and debt charts available on the St. Louis Fed’s website, you’ll see that post-1971 both the money supply and the amount of debt issued at all levels of the system (public, corporate, household) began gradually to go parabolic.
I would argue the political collapse kicked into high-gear during and after the Nixon administration, although I know many would argue that it began shortly after the Constitution was ratified in 1788. At the Constitutional Convention, someone asked Ben Franklin if we now had Republic or a Monarchy, to which Franklin famously replied, ‘a Republic, if you can keep it.’
This post was published at Investment Research Dynamics on August 18, 2017.
The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.
This is the lacerating verdict of the IMF’s top watchdog on the fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.
It describes a ‘culture of complacency’, prone to ‘superficial and mechanistic’ analysis, and traces a shocking breakdown in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.
The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way European Union insiders used the fund to rescue their own rich currency union and banking system.
The three main bailouts for Greece, Portugal and Ireland were unprecedented in scale and character. The trio were each allowed to borrow over 2,000pc of their allocated quota – more than three times the normal limit – and accounted for 80pc of all lending by the fund between 2011 and 2014.
This post was published at The Telegraph
The Chinese Govt is greatly irritated by the requirement to use USDollars in payment for crude oil in the global market. The Beijing officials finally have some leverage in arranging for a major deal to pay for crude oil in RMB currency, their Yuan. The negotiations have been in progress for a couple months. The development is not covered well in the financial press, not even in the alternative media. It will happen, just a matter of time. Its effect will be far reaching and likely devastating.
The global currency reserve status for the USDollar is at severe heightened risk. It will not be deposed via financial markets, like with a bond market failure or a COMEX gold market default with bust. Such is folly to imagine as likely to occur. The Western bankers are expert at rigging the financial markets, one and all. Their central bank bond support has extended to stock market support, soon to corporate bond wide support also. The USGovt is hanging onto its power base in increased isolation. The assaults are on many flanks and platforms.
ESSENCE OF PETRO-DOLLAR
Its essence is the sale of crude oil universally in USDollar terms. Typically the payment form is the USTreasury Bill. The OPEC crew typically sock their surplus petro dollars in USTreasury Bonds. The sale proceeds never exit the USD form. The deal was struck in 1973 by the Rockefeller agent named Heinz Kissinger. It came in the wake of the abrogated Bretton Woods Gold Standard, which Nixon violated with force and audacity. In fact, the arrangement was suggested by the US side of the table. Nevermind that it was Rockefeller who hatched the idea of a tripled oil price, the exact opposite of what has been inscribed in the historical annals. The other little item in the Petro-Dollar defacto standard treaty is that the Saudis, along with the Gulf Arab neighbors, would buy USMilitary hardware exclusively. The USGovt would provide them with plenty of regional conflict. Over the four decades since, the Arabs have accumulated a few cool $trillion in USTBonds. The TIC Report on foreign bond assets is a gigantic fabrication. Most Saudi bond holdings have been hijacked and stolen, used as the core to the USDept Treasury’s vaunted Exchange Stabilization Fund. They will never see at least $3 trillion in sequestered bonds. A joke here, since the ESFund is the most secretive multi-$trillion fund in human history.
This post was published at GoldSeek on July 30, 2017.
Via The American Herald Tribune,
Bolivia’s President Evo Morales has been highlighting his government’s independence from international money lending organizations and their detrimental impact the nation, the Telesur TV reported.
“A day like today in 1944 ended Bretton Woods Economic Conference (USA), in which the IMF and WB were established,” Morales tweeted. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.”
Morales has said Bolivia’s past dependence on the agencies was so great that the International Monetary Fund had an office in government headquarters and even participated in their meetings.
Bolivia is now in the process of becoming a member of the Southern Common Market, Mercosur and Morales attended the group’s summit in Argentina last week.
This post was published at Zero Hedge on Jul 25, 2017.
Beginning in October of last year, China’s renminbi was added to the International Monetary Fund’s currency basket known as the Special Drawing Rights, or SDR.
The IMF, founded after Bretton Woods, established the SDR to be its own international reserve asset – what many have identified as world money.
Prior to Chinese inclusion, the elite currency basket was calculated with the U. S dollar, Euro, Japanese yen and British pound sterling. While China joining the SDR may have been largely status-driven at the time, the yuan and the Chinese economy have become open to heightened concern.
Significant worries over debt, wasted investments and threats of sweeping deflation left macroeconomists seeing a Chinese financial crisis on the horizon. Financial commentators ranging from hedge fund manager Kyle Bass to economist Jim Rickards highlight that the Chinese economy is on a dangerous course.
So what does that mean for China and its inclusion with the SDR’s world money basket?
Here’s five things we’ve learned from the Chinese entrance into world money:
1. October 2017 is Crucial
This October, the 19th National Congress of the Communist Party of China will be held. Thousands of lawmakers will gather in Beijing for the Congress. The Chinese Communist Party (CCP) does hold ultimate power, but certain influencers are beginning to rise.
This post was published at Wall Street Examiner on June 26, 2017.
Latest reports from the People’s Bank of China for May indicate that the World’s No. 2 economic power has kept its official gold reserve unchanged – at 59.24 million ounces (1,842.6 tonnes) – for the seventh successive month. Indeed China’s officially reported gold reserves have remained unaltered since the Chinese renminbi (or yuan) was confirmed as an integral part of the IMF’s Special Drawing Right (SDR) back in October last year. Currently the Chinese currency accounts for 10.92% of the basket of currencies which make up the SDR – the others are the US dollar 41.73%, the Euro 30.93%, the Japanese yen 8.33% and the pound sterling at 8.09%.
The IMF notes on its website that the SDR was created in 1969 as a supplementary international reserve asset, in the context of the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves – government or central bank holdings of gold and widely accepted foreign currencies – that could be used to purchase its domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets – gold and the US dollar – proved inadequate for supporting the expansion of world trade and financial flows that was taking place. Therefore it was decided to create a new international reserve asset under the auspices of the IMF.
Although the idea was to create a new reserve currency as defined by the SDR basket, the composition of which is reviewed every five years, the inclusion of a currency in the basket does lend a degree of acceptance as a potential reserve currency in its own right, which is presumably why China was so keen for the renminbi to become part of the SDR basket. To help achieve this the Chinese central bank began to announce monthly additions to its gold reserves in the interests of transparency. Prior to that it had only announced its gold reserve increases at five or six year intervals saying that this additional gold, which it then moved into its official reserve, had been held in accounts which were outside the purview of its gold reserve reporting to the IMF.
This post was published at Sharps Pixley
At this juncture it’s clear that the attempt of the Trump Administration and related circles in the U.S. military industrial complex have failed in their prime objective, that of driving a permanent wedge between Russia and China, the two great Eurasian powers capable of peacefully ending the Sole Superpower hegemony of the United States. Some recent examples of seemingly small steps with enormous future economic and geopolitical potential between Russia and China underscore this fact. The Project of the Century, as we can now call the China One Belt One Road infrastructure development – the economic integration on a consensual basis by the nations of Eurasia, outside the domination of NATO countries of the USA and E.U. – is proceeding at an interesting pace in unexpected areas.
1971: America’s Twilight Begins
It’s very essential in my view to appreciate where the post-1944 development of America’s role in the world went seriously wrong. The grandiose project dubbed by Henry Luce in 1941 as the American Century, if I were to pick a date, began its twilight on August 15, 1971.
That was the point in time a 44-year-old Under-Secretary of the Treasury for International Monetary Affairs named Paul Volcker convinced a clueless President Richard Milhous Nixon that the treaty obligations of the 1944 Bretton Woods Treaty on a postwar Gold Exchange Standard should be simply ignored. Volcker rejected the express mandate of the Bretton Woods Treaty which would have seen a devaluation of the dollar in order to rebalance world major currencies. By 1971 the economies of war-ravaged countries such as Japan, Germany and France had rebuilt at a significantly higher level of efficiency than the U.S.
A devaluation of the dollar would have given a major boost to U.S. industrial exports and eased the export of dollar inflation in the world arising from Lyndon Johnson’s huge Vietnam War budget deficits. The de-industrialization of the USA could have thereby been avoided. Wall Street would hear none of that. Their mantra in effect was, ‘Nothin’ personal, just bizness…’ The banks began the destruction of the American industrial base in favor of cheap labor and ultra-high-profit manufacture abroad.
Instead of correcting that at a point it could have had an enormously positive economic effect, Volcker advised Nixon to in effect spit on America’s international treaty obligations and to brazenly dare the world to do something about it. On Volcker’s advice, Nixon simply ripped the treaty in shreds and ended Federal Reserve redemption of dollars held by foreign central banks for U.S. gold reserves. The U.S. dollar overnight was no longer ‘as good as gold.’
This post was published at New Eastern Outlook
Authored by Chris Hamilton via Econimica blog,
Since 1971, and the disconnection of the dollar from a finite gold backing, the value of money (the dollar) has been determined by it’s purchasing power versus the inflation of the assets to be purchased. Thus printing more money has not necessarily created “wealth” if the assets to be purchased are rising as fast or faster than the purchasing power of the “money”. The Fed touts it’s dual mandate of full employment and stable prices…but the result in prices; not so stable.
The primary global asset purchasable only in US dollars, crude oil, has told a story of wildly gyrating prices. Since the end of Bretton Woods and the subsequent Congressionally dual mandated roles bestowed on the Fed…crude oil prices have gone bezerk, twice climbing nearly 10x’s within a decade. This is the opposite of stable (particularly compared to the price stability from WWII’s end until the?Fed took over).
This post was published at Zero Hedge on May 23, 2017.
Guest post from Luis Aureliano
It is no longer news that the U. S. economy is struggling to stay afloat as economic power gradually shifts to the eastern world. More worrisome is the fact that the U. S. Dollar is slowly losing its position as the global reserve currency. The USD replaced the British pound as the global reserve currency in the Bretton Woods Conference of 1944, and it seems the reign of the greenback is nearing its end.
This piece provides insight into how investors can find financial safe havens to protect their wealth in gold, cryptocurrency, and other alternative investments.
This post was published at Deviant Investor on May 22, 2017.