Saturday, August 25, 2018

Monetary Nationalism

More and more we see the trends continue. Not only are countries seeking to preserve their moral values, cultures and traditions, but they are beginning to favor a sort of "currency nationalism".

It is no wonder, as our money system reflects our very essence:
“There is a common understanding that we need to move towards the use of national currencies in our settlements. "
Just as the dollar is a reflection of the global empire's hubris, other national currencies retain a certain character derived from the country and its people (factored into exchange rate considerations). Many times we have heard the call for "dollar abandonment". This may in fact be the first time I have actually seen it phrased as a form of national currency preservation.

Yes, to preserve the tradition of a country's national currency is as much a boon to national sovereignty as the act of preserving cultural tradition. Nationalism, populism, tribalism - call it what you will - it is indeed ultimately an economic phenomenon, once described as "group retreat to avoid paying up".

That may seem an odd way to view "tribalism" ... until we see the systemic impact upon "certain tribes" of economic sanctions for most unusual reasons ... and in most creative ways.

Rejection of the dollar-based global power structure is a rejection of all forms of "interdependent economic structure". The promises of globalism and it's attendant inter-dependencies have been shown to be a betrayal. Power has been shown to be corrupt, and absolute power is being rejected across the world with growing resolve.

Thus, any replacement "global reserve asset" that places one country above all will never be fully accepted by any sovereign. The SDR serves this end by being a basket of sovereign currencies - each retaining its national characteristic. This arrangement takes into consideration the understanding that no "progressive economy" is truly sovereign. Likewise the formerly emerging markets have emerged - these are the new Sovereigns. So, again, our definitions change.

Gold functions as the "global reserve asset" that places no country above another. All sovereigns can agree upon the purity of gold as having "no strings attached" in terms of inter-dependencies, conditions, counter parties or strategic advantage. The "issuer" of gold does not play the sanctions game. It is an asset that all nations claim through possession alone.

After great complexity, simpler times come.

4 comments:

  1. Thank you for bringing this to light. It often gets overlooked inside the bubble. A novel concept....countries settle trade through a decentralized platform facilitated thru IMF. If a trade surplus exists a country has the option to "store" that surplus in gold, a diversified basket (SDR) or a preferred currency based upon future trade....

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  2. Read Snider's latest. He doesn't know it yet, but he's finally coming around to free-floating gold price as a brake and spur.

    http://www.alhambrapartners.com/2018/08/24/eurodollar-university-dark-money/

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    1. "This isn’t an argument for returning to gold, but to find the same beneficial properties that dominated under a gold standard and marrying them to the most modern operations."

      It's called "Freegold" a.k.a. a truly free gold market. You can't have dark money with freegold, but ... you'll never arrive at freegold with dark money either. No market is free. Dark money derivatives price everything (or did you think there is a "private" counterparty in this world who hedges interest rates in the hundreds of trillions against ... what other counter party is that?

      A gold standard will never happen and isn't the answer anyway - we've never had one. Freegold is the true gold standard we never had but desperately need.

      Out of crisis comes rebirth.

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