Vodpod videos no longer available.
- Ben Bernanke says he will drop dollars from helicopters should deflation persists. Well he is starting to do it with Quantitative Easing. Of course the FedRes think they can reel in inflation easily. It remains to be seen. Past attempts by Paul Volcker destroyed the US economy.
- The Telegraph UK comments :
The US Federal Reserve is increasing its balance sheet by another $1 trillion, including $300bn of Treasury bonds, the Federal Open Market Committee said on Wednesday.
Yet the pace of US economic decline seems to be slowing, while deflation is nowhere visible. Fed policy is now high-risk, and resurgent inflation may strike sooner than expected.
The FOMC said it expects inflation to remain subdued with some risk it could “persist for a time below rates that best foster economic growth”. Notably, the Fed is not now forecasting actual deflation.
That’s not surprising, since February’s top-line consumer price index rose 0.4pc, equivalent to 4.8pc annually, while core consumer prices also rose, by 0.2pc. The Cleveland Fed’s median CPI was 2.8pc above the previous year. February’s producer price inflation was marginally lower, with the headline index rising at 1.2pc annually and the core measure at 2.4pc.
Meanwhile, last week’s unexpectedly strong February retail sales and Institute for Supply Management index readings suggest that economic decline is slowing.
The experience of the 1970s in both the United States and Britain demonstrates that the Fed’s theory that inflation won’t co-exist with economic slack is wrong. Thus an over-inflationary monetary or fiscal policy could quickly produce accelerating inflation even while recession persists.
The Fed’s proposed purchase of $300bn of long-term Treasury bonds, when combined with the Obama administration’s record budget deficits, is particularly risky. Running large budget deficits and monetising them through central bank purchases of debt is a highly inflationary policy that has got plenty of emerging markets into trouble.
Broad money growth, whether by the M2 metric or by the St. Louis Fed’s MZM figure, has been running at over 15pc annually since last September. The $1trillion further expansion of the Fed’s balance sheet is very likely to accelerate this. The effect may not be obvious in the short term. But at some point, it is almost inevitable inflation will return, probably with force.
The Fed will then need to reverse policy with the speed and verve of a racing driver. Unfortunately, the odds are against it doing so before inflation has taken hold.
- The financial nuclear option: Quantitative Easing has been launched. Is it working? What is the market response so far? Adrian Ash comments :
THE WHOLESALE SPOT PRICE of gold continued to rise for US-Dollar investors early Thursday, hitting $951 an ounce in London as the greenback fell versus all asset classes.
Creating $300 billion to buy long-dated US Treasury bonds, Ben Bernanke’s policy team also announced a further $750bn to buy government-insured US mortgage bonds.
“USD getting destroyed. Hearing Asian central banks buying Euro,” said one London dealer to BullionVault this morning. “Stops going off on topside,” he added, as bearish bets on gold got wiped out by the rising price breaking above traders’ stop-loss levels.
Over on the currency markets, meantime – and for the first time since mid-Jan. – the Euro also jumped together with gold, adding to Wednesday’s record one-session leap and hitting a fresh 10-week high vs. the Dollar above $1.3680.
The Fed’s Nuclear Strike on US Treasury yields – which squished 30-year rates to new record lows – meantime rippled across government bond markets worldwide, with investors bidding up UK and German bonds so high, their 10-year debt yielded barely 3.0% by lunchtime in London.
“I am torn between deflation unleashed by a bursting credit bubble, and the inflationary pressures of the policy response,” writes James Montier, strategist with Albert Edwards at SocGen in London. Trying to identify “cheap investment insurance” for clients this morning, Montier cites inflation-protected government TIPS as one possible solution. His “second inflation/deflation hedge” is gold.
“From an insurance point of view, most obviously…gold is the one currency that can’t be debased. Thus it provides a useful hedge against the return of [the Fed’s] sort of beggar-thy-neighbor policy. In the event of significant prolonged deflation [on the other hand], what is left of our financial system is likely to collapse. “Thus holding a money substitute isn’t such a bad idea against this cataclysmic outcome.”
- DJIA corrected downwards yesterday. It seems to be meeting major resistance on the upside. This is largely confirmed by the action of the S&P500, it failed to breach the 800 level. The bear picture is still intact. The stock market should resume its downward slide and test the previous lows. The target seems to be 450 for the S&P500.
- Dan Norcini comments on the market action yesterday:
Here comes the index funds and the hedge funds on the return to the “anti-dollar” move. You will recall they all began a mass exodus beginning in July of last year that took many months to complete as they had built a massive long position across the entire gamut of commodity markets. Those long positions were as much a play on the weaker dollar as they were on a move to hard assets or tangibles as investors were fearful of the spectre of runaway inflation with the Dollar the probing new life time lows.
That all came to a screeching halt as risk aversion and the need for cash to meet both redemption requests and margin calls resulted in a wholesale repatriation of funds from emerging markets abroad and a huge reversal in the Yen carry trade. We all know the results of that by now having watched it unfolding before our eyes – the Dollar embarked on a sharp move higher which sent commodity prices crashing alongside of equities as every single commodity market was crushed with not even gold being spared for a short season before it took on its historic safe haven role.
What we are now seeing continue this morning after beginning yesterday, are these same exact players who bailed out en masse, now returning en masse to the commodity markets as the long term implications of the Fed’s announcement becomes crystallized in the minds of investors world wide. The death knell of the US Dollar was just rung by Bernanke and company – we wonder how many heard it. Their action guarantees that the US will experience at some point in the not-too-distant future soaring inflation with the increasing likelihood of a hyperinflationary event following. Think about what they announced and sweep aside all the high-sounding phrases and flowery rhetoric – they are going to create in excess of US $1 trillion out of thin air and buy US debt . This is the very monetization that we have been predicting they would be forced to resort to but which we were somehow hoping could be avoided for the sake of our nation’s future.
The cards have been dealt and the Fed has shown its hand – with the US embarking on a spending spree that makes the word “orgy” too mild to describe it, they have decided to devalue the currency and debauch our Dollar. They have no other choice now short of defaulting on our debt obligations. I am not sure how this is going to go down with the Chinese who have become our largest holder of US debt but I would strongly suspect that the Chinese will move with even greater speed in their reserve diversification process.
I also suspect that the recent chatter coming from several quarters about the need to have a new global reserve currency or some combination thereof is going to garner more earnestness. If the path which the Fed has chosen to follow were being implemented by any other nation on the face of this earth, the currency of that nation would immediately become practically worthless overnight. The only thing that allows the Fed to get away with this con is the fact that the Dollar is the global reserve currency. How do you think this is going to sit with other nations around the world?
I am both sickened and angered by what these men, who were given a stewardship of our national currency, have done to us. As I have said many times before, I would much prefer to see a sound US economy, sound monetary policy, a balanced budget and responsible spending and taxing policies. Instead we have the worst of all possible worlds. All we can now do is to attempt to protect our wealth from the ravages that are going to be inflicted upon it. It is coming and nothing can avoid the consequences of this action.
Gold continued its torrid reversal off the lows made early in yesterday’s session. It experienced a bit of selling during the Asian session last evening as shorts were trying to push it back below the technically significant $930 level. They failed. It ran right on into the heavy resistance band on the charts near $960 this morning which is the level that is so critical for the shorts to defend if they are going to prevent an almost immediate return to the $1000 level. A breach of $960 that can hold that level for a couple of hours and many of the shorts will cover. That will also bring in fresh money from the momentum funds which have been sitting on the sidelines who are watching to see if that level will fall before their algorithms kick in.
- Gold will breach US$960/ounce without any difficulty soon. Next week??
Disclaimer – I am not a financial advisor. This is not an advice to buy, sell or hold any stocks or bonds or any precious metals.
- I see no difference between Obama and the Bush administration. It is the same old Neo Con policies of war and more wars. The military industrial complex needs the business. America is essentially: Wall Street and Military Industrial Complex now. Money and War !
- War is highly profitable to banksters. War is primarily for economic profit. Who are the major shareholders of all these military corporations? I will not be surprised if they are controlled by banksters. See also :
Obama’s Wall Street & War Budget !
America: From Freedom to Fascism
The Plot to Overthrow Franklin D. Roosevelt
America – Why do We Fight ?
Do Banksters and the Military Industrial Complex Rule the World ?
- Why does America have so many military bases around the world? Why is the military budget still increasing despite the economic depression the country is in? (see Obama’s Wall Street & War Budget ! ) It makes absolutely no sense. The Soviet empire faced the same problem 25 years ago. Where is the Soviet empire now?
- Just how costly are all these military bases? Professor Hugh Gusterson writes in Empire of bases :
Before reading this article, try to answer this question: How many military bases does the United States have in other countries: a) 100; b) 300; c) 700; or d) 1,000.
According to the Pentagon’s own list PDF, the answer is around 865, but if you include the new bases in Iraq and Afghanistan it is over a thousand. These thousand bases constitute 95 percent of all the military bases any country in the world maintains on any other country’s territory. In other words, the United States is to military bases as Heinz is to ketchup.
The old way of doing colonialism, practiced by the Europeans, was to take over entire countries and administer them. But this was clumsy. The United States has pioneered a leaner approach to global empire. As historian Chalmers Johnson says, “America’s version of the colony is the military base.” The United States, says Johnson, has an “empire of bases.”
Its ’empire of bases’ gives the United States global reach, but the shape of this empire, insofar as it tilts toward Europe, is a bloated and anachronistic holdover from the Cold War.”
These bases do not come cheap. Excluding U.S. bases in Afghanistan and Iraq, the United States spends about $102 billion a year to run its overseas bases, according to Miriam Pemberton of the Institute for Policy Studies. And in many cases you have to ask what purpose they serve. For example, the United States has 227 bases in Germany. Maybe this made sense during the Cold War, when Germany was split in two by the iron curtain and U.S. policy makers sought to persuade the Soviets that the American people would see an attack on Europe as an attack on itself. But in a new era when Germany is reunited and the United States is concerned about flashpoints of conflict in Asia, Africa, and the Middle East, it makes as much sense for the Pentagon to hold onto 227 military bases in Germany as it would for the post office to maintain a fleet of horses and buggies.
Drowning in red ink, the White House is desperate to cut unnecessary costs in the federal budget, and Massachusetts Cong. Barney Frank, a Democrat, has suggested that the Pentagon budget could be cut by 25 percent. Whether or not one thinks Frank’s number is politically realistic, foreign bases are surely a lucrative target for the budget cutter’s axe. In 2004 Donald Rumsfeld estimated that the United States could save $12 billion by closing 200 or so foreign bases. This would also be relatively cost-free politically since the locals who may have become economically dependent upon the bases are foreigners and cannot vote retribution in U.S. elections.
Yet those foreign bases seem invisible as budget cutters squint at the Pentagon’s $664 billion proposed budget. Take the March 1st editorial in the New York Times, “The Pentagon Meets the Real World.” The Times‘s editorialists called for “political courage” from the White House in cutting the defense budget. Their suggestions? Cut the air force’s F-22 fighter and the navy’s DDG-1000 destroyer and scale back missile defense and the army’s Future Combat System to save $10 billion plus a year. All good suggestions, but what about those foreign bases?
Even if politicians and media pundits seem oblivious to these bases, treating the stationing of U.S. troops all over the world as a natural fact, the U.S. empire of bases is attracting increasing attention from academics and activists–as evidenced by a conferenceon U.S. foreign bases at American University in late February. NYU Press just published Catherine Lutz’s Bases of Empire, a book that brings together academics who study U.S. military bases and activists against the bases. Rutgers University Press has published Kate McCaffrey’s Military Power and Popular Protest, a study of the U.S. base at Vieques, Puerto Rico, which was closed in the face of massive protests from the local population. And Princeton University Press is about to publish David Vine’s Island of Shame–a book that tells the story of how the United States and Britain secretly agreed to deport the Chagossian inhabitants of Diego Garcia to Mauritius and the Seychelles so their island could be turned into a military base. The Americans were so thorough that they even gassed all the Chagossian dogs. The Chagossians have been denied their day in court in the United States but won their case against the British government in three trials, only to have the judgment overturned by the highest court in the land, the House of Lords. They are now appealing to the European Court of Human Rights.
American leaders speak of foreign bases as cementing alliances with foreign nations, largely through the trade and aid agreements that often accompany base leases. Yet, U.S. soldiers live in a sort of cocooned simulacrum of America in their bases, watching American TV, listening to American rap and heavy metal, and eating American fast food, so that the transplanted farm boys and street kids have little exposure to another way of life. Meanwhile, on the other side of the barbed-wire fence, local residents and businesses often become economically dependent on the soldiers and have a stake in their staying.
These bases can become flashpoints for conflict. Military bases invariably discharge toxic waste into local ecosystems, as in Guam where military bases have led to no fewer than 19 superfund sites. Such contamination generates resentment and sometimes, as in Vieques in the 1990s, full-blown social movements against the bases. The United States used Vieques for live-bombing practice 180 days a year, and by the time the United States withdrew in 2003, the landscape was littered with exploded and unexploded ordinance, depleted uranium rounds, heavy metals, oil, lubricants, solvents, and acids. According to local activists, the cancer rate on Vieques was 30 percent higher than on the rest of Puerto Rico.
Its “empire of bases” gives the United States global reach, but the shape of this empire, insofar as it tilts toward Europe, is a bloated and anachronistic holdover from the Cold War. Many of these bases are a luxury the United States can no longer afford at a time of record budget deficits. Moreover, U.S. foreign bases have a double edge: they project American power across the globe, but they also inflame U.S. foreign relations, generating resentment against the prostitution, environmental damage, petty crime, and everyday ethnocentrism that are their inevitable corollaries. Such resentments have recently forced the closure of U.S. bases in Ecuador, Puerto Rico, and Kyrgyzstan, and if past is prologue, more movements against U.S. bases can be expected in the future. Over the next 50 years, I believe we will witness the emergence of a new international norm according to which foreign military bases will be as indefensible as the colonial occupation of another country has become during the last 50 years.
- Daniel 7:23 (New King James Version)
23 “Thus he said: ‘ The fourth beast shall be
A fourth kingdom on earth,
Which shall be different from all other kingdoms,
And shall devour the whole earth,
Trample it and break it in pieces.
- It is here ! The major tsunami that will hit the USD and treasury bonds market. The FedRes can monetize all the debts (bonds) by printing USD out of thin air. But they cannot persuade investors that it is sound economic policy. The market is voting with its feet. It is good bye time.
- Clive Maund reports :
You may have heard the old saying that “the Market is the news”, and it is true. You don’t have to look for explanations regarding yesterday’s response by the markets to the Fed’s announcement that it will buy $300 billion of Treasuries, you only have to look at the reaction of the markets. The dollar index tanked by nearly 3% – it’s biggest drop for over 2 decades. That alone tells you all that you need to know.
While the Fed is certainly very much to blame for the horrible dilemma in which it now finds itself, which has its roots in a litany of crassly irresponsible policies going back years, such as the slashing of interest rates to near zero in 2003 which ignited the housing boom and fuelled rampant leveraged speculation, one can understand why its present reactions to the financial crisis can be classed at best as clueless and at worst as desperate and reckless. Right now the hackneyed old saying “between a rock and a hard place” applies very well to the unenviable situation it finds itself in. Up until yesterday it had to make one of two choices, to support the Treasury market or not support it. Vast quantities of money have to be raised to finance the deficit, the government and to pay for the numerous bailouts, requiring the issue of a flood of new Treasuries.
The problem is that overseas buyers are abandoning ship – they don’t want them anymore because they have a minuscule yield, and besides they have plenty of problems at home that require urgent attention. This means that the US Treasury market is verging on collapse, and in the absence of intervention it will collapse. To prevent this and the resulting ruinous spike in interest rates, the Fed and the Treasury would have to monetise the new Treasuries, in other words, buy their own rubbish, and to do this this they will have to create vast quantities of new dollars. Yesterday was a momentous day because the Fed came down off the fence and announced that this is exactly what they they are going to do. Of course, major financial news networks tried to put a positive spin on it by proclaiming that this “would ensure adequate liquidity for the upcoming economic recovery”, but the real news was the reaction of the dollar, which plummetted like a lead balloon.
This news telegraphs that the course has been set towards collapse of the dollar and hyperinflation because yesterday’s announcement has opened the floodgates – they can’t stop with buying $300 billion of this stuff, just like the bailouts they will find themselves obliged to buy more and more until they crumple up completely like an exhausted junkie. If the Fed thinks it can prop up the Treasury market by creating money to backstop it, it is in for a rude awakening – the huge near 3% drop in the dollar index yesterday will have scared the **** out of foreign investors in US government paper. So Treasuries spiked yesterday, but the gains were almost entirely erased by the drop in the dollar, and then you have to factor in the drop in the yield for potential new buyers. So in an environment where the Fed and Treasury are going to have to create dollars, i.e. dilute the currency, to prop up financial instruments which have almost zero yield, due to a serious shortfall of demand, meaning that their real worth will decline because of the steeply depreciating currency, who but a complete imbecile is going to buy them? Less and less investors is the answer, and that being the case the Treasury market will collapse in due course anyway despite, and perhaps even because of the Fed’s desperate and reckless attempts to backstop it.
- The smart money has already started to buy gold. In the past central banks manipulated the price of gold to hold it down and keep it as low as possible. Gold is the obvious competitor to fiat currencies. It is a threat to central banks fiat money economic policies. They can print limitless amount of fiat currencies. But they cannot print gold. There will not be a USD hegemony if gold becomes the currency of the world. Imagine pricing oil in gold instead of dollars.
- This past few months have seen a significant shift in central banks attitude toward gold. Julian DW Phillips writes in Central Banks are Buying Gold for their Reserves Now! :
It is clear now that central banks are buying gold for their reserves. Here is a brief history leading to today and the present position of central banks as they turn to buying gold.
Massive Gold Sales!
From the early 1980’s and for the next 20 years gold was under the threat of massive sales from the world’s central banks. ……. This acceleration in the production of gold allowed the gold price to be pressed down $850 to $275, the point at which Britain, at the instruction of the current Prime Minister Gordon Brown instructed that Britain sell the bulk of its gold reserves. From the turn of the millennium this perspective changed dramatically.
Limitation of gold sales by central Banks!
In 1999, through the establishment of the Washington Agreement, the signatories announced to the world that it need not fear uncontrolled sales of gold reserves for the next 5 years. While the U.S. and Japan were not signatories, they gave tacit agreement to such a limitation. Since then neither of them have sold gold on the open market. ……
The halting of Central Bank Gold Sales!
Of great significance has been the actual slowing of gold sales from European banks, which appear to have lost all appetite for gold sales.
Indeed France was an unwilling seller, but under Presidential instruction has done so. Italy has had no plans to sell any of its gold. Germany had the option to sell 600 tonnes but has not taken this option up. Switzerland took some of this but has ceased selling now. It would be surprising if the signatories sold more than 150 tonnes of gold let alone the ceiling amount of 500 tonnes by the 26th of September this year. And next year, we expect no such sales [the I.M.F. sales are potential sales that are not part of a central bank gold selling policy] from central banks.
Central Bank buying of gold for reserves!
Just as the tide turned from damming gold in the monetary system in 1999 it appears we are rapidly approaching another watershed in the history of gold in the monetary system.
Countries not seen as an important part of the global monetary system have, in the last few months, turned buyers of gold. Ecuador [28 tonnes – 920,000 ounces – doubled its reserves from 26.3 tonnes], Venezuela bought gold [ 240,000 ounces – 7.5 tonnes – taking it up from 356.4 tonnes] , but this is not deemed of great significance.
Russia at last, after talking about it for over one year has begun to buy gold. It was reported that Russia has bought as much as 90 tonnes of gold for its reserves, lately [Previously it held 495.9 tonnes]. This is much more significant as it is a large figure in the small gold ‘open market’. Prime Minister Putin is reported to have said that Russia wants to see gold forming 10% of Russia’s reserve. The slow process of getting them up to that level could have begun. Even so Russia has little influence on global central bank thinking, so such increase are not thought to directly influence the principles behind gold as a reserve asset. So as not to minimize such purchases, if Russia were to keep up this pace of acquisition, it would be able to buy 360 tonnes a year and have a very significant impact on the gold price.
But the principles behind gold, as a reserve asset, are affected far more by the following news. Last week the European Central Bank reported that one signatory to the Agreement purchased gold [which for the first time we have seen them do it], because the purchase was not simply of gold coin [which has happened before – seemingly for good housekeeping reasons] but simply “of gold”. In other words the ranks of central bank selling in Europe have been broken and one has turned buyer!
We feel more positive now in our belief that European Central Banks are unhappy sellers and are inclined to change their views to the buy side. The very fact that one central bank in Europe has turned buyer confirms this . There is little doubt in our minds that there are conflicting views now amongst the heads of the leading European central banks on gold now.
Major changes taking place in central bank policies on gold!
According to the World Gold Council’s new chief Executive Aram Shishmanian, in the Middle East the new monetary union there intend to have “gold play a prominent role in Gulf CC economies.” He said, “It may play a role in that basket of currencies on which the GCC common currency will be pegged”. Of course, please bear in mind that the inclusion of gold in a basket of currencies, would simply be for valuation purposes and does not, of itself, imply that these central banks will buy gold for their reserves.
He continued, “Gulf central banks, along with the central banks of Brazil, Russia, India and China are expected to increase their gold reserves. Central banks with low reserves of gold are looking to increasing their reserves. They are trying to analyze what the right balance should be. They are becoming aggressive. Currently the belief is that if more than 20% of a central bank’s reserves are in gold, it is overweight, but this perception is changing! The metal is becoming an assert class in the region and Gulf investors are looking at long-term investments in gold as a hedge against inflation.” We are certainly not in a position to contradict what he says. After all he has the resources and contacts to be authoritative on the matter.
However after nearly 30 years of opposition to gold by central banks ands occasionally governments, it is a remarkable turnaround that tells us that gold is returning to the monetary arena again! [The gold world has expected this for so long it feels a bit like seeing an oasis in the desert.]
If right, expect to see both Russian and Chinese gold production go straight into those countries reserves and not even reach the open market . That will account for nearly 600 tonnes of supply disappearing. Now add to that the halting of sales from European central banks, a perceived 500 tonnes a year. If this trend continues gold, as an investment, will be fully rehabilitated.
Institutional demand will follow!
But this is by no means the largest effect that this change of heart will bring about. The recognition by central banks that gold has a role in the monetary system will influence investors, both institutional and individual. Should that happen and say 5% of funds placed in gold by funds such as Pension funds, then an amount of $920 billion, in the States alone, could head gold’s way. Only a five figure gold price could accommodate that volume of money in the gold market. Now add to that the same inclination in the rest of the world. Any such rise in price will stunt the demand for sure, but be certain that gold is not simply in a bull market.
If the World Gold Council’s CEO is correct, then he will have confirmed that 2009 and 2010 will be the year that heralds the return of gold to the global monetary system!
“Gold is always accepted and is the ultimate means of payment and is perceived to be an element of stability in the currency and in the ultimate value of the currency and that historically has always been the reason why governments hold gold.”
- Why are central banks buying gold? Don’t they have confidence in the USD, Euro, Yen…. Yuan ? What about the IMF’s Special Drawing Rights (SDR) super currency? All these are just pieces of paper. They are a confidence trick. As long as people have confidence in them they are ok. The time is near when people will no longer have confidence in fiat currencies. Central banks are leading the way in buying gold to protect themselves in the event of a monetary collapse! When the USD and Treasuries tank, they will drag down, not just America, but many countries with it worldwide.
- Gold is about to SKYROCKET !!!! See also :
Quantitative Easing – Death Knell for Dollar, Re-Igniting the Gold Rocket !
Let the Currency Wars Begin?
World Financial System in a State of Insolvency !
Global Financial & Economic Meltdown
Global Monetary Meltdown in 2009 ?
Gold is Ready to Go Very High Very Fast!
Gold Price to go Parabolic!
Gold Daily Chart
Demand for Gold Coins Soar!
Gold About to SkyRocket ! China Worries about Treasuries and Diversify into Gold !
Gold Price Set to Soar !
What’s not to Like about Gold ?
Dollar Devaluation, Debt Default & Gold
Massive US Dollar Devaluation Against Gold During 2009
Gold Rush Worldwide!
Obama, Roosevelt, Gold Confiscation and Dollar Devaluation
Disclaimer – I am not a financial advisor. This is not an advice to buy, sell or hold any stocks or bonds or any precious metals.
Vodpod videos no longer available.
- The beginning of the end for the USD. More people are openly dissing the USD. Reuters reports :
A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.
Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.
Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.
“It is a good moment to move to a shared reserve currency,” he said. Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value — though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.
Some analysts said news of the U.N. panel’s recommendation extended dollar losses because it fed into concerns about the future of the greenback as the main global reserve currency, raising the chances of central bank sales of dollar holdings.
“Speculation that major central banks would begin rebalancing their FX reserves has risen since the intensification of the dollar’s slide between 2002 and mid-2008,” CMC Markets said in a note.
Russia is also planning to propose the creation of a new reserve currency, to be issued by international financial institutions, at the April G20 meeting, according to the text of its proposals published on Monday. It has significantly reduced the dollar’s share in its own reserves in recent years.
Persaud said that the United States was concerned that holding the reserve currency made it impossible to run policy, while the rest of world was also unhappy with the generally declining dollar. “There is a moment that can be grasped for change,” he said. “Today the Americans complain that when the world wants to save, it means a deficit. A shared (reserve) would reduce the possibility of global imbalances.”
Persaud said the panel had been looking at using something like an expanded Special Drawing Right, originally created by the International Monetary Fund in 1969 but now used mainly as an accounting unit within similar organizations.
The SDR and the old Ecu are essentially combinations of currencies, weighted to a constituent’s economic clout, which can be valued against other currencies and indeed against those inside the basket.
Persaud said there were two main reasons why policymakers might consider such a move, one being the current desire for a change from the dollar.
The other reason, he said, was the success of the euro, which incorporated a number of currencies but roughly speaking held on to the stability of the old German deutschemark compared with, say, the Greek drachma.
- Is this a plan by the global elite to ditch the USD for a 1 world currency? It looks like it. I seriously doubt the Illuminati bankers will relinquish their hold on the banking and financial system of the world.