One World, One Bank and America’s Spooky New Money
by Addison Wiggin
"The government is very good at making things overly complicated for the purpose of obscuring what's really going on from the public," observed hedge fund manager Erik Townsend during our interview in May. He was making a point about the 2008 bailouts. The Federal Reserve played a leading role, applying trillions in paper-clip and rubber-band solutions. The Fed's balance sheet swelled from $900 billion in September 2008 to $4.4 trillion as we go to press.
"Since Federal Reserve resources were barely able to prevent complete collapse in 2008," Jim writes in his recent New York Times best-seller, The Death of Money, "it should be expected that an even larger collapse will overwhelm the Fed's balance sheet."
| The IMF will print this Spooky New Money in the interest of keeping a rotten system functioning. |
Leading the way, says Rickards, will be the International Monetary Fund. "The task of re-liquefying the world will fall to the IMF because the IMF will have the only clean balance sheet left among official institutions. The IMF will rise to the occasion with a towering issuance of SDRs, and this monetary operation will effectively end the dollar's role as the leading reserve currency." Ah… the SDR. That's shorthand for "special drawing rights." The name is cryptic. That's why, Jim and I have decided to dub SDRs "America's Spooky New Money." That's what it is, after all.
When the next round of bailouts come, the IMF will print this Spooky New Money in the interest of keeping a rotten system functioning.
Boiled down to its essence, this spooky SDR money is printed by the IMF and then circulated among central banks and governments. Indeed, the IMF has issued this new money three times since their creation more than 40 years ago. Each time was linked to a crisis of confidence in the U.S. dollar…
1969: The French and others recognized the United States was printing too many dollars. At the time, foreigners could still exchange dollars for gold, and there was a run on Fort Knox. The IMF created this new money to smooth the rough monetary seas, issuing 9.3 billion SDRs through 1972.
| “Any inflation caused by massive SDR issuance would not be immediately apparent to citizens.” |
2009: In response to the Panic of 2008, the IMF issued 182.7 billion SDRs during August and September.
A 42-page IMF paper published in January 2011 with the innocuous-sounding title "Enhancing International Monetary Stability -- A Role for the SDR?" lays out what Rickards why America's Spooky New Money is coming sooner, rather than later. Perhaps as soon as within the next six months.
The paper describes the plan as "a multiyear, multistep plan to position the SDR as the leading global reserve asset. The study recommends increasing the SDR supply to make them liquid and more attractive to potential private-sector market participants such as Goldman Sachs and Citigroup… The IMF study recommends that the SDR bond market replicate the infrastructure of the U.S. Treasury market, with hedging, financing, settlement and clearance mechanisms substantially similar to those used to support trading in Treasury securities today."
Not that you'd use this spooky money to buy a gallon of gas or a loaf of bread.
| The SDR invisible to citizens. That’s why it’s...well… spooky. |
In fact, it enhances that role by making the SDR invisible to citizens. That's why it's...well… spooky.
"The SDR can be issued in abundance to IMF members," the paper goes on, "and can also be used in the future for a select list of the most important transactions in the world, including balance-of-payments settlements, oil pricing and the financial accounts of the world's largest corporations, such as Exxon Mobil, Toyota and Royal Dutch Shell."
The genius of the scheme is that the SDRs would create inflation… but ordinary people wouldn't know that this Spooky New Money was causing it. "Any inflation caused by massive SDR issuance would not be immediately apparent to citizens. The inflation would show up eventually in dollars, yen and euros at the gas pump or the grocery, but national central banks could deny responsibility with ease and point a finger at the IMF."
We've long chronicled China's gold accumulation. When we interviewed Mr. Rickards last year, he explained the rationale: "They want to be in a position where they just raise their hand and say to the world, 'Hey, we've got our gold, now we're a player. Now when the international monetary system collapses and the world has to reconfigure the system, we get a big seat at the table.'"
In Jim Rickards' Strategic Intelligence he goes a step further: He says Western powers are making room at the table for China. The West's central banks have "leased" their gold to commercial banks, and those commercial banks have sold that gold to Asian buyers -- including the Chinese central bank.
"The gold price must be kept low," explains Rickards, "until gold holdings are rebalanced among the major economic powers, and the rebalancing must be completed before the collapse of the international monetary system."
What's the metric the power brokers are using to judge when China is ready to take its seat at the table? Gold reserves as a percentage of GDP.
"The United States and China have a shared interest in keeping the gold price low," says Rickards, "until China acquires its gold… Once the rebalancing is complete, probably in 2015, there will be less reason to suppress gold's price, because China will not be disadvantaged in the event of a price spike."
His research and documentation is peerless. "Get the annual report from the Bank for International Settlements," he told us recently. "Read the footnotes. I understand it's geeky, but it's there. They actually get audited -- unlike the Fed and unlike Fort Knox."
Yet, we still wondered, who or what is the IMF's biggest enemy in carrying out its plan?
Time, replied Jim. "A financial panic, caused by derivatives exposure and bank interconnectedness, may trigger a global liquidity crisis worse than the 1998 and 2008 crises," he explains. The IMF will step in but "the emerging circumstances will mean the process will be carried out on a crash basis, without reference to carefully constructed infrastructure now contemplated."
| “Once the rebalancing is complete, there will be less reason to suppress gold’s price” |
And as he suggested in his first book, Currency Wars, the IMF might even swallow its pride and resort to some form of gold standard if that's what it takes to restore confidence in the system.
But if that's what it takes, expect some ugly times ahead, like Ferguson, Missouri, but worse. "Riots, strikes, sabotage and other dysfunctions," complete with a "neofascist" response from well-armed authorities.
What can you do? What should you do?
First, you should read Jim's latest book, The Death of Money and understanding the seven signs Rickards says will point to a looming crisis.
If you haven't gotten a copy yet, do not go out and buy one. We have a free copy waiting for you here in our Baltimore office. We'll send it to you for free-- instead of you going out and paying $28.95 at Barnes & Noble. It's necessary we get it to you as soon as possible, so you can use it as a playbook. We've agreed to work closely with Jim on a brand-new project that will not only put his advice in your hands, but deliver constant updates and advice on how the coming monetary collapse will unfold.
From an Agora reader..
"One Fiat to rule them all, One Fiat to find them,
One Fiat to bring them all and in the darkness bind them
In the Land of IMF where the Shadows lie."
Addison Wiggin is a three-time New York Times bestselling author and the cofounder of the Daily Reckoning. © 2014 Agora Financial, LLC