Friday, June 30, 2017

Jaime Caruana (BIS) Interview - Greatest Risks for Global Finanacial System

In April the General Manager for the Bank for International Settlements (Jaime Caruana) gave an interview that might be viewed as sort of a "state of the global economy" from a BIS point of view. The interview touched on some issues we cover here. Below are a few example questions and answers. Read the full interview here.

Q: So, what's your overall verdict of the crisis policy of recent years - of the bond purchases (quantitative easing, QE) as well as the zero and negative interest rates?
A: A final verdict will only be possible when normalisation has been completed. We're a long way off that, and from normality. As regards what we have seen so far, my provisional assessment is the following. At the onset of the crisis, central banks played a decisive role. If they hadn't responded the way they did, the crisis would have been much worse. With regard to the later phase, we have expressed concerns about how the balance of risks and rewards worsens over time: the impact of ultra-expansive monetary policy on growth declines, and the risks of that policy are cumulating. Negative interest rates have their own set of problems.
Q: What do you mean exactly?
A: In particular, negative interest rates become a big problem when they persist over a long period. They increase risk-taking [but not necessarily where it is desirable]. They induce greater indebtedness. They act as a burden on financial institutions, particularly banks, and thus may affect their intermediation.
Q: Are negative interest rates ultimately more worrisome than QE?
A: I don't have a comparison of that kind in mind! But seriously: whether negative interest rates or asset purchases - it is the protracted duration that is worrisome. It suggests that we are trying to solve a problem that is not solvable by monetary policy alone.
. . . . .
Q: Under Trump the US seems to be setting less store by multilateral institutions or global cooperation, whereas the BIS has lately been calling for increasing cooperation among central banks.
A: Central banks have a strong sense of cooperation. But we need more than that. From our perspective, the most important thing is that the international consequences of national monetary policy decisions, meaning spillovers and spillbacks, be internalised in the processes concerned.  In certain cases, central banks may want to reinforce their actions with some coordination, as occurred in the past. Furthermore, central banks may ultimately want to develop some common rules of the game for how to deal with excesses on the global financial markets. That is certainly the most difficult aspect, and not feasible at present. That's something we need to think about and develop for the future.
. . . . .
Q: Is there at present a danger of a bond market crash, similarly to 1994 when the Fed embarked on a cycle of raising interest rates?
A: There are a few similarities: a very long period of very low interest rates and the start of a normalisation process, beginning in the United States. But at the same time, there are also enormous differences. The biggest difference is that central banks today know how important communication is. In 1994, the Fed surprised the markets. That's different today. Therefore I'm not expecting a repeat of what happened back then. Nevertheless, there is of course the risk of a snapback - that is, that market rates will very suddenly start going up very quickly.

My added comment: I call your attention in particular to this Q&A from above:
Q: Under Trump the US seems to be setting less store by multilateral institutions or global cooperation, whereas the BIS has lately been calling for increasing cooperation among central banks.
A: Central banks have a strong sense of cooperation. But we need more than that. From our perspective, the most important thing is that the international consequences of national monetary policy decisions, meaning spillovers and spillbacks, be internalised in the processes concerned.  In certain cases, central banks may want to reinforce their actions with some coordination, as occurred in the past. Furthermore, central banks may ultimately want to develop some common rules of the game for how to deal with excesses on the global financial markets. That is certainly the most difficult aspect, and not feasible at present. That's something we need to think about and develop for the future.
Added comments:

This reply from Mr. Caruana is totally consistent with what we have reported here many times. While there are many meetings and discussions etc. about trying to implement "some common rules of the game" globally, the reality according to BIS General Manager Caruana is that this "is not feasible at present" for dealing with excesses on the global financial markets. Getting global consensus on anything is difficult and the power of the status quo is somewhat entrenched. In an upcoming article, we will examine that idea in more detail.

Added note: Janet Yellen assures us that no new major crisis is likely "in our lifetime". If that is true, it will be time to close down this blog and I am happy to do so if no new crisis is coming. I will add that no sources or contacts that I talk to have indicated to me that they see any signs of a new crisis right now even though there are all kinds of systemic and geopolitical risks out there (debt, derivatives, pension funds, Middle East, N. Korea, Iran, China. etc). 

Also, some recent articles appeared (here and here as examples) implying that the BIS was saying another "global crash" is coming. It turns out that was in error. Tomorrow I will have an article that clarifies what was actually said and how it was misinterpreted.The BIS always tries to point out any systemic risks they see that could stress the system, but they are not issuing any kind of "crash warning" right now. I confirmed that with the BIS.

Monday, June 26, 2017

John Taylor - Making the Rules and Breaking the Mold (Allan Meltzer)

Robert Pringle alerted me to this tribute article by John Taylor written about economist Allan Meltzer. It is clear that Mr. Meltzer was a widely respected contributor to economic thought despite also being a sometimes vocal critic of the Federal Reserve. Below are a few excerpts from the John Taylor article appearing in followed by some additional comments. Further below Robert Pringle recalls the first time he met Allan Meltzer.
John Taylor writes about the extraordinary life of a pioneering economist whose lifelong work defied traditional rules – but one who strongly advocated them for central banks

"Allan Meltzer, who died in May at the age of 89, had a long and productive career fundamentally affecting the fields of economics, central banking and economic policy, more broadly. An extraordinary scholar, he immersed himself in the practical world of policy making in many ways. He had a unique ability to understand, explain and improve the interface between the fields of economics and economic policy.

For Meltzer, it was not enough to develop a novel theory of the economic impact of monetary policy, which he did in his research on the financial system, starting with Swiss economist Karl Brunner. He also examined the institutions responsible for policy through his landmark books A History of the Federal Reserve, Volumes 1 and 2 and the Carnegie-Rochester Conference Series on Public Policy, which he co-founded with Brunner.

For Meltzer, it was not sufficient to show empirically that policy mistakes caused poor economic performance. He also researched why the mistakes were made, including by developing theories of political economy and decision-making with Scott Richard and Alex Cukierman. It was also not enough for him to conduct research and teach at Carnegie Mellon University, where he was a professor.

He also threw his hat into the ring of real world policy making, serving on the US president’s Council of Economic Advisers (CEA), chairing the Meltzer Commission on international monetary reform, writing reports for Congress, and often testifying in congressional committees on monetary policy.

And it was not even enough for him to have had a profound impact on central banking – he also delved into the operations of the whole market system, asking the key question in the title of his book Why Capitalism? and answering that it is “the only system that the world has ever known that produces both growth and freedom”.

. . . . .

"In sum, Meltzer concluded that the Great Depression was mainly due to bad economics: mistaken beliefs about interest rates and bank borrowings; the Great Inflation was a combination of both factors, with political pressures dominating near the end as beliefs changed but policies did not; the Disinflation avoided big mistakes of either type as the Fed regained independence and restored basic monetary fundamentals, which continued into the Great Moderation, a period of more rules-based policy; the Global Financial Crisis and its aftermath was a return to a combination of both kinds of errors. Meltzer’s research thus led him to a clear policy conclusion, as he wrote in the second volume of his History, published in 2010: “Discretionary policy failed in 1929–33, in 1965–80 and now.” And equally clear and convincing is that “the lesson should be less discretion and more rule-like behaviour”. This considered assessment, based on years of research and study, is perhaps his most fundamental contribution to central banking."

My added comments: When Mr. Meltzer passed away, Robert Pringle mentioned to me at that time that they had been friends for many years and he had enjoyed exchanging ideas with Allan Meltzer. Later, he pointed me to this interesting exchange of emails he had with Mr. Meltzer in 2014 posted on his blog site.

This is a good example of the very kinds of discussions I have seen doing research for this blog. I think it well illustrates how the topic of reform for the existing global monetary system is debated and discussed around the world. No consensus has been achieved, but it is clear that various ideas on what should be done if we do get another major financial crisis are out there and that the possibility is taken seriously. Here are the links to the two part article featuring their email exchanges on The Money Trap blog:

Debate with Allan Meltzer - Part I - their first email exchange just below:

Thinking further about the international monetary system, I now find it difficult to conceive monetary stability being established in one country alone – even if that country is the US. This is to me the main lesson of the crisis and why I have changed my mind. I would welcome your view.
Allan replied:
Yes, international stability would be a big improvement.  But it isn’t possible without better domestic policy–limits on budget deficits and money growth.  If forced to choose, I would choose limits on deficits.
Notice, please, that Germany chugs along year after year without world currency stability.And Japan has for decades gone its own way, remaining stable while growing very slowly.

Debate with Allan Meltzer - Part II - a key excerpt from Robert Pringle just below:

"But suppose that the next crisis brings unemployment to 20%, further financial chaos, leading to nationalisation of the finance industry, extreme controls on personal freedom, state-directed investment, restrictions on travel and capital flows. And imagine that there is a plan to jump to a world money where we could have freedom in all these respects and restore capitalism  IF governments accepted limitations of national sovereignty –  and if there is a good plan ready – we would have a chance of selling it to a desperate world. And I think there WILL BE another worse crisis!"  

- Robert Pringle (3-15-2014)

. . . . .

Allan Meltzer’s closing statement (20 March 2014):
Robert Pringle and I have discussed the problem of achieving greater international financial stability.  Although we started from very different origins we converged to a small number of principles.  We agreed that the current non-system reduces growth and productive opportunities and that no international system can last without a major change everywhere but especially in the United States to less expansive, and less variable budget policies accompanied by more stable monetary policies.  We agreed also that countries should seek a voluntary system that, like the old gold standard, depends on market enforcement. 
A remaining disagreement is over the ability of a single country, particularly a large country like the United States to achieve stability acting alone.   In his very good book, The Money Trap, Robert makes a strong case for his system.  I agree that a multi-national system has great merit.  I differ by believing that Germany, Japan and some others have achieved stability by following relatively independent policies. I hope our exchange will stimulate others to discuss the requisites of much greater financial stability.
Allan Meltzer

(note: bold and underline emphasis above is mine)

Robert Pringle also gave me permission to share these thoughts on Allan Meltzer he expressed by email:

"I first met Allan when he was looking for people with a wide range of interests to invite to a seminar series that he was setting up with Karl Brunner. It was called officially the Interlaken Seminar on Analysis and Ideology that met annually from 1974 to the late 1980s. The aim of the Seminar ( as he put it in his own tribute to Brunner ) was to extend economic analysis into many areas of social policy. As he described it, the conference organization was as unusual as the topics discussed: "We met only in the morning. Afternoons were given over to hiking in the Swiss Alps, or for a few playing golf. The idea was to have informal discussions while hiking. We reassembled for dinner."

You can imagine how much I, as a young financial writer with an interest in economic history and sociology , leapt at the chance of participating. It was a top rate group with future nobel laureates such as Jim Buchanan and others participating - only about 25 of us in all.  I was privileged to attend for several years - every year in fact until  I joined the G30 in New York in 1980.

We have remained in touch ever since. He was a tremendous supporter of Central Banking and a founding member of our editorial advisory board from 1990. 

By the way, he wanted John Taylor to be the next Fed chair."           

All best,

Added note: A thank you to Willem Middelkoop for a nice Twitter comment on this article.

Thursday, June 22, 2017

Dr. Lawrence White - Experts and The Gold Standard

Dr. Lawrence White has just written an excellent article  that asks why most mainstream economists oppose the gold standard. First, let me make it clear that I am not Dr. Lawrence White and (as far as I know) we are not related. We just happen to have the same name. 

When I saw this article I felt it would be an excellent article to feature here in contrast to the other proposals on monetary system reform that have been featured here. As Dr. White points out in his new article, most mainstream economists do not favor a gold standard so it has been hard for me to find an actual proposal for how to return to a gold standard. 

There are a variety of ideas on how gold might return to the monetary system, but until I learned of this information from Dr. White I had not run across a formal proposal for how to transition back to an actual gold standard. As Dr. White pointed out to me, it may just be that I had not searched in the right places so I am grateful that he pointed me towards his work in this area.

In this new article Dr. White makes his case for why the classical gold standard should be part of any modern day discussion for monetary system reform. Below are a few excerpts from his article and then a few added comments.


Experts and the Gold Standard

"Many mainstream economists, perhaps a majority of those who have an opinion, are opposed to tying a central bank’s hands with any explicit monetary rule. A clear majority oppose the gold standard, at least according to an often-cited survey. Why is that?"

. . . . .

"Why isn’t the gold standard more popular with current-day economists? Milton Friedman once hypothesized that monetary economists are loath to criticize central banks because central banks are by far their largest employer. Providing some evidence for the hypothesis, I have elsewhere suggested that career incentives give monetary economists a status-quo bias. Most understandably focus their expertise on serving the current regime and disregard alternative regimes that would dispense with their services. They face negative payoffs to considering whether the current regime is the best monetary regime.

Here I want to propose an alternative hypothesis, which complements rather than replaces the employment-incentive hypothesis . . . . . "

My added comments: In this article, Dr. White makes his case as to why modern economists dismiss the gold standard and also why they should not do that. This is one of the better articles I have found defending the idea of the classical gold standard by a highly respected economist. Dr. Judy Shelton (an adviser to the Trump campaign in 2016) has hinted at a way to move towards a return of gold to the system which we covered here. She has also proposed the idea of governments issuing bonds convertible into gold as a kind of first step back towards using gold in the system.

I reached out to Dr. White by email about featuring his new article and he kindly replied and referred me to links for articles he has written on the gold standard as follows:

"I'd of course be happy for you to discuss my recent piece, about why most economists don't like the gold standard, on your blog. More directly on the merits of re-instituting a gold standard, and on how best to make the transition, you could refer to these two older pieces of mine:"

Readers can use this new article by Dr. White and the links he provided to compare the classical gold standard to some other major monetary system reform proposals we have featured on the blog. Below are the links to two such alternative proposals:

1- Dr. Warren Coats Real SDR Proposal

Dr. Warren Coats (former IMF) proposes to use the SDR to replace the US dollar as the global reserve currency. He wants to see it issued based on public demand by a Currency Board and would anchor it to a basket of goods. Dr. Coats agrees that issuance of such a currency should not be left up to a central bank or the IMF, but should be issued under Currency Board rule. We covered his proposal in these articles here:

2- Robert Pringle - The Ikon - The Best World Money

Robert Pringle (former Group of 30 Director) proposes an idea in some ways similar to Dr. Coats Real SDR that could also be issued by a Currency Board and would be anchored to a basket of global equities. Mr. Pringle also believes that issuance of a global reserve currency should not be left up to the arbitrary discretion of a central bank.

Some Additional Comments: What I find interesting is that even though the proposals above are somewhat different, all of the respected experts cited above tend to agree that the present monetary system is not working well. They also tend to agree that leaving the supply of currency issued up to the discretion of monetary authorities with no restrictions is not a good idea. 

They may approach how to reform and improve the current system differently, but they all seem to believe that currency should be stable, sound, and anchored to the real economy unlike the present US dollar based system we have today. The US dollar is subject to the whims of the US central bank and is anchored to nothing in the real economy today. It is entrenched as the status quo however until something forces change.

Our goal here is to encourage the average person to understand that how the monetary system operates is important to them. We also hope to make readers aware of the systemic risks to the present system and to be aware of various credible proposals to reform the present system that exist.

Here, in this one article, readers can compare the various ideas from these three highly respected and credible experts. They offer real and serious proposals that could actually be considered in the event that something prompts change to the existing monetary system. I believe readers can benefit from learning about these proposals and I appreciate these experts taking time to share what they know with us.

Added note: A thank you to Dr. Judy Shelton for a nice Twitter reference to this article & Dr. White's article.

Tuesday, June 20, 2017

Jim Rickards - "It's Now Tantamount to a Civil War"

Before the recent testimony by James Comey to the Senate, I emailed Jim Rickards to get his thoughts on the situation. As usual, Jim quickly replied and gave his best assessment based on what was known at the time. Because this situation continues to ramp up in potential intensity, I am re posting his comments just below. After that are some updated thoughts on this situation and what we need to focus on here on this blog in regards to it. Below is my email exchange.

My questions are (if you have any thoughts on this):

1- Is the Coats/Comey testimony this week going to put Trump in a potentially serious legal situation (potential obstruction of justice?)

2- If Trump really launches a direct attack on Twitter on Comey during testimony will this add fuel to an already potentially explosive situation? It sounds like he is going to ignore his own lawyers advice on that.

3-If the news out tonight that a former contractor is suing the FBI for spying illegally on 20 million Americans turns out to be correct, does this inflame things even more?  Will the public start to lose confidence at what seems like open warfare within our own intelligence services between pro Trump and anti Trump factions?

I am trying to figure out if the combination of all this could actually turn into a genuine crisis of confidence situation that could then spill over into the markets? If so, I feel I should alert readers to watch all this carefully in that regard.

On the other hand, if all this is just more political theater and nothing truly significant is going to come of it, then of course I should just ignore it.

Jim's reply:

1. Trump's problems are more political than legal, but in Washington that amounts to the same thing.

2. Yes, this will continue and will get worse. The dysfunction will kill the Trump agenda. It's now tantamount to a civil war.

3. Meanwhile international crises from North Korea, China, Syria, Venezuela, and Iran will begin to intrude. This could be Trump's political salvation because the Commander-in-Chief has complete freedom of action in these realms and Mattis, Tillerson and McMaster are driving the bus. This could push the domestic agenda off the headlines, but it could also result in something that starts to look like World War III.      -----    James Rickards

My added updated comments: As this whole situation continues to unfold, I am particularly struck by the comment by Jim Rickards that "It's now tantamount to a civil war."

I follow all this because of the potential for it to ramp up to the point where it actually spills over into the markets and even impact systemic stability. While it is clear that there is a huge amount of political theater taking place which sadly is somewhat normal for Washington DC these days, the sheer intensity of the animosity (hatred?) behind some of the factions fighting in this battle are a real potential cause for concern. As we have just seen, this can lead to actual physical attacks on perceived political opponents.

We clearly have very powerful people involved on both sides of this "civil war". It also appears that we have people working in our intelligence services who have picked sides and are willing to go so far as to risk being prosecuted for illegal leaking of information to try and win this battle. Then we have very powerful and influential media lining up against each other as well that also benefit in ratings from conflict and hyperbole. The fact that it has become clear that people are willing to destroy other people's lives and careers illustrates to me how serious this power struggle has the potential to become.

Of course, at some point it may all blow over as usually happens with political noise. However, in this case it does seem like an enormous power struggle is in place with both sides willing to use more extreme tactics than we usually see. If this continues to ramp up, at some point it actually may spill over into what I will call the "real world" outside the beltway and impact stability and trust in the entire system. So far it has not and the markets are making that clear.

We need to watch and see if market behavior changes to reflect genuine concern over all this political infighting. My take on this is that so long as the US stock market holds up fairly well, the US dollar holds up fairly well, and gold remains in a normal trading range, confidence in President Trump and the current system as a whole is holding up OK even if all kinds of unusual events are happening on an almost daily basis.

I will think that President Trump may be in some kind of genuine trouble if we see the markets mentioned above start telling us a different story. A sharp drop in the US stock market (say more than 15% fairly quickly), a sharp move down in the US dollar, and a gold price moving sharply higher would indicate to me that something serious is going on and we need to pay very close attention. If the markets don't give those signals, I will assume that all we are seeing is the usual political noise and no one outside the beltway is overly concerned. It would indicate to me that Trump is not in serious trouble even if his agenda may be stalled.

Only time will tell us as the situation is certainly not resolved by any means. Democrats are still quite determined to try and do anything possible to prevent the Trump Administration from getting anything done on its agenda and now we are starting to see some push back on that. Now there are starting to be news stories from Trump friendly media sources suggesting that the former Attorney General should be investigated for possible obstruction of justice and demands to reopen the Hillary Clinton email investigation. If things like that actually start to happen, I think Jim Rickards comment about a civil war are likely to become even more on target.

Summary: Right now it is hard to tell where all this is going. Will this just be the usual political noise that ends up going nowhere and die out?


Will the intensity of the conflict continue to ramp up with one side going all out to take down the President and his forces firing back to try and take out his enemies in the same way (someone loses big)?

Normally, I would not think the latter was likley at all. However, this situation may be different and we have to follow it due to the potential for the collateral damage from such a "civil war" to spill over into the markets and impact our lives. All we can do is continue to monitor events.

Added note: A blog reader pointed me to this new article  by British historian Richard Evans (Cambridge) appearing in the publication Foreign Policy. It tends to support the idea Jim Rickards suggested in his reply above that we may be in real civil war. Here are some quotes from the Foreign Policy article - The Madness of King Donald :

"What would happen if a monarch does not cooperate with political elites who consider him deranged? In that case, removal by force becomes an option ,though sometimes it can only be effected through the intervention of a foreign power."

. . . . 

"But that still leaves other options. If Trump rules through what is in effect the modern American equivalent of a royal court, then perhaps it is the courtiers, as in so many examples from history, together with his family, who might have to get together and remove him, or at the very least, neutralize him."

. . . . 

"If Americans prove incapable of deposing their debilitated president, they may soon earn the mild relief of one, or more, informally appointed American regents."

Added note: 9:40pm CST:

With the results of the two congressional special elections tonight now in, the Democrats failed in every attempt to take any of the seats up for grabs across the country in special elections. These were Republican districts so that part is not overly surprising. What it does though is provide more confirmation that there is no major revolt going on across the country against President Trump in the minds of voters. This further convinces me that if we do not see a sharp stock market selloff, a big drop in the US dollar, and a surge in gold prices, it indicates that President Trump is not in any real trouble despite the media hype to the contrary we see daily. If things change, we will try to report that here.

Friday, June 16, 2017

Robert Pringle - The Ikon: The Best World Money

We have featured articles by Robert Pringle (former Group of 30 Director) for some time here on the blog. He has a new article out on his blog (The Money Trap) where he outlines his idea for a new global reserve currency that could be used to replace the US dollar some day. His proposed global currency (the Ikon) would be anchored to a basket of world equities. You can read the full article here. Below are a few excerpts. Further below, see his additional comments to me on how the Ikon would work.


"States cannot create good money. They are interested parties. A good monetary system should discipline states – i.e. hold them to account. A state-run money cannot do that. That is the flaw in proposals such as those made by Positive Money and The International Movement for Monetary Reform."

. . . . .

"A good money must also be the global standard – a standard that individual countries will voluntarily join. Only then can money’s chief benefits be obtained. Only then can the huge economies of scale be achieved.

In The Money Trap I argue that the best numeraire would be a new currency standard that I have called the “Ikon”. This refers to a basket of world equities. Everybody holding money would then have a personal stake in the future prosperity of the world and be induced, as if by an invisible hand, to work towards it."

"In all other respects, money tied to global equities would behave exactly as in the gold standard. . . . ."

. . . . .

"Monetary policies based on nation states, independent central banks, and floating exchange rates have reached their last stage of development. The doctrine of inflation targeting by independent central banks is a recipe for general financial instability. It will not survive another crisis. Nor will the current banking system. All these structures are propped up by governments/taxpayers’ money."

Added note: I reached out to Mr. Pringle with an additional question about his proposal for the Ikon. Below is our email exchange on it. A thank you to Robert Pringle for such a detailed reply and explanation for how his idea would work. 

My question is:

What entity would issue the Ikon and administer it over time? The IMF? Some new entity?
As a comparison, Dr. Coats Real SDR would be issued and administered by a Currency Board.

Reply from Robert Pringle:

The Ikon can be issued by a currency board also, or by the IMF or BIS. I think there is an advantage in having a distinctive asset  as the anchor - and also one for which there is a demand independent of its role as money. 

Here are some more background details for your interest. 

Basically it is a system for doing away with central banks and currency manipulation by officials or the government. The real value of money would rise with increases in productivity, as prices fell in terms of the money, Ikon. When the system is fully developed, there would be no exchange rates. People would see that the value of their money depended on the efforts and creativity of the entire world, everybody could see  and feel the inter-dependence of all people in the global money space, without the veil of money. There would be no easy pickings for the people who make money merely on speculating on monetary policies, exchange rates, debt, etc.

The general level of share prices would be held constant in terms of money. By offering to sell or buy a representative basket of stocks at a fixed price, the currency board would regulate the quantity of money automatically as currency boards like Hong Kong do now. No discretion.

There are various ways of putting this idea into effect. I would prefer to have money backed 100% by actual holdings of stocks; these stocks wold be chosen to represent all the stocks on the world’s regulated equity markets (there would need to be supervision of the integrity of such markets). When the price of the index rose above the fixed rate, the Ikon currency board would be obliged to sell stocks from its portfolio, reducing money in the hands of the public and causing deflation. If prices of stocks in the basket fell below the fixed rate, the Board would buy stocks from the public, increasing the money supply, until the price came back to the fixed rate. In practice, markets would soon expect this to happen and there might be, little need for intervention.

Of course, prices of individual stocks would continue to be volatile, as they would move in response to news about their future earnings.

Through this process, the prices of assets in general would be controlled to a much greater extent. Borrowing would be expensive as the value of money to be paid back would in real terms often be higher than the amount borrowed. Financing would take place mainly through equity markets, as under the gold standard. Thus speculation on the future prices of assets would also be expensive.

Hope this helps.

All best wishes and thanks again for your interest,


Mr. Pringle expands on how the Ikon would fit into a reformed global monetary system in this new article on his blog. These articles illustrate that there is ongoing discussion and debate around the world on how best to reform the present monetary system and that there are a variety of creative ideas out there. Mr. Pringle also advises me that he thinks events may be shaping up that would allow for ideas like the Ikon to be considered.

Wednesday, June 14, 2017

Bretton Woods Committee: The Future of Globalism and Multilateralism

As we have noted here, the election of President Trump has created somewhat of a "wild card" situation in regards to US policies for global institutions such as The World Bank and the IMF. Trump ran a campaign based on "America First" which most assumed meant that he is not a big fan of these kinds of global institutions. However, since taking office, Trump has shown that he can change his views very quickly and that trying to assume we know exactly what those positions will be can be tricky. 

In April, a conference was held to discuss the future prospects for globalism and multilateralism taking the new Trump Administration into account. Some think the future is somewhat dim under Trump while others see it differently thinking that the US will not pull away from these institutions, but will seek to reform them instead. Time will tell. Below are some excerpts from two relevant articles posted on the Bretton Woods Committee web site.


The Future of Globalism and Multilateralism

"On April 19, 2017, over 175 Committee members and friends – including leaders from both public and private sectors as well as academia and civil society – gathered at the International Monetary Fund headquarters in Washington, D.C. for the 2017 Bretton Woods Committee Annual Meeting. This year’s theme, The Future of Globalism and Multilateralism, focused on the future of the Bretton Woods system in a changing geopolitical landscape.
. . . . .

"In the second segment, World Bank Group CEO Kristalina Georgieva was joined by moderator Guillermo Ortiz, Chairman of Latin America, BTG Pactual to discuss her role as the inaugural CEO of the World Bank Group as well as the World Bank’s role in a shifting development landscape. Georgieva expressed concern over global uncertainty and what she called, “the mother of all crises, the crisis of confidence,” and its impact on investment, risk perception, and negative interest rates. Referencing the World Bank and regional MDBs’ initiative, “From Billions to Trillions,” Georgieva spoke about the need to catalyze dormant private sector financial resources to flow into developing markets, citing Vietnamese solar infrastructure projects as an example, and spoke on the need for action to address the famines in Yemen, Nigeria, South Sudan and Somalia. Finally, Georgieva expressed her belief that the Trump administration’s “America First” agenda would be better served by closer engagement with the World Bank Group, and added that she has not heard anyone from the administration say that they want to disengage."


Former top Treasury officials cautiously optimistic that Trump will come round to the MDBs (Multilateral Development Banks)

"Two former United States Department of the Treasury under secretaries for international affairs have called for strong continued U.S. support for multilateral development institutions and especially the International Monetary Fund and the World Bank.

The comments come amid fears President Donald Trump’s administration is less supportive of such institutions as it seeks to cut overseas aid and development spending, and prioritize an “America First” foreign policy."