Monday, May 28, 2018

Eurokinesis

While the Euro has certainly not failed completely (as some would have it) neither has it stepped up to the task of "cushioning" the dollar's fall. It was designed in part to both encourage, and to gracefully offset, the dollar's decline. And the fact that it hasn't done either is simply a testament to the fundamental role of gold.

As explained (and ultimately predicted) gold flows in position to perform this function, as no fiat (and certainly no crypto) can, or will.

Confidence is now long lost in the USD's ability to act as a "free market" currency. It is true that US policy is predictable enough to know which "enemies of the state" will be attacked with systemic sanctions. But once a currency's role turns toward protectionism and protracted financial warfare, it's global usage demand is necessarily sacrificed. For a currency to have optimal appeal in a global usage context, it must have the apolitical (agnostic) attribute of gold.

The E.U.'s attitude toward the physical gold reserves of it's members was always a step in the right direction, but early proponents like Mundell (and of course, Another) must see today that politicians are indeed within the reach of Euro monetary policy. In the larger scheme of things, the inclusion and weight of Euro in SDR allows it to have influence within the next fiat regime. But the dollar's final weapon (self destruction by sanction) will bring this current regime to its knees.

The balance of payments "netting" that Jim Rickards describes in his strengthening axis of gold doesn't play out quite as literally as all that. As long as there is a functioning physical gold market for yuan, yuan will be accepted for oil, just as euro and dollar are. Today, the dollar prices gold. Tomorrow, gold will price the dollar. Gold is best recognized and appreciated for having no political affiliation or discrimination ... at a time when financial fiat-warfare is destroying global growth and productivity in favor of enriching a failed Hegemon.

The problem arises when dollar system sanctions hurt the wrong banks and corporations in a complex interdependent chain that "strong dollar policy" doesn't fully understand - especially where international banks and their derivative exposure is concerned. In the past, financial warfare was much simpler. But it always took place, and the rise of fiat gives rise to a new development in financial weaponry - reserve currency abuse.

Dollar system "tamperers" were warned ... by entities whose warnings should clearly be heeded. Fuck with our functioning global monetary system at your own peril.

It is difficult to understand who or what the "United States" really is today and what control it really has over the dollar system. But the certainty of change, and the shifting of power and wealth are always morphing - whether by design or circumstance. If the dollar system is doomed to a gradual sentence of irrelevance, and it's final rounds of ammunition are intrinsically self-destructive, the situation will be a forgone conclusion to say the least.

That being the case, the families can simply do nothing and watch the design of inevitability unfold. As a strong dollar has been shown by the BIS to be a factor in global stagflation, it can either weaken or drag the world down with its strength. That seems to be the same prescription as sanctions, as well as US military interventionism. Again, design and circumstance seem intertwined.

Plans to circumvent the dollar thus gain consensus appeal, despite deep financial entrenchment, and are increasingly robust. International banks profit in times of growth, not stagflation. Producer nations of the East provide such growth. A spoiled bully who sits in his own soiled diaper and throws endless tantrums tends to be ignored, no matter how unchallenged his former playground status was. He can have his stinky sandbox. There are fertile playgrounds elsewhere, and they grow over time.

So the Euro cannot be counted upon to act as a true "free market" currency.

But in any event, a free market in gold will certainly engender a more objective "free market" (freely floating) currency just as much as an optimal global currency will engender a free market in gold. They go hand in hand.

As for a "dirty float", what could be dirtier than dollar system sanctions today?

The Euro, as something mostly in-between, will cushion what it will cushion in the transition. The SDR will seem less political as a hybrid reserve fiat, and a trading bloc's gold will have a much greater role in fiat exchange rate factoring.

Countries? Nations? How quaint.

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