Monthly Archives: January 2014
The Renminbi SDR Composition and the Great Consolidation
By JC Collins
“The creation of an international currency unit, based on the Keynesian proposal, is a bold initiative that requires extraordinary political vision and courage”.
– Governor of the People’s Bank of China
The father wiped the dirt from his hands and reached into his pocket. Keeping his hand inside for a few moments, he knowingly glared down at the boy. The air was still, the boy eager, eyes wide, dancing back and forth on his feet.
“Come on Dad, my friends are waiting”, explained the boy.
Slowly the father withdrew his hand and paused before dropping a few coins into his sons waiting hand.
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By JC Collins
In my previous post I briefly explained how China was in the process of assuming the liabilities of the Federal Reserve, in addition to their already held liabilities of the U.S. Treasury. Such a strong statement will require even stronger evidence. This I will attempt to achieve over this multi-part essay.
“The legislative process is underway right now. We want the reforms to be adopted expeditiously. It’s really the U.S. Treasury, Jack Lew and his team that’s taking the lead on getting these measures through the U.S. Congress that are required to implement the 2010 reforms.”
“Just to remind you what those are, the 2010 reforms do a couple things. One, they bring four dynamic emerging market countries into the top 10 shareholder ranks or what we call quota ranks of the institution. China, Brazil, Russia, India. It also doubles our permanent capital, the quota. And it also creates a fully elected Executive Board.”
– William Murray, I.M.F. Deputy Spokesman, Jan 9, 2014.
“The IMF is explicit in its antidemocratic leanings, what it calls “political considerations”. The SDR blueprint calls for the appointment of “an advisory board of eminent experts” to provide direction on the amount of money printing in the new SDR system. Perhaps these “eminent experts” would be selected from among the same economists and central bankers who led the international monetary system to the brink of destruction in 2008.”
– James Rickards, Currency Wars, Penguin Group, 2011
G. Edward Griffin’s mind altering “The Creature from Jekyll Island” introduced many of us to the somewhat hidden history of the U.S. Federal Reserve. It told of how the Federal Reserve Act was passed in Congress during the Christmas break in the year 1913. It was insidious. And it changed the course of human history, as it planted the seed of what would slowly grow to become the world’s reserve currency.
Though the U.S. dollar didn’t become the official reserve currency until the Bretton Woods Agreement of 1944, it is commonly accepted that the dollar had already usurped the British pound of this title well before it was officially acknowledged. As I believe the U.S. dollar has now already been usurped by another. We’ll get back to that in a while.
There was another event which took place in the year 1913 which has been little understood or known at all in the western world today. After the collapse of the Manchu Dynasty in 1911, the remaining Government of the Chinese Republic issued bonds to foreign investors for the purpose of raising capital to rebuild the country. These bonds were titled the 1913 Chinese Government 5% Reorganization Gold Loan. Emphasis on the word gold for later reference.
These bonds were pegged to the price of gold as a hedge against future inflation and were denominated in four currencies. The underwriting banks for the bonds reflect the four currencies which the bonds were interchangeable with at the time, which are now known as HSBC, Deutsche Bank, the Bank of Tokyo-Mitsubishi UFJ, and Caylon – Credit Agricole Corporate and Investment Bank.
Keep in mind that these bonds were issued in the same context as the U.S. Treasury Bonds which the world’s central banks have been gobbling up since 1944. These bonds had a yield. These bonds have never fully been acknowledged by the Chinese government. As a part of the deal with the British government for the return of Hong Kong, the People’s Republic of China did honor 10% of the outstanding bonds at about 62% of the face value. And what I can say at this time is that there is in fact a deal in the works for a final payout on the remaining bonds. We’ll get back to that in a while.
The U.S. Government Defaulted in October, 2013.
By JC Collins
In essence, China has been slowly buying up the Federal Reserve for some time now. If you can call it a purchase. Its more of a negotiation over assuming the liabilities of both the Federal Reserve and the U.S. Treasury.
The Federal Reserve is the largest holder of U.S. debt at $2.1 trillion. China is second at $1.3 trillion. Think of it as the United States government doing a debt consolidation of all its treasury bonds because it can no longer pay or service the debt.
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