"A year ago," said law professor Ross Buckley on Australia's ABC News last week, "nobody wanted to know the International Monetary Fund. Now it's the organiser for the international stimulus package which has been sold as a stimulus package for poor countries."
The IMF may have catapulted to a more exalted status than that. According to Jim Rickards, director of market intelligence for scientific consulting firm Omnis, the unannounced purpose of last week's G20 Summit in Pittsburgh was that "the IMF is being anointed as the global central bank." Rickards said in a CNBC interview on September 25 that the plan is for the IMF to issue a global reserve currency that can replace the dollar.
"They've issued debt for the first time in history," said Rickards. "They're issuing SDRs. The last SDRs came out around 1980 or '81, $30 billion. Now they're issuing $300 billion. When I say issuing, it's printing money; there's nothing behind these SDRs."
SDRs, or Special Drawing Rights, are a synthetic currency originally created by the IMF to replace gold and silver in large international transactions. But they have been little used until now. Why does the world suddenly need a new global fiat currency and global central bank? Rickards says it because of "Triffin's Dilemma," a problem first noted by economist Robert Triffin in the 1960s. When the world went off the gold standard, a reserve currency had to be provided by some large-currency country to service global trade. But leaving its currency out there for international purposes meant that the country would have to continually buy more than it sold, running large deficits; and that meant it would eventually go broke. The U.S. has fueled the world economy for the last 50 years, but now it is going broke. The U.S. can settle its debts and get its own house in order, but that would cause world trade to contract. A substitute global reserve currency is needed to fuel the global economy while the U.S. solves its debt problems, and that new currency is to be the IMF's SDRs.
That's the solution to Triffin's dilemma, says Rickards, but it leaves the U.S. in a vulnerable position. If we face a war or other global catastrophe, we no longer have the privilege of printing money. We will have to borrow the global reserve currency like everyone else, putting us at the mercy of the global lenders.
To avoid that, the Federal Reserve has hinted that it is prepared to raise interest rates, even though that would mean further squeezing the real estate market and the real economy. Rickards pointed to an oped piece by Fed governor Kevin Warsh, published in The Wall Street Journal on the same day the G20 met. Warsh said that the Fed would need to raise interest rates if asset prices rose - which Rickards interpreted to mean gold, the traditional go-to investment of investors fleeing the dollar. "Central banks hate gold because it limits their ability to print money," said Rickards. If gold were to suddenly go to $1,500 an ounce, it would mean the dollar was collapsing. Warsh was giving the market a heads up that the Fed wasn't going to let that happen. The Fed would raise interest rates to attract dollars back into the country. As Rickards put it, "Warsh is saying, 'We sort of have to trash the dollar, but we're going to do it gradually.' . . . Warsh is trying to preempt an unstable decline in the dollar. What they want, of course, is a stable, steady decline."
What about the Fed's traditional role of maintaining price stability? It's nonsense, said Rickards. "What they do is inflate the dollar to prop up the banks." The dollar has to be inflated because there is more debt outstanding than money to pay it with. The government currently has contingent liabilities of $60 trillion. "There's no feasible combination of growth and taxes that can fund that liability," Rickards said. The government could fund about half that in the next 14 years, which means the dollar needs to be devalued by half in that time.
The Dollar Needs to be Devalued by Half?
Reducing the value of the dollar by half means that our hard-earned dollars are going to go only half as far, something that does not sound like a good thing for Main Street. Indeed, when we look more closely, we see that the move is not designed to serve us but to serve the banks. Why does the dollar need to be devalued? It is to compensate for a dilemma in the current monetary scheme that is even more intractable than Triffin's, one that might be called a fraud. There is never enough money to cover the outstanding debt, because all money today except coins is created by banks in the form of loans, and more money is always owed back to the banks than they advance when they create their loans. Banks create the principal but not the interest necessary to pay their loans back.
The Fed, which is owned by a consortium of banks and was set up to serve their interests, is tasked with seeing that the banks are paid back; and the only way to do that is to inflate the money supply to create the dollars to cover the missing interest. But that means diluting the value of the dollar, which imposes a stealth tax on the citizenry; and the money supply is inflated by making more loans, which adds to the debt and interest burden that the inflated money supply was supposed to relieve. The banking system is basically a pyramid scheme, which can be kept going only by continually creating more debt.
The IMF's $500 Billion Stimulus Package:
Designed to Help Developing Countries or the Banks?
And that brings us back to the IMF's stimulus package discussed last week by Professor Buckley. The package was billed as helping emerging nations hard hit by the global credit crisis, but Buckley doubts that that is what is really going on. Rather, he says, the $500 billion pledged by the G20 nations is "a stimulus package for the rich countries' banks."
Why does he think that? Because stimulus packages are usually grants. The money coming from the IMF will be extended in the form of loans.
These are loans that are made by the G20 countries through the IMF to poor countries. They have to be repaid and what they're going to be used for is to repay the international banks now. . . . [T]he money won't really touch down in the poor countries. It will go straight through them to repay their creditors. . . . But the poor countries will spend the next 30 years repaying the IMF.
Basically, said Professor Buckley, the loans extended by the IMF represent an increase in seniority of the debt. That means developing nations will be even more firmly locked in debt than they are now.
At the moment the debt is owed by poor countries to banks, and if the poor countries had to, they could default on that. The bank debt is going to be replaced by debt that's owed to the IMF, which for very good strategic reasons the poor countries will always service. . . . The rich countries have made this $500 billion available to stimulate their own banks, and the IMF is a wonderful party to put in between the countries and the debtors and the banks.
Not long ago, the IMF was being called obsolete. Now it is back in business with a vengeance; but it's the old unseemly business of serving as the collection agency for the international banking industry. As long as third world debtors can service their loans by paying the interest on them, the banks can count the loans as "assets" on their books, allowing them to keep their pyramid scheme going by inflating the global money supply with yet more loans. It is all for the greater good of the banks and their affiliated multinational corporations; but the $500 billion in funding is coming from the taxpayers of the G20 nations, and the foreseeable outcome will be that the United States will join the ranks of debtor nations subservient to a global empire of central bankers.
Follow Ellen Brown on Twitter: www.twitter.com/ellenhbrown
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Honey's 3 point plan for the politicall
1. Eliminate TBTF immediatel
2. Eliminate income taxes immediatel
3. Enact 49% in-kind estate taxes immediatel
Radical yes, but google today's Robert Prechter Elliott Wave theory before you laugh.
You are both some kind of prophet.
If Too Big To Fail doesn’t sound right then just think of them as Too Big To Jail.
Pure Genius! IMMEDIATEL
And all the downsteam economic beneficiar
...Or pay for it with estate taxes?
On who, all those who commit suicide? As if they would have any assets of any value! But it would create more business for another industry..
Peruse the links I posted in the first post on this thread about economics. Watch these videos and send the links to others. Same on the links about the MERS mortgage fraud legal defense. Same with the links to her various writings on Ellen Brown's blog. the Internet changes everything
I fully agree, education of everyone about our current situation is critical.
STARTING NOW! Just like on Sesame Street, it's called "CO-OPERAT
If the game is broken, play a different one!
If the bullies on the playground victimize you, find or create a different playground
See below... (RE: www.MunnyF
Time to read "The Shock Doctrine" again.
The ducks are in a row and I seriously doubt the world, much less America will ever emerge from this Neo-feudal state the monied interests have spent centuries perfecting
It's back to the Dark Ages, my friends.
I find it interestin
And don't think anybody will be able to get out of these "loans". That's where all the new mercenary armies come in. XE Worldwide.
...And all will be well if we get your nationalis
And you don't think that you are also victims of a divide and conquer nationalis
And you don't see the value in organizing together to play a different game?
A transnatio
MunnyF .biz has videos on systems that played a different complement
Exposing your masters machinatio
ELLEN BROWN EXPLAINS THE LAST 350 YEARS - 5 VIDEOS
http://www
http://www
http://web
For more education see www.MunnyF
And yes, still lobby for public credit creation entities. While we simultaneo
BUT! Just focusing on education (which has happened for generation
I agree, Ellen is great at educating us about what has happened. So has Gailbraith
BUT! After a few hours of education and what the government
Where is the ACTION... that will work NOW?
Yes public owned Banks (or Credit Unions) can help solve a number of problems..
But doesn't it make more sense to ALSO operate a different NON-rigged game? A currency backed by mutual agreement rather than by the threat of physical violence?
A CO-OPERATI
Please see eo-global-
However Esperanto will be an auxiliary World language - a second language for all :) You can see this at http://www
Ellen, I hope you are still monitoring this site as I have a favor to ask of you.
I listen to Bonnie Faulkner on KPFA Guns and Butter regularly. She lives nearby. Her guests have included Michael Hudson and Michel Chossudovs
What I hear from them is how we got here and where they think it's going--and it is not a good place. Your piece today cements that.
But what I NEVER ever see or hear is a program that the 99% of us who will be the ones to suffer most could begin to implement that would allow us to survive with some parts of our current lives intact, and with our dignity.
I know that the 400 families of FDR's reference have crashed this system before as they are now and that THEY know the techniques for not just surviving, but coming out ahead. I've checked the people who were wealthy at the beginning of the Great Depression and those who emerged wealthier and more powerful after. Same folks. And it's the same this time.
I saw your note this morning. I have been busy at work today until now (software engineer). Your point about the 400 families is spot on! But look beyond 1929 too! These people came out of the Panic of 1907 even bigger! The history of everything is absolutely fascinatin
I agree that solid advice is in order for the financial survival of as many people as possible. I am working on it myself. I say step one is fro as many as people as possible to get their money out of the stock market ASAP. Invest locally not globally. Let's keep this discussion going here on HP over time.
God bless Philip Taylor!
If you haven't seen it yet, google The Century of Self. It was bad enough when the barons controlled the country, but when psychology
All of which makes me think that there must be some basic things that working and middle class people can do to protect ourselves from being totally wiped out. But no one wants to share the info. We need a game plan, and we need it yesterday! There is no industry this time, less than 10% of us live on farms, our debt load is killing--t
We need help! I'm asking. What can we do, where can we go, what resources are there? Short of revolution we know the oligarchs will prevail, but what can we do to minimize the suffering of millions?
Don't buy into the smoke screens. The IMF is nothing new, this has been going on for a long time. These people know exactly what they are doing.
The stealing has just begun. Solve the Problem.