In an article commenting on the World Economic Forum in Davos, Switzerland, gold and commodities expert Jim Willie had bleak words for the US economic system; and bright one’s for the wise investor.
“The US Dollar is essentially dead, the Davos Forum its funeral wake.”
Never one to sugar-coat the truth, CB and Op-ed writer
Jim Willie detailed in great length why the US dollar is beyond rescue, what that means from a global perspective, who the winners are, and who the new leaders will be. As to-the-point as he is succinct, Willie manages to bluntly answer many of these questions in one brief paragraph:
“Davos provided a flashpoint for a profound change in global leadership. The whimpering US-UK-EU bankers have been shamed. Then after the finger pointing, insults, hand wringing, and gut wrenching, Putin rode in on a white horse carrying a banner. Chinese Premier Wen Jiabao provided the confirmation to what Putin laid out, like a second of a formal motion (…) The US credit supply has already been severed and cut almost completely off. Reliance upon the printing press to finance its own debts is a primary trait of a Third World nation, a shocking fact soon to be recognized.”
goldenjackass.com
Gold and commodities expert Jim Willie.
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Translation; the US – in reacting to a worldwide financial meltdown – has responded by fatuously printing nigh-on-endless amounts of money, a remedy that is typically seen prescribed in Third World nations. This then means that the entire world – which uses the US dollar as its reserve currency – is in for stormy weather in the economic world. But amid the worldwide financial turbulence, surely there will be winners, right? Right. So who will they be?
To answer this question beyond simply saying Russia, China, and those who prefer intrinsic currencies over fiat systems (i.e., those of us outfitted with a brain), it is best to consult another paragraph of Willie’s report. Citing a trusted confidant, Willie tells readers to note his sources words:
“A cherished contact with deep global experience had some very strong words about Davos and the Putin Blueprint. He made additional comments about the Wen trip across major European capitals. In an important message, he said, ‘Read in between the lines of Putin’s speech and you find all the hints you want. The Chinese and Russians are burying the US alive. The Japanese, Germans, and Gulf States keep a very low profile for the moment. The decisions have been made: wait for 2010. They will use the unfolding chaos to introduce the new currency basket and trade rules… There is a brand new system being designed that will borrow from the past and apply 21st century tools for barter / counter trade / excess capacity etc. An Exchange Platform will cut out the banks altogether… [Chinese Premier] Wen delivered his speech in Davos and went straight to Berlin where they put the final touch on the new world currency basket, sponsored by Berlin-Moscow-Beijing-Tokyo-Riyadh. Moscow and Berlin already have a massive counter trade / barter trade agreement in place, and Beijing was eager to joint that platform as well.’”
So as the US (or US-UK-EU) monetary system fails, Willie surmises, a German-Russian-Chinese-Japanese-Saudi Arabian financial network will fill the leadership vacuum created as the current system collapses. But what exactly would this new economic system truly look like, and why will it be better than the current system? Both are good questions, and both have good answers.
Simply replacing the current centralized, fiat banking system with another centralized, fiat banking system would likely end with a similar fate. With that said, a return to intrinsically valued currencies is what Putin and Wen are promoting. “The overriding theme of the Putin plan is a new multi-polar world, where power is shared and no longer concentrated in a dangerous fashion.”
Though Putin’s model did not go into great detail, he did outline four major points:
Russian President, Vladimir Putin. - File photo
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“ 1. Get real and declare hopeless debt securities as bad assets, and write them off. The current crisis will only be prolonged unless the balance sheets are cleaned up. A liquidation process is essential. (The refusal for banks to come clean has resulted in extreme constipation for the credit system, while the patient slowly falls into mud.)
2. Get rid of virtual money, exaggerated reports, and dubious credit ratings on financial securities. He wishes for fundamental asset values to be determined by the ability to generate added value, apart from subjective models. (He refers indirectly to credit derivatives and futures contracts, the artificial mechanisms to control price structures, those onerous devices that act as pseudo-money.)
3. Get away from the single reserve currency system, which he regards as dangerous. Instead, install several strong reserve currencies in a smooth and irreversible switch. (This is the unofficial death knell of the USDollar itself, for alternatives in usage.)
4. Get currency reliability for foreign reserves management, which can be used by other states. This can be achieved by enabling more open monetary policies, and enforcing economic and financial discipline. (This will enable regional stability and cooperation.)”
Points three and four are particularly important. One and two are simply common sense. Considered in sum, this is good news for those with the capital to invest in gold, silver, and other precious metals; and also good for those of us that are tired of fluctuating currencies and endless inflation. Of course, it is very bad for those who have governed and guided the US-UK economic model. Putin’s recommendations not only highlight the failed theories and principles of the US-UK economic system, but also cuts them out the new economic order – leaving both nations in the metaphoric lurch. Or as Willie said it, with a new economic system being not only promoted but also widely adopted, “dire straits come to the US shores very soon.”
How will we – the average global citizen – be able to recognize a shift to a multi-polar economic system? We should look for three things.
First and foremost, the adoption of intrinsically valued currencies in any nation –particularly those mentioned in the multi-polar financial group – should signal to all of us that the system Putin outlined is in fact coming to fruition.
Second, an absence of meaningful action in the US (that is, an absence of the adoption of the first two of Putin’s previously mentioned recommendations), coupled with irresponsible spending (by which I mean stimulus packages that stimulate nothing at all) will be a gigantic signal for all global citizens that the US dollar and US financial system is beyond repair.
And finally – and perhaps the easiest to follow – keep a close eye on relations between Russia, China, Germany, Japan, and Middle Eastern nations – primarily oil rich nations (another commodity that could be used to value an intrinsically valued currency). If foreign conversation between these nations continues to pick up, it is likely a signal that nations not named Russia and China are interested in establishing a new financial system; one that is different than the US-UK model that brought us to 2009.
So, are any of the above currently happening? Well, Russia has been floating the idea of a
gold-backed rouble. If Russia does opt to back their currency with gold, it would surely establish the rouble as the most trustworthy currency in the world, and also cause other nations with the ability to create intrinsically valued currencies to follow suit.
To address the second point, it would be foolish to decidedly declare the actions taken in the US as successful or failures at this point. To answer this question accurately, we all need a few more months. Come Independence Day in the US, 2009, we should know if the US is going to be able to save itself, or if Willie and Putin are right.
And to address the final point, the
European tour that Chinese Premier Wen Jiabao is currently on suggests that relations are picking up between nations who feel able to fill the potential void left by the collapse of the US dollar.
In all, there are plenty of reasons to believe that the article Mr Willie has penned is not only worthwhile reading, but is also completely prescient. However, much like I am hesitant to declare the US financial recovery successful or otherwise, I am also reluctant to absolutely say if Willie is right or wrong. In any case, I know that in the coming months I will be closely following international relations, and also using my fiat currency to buy intrinsically valuable commodities.
Thanks for reading.
GRMM
