THE BARBARIANS AT THE GATE
By
JC Collins
The
amnesty issue and immigration reform are symptomatic of the larger implosion of
American culture and the transition away from micro empire to macro empire. In
order to fully understand the scale and scope of what is transpiring on the
socioeconomic and geopolitical spheres one must gain a deeper understanding of
how the current situation and dynamics have been engineered and orchestrated.
All
empires have been built around monetary policies and they crash alongside the
corruption of those policies. In regards to the current state of world affairs,
the transition away from one economic framework to the emergence of another
represents the larger transformation of empire which is taking place in the
world today.
The characteristics
of the international monetary system since the early 1970’s can be defined
as desperate attempts at maintaining the USD’s valuation. Whether
contrived as an act of socioeconomic engineering or a reactionary position is
somewhat irrelevant as the world now stands on the steep slope of transition
away from a dollar centralized system.
The imbalances in the international monetary system have
been used to leverage this transition towards a multilateral system where
emerging markets, such as the BRICS countries, have more control and leverage
over the metrics which determine whether there are economic balances or
imbalances.
From
the creation of the Bretton Woods system in 1944, through to its eventually
fragmentation in the early 1970’s, the international financial system was
configured around the parity of fixed exchanged rates. Foreign reserves
acted as a last line of defense against attempts to shift the system away from
the fixed exchange rate regime, as well as being the main source of
international liquidity.
These
“reserves” had the ability to be supplemented by resources from the
International Monetary Fund through foreign exchange swap lines to counter
speculation against fixed exchange parities. But still, the USD continued
to be used as the main source of international liquidity, and was accumulated
in vast amounts in the foreign reserve accounts of central banks around the
world.
The
point that world liquidity was connected to US balance of payments deficits
meant that as economic growth expanded and once marginal reserve requirements
increased dramatically the system became inherently dysfunctional. The
world was faced with two choices, an inadequate supply of global liquidity, or
continue to expand the USD in foreign reserve accounts around the world.
The
latter was the preferred method of restructuring the Bretton Woods agreement as
the USD removed its peg to gold in 1971 and the creation of what we call the
“petro-dollar” was established in 1973.
OPEC
was started in September of 1960, which was around the time frame when the
first deficiencies in the US balance of payments as a source of global
liquidity were first openly acknowledged. Throughout the 1960’s the oil
producing countries around the world were brought into the dollar system and
the energy alternative to the semi gold standard began.
Since
1973 there has been wanton desperation in the actions of central banks and the
international institutions to maintain the dollars valuations as to prolong the
balance of payments system. The financial crisis of 2008 was the just one event
in a series of events which foretold of the coming liquidity crisis. The
imbalances in the system caused by accumulating the USD in the foreign reserves
accounts around the world are now beginning to manifest across the broader
macro environment.
The
most obvious solution to this dysfunction is to displace the USD in the foreign
reserve accounts with a supplemental reserve currency such as the Special
Drawing Right of the IMF. But like before, these IMF resources, the SDR,
work best when there is parity as found in the fixed exchange rate structure
which existed before the fragmentation of Bretton Woods in the early 1970’s.
The
SDR would allow for the continued expansion of global growth and reserves
without the dysfunction associated with the USD balance of payments
system. These SDR’s can be distributed, or allocated, to members based on
the quota amounts defined for each. In essence, the SDR can displace the USD as
the global reserve asset without the imbalances found in a system centralized around
one specific country and currency.
This
is where the importance of the 2010 IMF Quota and Governance Reforms are
brought to the forefront of international macroeconomics and geopolitical
positioning. The reforms are meant to redefine the quota amounts of the
emerging market countries, such as the BRICS countries, and more specifically
China. With an increase in its quota amount, the People’s Bank of China will
strengthen its position in the multilateral financial system and the broad and
fast internationalization of the renminbi (RMB) will ensure its inclusion into
the SDR basket of currencies by next July.
It
is even likely that the SDR liquidity scenario may not even get traction
without the RMB and broader reforms to the IMF governance and quota system.
As such, we have watched for 4 years now as the reforms have languished in the
American Congress without being implemented as required by the agreements made
between the G20 countries in 2010.
This
week Congress should be passing the spending bill which will fund the
government for another year. There has been talk of having the IMF
Reforms once again presented for vote as an attachment to the spending
bill. If it isn’t, there will be the full implementation of Plan B which
includes the removal of the US veto on the Executive Board and a larger quota
adjustment for the emerging markets.
Reform
to IMF governance and quota amounts are happening whether America agrees or
not, with Plan B being the worst possible outcome.
One
specific analysis can determine that the US delay is being orchestrated by
China through political campaign funding directed towards the
Republicans. China would benefit from delaying the full implementation of
the Reforms so it has more time to strengthen its position and internationalize
the RMB for inclusion into the SDR basket.
See post The Tail of the Dragon – How and Why China Delayed IMF Reforms
Through Republican Party Donations
A
second analysis could also suggest that the delay is orchestrated by Republican
industrial interests for the purpose of weakening or outright preventing Russia
from having a seat at the table. Russia has made its intentions known
that it has been seeking to have the ruble included in the SDR basket along
with the RMB.
In
addition, the quota amounts for the Russian Federation would also be higher
with the implementation of the 2010 Reforms as written, but could also be
extremely larger if Plan B is utilized. With the control that Russia exerts
over the European natural gas market, it is problematic for the American
interests to allow the EU, and its quota allocations, to slide into the BRICS,
and Russian economic influence.
The
battle for Ukraine and the battle for Syria are both about the alliance between
Europe and North America. Both are existing and potential pipeline routes for
natural gas into Europe. The one in Ukraine is controlled by Russia and
the one in Syria is slowly transitioning towards western control, with the help
of ISIS and Israeli bombing campaigns.
For
its part, Russia is playing a patient game and waiting for the inevitable time
frame of IMF Reforms to be implemented. Whether through the 2010 Reforms as
they were originally written, or through the implementation of Plan B, Russia
is very aware that any overt provocation or reaction on its part would
instantly be branded as the pretext for excluding the ruble from the SDR basket
and lessening the Russian quota amount in the Fund.
Either
analysis can be equally considered and the potential merging of both is also
likely probable. The US Congress delays the reforms long enough to spoil
Russian chances for an increased influence in the multilateral system and China
plays both sides knowing that it will be the winner in the end because of the
growing usage of the RMB and the Plan B structure.
America,
trapped by the amount of USD held in the foreign reserve account of China, is
willing to play ball with the PBoC, but cannot accept the full and balanced
inclusion of both Russia and China into the multilateral financial system. With
Russia on the doorstep of Europe the decision was fairly easy from an economic
and geopolitical perspective.
The
mandates from the Bank for International Settlements have trickled down to the
central banks of the world and it has been made clear that USD liquidity based
on the balance of payments system is coming to an end. Many times I have
described how deflation and a broadening liquidity crisis would be used to
herald in the multilateral financial system. Some of my earlier posts at
the beginning of the year explained how methods of Hegelian Dialectic would be
used to force the acceptance of the supra-sovereign system.
We
have now been watching these methods, as presented in the form of civil unrest
and protests, spread across the world and now back to the shores of America
where the biggest transformation has to take place.
See post The Implosion of American Culture.
We
have previously discussed how there would be massive fluctuations in the
exchange rate markets in the days and weeks leading up to the transition.
We are now seeing this in the dramatic swings in the currencies of the emerging
economies, especially in Russia.
We have discussed the End of OPEC and
the forthcoming SDR Commodities Exchange. And now with the recent drops
in the valuation of energy we are beginning to hear the rumblings about the
viability and relevancy of OPEC as an institution. Back on April 21, 2014, in
the post The Greatest Game, I made the following statement, in
response to a readers question about the price of oil:
“Looking
at oil, we can assume that the price will be around $75.00 per barrel (really
anywhere from $60.00 to $80.00)”
At
that time crude oil was in the $104.00 range and the thought of -$80.00 or
-$70.00 oil was unthinkable. And yet, here we are 8 months later and the
price of oil is $63.00, the lower end of my spectrum at the time. It can be
assumed that oil will eventually settle in the $75.00 range as stated, where
the economics are balanced.
Also
in the post the Greatest Game we discussed the coming adjustments to the stock
markets around the world. Some of the headlines from just the last few
days confirm the deepening deflation and liquidity crisis as well as the stock
market adjustments that many have been anticipating.
Canadian
stock market drops 500 points before recovering at a +300 loss.
Vietnam
stocks drop amid oil price instability.
Greek
stocks crash 13%, the single biggest drop since 1987. And of course the Greek
protests return.
China
stocks drop.
Japan
stocks and bonds drop.
Baltic
Dry Index drops below 1000.
BIS
publishes a warning on liquidity.
Civil
unrest continues to grow across the globe.
Venezuelan
bonds crash to 1998 levels.
And Zero Hedge has put together an
excellent metrics based post titled Markets Turmoiled As 5th Hindenburg Looms.
So
much instability and manipulation is now at play in the world markets that
numbers are swinging wildly from losses and back to gains again. This
instability is building and expanding the script that the USD balance of
payments system needs to be replaced with a more centralized SDR liquidity
process which will balance the international financial system.
The
end of all empires are stricken with not only the debasement of currency, but
also an obsession for sex, and the promotion and propagation of sports and
entertainment. The barbarians at our gates is found in the immigration policies
and the multicultural propaganda which spews forth from our governments and
international institutions.
The
fact that the amnesty issue is at the forefront of American politics as the USD
system nears its end is very symbolic of the “barbarians at the gate’
historical script.
Yet, I don’t see this as the end of an
empire but the beginning of the world empire, as discussed in the post The Rise of the World Empire. The internationalization
of America’s “empire culture” has ensured a continuation of the obsession with
sex and the entrancement with reality television, as well as the multilateral
sport of mixed martial arts, the Roman colosseum of today.
What
the rest of the world doesn’t want will implode with the USD system.
The
attempts at maintaining the valuation of the USD are coming to an end. The SDR
replacement is simply a continuation of the fiat and fractional system of debt
based money creation. America was never meant to be the apex, only a
transition point to the multilateral. – JC
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