Eastern Remedies for the terminally ill Western financial system

Image  by sumetho / freedigitalphotos.net *

Image by sumetho / freedigitalphotos.net *

Jim Willie: “The pathogenesis is obvious to those in the Sound Money camp. (…) The cadaver in Intensive Care cannot be revived with more intravenous applications of contaminated money, the body dead since September 2008. Insolvent systems rush to the crash zone, where efforts can only delay the outcome.” (1)

“The Eastern solution avoids the USDollar and the entire FOREX system. It will be built upon gold trade settlement, will issue Gold Trade Notes to function like Letters of Credit, will operate as peer to peer instead of passing through the monolith banks, and will be conducted on portable devices like Smartphones and Blackberrys.” (2) 

Reginald H. Howe: “A well-functioning international monetary system is as critical to a healthy global economy as a well-functioning circulatory system is to the human body. Backwardation in gold can be compared to very high blood pressure: a sign that something is dangerously amiss and that absent prompt remedial action, a serious and quite possibly catastrophic event is imminent.”

“By relinking the international monetary system to gold in a flexible, practical and effective manner, Chinese GPS ( Gold Positioning System ) could spearhead a return of sanity and soundness to world finance and lay a new foundation for global growth and prosperity.” (3)

***

Many sides of monetary cancer

Jim Willie: “Cancer is a strong word. It conjures up images of internal broken functions, nasty growths, blockage of organs, twisted lives, pain, and death. Yes, that sounds right for describing the USDollar and its flagship the USTreasury Bond, with the accompanying destroyer in Fannie Mae. The word cancer fits perfectly. It has brought a removal of US industry. It has brought a wave of bond fraud centered upon mortgages. It has brought endless war, paid by foreigners. It has brought insolvency to US households. It has brought insolvency to the US banks. It has brought a tumor of REO homes seized by foreclosures and put the US bank balance sheets. It has brought a bloated wrecked USFed balance sheet. It has brought chronic $1.5 trillion USGovt deficits. It has brought a mass of Food Stamp recipients. It has brought Wall Street control of the USGovt finance ministries. It has brought a Black of Hole of tainted money. It has brought diverse toxic bonds. It has brought blockage of any independent audit of the USFed assets or activity. Yes, that qualifies as the many sides of cancer.” (4)

The Chinese Yuan Swap Facility

“The Yuan Swap practice has created a broad platform and precedent for non-US$ trade. The list of nations with such swap deals include Brazil, Australia, Russia, Japan, South Korea, Belarus, Malaysia, and Indonesia. Add England to the long and growing list of nations making bilateral currency agreements with China, which should instill fear in New York. The swaps have established a virtual barter system that is divorced from the banking settlement for trade. Instead, a bilateral account is set up with credits and debits, depending upon delivery and receipt. Regard the swap system as a foundation for global trade settlement in Gold, as the Chinese Yuan makes the rough transition to a gold-backed currency. In the Jackass view, the shift to a gold trade settlement system will coincide with the gradual Yuan currency backed by gold. They will become interchangeable when procuring Gold Trade Notes, my theory, all in time. The Chinese Yuan Swap Facility has undermined the USDollar dominant role in trade. Following trade practices will come bank reserve management practices, which means the removal of the USTreasury Bond from global banking. The numerous Yuan Swap Facilities have essentially worked to dethrone the USDollar as global reserve currency.” (1) – emphasis added

A Chinese Gold Positioning System

Reginald H. Howe: “No country has a greater stake in a strong and prosperous global economy than China, the emerging economic superpower with a population of some 1.3 billion. While many of the world’s major nations and some of its smaller ones have by various means tried to discourage private gold ownership, China almost alone has promoted the use of gold by its citizens. At the same time, China has aggressively added to its official gold reserves, leading some to suggest that the ultimate goal is a gold-backed yuan trading freely on international markets. (…) What China should do is to adopt and implement a US$ denominated floor price for gold and commit to maintaining that price, which may be adjusted upward but never lowered. (…)

The benefits to China, and indeed to the rest of the world, would be the long term benefits that may be expected to flow from a reformed and more stable international monetary system linked to gold, but in a manner far more flexible than earlier versions of the gold standard. Those systems called on governments to redeem paper for gold, something they too often ran out of. The Chinese Gold Positioning System would reverse the traditional exchange, replacing the promise to redeem paper for metal at a fixed rate with a promise to purchase metal with paper at a fixed or higher price. (…)

Chinese GPS would initially operate as both a tell-tale and a lever, a sort of report card, on the US$. Should the dollar be managed so recklessly as to lose its current status as the principal reserve currency, as would be indicated by a rapidly rising floor price, the Chinese would always have the option also to set a floor price in yuan, effectively replacing the dollar as the key currency. But by initially setting the floor price in US$ rather than yuan, China would be working within the current system, challenging the United States to better manage its own currency while allowing adequate opportunity for the international payments system to adjust if it does not.

What is more, any country could follow the Chinese lead and set a floor price for gold in its own currency. Indeed, it is possible to imagine a brave new monetary world where currencies compete on the basis of gold floor prices and interest rates. Under these circumstances the attractiveness of a nation’s notes and bonds would be determined principally by the proximity of its floor price to market, the competitiveness of its interest rate structure, and the perceived general soundness of its monetary policy. Nations that scored well on these criteria could expect to draw savings from gold holdings; those that did not could well find themselves effectively excluded from the debt markets.” (3) – emphasis added

Gold placed at the center of the global financial system

“Whatever the ultimate goal, the parlous state of the global economy and the international monetary system on which it depends calls for action now, and the only country capable of imposing a useful and effective unilateral reform today is China. No option other than unilateral action exists …” (3)

“A grand reset is in progress. The paper wealth of the Western world is undergoing a disappearing act. The Paradigm Shift has been in progress for the last four to five years. The banking system will be restored only by return of Gold as money, with Gold placed at the center of the global financial system.” (2)

Related important information:

Backwardation in Gold

Professor Antal E. Fekete: “Once entrenched, backwardation in gold means that the cancer of the dollar has reached its terminal stages. The progressively evaporating trust in the value of the irredeemable dollar can no longer be stopped.”

“Negative basis (backwardation) means that people controlling the supply of monetary gold cannot be persuaded to part with it, regardless of the bait. These people are no speculators. They are neither Scrooges nor Shylocks. They are highly capable businessmen with a conservative frame of mind. They are determined to preserve their capital come hell or high water, for saner times, so they can re-deploy it under a saner government and a saner monetary system. Their instrument is the ownership of monetary gold. They blithely ignore the siren song promising risk-free profits. Indeed, they could sell their physical gold in the spot market and buy it back at a discount in the futures market for delivery in 30 days. In any other commodity, traders controlling supply would jump at the opportunity. The lure of risk-free profits would be irresistible. Not so in the case of gold. Owners refuse to be coaxed out of their gold holdings, however large the bait may be. Why? Well, they don’t believe that the physical gold will be there and available for delivery in 30 days’ time. They don’t want to be stuck with paper gold, which is useless for their purposes of capital preservation.” (5)

Notes:

(1) Gritty Questions on the Historic Collapse, by Jim Willie, GoldenJackass.com, March 1, 2013

(2) Signals for Breakdown on Numerous Fault Lines, by Jim Willie CB, GoldenJackass.com , July 11, 2013

(3) Chinese GPS: Payback in Full with Benefits, by Reginald H. Howe,

(4) Cancer & Desperation of QE2, by Jim Willie, financialsense.com August 25, 2010

(5) Red Alert: Gold Backwardation!!!, by Antal E. Fekete, 24hgold.com, December 08, 2008

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