China paper urges new currency order after "financial tsunami"

[phirang]

Re: China paper urges new currency order after "financial tsunami"

Looks like we have more chatter about a new currency system, This time from our formal ally the British:

British Prime Minister Gordon Brown called on world leaders to create a new "financial architecture" to reflect the global reach of economics and banking, in much the same way that the current international economic system was set up at a conference in Bretton Woods, New Hampshire, in 1944.
"Only by global action can we fully restore the confidence that is needed and build the international financial order," said Brown, a leader who has yet to win a popular mandate but whose global profile has risen amid the crisis.

http://www.reuters.com/article/ousiv...dChannel=10338

Could this be the pause between syllables "Ka" "Poom" ?

What will this new system look like? Gold Standard? US dollar pegged to China's Yuan? Will our Dollar be like the Argentian curency after a massive bailout, we can exchange Dollars for Yuan? Or possibly will a world war insue, as this "new system" is declared and certian countries find out they are put at the back of the pecking line like Germany's issues back in the 40's........(Hope those historical anedotes are somewhat right, terrible at history but learning thanks to the smart ones at Itulip)........Interesting times indeed......

It's called continued domination of the USD...

[derelict54]

Re: China paper urges new currency order after "financial tsunami"

Looks like we have more chatter about a new currency system, This time from our formal ally the British:

British Prime Minister Gordon Brown called on world leaders to create a new "financial architecture" to reflect the global reach of economics and banking, in much the same way that the current international economic system was set up at a conference in Bretton Woods, New Hampshire, in 1944.
"Only by global action can we fully restore the confidence that is needed and build the international financial order," said Brown, a leader who has yet to win a popular mandate but whose global profile has risen amid the crisis.

http://www.reuters.com/article/ousiv...dChannel=10338

Could this be the pause between syllables "Ka" "Poom" ?

What will this new system look like? Gold Standard? US dollar pegged to China's Yuan? Will our Dollar be like the Argentian curency after a massive bailout, we can exchange Dollars for Yuan? Or possibly will a world war insue, as this "new system" is declared and certian countries find out they are put at the back of the pecking line like Germany's issues back in the 40's........(Hope those historical anedotes are somewhat right, terrible at history but learning thanks to the smart ones at Itulip)........Interesting times indeed......

[*T*]

Re: China paper urges new currency order after "financial tsunami"

All this slanging is tedious.

So I for one would like to continue the discussion of what will replace the bonar to settle international accounts. I have no doubt it is a just matter of time.

The options presented are:
1 - US treasuries (isn't that the system that is collapsing?)
2 - Gold (Tried before? Too just?)

To which I might add the following braindump:
3 - the Euro (Not enough traded EU debt)
4 - the Yuan (not freely convertible)
5 - the Rouble v.2 (nobody like Russia)
6 - SDRs v.2
7 - chaos, the dark ages
8 - local currencies (inelegant)
9 - oil (plausible, but very localised)
10 - the continuation of dollar hegemony, decaying into hyperinflation.

Any additions? Indications of most likely?

It seems to me 1/10 are plausible given that every country has so much invested in the status quo. Applying a little game theory, which player benefits most from the first move? Arguably the current equilibrium is unstable because there is a benefit to the first player to move. Much like a bank run.

[GRG55]

Re: China paper urges new currency order after "financial tsunami"

Correct! And IMHO Jim Sinclair completely misses the point:



We may see very well gold at $1650 ore even more, but there will be no "perpetual plateau" only an unbelievable crash IMHO everything that happens now it is done in order to remove completely gold as a class of power-money.

Then and only then, power-money will exclusively consist of US treasuries and only US treasuries or nationally issued certificates of US treasuries deposits.

What that means should be obvious for everybody....;)

The creation of a US T-bond based global "power-money" would seem unlikely to be accomplished unilaterally by the USA. So what are the reasons the US would receive external support for this outcome?



There's probably a long list but here's the obvious ones that come to mind early [too early :p ] this Sunday morning...

• You need, or believe you need, military protection, and there is no obvious substitute for the USA [the Gulf monarchies and certain Eastern European nations come to mind];
• You need the US consumer market to support your own economy, because "decoupling" is a myth [China and the SE Asia mercantilist economies come to mind];
• You are weak economically, as are your prominent allies, and you risk what is in your own personal and national self-interest if you get cross-threaded with the Americans [Putin and Russia come to mind];
• You are none of the above, but recognize that the alternative to allying yourself economically and financially with the USA is an inevitable loss of national sovereignty [the larger EU economies come to mind]

Note to Jeff: I probably should have dated more English majors. Being a gear is a convenient excuse I use often to explain my limited writing skills. My wife is fond of telling me that P.Eng actually stands for Poor English...

Re: China paper urges new currency order after "financial tsunami"

Jeff - I just gathered my wits long enough to peer once again at what you were referring to here, and spotted Sadsack's "oblique malapropism" (well it wasn't a malapropism, it was a humble mis-attribution). "Jonathan Smith" - does not a "Jonathan Swift" make! :p When it is followed by sublimely oblique and rarified comments such as "the grappling with the topographies", this is not a very fortunate combination. Ah well. No-one else seemed to notice. I can't abide patronizing as it is. Where it is indulged it had best get it's gowns gathered well away from it's feet, lest it encounter a stumble.

[phirang]

Re: China paper urges new currency order after "financial tsunami"

aNTIsPIN^2 : My information is that the preliminary talks flopped completely in spite of commitments to explore further the posiibilities.

The Chinese wanted to have a cake and eat it too. They wanted to be the Big Financial Brother who in fact decides all price control policies. Basically they wanted to propose a "modern" COMECON decorated with a lot of lipstick. The main reason for which the discussions collapsed was that in a group that constitutes a zero sum game you can't have every player winning. And nobody wanted to draw the short stick.;)

I don't see how those talks can go into anything viable. But the intentions are laudable

Chavez wants to do something similar in Latin America, based on a Venezuela-Cuba-Ecuador "financial power triangle"... you know to destroy the imperialist stronghold ... further the victory of socialism ....
(If Chavez really wants to build a socialist society maybe he should learn a thing or two from Ben & Henry )

Unfortunately for him, it seems the big boys in the area (Argentine and Brazil) are too pragmatic for that folly, looking more into assembling some kind of EEC (or some sort of proto -EU) model, which is to be pushed ahead slowly and carefully (the axis "de force"is of course made out of Brazil and Argentine ) :

http://www.reuters.com/article/marke...36676820080907

No immediate danger here ....

Oh, no, the kleptocracies of latin and south america are aligning against us! :p

These lands of naked children, unpaved roads, and non-existent power-projection: how we quake before them.

I need some financing to remind them who William Walker was. Maybe then I can get my hacienda.

[Jeff]

Re: China paper urges new currency order after "financial tsunami"

No English majors on this site, huh? I'm not, but I dated a lot of them so I know it was Jonathan Swift, not Smith who made the proposal about dining on Hibernian offspring.

Great thread otherwise.

Re: China paper urges new currency order after "financial tsunami"

if the cost of financing for US debt surges, then there'll be less of it, i.e. long-term yields.

And then the M3 stats will become "less unimportant" all over again and we can bring John Williams back from the doghouse? :rolleyes:

[phirang]

Re: China paper urges new currency order after "financial tsunami"

wtf? Your securitized debt sold is accretive to M3, not subtractive. Your assertion only highlights that the estimations of gold relative to M3 are lowball estimates. What's your point here then, with regard to the comment made by we_are_toast?

Notions that gold could possibly attain a much higher floor seem absurd to you guys, who instead posit that it must crash into a deflationary new secular term of fiat paper and paper assets supremacy "when the gold "blows off". Don't you see anything absurd in that extrapolation after forty years of the fiat USD as global anchor money?

Meanwhile, liquidated securitized debt makes a mockery of M3. Eh? How does that work? Liquidating securitized debt only makes the real monetary aggregates soar even further, constantly raising the implicit floor under gold after it "crashes". Back to the drawing board.

if the cost of financing for US debt surges, then there'll be less of it, i.e. long-term yields.

Re: China paper urges new currency order after "financial tsunami"

If you sell securitized debt you raise M3 => wtf.

wtf? Your securitized debt sold is accretive to M3, not subtractive. Your assertion also highlights that the estimations of gold relative to M3 are lowball estimates. What's your point here then, with regard to the comment made by we_are_toast?

Notions that gold could possibly attain a much higher floor seem absurd to you guys, who instead posit that it must crash into a disinflationary new secular era of renewed fiat paper and paper assets supremacy "when the gold "blows off". Don't you see anything dubious in that extrapolation after forty years of the fiat USD as global anchor money?

Meanwhile, you say liquidated securitized debt makes M3 so marginal a stat here that we should finally just jettison the M3 stat altogether. Eh? How does that work? Liquidated securitized debt now replaces M3 as an inflation barometer? Brave new world. That would be something to behold. And with regard to gold, that liquidating securitized debt only makes monetary aggregates soar further, which instead constantly raises the implicit floor price under gold.

Back to the drawing board.

[phirang]

Re: China paper urges new currency order after "financial tsunami"

Sadsack - can you be a little less arch and oblique here perhaps? I will smack my forehead in dismay, if you can evidence to me where I have overlooked any latent or overt "sarcasm" in "symbols" contributed "insight" above.

" Grappling with the topography here on iTulip." As for the rest of your comment, perhaps were it any more oblique it would come to be circular. Pray tell, which topography are you referring to, and which end of it am I grappling at? A previous devastating clarification perhaps which I have stumbled past unawares, that M3 is utterly useless as a broad inflation trend indicator? These musings are far too "sophisticated" for me. [ indeed, so "sophisticated" as to be floating with their feet a couple of inches off the ground ].

If you sell securitized debt you raise M3 => wtf.

Re: China paper urges new currency order after "financial tsunami"

IMHO "symbols" is recently on a sarcastic streak of the magnitude of Jonathan Smith's "A Modest Proposal."

Sadsack - can you be a little less arch and oblique here perhaps? I will smack my forehead in dismay, if you can evidence to me where I have overlooked any latent or overt "sarcasm" in "symbols" contributed "insight" above.

" Grappling with the topography here on iTulip." As for the rest of your comment, perhaps were it any more oblique it would come to be circular. Pray tell, which topography are you referring to, and which end of it am I grappling at? A previous devastating clarification perhaps which I have stumbled past unawares, that M3 is utterly useless as a broad inflation trend indicator? These musings are far too "sophisticated" for me. [ indeed, so "sophisticated" as to be floating with their feet a couple of inches off the ground ].

[sadsack]

Re: China paper urges new currency order after "financial tsunami"

I really love your insights "symbols", and your are an indispensable asset to itulip, but I fail to see the thesis behind US treasuries dominating FX.

Could you provide a schematic for how your situation would work? I am intrigued by this theory

P.S: EJ, can you provide a thread explaining why M3 is irrelevant, so we don't have to hear about it anymore?

IMHO "symbols" is recently on a sarcastic streak of the magnitude of Jonathan Smith's "A Modest Proposal."

Smith proposed, at the height of the 19th century Irish potato famine, that the English could reconcile their mercantilist philosophy with their Christian faith by feeding the starving Irish children in order to fatten them up for slaughter - Smith's harangue anticipated "Soylent Green" by over a century . . .

Much like Lukester, "symbols" is grappling with the topography here on iTulip. I personally applaud both of them; I only fear that they have been severly abused elsewhere (much like the treatment Bart received on Mish's blog), and therefore need time to adjust to the slower pace of deliberation here.

I don't deny that there is intellectual inertia on iTulip. To it's credit, however, the degree of this inertia is much lower than comparable sites.

Just for perspective - it took 13 years from the 1776 revolution for the 13 colonies to figure out what kind of government they wanted to have. If the near existential crisis facing this country is to be believed, a comparable period of protracted debate will need to be "endured" . . .

EDIT:

"symbols" is probably a euphemism for a 4-letter expletive. If so, I sympathize. I was nearly losing my mind at the possibility of the impending SHTF scenario late last year, and it's taken me this long to get to the point where (Holy Grail reference) "I got better . . . "

Re: China paper urges new currency order after "financial tsunami"

Correct! ... Jim Sinclair completely misses the point ... everything ... now is done in order to remove completely gold as a class of power-money. ... power-money will exclusively consist of US treasuries ....;)

I really love your insights "symbols" - EJ, can you provide a thread explaining why M3 is irrelevant, so we don't have to hear about it anymore?

Heh, Phirang and $#* are sounding just a little too flashy here with that self assurance schtick. "What John Williams and the amateurs will tell you" and "why Jim Sinclair completely misses the point". You lads seem to display all of the gaudy panache of a couple of the storied young hedge fund traders (except your Wall Street cousins seem to be taking a drubbing at the moment).

You have no better an idea of how this will work out than the rest of us. US Treasuries "engineered" as the "new power money"? Yeah right. Everything occurring now in gold is being "engineered" by a banking cartel? Doubtless a brilliant, probingly insightful call. "M3 is complete trash as any kind of useful indicator" because the ever glamorous "off-balance-sheet securitization" handily plugs up the valuation mismatch between gold and 13.5 trillion USD? A breathtakingly audacious theory.

What a lot of fluff and puffery. John Williams and Jim Sinclair have been around the block so many more times than either of you that your comments would probably not even raise their eyebrow in tentative interest. This kind of glamorous sounding tall talk does not readily convince. Either you've got a new US sponsored power money, or the "power money" has to be "invented" by some other entity. Wow, the US sponsored "treasuries power money" sounds like the odds on winner here, don't it?

And you posit that transition occurs fluently and deftly puts gold back in the box at the tail end of the world's first 40 year experiment with a global fiat currency? You guys must be soaring right up there with the eagles with this kind of insight! According to your feverish imaginations, this US securities denominated power money will institute a new monetary reign which will be a "coup de grace" that echoes back in paradigm busting terms, down through the elapsed 5000 years of monetary history. What a pair of geniuses.

For one thing, we_are_toast is a lot more modest than either of you (does not breezily dismiss John Williams and Jim Sinclair which would put one on one's guard to begin with), and what's tucked away in his observation is that some sort of reckoning with gold beyond the "superspike" will be hard to finesse after 40 years with a global fiat-unit for senior currency.

If the dollar is going to be backed by gold, and a rough estimate of M3 is $13.5 trillion, and the government has 8133 tons of gold, let me get my calculator; that would be $51,923.08/ounce

[phirang]

Re: China paper urges new currency order after "financial tsunami"

Correct! And IMHO Jim Sinclair completely misses the point:



We may see very well gold at $1650 ore even more, but there will be no "perpetual plateau" only an unbelievable crash IMHO everything that happens now it is done in order to remove completely gold as a class of power-money.

Then and only then, power-money will exclusively consist of US treasuries and only US treasuries or nationally issued certificates of US treasuries deposits.

What that means should be obvious for everybody....;)

I really love your insights "symbols", and your are an indispensable asset to itulip, but I fail to see the thesis behind US treasuries dominating FX.

Could you provide a schematic for how your situation would work? I am intrigued by this theory

P.S: EJ, can you provide a thread explaining why M3 is irrelevant, so we don't have to hear about it anymore?