Archive for September 2019

Has the SDR been secretly pegged to Gold?

In a recent article, Jim Rickards, the author The Road to Ruin and the more recent book Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos, mentioned that someone appeared to be maintaining a peg between the IMF’s reserve currency the Special Drawing Right or SDR and gold. In Aftermath, he spells it out in much more detail. I quote:

Has a global monetary reset already happened? 

I was alerted to this possibility by a research report sent to my attention from a correspondent named D. H. Bauer based in Switzerland. An explanation of Bauer’s research begins with the dollar price of gold: $ 1,260 per ounce at the date of the report. Following the dollar price of gold, we consider that on a given day gold is “up” or “down” by, say $ 10 per ounce. When we make this observation, we effectively quote a cross rate between U.S. dollars (USD) and one ounce of gold (GOLD) or USD/ GOLD. 

Next, we observe the U.S. dollar value of the SDR. This cross rate, SDR/ USD, is calculated and published daily by the IMF. As of this writing, SDR1 = USD1.406570. That rate changes daily like any floating exchange rate. Bauer took the known rates of USD/ GOLD and SDR/ USD and applied the transitive law to calculate SDR/ GOLD, a price that is not actively followed on trading screens. He then graphed the time series of both prices with trend lines from December 31, 2014, to March 31, 2018. The graph includes a black vertical line corresponding to October 1, 2016. That is the date the Chinese yuan was officially included in the SDR basket of major currencies. The other currencies are sterling, yen, euro, and the dollar. The data and graph show that before China joined the SDR, the dollar price of gold and the SDR price of gold were volatile and highly correlated. After China joined the SDR, the dollar price of gold remained volatile, while the SDR price exhibited far less volatility. 

Importantly, the trend line of SDR/ GOLD is a nearly horizontal line. Gold denominated in SDRs has been trading in a narrow range of SDR850 to SDR950, an 11 percent band with fluctuations of 5.5 percent above and below the SDR900 central tendency. The price exhibits mean reversion. When gold rallies to SDR950, it quickly falls back toward SDR900. Likewise, when gold sinks to SDR850, it rallies back to SDR900. No prices appear outside the range after October 1, 2016. This price band narrowed in early 2017 and was contained in the SDR875 to SDR925 range, a 5.5 percent total band, 2.75 percent on either side of the target. This narrower band is indicative of a currency peg. A first approximation hints the SDR has been pegged to gold at a rate of SDR900 = 1 ounce of gold. This implies a new gold standard using not dollars, but the IMF’s world money. A global monetary reset may have occurred without a formal conference or declaration. SDR900 = 1 ounce of pure gold is the new monetary benchmark. 

The advent of low volatility in SDR/ GOLD (versus prior high volatility) occurred on October 1, 2016. The near straight-line trend of SDR/ GOLD after the Chinese yuan joined the SDR is practically impossible without an intervening factor or manipulation. The probability of this occurring randomly is infinitesimal. The SDR/ GOLD horizontal trend line after October 1, 2016, is an example of autoregression. This appears only if there’s a recursive function (a feedback loop) or manipulation. In the case of SDR/ GOLD, one can rule out a recursive function since gold trades in a relatively free market determined by supply and demand. One can also rule out randomness as statistically highly improbable. That leaves manipulation as the only explanation for the flat trend line in SDR/ GOLD. 

If the SDR price of gold falls below SDR900 (indicating a strong SDR and a weak gold price), the manipulator buys gold, sells dollars, and buys the non-dollar currencies behind the SDR. If the SDR price of gold rises above SDR900 (indicating a weak SDR and a strong gold price), the manipulator sells gold, buys dollars, and sells the non-dollar currencies behind the SDR. By monitoring markets and intervening continually with open-market operations in gold and currencies, the manipulator can maintain the peg. There are only four parties in the world with the resources to conduct this manipulation in an impactful way: the U.S. Treasury, the ECB, the Chinese State Administration of Foreign Exchange (SAFE), and the IMF. These are the only entities with enough gold and hard currency reserves (or SDRs) to conduct the large-scale open-market operations needed to peg the price. 

One can eliminate the U.S. Treasury and ECB as suspects. Both are relatively transparent about their total gold holdings, foreign exchange reserves, and the SDR component of their reserves. (For the ECB we look at the large members, including Germany and France, for this data.) If either the Treasury or ECB were conducting open-market operations of this kind, changes in holdings of gold and SDR component currencies would appear in official reports. No fluctuations of any magnitude appear. That leaves SAFE and the IMF. Both are non-transparent. China has about 2,000 tons of gold, probably more—they don’t disclose the excess. China has also acquired SDRs in the secondary market in addition to official allocations provided by the IMF to its members. The IMF owns 2,814.1 metric tonnes of gold and can print SDRs in unlimited quantities subject to executive board approval. The IMF makes loans and receives principal and interest in SDRs that are traded among IMF members through a secret trading desk. Gold is traded surreptitiously by major central banks through the Bank for International Settlements (which also traded Nazi gold in the Second World War). The BIS is furtive and controlled principally by the same nations who control the IMF. China can also conduct gold purchases and sales for yuan or dollars on the open market in Shanghai and London and separately buy or sell SDRs for dollars or yuan through the IMF. China can buy or sell the SDR basket currencies separately through bank foreign exchange trading desks. 

The targeted value of SDR900 per ounce of gold is intriguing, with dark implications for the future of the U.S. dollar. Currently a total of SDR204.2 billion are issued and held by IMF members. The IMF owns 2,814.1 metric tons of gold, equal to 90,475,284.87 troy ounces. If the IMF wished to make SDRs the sole global reserve currency backed by gold at a 40 percent ratio, the same gold cover as the U.S. dollar from 1913 to 1945, then the implied SDR price of gold would be equal to the quantity 0.40( 204,200,000,000/ 90,475,284.87), representing the amount of SDRs divided by the amount of IMF gold in troy ounces times 40 percent. This quantity equals SDR902.8 per ounce, almost exactly the pegged price of SDR900 per ounce.

There is no evidence the IMF is implementing an SDR/ GOLD peg. The IMF’s gold holdings have remained constant since 2010 and permission to launch the gold-peg operation is unlikely to have been granted by the United States or Germany. To the contrary, there is strong evidence to support the view that China is behind the peg. This is ironic; when the SDR was created in 1969 it was originally pegged to gold and defined as a weight in gold (SDR1 = 0.88867 grams of gold). That peg was soon abandoned even as the dollar peg (USD1 = 0.02857 ounces of gold) was also abandoned. Now the SDR/ GOLD peg has returned, albeit at a much higher price for gold. 

Since this SDR peg to gold is informal and unannounced it can be abandoned at will. The peg probably will be abandoned sooner than later because Chinese sponsors of the peg have ignored the lessons of 1925, when the United Kingdom returned sterling to the gold standard at a level that overvalued sterling. The result was a catastrophic deflation in the United Kingdom that presaged the Great Depression. Likewise, the Chinese peg of SDR900 per ounce of gold is too cheap to sustain, given the scarce supply of gold and the growing supply of SDRs. More to the point, the IMF will print trillions of SDRs in the next global financial crisis, which will prove highly inflationary unless the IMF conditions the distribution of SDRs on the receipt of gold. China would have to sell precious gold reserves to maintain an SDR900 price. This would reprise the U.S. depletion of its gold reserves by 11,000 tons from 1950 to 1970 to maintain the Bretton Woods gold peg to an overvalued dollar. Still, this is an historic development. Even if the peg is non-sustainable in the long run, it’s a clear short-run signal that China is betting on the SDR and gold, not the yuan or the dollar. An important pillar of a global monetary reset seems already in place.

End of quote.

Rickards is an extraordinary thinker and deeply entrenched in the US financial, business and government worlds. He brings extraordinary insight to his writing. I commend Aftermath to you.


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Is the Fed Preparing to Topple US Dollar? – F. William Engdahl

Another excellent article by F. William Engdahl:

Unusual remarks and actions by the outgoing head of the Bank of England and other central banking insiders strongly suggest that there is a very ugly scenario in the works to end the role of the US dollar as world reserve currency. In the process, this would involve that the Fed deliberately triggers a dramatic economic depression. If this scenario is actually deployed in coming months, Donald Trump will go down in history books as the second Hebert Hoover, and the world economy will be pushed into the worst collapse since the 1930s. Here are some elements worth considering. 

Bank of England speech

The about-to-retire head of the very special Bank of England, Mark Carney, delivered a remarkable speech at the recent annual meeting of central bankers and finance elites at Jackson Hole Wyoming on August 23. The 23-page address to fellow central bankers and financial insiders is clearly a major signal of where the Powers That Be who run world central banks plan to take the world. 

Carney addresses obvious flaws with the post-1944 dollar reserve system, noting that, “…a destabilising asymmetry at the heart of the IMFS (International Monetary and Financial System) is growing. While the world economy is being reordered, the US dollar remains as important as when Bretton Woods collapsed.” He states bluntly, “…In the longer term, we need to change the game…Risks are building, and they are structural.” What he then goes on to outline is a remarkably detailed blueprint for global central bank transformation of the dollar order, a revolutionary shift.

Carney discusses the fact that China as the world leading trading nation is the obvious candidate to replace the dollar as leading reserve, however, he notes, “…for the Renminbi to become a truly global currency, much more is required. Moreover, history teaches that the transition to a new global reserve currency may not proceed smoothly.” He indicates that means it often needs wars or depressions, as he cites the role of World War I forcing out sterling in favor of the US dollar. What Carney finds more immediate is a new IMF-based monetary system to replace the dominant role of the dollar. Carney declares, “While the rise of the Renminbi may over time provide a second best solution to the current problems with the IMFS, first best would be to build a multipolar system. The main advantage of a multipolar IMFS is diversification… “ He adds, “… When change comes, it shouldn’t be to swap one currency hegemon for another. Any unipolar system is unsuited to a multi-polar world… In other words he says, “Sorry, Beijing, you must wait.”

The Bank of England Governor proposes in effect that the IMF, with its multi-currency Special Drawing Rights (SDR), a basket of five currencies—dollar, Pound, Yen, Euro and now Renminbi—should play the central role creating a new monetary system: “The IMF should play a central role in informing both domestic and cross border policies. … Pooling resources at the IMF, and thereby distributing the costs across all 189 member countries…” For that to work he proposes raising the IMF SDR funds triple to $3 trillions as the core of a new monetary system.

Then Carney proposes that the IMF oversee creation of a new payments infrastructure based on an international “stablecoin.” Referring to the private Libra, he clearly states a “new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies.” Note that Carney, a former Goldman Sachs banker, is mentioned as a leading candidate to replace Christine Lagarde as IMF head. Is his speech open admission of what is being planned by the world’s leading central bankers as the next step to a world currency and global economic control? Let’s look further.

Lagarde to ECB

The Carney speech, when deciphered from its central bank language, gives us for the first time a clear roadmap where the powers that control world central banking would like to take us. The world reserve role of the US dollar must end; it must be replaced by some form of IMF SDRs as basis for a multi-currency reserve. That in turn would ultimately be based on digital money, so-called block chain currencies. Such currencies, make no mistake, would be completely controlled by central bank authorities and the IMF. That would require their often-proposed elimination of all cash in favor of digital money where every cent we spend can be monitored by the state. This cashless society would also set the stage for the next great financial crisis and the confiscation by governments of ordinary citizens’ bank deposits under new “bank bail-in” laws now on the books since 2014 in every major industrial country including the EU and USA. 

The IMF is fully behind the turn to global blockchain digital currencies and use of SDR to replace the dominant US dollar. In a little-noticed speech in November 14, 2018, IMF chief Lagarde strongly indicated that the IMF was behind central bank digital currencies as well as cashless societies. She noted very carefully, “I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy.” She added, “A new wind is blowing, that of digitalization…What role will remain for cash in this digital world? … demand for cash is decreasing—as shown in recent IMF work. And in ten, twenty, thirty years, who will still be exchanging pieces of paper?”

Dudley Remarks

The introduction of this central bankers’ new digital currency world will require, as Carney suggests, dramatic upheavals of the status quo, upheavals that would lead to the end of the dominant role of the US dollar since the 1944 Bretton Woods agreement. As that dollar reserve currency role is a pillar of American power in the world, for that to happen would require nothing short of catastrophe. Is this in fact what the Federal Reserve is quietly planning with its money policies? 

A remarkable hint of what might be in the works came in an OpEd by the person who until 2018 was the very important President of the New York Federal Reserve Bank, Bill Dudley, who like Mark Carney is a senior Goldman Sachs alumnus. Dudley is no minor actor in the central bankers’ world. Until last year he also was a member of the Bank for International Settlements Board of Directors and chaired the BIS Committee on Payment Settlement Systems and the Committee on the Global Financial System. 

Dudley, pointing to the Trump trade war policies and economic dangers of same, then issues the following rare undiplomatic declaration: “Trump’s re-election arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.” While it shocked many, Dudley is merely making public what the Fed has done since its creation in 1913 — influence the course of world and US politics stealthily behind the cover of “neutral” monetary policies. Dudley suggests not “Russian interference” but rather Fed interference.

The Fed could easily tip the US into crisis. The debt levels of the US economy are at record high levels for private households, Federal government, and US corporate debt. Most US corporations have used growing debt, well over $9 trillion, to make stock buybacks rather than invest in new plant and equipment, fueling an unprecedented bubble in the S&P stocks. The rising stocks are not a sign of economic health but of a dangerous speculative bubble vulnerable to collapse. 

Were the Fed now to resume rate rises and continue its less-publicized Quantitative Tightening into 2020, a domino-style series of debt defaults, corporate bankruptcies, home mortgage foreclosures, default on car loans and student loans could quickly make a second Trump Presidency in 2020 more than doubtful. However that would be no grounds for the rest of the world opposed to Trump policies to cheer. It would also trigger collapse in major emerging market countries who have borrowed hundreds of billions denominated in US dollars, including Chinese state companies, Turkey, Argentina, Brazil to name a few. EU banks from Italy to Germany to France would fail.

If this Dudley scenario comes to pass in 2020 or not, only the key central bank actors know for sure. It is clear that, after almost eleven years since the 2008 global financial meltdown, the unprecedented central bank zero interest rate policies in the EU and until recently the US, have fueled creation of what some call an “everything bubble”, not only in stocks, in corporate and public bonds, in home prices. Is a new Fed intervention to raise rates and tighten credit the event– the deliberate central bank rupturing of this inflated bubble using the excuse of the Trump danger to the world economy– that Carney has in mind when he says, “transition to a new global reserve currency may not proceed smoothly,”? Let us hope not. The coming months will tell.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook.”

Murdered for Speaking Out: Last Words of David Goldberg Warning of Mass Murder of Americans – Veterans Today

Thank you, Brian. 
If what is shared on this link is true, it is important to understand it. It fits perfectly with a lot of what I know and understand and it is important to expose and intercept these plans. This man is dead for a reason…
If you understand the plans that sit behind what unfolded in the 20th century, most notably the two world wars, the Russian Revolution and many other things, you will understand how such action is entirely consistent with it. In truth, the seeds of those plans are centuries old, not decades and I have written extensively about this on my blog. The Protocols of the Learned Elders of Zion is a good place to start. Even though a great deal was done to discredit this document, I am satisfied it is genuine, borne out by events that unfolded last century. Few have grasped that one of the key objectives of the two world wars was the creation of Israel, a nation state in the Middle East that houses mostly Khazarian (European) Jews who have no bloodline connection to the Semitic Hebrews of the region.
However, as David Goldberg has said, more and more people are waking up. It is time.
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