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World Bank's Zoellick Calls For Overhaul Of Monetary System, Says Yuan Should Get Prominent Role

Tyler Durden's picture





 

World Bank's Robert Zoellick, who has recently been on a truth-telling roll, suggesting a return to the gold standard, and also highlighting that surging food prices have suddenly pushed 44 million to extreme hunger around the world raising the likelihood for many more revolutions, penned an oped in yesterday's FT, sharing his vision for a "monetary regime for a multipolar world" in which, not surprisingly he warned that the current monetary system is perilous, and that China's Yuan should be added to the SDR, as well as other currencies "over time." This is yet another dig at the dollar's status as a reserve currency, yet without China taking proactive steps to indicate its interest at becoming the new de facto world currency, the status quo may be stuck with the greenback. Essentially, China is waiting until the right moment emerges, a time when it has stockpiled enough resources, when it can, unilaterally, or in collaboration with Russia and potentially a post-EUR Europe, make an announcement that the Yuan is the new reserve currency, backed by a basket of commodities. This is precisely the step-change that Zoellick is trying to avoid: "A framework to manage a monetary system in transition may be less headline-grabbing than sudden regime change, but it is a lot more realistic. Modernising the management of international monetary affairs could prove an important contribution to future growth. The time of powerful kings is long gone. But today’s leaders still have the chance to stamp their mark on the monetary framework of tomorrow." Unfortunately, the possibility of a gradual transition in which the US willingly cedes ever increasingly more of its reserve status is unthinkable: after all the bulk of the Fed's disastrous policy is dictated that no matter what the Chair does, the world has no choice but to continue using dollars. Which will work until it doesn't (and with total US debt at almost 100% of GDP, the "doesn't" part is approaching.

Some more thoughts from Reuters on Zoellick's op-ed:

Zoellick said countries participating in the SDR should review monetary and currency issues in an SDR forum.

"This group should offer China the incentive to join the forum and eventually the SDR after it takes steps to internationalise the renminbi and moves towards an open capital account."

Zoellick said over time other major internationalised currencies could be added to the SDR basket.

"Leading powers are not going to accept the SDR as a new global reserve currency, nor the IMF as a global central bank," Zoellick said.

He added, however, that the IMF would act as a referee, "able to blow the whistle on the appropriateness of external policies but not to impose penalties" in order to support a healthy global economy.

And naturally Zoellick once again invokes the status of gold as the ultimate monetary arbiter:

Within this new framework, the IMF should be a referee, able to blow the whistle on the appropriateness of external policies but not to impose penalties. The IMF should be directed to sharpen the multilateral review of “capital account” policies, as part of the G20’s new mutual assessment process (MAP). This review should compare national policies with international information indicators, including commodity prices such as gold. The IMF’s involvement, with its 187 shareholders, offers the G20 the incentive of greater legitimacy and the support of an institution with financial resources.

All these suggestions are great. Too bad that just like with the SEC's trivial inversion of cause and effect in the flash crash and its precipitating factor, High Frequency Trading (circuit breakers do nothing to handle the reasons for a market crash: they merely moderate the symptoms), so all of Zoellick and Strauss-Khan's warnings that it is time to move to an SDR regime will not be heeded until it is too late. 

Full Op-Ed link.

 


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Sat, 02/19/2011 - 15:01 | Link to Comment Azannoth
Azannoth's picture

Why would Chinese debt be any better than USA debt or British debt or German debt ?

Sat, 02/19/2011 - 15:14 | Link to Comment Black Forest
Black Forest's picture

Why would Chinese debt be any better than USA debt or British debt or German debt ?

Because they use to smile more favourably.

Sat, 02/19/2011 - 15:41 | Link to Comment malek
malek's picture

Why would Chinese debt be any better than USA debt or British debt or German debt?

There is so little of it yet, but such a big country?

Sun, 02/20/2011 - 10:23 | Link to Comment Bob
Bob's picture

nyuk, nyuk, nyuk

Sat, 02/19/2011 - 16:25 | Link to Comment Temporalist
Temporalist's picture

And their foreign reserves which are just paper promises from the same countries.

Sat, 02/19/2011 - 18:15 | Link to Comment Michael
Michael's picture

What country would be the issuer of the SDRs, who owns the gold to back them, how is it they came into possession of that gold, and what military forces do they command? So many questions.

Sat, 02/19/2011 - 18:57 | Link to Comment LowProfile
LowProfile's picture

If you think of the country that owns the most of each of those, you just answered your own question.

Sun, 02/20/2011 - 15:05 | Link to Comment prophet_banker
prophet_banker's picture

 

 

my understanding of SDR, specail drawing rights, are always created by the IMF / World Bank sytem, and is convertable to currency.

Sat, 02/19/2011 - 19:11 | Link to Comment Syntaxkat
Syntaxkat's picture

sure looks like we are going to have a gold backed currency, the propaganda machine is in full swing with global banking leaders stating the merits.  sounds a lot like when the federal reserve was created.  slow intro of a new currency so it becomes acceptable, let me guess, world central banks would be board of directors with 1 chairman probably out of london?

Sun, 02/20/2011 - 02:40 | Link to Comment Popo
Popo's picture

... just another effort to give the appearance of change, while keeping the same elites in power.

At some point change will be forced upon Mr. Zoellick, and I'm quite sure he's going to be very unhappy with his new reality.

 

 

Sun, 02/20/2011 - 23:30 | Link to Comment prkr01
prkr01's picture

There already is a solution to this problem thats coming out of the UK and it is called the Wocu.It is a basket of 20 currencys that are weighted based upon each countrys GDP. Its like a modern day updated SDR.Looks like all that is needed is market acceptance and pools of liquidity.Think you can find it by googling or going to its website.Believe its Wocu.com or something.Also whats interesting is a small microcap traded company with a miniscule market cap trading below its cash value owns a majority share of the business.

Sat, 02/19/2011 - 15:01 | Link to Comment SilverRhino
SilverRhino's picture

Right, let an industrial house of cards that murdered 60 million chinese citizens last century and with a known penchant for fraud and financial malfeseance have reserve fucking currency status.  

What could possibly go wrong?

Sat, 02/19/2011 - 16:47 | Link to Comment Arkadaba
Arkadaba's picture

As opposed to the American Imperium which have murdered X citizens in Y countries in the last century. And who also have a known penchant for fraud and financial malfeasance?

Sat, 02/19/2011 - 17:42 | Link to Comment DosZap
DosZap's picture

As opposed to the American Imperium which have murdered X citizens in Y countries in the last century. And who also have a known penchant for fraud and financial malfeasance?

I would rephrase that to make it more truthful,maybe you meant since Vietnam.

As WWII, should never be incuded in that.

As for Fraud and Fiscal Malfeasance, I cannot think of ONE major nation that is not just as slimy.

Sat, 02/19/2011 - 18:15 | Link to Comment A Nanny Moose
A Nanny Moose's picture

Bingo. The entire argument here boils down to which form of STD is preferred. Government is government.

Sat, 02/19/2011 - 18:44 | Link to Comment snowball777
snowball777's picture

South America, Central America, and the Carribean know you're full of shit on that count.

And China and Korea aren't suffering from your Alzheimer's either.

Did the Monroe Doctrine get knocked out of your head to make room for the Bush Doctrine?

Sat, 02/19/2011 - 18:45 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

America has its problems but we're 10 times better than any other country, and 100 times better than the f*cking communist chinese.

Anybody who thinks putting the world's financial future in the hands of China is a traitor or insane. or both.

How about an unregulated international currency, like, um... GOLD??

Sat, 02/19/2011 - 19:46 | Link to Comment snowball777
snowball777's picture

No thanks, I'm allergic to routine bank panics.

Sun, 02/20/2011 - 18:37 | Link to Comment akak
akak's picture

Non sequitur.

If you really are allergic to bank panics, then you should blame the REAL cause of them: fractional reserve banking, a.k.a. fraud.  Gold backing for currencies has, and had, absolutely nothing to do with such occurrences.

 

Sun, 02/20/2011 - 20:30 | Link to Comment snowball777
snowball777's picture

While I agree that a cash reserve ratio closer to 50% would be better than 10% (and that ending the Fed alone wouldn't prevent the TBTF from using FRL to debase our currency with credit bubbles), there were plenty of bank panics in the 19th century in the US and the inelasticity of currency during that time period most definitely did have something to do with lashing the dollar to certain commodities.

 

Sun, 02/20/2011 - 10:28 | Link to Comment Bob
Bob's picture

Anybody who thinks putting the world's financial future in the hands of China is a traitor or insane. or both.

The Chairsatan strongly agrees--but he is nonetheless in charge of those printers.

Sun, 02/20/2011 - 15:08 | Link to Comment prophet_banker
prophet_banker's picture

so the killing  Germans is rightous, but all other wars aren't?

Sat, 02/19/2011 - 15:10 | Link to Comment bob_dabolina
bob_dabolina's picture

Seeing as we live in an insane world I think that tally sticks would be appropriate for the worlds reserve currency.

Seeing as this idea makes absolutely no sense it should clearly be marched to the front lines of the currency debate.

How can you argue with 800 years of success?

Sat, 02/19/2011 - 15:41 | Link to Comment Dr. Porkchop
Dr. Porkchop's picture

By the time they get done with the derivatives, you'd end up with a box of devalued toothpicks.

 

CDS - Credit Default Sticks

 

Instead of a basket of currencies, you'd invest in a faggot of sticks.

 

Sat, 02/19/2011 - 15:10 | Link to Comment Catullus
Catullus's picture

"A framework to manage a monetary system in transition may be less headline-grabbing than sudden regime change, but it is a lot more realistic. Modernising the management of international monetary affairs could prove an important contribution to future growth. The time of powerful kings is long gone. But today’s leaders still have the chance to stamp their mark on the monetary framework of tomorrow."

I just threw up a little in my mouth.  Neo-feudalism. 

Sat, 02/19/2011 - 16:05 | Link to Comment Arkadaba
Arkadaba's picture

I think the powerful kings are losing control. 

Sun, 02/20/2011 - 10:33 | Link to Comment Bob
Bob's picture

Indeed.  Zoellick is trying to respectfully counsel Henry VIII, but King Ben's syphilis has ripened into the acute phase.

More turkeys stuffed with dollars, knaves!

Sat, 02/19/2011 - 15:12 | Link to Comment smlbizman
smlbizman's picture

i never get tired of watching these assholes trying to fit a giant fucking imaginary square peg into a real deeper darker round hell hole....

Sat, 02/19/2011 - 15:12 | Link to Comment The Answer Is 42
The Answer Is 42's picture

What happened to the neo-conservative, former Zoelick? This guy has been making sense for a year!

Sat, 02/19/2011 - 15:42 | Link to Comment malek
malek's picture

He is just hedging his position, vocally.

Sat, 02/19/2011 - 15:12 | Link to Comment silvertrain
silvertrain's picture

  There are only so many seats at the table and everybody cant have the power...

Sat, 02/19/2011 - 16:00 | Link to Comment Fred G Sanford
Fred G Sanford's picture

Agreed. I think there may be an East vs. West power struggle going on. I'm sure the Anglo-American elites want to keep running the show while China now wants center stage.

Sat, 02/19/2011 - 15:13 | Link to Comment The_Euro_Sucks
The_Euro_Sucks's picture

Zoelinck didnt call for a (classical) goldstandard. He called to use gold as a 'reference point' for fiat. If you abuse fiat, gold will rise in fiat terms. If a governement behaves well, gold will be stable in their fiat. This way we wont get drama like bretton woods.

 

just my 2 cents

Sat, 02/19/2011 - 16:35 | Link to Comment Temporalist
Temporalist's picture

From what I gathered you are correct about what Zoelick said but the fact that it was suggested is the real point as within the past 40 years that would have been a "barbaric" thought. 

I think Zoelick is acutally saying what Ron Paul is saying about competing currencies, PMs being one of them, for any global citizen to use.  Zoelick and his ilk, however, would more likely go for a single currency, managed by unelected financiers, accountable to nobody, eliminating sovereignty from all nations, holding the purse strings of all political and economic decisions.

Tim Geethner for Global Bank President!

Sat, 02/19/2011 - 20:08 | Link to Comment Common_Cents22
Common_Cents22's picture

competing currency? yeah right, just like obama says you can keep your insurance, but he didn't tell you they won't keep you as they are run out of business

Sat, 02/19/2011 - 15:20 | Link to Comment Mongo
Mongo's picture

Too late. For whatever reasons anybody believes otherwise suit yourselves...

 

Hedge for total collapse, if you can!

Sun, 02/20/2011 - 15:11 | Link to Comment prophet_banker
prophet_banker's picture

+1

Sat, 02/19/2011 - 15:23 | Link to Comment km4
km4's picture

Guess we know how he feels about the Ben Benarnk and his printing press that of course does not cause inflation of food prices and commodities ;)

Sat, 02/19/2011 - 15:24 | Link to Comment Huck T
Huck T's picture

Essentially, China is waiting until the right moment emerges, a time when it has stockpiled enough resources, when it can, unilaterally, or in collaboration with Russia and potentially a post-EUR Europe, make an announcement that the Yuan is the new reserve currency, backed by a basket of commodities.

 

And how do we know this? 

Sat, 02/19/2011 - 15:39 | Link to Comment snowball777
snowball777's picture

Ya see, this is one of the main drawbacks of cutting off your ear to spite a hooker.

Put it together with the Chinese taking Europe (at least the smelly parts) under their wing and the ravenous accumulation of the aforementioned commodities. Rocket science it ain't...nary a quaternion to be found, in point of fact.

These guys are playing the long game like a damn Stradivarius.

http://bit.ly/geWOkt

Sat, 02/19/2011 - 16:15 | Link to Comment Arkadaba
Arkadaba's picture

I agree. Also buying up assets in Canada: http://roseman.sovereignsociety.com/2011/02/10/chinese-hungry-for-canadian-assets/

And this is just a guess ... but I might wager that the recent Chinese cyberhacking of Canadian gov has something to do with the more accessible North:

http://www.takepart.com/news/2011/02/11/as-mideast-roils-oil-seekers-turn-sites-on-the-far-north

Sat, 02/19/2011 - 19:15 | Link to Comment Huck T
Huck T's picture

No question the Chinese play the long game.

I'm just trying to figure out how a unilateral or multi-lateral declaration of a new Yuan-based reserve currency follows from this.  Science - rocket or otherwise - depends on data. 

 

 

Sat, 02/19/2011 - 20:08 | Link to Comment snowball777
snowball777's picture

The basket of SDR currency weighting gets set periodically by the IMF. They'd just (re)define it in terms of Euro+Yen+$+Pound+Yuan(+Gold?Corn?Rice?). The degree to which it would be the 'reserve currency' would be determined by that weighting.

The gritty details of the reset and method used from 2005...

http://www.imf.org/external/np/pp/eng/2005/102805.pdf

Sun, 02/20/2011 - 16:43 | Link to Comment snowball777
snowball777's picture

The RMB question. The recent review of the SDR valuation concluded that in spite of China’s prominent share of global exports, the RMB should not be included in the SDR basket, as it did not meet the criteria to be determined a freely usable currency ((http://www.imf.org/external/np/sec/pn/2010/pn10149.htm). It is an open question however whether this criterion should be retained as part of the SDR valuation method. Recent reforms that allow nonresidents, including central banks, to hold RMB-denominated deposits and the gradual development of RMB derivatives in Hong Kong could contribute, overtime, to resolving some of the technical difficulties in hedging RMB exposure. These could perhaps be supplemented by additional convertibility agreements between the PBC and other SDR designated holders. Such steps might be sufficient to preserve the SDR’s attractiveness with traditional reserve managers, particularly if explicitly part of a broader plan including a credible public commitment to internationalize use of the RMB and to liberalize capital flows. Other issues might need to be considered however, in particular the fact that the RMB’s value is tied to the dollar and managed by the authorities. Thus, adding the RMB to the SDR basket would de facto increase the weight of the U.S. dollar in it, and allow the exchange rate policy of one country to impact the value of the SDR in a discretionary way.

Sat, 02/19/2011 - 17:01 | Link to Comment Apostate
Apostate's picture

No chance of international adoption.

Gold is the only element that can restore trust to international trade. This happens over and again.

Sat, 02/19/2011 - 18:29 | Link to Comment akak
akak's picture

Damn, that Rand was one ugly broad!

The flower pot on her head didn't help matters, either.

Still admire her, though.

Sat, 02/19/2011 - 15:24 | Link to Comment Spigot
Spigot's picture

In other news, World Bank's Robert Zoellick outs himself as a communist chinese  agent...details at 11.

Sat, 02/19/2011 - 15:29 | Link to Comment snowball777
snowball777's picture

Could just be attempting to avoid WWIII...nevertheless, I'm not riding on any planes with him.

Sat, 02/19/2011 - 15:33 | Link to Comment born2bmild
born2bmild's picture

If they couldn't get the WTO off the ground pre-internet I would expect more friction now.

Sat, 02/19/2011 - 15:45 | Link to Comment Atomizer
Atomizer's picture

So ZoelDick is worried. The king's orders chime down on him everyday & no positive results to report back. LOL

A little educational video.


History of the Internet

Sat, 02/19/2011 - 15:42 | Link to Comment falak pema
falak pema's picture

Like I said in my posting on  TD's  article 'letter to Ben Bernanke' that the consensus in Washington is cracking up. Zoellick is not in line with BB's current QE trajectory. Ben doesn't want a major stabilising role for the Yuan in SDR, given China's major creditor position,  as this would destroy de-facto reserve currency role of USD and oblige him to become accountable at this late stage to real $ devaluation through QE2. World bank and FED at loggerheads. What will Obama do if he has a clue! Any takers?

Sat, 02/19/2011 - 15:52 | Link to Comment born2bmild
born2bmild's picture

Considering he's never seen a fence he didn't want to warm with his ass...who knows?

I hear Spike Lee is making a documentary about him : Do the Wrong Thing.

Sat, 02/19/2011 - 16:13 | Link to Comment snowball777
snowball777's picture

Kids, don't make me stop this car!

Sun, 02/20/2011 - 10:42 | Link to Comment Bob
Bob's picture

He doesn't have a clue.  He's revealed himself as a good looking boy who believes in one thing only: compromise.  He's a one trick pony to the bone.  In financial matters, of course, like any good technocrat, he defers to the "experts" who will define the choices.  Ben and Timmy are running this show to the bitter end.

Sat, 02/19/2011 - 16:00 | Link to Comment savagegoose
savagegoose's picture

you mean the rich in the west want to transfer their wealth , before they get stuck with nothing but worthless paper?

Sat, 02/19/2011 - 16:00 | Link to Comment Sean7k
Sean7k's picture

I love theatre and this is good theatre. Having said that, you do realise what theatre is? Players acting out a role in a play that has been written to lead you from a beginning to the end. 

Pretty important to see the purpose here. Legitimacy for a world currency. International clearinghouse operation for all currencies. No more national determination. This will diminish the effectiveness of national governments and increase the power placed in the hands of international bankers.

This makes treaty law look like a piker in terms of overuling national sovereignty. We will be sold on the efficiency and fairness of this system. No one will mention the degree of control and opportunities for enslavement. 

Sat, 02/19/2011 - 16:06 | Link to Comment The_Euro_Sucks
The_Euro_Sucks's picture

All the world's a stage,
And all the men and women merely players;
They have their exits and their entrances,
And one man in his time plays many parts,
His acts being seven ages.

 

(The idea that "all the world's a stage" was already clichéd when Shakespeare wrote As You Like It in 1599)

Sun, 02/20/2011 - 08:02 | Link to Comment Confused
Confused's picture

It would seem that what you say is the direction things are headed. 

Sun, 02/20/2011 - 10:50 | Link to Comment Bob
Bob's picture

The US, like all putatively capitalist nations,  is sovereign in name only, having been taken over by transnational corporations.  Anything that develops in an orderly manner from here on out will be nothing but a reorganization of the various corporate divisions.

Sun, 02/20/2011 - 15:19 | Link to Comment prophet_banker
prophet_banker's picture

 

 

 

well said; you could have fininished by invoking individuals to empower themselves with local currencies.

Sat, 02/19/2011 - 16:04 | Link to Comment gwar5
gwar5's picture

This is the center of gravity of everything. There's economic warfare going on (WWIII) over who controls the next WRC.

The battles and food riots will continue until somebody wins the WRC war. China (and Asia) is in the gold camp and the Western banks want their fiat. Western talk of adding the Yuan to the SDR basket with some gold is an enticement to go along with the Western IMF creation. China would give up control with an omnipotent IMF mothership and will hold out for more as they press forward unilaterally toward a Yuan WRC. They're in the driver's seat.

China's acquisition of gold must be hurting the Western banks big time --- 

FT (2-18) reported: "one senior banker (who is not prone to hyperbole) put it, "The demand in China is vast. It's unbelievable. Whatever you think the demand is, it's much bigger ... I'm really staggered."


Sat, 02/19/2011 - 16:21 | Link to Comment snowball777
snowball777's picture

I appreciate the perspective, but perhaps the negotiation of truce is a fait accompli and they're merely rounding out their 'basket' for the day spring is sprung. They already have plenty of the other components on hand, no?

Sat, 02/19/2011 - 17:50 | Link to Comment DosZap
DosZap's picture

China's acquisition of gold must be hurting the Western banks big time --- 

 

Don't forget their into the SLW accounts now..........theeir getting physical, with both metals using fiat shit.

Sat, 02/19/2011 - 16:09 | Link to Comment bernorange
bernorange's picture

Sorry Tyler, but I think you are misinterpreting Zoellick's vision.  Having the IMF play watchdog and using gold prices as a measuring stick is not even close to the same thing as having a currency fully convertable to gold.  This is not a gold standard.  This is just laying the groundwork for a global fiat currency. 

Sat, 02/19/2011 - 16:21 | Link to Comment Atomizer
Atomizer's picture

sounds? like a load? of hick wup huh! over over..

The Man Whose Head Expanded

 


Update your resume to include, I can create a budget imbalance. My strong points, finagle billions from unsuspecting victims to support my underfunded budget.

Sat, 02/19/2011 - 16:36 | Link to Comment snowball777
snowball777's picture

http://www.youtube.com/watch?v=AnrM4UjaQmY

 

Pigs, they tend to wiggle when they walk
the infrastructure rots
and the owners hate the jocks
with their agents and their dates

if the signatures a check
you'll just have to wait

and we're counting up the instants that we save
tired nation so depraved
from the cheap seats see us
wave to the camera
it took a giant ramrod
to raze the demon settlement

but high-ho silver, ride
high-ho silver, ride

take another ride to see me home
listen to me! i'm on the stereo stereo
oh my baby baby baby baby babe
gave me malaria hysteria

what about the voice of geddy lee
how did it get so high?
i wonder if he speaks like an ordinary guy?
(i know him and he does!)

and you're my fact-checkin' cuz
(Aww...)

well focus on the quasar in the mist
the kaiser has a cyst
and i'm a blank want list
the qualms you have and if they stick
they will drown you in a crick
in the neck of a woods
that was populated by
tired nation on the fly
everybody knows advice
that was given out for free
lots of details to discern
lots of details

but high-ho silver ride
high-ho silver ride
takes another ride to make me
oh, get off the air
i'm on the stereo stereo
oh my baby baby baby baby baby babe
gave me malaria hysteria

Sat, 02/19/2011 - 17:45 | Link to Comment Arkadaba
Arkadaba's picture

Pavement - nice! 

One of my favs:

http://www.youtube.com/watch?v=0Uc3ZrmhDN4&feature=artistob&playnext=1&list=TLTfAiu-afvzI

And another one:

http://www.youtube.com/watch?v=veOvUPNSelY&feature=related

With great comment: "I bet this is on God's ipod..? actually he's probably jammin with brad right now."

Sat, 02/19/2011 - 17:57 | Link to Comment snowball777
snowball777's picture

Ah, Bradley...not the smartest guy, but soulful for a white boy.

http://www.youtube.com/watch?v=NoFMmNM9H70

http://www.youtube.com/watch?v=BwuTHjoOOtk

Peace.

Maybe that should be "A Message to Ben-nie".

Sat, 02/19/2011 - 16:21 | Link to Comment rufusbird
rufusbird's picture

I am curious as to why this discussion does not give more consideration to Wocu, or World Currency Units, which use a larger basket of currencies than SDR's.  The subject seems to merit discussion as much as the use of a new currency backed by commodities.

Sat, 02/19/2011 - 17:01 | Link to Comment akak
akak's picture

If every single fiat currency is crap, as we know they are from observation and every historical precedent, then why would it be somehow preferable to use a one-size-fits-all, monolithic, collective basket of crap as money instead?

Sat, 02/19/2011 - 17:51 | Link to Comment DosZap
DosZap's picture

Because then EVERYONES crap level is the same.

Far more manageable.

Sat, 02/19/2011 - 23:17 | Link to Comment Reptil
Reptil's picture

"many rotten eggs in one basket do not a big healthy egg make" Yoda 2011-02-20

Sat, 02/19/2011 - 16:29 | Link to Comment falak pema
falak pema's picture

If China moves to making Yuan-Gold standard a de-facto internal reality through prolonged gold buying, as they are supposed to be doing according to certain whispers, it will be one step closer to then linking the future, very theoretical, SDR linkage to a Yuan-gold. China is now global creditor. So it does have clout. We don't know if it's fiscal/real estate bubble/commodity inflated trouble is a real down side... But as I say, I assume it's controllable on very theoretical short term basis. Because as long as Ben is in charge of FED there isn't a chance in hell that the US wil buy into this SDR deal. SO the WW3 monetary game could go on, until one players really caves in...I wonder who...Zoellick seems to have chosen his side...in the name of long term stability...Painfull for Helicopter Ben! What says BO, the king?

Sat, 02/19/2011 - 16:34 | Link to Comment snowball777
snowball777's picture

In short, China is a great deal more comfortable with tent cities than the West.

Sat, 02/19/2011 - 17:58 | Link to Comment DosZap
DosZap's picture

falak,

At this junction, WHERE would you put your marbles?.

With a Nation that is far beyond dead broke, to a Nation that has tremendous reserves.

With a vibrant and humongus youth(workforce) population, rather than into a dead and dying  geriatric ward?

Sat, 02/19/2011 - 20:41 | Link to Comment AmCockerSpaniel
AmCockerSpaniel's picture

How does the world know for sure just how much every country has in Gold?

Sat, 02/19/2011 - 16:51 | Link to Comment Atomizer
Atomizer's picture

ZH posters. Start here & then expand upon. Many good blood hounds on this board.

http://coinmill.com/SDR_calculator.html

Edit: enter this number in top field.

1 USD = SDR 0.64179

http://www.imf.org/external/np/fin/data/param_rms_mth.aspx

You can track historical info to plainly see what is happening.

Sat, 02/19/2011 - 18:52 | Link to Comment snowball777
snowball777's picture

The greenback’s weighting was cut to 41.9 percent compared with 44 percent after a 2005 review, the fund said in its statement dated yesterday. The euro’s share rose to 37.4 percent from 34 percent. The yen’s fell to 9.4 percent from 11 percent, while the pound was little changed at 11.3 percent. 

 

Make way!

Sat, 02/19/2011 - 17:58 | Link to Comment BKbroiler
BKbroiler's picture

a world currency sounds like a bureaucratic nightmare, a fiat reserve currency is a bad idea in general, I thought that was the lesson here.  Imagine all these countries manipulating their share of the SDR's value as they go along. Dollar=fail, Euro=fail, Fiat=fail  Till they figure that out, buy the dip or die a blip.

Sat, 02/19/2011 - 18:19 | Link to Comment savagegoose
savagegoose's picture

but the reason to go to fiat is because you cant wage war ona gold standard.

 

ergo china would lose.

Sat, 02/19/2011 - 18:21 | Link to Comment saulysw
saulysw's picture

Two points which spring to mind when I read this --

 

1. The Yuan and the USD are effectively the same due to the peg. Of course, the peg could be removed at any point, but will it?

2. This phrase caught my eye as a step to world government - "Within this new framework, the IMF should be a referee, able to blow the whistle on the appropriateness of external policies but not to impose penalties." The bit about not imposing penalties is what they are saying now. Trust them to not take this power? I don't. 

Sun, 02/20/2011 - 11:59 | Link to Comment Bob
Bob's picture

1. The Yuan and the USD are effectively the same due to the peg. Of course, the peg could be removed at any point, but will it?

If I were China, I would dump the US Treasuries, respond to the US howls with the explanation that I was forced to do it to keep people from starving (due to rising commodity prices), and then (with the dollar crashing) give the US what it's been screaming for: an unpegged yuan.

At that point the EU would be crashing, but I'd throw them a nice, solid rope. 

Presto chango!  The US is the odd man out. Best of luck, Ben! 

This would be the Mad Max version.  Mutual--but by no stretch of the imagination equal--pain. 

In the real extend and pretend world, the Fed would be desperate to manage a "soft" descent.  They would be more than willing to get those Chinese T's onto the Fed balance sheet to sterilize the impact upon interest rates.  It would be just a finger in the dike, but that's what they do.  Meanwhile, Congress is throwing up trade protections which, combined with increasingly severe biflation here, will dramatically decrease the volume of Chinese imports in any case.  Not that we'll shift to replacing the Chinese products with American or other products--China is the world's manufacturer.  Of course, input prices are soaring worldwide, so there's no real escape.  We'll spend ourselves into poverty just to live, but it will take a while. The Fed, of course, has no choice but to print on.

But it ends the same . . . it just takes a longer period of time. Assuming the western CB's can keep the plates spinning on their end, of course.

Sat, 02/19/2011 - 18:22 | Link to Comment falak pema
falak pema's picture

Like I said I don't know China's REAL current downside. They've achieved mega growth in ten years equivalent to 50 years at  normal growth rate. This is tantamount to real structural  overheat. Secondly, apart from China's true sustainability, lies Germany's role as mainstay in a teetering peripheral Europe. Can Merkel stabilise this? I hear that Russia and Brazil, dead scared of US's exported monetary mega-inflationary drive, want EU to be buffer to US speculation on all fronts. There is an anti US$ front currently brewing in Paris. But China is not totally aligned to this BRIC cartel. If Helicopter Ben continues down QE route beyond June the cartel will firm out. There will be a EU-BRIC front, with Zoellick support to push to oust USD as reserve. We may see this happen this summer. The next G20 is in November. Sarkozy, Merkel's second,  wants this consensus to solidify by then : one way or the other, with USA playing ball and calling off QE (exit Ben), or with QE continuing, and then a EU-BRIC ultimatum delivered to USA. Where will the USD be by then...how will Euro have fared in the summer mayhem...China looks fitter I agree, if their inflationary bubble is controllable.

Sat, 02/19/2011 - 18:25 | Link to Comment Poor Grogman
Poor Grogman's picture

The huge advantage conveyed to the USA by the USD has blinded them.

Fiat only works by force (legal tender laws etc)

The world bank has no Nukes and no teeth.

A gold backed alternative is rising in the east.

Game Over.

Sat, 02/19/2011 - 18:27 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Adding the Yuan to the SDR is the next move away from the dollar, after printing bazillions of them of course.

Sat, 02/19/2011 - 18:30 | Link to Comment falak pema
falak pema's picture

Seen from a European perspective, it is now clear that even as USA's allies, their future survival requires USD be neutralised from it's toxic role on world economy. Ben's QE has destroyed all consensus around american financial leadership. This has to be clearly understood on your side of the Atlantic pond. From what I can see of the mood in ZH it's a forgone conclusion you all agree. That's an understatement, to say the least!

Sat, 02/19/2011 - 18:36 | Link to Comment falak pema
falak pema's picture

China does not want a Nuke confrontation with USA. Not before ten years...

Sat, 02/19/2011 - 18:49 | Link to Comment Yen Cross
Yen Cross's picture

 When the Hu-mernites, start floating the YUAN and bonds, Instead of raising reserve requirements, and throwing out 25 BPS hikes to appease the world order we can talk. They are like the BORG. Move from one medium to the next, until the heat forces the next pirating act.

Sat, 02/19/2011 - 18:54 | Link to Comment snowball777
snowball777's picture

Alllllgh Mae Ti!

Sat, 02/19/2011 - 19:24 | Link to Comment Yen Cross
Yen Cross's picture

Looking @ another post 777. Can someone dry out that sponge?

Sat, 02/19/2011 - 20:18 | Link to Comment snowball777
snowball777's picture

Smells like mildew. You touch it.

Sat, 02/19/2011 - 21:52 | Link to Comment enobittep
enobittep's picture

Zoellick is a bought and sold one world government lap dog. Why the hell would we want to jump into that crazy ass plan.

Sat, 02/19/2011 - 22:49 | Link to Comment Paul Bogdanich
Paul Bogdanich's picture

In my view the US will have to impose capital controls on federal and state bonds before too long (forced conversions into new bonds at capped rates.  Restrictions on gold will probably happen at the same time but I digress).  At that time the Chinese could propose a new regime, make it our fault, which it would in fact be, and have plenty of unhappy bond holders looking for different options to make sure participation is high and the new regime sticks.    

Sat, 02/19/2011 - 23:58 | Link to Comment Coldfire
Coldfire's picture

Let us not forget that Zoellick is the hump who recently helped conjure up a carbon casino in Mexico. The IMF is a threadbare statist sweat act and Zoellick, despite his opportunistic apologism, is its craven lickspittle.

Sun, 02/20/2011 - 01:18 | Link to Comment Sizzurp
Sizzurp's picture

This global SDR scheme is just another way to try and kick the can down the road a few more years.  I think it is complete crap.  We will have currency led by mob rule.  I don't want our own fiat, let alone fiat from some other country.  China has weak gold reserves, why are they any better than the dollar.  We need sound money backed by and redeemable for gold / silver.  End of story.  Anything less is just playing into the hands of the central banking elite fraudsters.

Sun, 02/20/2011 - 13:56 | Link to Comment Paul Bogdanich
Paul Bogdanich's picture

Money backed by gold is impossible since the advent of large scale, low grade, leach circuit mining using bacteria.  It used to be that gold was hard to mine because you had to find concentrations to make it economical.  That's not true anymore.  They can mine for less than $400 per ounce all the way down to .01 ore including remediation nowdays.  Knowing that, if you look at the proven low grade alluvial reserves they are almost all in Russia.  Hundreds of billions of tons (proven) of .02 or better ore.  Plus there are are high grade reserves (deep underground) in South Africa and Mexico.  If gold were money then the Russians alone without material difficulty could mine and smelt 2,500 tons of gold a year.  Easily.  If they were willing to destroy some landscape and skip the remediation they could probably do 10 times that amount at a blended cost less than $200 per ounce.  So why would we want to be on the gold standard again?  So we can trade our bankers for Russian bankers?  Not that they could possibly be any worse mind you but it does not seem like a good solution.        

Sun, 02/20/2011 - 08:39 | Link to Comment Jack Sheet
Jack Sheet's picture

There will never be a gold standard or gold backing of any currency, especially SDRs. For the simple reason that maintaining such requires honesty, integrity and openness on the part of governments, politicians and central banks regarding gold (tungsten?) storage, auditing, ownership, leasing..you  name it. Sorry. Not a chance in hell. 

Sun, 02/20/2011 - 16:46 | Link to Comment snowball777
snowball777's picture

Tricky Dick ruined it for everyone.

Sun, 02/20/2011 - 12:37 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

why do some things require secrecy??

inventory of fort knox? fed gov could do an yearly inventory just like most business have to do..they don't they fight tooth and nail to stop it.

Audit of fed reserve..yearly like most business have to do..they don't they fight it tooth and nail.

does fort Knox have billions in gold? I cannot know as a citizen..is the Fed feeding crony criminal banksters? I cannot know as a citizen.

why produce this current paranoia about both?

well one simple answer is :there is criminal activity in both and it cannot come to light.

Any other explanation must be so contrived that none I have seen passes Occam's razor

 

Sun, 02/20/2011 - 18:27 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

China's currency will eventually replace the US dollar as the world reserve currency because China is replacing America as the world's largest manufacturer. 

It has nothing to do with being communist, killing X millon of it's citizens over Y period of time, nor any other non-economic issues.  It's strictly who has the most exports, end of story, and China is far outpacing America in exports.

China is expanding it's manufacturing economy when America is shrinking its manufacturing economy.  The reasons are immaterial.

Sun, 02/20/2011 - 23:04 | Link to Comment Monk
Monk's picture

Usually, the country whose money becomes the reserve currency can no longer rely on exports and manufacturing to earn.

Also, if there are only 150,000 metric tons of precious metals worldwide, then there will be less than one troy oz. per person for the global population. And capitalism of any form requires increasing credit which cannot be met by a gold standard.

 

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