#13 SDRs – The Preferred Solution of Global Elites

 

So why would anyone want to use SDRs ?   This is taken from a transcript of a Peter Schiff interview of Jim Rickards. 

Peter: (Jim) In your book, you lay out four possible results from the present currency war. Please briefly describe these and which one do you feel is most likely and why.

James: Yes, I lay out four scenarios, which I call “The Four Horsemen of the Dollar Apocalypse.”

The first case is a world of multiple reserve currencies with the dollar being just one among several. This is the preferred solution of academics. I call it the “Kumbaya Solution” because it assumes all of the currencies will get along fine with each other. In fact, however, instead of one central bank behaving badly, we will have many.

The second case is world money in the form of Special Drawing Rights (SDRs). This is the preferred solution of global elites. The foundation for this has already been laid and the plumbing is already in place. The International Monetary Fund (IMF) would have its own printing press under the unaccountable control of the G20. This would reduce the dollar to the role of a local currency, as all important international transfers would be denominated in SDRs.

The third case is a return to the gold standard. This would have to be done at a much higher price to avoid the deflationary blunder of the 1920s, when nations returned to gold at an old parity that could not be sustained without massive deflation due to all of the money-printing in the meantime. I suggest a price of $7,000 per ounce for the new parity.

My final case is chaos and a resort to emergency economic powers. I consider this the most likely because of a combination of denial, delay, and wishful thinking on the part of the monetary elites.

Peter: What do you see as Washington’s end-game for the present currency war? What is their best-case scenario?

James: Washington’s best-case scenario is that banks gradually heal by making leveraged profits on the spreads between low-cost deposits and safe government bonds. These profits are then a cushion to absorb losses on bad assets and, eventually, the system becomes healthy again and can start the lending-and-spending game over again.

I view this as unlikely because the debts are so great, the time needed so long, and the deflationary forces so strong that the banks will not recover before the needed money-printing drives the system over a cliff – through a loss of confidence in the dollar and other paper currencies.

http://www.safehaven.com/article/24294/peter-schiff-speaks-to-james-rickards-author-of-currency-wars

I still view the SDR (maybe defined differently than today’s basket of four currencies) as a very likely option with a return to the gold standard as a long shot.   Elites (international corporations, big banks and powerful politicians etc) would love the fixed 5 year currency peg of the SDR!!  Why ?  You can plan around it. 

Oh … I guess the global elites could add gold to the SDR basket of currencies, but why ?  Would that then be defined as a gold standard ?

 

 

 

 

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  • Bigcollapso

    There is no doubt in my mind that the chaos and emergency mode is in the cards. The debt cannot be solved now due to shortages of wealth. The technical systems that produce the wealth have been so damaged by the monetary system that they will be toast when the game is over. There is just no way to put the system back to the way that it would have evolved with a positively stable monetary system. If the powers that be cannot agree on what to do about the severe shortage of wealth that is destroying the money now, there is no way that accelerating shortage will help.

    • Slough of Despond

      BC,
      Please re-read, and explain what the hell you just said?! 
      The best advcie that I have ever received about writing (and engineering) was the K.I.S.S. principle. 
      Keep It Simple, Stupid! 
      I think some of your comments are written in bursts of fury.  Afterwards, you may look back and say, WTF?.
      Take a chill pill, BC, then draft a comment.  Please put an emphasis on draft, just like in engineering. 
      You are a smat man, demonstrate your intelligence through coherent and thoughtful comments.
      Thanks for your inputs.
      -Paul

  • Haploid

    would have been nice if j.Richards had elaborated on what he meant by chaos and specifically “Emergency Economic Powers”.  Does that imply all banks nationalised, capital controls, totalitarianism etc.? and generally more inter-dependency between governments and banks, not that there is any lack of it right now.  Also, in the case where external lenders such as Bond Vigilanties stop participating in the ponzi (unless they’re somehow forced) could we go to a situation where banks just buy it’s own nations bond’s .  This does seem like a situation where hyperinflation will come about rapidly especially if banks do start only buying its own government bonds and it won’t last without some sort of massive social unrest.   

  • snedmeister1

    Evening Richard….

    I’m wondering,If we went to SDR’s, as in example two, would that then mean that every country is, in effect, like the countries of Europe..??ie Someone else has control of your currency…???Or would we still have your own currencies, but that international transactions must be carried out in SDR’s..???May sound a daft question, but SDR’s are alien to me..??!! :)

    Thanks in advance.

    • CSArichardo

      The way I see it the SDR is just a basket of the most important currencies (reserve currencies) in the world.  That is currently the US, Euro, Pound and Yen with a fixed 5 year exchange rate.  Reserve means needed to do trade internationally.  The SDR does not mean someone else is in the boss of these 4 currencies.  Each country remains in charge.

      • snedmeister1

        Ok, cheers Ricardo….

        Some day, I am going to have to invest some time in the SDR world….
        But it always lingers in the background, never really having any particular influence ( in my opinion )…
        Or better put, they don’t get much news coverage….

        Could that all change…?? 
        For sure, anything could happen, but I wouldn’t like to say one way or another…!!! :)