Did Anything Dramatic Happen at the BRICS Summit? Maybe

The buildup to the August BRICS summit was quite something. Predictions of what would be announced ranged from an announcement of a new gold backed BRICS+ currency and the end of the petrodollar to the view that nothing of substance would come out of the summit.

So, what is our take here? First, there was no announcement of not only any new gold backed BRICS+ currency, but not even any kind of new BRICS+ currency. There was talk of using BRICS national currencies more for trade which is nothing new.  There was talk about studying the issue of a new BRICS currency going forward. So this was also nothing new from the BRICS and not a dramatic announcement. 

On the other hand, BRICS did announce six new members will be joining the BRICS in January 2024 including both Iran and Saudi Arabia. So was this announcement a dramatic game changer? Maybe, depending upon what happens next year. How energy is priced is for sure a key component of how the present monetary system works. The decades long petrodollar agreement whereby the Saudis agree to price and sell oil in US dollars definitely provides strong support and global demand for US dollars. As things unfold, if that agreement goes away and the largest global oil exporters (aside from the US) no longer price and sell oil in US dollars, we may have a potential game changer on our hands. It's what we will monitor here over the next year.

One lesson to take from how this summit played out versus how it was built up is that the norm is that things rarely change quickly in the global monetary system. It's just not how things happen unless some kind of dramatic unexpected black swan event happens suddenly. We have long reported that here, even as many dates have come and gone where forecasts that "the monetary system will be turned upside down" did not pan out. Does this mean that cannot happen? Of course not. There are many systemic risks (that we have documented here on this blog) that can arise at any time to destabilize the system. This BRICS summit however was not such an event in terms of any immediate major shock or impact on global markets. We'll see if Saudi Arabia joining BRICS leads to something more dramatic over the next year.

As various analysts react to the summit, we'll post some links below over time. For now, there is nothing upcoming we are aware of to report on related to major monetary system change, so we'll return to just monitoring events here.

Official Summit Declaration

Item #45 (bold and underline is mine)

"We task our Finance Ministers and/or Central Bank Governors, as appropriate, to consider the issue of local currencies, payment instruments and platforms and report back to us by the next Summit." (scheduled to be held in October 2024 in Russia)

The six new members to what I guess will be called BRICS+ are Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. This article says some analysts facetiously suggested a new name of BRICS + OPEC.

Analyst Reaction to BRICS Summit:

Jim Rickards - Here is a link to the last public article from Jim as the BRICS summit began and here is a link to his latest article reviewing what happened at the summit and what he sees going forward. Although BRICS did not announce a new gold linked currency at the August summit, Jim remains convinced that is still their long range plan with the inclusion of Saudi Arabia as a new BRICS member being a first step in the plan. New article 9-6-23 -- The Dream is Dead.

Alisdair Macleod is a gold market analyst who has been writing all year that the BRICS would announce a new gold backed currency at the summit which would then trigger a major global loss of confidence in all fiat currencies including the US dollar. In this new audio interview, he acknowledges that his prediction did not pan out and goes on to offer his thoughts on why. Basically, he believes China prefers not to move forward with a separate BRICS+ currency at this time. He still believes a gold back BRICS+ currency will eventually emerge.

Willem Middelkoop - In this new interview on Kitco, analyst and financial system author Willem Middelkoop offers his take on things.

Silk Road Briefing Article

This article in Silk Road Briefing suggests any common BRICS+ currency will not happen soon and only possibly after other events listed in the article take place. The article does claim that a potential name for an eventual common currency has been chosen however (the R5).

Global Times (Chinese Publication) 

This article in Global Times quotes an anonymous "insider" as follows making it clear what the long term goal is for the BRICS.

"people are witnessing the twilight of the petrodollar"       . . . .

"The selling of US dollars and US Treasuries will be accelerated," the insider noted.

Business Insider  - BRICS Leaders Appear to Disagree on a Common Currency

Kinesis & Indonesia Launch New Gold Backed Digital Currency Alternative

While no news came out of the BRICS Summit concerning a new gold backed currency, in their latest weekly video update, Kinesis spokesperson Andrew Maguire reports the Vice President of Indonesia has now officially launched it's gold (and silver) backed digital currency alternative to the full population of Indonesia (PosPayGold -use Google to translate to english). Maguire also hinted that more government partnerships involving digital gold and silver backed currencies are in the works in the future. We'll monitor that here in the coming year.

Will Something Dramatic Happen At the BRICS Summit in August?

With very little happening to suggest any major change in the global monetary system for quite some time, I have not written much here on the topic. That's because we have spent years here documenting the risks to the system and offering input from a variety of leading experts around the world on how to potentially reform or replace the existing monetary system. In the past several years we have noted the ongoing political stalemate between those who view the world from a "globalist" perspective and those who view the world from a "nationalist" perspective. Our analysis here is that they have been locked in somewhat of a stalemate in terms of gaining enough political leverage to push forward their agendas for the future. Since each side has a different agenda for how the monetary system should work, the outcome of that battle could very well impact the monetary system. However, at this time, it appears that battle will just continue until the 2024 US elections. If one side or the other gains leverage in those elections, we might see some significant changes. But it is also possible that the elections will just end up with divided government once again. That tends to negate any significant change coming from political policy changes. So for now, no change on that front from the perspective of our analysis here.

There is however an event upcoming in August (the BRICS Summit) that many are eagerly watching with the view that something dramatic may be announced that could impact the monetary system. Some are forecasting that a new BRICS+ currency will be announced and that it may be tied in some way to gold. There are various speculations on how gold might be involved. Jim Rickards (an expert we follow here and get some input from) has written an article recently talking about how he sees this playing out. He believes that a new BRICS+ currency will likely be tied to a specific weight of gold (rather than fixing a set exchange rate between the currency and gold) whenever it is announced. Jim also sent me a link to this interesting article which he says is a good read on this topic.

There is some intrigue ahead of this summit to be held in August. In the past few days, articles are appearing that seem to put out conflicting statements and signals from various BRICS nation officials as to what will actually happen in August. Fortune put out this article quoting the VP of the BRICS New Development Bank as follows:

“The development of anything alternative is more a medium to long term ambition,” he said. “There is no suggestion right now to creates a BRICS currency.”

Soon after this article comes out, articles like this one carried on Kitco appeared quoting a Russian official as saying the BRICS will in fact announce a new "gold backed" BRICS currency system. Other non mainstream media sources are also reporting this citing the Russian backed RT (Russia Today) media as "official" confirmation. So far, no western media outlets I have found are confirming this story coming out of Russia. 

Obviously, a new BRICS+ currency backed in some way by gold has the potential to be a significant event in terms of what we follow here. If it does happen, how markets react to that event needs to be monitored to see if it is viewed as significant or not. It's appropriate to try and understand what will actually happen in August and keep an eye on it.

So, what is going on here? Why are we seeing clearly contradicting statements from various BRICS officials coming out like this ahead of the August summit? We cannot know, we can only speculate as to the reason. Here is a short bullet point list of some possible explanations:

-BRICS officials are not properly coordinated and are putting out conflicting statements due to poor communications between them

-the BRICS do plan to make a new currency announcement, but want to shock and surprise the markets so as to try and hurt the US dollar as much as possible by surprise

-BRICS nations are truly conflicted about whether to move forward with this kind of announcement right now. They do plan to do something like this eventually, but not all members are on board with moving forward at the August summit

-Russia is putting out it's statement because it has the most incentive to try and hurt the US dollar given it's conflict with the West in the Ukraine. So, they hope to try and force this announcement at the August summit by putting out this statement ahead of the summit

-western media want to downplay any announcement of such a new currency to try and negate any negative impact on the US dollar as part of the ongoing conflict with Russia in the Ukraine

Fortunately, we won't have to wait too long to find out what will really be announced and how much impact it will have. The main point to make in our analysis here is that you must view these monetary system battles as part of the much bigger political war ongoing between the nationalists and the globalists. The present globalist US dollar based monetary system of course does not want to see anything seriously disrupt that system. The nationalists see disruption of the US dollar based system as a key part of their strategy to upset the globalist hold on the global monetary system. So, in our view here, you should follow this from that perspective to better understand what is actually going on. We'll follow it here and report what happens after the summit.

Other side note: In our world today, we see people sharply divided on many important issues. In the monetary system realm, those who see the present fiat US dollar based system as corrupt and close to failing believe we are on the cusp of major change that will see a return of gold to the system one way or another. Those who are what is called the "mainstream view" don't see this happening and assume the present system will continue into the future with just various tweaks to the system (such as CBDC's issued by central banks) gradually in the years ahead. Both views acknowledge there is always a risk of systemic failure opening the door for some kind  of major monetary system change (which is what we monitor here). But they have vastly different ideas on what should reform or replace the current system. With that in mind, I am linking below to an interesting recent interview between Andrew Maguire and Danielle DiMartino Booth. Andrew Maguire is a well known icon for advocating for the gold and silver markets and Danielle DiMartino Booth is a former official at the Dallas Texas branch of the Federal Reserve. So they come from very different perspectives as this interview illustrates, but they also agree on some points. DiMartino Booth has become an outspoken critic of Fed policy on many issues.

Civil Discussion on key Monetary System Issues

First, congratulations to Andrew Maguire for conducting an interview like this. Here we have a civil and thoughtful discussion of some of the key issues we see today related to the monetary system. So often what we see is different sides only pushing out their talking points in a echo chamber fashion without even listening to another point of view. This discussion is not like that which is why I am featuring it here. Having covered this topic for many years, I am well aware of the divergence of views between those who view a "sound money" system as being important and the need include gold as part of the system for public trust and confidence on the one hand. On the other hand is the view that the fiat US dollar based system is entrenched so deeply it is not going to be disrupted for a long time unless a catastrophic collapse of the present system happens (something both sides concede is possible). So here in this interview I think we see a real honest discussion centered around that divergence of views well worth listening to. In our view here, we need more of this kind of exchange of ideas and respect for different views across all aspects of society.  So we applaud this example of a civil discussion about issues that are certainly very important and will likely decide how the future of the monetary system unfolds. In August we will find out if anything along these lines is imminent or not.

Added notes related to the August BRICS Summit 7-19-23:

News reports indicate Russian leader Putin will not attend the Summit in person (Lavrov will instead) but will attend via video phone conference. 

Jim Rickards publishes this article again pointing to this BRICS summit as an important event in terms of potential its future impact on the global monetary system.

Added notes related to the August BRICS Summit 7-21-23:

Reuters reports the discussion for a new BRICS currency is not on the agenda for the upcoming summit in August.  However, the South China Morning Post quotes the President of South Africa assuring the President of Brazil that a BRICS currency discussion is on the agenda.

Added note related to the August Summit 7-22-23:

In this new interview, Jim Rickards addresses the conflicting statements from various BRICS officials about what will be on the summit agenda in August. Jim's comments in this interview are very interesting. 

Added note related to the August Summit 8-14-23:

In this interview, gold dealer Andy Schectman offers his thoughts on the upcoming BRICS summit and the future afterwards.

Just a little over a week ahead of the summit, there continues to be a wide variety of views on exactly what will be announced at the August summit. The two keys we will watch here are what new countries join the BRICS (especially if Saudi Arabia is one of them) and what is announced in regards to some kind of new BRICS+ payment currency system. The views on that last one are all over the board ahead of the summit.

Added note related to the August Summit 8-16-23:

In this new article, former Goldman Sachs economist Jim O'Neill says nothing of significance impacting the US dollar or monetary system will come out of the BRICS August Summit.

Added note related to the BRICS August Summit in progress 8-23-23:

The AP reports that discussions are being held to decide about adding new BRICS members including Saudi Arabia. This is a key we are watching here. So far no mention of a new BRICS+ currency being close to implementation in news reports from the Summit. We'll review the Summit after it concludes to try and determine if anything dramatic happened or not.

Added note related to the BRICS August Summit in progress 8-24-23:

Iran and Saudi Arabia are among 6 nations set to join China and Russia in the BRICS economic bloc | AP News

AP reports that Six Nations Including Saudi Arabia and Iran will become members of BRICS starting in January 2024. We do view this as potentially significant news which could impact the present dollar based monetary system depending upon what follows next. We'll review it after the summit concludes. Some expected an immediate impact on markets this week, but it appears if any impact emerges, it will happen over time.

Where Are We?

Not much has changed so not much has been posted here in terms of where things may be headed for monetary system reform or (even more dramatic) monetary system failure requiring some kind of new "restart" monetary system. 

Everything posted here for years is pretty much still valid today. All the monetary system risks listed and explained mostly still exist and if anything are riskier than ever. All kinds of various proposals to reform the system or replace it with a new system have been offered and many documented here on this blog. For years, I got direct input from a variety of leading experts from around the world on these issues. Virtually all of them agreed with the risks that exist to the present monetary system. Many of them offered a variety of ideas on the best ways to fix the system going forward. None of these reforms have gotten any traction anywhere as far as I know. 

So, Where Are We Today and why are we where we are?

The best answer I can give is that we are still clinging to a wobbly debt based monetary system administered by central banks using national fiat currencies. Debt levels never imagined possible are now accepted as routine and business as usual. The world seems to accept that all this debt will not be paid off unless it is paid off with currencies that continue to lose significant purchasing power over time. So long as governments and central banks can continue to create money with computers and people keep accepting it for use in business and trade, business as usual does just go on and on and on.

Having followed this for years, I can attest that almost everyone accepts the above analysis as true. All kinds of official warnings have been issued related to the risks that exist to the current monetary system, so it's not that no one realizes the risks exist. 

So why does nothing change?

All I can offer here is my own opinion and speculation based on covering this in some detail for a long time. The global political stalemate between two very powerful factions appears to remain in full force. There are two basic forward looking political agendas or ideas on how the future should look. Both sides are unwilling to compromise and are determined to eventually prevail. So long as this condition continues, the most likely scenario is that every possible effort will be made to prop up and sustain the current unstable (and quite corrupt in many cases) system. I believe the reason for this is because both sides in the larger global power struggle understand that whatever happens to the monetary system impacts every person on earth in their daily lives. If the system fails and that results in major human suffering on a global scale, most of the world population is going to be very angry and looking for who to blame for this total disruption of their ability to plan and conduct their lives freely. No one on either side of this power struggle can really be sure who will get the blame. So neither side has an incentive to see it fail because of the risk their side will get the blame and will suffer complete loss of power and influence for a long time (probably for generations). So the stakes are enormous for both sides.

Thus, whatever has to be done to keep the existing massive debt based system afloat continues to be done unless one side or the other thinks they can leverage a system failure to the advantage of their side. That's my take on it.

So, when will that come to an end?

That is the Trillion dollar question that apparently no one can answer. Everyone knows it cannot go on forever. No one knows when it might fail dramatically. So, politicians and officials on both sides of the major power struggle are spending their time and effort trying to spin whatever talking points they can out to the public to try and insure the other side will get blamed when the system does fail. That's the objective now on both sides. No actual efforts at compromise or genuine solution finding are in play at all as best I can tell. 

So, what does the average person do in a world like this?

There is not much of anything the average person can do to impact what policy makers and officials decide to do in my opinion. They are going to make decisions based upon whatever they think will advance their cause (their side) and provide them with political power to shape the future agenda. Certainly people should vote and express their views as they feel led to do so. But in reality, there is no evidence I see to suggest policy makers will pay attention to any of that other than needing people's votes to be in power. Once they get their votes, they will go back to ignoring them in terms of their policy making as I view the situation. 

Here is what I would offer for the average person to do in bullet point form in this kind of world:

-stay as informed as possible about what is actually happening by looking at many various forms of media sources. Follow them over time to establish which information sources are more credible based on what actually happens, not what you prefer to happen or want to believe. There is massive misinformation and disinformation in circulation from all directions. Time usually tells what information is more credible. 

-try to be a responsible adult focused on doing the best you can to take care of yourself and your family so as to be as prepared as possible for whatever the future may bring. Try to stay informed on the big picture, but don't over stress about it.

-reduce debt as much as possible, build up an emergency savings fund if possible, add some amount of precious metals to your savings to better diversify against a potential systemic failure.

-be a person of honesty and integrity and kindness to everyone in your circle of influence. The world is badly divided and there are people who don't mind trying to capitalize on that to gain wealth or power. While people will always disagree on important issues, there is no reason they cannot make an effort to get along and work together whenever possible. A couple of major common goals should be human freedom and a decent standard of living for everyone. People of genuine good will with those key goals can usually find ways to work together despite differences.

I'll continue to monitor events. If I become aware of something new that could involve a major change in the monetary system (either a planned change or an unplanned systemic failure) I will post it here as always. For now, the global power struggle and political stalemate continues until it doesn't -- and no one knows when it will end as far as I know. It is possible we could see some closure on the political front by the 2024 US elections. The monetary system remains at risk of some level of failure at virtually any time.

Is There Anything That Could Disrupt the Current Monetary System? - Update

We have noted that the ongoing movement by the BRICS nations to not only bypass using the US dollar but to actively promote an alternative currency is the thing to monitor in terms of anything that could potentially disrupt our present US dollar centered monetary system. It is assumed this process would unfold over a long term, but the US sanctions and weaponization of the dollar have created a sense of urgency to get more serious about De-Dollarization, especially for the BRICS nations and now nations like Saudi Arabia and Mexico.

Below are a couple of links to new articles discussing that issue. 

Russian Official - BRICS Nations working on Fundamentally New Currency (a partially gold backed one)

7 Signs that Global De-Dollarization Has Shifted into Overdrive

At the same time that US weaponization of the US dollar and SWIFT system have created an urgency to bypass the dollar globally, the US Federal Reserve is trying to fight stubborn inflation and now a potential banking instability at the same time. Meanwhile, the US is deadlocked over  raising the debt ceiling limit. That battle is expected to extend up to the point in time the debt ceiling would be reached this summer. In addition, we have OPEC announcing oil supply cuts apparently designed to put upward pressure on energy prices and by extension, inflation. So a lot of points of stress on the system at this time. It is certainly time to monitor events closely on several different fronts.

Added note 4-11-2023: In this new article, Jim Rickards comments on how the process of de-dollarization has clearly sped up lately and is likely to continue to do so due to US weaponization of the dollar in the form of sanctions against nations it does not like. Once you start using money and the monetary system as a form of weapon to punish those who are deemed to be "bad guys", trust in the entire dollar based system starts breaking down. After all, who decides who is worthy of getting to use their money and who isn't (who are the good guys and who are the bad guys)? To many people around the world, the US government appears to think anyone who does not want to support US dollar hegemony is a "bad guy." This creates more urgency to use something other the dollars which can be seized or banned from use at any time.

4-17-2023: US Treasury Secretary States What We Have Reported Here - US Sanctions Threaten Dollar Hegemony  She appears to think the tradeoff is worth it, confirming why many people around the world view the US as seeing itself as the judge of who is a "good guy" and who is a "bad guy".

The Banking System - Some Things to Know

Readers here know that this blog has followed events related to our monetary system for many years in an effort to monitor any events that might lead to some kind of disruption to the present monetary system whether that be major reform or a completely new monetary system. 

Extensive effort has been made here to provide the best quality information on this topic we can find. On the right side of the blog are links to many various systemic risks that have been identified over the years. Another link leads you to several different proposals or ideas on how to reform or remake the present monetary system. These come from some of the best experts (in my opinion) in the world on this topic. So all that archived information remains available and free to access for anyone who wants to use it.

Now we have a new set of issues arising with banks around the world and including in the US. By now, everyone knows a couple of large US banks failed and the FDIC and Federal Reserve have intervened in an effort to maintain public trust in the banking system. So, it is natural to ask the question -- Is this problem going to worsen and become a systemic risk to the entire monetary system?

We cannot answer that question here. We have advised readers that systemic risks like this are present all the time and at any time one or more of the risks could result in a failure of the present system. This most recent situation simply serves to remind us of that fact. It's too early to tell if this event will worsen and trigger a major crisis leading to major problems with the present system. Our advice here is to monitor events closely and if possible review your own banking situation to see if or how you could be impacted.

The best thing we can do here is to just try to provide some reliable basic information in an effort to help readers assess things. With that in mind, below is a bullet point list of information with that goal in mind.

-Some banks are experiencing problems with liquidity (having enough ready cash to meet funding requirements such as depositor payments and withdrawals). 

-Some banks are struggling because the rapid rise in interest rates has caused some of their investments in things that have an inverse relationship with interest rates to drop in current market value. For example, government bonds drop in value when interest rates rise. So long as the bank does not need to liquidate the bonds to meet cash demand requirements from depositors, they don't have to sell the bonds and take a loss.

-If for any reason cash demand requirements from depositors exceeds available ready liquid cash, then banks have a problem. They could be forced to sell their long term investments at a loss to raise the needed cash.

-The Federal Reserve, recognizing this problem, created a program to allow banks needing cash to sell their bonds to the Fed for full market value even though their current market value has dropped below what they paid for the bonds (because interest rates have risen).

-The FDIC insures each individual bank deposit account up to $250,000, however they do not insure any amount over $250,000 unless the bank involved is deemed to be a "systemic risk" if it fails. This means many smaller regional banks do not currently have protection above the $250,000 amount since they would not be viewed as "systemic risks" to the entire banking system. Congress is discussing this situation right now per this article on CNBC.

Given the facts above, obviously anyone who has a bank account needs to understand the above information and review their bank to assess what level of risk it may have at this time. One tool I did find that may be helpful is found on this link for iBanknet. This web page allows you to search individual banks where you can find a link to their Balance Sheet information.  You may have to enter a code to prove you are not a computer bot first. 

Once you find your bank and go to the link showing the Balance Sheet information, you can then review the assets and liabilities the bank has. It will give an idea of what kind of risks that particular bank may or may not have at this time. The data is pretty current on the banks I looked at.

A couple of other information resources you may find of value or interesting to read are linked below.

If we find credible information regarding the impact of this situation on the overall banking system and/or the monetary system, we'll post it here. (note: Central Banks take global liquidity action)

Recent Update/Discussion on the Banking Issues from Jim Rickards

Alisdair Macleod - Banking Chaos

Dr. Warren Coats (former IMF) - Econ 101 and Bank Runs

Jim Rickards - The Fed Finally Broke Something

Conclusion: It's impossible for anyone to really predict how this situation will play out. Our entire system is fully based on public trust and confidence both in the monetary institutions they rely on and also the currencies issued by various governments. So long as the public maintains trust in that, it is easier to operate a more stable system. If public trust is eroded too much, it becomes much harder to operate a stable system. Each person has to assess for themselves what level of public trust exists at any given point in time. No one can 100% sure what human behavior/reaction will be when problems arise in any system. 

Is there anything that could disrupt the current monetary system?

 Having followed this question now for a decade I came to the conclusion that so long as the US dollar remains the primary global reserve currency we are unlikely to see any major changes to or current monetary system. The catalysts for major change would have to come from some kind of major political realignment in the US that no longer priortized US dollar hegemony. The last two major elections in the US seem to leave the nation politically gridlocked with no impetus for major change emerging as we reported earlier this year. 

So, at this point, the only question to ask is if there is anything that could disrupt the current monetary system? Of course, if the present system were to implode under some kind of major financial crisis, we would see an immediate power struggle to control whatever new monetary system emerged. That's unpredictable both in terms of timing or in terms of who would control such a new system. 

There is one obvious other scenario out there that could eventually disrupt the current system if there is no major crisis leading to collapse of the present system. It is clear that the world has divided into two major competing factions. The US/West led by the western central banks and institutions such as the IMF and the East led by the BRICS nations. The proxy war in the Ukraine has caused monetary system control issues that mostly are behind the scenes to emerge more into the public arena. The Russian invasion into the Ukraine led to the US/West weaponization of the US dollar and the global SWIIFT payments system in retaliation to the Russian move into the Ukraine. 

While the military confrontation gets most of the news media and public attention, anyone who has followed these monetary system issues for awhile understands that the real war is for control of who will decide what money is and who will control it's supply and distribution for commerce. That is where the real power lies and why nations (both West and East) are willing to use military power to gain the advantage.

We have reported here that the BRICS nations led by Russia and China have long talked about ways to bypass the US dollar and undermine the monetary power structure controlled by the western central banks and the IMF. For many years this discussion has continued, but without much actual change to the present US dollar dominated system. If that system is ever to be undermined, it will most likely happen as a result of the direct efforts of these eastern nations to make it happen. 

With that background, here is a link to an interview in April 2022 with Russian economist Sergey Glazyev. In this interview, Glazyev lays out the most detailed plan I have seen on how the BRICS nations can eventually bypass and undermine the US dollar. 

Russia's Glazyev introduces the new global financial system

If you want to read a detailed description of how the BRICS hope to disrupt the US dollar hegemony, this article is worth your time to read. I cannot predict whether this plan will be successful or not, but a key component of it is to get the world to move away from trading oil in US dollars (the so called petrodollar system that has run the world since the 1970's). Just yesterday Reuters reports that China is pushing hard to get Saudia Arabia to switch to using Yuan for oil sales. This excerpt from the article is worth noting:

"At the start of Friday's talks, Prince Mohammed heralded a "historic new phase of relations with China", a sharp contrast with the awkward U.S.-Saudi meetings five months ago when President Joe Biden attended a smaller Arab summit in Riyadh."

The article makes it clear that this meeting between China and Saudi Arabia is part of the ongoing effort to undermine the US dollar:

"President Xi Jinping told Gulf Arab leaders on Friday that China would work to buy oil and gas in yuan, a move that would support Beijing's goal to establish its currency internationally and weaken the U.S. dollar's grip on world trade."

As events unfold, what we should monitor is to see if Saudi Arabia moves away from the US dollar for oil sales (added note 1-17-2023). First to perhaps the Yuan and then later to the new proposed alternative reserve currency proposed by Russian economist Glazyez. If anything is going to disrupt the current US dollar based monetary system, it would likely be something along those lines. 

Added note 12-22-2022: Alisdair Macleod offers his thoughts on the potential for a major change in the current monetary system in this article. It delves into the "end of the petrodollar" speculation. This is a view that has been around for quite some time, yet the US dollar based system has persisted. We have stated here for quite some time we think it will take a major crisis in the current system to change things. We still hold that view here. We don't try to predict the timing of any such event.

Added note 1-9-2023: It was brought to my attention that Russian Official Medvedev recently posted his predictions for what could happen in 2023 on his Twitter account (see them here). While many of these seem far fetched, #10 on his list (pasted in below) did get may attention and does relate to what this blog monitors. I passed his prediction #10 on to one expert and he replied that it was possible that one could unfold some time in the future. Certainly the proposal outlined by Russian economist Glazyev above fits in with this prediction. Here it is:

"10. The Bretton Woods system of monetary management will collapse, leading to the IMF and World Bank crash. Euro and Dollar will stop circulating as the global reserve currencies. Digital fiat currencies will be actively used instead."

Added note 2-24-2023: This new article by Alisdair Macleod is worth reading. It updates the potential for the BRICS nations (led by Russia) to move forward with a new monetary system that could disrupt the present dollar based monetary system. It also covers recent news related to CBDC's suggesting we are not likely to see those disrupt anything any time soon or perhaps forever.

Added note 3-13-23: For those following the bank problems in the US, this new update from Jim Rickards is probably as good a take on things as you are going to find.

Did the US Election Open the Door for Change?

The short answer is no.

Not much new to report here. The US midterm elections were basically another tie just confirming that the public is split 50-50 which is not news. It's been that way for some time in the US. The slight shift towards the Republicans in Congress will mean the nationalists do have a bit more leverage if House of Representatives does fall under Republican control as expected (they are expected to have a 5-10 seat majority as this is written). 

The Republican side of the House did become significantly more nationalistic, so that is more of what changed than the actual numbers in terms of seats held by the Republican party. Several of the incoming new Senators are also more nationalistic than the people they are replacing, so the Senate will also move a bit more nationalistic. 

I don't expect any of these election results to provide any impetus for major change in the monetary system any time soon. The more likely result is just continued gridlock and no desire for major changes to the status quo in the monetary system. 

As we have said here for quite some time now, the only force for major change out there that we can see is a major implosion/collapse of the present monetary system. That would force some kind of major change. It's impossible to forecast what that change might look like with neither political party having complete control. It's anyone's guess as to who the public would blame for all the pain that would come with such a collapse. For that reason, I would expect both parties to continue to just try to keep the present system wobbling along and do their best to avoid a major negative event. 

Not much else to report. If I see something changing, I'll add a post here.

Final post election update 11-17-22: It's now confirmed the US is returning back to divided government and probably a lot of gridlock over the next two years. None of that suggests the people vying for political control will have much interest in making major changes to the current monetary system. It's still unclear who the public might blame if the current system just imploded in that time frame for any reason. Usually, whoever is President during such an event gets most of the blame whether deserved or not. It does matter because it will determine who the public trusts to move forward after a major negative economic event. So, we likely either get two more years of not much happening or a major political realignment away from whoever is blamed for any major negative event if that takes place. There is nothing to suggest US policy designed to maintain global reserve currency status for the US dollar will change if no major economic events disrupt the present system. That means likely nothing here to report again for some time.

Where Do Things Stand - What Things Should We Monitor?

This blog was started because out of the 2007 great financial crisis (GFC) there was growing concern that the existing monetary system most people have lived with for their entire lives might be unable to be sustained long term. This blog attempted to monitor events and look for indications that some kind of major change or transformation in our present system might be on the horizon. The existing system I will define as a system based upon the US dollar as the world's global reserve currency, operated and administered by the world's central banks, and payments systems and fiat currencies fully controlled by those central banks. Any major change to that system (whether you may view that change as good or bad) is important to understand because it would clearly impact all of us. If the US dollar were to lose its status as the global reserve currency, it is very likely every individual that uses money would be impacted and that includes all of us. It is possible the impact could be dramatic. So, the premise here was that it is important to monitor events to see if major change is in progress or might be coming sooner rather than later. A further goal of this blog was to try and learn as much as possible about how leading experts around the world viewed this situation and what proposals exist to reform or fully replace the presetnt monetary system should it fail. A mantra here has always been, "what matters is what actually happens, not what I or anyone else might prefer to happen". 

 With all this in mind and with the US and the world clearly engaged in a more open struggle to determine which way the future will unfold, this article is an attempt to try and provide an update on where things stand and what should we monitor going forward to get an idea of what will "actually happen" regardless of what we may personally wish would happen. It is critical to have as firm a grasp on reality as possible to make personal financial decisions. This new article by Jim Rickards seems to sum up the where we stand situation as clearly and succinctly as any I can find. Below is a relevant quote from his article:

"The bottom line is the world is looking to turn away from dollar dominance in global finance. Given the severe sanctions regime against Russia, it may end sooner than most expect."

So, if Jim's analysis is correct (and I believe it is) the biggest global battle in progress is the battle to determine if the existing US dollar based monetary system as administered by the major central banks will continue to dominant the world's power structure or if it will replaced by something new and different. 

After years of following all this and based upon direct input from a variety of experts like Jim Rickards my take is as follows.

There appear to be two major competing factions in the world over where we will go in the future (see recent article by Robert Pringle on this). A globalist view sees us moving towards a more centralized global governing structure where major global institutions make policy and the world's monetary system becomes more and more digitized and centrally controlled over time. A nationalist view sees us moving towards a breakdown of the existing more centralized power structure with individual nations reclaiming more national sovereignty. 

So, while many view the current world conflict as East vs. West, my take is that the real battle is between the globalist and nationalist factions that exist in both the East and West. This can lead to strange alliances we would not expect. Nationalists in nations thought of as adversaries might work together on the big picture battle against a "globalist view" of the future for example. I think this view of things provides a better basis for understanding the information narrative wars we all see around us every day across all media platforms from mainstream media to social media to alternative internet based media.

What Should We Monitor?

My best guess is that we should watch to see how the ongoing battle between the globalist view for the future and the nationalist view unfolds. It seems as if these two factions have been somewhat gridlocked for many years with both sides having advantages and disadvantages in terms of gaining more leverage over the other side. 

So, the first big thing to monitor is if we see a shift indicating one side or the other is gaining more leverage to move the future in the direction it prefers. If things stay gridlocked, we can expect that the present monetary system will continue to prevail for as long as possible. That is where we have been since 2007. At any time going forward, that could change, so it is important to understand the battle underway (between globalists and nationalists) to control any major changes to the global power structure going forward. 

The biggest upcoming event to monitor is the outcome of the midterm elections in the US. Both sides of this struggle for control of the future are all in to win those elections. We can expect, given the high stakes for control and loss of control in the US, that just about anything could happen to try and influence voters between now and November. If the Republican party achieves a significant win this fall (regains control of the House of Representatives), I would view that as a shift in leverage towards the nationalist side of this conflict. If the Democrat party holds on to the House, I would view that as a shift in leverage towards the globalist side.

The other biggest thing to monitor is what happens globally in the struggle to disrupt the present US dollar centered monetary system and global payments system. The globalists are more likely to want to preserve the US dollar based system as long as possible and, if a major transition takes place, to move to a globally accepted fiat currency system controlled by the same basic institutions who run the present monetary system (central banks, IMF, etc). The global nationalists, which in my view would now include the BRICS nations, are more likely to try and replace the present US dollar centered monetary system with an alternative system where they would be less subject to being controlled by the western central banking institutions and the IMF (the opposite of a globalist vision of the entire world uniting under a global governance power structure). So, this is what I would encourage people to monitor in the coming year. 

Who decides what money is and how it will be distributed  to the population holds immense power over what actually happens all the way down to the individual level. These big picture issues (and which side controls them) are likely more tied to how the future will unfold than any single issue politics such as cultural social issues or even things like inflation and employment. Those are the smaller battles in the information narrative war.

As I view things, those individual political issues are symptoms of how the big picture issues are decided along with which side (globalist or nationalist) will have the most control of the global power structure. That is why this blog focuses on monitoring the big picture issue of the future of the monetary system. Whoever controls the money and payments system controls how things work as Jim Rickards explains in his article linked above.

Added comment 8-17-22: I see no reason to change anything stated above. It appears to me that things are unfolding very much as expected with the November US elections being the biggest upcoming event to monitor. Unless something major happens, I'll likely not have much else to say until those results are known.

Added comment 9-21-22: While I have nothing new to report and things appear to continue to unfold as expected above politically in the US, some readers may have interest in this new interview Jim Rickards did with Steph Pomboy. It's somewhat of an update on things with Jim now more concerned about policy makers creating a deep recession and/or global liquidity crisis that could be worse than the GFC of 2008. Obviously, if that happens, the potential for the present monetary system to become unstable would go sharply up. Below are the links to Part I and Part II of the interview. Part II is the first 25 minutes or so of the second link:

Part I - Deep Recession and/or Liquidity Crisis?

Part II - Double Digit Inflation if the Fed Pivots Too Soon?

Information War is Not Focused on Monetary System Change Right Now

Not much has changed since the last update here. Certainly we have not seen anything yet dramatically impact the present monetary system other than inflation and the Fed attempted response to inflation. None of that implies a major change to the present monetary system. Instead, it is just more effort to try and preserve the existing system by getting inflation under control and continue to prop up the US dollar as the global reserve currency (see Reuters link below). Clearly, Russia (and China along with perhaps other BRICS nations) would be happy to see the US dollar undermined and we can assume they will continue working towards that end. So again, no major change to the status quo so far. If we were to see a major drop in the US dollar or the ruble, that would indicate something worth noting is probably taking place. But not so far. (see chart of ruble vs dollar since sanctions were imposed here).

This blog does not attempt to delve into politics other than to try and assess the political trends in place and how they might impact changes to the present monetary system. Right now, world events seem to suggest that a major "information narrative war" is in full swing in the United States with tangential impacts all around the world. My own take on this is that much of competing information narrative war we see every day all around us is instigated by various competing factions in the intelligence agencies that influence what information flows out to the public, led by the competing US intelligence factions. In my view, all that noise they generate makes it especially difficult to sort out true information from intentional disinformation used by all the competing factions to try and gain more leverage with the general public to their side of the information war. This always ramps up during election cycles and I expect that to be the case again this year. 

Conclusion: My conclusion from the above is that the information warriors are engaged for now on swaying the upcoming US elections; so the monetary system is not a prime area of focus for them right now. While whatever happens in the political realm can significantly impact the monetary system, I would be surprised if anything major happens to change the present monetary system before the US midterm elections in November. 

I also expect the "information narrative war" to just keep ramping up until the elections and won't be surprised at anything that happens in the political world leading into the fall. Fewer people vote in mid term elections so both sides know they can win by swaying just enough of their base voters who do vote to show up. It is possible to significantly change the balance of power with a relatively small number of voters in the key races that determine that balance of power. As always, both sides will do just about anything to win. Whoever "wins" then immediately faces an ongoing intense effort to undermine their ability to govern. All that moves monetary system issues to the back burner. The only monetary issue even being talked about in the US right now is inflation.

Added note 6-18-2022: Just to insure that we understand that current US policy is devoted to maintaining the global reserve currency status of the US dollar, Fed Chairman Powell makes it clear in these recent remarks as reported by Reuters:

https://www.reuters.com/markets/us/feds-powell-us-digital-dollar-could-help-maintain-international-primacy-2022-06-17/

Added note 6-25-22: BRICS Announce Potential Rival for US Dollar

Added note 6-28-22: The Move Away From Western Based Global Cooperation Continues

Added note 6-30-22: New Article by Robert Pringle - We Remain Stuck in a Bad Money Trap, Why?

End of Global Cooperation?

In the last update here I made the comment pasted in just below dated 4-18-22. Nothing major that I am aware of has changed since. However, in regards to a key point that we may seeing the end of "global cooperation" going forward from here, I did see this article about the idea that Russia and other nations may be moving forward with some kind of plan to back the ruble with commodities (possibly to include gold). Obviously, if Russia and other nations make a move like this, it will be significant news potentially impacting the global monetary system. But I could not help but notice one part of this article discussing a recent interview by a high level Russian official (Nikolai Petrushev). It provides some insight into the very key point I had mentioned below about the weaponization of the monetary system creating trust issues around the world.

Here is the key paragraph with a quote from Russian official Nikolai Petrushev (added underline is mine)

"On the subject of the financial sanctions themselves, and the freezing of Russia’s FX reserves held abroad, Patrushev states that by imposing sanctions against Russia, the “the West is hitting not only Russia, but also itself”, and has damaged trust in the US dollar as the world’s de facto reserve currency:

“The current global financial system is built solely on trust, including in the United States as the issuer of the world’s reserve currency. Half a century ago, the gold factor was present, but in 1971 the States untied its currency from its quotes, which made it possible to issue money virtually without control.”

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Previous Update as of 4-18-2022:

Nothing major in terms of an update to report as a change from anything below as the war in the Ukraine just continues to drag on for now with no clear end of the conflict in sight. So things are still pretty much the same in terms of economic impact on the monetary system. Jim Rickards did do another pretty in depth interview to update things from his point of view which you can find here. Jim is a good source because for the most part he tries to offer objective analysis based on the latest information and he adjusts things as new information comes in as best he can. But no one really knows where all is going for sure and what the full impact long term is going to be. The easiest observation to make is one that Jim goes into this most recent interview  --- It is most likely the the period of "globalization" we have had for some time is coming to an end and we probably are entering a new world where there are at least two and maybe more competing power blocs that now are more concerned about being able to be independent from the other bloc(s) (for survival) and far less motivated to move forward with "global cooperation". The weaponization of the monetary system has probably destroyed any trust left that people can count on not having their assets confiscated if they behave in a manner not acceptable to those in control of the monetary system. Once that kind of trust is lost, it can take a long time to ever restore. 

Is the Current Geo Political Conflict a Trigger for Major Monetary Change?

I have not posted anything here for some time simply because there were no major events likely to lead to major monetary system change taking place. Now, with military conflict underway and the world watching to see if this will be resolved without further escalation, it's reasonable to ask if this situation could be the trigger for major monetary system change. I'll offer some thoughts on that here.

My answer right now would be it is too early to tell. We need to see if this military conflict is resolved without further escalation or not. The trend right now is towards increasing escalation with both sides making moves to ramp up pressure on the other side. If that trend continues, we certainly could arrive at a place where the current global financial and monetary system is destabilized. Below I'll bullet point some things I plan to watch over the coming weeks/months.

• Does limited military conflict expand beyond borders into broader scale military conflict? (not yet)
• Is the oil and gas supplied into global markets by Russia cutoff by sanctions? (so far it's not)
• Does a monetary system alliance emerge between Russia and China to bypass the US dollar? (not yet)
• If so, how does that impact the global reserve currency status of the dollar? (nothing so far on this)
• Are important strategic commodities needed in the East and West cutoff from each other? (not yet)
  
• Will gold emerge from all this as a more prominent factor in the financial system? (not yet)
• Is the world trending to more "global monetary cooperation" or "competing monetary systems"? (an East vs. West trend seems in place right now rather than global cooperation)
• Is what is happening a simple military conflict or are there deeper chess moves being made?

Please note that despite all the dramatic events taking place right now, I still really have no final answers to the questions listed above yet. That is why I say it's too early to tell if these events are the start of major monetary system change or not. It may take weeks/months to see the answers to these questions emerge, but these are the things I would suggest to monitor over time.

One other comment. War is horrible. I hope the conflict now underway is resolved as soon as possible with the least possible loss of life and hardship on the regular citizen who always bears the worst brunt of war. The prayer here is for military conflict to cease as soon as possible with the best possible future outcome for all the regular citizens (on both sides) who suffer most in the midst of war. While trying to understand the monetary and financial implications of events is important to do, it pales in comparison to the loss of innocent human life and suffering that comes with war.

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Update as of 4-18-2022:

Nothing major in terms of an update to report as a change from anything below as the war in the Ukraine just continues to drag on for now with no clear end of the conflict in sight. So things are still pretty much the same in terms of economic impact on the monetary system. Jim Rickards did do another pretty in depth interview to update things from his point of view which you can find here. Jim is a good source because for the most part he tries to offer objective analysis based on the latest information and he adjusts things as new information comes in as best he can. But no one really knows where all is going for sure and what the full impact long term is going to be. The easiest observation to make is one that Jim goes into this most recent interview  --- It is most likely the the period of "globalization" we have had for some time is coming to an end and we probably are entering a new world where there are at least two and maybe more competing power blocs that now are more concerned about being able to be independent from the other bloc(s) (for survival) and far less motivated to move forward with "global cooperation". The weaponization of the monetary system has probably destroyed any trust left that people can count on not having their assets confiscated if they behave in a manner not acceptable to those in control of the monetary system. Once that kind of trust is lost, it can take a long time to ever restore. 

Update as of 3-8-2022 on the bullet point list above:

• Does limited military conflict expand beyond borders into broader scale military conflict? (not yet, but war by proxy creeps closer)
• Is the oil and gas supplied into global markets by Russia cutoff by sanctions? (Yes - US,UK, but not the EU)
• Does a monetary system alliance emerge between Russia and China to bypass the US dollar? (not yet, but some media speculation about it out there)
• If so, how does that impact the global reserve currency status of the dollar? (nothing so far on this, most assume long term impact)
• Are important strategic commodities needed in the East and West cutoff from each other? (Russia says it is making a list and will release it later)
  
• Will gold emerge from all this as a more prominent factor in the financial system? (not yet, but price has reacted upwards -one source advises me that gold cannot be linked to any currency below $15,000 per ounce if anyone tries to do that)
• Is the world trending to more "global monetary cooperation" or "competing monetary systems"? (an East vs. West trend seems in place right now rather than global cooperation)
• Is what is happening a simple military conflict or are there deeper chess moves being made? (the indications are that this is a deeper chess game beyond just this initial military action by Russia)

Still too early to tell if all this results in actual major monetary system change. I am advised by an expert that all this will result in calls for such change, but no one knows where that will go yet.

Added note 3-12-22: For those interested in Jim Rickards take on all this, you can find that in this recent interview.

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Update as of 4-4-2022:

There is a lot of debate/discussion going on all over the world in regards to the recent decision by Russia to demand payment for natural gas in either rubles or gold. Also, the recent decision by Russia to pay 5,000 rubles per gram of gold to banks willing to sell gold to them at that price point.

Questions being asked are:

-Is Russia in essence putting gold back into play in global trade?

-Is this just an effort to bypass US/EU sanctions or is it the start of an effort to try and destabilize the US dollar?

-Will Russia actually formally back the ruble with gold?

-Will China formally back the Yuan with gold?

-How will the US dollar react to all this over time?

-Who will win the apparent Currency War? (interestingly predicted by Jim Rickards a decade ago in Chapters 1 & 2 of his book - Currency Wars.

I don't have answers to these questions. I can offer some comments I have seen and gotten from a variety of experts around the world for those who may be interested.

-one expert told me they do not think the US dollar will quickly or easily be destabilized, but these moves do indicate efforts towards that end. This expert did also say that if Russia and or China were to use gold backing for currency, that would be a very significant event. This recent article (from someone else- Charles Hugh Smith) kind of lays out this point of view.

-others believe these events increase the chances of not only the US dollar, but all western fiat currencies losing trust and confidence. Here are a couple of different articles taking that view:

Edging Towards a Gold Standard  (here's a vdeo discussion with the author of this article)

Russian Ruble Relaunched linked to gold and commodities

While I cannot answer my list of questions above, I can offer a few observations that seem factual to me at this point in time:

-any movement towards some kind of global monetary system or cooperative global currency appears to be dead for now. The world seems currently to be breaking down into at least two competing spheres of influence with currencies and commodities being weaponized by both sides. 

-gold has emerged out of the shadows as one of weapons in play now. We know both Russia and China have been stockpiling huge gold reserves for years. There are official estimates which are substantial, but also many rumors/reports of much larger reserves than are officially being reported. It is pretty clear that we are now seeing why that took place as having national fiat reserves blocked from use by sanctions shows everyone that "the global monetary system", such as it is, cannot be trusted to honor its normal rules once things break down.

-it appears very likely that we are seeing the start of a long and bitter currency war that will leave all kinds of wreckage in its path. Both sides likely suffer significantly and, as usual, the regular people just trying to live normal lives and earn a living will suffer the most.

-distrust of both government and all kinds of "establishment" institutions seems to be at the highest point I can recall in my lifetime, making it all the harder for those in power to unite people towards any sort of common goals. 

I will just continue to monitor events and provide an update if I see something important to update. But really, this blog has pretty much covered all this for years and the information already presented here is totally relevant to current events as best I can tell.

Fed Continues To Evaluate a CBDC

Not much new here, but Fed Chairman Powell again states the Fed will continue to look at a central bank digital currency (CBDC) and decide whether one seems useful or not. He made it clear that the Fed is in no hurry and does not feel any pressure to move forward on any particular time table.

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from the CNBC article:

"Powell noted the dollar’s position in the world and said the Fed is “in a good place” to make a decision on whether to implement its own digital currency. He expressed some concern about the regulatory landscape and said the Fed likely will need congressional permission should it decide to proceed."

Dr. Warren Coats (former IMF) Proposes "A Future Digital SDR"

Readers here know we have long covered monetary system reform proposals from Dr. Warren Coats. Dr. Coats is formerly the head of the SDR Division and is in my view a leading expert in the world on the SDR along with IMF rules and regulations. So we feature him here as the best source of information on this topic. 

Dr. Coats recently sent me his new article, The IMF's $650bSDR Allocation and a future 'digital SDR' recently published on centralbanking.com (8-3-2021) that outlines his proposal for the IMF to promote a broader adoption of the SDR as a globally used form of currency. It's important to note that Dr. Coats proposal includes issuing SDR's under currency board rules. 

In this article, Dr. Coats is responding to the current proposal to issue a new $650 billion (SDR) allocation of SDR's in response to the Covid pandemic as one way to assist developing nations. Below I have selected a few extracts from the article and then a few summary comments.

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"While a strong case can be made for financial assistance by high-income countries to low-income ones to combat the Covid-19 pandemic, an SDR allocation cannot properly be justified on that basis. This link is unfortunate, and mixes the monetary contribution of SDRs to the stock of international reserves with the case for aid to developing countries. Such aid, while potentially justified, is a fiscal issue – and should be addressed as such. The case for a new allocation must be based on “the objective of meeting the long term global need to supplement existing reserve assets”

. . . . . 

"As indicated in the opening paragraphs, the case for expanding the role of SDRs in international payments is strong. But, in fact, their role has been very limited beyond the IMF. To become a serious supplement to, if not replacement for, the US dollar in the international monetary system, the SDR would need to be usable for payments by private-sector parties. This would require the creation of private or market SDRs. Following the model of national currencies in which central banks create base money that backs the deposits created by banks (broad money), the IMF’s ‘official’ SDRs could back private digital SDRs.

Article XXII of the IMF’s Articles of Agreement provides that: “In addition to the obligations assumed with respect to special drawing rights under other articles of this agreement, each participant [in the SDR department] undertakes to collaborate with the fund and with other participants in order to facilitate the effective functioning of the special drawing rights department and the proper use of special drawing rights in accordance with this agreement with the objective of making the special drawing right the principal reserve asset in the international monetary system.”

In support of member obligations to make “the special drawing right the principal reserve asset in the international monetary system” the IMF needs to facilitate and encourage the private-market uses of the SDR for pricing and paying for globally traded goods, as well as for denominating financial assets. The breath, depth and liquidity of such uses of the US dollar are important factors in the dollar’s widespread use in international payments and as a reserve currency."

. . . . 

Digital SDR currency 

"As with national currencies, the internationally issued SDR needs a central issuer of the base money version of market SDRs (M-SDRs). The IMF should oversee the development of a procedure for issuing M-SDRs following currency board rules and backed 100% by official SDRs or by an appropriate mix of sovereign debt of the five basket currencies."

. . . . .

"Banks offering M-SDR deposits/currency to their customers would hold an SDR reserve backing with the IMF SDR trust fund. The base money M-SDRs issued by the IMF trust fund would perform the same payment settlement function as do central banks for the base money they issue, with the critical difference that depositors/participants would be global, rather than national. This would enable virtually instantaneous final settlement of M-SDR payments globally."

Find the full article on centralbanking.com here

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Added comments: These proposals may sound as if we are about to see some major changes to the present global monetary system which is what this blog was created to monitor. However, a question that I always ask Dr. Coats when this topic arises is if he sees any signs of movement towards this kind of change. I am quite confident Dr. Coats would know that. I asked him that again and here is his reply to that:

"The IMF has no plans for a digital SDR and they say they are too busy with the allocation itself and related covid lending to focus on my other private SDR promotion suggestion though they might in the future."  

This reply is in line with what we have reported here for some time. If anything changes in this regard and I am aware of the change, I will report it here. But I continue to see no indication that this kind of major monetary system change is on the near term horizon. There is no better source on this than Dr. Coats in my view.

Fed's Powell -- Proper Reaction To Surging Inflation is a "Challenge"

In comments to the US Senate, Federal Reserve Chairman Jerome Powell admitted inflation is running higher than they expected and that how to react to that is a "challenge". His comments are reported in this article on Kitco. Below is a couple of excerpts from the article and then a bullet point list of his key comments.

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"We don't have another example of the last time we reopened a $20-trillion economy with lots of fiscal and monetary support," Powell said. "The challenge we are confronting is how to react to this inflation, which is larger than we expected. To the extent it is temporary, it wouldn't be appropriate to react to it. But to the extent it gets longer and longer, we" have to continue to revaluate the risks that would affect inflation expectations, and that is what we are monitoring."

. . . . . 

Debt was another issue discussed during the testimony, with Powell highlighting that the U.S. is not on a sustainable path.

"Debt is growing substantially faster than the economy. In the long run, that is not sustainable. The laws of gravity have not been repealed. We'll need to get back on the sustainable path at some point. The time to do that is when the economy is strong — unemployment is low, taxes are rolling in. That is the time to do it."

• Inflation is way above the Fed's 2% target - they are "not comfortable" with that
• Current inflation problem is "unique" in history recovering from a pandemic shutdown
• Higher Inflation expectations can lead to higher actual inflation
• Fed will discuss reducing QE if high inflation persists
• Fed will use its tools to fight inflation if necessary
• The laws of gravity have not been repealed
• US debt is growing faster than the economy which is "not sustainable"
• Fed will continue to study a central bank digital currency - not sure if it is needed
• Cyber risks of ransomware attacks is what Powell worries about the most

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My added comments: In these comments Chairman Powell outlines the problem facing the Fed which we have long reported here. The Fed is in a potential no win position. If they continue intervening in the interest rate market to keep rates suppressed, the risk of way too much inflation is clearly present and now the Fed is finally admitting that. However, despite the assurance that the Fed has "tools" to fight inflation (which would mean allowing interest rates to rise), if they take that route they speed up the explosion higher of US debt which Chairman Powell just described as "unsustainable".  Higher interest rates means US debt grows faster and quicker towards unsustainability.

It is impossible to believe the Fed is surprised by this situation. Economists and analysts have been predicting this situation for years and almost anyone who understands math can easily figure out propping up a debt dependent system with ever expanding money creation and even more and bigger debt cannot go on forever without consequences. 

The problem is that no one has the courage to step up and be honest about how these policies create this kind of problem because the solutions involve inflicting pain and accepting a share of blame for creating the problem. Politicians love spending money because it buys them votes and funnels money to the special interests that fund their campaigns. They want the central bank to just keep bailing them out with more and more new money so they can keep spending without having to pay for it with much higher taxes on the middle class (where all the votes are). Politicians do not like being honest about the mess all this eventually creates and certainly don't have any interest in accepting any share of the blame for their role when problems arise from these policies. The public just mostly ignores the situation until some kind of real world consequences show up in their daily lives. They instinctively know something is wrong about piling up more and more debt and creating money out of thin air to paper over problems, but don't really want to believe a price will ever have to be paid for it and their leaders assure them it's all under control. It's easier to just accept that and ignore reality.

Bottom line: So long as all the parties involved in this process (central banks, politicians, and the general public) refuse to be honest and transparent about how these policies lead to an "unsustainable" system, we can expect that nothing will change and the same policies will continue anyway (even as they admit it's not sustainable) until something forces them to change (the system cannot function). It appears no one is really interested in proactively reforming the policies of the present system leading to unsustainability and accepting any share of blame for them. We can reasonably expect that the various parties involved will all point fingers of blame to someone else if the day of unsustainability does arrive. Politicians out of power will blame the political party in power at the time (too much debt). The political party in power will blame the Fed (too much easy money). The Fed will blame the politicians in both political parties (too much debt). None of that will solve the problem of course, but will just create confusion in the hopes the public will blame someone else for the mess. So we are all reduced to just hoping it doesn't come any time soon, even though Chairman Powell just told us once again it is unsustainable.