October 05, 2009
The IMF may have catapulted to a more exalted status than that.
According to Jim Rickards, director of market intelligence for scientific consulting firm Omnis, the unannounced purpose of the G20 Summit in Pittsburgh on September 24 was that,
Rickards said in a CNBC interview on September 25 that the plan is for the IMF to issue a global reserve currency that can replace the dollar.
SDRs, or Special Drawing Rights, are a synthetic currency originally created by the IMF to replace gold and silver in large international transactions.
But they have been little used until now. Why does the world suddenly need a new global fiat currency and global central bank?
Rickards says it because of the “Triffin Dilemma,” a problem first noted by economist Robert Triffin in the 1960s. When the world went off the gold standard, a reserve currency had to be provided by some large-currency country to service global trade.
But leaving its currency out there for international purposes meant that the country would have to continually buy more than it sold, running large deficits until it eventually went broke.
The U.S. has fueled the world economy for the
last 50 years, but now it is going broke. The U.S. can settle its debts and
get its own house in order, but that would cause world trade to contract. A
substitute global reserve currency is needed to fuel the global economy
while the U.S. solves its debt problems, and that new currency is to be the
If we face a war or other global catastrophe, we
no longer have the privilege of printing money. We will have to borrow the
global reserve currency like everyone else, putting us at the mercy of
Warsh said the FED would need to raise interest rates if asset prices rose - which Rickards interpreted to mean gold, the traditional go-to investment of investors fleeing the dollar.
If gold were to suddenly go to $1,500 an ounce, it would mean the dollar was collapsing.
Warsh was giving the market a heads up that the FED wasn’t going to let that happen. The FED would raise interest rates to attract dollars back into the country.
As Rickards put it,
What about the FED’s traditional role of maintaining price stability?
It’s nonsense, said Rickards.
The dollar has to be inflated because there is more debt outstanding than money to pay it with.
The government currently has contingent liabilities of $60 trillion.
The government could fund about half that in the
next 14 years, which means the dollar needs to be devalued by half.
The Dollar Needs to be
Devalued by Half?
In fact, the move is designed not to serve us but the banks. The dollar needs to be devalued to compensate for a dilemma in the current monetary scheme that is even more intractable than Triffin’s, one that might be called a fraud.
There is never enough money to cover the
outstanding debt, because all money today except coins is created by banks
in the form of loans, and more money is always owed back to the banks than
they advance when they create their loans. Banks create the principal but
not the interest necessary to pay their loans back.
But that means diluting the value of the dollar, which imposes a stealth tax on the citizenry; and the money supply is inflated by making more loans, which adds to the debt and interest burden the inflated money supply was supposed to relieve.
The banking system is basically a pyramid
scheme, which can be kept going only by continually creating more debt.
Rather, he says, the $500 billion pledged by the G20 nations is,
He notes that stimulus packages are usually grants.
The money coming from the IMF will be extended in the form of loans.
Basically, said Professor Buckley, the loans extended by the IMF represent an increase in seniority of the debt.
That means developing nations will be even more firmly locked in debt than they are now.
Not long ago, the IMF was being called obsolete.
Now it is back in business with a vengeance; but it’s the old unseemly business of serving as the collection agency for the international banking industry.
As long as third world debtors can service their loans by paying the interest on them, the banks can count the loans as “assets” on their books, allowing them to keep their pyramid scheme going by inflating the global money supply with yet more loans.
It is all for the greater good of the banks and their affiliated multinational corporations; but the $500 billion in funding is coming from the taxpayers of the G20 nations, and the foreseeable outcome will be that the United States will join the ranks of debtor nations subservient to a global empire of central bankers.