Today the International Monetary Fund will insert the yuan, the Chinese currency, the club of coins authorized to be traded globally.
A currency in this international elite earns the right to be part of the "supermoneta" Official Monetary Fund, called SDR (Special Drawing Right), which until now was composed of the following currencies with the following percentages:
sdr-today
As from tomorrow, with the inclusion of the yuan, the SDR will have the following composition:
sdr-tomorrow
The most serious official media such as Bloomberg, could not help but point out this historical event (you will see that in a few weeks or months even the Sole 24 Ore will arrive there, be patient!). But in commenting on the news they are focusing on the finger, instead of talking of the moon.
The "finger" highlighted by the media is the fact that China was finally admitted into the "club" international economic.
But it is a detail after all limited. That's not the real reason why October 1, 2016 will go down in economic history of our grandchildren.
As I said in the article of 14 September, the real historical event is another.
This is the transition of power in the world economy by central banks to the IMF.
They 'a process not without conflict, as central bankers, especially the US Federal Reserve, will not yield the throne so easily.
But why is this happening?
Because central banks have failed their monetary policies and the IMF now proposes a recipe of his own to resolve the situation.
What central banks have failed?
To maintain a sufficient level of liquidity in the world, while governments are enriched by increasing their debt (ie issuing more government bonds to raise cash).
As we all know, the real cash economy never arrived; whereas in fact, this economic system based on debt is bringing recession and deflation in the world.
Unfortunately, the central banks have not been able to prevent this from happening. So, as the debt nears its unsustainability, they have more and more on the neck the breath of the IMF, which publishes more explicit economic analysis in which shows how it is now only a matter of time before everything collapses on him.
But what is the recipe that the IMF would like to apply as an alternative to the failed policies of central banks (and what enters into this the yuan and the SDR)?
Here we come to the heart of the problem.
As you know, the currency in which it is carried out most of the trade in the world is the dollar.
So, when we speak of the need to increase the liquidity in the real economy, we are referring mainly to the availability of dollars.
The US Federal Reserve (Fed) has sought to achieve this by lowering interest rates, so as to make it much less expensive for companies to borrow in US dollars, that is self-financing by issuing bonds (corporate bonds) with low interest rates pay the debtors.
In practice, in parallel with the growing state debt, the Fed has done nothing but create an equal, if not greater amount of private debt of companies for a total of 60 trillion (million million) dollars from 2009 to 2015.
This is for the Fed wanted to say "give cash" businesses, ie the real economy.
But the facts have shown that when the world economy goes into recession, companies, although they can easily be financed with debt, do not survive.
Indeed, the debts become a noose that quickly brings these companies to fail (as seen for example with the oil companies, choked by low oil prices).
Far indebt companies does not mean, therefore, prevent the downturn in the economy.
This is because the world economy is more complex than the Fed intends.
Increase the supply of dollars (in the form of the state and private companies USA) bonds, in addition to failing to ensure liquidity, has also led to a paradoxical reduction in dollars available and an excessive strengthening of the dollar against all other currencies .
The strong dollar has so literally destroyed the economy, making trade between America and its trading partners now difficult.
The experiment of the Fed seems to come to an end.
And it is at this point that the IMF (and the elites of American power who support it) would intervene with its solution.
What solution?
According to the IMF, to inject liquidity into the system, you should not use the dollar (or bonds denominated in dollars), but the supermoneta the IMF itself, ie the SDR that we saw at the beginning of this article.
To use the SDR, however, it requires the cooperation of all nations that "count" in world trade, and also of China.
The inclusion of the yuan nell'SDR (which is the case today) is therefore a necessary step for the use of this supermoneta.
If you think the use of the SDR is something improbable, almost science fiction or conspiracy blog, you should know that in fact the SDR has already been used:
In 1979, after the outbreak of hyperinflation in the US and the loss of the dollar's dominance as a world trading currency, the IMF issued SDR of 12.1 billion dollars worth to enter new liquidity to the system
In 2009, in a deflationary crisis this time, the IMF issued SDR amounting to 310 billion dollars.
This time, however, the IMF does not intend to issue SDR episodically, to buffer of emergencies.
In a document of July 2016, the IMF issued a policy program called "M-SDRs".
The title makes it clear what it's about. "M" in fact stands for "Market" and refers to the issue of SDR "of" distinct market since the "O-SDRs", where the "O" stands for "Officials" and refers to the issue of the official SDR only part of the IMF.
According to this document, the last times (1979 and 2009), the SDR were the "Official" type, issued directly by the IMF only for contingent reasons.
But now the IMF wants to turn the SDR SDR-M, that is, in a global currency traded in a permanent position in the market. And to do that, bonds in the SDR should be able to be placed on the market free of any institution, not necessarily by the IMF itself.
On 31 August, the Central Bank has now accepted the invitation, by issuing on its own 500 million SDR (700 million dollars) in the form of bonds.
And in what market they were issued these SDR?
In the Chinese currency market, by agreement signed by four Chinese banks.
In return, starting today, the inclusion of the yuan in the SDR basket will ensure that whenever an institution or an investment fund will buy SDR, will indirectly support the yuan.
We must not think that this was a "suicidal" move on the part of American elites.
Between China and the US there is a pact that binds the dollar and the yuan so that the two currencies are "peggate", as the jargon. That is, when a salt, salt also the other and vice versa.
The issuance of bonds in the SDR to be bought in China was therefore not in conflict with this "pact" since both China and America want to devalue their currencies in relation to all others. And the issuance of SDR will help accomplish this.
But the IMF project is more ambitious.
The SDR emission in China is only a first step for the success of this supervaluta on the dollar.
If international trade were used SDRs instead of dollars, the current currency wars going on between the countries whose currencies make up the SDR would cease.
It would create a small circle of countries that dominate the currency market, at the expense of other currencies excluded from the "club".
The commercial interests of the "club" countries would be governed not by currency wars, but by agreements made within the IMF and G20 on the percentage composition of the SDR basket.
This ultimate goal could be achieved in two main scenarios:
the progressive scene
the catastrophic scenario
Let's see them both:
Progressive scenario:
bonds denominated in SDR will be used for a long time together with the dollar bonds.
The tendency on the part of many countries, to divest the dollar bonds has been going on for a couple of years and the SDR will only fit into this process, which will follow the stages gradually established by the various countries.
It will not be a linear process. Central banks will continue to create distortions. Some countries will be forced again to continue to use dollars, but then there will be other pressures to favor the use of SDR (and why not? Also yuan).
Not being a project managed by a single governing body, we do not know if it will ultimately prevail a mixed system of most global currencies, or a system based on the yuan or sull'SDR.
catastrophic scenario:
the IMF could impose the use of the SDR in the course of a possible (and very likely) global systemic crisis.
As in 1978 and 2009, the IMF would issue the SDR during the crisis, but then try to get them to use permanently.
Some analysts have noted however that in the last G20 (held their own in China) veto power of the BRIC countries has been increased so as to equal that of the United States.
Their hypothesis therefore is that during the crisis, the IMF will issue the SDR as usual, but it will be just the BRIC countries to impose permanent use as a global currency instead of the dollar, threatening otherwise to veto their emission.
The truth is that after all we do not know how things will go really.
What at the moment we can say with some certainty is that the dollar will suffer a devaluation of at least 30%.
And this not because of currency wars, but for a project approved for a part of American elites and the Chinese government.
The devaluation of the dollar (and therefore the inflation trigger liquidity that central banks have not been able to cause) is the only way to unlock the global recession that now seems so inevitable.
The downside is that no inflationary policy in history has ever managed to remain under control. On the contrary, it is always out of hand to the states that have carried out.
If this devaluation will be accompanied affirmation SDR as global currency, will there be any hope of controlling it?
According to the IMF it is so, but in reality no one can say for sure, because it's never happened before an event and there are no historical data on which to make predictions.
All that we at the Stock Exchange Signals can do is to constantly monitor the situation and understand each time its evolution.
For now, keep in mind all that you read in this article, because it will be the basis to understand what will happen in the future.
Even seemingly distant events, such as the "case" Deutsche Bank, the American elections, and more, are always connected to this undercurrent scenario.
There is a tug of war going on between various elites in America, some linked to the central bank, the IMF and others from it depends the future of America, Dollar, Europe, emerging countries and the world economy.
