Peterson Foundation Fiscal Summit: Paying for the Past

Here is a link to a video of a recent discussion of the financial problems facing the US due to the ever increasing debt overhang and the expansion of entitlement programs. Participants included former Fed chief Alan Greenspan, head of the Dallas Fed Richard Fisher, and former Bush Administration economic adviser Lawrence Lindsey.

They discuss the large problems facing the US and offer some ideas on what to do. But at the end of the discussion, they mostly agree that we are more likely to suffer another major crisis because the actions needed to avoid one are not being taken. If you have followed these issues for any length of time, you understand that the political division in the US has led to gridlock on any possible solutions to the problems. Nothing at this point seems likely to change that. It's as if only a crisis might break the impasse.

If we do eventually get another major financial crisis, it will bring Jim Rickards forecast into play and very likely lead to some major monetary system change. That is what we follow here on this blog. You can also watch the video by just clicking on it below.

Added note: Bill Holter reviews the above discussion from the point of view that sees the central banks as a main contributor to the problems being discussed. His review gives you a good idea what the central bank critics think about the situation. I can say from reader feedback that there are a lot of people who take this view of the situation.

All of this ties in to one of the two big questions I have which is: Will we get another major financial crisis that disrupts the current monetary system?

The followup question is: If we do get another major crisis, how will the public react to it?

Will people trust those who have been running the present system to fix it again or will they agree with Bill Holter and decide that those running the present system are to blame? If they agree with Peter Schiff and Mike Maloney in this video discussion, they may blame the central banks if we get another crisis. This video got over 45,000 views in just four days after being posted to Youtube (more than twice the views of the video discussion above). This illustrates how many people are listening to this point of view.

These are all unknowns if we truly live in a complex system as Jim Rickards believes. I do not claim to know the answers as explained in this recent blog article. All we can do here is follow events and see what actually happens.

Added note: In response to this blog article a reader sent me a link to his own article. He gave permission for me to provide the link here below:

Edge Trader Plus Article

Jim Rickards: The Dollar Will Die with a Whimper, Not a Bang

Jim Rickards has written this new article which argues that those expecting the US dollar to have some kind of sudden collapse in value may well be wrong. Instead he says that if history is a guide, the US dollar is more likely to lose value steadily over time. He notes that this may cause many people to be unprepared for the loss of value if it does happen slowly over time. Below a few quotes from the article.

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"The same force that made the dollar the world’s reserve currency is working to dethrone it.

July 22, 1944, marked the official conclusion of the Bretton Woods Conference in New Hampshire. There, 730 delegates from 44 nations met at the Mount Washington Hotel in the final days of the Second World War to devise a new international monetary system.

The delegates there were acutely aware that the failures of the international monetary system after the First World War had contributed to the outbreak of the Second World War. They were determined to create a more stable system that would avoid beggar-thy-neighbor currency wars, trade wars and other dysfunctions that could lead to shooting wars.

It was at Bretton Woods that the dollar was officially designated the world’s leading reserve currency — a position that it still holds today. Under the Bretton Woods system, all major currencies were pegged to the dollar at a fixed exchange rate. The dollar itself was pegged to gold at the rate of $35.00 per ounce. Indirectly, the other currencies had a fixed gold value because of their peg to the dollar.

Other currencies could devalue against the dollar, and therefore against gold, if they received permission from the International Monetary Fund (IMF). However, the dollar could not devalue, at least in theory. It was the keystone of the entire system — intended to be permanently anchored to gold."

Click here to read the full article

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My added comments:

So far those calling for a huge (and sudden) drop in the value of the US dollar have been wrong although the dollar is far below its historic highs. Lately, the dollar has staged a strong rally up to near the 100 level on the US dollar index. It fell back from that level below a key support level at 95, but has since rallied back up above that level. 

Despite the strength of the dollar so far, there are still many who are calling for a big drop in the dollar and they remain convinced it will happen. Peter Schiff thinks it will drop sharply at some point.

The US dollar index is one of the keys we watch here that could clearly impact monetary system change. If the dollar does drop in price (slowly or quickly) it will mean the dollar is losing its status as the leading global reserve currency. Many believe that the inclusion of the Yuan into the SDR currency basket will be a signal that the decline is underway. A loss of sole global reserve currency status by the US dollar is, of course, is a significant event related to the global monetary system if it does happen. I should point out however, that some sources told me last year that the dollar looked strong when many were forecasting a sharp drop. They turned out to be correct. 

I think that until the general public becomes more convinced that the risks to the system are being managed successfully, we will continue to see a lot of concern about the future of the US dollar. Increased awareness/transparency of that process would be helpful, but may not be forthcoming. People can only evaluate things based on the information made available to them.We will just continue to follow it here with an open mind and see what actually happens.

News Note: Russia to Buy $140 Billion in Additional Gold Reserves

We know China is building up a lot of additional gold reserves. Russia has been as well. Today they announce they will add another $140 Billion to get up to $500 Billion in gold reserves. If this gold were purchased at the current price it would amount to over 120 million ounces or over 3700 tons of gold. This would be nearly two years of annual gold production. (approx. 4,000 tons). This is bound to fuel more speculation as to why China and Russia are adding so much to their gold reserves.

Below are some quotes from the article.

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"The Russian central bank has been a major purchaser of gold bullion, and that trend does not appear to end any time soon.

According to media reports, Elvira Nabiullina, chairwoman of the central bank, said the plan is to increase its foreign reserves to around $500 billion in the next few years, from the current level of $357 billion.

“In optimal conditions, reserves should be enough to cover considerable capital outflows for two to three years,” she said. “The increase in reserves should be gradual and solely in a way that doesn’t contradict monetary policy goals, particularly reducing inflation to 4 percent in the medium term.”

Click here to read the full article

News Note CNBC: IMF Calls on Fed to Delay Rate Hike Until 2016

The IMF is now calling on the US Fed to wait until 2016 to raise interest rates and also forecasts it will be 2017 before inflation hits the Fed's target rate. All this suggests that once again Fed and other economist forecasts have been too rosy. If the Fed heeds the IMF call, this will also prove out another Jim Rickards forecast that there would be no rate hike in 2015. Rickards has also said he thinks the Fed will actually have to revert back to QE4 sometime in 2016 as well. Below are some quotes from the CNBC article.

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"The U.S. Federal Reserve should delay a rate hike until the first half of 2016 until there are signs of a pickup in wages and inflation, the International Monetary Fund said in its annual assessment of the economy on Thursday.

The fund's report comes amid signs that some rate setters at the U.S. central bank are also pushing for rate hikes to be delayed until there are clearer signs of a sustained recovery. U.S. data has been mixed and the economy shrank 0.7 percent in the first quarter.

"Based on the mission's macroeconomic forecast, and barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016," the fund said.

Fed chair Janet Yellen has insisted the economy remains on track and that a rate rise this year is on the cards, although others including Fed governor Lael Brainard, viewed as a centrist on the rate-setting committee, have raised concerns over growth.

The fund forecast that the Fed's favored measure of inflation, the personal consumption expenditures (PCE) reading, would hit the central bank's 2 percent target only in mid-2017."

Click here to read the full article

In other news: Greece asks to kick the can to the end of June

OMFIF: Chinese SDR Inclusion Could Trigger Global Assets Shift

A big thank you to a blog reader from South Africa who sent me this link! This article on the OMFIF web site talks about a possible unintended consequence for China if the Yuan is included in the SDR currency basket later this year (increase in the value of the Yuan might depress the Chinese economy). This is something I have not seen mentioned in other articles on this topic. Below are some quotes from the OMFIF article.

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"A large shift of global institutional assets into renminbi could take place if the International Monetary Fund concludes later this year that the Chinese currency should join the Special Drawing Rights, the Fund’s composite currency unit used in official worldwide transactions

Some sizeable moves on world capital markets could take place pre-emptively if opinion hardens in the next few months that the IMF is about to bring the renminbi into the SDR, combining the world’s most important reserve currencies. This could spur further appreciation of the renminbi that could represent another depressant for the Chinese economy, complicating Beijing’s efforts to prevent an unduly sharp slowdown this year.

 A possible conflict between China’s international monetary ambitions, on the one hand, and, on the other, the need to keep the economy on an even keel was highlighted in a seminar on the SDR and the renminbi organised in Beijing on 22 May by the International Monetary Institute of Renmin University and central bank research group OMFIF.

Whether the SDR could or should be expanded from its present four constituents, the dollar, euro, yen and sterling, is being debated at a technical level, ahead of a decision by the IMF executive board before the end of the year.

An intriguing issue is whether this becomes elevated to a political question between the US and Chinese governments. A decision to include the renminbi in what is effectively an association of the world’s top reserve currencies has big implications for financial markets, to which only a few specialists hitherto have paid much attention.

"The general consensus at the Beijing seminar was that, from a technical point of view, the renminbi was probably well on the way to SDR membership. Although many Chinese financial market participants believe the US opposes renminbi inclusion, Washington cannot – even if it wished to – by itself block adhesion. The SDR decision requires a 70% majority on the IMF executive board. The US has the power to veto solely decisions that require an 85% majority.

In addition, the US will almost certainly not wish to risk another potentially embarrassing showdown with China just months after being rebuffed in its attempt to block western countries’ adherence to the China-led Asian Infrastructure Investment Bank." . . . . . 

Click here to read the full article

Added note 8-12-15: This article become even more interesting in light of the recent decisions by China to devalue the Yuan.

Speaking of Summer - Love and Mercy is a Movie You Might Enjoy - Off Topic

With summer upon us now I am ready to go see this movie coming out on Friday (June 5th).

The Beach Boys are from my era, but I was never a huge fan while growing up. Like most people, I just enjoyed hearing their more popular songs now and then. Later on, as I came to know about the incredible journey Brian Wilson made during his life, I have gained more appreciation for him. To see anyone hit bottom in life and then somehow overcome severe adversity is always a heart warming story.

In this case, we probably have seen a musical genius do it. In 2012 our family was fortunate enough to be able to attend the Beach Boys 50th anniversary tour appearance in the Dallas area. The remaining original Beach Boys (see note below) probably appeared together for the last time. It really felt like you were watching a historic performance never to be repeated.

I was amazed that they could still produce their beautiful harmonies even after 50 years. Brian Wilson and the Beach Boys truly are American icons and I am glad I was able to attend that performance in 2012. This new movie is getting rave reviews so I hope it is showing in your area (it has a limited theater showing) and you get a chance to see it this summer. I suspect the sound track will be pretty good :)

note:  The Beach Boys who performed in the original group in the 1960's that are still alive are Mike Love, Brian Wilson, Al Jardine, Bruce Johnston, and David Marks. Carl and Dennis Wilson have passed on.

Update 6-17-15: Have seen the movie now. Some outstanding performances, excellent movie!

Hot Rods segment from the 50th Anniversary Tour 

Surf segment from the 50th Anniversary Tour 

Good Vibrations - 50th Anniversary Tour

Original a cappella sound track - Incredible

Good Vibrations Studio Footage - Also Incredible

Paul McCartney talks about singing God Only Knows with Brian Wilson

Here McCartney inducts Wilson into the Songwriters Hall of Fame

What's Ahead this Summer?

As we near the half way point in 2015, things are not a lot different than they were as we started the year. All the risks to the present monetary system we have documented here on the blog still exist. So far, those risks have been managed in such a way that we have avoided another major financial crisis. 

Those forecasting that we will have another crisis are still making those forecasts. Some think we will see one this year (most have a September to October time frame). Others who think we will see another crisis don't have a set time frame. Those running the present system agree there are risks, but many feel the risks can be managed. Some on the inside see potential blind spots in the current system.

At this point after nearly one and a half years of covering this topic, I really have two big picture questions I am following here on the blog. Those are:

1- Will we get another major global financial crisis as many are predicting that will be much worse than the 2008 crisis because all the numbers are bigger now?

If we do get this crisis, a followup question is how will the public react to it and how will the crisis get resolved? Will the IMF step in to solve the crisis this time?

2- If the global financial system moves towards a more global environment (the IMF and the SDR step forward as the new main global reserve currency) for whatever reason, will we see a new asset backed digital currency that would allow the average citizen and major central banks to connect with each other in a new historic way?

Another way to ask this question is will there be a way some day in the future to tie the "inside" SDR to an "outside" currency that everyone can hold and use for commerce? Will new digital technology play a role in this?

This second question will seem strange to many readers. I understand that. But my research on all this leads me to believe such a concept is possible in the future. This could be a question that we don't get an answer to for a few more years.

If the answers to either or both of the above questions are yes, we will see historic changes to the global monetary system which is what this blog covers. We could see those changes forced upon us under crisis conditions or slowly evolve over many years. 

If the answer to both questions ends up being no, it's probably time to bring this blog to an end. If no major change is coming anytime soon, the blog is not really serving a useful purpose.

While we follow these two big questions and wait to see how they are answered (which could take awhile), we will continue to follow news events that relate to the monetary system and that could impact potential change to the system.

This summer we have several news events ongoing to keep an eye on. Here is a bullet point list:

- What happens with Greece? A lot of drama so far. Greece says they cannot pay the IMF? Will there really be a default or will this get rolled forward again as has been the case in the past?

- BRICS nations hold their summer summit in July in Russia. We can expect some news and updates from this meeting on the BRICS bank (and probably the AIIB as well)

- A lot of intrigue is happening in the gold market with everyone watching China to see what their end game is for all their gold buying. We might get some news on that this summer leading into the IMF decision this fall on the SDR currency basket.

-The Ukraine has dropped off the radar map, but its debt problems are not yet resolved so we should probably check in on that sometime this summer

-We will continue to follow experts like Jim Rickards and Nomi Prins who regularly provide new articles and interviews for the public. People with experience and connections inside the system who will talk about key issues are rare, so we value those who do.

-We will continue to monitor alternative media sites to see what the thinking is on these sites. Here is a recent interview that is a good example of how these sites view things. Many of these sites believe we will see a major crisis this fall, so we will see if that happens or not. We will also look to see how Bo Polny's forecast for June 21st turned out.

By now we should all understand that the conditions for a crisis are basically always present with shadow banking, derivatives, unsustainable sovereign debt, etc. Both the IMF and the BIS have issued multiple warnings about all these risks which we have documented here on the blog over the past year. You can find those warnings in the blog archive links on the right hand panel of the blog. Here is an example of partial list we compiled last December. There have been several more added since then. On the other hand, it may be that another major crisis will be avoided if these systemic risks are well managed.

This fall we have the IMF decision on whether to add the Yuan into the SDR currency basket so we can also expect continuing news articles on that this summer leading into that decision. The IMF 2010 reforms are still stalled and frustration with that continues. We can expect that to impact how various nations move forward.

I will also re-post a few of the most popular blog articles this summer for new readers. This blog continues to get new readers every week. If you are one, the archive of articles on the right side of the blog might be useful to you.

If you as a reader here see a topic relevant to monetary system change you want covered, just let me know. If you are a new reader, you might enjoy this page which explains more about this blog. If you are a dog lover, you might enjoy this page. I appreciate all feedback from readers and have gotten lots of great article tips from readers here from around the world including the BRICS nations. That is much appreciated!

Contact me at: lonestarwhiteshouse@gmail.com

I hope everyone has a pleasant and enjoyable summer!

I guess I should say pleasant winter for those in the Southern Hemisphere :)

More on Bitgold and Some 'Future World' Speculation

Recently BitGold merged with GoldMoney to create a new entity that intends to allow people to both own gold and be able to use it to buy things in every day life. This article in the Guardian provides some more details about it. It appears a full featured version of this concept will not be available yet in the US, but perhaps later on. 

This may be a way that those who want to hedge against their own local currency can use gold to do that and also have it available to use like cash. Of course any digital currency is vulnerable to the problem of a systemic failure due to a cyber attack or some other failure of the internet. But it could be something that would appeal to those who like gold as a hedge and also want to have liquidity available (click here to see James Turk defend the concept to critics)

Interestingly, BitGold has backing from both a high profile gold and silver advocate (Eric Sprott) and the Soros Brothers Investments group. Soros Brothers Investments is run by George Soros son Alex. 

Below are some quotes from the article and then some added comments

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"When Josh Crumb and his colleague started out, they just wanted to figure out a way to allow people to pay for a cup of coffee with gold. Yes, you read that correctly. With gold.

In the more than four decades since president Richard Nixon abolished the gold standard – the pledge that a dollar was worth 1/35th of an ounce of gold – there has been no formal link between the value of the precious metal and that of the dollar or any other of the world’s other chief currencies. That has driven a group of economists and policymakers crazy; they argue that the demise of the gold standard lies behind all of America’s economic woes since Nixon’s 1971 edict. Rand Paul, one of the current crop of Republican candidates for president, is among those arguing that it’s time to at least study the idea of linking the dollar to gold.

For Crumb and Roy Sebag, the founders of BitGold Inc, whatever the world’s politicians and central bankers choose to do about gold and the dollar (or gold and the Euro, or gold and the yen) is interesting, but irrelevant to their own business plans. They’ve already married gold and the dollar, in what Crumb describes as “a personal gold standard”. The Toronto-based company’s product is simple: it offers clients the ability to deposit gold in their BitGold accounts, and then use those funds (or their value in their local currency) to make mortgage or car payments – or simply to pay for a coffee.

Essentially, in BitGold, one of the financial world’s newest innovations – digital currency – has run full tilt into one of its oldest concepts, gold as a medium of exchange. The idea for the latter probably predates recorded history, while digital currencies are in the midst of radically redefining the very meaning of the concept, and in the very earliest stages of what could prove to be an enormous shakeout in the way global financial systems function today."

. . . .

"Crumb is imperturbable. For starters, he has some powerful friends and allies – including veteran gold bugs such as Eric Sprott, a Canadian asset manager, and Alex Soros, son of famed hedge fund manager George Soros, whose Soros Brothers Investments is among BitGold’s investors. Then, there’s his conviction that the public is itching for a product just like this – especially those with only a few thousand dollars in savings, being offered accounts that pay little or no interest by conventional banks. BitGold, in contrast, will allow them to store their gold for free (an instant savings) and – or so Crumb argues – give them a hedge against inflation that might eat away at the value of those savings".

Click here to read the full article

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My added comments:

By now it should be clear that the world is moving towards a digital currency environment. We can expect competition in this area as there would be in any type of banking or payments system. Digital currencies will have their pros and cons. Certainly, not all of them will not be wise places to put money (some will fail). All of them would have vulnerability to a systemic failure of the internet or a cyber attack (just as current digital accounts do). Also, as we have noted here, those who try to bypass the present banking system will likely encounter all kinds of problems like Bitcoin has had to endure. BitGold looks like they will not try that.

While BitGold is not the digital currency we have talked about here on the blog that might someday tie in to the SDR used at the IMF, it does show us that in the future we could see a new system backed digital currency some day. 

Those who believe that there are no tools or solutions left if and when the next crisis arrives may be surprised. It's not hard to imagine a future world where all the unsustainable bad debt left in the world is rolled up into one giant "bad bank" and written off. The remaining debt that could actually be sustained could be restructured over longer time periods. The IMF does have guidelines on this. Debt restructuring has been done before many times on a smaller scale. If we get a global crisis, it might happen at a global level.

Along with this we could see a new digital asset backed currency (backed with gold and other assets) that people could use both as a store of value and for every day transactions (somewhat like BitGold intends to do using only gold). This new currency might some day tie into the SDR used at the IMF so that every day citizens and central banks had the same standard currency unit available to hold and use. The IMF rules would have to be changed to do this, but who is to say that can never happen? And it does not have to be something people are forced to use. Rather, it might simply be offered as a superior alternative to their own currency in places with currency problems. It could add stability and more convenience to the global financial system. It could also promote financial inclusion for the unbanked around the world.

The inclusion of the Yuan into the SDR basket might be just a step along the way to this new type of system. It could evolve from a regional basis to a global basis over time. The gold held in the current system could be part of the assets behind this new digital currency. This new currency would then provide people a way to hedge against their own local national currency if they felt a need to do so. For people who travel a lot, it might also provide a convenient currency to use worldwide without the hassle of currency conversions every time they changed locations (this is one goal BitGold is trying to achieve).

All this is future world speculation of course. But it's not unrealistic speculation as we can see from things like BitGold already coming into view. The point is that we should not assume that there are no tools left to reset the system if that becomes necessary. Many who have made that assumption have been surprised to find out they were wrong. None of us can know the future for sure and time will surely tell. We will follow it here.

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Added note: 

A reader posted a link in the comments below. This makes it a clickable link:

http://support.bitgold.com/customer/portal/articles/1939439-allocated-gold-vs-unallocated-gold

Will There Be Another Huge Global Financial Crisis?

If you are a reader here, you know that this is one of the two big questions I have after writing on this blog now for about a year and a half. This article will explore this question and try to provide the best information I have on this question based on all the research I have done and some highly credible input I have gotten on it from solid sources.

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If you spend any time at all researching this question, you will quickly find out that there are many highly respected analysts who believe we will get another major global financial crisis. We have written many blog articles here that explain that view in great detail. In addition, the leading global financial institutions in the world such as the IMF and the BIS have issued repeated warnings that there are systemic risks that could lead to another global crisis. Below is a quick bullet point list of some of the risks we have documented here on the blog:

- too much sovereign debt leading to default on that debt at some point in the future

- huge derivative positions tied to not only all this sovereign debt, but also the movement of interest rates, real estate values, commodity prices, and just about everything else on earth

- shadow banking where risks that may be hidden to regulators likely exist

- the ending of unconventional easy monetary policies leading to unknown market reactions

- the globally interconnected nature of the financial system that exists today, risk of spillover and contagion

- potential for geo-political conflicts leading to a breakdown in international cooperation (currency wars, real wars, sanctions, etc)

-mismatched investment flows leading to a sudden unexpected lack of liquidity (Funds promising investors instant liquidity while investing in instruments that are not liquid)

We could go on, but all these have been identified as legitimate risks to the system. People like Jim Rickards believe that because the system is a complex system and economists are using improper risk models, we will get another major crisis. He thinks that those running the present system will not see it coming. Jim Rickards is a voice I greatly respect and should always be listened to in my view.

We have spent a lot of time on this blog documenting all the above in order to help readers be as informed as possible about the risks and hopefully prepare some kind of personal financial plan in case there is another major crisis. It is always wise to be as prepared as possible.

On the other hand,

it is important to make sure that we present a balanced view here. I can say with a high degree of confidence that those working inside the present system DO understand these systemic risks exist. In fact, please note in the blog archives that most of the warnings we have documented here on all these risks come from the IMF and the BIS. So they do get it. They are not going to forecast a crisis because they know such a forecast could actually help trigger the crisis. Maintaining public confidence is a vital part of the equation. Jim Rickards may be right that the models they are using are fooling them and a crisis will catch them by surprise. That is something we will just have to watch over time and see what happens. Jim makes a strong argument for his views.

In addition, I can also say with a high degree of confidence that good people working inside the system are always working on tools to use to manage all these risks. We can't know all of what is being done because work inside the system is confidential. However, it would be foolish to think that nothing is being done or that those inside the present system have no tools left available to deal with problems. Many have thought that in the past and have been surprised in that regard.

I believe there is confidence within the system that the systemic risks can be managed to avoid a crisis. If another crisis does emerge, I believe it is likely there are backup plans that can be brought into play to work on the problems. Readers should also keep in mind that at the core of the existing system there are still large gold reserves that can be used as a last resort to bring stability back into the system if all else were to fail. We will not be returning to a gold standard as was used in the past. But that does not mean that gold is not still very important as a core reserve asset. Regardless of what is said about gold, it is still important at the core of the system. It could be used again in new ways in the monetary system with the innovative new technologies that exist today if need be.

My point here is that readers should not assume that another major crisis is inevitable. Also, if we do get one, readers should not assume that there are no tools left to deal with problems. There are very good and very bright people who work on these issues all the time behind the scenes. It's possible that new ideas and innovations will help us work through whatever problems may arise. We won't really know until it happens.

None of us can know the future, period. Given that truth, I think a wise way to look at it is to make a reasonable personal backup plan in case another crisis does arise. If it does happen, try to think in terms of how you might be able help others if possible. Don't live every day in fear of another crisis. Fear is wasted energy. We may not ever have to go through the worst case crisis some think will happen. If we do, it will be important to pull together and do what we can to help improve things. For example, look at how most people pitch in to help when a natural disaster happens. That is what we have always done when we are at our best.

I believe it's a much better way to approach things than worrying about something that may never happen and that you cannot control if it does happen. Let's just stay alert and informed and see what actually does happen. That is something we can try to do. This blog will try and help out with that part as long as I have time to follow events.

Our Two Most Popular Blog Articles in May

There have been many blog articles here that attracted a lot of interest and thousands of readers. Below are links to the two most popular blog articles in May. Both were related to a call for "new rules of the game".  

This is phrase used by central bankers when they are calling for changes to the international financial system. Since that is what this blog is all about, it makes sense that these two articles were very popular. The articles were read by people in over 50 countries around the world.

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BIS: Time to Think About New Global "Rules of the Game"


We often cite speeches and articles found on the Bank for International Settlements (BIS) web site here on the blog. This is because the BIS and the IMF are the two most influential global financial institutions in the current monetary system. If we are going to see major change in the system, these two organizations will be in the middle of that change. The article linked above contains remarks made by BIS General Manager Jaime Caruana at the recent IMF meetings in Washington DC.

Head of India's Central Bank says IMF needs to Re-examine "Rules of the Game"

Rules of the game is a term used by central bankers to describe the fundamental rules used to govern the international monetary system. If someone is calling for new "rules of the game" that means they are calling for monetary system change which is what we follow here on the blog. A big thank you to a reader who sent me this link to an article in the Economic Times! (an Indian based publication) This article is about comments from Raghuram Rajan who is the head of the central bank for India (Reserve Bank of India). He also says it may be time for new rules of the game.

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My added comments:

When you see this kind of similar pattern in articles and speeches by central bankers, it suggests a consensus is developing. In this case a consensus to change the rules of the game translates into major changes in the global monetary system. That can impact everyone so everyone should be interested in the topic.

Monthly Repost: Monetary System Change for Dummies

Note: We get new readers here every week. For that reason I will re-post the article below every 1st day of the month so new readers can find it easier. The information in this article should remain pretty relevant all year and gives a full background as to what the purpose of this blog is.

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Monetary System Change for Dummies (originally published 1-1-2015)

Hopefully, readers here have a sense of humor. Of course I am not calling readers here dummies. My email inbox proves we have some highly intelligent and well informed readers here. What this post is about is why the blog got started, what it is trying to do, and how we "monetary system dummies" can make a common sense plan for whatever changes are coming in the future. I classify myself in this same group of monetary system dummies --- the average person who does not spend much time reading IMF workpapers and listening to Bank of International Settlements speakers. Those of us who don't have a background in macro economics, but are willing to learn because we sense it does impact our lives. 

With that in mind, I have linked below a somewhat longer article called 'Monetary System Change for Dummies'. Since it is about 4 pages long, below I have just pasted in a few selected paragraphs to give you a feel for the article. The full article explains why I got interested in this topic, why I started this blog, and offers some common sense ideas on how to prepare for coming changes that most anyone can follow. The full article (click here for it) is written in Word format so you can print it out if you like. It contains a link to the web address for this blog making it easy to print and hand out so people can find the blog on the internet.

A big thank you to all who visited here (over 120,000 visitors from around the world). The blog continues to get new readers all the time. It's designed for the average person who wants to learn about this topic without spending hour upon hour researching and digging up the info (that's my job). Please let others know it is here if you find the information worthwhile.      2015 will be interesting!

Monetary System Change for Dummies

(What I Have Learned from a year of Bogging on this Topic)

A little over 10 years ago I became interested in the “big picture” of the global monetary system and what kind of changes might be coming that could impact my family in our daily lives.  I stumbled onto a web site operated by Jim Sinclair called JS Mineset. I was intrigued because this was a free information source web site that challenged me to learn more about how the monetary system works and how changes to it can impact our daily lives. Jim Sinclair had a lot of credibility because he had decades of experience inside the system and had become somewhat famous for accurately forecasting the gold market. I am old enough to recall the late 1970’s when gold made a then historic move to all time highs. I remember the Hunt Brothers move into the silver market and the accusations that they were attempting to corner the silver market. In fact, I even worked for one of the Hunt family oil and gas companies for 15 years after the silver price collapse that led to Placid Oil filing for bankruptcy protection. (the one owned by their sister Caroline Hunt of hotel fame)

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As time went by I began to do more and more research to seek out good sources of information. I realized that having an understanding of the monetary system was important, because how it operates impacted my life and my family. To make good decisions, it is important to understand how things work and to get the best information possible.  I learned that good information is out there if you look for it, but it takes time and effort. There is good information from both mainstream media sources and alternative media sources. In fact, studying both sources is the best way to compare different perspectives and see which ones turn out to be more accurate over time.  This led to one of the key objectives for my blog. To track various opinions and forecasts of credible sources over time to see who gets things right more often. This takes patience and persistence because events usually play out over years. The modern 24 hour news cycle does not allow for that approach as most news and opinions come and go very quickly and are forgotten by most people.

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All of this led me to start up a blog dedicated to following potential major change in the monetary system. Also, how this might impact the average person like myself.  That is, a typical family just trying make a living and provide for their kids. People that normally couldn’t care less what the IMF did yesterday (like my wife and daughter for example ☺).   I felt like there was a need to try and reach out to the average person who would not normally care about this and encourage them to think about the issues involved seriously. After all,  if we have another major global financial crisis that is even worse than the one we had in 2007-2008, do you really think we can just ignore it? That it will have no impact on our daily lives? I don’t think so.

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So, What Have I Learned After a Year of Writing Blog Articles on this topic?

A lot of course. I have learned that it is wise to keep an open mind and to continue to follow events over time. In fact, I would say this is probably the most important lesson I have learned. The one constant that I remain convinced of is that we will see major monetary system change in the future. When you follow this topic, you quickly find out that there are a lot of different views on how and when this change will happen. A lot of very intelligent and very credible people (from both inside and outside the system) have different opinions.  I think it is wise to listen to various points of view and not become “locked in” to one view so that you quit following the all the facts and only listen for those facts that support the conclusion you want to believe in. . . . . . . .

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Writing this blog has allowed me to make contact with people I never expected to meet as “an average person”.  Some people who are working at high levels within the system stumbled onto my blog and were willing to spend time helping me gain a better understanding of how all this works.

This has led me to conclude that the future of how and when the monetary system will change is far from certain. It could range anywhere from another huge global financial crisis that leads to rapid system change to a slow and steady form of change that unfolds over years in a controlled manner.

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I think we can list some outcomes that are probable however. We can then use that as a guide for making the best financial decisions for our personal situations. Below are the scenarios that seem most probable  to me after a year of learning and writing on the blog.  

--- Read the full article to see these four scenarios---

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How Do We Prepare for Future Monetary System Change?

This is the question that really matters for people who would read my blog. Learning about the monetary system can be interesting (at least for some), but most people want to get to the bottom line. How is this going to impact me and my family?    What Should I Do to Prepare?

Glad you asked. I think there is a reasonable way to deal with all these unknowns and potential major change coming in the future.  Let’s list some bullet points and then some concluding thoughts.

--- Read the full article to see the 8 bullet points ---

Thanks for visiting and reading!

Best Wishes – Larry White

http://lonestarwhitehouse.blogspot.com/