Wednesday, July 16, 2014

Where is all this Leading? And When will it Happen?

It's mid 2014 now. This blog has been here since January. In that time I can honestly say I have read hundreds of articles and read dozens of theories attempting to answer these two headline questions. And it makes sense to try. These are the big questions we are all trying to answer. In this post I will try to sort of give an overall summary of where things stand from all the information I have researched so far. It doesn't mean I know the answers because I don't. But I do have a whole lot more information now than when I started the blog. So here goes.

First I want set the stage for what follows below. The ideas for how this might turn out and the guess at timeframes are my best effort based on all the research so far. I want to stress that this includes some direct input from very knowledgeable readers here. These readers prefer to remain in the background and I will surely honor their request (despite my deep respect for their knowledge and willingness to answer my questions and help me learn). So keep in mind the ideas below are not just from myself and include knowledge from some much better informed than me.

Let's talk time frames first. The most credible people who even try to guess at this like Jim Rickards and Jim Sinclair have always said the time frame starts today and could be anytime up to perhaps 3 more years before some event causes the present system to end and open the door for what comes next. I can say with confidence that I believe that people inside the system feel that we have at least 2-3 years at worst and possibly as many as 10 years if we are lucky before a "debt inversion". I believe this means that the people you see every day within the system are not feeling a sense that a major change event is imminent. I think they feel there is still time to deal with the problems and that they can still be solved in a way that will hopefully limit the downside. None of us can possibly know or be sure of course. But I think I can say that a time frame view of 2-10 years is widely held. However there is an understanding that if there is an unexpected "black swan" event that no one sees coming, a derivatives contagion event is possible at any time and has to be kept in mind. That is the best I can offer on timing.

Now, Where will we end up eventually? We have already covered that here by listing what we feel are all the possible scenarios. Keep in mind when we say monetary system change we mean that the current US dollar based system ends and a new different system is put in place.

Here is that list again:

-slow and steady monetary system change where the IMF eventually sets up an new SDR based currency system (a controlled change over several years)

-change prompted by a sudden event crisis where the IMF steps in as lender of last resort and sets up a new SDR based system

-slow and steady change that takes place in regional blocs first, then ends up in a new SDR system under the IMF (the regional change part is already happening now in some places)

-slow and steady change where the monetary system splits into two major blocs 
(the BRICS bloc and the IMF bloc) that compete in the future for influence and control

-change prompted by a sudden crisis that leads to the two major blocs scenario above

-change prompted by a sudden crisis that leads to chaos with no central authority able to restore confidence. Here we go to a world where precious metals and bitcoins are essential to conduct commerce because the whole fiat system is gone and people have to barter.

Now, can we say which of the above is more likely? We'll try, but readers must understand that it is impossible to know if change will come in a slow, steady, controlled manner (under a plan) or due to an unforseen event that leads to a crisis. We admit we cannot possibly know that. 

Given that, we will assume that change takes place over time in a controlled manner using a plan. If that assumption holds up, we think this could very well happen:

1) The Central Banks will continue to do their best to buy time and hold the present system together while ultimate solutions are being worked on. Let's give them the benefit of doubt and say they can do this for 2-3 years.

2) The US dollar is very likely to lose global reserve currency status no matter what because the US debt (and also unfunded future liabilities) are simply too big now. The debt will have to be dealt with in some unpleasant way eventually. In the process the US dollar (and probably all pure fiat debt based currencies) are likely to lose the trust of the people.

3) We think it is likely that a new asset backed currency system will be used to restore confidence. People will not want a debt based system once they see it is unsustainable. We believe it will be essential for the authorities to do everything in their power to restore lost confidence. We think they realize this too.

4) This will probably include two major steps. Somehow, the existing unsustainable debt will have to be written off (recall how the old S&L crisis was handled years ago). All the bad stuff goes into a "bad debt" pile and whoever holds that debt will take losses. The debt that is still sustainable will probably stay. It may be repackaged as SDR bonds if it all moves into the IMF.

5) We will have to have a new asset backed currency. People simply will not trust anything less. That could happen a variety of ways. Here is one we ask you to think about. We believe it is a real possibility. Imagine that a new virtual asset backed currency is available. It is backed by a diverse set of assets including real tangible assets to attempt to make it as stable a unit as possible (no junk assets allowed). Imagine if this currency had the backing of the present banking system all the way up to and including the IMF and the BIS. Imagine it is also Basel III compliant and meets all existing international money laundering regulations. Imagine this new currency being useable in real time for commerce anywhere in the world with the approval of the existing system (because it meets existing regulations). Imagine you could use it from your mobile phone. Think of this new currency as sort of an "everyman's SDR" where you and I might own a currency with the same backing the SDR has now between the nations (keep in mind the IMF owns lots of gold).

That's a lot to think about. By no means can I "predict" all this will happen or when. But I can say without reservation that I do know that something like this is a real possibility. If the present system somehow hangs on for decades more, I guess all this effort on the blog here is a waste of time. I'd actually be fine with that:)

But the reality I see based on all the research done is that the much shorter time frame we discussed above is more likely. This is the best answer I can offer for now. We will continue to follow it all and if our thinking changes, we will tell readers why. We live in historic times.


  1. Points #3 & 4. Instead of SDR's being issued, it is possible that TRN's (Treasury Reserve Notes) will be issued. If that happens it is goodbye and good riddance PRIVATELY HELD Federal Reserve.

    1. Thanks for reading and for your commets.

      Since the GSD is not yet live in a real country yet, many details are unknown. This is a process likely to unfold over years and not months so there will be plenty of time to learn about it and how it will work. I do know it will not replace any current currency.

      It is not something people will be forced to use. It will be an alternative people can choose if they want. Those working on it believe it will prove itself in the real world and convince people to use it and own it. It has interest and support at high levels within the present system which is why we think it needs to be covered and understood.

      We will cover it here as anything new on it becomes available.

  2. Additionally, an excellent historic resource regarding TRN's