Jim Rickards On The Reserve Currency Transition From Dollars To SDRs, Gold, And Much More
Courtesy of Tyler Durden
Jim Rickards, who recently seems to have a quota of one media appearance minimum per day, is back on King World News today, discussing his sense of a shift in sentiment within the G-20 that the dollar may be approaching its “exhaustion” limit, and that as concerns that Russia, China and Germany may be moving to a commodity backed currency (oil and gold), the G-20 will need to preempt a paradigm shift away from worthless Fed-printed paper, to another vehicle, which however, is still under the control of the “developed world.” The idea would be to use the IMF’s SDR as a shadow replacement to a greenback which is at current recent record high levels not due to endogenous strength, but because all its peers are far, far weaker. And in an environment in which daily FX vol is hitting daily records, and thus increasingly reducing the credibility of capital markets, a gradual transition to a currency which represents nothing but yet another “liquidity pump” as Rickards calls it, just as the dollar was in the years from just before WW1 (thank you Fed creation in 1913) all the way through the 21st century, may be the only answer in which the existing oligarchy does not lose that all important controlling factor – the currency.
Some of the key observations from Rickards:
“The alternative is to find another engine, another liquidity pump if you will, and that’s clearly what the G-20 leadership would like to do, and their chosen candidate are the SDR’s, and their chosen vehicle is the IMF. So basically the IMF putting out SDR’s, will over time displace the Fed printing dollars as the engine of world trade, world liquidity and world growth.”
“So, that can’t happen overnight, that is a momentous shift. It’s going to require a lot of consensus building among the G-20 members. So what they do is they put these papers out, get the dialogue going and get it on the agenda, talk about it, get people kind of used to it. The average citizen has no idea, it’s not that they’re dumb it’s just that they’re not necessarily informed or trained in this fairly technical area, and so it’s the kind of thing the elites can pull off without a lot of accountability and they are definitely headed in that direction.”
Here is the link to the full most recent Rickards interview on KWN, which everyone who is concerned about the monetary future should listen to. Another critical and extremely simple observation from Rickards, which somehow is never appreciated enough by the population is the “money is debt” – the debt of the Fed, a Fed whose balance sheet is becoming increasingly impaired. Should the IMF proceed to have its SDR become the reserve currency, we will likely end up with another even more impaired balance sheet backing the new reserve fiat – we first covered the appearance of standby and impromptu multi-billion IMF rescue facilities that form the backbone of the current sovereign stability. It is these worthless loans, that purchase toxic assets all over Europe and the rest of the world, that will be “asset” to the IMF’s debt -i.e., the SDR. In other words, there is no way out, absent another hyperinflationary episode. But it will take time for the G-20 to realize just how dangerous of a corner it is in. By then the China-Germany-Russia axis will likely be complete.
Incidentally, one can see why the Fed and fiat paper was created when it was: in the post 19th century world, when entering a war meant certain bankruptcy if the war drew on long enough, having the ability to outlast the opponent’s financial resources was more important than having a stronger army (see Cold War). Yet since the end of the Cold War, due to globalization and the virtual elimination of wars, the excess “fiat”, which otherwise would have gone to fund the military complex, instead ended up padding the pockets of uberrich kleptocrats. In other words, the only way to justify a central banking system is to have a massive war: as Darwinian as it sounds, this may be the only way to promptly remove any of the systemic imbalances and flaws, brought upon the developed world by runaway printers that have been in overdrive for 60 years now.
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