Friday, March 11, 2016

Some Input from Readers

I have already mentioned how much I appreciate the great readers here for sending me article links and also offering me their comments by email. All of it is helpful and the input has been very kind and offered in an effort to help me do a better job for blog readers. I'm thankful for it.

Below are some links I got from some readers recently. I will just place the links below and let readers select any they want to explore. Below that I will add a few comments on where things seem to stand as best I can tell right now overall.


Some prior writing/speeches by Claudio Borio (BIS) in which he mentions the gold standard but does not take a position on it pro or con:

My added comments: The above are just examples of articles that readers sent me that I otherwise would miss. They along with helpful comments make it easier for me to produce better quality blog articles.

A Quick Take on where things seem to stand right now:

Really, not much change from the recent article I wrote in Q&A style here in an attempt to answer the most commonly asked questions I see. All the people who believe we are seeing the start of another major crisis now still feel that way. Those who think this is not "The Big One" (as Jim Rickards put it recently) still seem to feel that way.

Input I see and get from sources who are knowledgeable and connected from within the present system still does not indicate that there is any feeling right now that a major crisis is imminent. I do see some higher levels of concern that growth is not doing as well as many had hoped, but not that another major crisis is coming soon. Of course, we rarely get any advance warning when a crisis does emerge.

This election cycle in the US is really creating a wild card dynamic along these lines. Obviously, it would not be in the interest of the Obama Administration in the US (or the US Fed) for a major crisis to erupt during this election year. The intense anger showing up in voters across the political spectrum suggests that whoever would get blamed for such a crisis would lose credibility with the general public for a long time (Donald Trump would likely win easily for example if he is the nominee). We can expect that a full fledged revolt (politically speaking) would probably take hold in the US if we get a big crisis during this year before the election is held. We already nearly have one now without a major crisis. I would not want to be any kind of monetary official if a major crisis broke out this year.

This means that we can expect that the politicians and monetary officials will probably literally do anything to avoid that happening during this year. But there are signs of stress everywhere and, as BIS economist Claudio Borio noted recently, confidence in central banks has perhaps started to falter. I cannot even imagine what would happen this year in the US if we were to get another major crisis such as Jim Rickards has predicted.

If we don't get that crisis, by no means can we relax and say all the problems are solved. The systemic risks which IMF and BIS have pointed out over and over still exist and continue to grow in some cases. Whoever is elected President in the US will probably face the most daunting challenge in our lifetime trying to avoid another major crisis. If one happens during their term, we have no idea how they would handle it as the topic has not even been raised in all the many debates. 

All of this is why we have boiled this down to two major questions we follow here over time:

1) Will we get another major crisis worse than 2008 as many predict?

2) If we do, will the SDR used at the IMF take on a more prominent role in replacing the US dollar as global reserve currency? (as Jim Rickards predicts and Dr. Warren Coats (former IMF) proposes)

We think these two questions are the keys to any potential major monetary system changes that we might see in our lifetime (I am 60 years old now). If we get a yes answer to #1, some kind of major change is coming for sure. If we then get a yes answer to #2, we will have some idea what solution will be offered by current monetary officials as we have covered that fully here on the blog. We still won't know if the public will accept the solution offered by current officials or not because we cannot know if the public will still trust those officials if they get blindsided by another major crisis. That is another wild card in a complex system.

What we can assume is that a yes answer to either or both questions above will mean we will see some kind of major monetary system change that would impact our daily lives in a real way. Again, this is why we focus on these two questions here. 

Since no one can know the future we cannot predict with surety the answer to any of the questions above. We just know the potential for major change does exist and so we have to stay alert and informed and try to formulate a backup plan in case "The Big One" ever does arrive. In our view here, most of the political issues debated in the US are minor in comparison to the answers to these two questions in terms of the potential to have a direct impact on the life of the average person. Unfortunately, these two questions are not even on the radar for either major political party or anyone running for President. We will follow it here hoping we do not get a crisis, but encouraging readers to have a plan in mind for one just in case we do.

No comments:

Post a Comment