“The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon. There are striking similarities between America’s current situation and the factors that brought down Rome, including declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government.”
http://www.financialsense.com/editorials/quinn/2009/0428.html
Showing posts with label fsu. Show all posts
Showing posts with label fsu. Show all posts
30 April 2009
23 April 2009
KNOW YOUR ENEMY ` James Quinn
Welcome to a new kind of tension.
All across the alien nation.
Where everything isn't meant to be okay.
American Idiot - Green Day
Strauss & Howe described the Prophet/Idealist generation as being born during a High, spending its rising adult years during an Awakening, spending midlife during an Unraveling, and spending old age in a Crisis. Prophetic leaders have been cerebral and principled, summoners of human sacrifice, wagers of righteous wars. Early in life, few saw combat in uniform. Late in life, most prophets come to be revered as much for their words as for their deeds. The three previous crisis periods in U.S. history were dominated by the prophetic leadership of George Washington, Abraham Lincoln, and Franklin Roosevelt. George Bush has led us through the 1st half of this crisis. It is likely that Barack Obama will lead us through the 2nd half of the crisis. I don’t think George Bush will be revered for being cerebral or making inspiring speeches. He did wage a righteous war against terrorism. Barack Obama is cerebral and principled. He is waging a righteous war in Afghanistan, though he has never seen combat. He is already known for his inspiring speeches. Will he rise to the level of Lincoln?
George Bush and Barack Obama are both Baby Boomers. The oldest boomer is 63, the youngest 45. Boomers occupy the leadership positions in government, corporations, military, and educational institutions. Boomer leaders are cocky, aggressive, and quoting Doug Casey,
“quite willing to burn down the barn in order to destroy whatever rats they see.” George Bush was sure there was WMD in Iraq. He was sure that cutting taxes, sending out rebate checks, and letting banks regulate themselves was the path to prosperity. Hank Paulson and Ben Bernanke were sure that TARP would save our financial system from collapse. Barack Obama was sure that if we didn’t pass his bloated stimulus bill, catastrophe awaited the country. Baby Boom leaders are always sure and often wrong. The masses are drawn to leaders who are sure of themselves. They want to believe that a wise man will lead them to the Promised Land. They won’t realize that he is leading them to hell, until it is too late.
Civil Unrest – The Great Unraveling
Overthrow the effigy
The vast majority
Burning down the foreman of control
Silence is the enemy
Against your urgency
So rally up the demons of your soul
Know Your Enemy – Green Day
Strauss & Howe explained their view of how America was feeling in 1997. They were dead on. We are a country that has been rotting from within for decades.
America feels like it’s unraveling. Though we live in an era of relative peace and comfort, we have settled into a mood of pessimism about the long-term future, fearful that our superpower nation is somehow rotting from within. The America of today feels worse, in its fundamentals, than the one many of us remember from youth, a society presided over by those of supposedly lesser consciousness. We yearn for civic character but satisfy ourselves with symbolic gestures and celebrity circuses. We perceive no greatness in our leaders, a new meanness in ourselves. Each new election brings a new jolt, its aftermath a new disappointment.
Many Americans know we are on the wrong track but are so distracted by the circus like distractions of every day life, they choose not to think about it. It is likely that the 123 million eligible voters who chose not to vote in the 2008 Presidential election don’t even realize the country is on the wrong track. The sedated masses were easy to manipulate when unemployment was 4%. There are now 6 million more people unemployed today than just 16 months ago in November 2007. Another 2 to 3 million will lose their jobs in 2009. The government doesn’t count another 5 to 10 million people who are classified as out of the workforce, but would like to work. This means there will be 20 to 25 million people out of work by the end of this year. Unemployed people have a propensity to be angry. In the last few months there have been several mass murders committed by angry unemployed men. As the economic “solutions” rolled out by politicians and Federal Reserve bureaucrats lead to an inflationary depression similar to the Weimer Republic of the early 1930’s, civil unrest will rear its ugly head.
Doug Casey describes the likely scenario:
People believe they have little to lose, they’re eager to hang those they believe responsible for their problems, and they’ll listen to radical or violent proposals. We’re now just entering what will likely be the worst economic trough since the Industrial Revolution. A rioter is typically an angry person looking for vengeance because he blames someone else for his problem. So far, rioters seem to be directing their attention at governments. Correct target, of course, but they don’t have the rationale quite right. They’re not angry because governments inflated the currency, promoted fractional reserve banking, and nurtured all the cockamamie socialist programs that caused this crisis. Not at all; they rather liked all that. They’re angry only because their governments haven’t adequately protected them from the consequences of what they did. So as conditions worsen, we can expect governments worldwide to pull out absolutely all the stops to show they’re “doing something.” And round up scapegoats to satisfy the mob and divert anger from themselves. I fully expect civil unrest to spread everywhere, simply because the depression will spread everywhere. It will be worst in places that have been most overextended, most debt leveraged, most urban, and have the largest numbers of unemployed workers -- the U.S., Europe, and China.
The civil unrest is most likely to erupt among Hispanics and African Americans. The unemployment rate of Hispanics is 11.4% versus 5.0% in November 2007. It is doubtless far worse, as many Hispanics worked “under the table” in the housing industry. The unemployment rate of African Americans is 13.3%, the highest since 1993, and up from an all-time low of 7.0% in 2000. The urban areas of the United States are a powder keg, with automatic weapons available to anyone. Policemen are being slaughtered at a record pace. Mexico is on the verge of becoming a failed state. Drug lords are running the country. Its oil fields are in rapid decline and it will no longer be an exporter of oil within 5 years. The Mexican government depends on oil for 40% of its tax revenues. The collapse of Mexico’s government, extreme power of murderous drug lords, and worldwide depression will drive millions of poor towards the U.S. border. The anti-immigrant feelings in the U.S. continue to grow as more white Americans lose their jobs. This is an explosive combination that will eventually require military and National Guard intervention.
There are two other hot button issues which will increase the anxiety in this country. Guns and ammo are selling like hotcakes. The combination of apprehension that Obama and his Democratic majority will put restrictions on gun ownership and the severe economic downturn has led to an exorbitant increase in gun sales. Ruger has a $48 million backlog of guns on order. Many citizens in the Western states live by the motto: You can have my gun when you pry it from my cold, dead fingers. Any effort by the Obama administration to restrict gun ownership will be met with major resistance. The Tax Day Tea Parties revealed the other hot button issue for many Americans. When the Bush tax cuts expire in 2010 and Obama institutes his Cap & Trade energy tax, the economy will receive a double whammy. At that point the failed economic policies and higher taxes will lead to consternation and resentment throughout the land. The unending economic turmoil throughout the world will result in protests and anger in many countries. The more disturbing issue is how politicians will try to divert the attention of the masses through the use of an external threat.
War – Fingers of Instability
The insurgency will rise
When the bloods been sacrificed
Don't be blinded by the lies
In your eyes
Violence is an energy
From here to eternity
Violence is an energy
Silence is the enemy
So gimme gimme revolution
Know Your Enemy – Green Day
Back in 2006 John Mauldin wrote an article titled Fingers of Instability. It was based on a book written by Mark Buchanan called Ubiquity, Why Catastrophes Happen. It examines chaos theory, complexity theory, and critical states. Physicists, using a computer model examined what takes place when sand is continuously piled up grain by grain. They were endeavoring to understand what makes the pile ultimately collapse. Buchanan described the experiment:
"Imagine peering down on the pile from above, and coloring it in according to its steepness. Where it is relatively flat and stable, color it green; where steep and, in avalanche terms, 'ready to go,' color it red. What do you see? They found that at the outset the pile looked mostly green, but that, as the pile grew, the green became infiltrated with ever more red. With more grains, the scattering of red danger spots grew until a dense skeleton of instability ran through the pile. Here then was a clue to its peculiar behavior: a grain falling on a red spot can, by domino-like action, cause sliding at other nearby red spots. If the red network was sparse, and all trouble spots were well isolated one from the other, then a single grain could have only limited repercussions. But when the red spots come to riddle the pile, the consequences of the next grain become fiendishly unpredictable. It might trigger only a few tumblings, or it might instead set off a cataclysmic chain reaction involving millions. The sand pile seemed to have configured itself into a hypersensitive and peculiarly unstable condition in which the next falling grain could trigger a response of any size whatsoever."
"In this simplified setting of the sand pile, the power law also points to something else: the surprising conclusion that even the greatest of events have no special or exceptional causes. After all, every avalanche large or small starts out the same way, when a single grain falls and makes the pile just slightly too steep at one point. What makes one avalanche much larger than another has nothing to do with its original cause, and nothing to do with some special situation in the pile just before it starts. Rather, it has to do with the perpetually unstable organization of the critical state, which makes it always possible for the next grain to trigger an avalanche of any size."
You may be wondering what sand has to do with war. The relevance is that a small seemingly minor incident could lead to a large world war.....
read the rest
All across the alien nation.
Where everything isn't meant to be okay.
American Idiot - Green Day
Strauss & Howe described the Prophet/Idealist generation as being born during a High, spending its rising adult years during an Awakening, spending midlife during an Unraveling, and spending old age in a Crisis. Prophetic leaders have been cerebral and principled, summoners of human sacrifice, wagers of righteous wars. Early in life, few saw combat in uniform. Late in life, most prophets come to be revered as much for their words as for their deeds. The three previous crisis periods in U.S. history were dominated by the prophetic leadership of George Washington, Abraham Lincoln, and Franklin Roosevelt. George Bush has led us through the 1st half of this crisis. It is likely that Barack Obama will lead us through the 2nd half of the crisis. I don’t think George Bush will be revered for being cerebral or making inspiring speeches. He did wage a righteous war against terrorism. Barack Obama is cerebral and principled. He is waging a righteous war in Afghanistan, though he has never seen combat. He is already known for his inspiring speeches. Will he rise to the level of Lincoln?
George Bush and Barack Obama are both Baby Boomers. The oldest boomer is 63, the youngest 45. Boomers occupy the leadership positions in government, corporations, military, and educational institutions. Boomer leaders are cocky, aggressive, and quoting Doug Casey,
“quite willing to burn down the barn in order to destroy whatever rats they see.” George Bush was sure there was WMD in Iraq. He was sure that cutting taxes, sending out rebate checks, and letting banks regulate themselves was the path to prosperity. Hank Paulson and Ben Bernanke were sure that TARP would save our financial system from collapse. Barack Obama was sure that if we didn’t pass his bloated stimulus bill, catastrophe awaited the country. Baby Boom leaders are always sure and often wrong. The masses are drawn to leaders who are sure of themselves. They want to believe that a wise man will lead them to the Promised Land. They won’t realize that he is leading them to hell, until it is too late.
Civil Unrest – The Great Unraveling
Overthrow the effigy
The vast majority
Burning down the foreman of control
Silence is the enemy
Against your urgency
So rally up the demons of your soul
Know Your Enemy – Green Day
Strauss & Howe explained their view of how America was feeling in 1997. They were dead on. We are a country that has been rotting from within for decades.
America feels like it’s unraveling. Though we live in an era of relative peace and comfort, we have settled into a mood of pessimism about the long-term future, fearful that our superpower nation is somehow rotting from within. The America of today feels worse, in its fundamentals, than the one many of us remember from youth, a society presided over by those of supposedly lesser consciousness. We yearn for civic character but satisfy ourselves with symbolic gestures and celebrity circuses. We perceive no greatness in our leaders, a new meanness in ourselves. Each new election brings a new jolt, its aftermath a new disappointment.
Many Americans know we are on the wrong track but are so distracted by the circus like distractions of every day life, they choose not to think about it. It is likely that the 123 million eligible voters who chose not to vote in the 2008 Presidential election don’t even realize the country is on the wrong track. The sedated masses were easy to manipulate when unemployment was 4%. There are now 6 million more people unemployed today than just 16 months ago in November 2007. Another 2 to 3 million will lose their jobs in 2009. The government doesn’t count another 5 to 10 million people who are classified as out of the workforce, but would like to work. This means there will be 20 to 25 million people out of work by the end of this year. Unemployed people have a propensity to be angry. In the last few months there have been several mass murders committed by angry unemployed men. As the economic “solutions” rolled out by politicians and Federal Reserve bureaucrats lead to an inflationary depression similar to the Weimer Republic of the early 1930’s, civil unrest will rear its ugly head.
Doug Casey describes the likely scenario:
People believe they have little to lose, they’re eager to hang those they believe responsible for their problems, and they’ll listen to radical or violent proposals. We’re now just entering what will likely be the worst economic trough since the Industrial Revolution. A rioter is typically an angry person looking for vengeance because he blames someone else for his problem. So far, rioters seem to be directing their attention at governments. Correct target, of course, but they don’t have the rationale quite right. They’re not angry because governments inflated the currency, promoted fractional reserve banking, and nurtured all the cockamamie socialist programs that caused this crisis. Not at all; they rather liked all that. They’re angry only because their governments haven’t adequately protected them from the consequences of what they did. So as conditions worsen, we can expect governments worldwide to pull out absolutely all the stops to show they’re “doing something.” And round up scapegoats to satisfy the mob and divert anger from themselves. I fully expect civil unrest to spread everywhere, simply because the depression will spread everywhere. It will be worst in places that have been most overextended, most debt leveraged, most urban, and have the largest numbers of unemployed workers -- the U.S., Europe, and China.
The civil unrest is most likely to erupt among Hispanics and African Americans. The unemployment rate of Hispanics is 11.4% versus 5.0% in November 2007. It is doubtless far worse, as many Hispanics worked “under the table” in the housing industry. The unemployment rate of African Americans is 13.3%, the highest since 1993, and up from an all-time low of 7.0% in 2000. The urban areas of the United States are a powder keg, with automatic weapons available to anyone. Policemen are being slaughtered at a record pace. Mexico is on the verge of becoming a failed state. Drug lords are running the country. Its oil fields are in rapid decline and it will no longer be an exporter of oil within 5 years. The Mexican government depends on oil for 40% of its tax revenues. The collapse of Mexico’s government, extreme power of murderous drug lords, and worldwide depression will drive millions of poor towards the U.S. border. The anti-immigrant feelings in the U.S. continue to grow as more white Americans lose their jobs. This is an explosive combination that will eventually require military and National Guard intervention.
There are two other hot button issues which will increase the anxiety in this country. Guns and ammo are selling like hotcakes. The combination of apprehension that Obama and his Democratic majority will put restrictions on gun ownership and the severe economic downturn has led to an exorbitant increase in gun sales. Ruger has a $48 million backlog of guns on order. Many citizens in the Western states live by the motto: You can have my gun when you pry it from my cold, dead fingers. Any effort by the Obama administration to restrict gun ownership will be met with major resistance. The Tax Day Tea Parties revealed the other hot button issue for many Americans. When the Bush tax cuts expire in 2010 and Obama institutes his Cap & Trade energy tax, the economy will receive a double whammy. At that point the failed economic policies and higher taxes will lead to consternation and resentment throughout the land. The unending economic turmoil throughout the world will result in protests and anger in many countries. The more disturbing issue is how politicians will try to divert the attention of the masses through the use of an external threat.
War – Fingers of Instability
The insurgency will rise
When the bloods been sacrificed
Don't be blinded by the lies
In your eyes
Violence is an energy
From here to eternity
Violence is an energy
Silence is the enemy
So gimme gimme revolution
Know Your Enemy – Green Day
Back in 2006 John Mauldin wrote an article titled Fingers of Instability. It was based on a book written by Mark Buchanan called Ubiquity, Why Catastrophes Happen. It examines chaos theory, complexity theory, and critical states. Physicists, using a computer model examined what takes place when sand is continuously piled up grain by grain. They were endeavoring to understand what makes the pile ultimately collapse. Buchanan described the experiment:
"Imagine peering down on the pile from above, and coloring it in according to its steepness. Where it is relatively flat and stable, color it green; where steep and, in avalanche terms, 'ready to go,' color it red. What do you see? They found that at the outset the pile looked mostly green, but that, as the pile grew, the green became infiltrated with ever more red. With more grains, the scattering of red danger spots grew until a dense skeleton of instability ran through the pile. Here then was a clue to its peculiar behavior: a grain falling on a red spot can, by domino-like action, cause sliding at other nearby red spots. If the red network was sparse, and all trouble spots were well isolated one from the other, then a single grain could have only limited repercussions. But when the red spots come to riddle the pile, the consequences of the next grain become fiendishly unpredictable. It might trigger only a few tumblings, or it might instead set off a cataclysmic chain reaction involving millions. The sand pile seemed to have configured itself into a hypersensitive and peculiarly unstable condition in which the next falling grain could trigger a response of any size whatsoever."
"In this simplified setting of the sand pile, the power law also points to something else: the surprising conclusion that even the greatest of events have no special or exceptional causes. After all, every avalanche large or small starts out the same way, when a single grain falls and makes the pile just slightly too steep at one point. What makes one avalanche much larger than another has nothing to do with its original cause, and nothing to do with some special situation in the pile just before it starts. Rather, it has to do with the perpetually unstable organization of the critical state, which makes it always possible for the next grain to trigger an avalanche of any size."
You may be wondering what sand has to do with war. The relevance is that a small seemingly minor incident could lead to a large world war.....
read the rest
31 March 2009
Taken for the Ride of Our Life
by Doug Wakefield and Ben Hill, Best Minds, Inc. | March 30, 2009
In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency ‘that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.
Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.
Although Mr. Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.
‘The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,’ Mr. Zhou wrote.
http://www.financialsense.com/fsu/editorials/wakefield/2009/0330.html
To replace the current system, Mr. Zhou suggested expanding the role of Special Drawing Rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.
Mr. Zhou said the proposal would require, ‘extraordinary political vision and courage’ and acknowledged a debt to John Maynard Keynes, who made a similar suggestion in the 1940s.”
And, perhaps this is the direction that was intended all along. If you’re unfamiliar with the idea that John Maynard Keynes proposed in the 1940s, let me take you back to that era, when the world was still reeling from another world crisis and currencies were far off the radar screen of most individuals. On page 481 of, A History of Money and Banking in the United States, Dr. Murray Rothbard notes:
“While the [US] White Plan envisioned a substantial amount of inflation to provide greater currency liquidity, the British responded with a Keynes Plan that was far more inflationary. By this time, Lord Keynes had abandoned economic and monetary nationalism for Britain under severe American pressure, and his aim was to salvage as much domestic inflation and cheap money for Britain as he could possibly induce America to accept. The Keynes Plan envisioned an International Clearing Union (ICU), which, in return for agreeing to stable exchange rates between currencies and the abandonment of exchange control, provided a huge loan to its members of $26 billion. The Keynes Plan, moreover, called for a new international monetary unit, the ‘bancor,’ which could be issued by the ICU in such large amounts as to provide almost unchecked room for inflation, even in a country with a large deficit in its balance of payments.”
And, Geithner is open to China’s suggestion. On March 26th 2009, a Chinese news source, the People’s Daily Online, noted:
“Meanwhile, Timothy Geithner, speaking at the Council on Foreign Relations in Washington on Wednesday, said that the U.S. is ‘open’ to China's proposal.”
‘I haven't read the governor's proposal. He's a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue,’ Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights (SDRs) – shares in the body held by its members – while not creating a new currency in the literal sense.
‘We're actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union,’ he said.
‘The only thing concrete I saw was expanding the use of the (SDRs),’ Geithner said. ‘Anything he's thinking about deserves some consideration.’
The continued use of the dollar as a reserve currency, Geithner added, ‘depends on how effective we are in the United States...at getting our fiscal system back to the point where people judge it as sustainable over time.’”
Though we discuss the behind the scenes aspects of these maneuvers in more detail in the closing pages of our November 2008 issue of The Investor’s Mind, “The Power of…the Few,” we will briefly touch on SDRs in the IMF’s own words:
“The Special Drawing Right (SDR) was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system.
After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF's website.”
As we read the IMF’s website further, we learn that the IMF has been trying to expand the amount of SDRs in circulation for years. The only thing the IMF needs to do so is a “yes” vote from the US on an IMF amendment. In the same issue of The Investor’s Mind, we quote George Soros’ October 28th 2008 article in the Financial Times, where Soros states, “The financial crisis is spinning out of control. It is time to start thinking about creating special drawing rights or some other form of international reserves on a large scale, but that is subject to American veto.”
On April 2nd 2009, the G20 will meet in London to discuss the largest expansion of lending powers of the IMF in world history. Both Japan and the United States have indicated that they will loan the IMF up to $100 billion, while the EU has stated that they will loan the IMF €75 billion.
While the UK has not agreed to an amount to loan to the IMF, as of this release, their financial stress indicates that they are having severe problems of their own right now. On March 25th 2009, a Bloomberg article titled, UK Bond Auction Fails for the First Time since 2002, reports:
“The UK failed to find enough buyers for 1.75 billion pounds ($US 2.55 billion) of bonds for the first time in almost seven years as debt investors repudiated Prime Minister Gordon Brown’s plan to stem the worst economic crisis in three decades.”
While most individuals refuse to believe that we have arrived at this juncture, any good contrarian looks to history to get their bearings. An expansion of a central currency will shift power away from independent countries and towards the global powers that be. And though, in light of the US’s profligacy, this may sound like a good idea to many, there is ample evidence to suggest that we were led to this point for a reason. Joan Veon, founder of the Women’s International Media Group, shows us that the “Public-Private Partnership” has been around since at least 1996 and talks about the history of such arrangements.
“I first heard the term Public-Private Partnership (PPP) when I attended the June 1996 United Nations Habitat II conference in Istanbul Turkey. The first time I read the conference’s Programme of Action, I missed it completely. After I returned from Istanbul, I went back over the document and was shocked at its prominence. I spent six months trying to figure out what it was and I even conducted several interviews with people at the U.N. and other agencies.
A Public-Private Partnership is exactly what it says it is. First, it is a partnership that is business arrangement, and it is for profit…Historically, such deals were considered glaring conflicts of interest, and as such, not in the best interest of the people…When you marry government and business, all existing rules of law and government change as the checks and balances of our Constitution no longer pertain…The door is open for anything – politically, socially, and economically. Plunder is tyranny.” (The United Nations Global Straightjacket (1999) Joan Veon, pp83-86)
So if you have recently been swept into euphoria of this explosive rally of the last few weeks, and haven’t spent a great deal of time studying the history of money and politics, now is the time to start asking a great many skeptical questions. History suggests that the second quarter of 2009 could be among the most important periods in financial history.
In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency ‘that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.
Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.
Although Mr. Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.
‘The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,’ Mr. Zhou wrote.
http://www.financialsense.com/fsu/editorials/wakefield/2009/0330.html
To replace the current system, Mr. Zhou suggested expanding the role of Special Drawing Rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.
Mr. Zhou said the proposal would require, ‘extraordinary political vision and courage’ and acknowledged a debt to John Maynard Keynes, who made a similar suggestion in the 1940s.”
And, perhaps this is the direction that was intended all along. If you’re unfamiliar with the idea that John Maynard Keynes proposed in the 1940s, let me take you back to that era, when the world was still reeling from another world crisis and currencies were far off the radar screen of most individuals. On page 481 of, A History of Money and Banking in the United States, Dr. Murray Rothbard notes:
“While the [US] White Plan envisioned a substantial amount of inflation to provide greater currency liquidity, the British responded with a Keynes Plan that was far more inflationary. By this time, Lord Keynes had abandoned economic and monetary nationalism for Britain under severe American pressure, and his aim was to salvage as much domestic inflation and cheap money for Britain as he could possibly induce America to accept. The Keynes Plan envisioned an International Clearing Union (ICU), which, in return for agreeing to stable exchange rates between currencies and the abandonment of exchange control, provided a huge loan to its members of $26 billion. The Keynes Plan, moreover, called for a new international monetary unit, the ‘bancor,’ which could be issued by the ICU in such large amounts as to provide almost unchecked room for inflation, even in a country with a large deficit in its balance of payments.”
And, Geithner is open to China’s suggestion. On March 26th 2009, a Chinese news source, the People’s Daily Online, noted:
“Meanwhile, Timothy Geithner, speaking at the Council on Foreign Relations in Washington on Wednesday, said that the U.S. is ‘open’ to China's proposal.”
‘I haven't read the governor's proposal. He's a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue,’ Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights (SDRs) – shares in the body held by its members – while not creating a new currency in the literal sense.
‘We're actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union,’ he said.
‘The only thing concrete I saw was expanding the use of the (SDRs),’ Geithner said. ‘Anything he's thinking about deserves some consideration.’
The continued use of the dollar as a reserve currency, Geithner added, ‘depends on how effective we are in the United States...at getting our fiscal system back to the point where people judge it as sustainable over time.’”
Though we discuss the behind the scenes aspects of these maneuvers in more detail in the closing pages of our November 2008 issue of The Investor’s Mind, “The Power of…the Few,” we will briefly touch on SDRs in the IMF’s own words:
“The Special Drawing Right (SDR) was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system.
After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF's website.”
As we read the IMF’s website further, we learn that the IMF has been trying to expand the amount of SDRs in circulation for years. The only thing the IMF needs to do so is a “yes” vote from the US on an IMF amendment. In the same issue of The Investor’s Mind, we quote George Soros’ October 28th 2008 article in the Financial Times, where Soros states, “The financial crisis is spinning out of control. It is time to start thinking about creating special drawing rights or some other form of international reserves on a large scale, but that is subject to American veto.”
On April 2nd 2009, the G20 will meet in London to discuss the largest expansion of lending powers of the IMF in world history. Both Japan and the United States have indicated that they will loan the IMF up to $100 billion, while the EU has stated that they will loan the IMF €75 billion.
While the UK has not agreed to an amount to loan to the IMF, as of this release, their financial stress indicates that they are having severe problems of their own right now. On March 25th 2009, a Bloomberg article titled, UK Bond Auction Fails for the First Time since 2002, reports:
“The UK failed to find enough buyers for 1.75 billion pounds ($US 2.55 billion) of bonds for the first time in almost seven years as debt investors repudiated Prime Minister Gordon Brown’s plan to stem the worst economic crisis in three decades.”
While most individuals refuse to believe that we have arrived at this juncture, any good contrarian looks to history to get their bearings. An expansion of a central currency will shift power away from independent countries and towards the global powers that be. And though, in light of the US’s profligacy, this may sound like a good idea to many, there is ample evidence to suggest that we were led to this point for a reason. Joan Veon, founder of the Women’s International Media Group, shows us that the “Public-Private Partnership” has been around since at least 1996 and talks about the history of such arrangements.
“I first heard the term Public-Private Partnership (PPP) when I attended the June 1996 United Nations Habitat II conference in Istanbul Turkey. The first time I read the conference’s Programme of Action, I missed it completely. After I returned from Istanbul, I went back over the document and was shocked at its prominence. I spent six months trying to figure out what it was and I even conducted several interviews with people at the U.N. and other agencies.
A Public-Private Partnership is exactly what it says it is. First, it is a partnership that is business arrangement, and it is for profit…Historically, such deals were considered glaring conflicts of interest, and as such, not in the best interest of the people…When you marry government and business, all existing rules of law and government change as the checks and balances of our Constitution no longer pertain…The door is open for anything – politically, socially, and economically. Plunder is tyranny.” (The United Nations Global Straightjacket (1999) Joan Veon, pp83-86)
So if you have recently been swept into euphoria of this explosive rally of the last few weeks, and haven’t spent a great deal of time studying the history of money and politics, now is the time to start asking a great many skeptical questions. History suggests that the second quarter of 2009 could be among the most important periods in financial history.
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