What to Watch for in 2019

As we move into 2019, we still do not have anything significant to report here in terms of major monetary system reform or even some kind of new global monetary system. We have attempted to cover this issue as in-depth as possible based on whatever we could find on the topic.

What we have learned over the last few years is changing from the status quo is something much talked about, but very much harder to actually do. It's not that there is any shortage of ideas for reform. We have covered many such ideas here. Also, the financial crisis of 2008 clearly ramped up discussion of the idea of monetary reform more than anything I can recall in my lifetime (I am now 63). There is an ongoing debate about whether the measures taken to recover from that crisis have actually worked or not and that debate will no doubt continue on. Organizations like the IMF and the BIS have issued multiple systemic risk warnings since 2008 and even today still don't rule out another major global crisis. People like Jim Rickards continue to predict that the next crisis will dwarf the 2008 crisis and that major monetary system change will be essential at that time.

Meanwhile, despite all of the above, the status quo has managed to survive and the US dollar based global monetary system just rolls along even as various efforts to move away from the US dollar continue. Efforts to challenge the central bank based system have also arisen with the "blockchain technology" buzz first surfacing around Bitcoin and then speading out to all kinds of blockchain based alternative ideas (SAGA and Kinesis are a couple of newer examples). Despite the blockchain buzz, the information we have here suggests that major central banks and the IMF are not on the verge of implementing blockchain based technology for either national currencies or the SDR at this time. They do issue a lot of studies on the topic which mostly just continue to point out the pros and cons and then conclude by saying they still see a lot a major issues and challenges for using blockchain.

Below is my best guess at some things to watch for in 2019. I won't publish many articles until there is evidence that something truly significant impacting the present monetary system is actually happening. Until that happens, we can expect the status quo to continue to prevail.

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1) Will we get a new major financial crisis? (perhaps worse than 2008) - this would be the most likely event to prompt some kind of monetary system change which is why we must watch for it. Lately, we see global stock markets possibly rolling over into bear markets and rising interest rates could add more problems for consumers and real estate (while helping out retirees with savings earning interest). Oil and other commodity prices have crashed heading into late 2018. Are these signs that the economy is rolling over? Will these problems pick up momentum or are we just seeing normal market corrections? Is the so called "everything bubble" that some say central bank easy money policies have created starting to pop? All these are questions worth asking for 2019.

2) Will the Blame Game Ramp Up in 2019-2020 heading into the next US Presidential election? We wrote an article on this in November 2018 and don't see anything that changes what we wrote in that article (in fact everything we see happening further confirms that analysis). If we get a new major financial crisis under President Trump, expect the efforts to assign the blame to him by his opponents and by him to assign the blame on the US Fed to go through the roof. Who the public does blame will be a huge factor in what happens next. I offer no predictions on that.

3) Will one of the new blockchain based initiatives (like SAGA or Kinesis noted above) emerge in 2019? I don't know, but they are worth monitoring to see what happens. Again, a new major crisis will no doubt create public doubt in the current system (central banks, etc) and this might trigger a more massive search for alternatives. Or at a minimum, there may be calls for major reform within the central banking system.

4) Will any major central banks adopt a central bank digital currency (CBDC) with or without using any kind of blockchain technology? Sources I view as credible report that the adoption of blockchain technology at major central banks or IMF is unlikely any time soon. If that should change, we will report that here. Sweden may attempt a try at a central bank digital currency during 2019, so watch for that.

5) What happens with various trade war issues (sanctions and tariffs)? I have tended to assume these are just temporary tools intended just to gain leverage in negotiations, but if they continue to drag on (or even intensify), they could certainly add to overall systemic risk and increase the incentive for other nations to try and bypass the US dollar. I appreciate the input from some experts who called this potential problem to my attention as another issue to keep an eye on in 2019.

Conclusion:

As always, the most likely trigger for some kind of major monetary system change would be a new major global financial crisis (which plenty of people are still predicting will happen). Without such a crisis, very slow and gradual change to the status quo appears most likely. In such a crisis, who the public blames for the crisis will be hugely important. Now there are some emerging proposed alternatives to the current central bank run monetary system that could become truly competitive if the public loses trust in these institutions in a new crisis. 

Also, the political ramifications of who gets blamed would play a role as well. We can expect that the solutions to a new major crisis would vary greatly across the political spectrum ranging from calls to disband the Fed to full implementation of a more socialist style economy (such as proposed by Bernie Sanders).  What President Trump might propose to deal with a new major crisis is a complete unknown.

We make no predictions here, but these are the major issues we can think of to watch for in 2019 that we will keep an eye on here. 

Added note: I had a number of experts from around the world review this update and the general consensus was that it seems to be a fair analysis of the issues to keep an eye on in 2019. They also called my attention to item #5 as one to add to the list which I had overlooked in my original draft.