Before I delve into today's topic, I want to clear some doubts about the impending collapse.
Anyways, let's get back to the agenda. As you know, the people and institutions in power are going to do anything they can to keep the fiat monetary system afloat. The end game for the dollar is its massive depreciation through inflation or even hyperinflation induced by the Fed. By reading this section of this website, you become aware today's currencies are not money for they are not a store of value. This is an essential requisite to be considered money. Since the dollar only loses a bit of its value every year (2% according to the CPI, though its been more than that in reality), individuals have the perception that it is stable, and the keynesians want you to believe it. During the next few years, due to tremendous debt monetisation and helicopter money, besides the "novel" Modern Monetary Theory rising in popularity, the dollar is going to devalue rapidly, breaking people from the keynesian stirred up daze, realising at last that the dollar is not a store of value. Seeing that the greenback is the world reserve currency, it is not only the american people that are going to lose confidence in it. Most of the dollars in existence actually circulate outside of the US (eurodollar and petrodollar systems). Therefore, foreign investors and governments/central banks are also going to dump the dollar and get rid of its supremacy. In addition, the dollar is not going to be the sole rejected currency. All around the world, the reliability on this fiat regime is going to evaporate, making people demand a proven, trustworthy form of money: gold. As emerging and developing countries continue to grow faster than the developed ones, specially the US, Europe and Japan, their weight in the world economy will become more prevalent. Hence, thet are going to get increasingly more influent on monetary, financial and political affairs at the world stage, with the balance of powers becoming progressively more even. Accordingly, they are going to make sure a resemblance of the Bretton Woods agreement is not on the table. On the Bretton Woods system, virtually all currencies in the world were pegged to dollar and the dollar was pegged to gold. This meant the dollar became the reserve currency of the world because it was viewed as good as gold. The US managed to struck this deal owing to the fact that after WWII, America rose as the greatest economy in the world, by far surpassing the wrecked post-war Europe. Thus, if the leaders of the world get together to discuss the next monetary system, the west will not have the upperhand and, consequently, it is going to recognise the most powerful emerging economies (BRICS) as equals. As a result, they are going to have to come up with a means of transaction that is created and managed by an independent entity. Luckily, such entity and means of transaction are already set up. I am refering to the Special Drawing Right (SDR) established by the International Monetary Fund (IMF). Currently, the SDR is calculated by an weighted-average of five currencies: the US dollar, the euro, the British pound, the Japanese yen and the Chinese renminbi. In the next system, the SDR will have to change the composition of the basket in order to reflect the new balance of powers. Despite having the structure established already, contries may reject this multilateral system, prefering instead to engage in bilateral settlements. Alternatively, the west may become resentful of the shift in powers and can refuse to submit to the desires of the chinese, the indian and so on. Therefore, it is likely the globe will be divided in two blocs: the west (the US and Europe) and the east (China, India, Russia, South Korea, etc). Each bloc could have its own intitutions to regulate trade and monetary and financial matters, with gold acting as the means of transaction. Moreover, China, Russia and other emerging countries have been moving in this direction. According to James Rickards, who has written several books about the imminent meltdown of the dollar and present monetary system, China, Russia, Iran and Turkey are forming what he calls the "Axis of Gold". All of them have been acquiring gold, as well as reducing their holdings of US Treasuries. Furthermore, others countries may join the Axis, such as India, considering that it has been active in a gold shopping spree. Obviously, these scenarios are not going to unfold until at least five years from now. In the meantime, the keynesian technocrats are going to insist in following their impossible and fanciful doctrine of having permanently booming economies. To follow this fantasy, the Fed is going negative. Just a moment ago the Fed announced it was going to cut the Fed Funds rate by 100 basis points, from 1% to 0%. Hence, the US will join the Euro Area and Japan in the moronic NIRP experience. Tomorrow, I am going to expand more on the possibility of negative interest rates and their outcomes.
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AuthorDaniel Gomes Luís Archives
March 2024
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