Thursday, October 1, 2015

Post Financial Reset World - Strategic Overview

Introduction

While it is my intent to write a series of essays that detail my research and thoughts as of this point in time, part of the process includes stating upfront what my basic assumptions are/ have been. This is easier said than done as much of one's personal biases are either so ingrained into one's personality/ outlook, that one tends to take these as being matter-of-fact shared by others at a fundamental level. 

Over the past two (2) years, through extended online interaction with individuals dispersed all over the globe, the issue of bias in individual perception has been "driven home". The differences in viewpoints over such "simple concepts" as to what constitutes "freedom" and "liberty" have been points of disagreement and contention. However, it is important to address these if people from different backgrounds, cultures, political sympathies and historical memories are to communicate and gain from this communication. The alternative is for differences of opinion to continue unresolved and for viewpoints to harden as each retreats into a cocoon of comfort with those similar to them.

It is not guaranteed that I will continue with my essays, but as of today, this remains my intent. By placing my thoughts "on paper", it is likely that I will gain additional insight. Undoubtedly, with the passage of time, as my own consciousness evolves, I may look back upon these essays and find a marker of sorts that delineates the changes that have been made internally within my psyche.

To pinpoint a specific date of time period when interest in a subject matter commenced is a very difficult task, for me anyway. In a sense, it can be said to have begun at birth or even preconception. However, this specific train of thought can be traced back to the passing of my late father in 2010. He had spent the previous eight (8) years writing his memoirs. Ostensibly his efforts were to provide a family history for his beloved grandchildren who were born and raised in the USA, but on reflection, it may have also been a way for my father to reflect upon his life, and by putting his thoughts and feelings into writing, he was probably able to come to terms with those issues/ phobias that may have affected his consciousness since birth.

The reflections of my late father also served to trigger a response within my own subconscious. Why is it that my father and I had such similarities and differences in outlook? This raised questions about the subtle nature and impact of "Parampara" (a Sanskrit term that roughly translates as "tradition" but implies much more) upon my own perceptions and judgments. This led me to examine the history of post-1857 Colonial India which had to have influenced the worldview of my Indian ancestors, especially the history of that period as written/ recorded by Indians. It helped that my family, both paternal and maternal, have had contact with their "relations" who had remained in India. This however did provide me with an emotive starting point of sorts to initiate my investigations.

Intensive reading took me back to the days of the East India Company and the British Raj that ruled the India that then existed, and particularly the impact of the then legal opium trade monopoly. What I uncovered addressed more than I had ever hoped, and opened additional fascinating vistas for exploration. A whole "new" perspective was magically handed to me, and raised issues that resonate quite strongly with the ongoing global geopolitical happenings of today. I will outline some of these in very broad terms at the end of this essay, and will build upon these in subsequent essays.

My specific purpose in writing these essays is difficult to clearly articulate. As I have stated before, it is to track the evolution of my own thinking and to see how they develop at the end of this exercise. I also hope that some of my own relations may derive some benefit and would be motivated to go even deeper into some of the issues that have resonated so deeply within me. I do not expect that my blog will appeal to many outside a very small circle. That being the case, mine is but a small step towards self discovery, a coming to terms with as yet unrecognized aspects buried within my psyche.

Essentially, my analysis will extend to the following, but will likely incorporate others as there is a tendency for subject matters to criss-cross our attempts at neatly defined categorization. In any event, my principal thrusts, in no order of precedence, will be principally focused on the following...
  1. Global Geopolitical Developments as it relates to the Future.
  2. Global Financial/ Currency Reset and Global Governance
  3. Colonialism and its Continuance in the Present and into the Future through Banking
  4. Trinidad & Tobago Politics and Economics
  5. Trinidad & Tobago in Context of the Emerging Multilateral World
  6. Eastern Philosophy, principally Hindu and Quantum Consciousness
  7. Socio-Cultural Factors that Defines My Indo-Trinidadian Consciousness.

Perception and Bias

Nothing more clearly demonstrates the Perception Divide than the online discussions that I have had with varied individuals from the Developed World. There have been the obvious divides based upon political philosophy/ outlook, based upon religious persuasion and based upon belief/ non-belief in analyses/ predictions/ prophecies, whether these are astrological, religious or from other authority.

My online colleagues from Developed Countries quite rightly perceive a fundamental threat to their lifestyles, and in some cases, future financial well being, from the events that are likely to unfold due to the dynamics of Financial/ Currency Reset. These fears are more exaggerated in some than others. For the most part however, there has been little commentary as to what this cyclical turn of the wheel implies for Emerging Markets and what the future implications would be for them as individuals. 

In essence, rightly or wrongly, the impression that I have gotten is one of We/ Them Dialectic. In a sense, this is totally understandable as both the mainstream and alternative media focus upon the disruptive intensity that these global readjustments may bring to the major metropolitan countries. Little, if anything, is said about the impact upon Emerging Market economies/ societies. In a sense, this is understandable as the media seeks to further their own fortunes by boosting readership and advertising revenues, and media commentary in Emerging markets have been notably absent. As a result, there's a disconnect at a fundamental level. Whether this divide is choreographed, or merely cynically capitalized upon, is immaterial. In the final analysis, the fact that it exists is what counts. Yet, it must be recognized that this Dialectic divide mutes any "real" conversation with the "other".

From my Emerging Market colleagues, as well as from writings by the intelligentsia, particularly the more ideological and radicalized, there is a perception that the global "wrongs" are but a continuance of "white colonialist privilege" in "new" clothes. They see an international order dominated by force by the nations of the Developed World as proof of continued subjugation. To these mindsets, there can be no compromise as the divide is existential and their sense of moral justice dictates that they continue the long struggle for social justice by tearing down pillars of global systematic privilege.

Moderate voices of reason do however exist on both sides of this great ideological divide, with many of these voices seeking a just world for all. The Catch 22 is always about bringing this about, the mechanics of effecting "real" global transition. Even the IMF's Christine Lagarde has weighed in on this issue. In Developed Countries, progressives fantasize that there will be a global coalescing of "people power" to overthrow the existing corrupt order dominated by the 1%. However, implicit in their statement/ worldview is a "leadership" from the Developed World, for the debate is framed in terms deposing the Developed World's recently discovered domination by their privileged 1% elites. 

This "objective" finds no resonance in Emerging Markets, for even the 99% of the Developed World are seen as beneficiaries of an "unjust exploitative" system that needs to be overturned. No attempt has been made to frame the "debate" in terms of "global class consciousness" and even then, there is no assurance that such a philosophical approach will work. The fact is that the global societal chasms that define "class" differs widely, with the lower class in some societies being more affluent than the middle or upper-middle classes of Emerging Market nations. Class consciousness simply does not translate well globally as the chasms of existing perceptions are too wide.

Common global cause is therefore unlikely to ever manifest at this stage of global consciousness. That being the case, we then need to ask certain questions. What is it that gives such a variance in opinion, not only within countries, but between countries? Are the differences all due to Applied Perception Management manipulations by a globalized "bad guy" that seeks world domination? Or is it that there is more than acculturation and class consciousness dynamics at play? It is something that goes way beneath, into the psyche, into the essence of what constitutes identity and consciousness?

These questions have been very well addressed by the late Swami Chinmayananda, the great Vedanta teacher from India who brought the philosophical teachings enshrined in the Vedas and Upanishads to the modern man, and who, during his lifetime, was considered to be a "living saint". While this lecture addresses individual consciousness, the applicability to societal perceptions can be inferred quite easily. In essence, the manifest differences are due to "Vasanas", a Sanskrit term that is difficult to translate accurately into English, especially by one such as myself. I will therefore leave it up to Swami Chinmayananda to explain the concept. One can accept or reject at will, but this is one of the most concise and accurate explanations that I have ever come across.





Methodology

Perhaps my Method of Analysis reflects my non-orthodox Hindu background as well as the number of years that I have spent studying and working in North America, as it represents a mix of both East and West. I won't delve into the subtle differences, but will instead provide a brief summary so as to establish the foundations for evaluating my essays, a road map of sorts for deciphering my analyses.

Hypothesis Building


The first is essentially the Enquiry Methodology of Vedanta that has come down through the mists of prerecorded history. Essentially, the methodology is a 3-step one, as follows...
  1. There can be no effect without a cause.
  2.  Effects may manifest in multiple forms from the same cause/ source. One common example is that of water. It can manifest as ice, steam, water, a flowing river, rainfall, dewdrops, a turbulent or calm sea, but its essence is always that of water.
  3. Once the cause/ source has been identified, the effects disappear, or alternatively, we have gotten a hypothesis for testing. 
The hypothesis can thus be tested against real word happenings/ occurrences, whether personal, financial, geopolitical, social or otherwise. The big problem that we have is that information about real world happenings is often concealed in "spin" and "applied perception management" disinformation, "hidden in the open" so to speak. Rarely is it ever up-front and clear cut. However, through the process of Logical Inference based upon observed/ reported events, we may draw conclusions that either supports or negates the Hypothesis.


Hypothesis Testing


Now that we have a Theory/ Model of what is happening, we call this our Hypothesis. We then need to test this hypothesis against real world events so as to verify and/ or fine tune our understanding. This is necessary due to the manipulation of information/ disinformation that seeks to manage public opinion by dividing them into designated ideological corrals as determined by “spin doctors” intent on dictating the terms of discourse.

The simplest concise explanation that I have found comes from “The Conversation” website. The information is clearly and simply presented. The methodology for testing the Hypothesis is the “Null Hypothesis” or the “Alternate Hypothesis” methods. For convenience, I have copied verbatim. 


Should one need further information, I suggest the following site… http://theconversation.com/explainer-what-is-a-null-hypothesis-10757
At the heart of the scientific method is the process of hypothesis testing. Given an observable phenomenon in the world, a scientist will construct a hypothesis which seeks to explain that phenomenon.

The way hypothesis testing works is by setting up two opposing hypotheses. One, the “null hypothesis”, is the reference or baseline hypothesis.

If the null hypothesis is supported, nothing unusual is going on; the factor under investigation has no explanatory power; the drug being tested has no effect; the advertising campaign doesn’t work.

But don’t be misled – this hypothesis is crucial. In reality it is the only hypothesis actually being tested.


Hypotheses for the Globalized Future

While recognizing that my viewpoint may evolve/ change by the time I complete my series of essays (provided that I continue with the effort), I am briefly outlining the conclusions which undoubtedly color my analysis. Some may agree, others may not. The rapidly unfolding future will either verify or negate my analyses. As for now, I present my non-exhaustive list of key hypotheses as of this date.
  1. Global Financial/ Currency Reset to a Multilateral Reserve Currency is but a trigger point for the much larger choreography that will bring about the emergence of Global Governance.
  2. There is no "real" conflict at this point in time, or for the foreseeable future, between the US/ EU/ Japan (West) and China/ Russia/ BRICS/ SCO. Any apparent conflict is choreographed to create Hegelian Dialectic preconditions for change to be implemented with the least resistance.
  3. Post-2018 global growth will reignite in a massive liquidity expansion that follows Renminbi inclusion in the IMF's SDR Basket of Reserve Currencies. Before this happens, a global liquidity crisis has to be brought about. Monetary contraction will worsen short term. The purpose is to create the conditions precedent for the formation of global trade/ currency blocs.
  4. The formation of global trade/currency blocs will herald the strengthening and reorientation of international institutions that will eventually emerge as a transnational bureaucracy that will underpin the emergent Global Governance which will initially be de facto rather than de jure.
  5. Parallel to centralization trends that Global Governance portends, there will be a splintering of nation states into ethnic enclaves and multi-ethnic mega city states. Such localized political formations will have limited authority on the model of US states whose key laws remain subordinate to US federal laws. Enforcement of central dictates will be enforced by market access, monetary restrictions, and in worse cases, by a global military under unified command.
  6. The US Federal Reserve's powers will migrate to the Bank for International Settlements, the Central Bank for Central Banks. Global power structures will remain unchanged, merely unified and consolidated. The US/ Euro elites will continue to maintain control, but significant space would have been made for Emerging Market power elites. Present day Central Banks will assume the role now played by big money center banks, largely domestically/ regionally.
  7. In the post Bretton Woods system, colonialism hid behind the cloak of monetary/ financial control but was exercised through local elites that were educationally, culturally, economically and psychologically affiliated Developed Country elites. This affiliation existed since the 17th century when Central Banking grew to its present form through control of the Opium Trade from India to China, and which was then visibly controlled during British Colonial days by the East India Company. Their surrogate corporations exercise real, effective control to this day.
  8. Currencies will be gradually revalued according to Purchasing Power Parity, initially on a regional/ trade bloc basis, but eventually, globally. This structural change to global money will entail a relative loss of purchasing power (devaluation) of today's premier monetary units.
  9. Global growth will increasing be dictated by regions with population growth or which remain attractive and welcoming to global immigration. To stimulate global growth, the shift will be demographically dictated away from the rapidly aging, low birth rate countries of Europe and Japan, and increasingly towards the nations of today's Emerging Marker periphery, principally Africa, India, Asia and South America. With growth will come purchasing power affluence.
  10. Affluence and emergent growth dynamics will favor distributed manufacturing, rather than metropolitan country manufacture and exports. This will entail a shift within the power dynamics of Emerging Markets. Many of these countries are ancient cultures with long-persisting socio-cultural mores/ traditions. The fissures so created will be the ignitor of class/ group conflict within the Emerging Markets, and fester into the battlefields of the future.
  11. Resistance to the Global Order will emanate from traditional groups whose belief systems/ lifestyles are perceived to be under threat through forced implementation of change through bureaucratic diktat. Alternatively, it may be triggered by competing groups fighting for control over the localized pie. Such resistance, due to distributed manufacturing, increased affluence and exponentially increasing technological prowess due to rising educational opportunities, will no longer require outside sponsorship to challenge the then existing order. They will be self sufficient, will have control over their terrain and will have the ability to preplan. This will be the only real threat to the emerging Global Governance structure until such time as it falls due to its own inherent contradictions due to power struggles and/ or incipient corruption.


Tuesday, September 22, 2015

Global Financial Reset - Strategic Overview of the Petrodollar Transition to the SDR Multilateral Reserve


The Paradox of Triffin’s Dilemma


NOTE:  The information for this summary brief has been taken from the article written by James Rickards and published on The Daily Reckonings website. This article does an exemplary job and all credit goes to the author James Rickards.  
[URL: http://dailyreckoning.com/triffins-dilemma-and-the-future-of-sdrs/]


BRETTON WOODS


Triffin’s dilemma arose from the Bretton Woods system established in 1944. Under that system, the dollar was pegged to gold at $35.00 per ounce. Other major currencies were pegged to the dollar at fixed exchange rates. The architects of the system knew that these other exchange rates might have to be devalued from time to time, mostly because of trade deficits, but the devaluation process was designed to be slow and cumbersome.

A country that wanted to devalue (for example, the U.K. in 1967) first had to consult with the International Monetary Fund, IMF. The IMF would typically recommend structural changes, to fiscal policy, tax policy and other areas designed to cure the trade deficit. The IMF also stood ready to offer bridge loans of hard currency to help the deficit-hit country withstand temporary stresses while the structural changes were implemented. Only if the structural changes failed and the trade deficits were persistent would the IMF allow devaluation.

That was the process for countries other than the U.S. As far as the U.S. was concerned, the link between gold and the dollar was fixed for all time and could never be changed. The dollar/gold link was the anchor of the entire system. This fixed link between the dollar and gold made the dollar the most prized reserve currency in the world. That was the hidden agenda of Bretton Woods.


PRE-BRETTON WOODS 


With the dollar as the main reserve currency, U.K. pounds sterling, a competing reserve currency, would eventually fall by the wayside.

The U.K. relied on Imperial Preference among its trading partners in the British Commonwealth to gain trade surpluses, and also relied on the willingness of those Commonwealth partners to hold sterling in their reserves. The Bank of England assumed Commonwealth members would not ask to convert the sterling to gold. Imperial Preference came under attack by the General Agreement on Tariffs and Trade, the GATT, which was also part of Bretton Woods. (Today, GATT is known as the World Trade Organization, WTO.)

Bretton Woods was a one-two combination punch designed by the U.S. to destroy the British empire. GATT undermined Imperial Preference. The dollar-gold link undermined sterling. It worked. The U.K.’s trade deficits persisted, and the Commonwealth partners demanded their gold. Eventually, the pound sterling was devalued, and the empire dissolved. It was replaced by a new age of U.S. empire and King Dollar.


TRIFFIN'S PARADOX


There was only one problem, and Robert Triffin pointed this out. If the dollar was the lead reserve currency, then the entire world needed dollars to finance world trade. In order to supply these dollars, the U.S. had to run trade deficits.

The U.S. ran trade deficits, the world got dollars and global trade flourished. But if you run deficits long enough, you go broke. That was Triffin’s dilemma. Any system based on dollars would eventually cause the dollar to collapse because there would either be too many dollars or not enough gold at fixed prices to keep the game going. This paradox between dollar deficits and dollar confidence was unsustainable.

This system did break down in the 1970s. The solution then was to abolish the dollar-gold peg in 1971, and demonetize gold in 1974. But there was a third leg of the stool invented in 1969 — the IMF’s Special Drawing Right, SDR.


PETRODOLLAR & SDR


The SDR was a new kind of world money printed by the IMF. The idea was that it could be used as a reserve currency side by side with the dollar. This meant that if the U.S. cured its trade deficit, and supplied fewer dollars to the world, any shortfall in reserves could be made up by printing SDRs. In fact, SDRs were printed and handed out repeatedly during the dollar crisis from 1969–1980.

Then a new King Dollar age was started by Paul Volcker and Ronald Reagan. Under the new King Dollar system, U.S. interest rates would be high enough to make the dollar an attractive reserve asset even without gold backing. Remember those 20% interest rates of the early 1980s? Henry Kissinger also persuaded Saudi Arabia to keep pricing oil in dollars. This “petrodollar deal” meant that countries that wanted oil needed dollars to pay for it whether they liked the dollar or not.

The Arabs deposited the dollars they received in Citibank, Chase and the other big banks of the day. The bankers, led by Wriston at Citibank and David Rockefeller at Chase, then loaned the money to Asia, South America and Africa. From there, the dollars were used to buy U.S. exports like aircraft, heavy equipment and agricultural produce. Suddenly, the game started up again, this time without gold. This new Age of King Dollar lasted from 1980–2010.

Still, it was all based on confidence in the dollar. Triffin’s dilemma never went away; it was just in the background waiting to re-emerge while the world binged on new dollar creation and forgot about gold. The U.S. ran persistent large trade deficits during this entire 30-year period as Triffin predicted. The world gorged on dollar reserves with China leading the way in the 1990s and early 2000s.


CURRENCY WAR


The new game ended in 2010 with the start of a currency war in the aftermath of the Panic of 2008. Trading partners are again jockeying for position as they did in the early 1970s. A new systemic collapse is waiting in the wings.

The weak dollar of 2011 was designed to stimulate U.S. growth and keep the world from sinking into a new depression. It worked in the short run, but now the tables are turned. Today, the dollar is strong, and the euro and yen have weakened. This gives Japan and Europe some relief, but it comes at the expense of the U.S., where growth has slowed down again.

The new dollar-yuan peg with China has also contributed to a slowdown in China. There’s just not enough global growth to go around. The major trading and finance powers are cannibalizing each other with weak currencies. Soon the U.S. and China may devalue relative to Europe and Japan, but that just moves the global weakness back to them.

Is there no way to escape the room? Is there no way out of Triffin’s dilemma?


DILEMMA SOLVED


A new gold standard might be one way to solve the problem, but it would require a gold price of $10,000 per ounce in order to be non-deflationary. No central banker in the world wants that, because it limits their ability to print money and be central economic planners. Is there an alternative to gold?

There is one other way out. That’s our old friend, the SDR. The brilliance of the SDR solution is that it solves Triffin’s dilemma.

Recall the paradox is that the reserve currency issuer has to run trade deficits, but if you run deficits long enough, you go broke. But SDRs are issued by the IMF. The IMF is not a country and does not have a trade deficit. In theory, the IMF can print SDRs forever and never go broke. The SDRs just go round and round among the IMF members in a closed circuit.

Individuals won’t have SDRs. Only countries will have them in their reserves. These countries have no desire to break the new SDR system, because they’re all in it together. The U.S. is no longer the boss. Instead, you have the “Five Families” consisting of China, Japan, the U.S., Europe and Russia operating through the IMF.


GLOBAL FINANCIAL RESET


The only losers are the citizens of the IMF member countries who will suffer local currency inflation.

This SDR system is so little understood that people won’t know where the inflation is coming from. Elected officials will blame the IMF, but the IMF is unaccountable. That’s the beauty of SDRs — Triffin’s dilemma is solved, debt problems are inflated away and no one is accountable. That’s the global elite plan in a nutshell.

We never take our eye off the IMF and its plans to expand the use of SDRs. The IMF will include the Chinese yuan in the SDR basket over the next 12 months to make sure the Chinese are “on the bus” when the endgame begins. That’s an important step in the SDR process.

This story has longer to run, but the endgame is already in sight.