The Coming Global SDR Currency?
TDC Note – This article assumes gold will be, at some point, added to the SDR basket of currencies. At this point in time that is a terrible assumption. Based on our research, and information directly from the IMF, former members of the IMF SDR development team and former Director of the Group of 30, gold is not on the table and it will be a long time before it is brought to the table. Black swans are everywhere and have the potential to change everything on a dime. Under “normal” circumstances, gold is not in the picture for the foreseeable future according to the overlords at the IMF, BIS and World Bank.
With many investors worried about the economic turmoil that has engulfed the globe, here is stunning the roadmap to the coming global SDR.
Stephen Leeb: “Wake up, America. We have a problem that’s threatening our economy and perhaps even our continued existence as a free society, and no one is paying attention. The problem: we have too much money and too little wealth. Today our money-to-wealth ratio is probably lower than for any other developed country in history. But there’s no indication that policymakers here understand the key distinction between money and wealth or even see the dire implications…
The Chinese do. They realize the vastly disproportionate amount of money compared to wealth in the West has made the world’s dollar-denominated monetary system a cancer. The Chinese are scared to death it could spread to contaminate them, and they’re determined to change the system.
What’s the distinction between money and wealth? Wealth refers to real things – commodities like oil and germanium, and the products created with commodities, and even the information needed to create those products. Wealth (with money as a facilitator) must be used to create wealth or it lies fallow and is no different than the paper money that piles up in West. There is no future without future wealth creation. And gold, which is the only thing you can call both wealth and money, will be at the center of future wealth creation. If you are going to survive a transition rockier than any we have ever experienced, owning gold, and especially gold mines, is absolutely essential.
It’s revealing that on Friday the country’s top two government economic policymakers contradicted each other within the space of barely an hour, resulting in the market lurching in opposite directions. First Federal Reserve Chair Janet Yellen said an interest rate increase might be in the cards but that any rate hikes would be slow and gradual. The markets rallied.
Right on her heels the Fed’s No. 2 official, Stanley Fischer, said there could be two rate increases before yearend – i.e., increases might not be gradual. The markets sank.
Why is this revealing? Because markets used to be all about the future. Now they are rudderless, rising when the spigot is wide and faltering when the spigot narrows. Wealth creation has nothing to do with it. And clearly even Fed officials with access to the most complete information have any idea what is going to happen next.
Which brings us back to the Chinese, whose ideas about the future are firmly focused on creating a century of well being for their populace. One stark contrast between China and the U.S. is in how we use technology and information. The U.S. too often uses information to create money, not to manage the relationship between money and wealth. Some examples: nanosecond trading, targeted advertising, millions of words of cascading rules and regulations that keep zillions of lawyers and people in financial services busy and well paid. This is a form of targeted helicopter money.
China Is Working To Create A New Monetary System
The Chinese, in sharp contrast, are marshalling information and technology towards a particular goal, which is to create a new monetary system – one that centers on gold, information, and collections of currencies known as SDRs.
Several weeks back, KWN showed a chart of China’s extraordinary gains in the field of supercomputers (see above). Not only has China had the fastest supercomputer for several years running but last year it surpassed America with the most supercomputers among the 500 fastest machines. In 2015, we banned the export of Intel chips in an effort to slow the Red Dragon down. China didn’t miss a beat. This year’s fastest computer is three times faster than last year’s winner. And this year it is all made in China. But as we discuss below, China has focused on super computers not for bragging rights but as a necessary tool for creating a world that will let it build and secure its future.
The Stunning Roadmap To The Coming Global SDR
Here is China’s goal. Come October, SDRs will include the renminbi, which will be part of a melded currency that also includes dollars, euros, renminbi, yen, and the British pound. Each of those currencies is assigned a relative weighting, which along with currency fluctuations determines how many SDRs a particular currency can buy. When a currency is rising relative to others, it is worth more SDRs than when it is falling – the arithmetic is as simple as that. Moreover, rarely if ever do currencies follow dramatically different paths.