Tuesday, October 18, 2016

Warren Coats Interview - China, Gold, SDR, and More

Here is an interview I can easily recommend to readers here. Rory Hall of The Daily Coin interviewed Dr. Warren Coats who we have featured here on the blog a number of times. The interview covers a broad array of issues. Good questions are asked and Dr. Coats is allowed to give detailed answers to explain his ideas. This is the kind of respectful discussion I wish we had more of these days. You can listen to the interview here or below.



My added comments:

Dr. Coats in this interview repeated what he has told me many times by email. He agrees that the current monetary system is flawed and would prefer to see a global reserve currency (in this case the SDR) tied to what he calls a "hard anchor". By this he means he advocates changing the IMF rules so that the SDR would be valued using a basket of goods rather than using a basket of fiat currencies as is used currently. He thinks a basket of goods would provide more stability than using one such as gold by itself.

When I read comments on all this on various internet forums I can see that there is lot of confusion and misunderstanding that exists on these issues. Here is my bullet point list of a few of them:

- the IMF can magically back the SDR with gold at any time as some people are suggesting is about to happen. In fact, as Dr. Coats explains, under current IMF rules they cannot do this at all. They cannot even implement Dr. Coats own proposal to use a basket of goods under the current rules. It would require a change to IMF rules agreed to by the member nations to do this as Dr. Coats explained (note: the US still has veto power on this at the IMF under the current voting quotas).

- there is a secret plan by China to either back the Yuan directly with gold or insist that the SDR at the IMF be backed by gold. Dr. Coats stated that he knows of no such plan at this time and I can find no evidence in any public documentation that supports this is the case. However, I don't rule out that China may have interest in promoting gold in some way as part of the monetary system in the future. It's just an unknown for now and all we really have is a lot of people speculating about it without providing any verifiable official source that could support that China plans to do this. If anyone can point me to an official source (see added note below) confirming China plans to back the yuan with gold, I would happily publish it here. The fact that China is buying lots of gold is circumstantial evidence, but far from conclusive hard evidence. Jim Rickards says they are doing this so as to be ready for a global currency reset conference when the new crisis he predicts unfolds. Time will tell.

- there is an "elite plan" waiting in the wings to implement a new global currency using the SDR which will unfold very soon that has already been agreed to globally. I can find no evidence at all that this true. Instead, what I find is a lack of urgency by current global policy makers to make ANY major changes to the current monetary system at all. And beyond that, a lot of disagreement within the "global community" on how to change the system if it were to happen. I do find that there is a lot of consensus around using the SDR as the global reserve currency, but still no broad consensus on how to actually implement that in the real world. The "Real SDR" proposal Dr. Coats has made is the ONLY such proposal in the world that I am aware of at this time. Dr. Coats said in this interview and has told me directly many times that without a major crisis to trigger such change, he does not think the political will to make these kinds of changes exists currently. Other similar sources such as former Group of 30 Director Robert Pringle have told me the same thing. For some reason this is upsetting to many people who seem to prefer to believe all kinds of wild speculation about what might happen without any kind of credible official source to support their belief. 

I can't rule out that some kind of agreed secret plan is ready to be implemented very soon since it would be secret and therefore I obviously wouldn't know about it. What I can say is that I find no evidence that this is the case from the information that is publicly available and from the direct input I have had from sources like Dr. Coats and Robert Pringle (and some others who prefer to remain anonymous). 

Jim Rickards does tell me he believes that a plan would quickly be agreed upon to use the SDR to replace the dollar, but he agrees that it will take the crisis he predicts to trigger that. (his new book will discuss this I am sure) He also adds that he does not know the potential timing for any such crisis which is why it is important to stay alert.

Again, if the world were to fall into the kind of major new crisis Jim Rickards predicts, perhaps things would quickly change. Until that happens though, I believe it is misleading to suggest that some kind of plan for major change like this is about to rapidly unfold without the trigger of a new major crisis to create the sense of urgency required to get consensus for such change.

Added note: Ronan Manly reports on his twitter feed that he was told at the recent LBMA Conference in Singapore by Yang Qing of Bank of China that he feels in the future the Renminbi should have some gold backing. Yang Qing is not an official of the PBOC, but is an official of Bank of China. It's not an official endorsement by China for gold backing, but is a noteworthy statement that does add circumstantial evidence and should be reported here.

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