The Collapse of the International Monetary System and the Petrodollar -Jim Rickards

[nbruno322]

"Jim Rickards talks about the coming collapse in the international monetary system, the petrodollar, and the elite’s preferred outcome—the IMF’s SDR."

http://www.internationalman.com/articles/the-collapse-of-the-international-monetary-system-and-petrodollar-part-1

[Brian4Liberty]

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[nbruno322]

Article requires registration....

Not for me..??

[Bern]

I was able to read it without registering. It's only part 1 of a series though.

[Lucille]

Article requires registration....

Not required! Just close the pop-up and you can read it.


“Scale and metrics” is just a fancy way of saying the size of the system. And if you look at what has happened since 2008, we heard over and over about “too big to fail.” Since 2008, the five largest banks in the United States are now actually bigger. They have a larger percentage of the total banking assets, which means the risk is more concentrated into fewer hands, and the derivatives books are also much larger. If it was too big to fail in 2008, it’s even worse today.

One of the lessons of complexity theory is that the greatest catastrophe that could happen is a function of systemic scale. It’s not a linear function; it’s an exponential function. This means that if you double or triple the system, you are not doubling or tripling the risk. You are increasing it by a factor of 10, or perhaps 50 or 100 or more, depending on the exact dynamics.

So we’ve set ourselves up for an unprecedented and catastrophic collapse—something worse than has ever been seen in history, and that’s just based on the fact that the system is bigger than it has ever been in history.

Fragile (http://www.amazon.com/Antifragile-Things-That-Disorder-Incerto/dp/0812979680).

[Zippyjuan]

Confused. According to the interview (selling a book), they want to replace the dollar with SDRs? An SDR is 40% US dollars. (the rest is UK pounds, the Euro, and the Yen). If you get rid of the dollar, the other currencies will follow and you will have nothing in an SDR so nothing to replace the dollar with. It is impossible to replace the dollar with SDRs since SDRs are mostly (well, nearly half) dollars already. This is illogical.

[acptulsa]

Confused.

The usual excuse for obfuscation.


According to the interview (selling a book),

Is this information suspect because it's in a book, or because the author is promoting the book?


they want to replace the dollar with SDRs? An SDR is 40% US dollars. (the rest is UK pounds, the Euro, and the Yen). If you get rid of the dollar, the other currencies will follow and you will have nothing in an SDR so nothing to replace the dollar with. This is illogical.

Thank you for admitting to being illogical. The truth is the pound, the Euro and the yen might just be dominoes as well, but that doesn't mean they're standing close enough to the FRN to automatically fall when it falls.

Does it?

[Zippyjuan]

If the US economy collapses, Europe will collapase as well. The are too intertwined. We saw that clearly in 2007. If the dollar collapses, the Euro and UK pound will likely follow.

And yes, it is hard to replace the dollar with a currency which is 40% dollars because destroying the dollar would also destroy the SDRs. Its value is very closely linked to the value of a dollar. Can you replace apples with an apple pie if the pie doesn't have any apples left in it?

[acptulsa]

If the US economy collapses, Europe will collapase as well.

I'd argue that you assume too much, but in order to make the point I'd have to assume I know what you mean by 'collapase'.


The are too intertwined. We saw that clearly in 2007. If the dollar collapses, the Euro and UK pound will likely follow.

There were a lot of banks that failed in the U.S. during the depression. There were a lot that didn't, even though they were suffering the same pressures. The Japanese yen isn't losing value like the others, despite the 'intertwined' state of them all. Simple fact is, the economy isn't dependent on the dollar and the dollar isn't dependent on the economy. Not completely. One will affect the other, but either could survive the fall of the other. And the Japanese can watch the dollar collapse, watch that send shock waves through the world economy, and manage their fiat in such a way that it survives just fine. They could. And probably will. As you tacitly sort of admitted.


And yes, it is hard to replace the dollar with a currency which is 40% dollars.

That's like saying it's hard to replace a flat tire with a tire that is 70% air. In the fiat money game, if you don't replace a failed fiat with another bubblicious bag of air, you're no longer playing the fiat money game.

The truth of the matter is that the IMF's salad could be lettuce and onions and croutons or it could be spinach and leeks and croutons and few people would ever notice. Would they?

Besides, you and I and anyone else with more than three brain cells knows exactly what will really happen.

'In emergency response to the collapse of the Fedral Reserve Fiat--er, we mean the U.S. Dollar--we of the exact same banks that own the Fed--er, we mean the far more trustworthy banks that own the IMF--will continue to print the garbage, but cut a few zeroes off in the traditional Zimbabwe inflation fighting style--er, we mean introduce a new, more valuable and far more solid currency with international backing--which you can now watch us inflate away to nothing--er, we mean which you can deposit in our banks at half a percent interst with confidence.

[Bern]

Zippy - Rickards has been talking about the "elite's plan to move to SDRs" since roughly 2008.

Maybe this will help clarify the point for you:
...
"Sovereign banks bailed out the private sector, but now who's going to bail out the sovereign banks because they are all—all the major ones anyway—are insolvent now on a mark-to-market basis. Well, who's bigger than a sovereign? The answer is the IMF.”

“This is not well-known, but they have a printing press also. They can print special drawing rights, so-called SDRs... Just to be clear: you and I are not going to have SDRs in our pockets. We're still going to have US dollars. It's just that the dollar will cease to function as the global reserve currency. It will be a local currency...but it won't be used for the big things [like]…the price of oil, settlement and balance of payments between countries, rescue packages, and probably the financial statements of the hundred largest corporations, [which]…in the not too distant future they'll actually publish their financial results in SDRs, not in dollars.”
...

http://www.financialsense.com/contributors/jim-rickards/death-of-money-interview-part-2

[Tod]

I found this video of Greg Hunter interviewing Jim Willie interesting, especially at 28:45 where Willie starts talking about "critical mass" for China, Russia, & BRICS & Associates nations.



https://www.youtube.com/watch?v=sZD1i0GbQzg

[Zippyjuan]

They are gonna need a ton more SDRs if they want to do that (and a ton more dollars, Euros, Pounds, and Yen to back them up) if that is their goal. Total value of all SDRs in the world is only $316 billion. https://www.imf.org/external/np/exr/facts/sdr.HTM World GDP is $72 trillion. No- I don't think there will be any global currency "in the not too distant future".


The role of the SDR

The SDR was created by the IMF in 1969 to support 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 the 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 U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.

However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.

[Madison320]

If the US economy collapses, Europe will collapase as well. The are too intertwined. We saw that clearly in 2007. If the dollar collapses, the Euro and UK pound will likely follow.

And yes, it is hard to replace the dollar with a currency which is 40% dollars because destroying the dollar would also destroy the SDRs. Its value is very closely linked to the value of a dollar. Can you replace apples with an apple pie if the pie doesn't have any apples left in it?

I agree with part of this. I think when the dollar fails there's a good chance all other unbacked fiat currencies will fail also. I'm guessing there's going to be a global aversion to paper when millions of people lose their life savings. As far as what happens with the economies, that part is harder to predict. But paper currencies are going to fail as they always do.