This is part 2 of the SDR article series, interesting that they are using the same template as before including the Keynesian model that got us where we are now. If too big to fail didn't work in the USA, how is even bigger than too big to fail going to solve the problem?
What if the problem IS the central banks hoarding vast stores of value (and the mountains of time-displaced hypothecated value that borrows from your grandchildren value via inflation)? Banks operating under an antiquated centrally planned economic model are doomed to failure. If central planning didn't work for the Soviet Union, how is it supposed to work under a capitalist model with a system as complex and organic as an economy?
We are already seeing and hearing about de-facto currency controls worldwide. People with money are having issues transfering even minor sums like $5000 without weeks of delay. Even people working in the banking industry are finding their accounts mysterious frozen, or wire transfers sent to locations they did not authorize. The banks are in very serious trouble and they are about to confiscate everyone's value, or deny access to the value that is currently stored in banks. If you can't access your money, what good is the banking model? These dinosaurs from the 17th century would rather choke the planet than give up their power to parasite humanity. -AK
Reblogged from: http://philosophyofmetrics.com/2014/01/23/sdrs-and-the-new-bretton-woods-part-2/
SDR’S AND THE NEW BRETTON WOODS – PART TWO
JANUARY 23, 2014
By JC COLLINS
The Renminbi SDR Composition and the Great Consolidation
By JC Collins
“The creation of an international currency unit, based on the Keynesian proposal, is a bold initiative that requires extraordinary political vision and courage”. – Governor of the People’s Bank of China
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The father wiped the dirt from his hands and reached into his pocket. Keeping his hand inside for a few moments, he knowingly glared down at the boy. The air was still, the boy eager, eyes wide, dancing back and forth on his feet.
“Come on Dad, my friends are waiting”, explained the boy.
Slowly the father withdrew his hand and paused before dropping a few coins into his sons waiting hand.
“Are you going to spend it all at the corner store?”
“Yes,” said the son.
“Money isn’t easy to come by boy. It takes hard work to make money. You kids don’t know the value of money. “
“I just want some pop and chips Dad, and maybe a comic book if I have enough.”
“When I was you’re age I could buy all that for a dime and a nickel”, said the father.
The boy, perplexed, thought for a moment, “Why does it cost so much now Dad?”
The father leaned down and picked his shovel back up. “I don’t know boy. Things just keep getting more expensive. I work harder but get less for my money. I’m tired.”
The boy shrugged his shoulders and ran off to meet his friends. The father, disturbed deeply by something that he couldn’t quite put his finger on, stared off into the distance. The faraway clouds were dark. It hurt his heart not to be able to answer the boy’s questions. He pushed the shovel into the pile of dirt with a grunt. This dirt wasn’t going to spread itself and the day was getting short.
The father in our brief story need not feel bad. What it is he doesn’t understand is in fact a very complex system of social and economic engineering designed to maintain the most functional equilibrium between the balance of nature and desire, or brain and consciousness, logic and dreams.
The absolute board upon which reality is drawn has borders, and until such a time as consciousness is capable of expanding those borders (think of a balloon expanding) we are left with a system that can and will maintain the status quo, which is the system represented by the father above, spreading the dirt with a shovel, over the board of his reality. He senses a much bigger reality and bigger possibilities, but his limited capacity and reference point keep him from understanding the full scope of what surrounds him.
The system that surrounds all of us is still a mystery. Yet the economic portion of that system is slowly revealing itself. And it reveals itself through patterns. There are patterns everywhere. For the sake of argumentation, let’s call them philosophical patterns. The obvious example in our lives of a philosophical pattern would be the connection between two of the largest events in our lives. These events are the birth and death of each one of us. We are born. We live a life. And we die.
This pattern is very similar to another pattern in our life. And that is sleep. We wake in the morning. Go about our day, and go back to sleep at night. This is why death is referred to as the great sleep. Sleep is the micro pattern of the macro death.
I will be expanding upon these sort of philosophical patterns in the future essay series titled the Grand Man. But for our purposes here, this example will suffice.
The patterns are everywhere and in everything. The complex system of economic and social engineering is no different. Remember the saying, “there is nothing new under the sun”. It’s true. There never is anything truly new. Everything in reality (and non-reality) is in transition, or motion. One thing gradually becomes something else.
Let’s take the fall of the Roman Empire as our example here. There is no one specific time or date which can be defined as the moment the empire ended. Like the U.S. today, Rome degraded their currency through a slow process of minting contamination until full debasement of the Gold Aureus led the regions outside of Rome to use other forms of exchange. Once this happened, the barbarians slipped through the gates of the former empire one at a time, slowly debasing the population of the regions once controlled by Rome, before moving on to Rome itself.
Can we not see this same pattern with the increase of immigration in the western world? There are more than just philosophical patterns visible regarding this as well. Such as the inflation of the western world currencies being exported to the countries from which we import people back. Logically, there is a balancing of accounts taking place here.
So when we are attempting to understand the economic system that is being built up underneath the structure of the old one, we only need but look at what exists today to discern what is coming our way shortly.
The first thing to understand is how the Federal Reserve System actually works. There are many resources on the web to help you understand this if you don’t already, so I will not explain it in detail. This is not a book, only an essay.
So in brief, the U.S government decides on a debt limit. They then issue Treasury Bonds of different yields to meet that limit. These Treasury bonds are purchased by the Federal Reserve (and China, Japan, etc..) and the money used to purchase them is created out of thin air and lent back to the government at the interest rate as defined on the yield of each bond. The government then prints the money and puts it into circulation.
So, say you were the government and you needed money to run your household. You go to the bank and borrow $10,000.00. The bank lends you this money at a yield, or interest rate. You have a predetermined number of years to pay this loan back. Your real money, being your labor and time, pays this loan back by creating the “energy” from which the value of the loan is extracted. Think of the human resources department at your local corporate office.
So in essence, the Federal Reserve System is the macro of your micro local bank. It works the same way.
Since there is nothing new under the sun, it can be reasoned that any new economic system will be the macro of, what now becomes, the micro Federal Reserve System. So for clarity, the Fed has been the macro pattern since 1944. But, like Rome, it has slowly been converting into the micro since 1971. Now we are in the final stages of this transition and the new macro is becoming visible for those with the eyes to see.
The new macro is of course the SDR (Special Drawing Right) issued by the International Monetary Fund.
So, we will attempt to keep this simply. Before the Federal Reserve there was still a system of debt creation. What the Fed system did was consolidate the debt in the country into a new system by which bonds were created and issued to banks, insurance companies, etc… After the Bretton Woods agreement of 1944, the Fed went international. It’s this process of becoming international (becoming the primary reserve currency for international trade) that is now transitioning into the larger pattern through the I.M.F. and the SDR’s.
Not only the Federal Reserve, but all central banks of the world have created too much debt. And like before, the I.M.F. will now consolidate this sovereign debt into a supra-sovereign reserve currency by way of SDR securities, or otherwise SDR bonds.
Let us investigate this further.
The present value, or composition (get use to this term) of the SDR is determined by only 4 currencies. They are the U.S. dollar, the Euro (think basket of currencies micro pattern), Japanese Yen, and the British Pound (the old girl just won’t quit).
With the implementation of the 2010 I.M.F. Code of Reforms discussed in part one of this series, this composition is about to change. The currencies of the BRICS countries will soon be added to this composition, along with other major economies. Perhaps Vietnam will be added to the composition.
The weights used to determine the value of each composition will also change. These changes will consist of the economic fundamentals, such as GDP, as well as other metrics, like human development, ecological sustainability, concentration and diffusion of assets and income, as well as the demographics of populations. Research each of these and apply what you learn to the overall social and humanity programs being injected into school curriculums. Remember the micro and macro patterns which endlessly weave through everything.
Also with the 2010 Code of Reforms, there will be no more western veto power within the Executive Board of the I.M.F. The geopolitical world will be balanced in preparation for the “great consolidation”. SDR allocation (get use to this word also) will be controlled by those with the largest interest in the system. This large interest is no longer the micro Fed.
Part Two of this essay series is starting to get long so let’s begin to wrap it up.
We know that through debt creation we are subjected to inflation. The more currency we print the less valuable that currency becomes. Like the father at the beginning having to pay more for goods and services. Like each micro to macro pattern before it, debt eventually needs to be consolidated and repackaged as new securities instruments - bonds. Sovereign debt will be consolidated and repackaged as SDR bonds. These offer new potential for energy storage. And remember energy (your time and labor) is real money.
But before these bonds can be issued, accounts require balancing. This is what we are seeing in the world right now. The gold is going east to China. New oil and gas deals are being brokered. Wealth is on the move, shifting and splashing around upon the sea of international understandings. Inflation is being sent back from whence it came. Currencies and commodities which have been artificially suppressed to support the now old micro will be expanding to reflect the new macro realities.
Debt balances will settle into new account holders before the system is locked down. Those with greater capacity for composition will swallow the old sovereign debts. The U.S. owes a great debt to China and because of this China is allowed to import all the gold. This gold will ensure the transfer of Fed liabilities to the Renminbi composition. The Renminbi will be international, the Yuan in house. Just like the dollar will be split into an international exchange and an in country exchange. The Treasury being severed from the Federal Reserve. The micro being severed from the macro.
All old sovereign debts, including historical bonds, like the Chinese 1913 Gold bonds, will be balanced before consolidation. All the countries of the world have been explored and their resources catalogued. Processes have been designed to produce those resources and bring them to market.
Central banks are increasing their holdings of Canadian and Australian dollars. These are two resource rich countries. Foreign reserves can also add to the composition of any one currency.
In Part 3 we will venture into the pipeline mechanics of SDR compositions, including historical bonds, resources and commodities, and the inevitability of the great consolidation. We will see how the U.S. market is beginning to open itself to the idea of SDR denominated bonds. It simply has no other choice. And we will learn how the SDR bonds will be issued by the Federal Reserve, the World Bank, the European Central Bank, and what will become the monster allocator of the Renminbi SDR composition – the BRICS Development Bank. – JC Collins
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