DIGITAL CURRENCY: Who Needs Central Bank Conspiracy Theories when Central Banksters Speak this Openly?

cashless society cover of The Economist

Central-banker talk about centrally controlling the entire world’s finances is now so open, you can take the words “conspiracy” and “theory” right out of the discussion and just talk about “public planning.” Public acceptance is broad and trusting enough that the bankers have no need to hide their plans. I’ve been parsing their words this year to see where they are going, but there is no longer even a need to parse between the lines. Their globalist plans over the last few months are now increasingly spoken in public auditoriums without a shiver of concern in the audience.

With the European Central Bank having reverted back to quantitative easing and interest-rate cuts only nine months after having stopped quantitative easing …. and the Federal Reserve having reverted back to lowering interest rates only six months after it stopped raising them … and with the Fed now injecting well over a hundred billion dollars a week into bank reserves to try to stabilize its foundational interest rate because it is losing control over interest (at least, temporarily) … and a former New York Reserve Bank president having advocated this month for the Fed to stall the economy in order to depose the US president … you have to ponder whether central bankers know anything about 1) what their real business is and 2) how their business works.

Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives…. Officials could state explicitly that the central bank won’t bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions….

William Dudley, former NY Reserve Bank President, The Washington Post

There’s a brazen plan stated in daylight. “Let’s take down the president of the United States by subverting his government.”

I’ve said for years on this blog that the first thing the Federal Reserve will do after stopping interest cuts and QE will be to go right back to them as everything fails around them. The second thing it will do is look for a ready scapegoat to explain why it had to so quickly revert back to QE after saying tightening would be no problem.

Obviously, we’re there.

The plan to take down the president, however, (subversive as it plainly and openly was) immediately drew crossfire from other Fed members, so the former Fed member who voiced it choked it back a bit. Yet, other plans, once only sussed out by those who eavesdrop through the large doors of smoke-filled inner sanctums, are now spoken publicly over loudspeakers without any objections.

Possibly, these are conspiratorial plans finally coming into the daylight. Just as possibly, as I’ve said is more my bias, they are the zeitgeist of our times leading to obvious conclusions being made by bankers based on where the world is and where most people in it want to go, which would be electronic and global and without borders. (Those mega trends are, of course, leading to the sharp blowback in the Trump years by nationalists who see globalism as repressive to their individuality.)

Since the most of the world appears ready to keep entrusting central banksters with guiding the world’s major economies and currencies, in spite of their repeated and resplendent failures, we might want to know what their next ill-concocted plans are for the world now that their recovery plans are spectacularly crumbling around them. Are we moving on to QE4ever, negative interest rates to eternity and beyond? Or moving to a whole different techno paradigm in a brave new world? Sifting out that direction from the increasingly overt words of the central banksters, themselves, is what most of my Patron Posts this year have been about. Now, here is a speech more open than any we’ve seen.

Central bank deficiency promises to deliver efficiency

Mark Carney, governor of the Bank of England, admitted at the Bankster Bash in Jackson Hole, Wyoming, in August that …

The IMFS [international monetary and financial system] is not only making it harder to achieve price and financial stability but it is also encouraging protectionist and populist policies which are exacerbating the situation. This combination reduces the rate of global potential growth, increases its downside skew, and bolsters the likelihood of an extreme downside event (a fatter left tail)…. Past instances of very low rates have tended to coincide with high risk events such as wars, financial crises, and breaks in the monetary regime. The lower global equilibrium interest rate is … increasing the risk of a global liquidity trap…. In the new world order, a reliance on keeping one’s house in order is no longer sufficient. The neighbourhood too must change.… There can be innocent bystanders but there should be no disinterested observers. We are all responsible for fixing the fault lines in the system….

Kansas City Fed

To which I can only ask, was Carney saying low interest rates coincided with such calamities as a response to bring salvation from on high or as the cause? Did we not this month start to see his warning of a liquidity trap materialize as the first major cracks formed right where one might expect to see them at the start of such a crisis — all around the global currency’s reserves and the Fed’s key lending rate?

Collective action should improve the adequacy of the global financial safety net (GFSN) to reduce the need for [emerging markets] to accumulate reserves of safe assets as insurance against less sustainable capital flows. Over the past two decades, the GFSN has become more fragmented and its core – IMF resources – has shrunk relative to the size of the global financial system…. Pooling resources at the IMF, and thereby distributing the costs across all 189 member countries, is much more efficient than individual countries self-insuring.

Their answers are always leaning toward greater globalism, and the greater size of expected calamities right now is driving the search for even bigger global answers. Of course, this means major nations like the US become the primary insurers as the largest contributors to the IMF.

This would imply a tripling in the IMF’s resources over the next decade.

Uh huh.

Changing the Game. While such concerted efforts can improve the functioning of the current system, ultimately a multi-polar global economy requires a new IMFS to realise its full potential. That won’t be easy…. Transitions between global reserve currencies are rare events given the strong complementarities between the international functions of money, which serve to reinforce the position of the dominant currency.

There you have it. Unseating the dominancy of the dollar as the current global currency is one of the main objectives, spoken about here by the Bank of England in America in public before America’s Dollar Priesthood. Perhaps the Bank of England is still wincing over the loss of its own status where the Pound Sterling was the previous global currency — as if it is the United State’s turn to lose status for the sake of improving the safety net as a long-term game change.

And why wouldn’t it be in the minds of most of the world with so much gross mismanagement of the dollar before, during and after a Fed-caused Great Recession and after so many decades of rudely forced US hegemony all over the world? Keep slapping sovereign nations around with sanctions every time they do things you don’t like because you have enough currency power to enforce those sanctions at their core financial level, and more and more nations will want to see you and your controlling currency unseated. After all, there was once another term for sanctions when states were only the size of cities — laying siege, an act of war.

But where to turn?

The initial building blocks are there. Already, China is the world’s leading trading nation, overtaking the US at the start of this decade. And the Renminbi is now more common than sterling in oil future benchmarks, despite having no share in the market prior to 2018. The greater use of the Renminbi in international trade is also leading to its growing use in international finance. This has been enabled by reforms to China’s monetary, foreign exchange, and financial systems that have liberalised and improve its financial market infrastructure, making the Renminbi a more reliable store of value.

No surprise there.

However, for the Renminbi to become a truly global currency, much more is required. Moreover, history teaches that the transition to a new global reserve currency may not proceed smoothly.

Yes, the usual route is war. If the currency is global, then likely global war.

Consider the rare example of the shift from sterling [ah, there it is] to the dollar in the early 20th Century – a shift prompted by changes in trade and reinforced by developments in finance. The disruption wrought by the First World War allowed the US to expand its presence in markets previously dominated by European producers…. Institutional change supported the role of the dollar, with the creation of the Federal Reserve System providing, for the first time, a market-maker and liquidity manager in US dollar acceptances.

Uh huh. Wasn’t hard to see that coming, was it? Maybe not advocacy of war, but acknowledgment that this is the usual path to be anticipated.

While the rise of the Renminbi may over time provide a second best solution to the current problems,… first best would be to build a multipolar system.

Now that’s more like it. Forget this Chinese stuff. Let’s go straight for the global gold. (Well, except that it won’t have anything to do with gold, which banksters hate.)

Except that Carney’s answer is not a single global currency, but …

Multiple reserve currencies would increase the supply of safe assets, alleviating the downward pressures on the global equilibrium interest rate that an asymmetric system can exert.

Or is he?

While the likelihood of a multipolar IMFS might seem distant at present, technological developments provide the potential for such a world to emerge. Such a platform would be based on the virtual rather than the physical.

Ah. So, maybe a digital currency that is based on the values of a basket of national currencies, like the oft’ talked about basket of currencies used for IMF special drawing rights?

History shows that the rise of a reserve currency is founded on its usefulness as a medium of exchange, by reducing the cost and increasing the convenience of international payments.

Well, this is the global, computer age, so what could be more convenient than a digital currency based on IMF drawing rights?

Technology has the potential to disrupt the network externalities that prevent the incumbent global reserve currency from being displaced.

I.e., that damned dollar.

Retail transactions are taking place increasingly online rather than on the high street, and through electronic payments over cash. And the relatively high costs of domestic and cross border electronic payments are encouraging innovation, with new entrants applying new technologies to offer lower cost, more convenient retail payment services.

This is now the refrain we have been hearing through each of these Patron Posts as we keep following what central banksters are saying around the world. Ditch the dollar. Go global. Value the virtual over the real in the Virtual Age.

The Bank of England and other regulators have been clear that unlike in social media, for which standards and regulations are only now being developed after the technologies have been adopted by billions of users, the terms of engagement for any new systemic private payments system must be in force well in advance of any launch.

In other words, the world’s true virtual currency needs to be centrally regulated by the central banks, not something like Libra, where …

There are a host of fundamental issues that Libra must address.

They have a name for the kind of well-regulated, secure, stable, electronic currency they want to create … or, at least, this central banker does:

As a consequence, it is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies.

No private-sector digital like Libra or open-source like Bitcoin, but something provided by the public sector (governments) via their usual provider, central banks. In other words, they just need to catch up with the private-sector technology, determine the rules of engagement, and gain their usual monopolistic authority and backing for their own global plan via government charters. So long as the bankers serve the governments as they do now, the governments will serve the bankers … as they do now.

But it won’t be dollar based:

An SHC could dampen the domineering influence of the US dollar on global trade…. Global trade would become more sensitive to changes in conditions in the countries of the other currencies in the basket backing the SHC. The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around the new SHC.

And how might that come about without the usually mandatory war? (And notice the word basket.)

Widespread use of the SHC in international trade and finance would imply that the currencies that compose its basket could gradually be seen as reliable reserve assets, encouraging EMEs to diversify their holdings of safe assets away from the dollar.

How will this currency take control? Simple: Market share. Create something electronic that does not replace the dollar but is based on the IMF’s “basket of reserve currencies” (a common IMF for its own financial system), and then, because it is electronic and global, it will outcompete the dollar until it comes to dominate by its own efficient virtue and stability across multiple currencies.

In conclusion:

The deficiencies of the IMFS have become increasingly potent. Even a passing acquaintance with monetary history suggests that this centre won’t hold. We need to recognise the short, medium and long term challenges this system creates for the institutional frameworks and conduct of monetary policy across the world. Given the experience of the past five years, I will close by adding urgency to Ben Bernanke’s challenge. Let’s end the malign neglect of the IMFS and build a system worthy of the diverse, multipolar global economy that is emerging.

Implicitly, even the former high priest of the dollar, Ben Burn-the-banky, is ready to see it sublimated to the multipolar order. This all fits perfectly with this year’s earlier Patron Post that quoted Christine Lagarde (former IMF head and now head of the ECB) and Agustín Carstens (president of the Bank for International Settlements) on this theme, but here it is spelled out as straightforwardly as you ever thought you might see by yet another central banker of the high international priesthood. Each public communique this year has become a little bolder as though a concerted effort is now being made to test the media and public for acceptance and ready the media and public for a move to a unified, global, electronic currency controlled by central banks and authorized and backed by national governments.

I’ll be writing more on the words of central bankers for a second Patron Post this month (unless events sweep me away in other more urgent direction as quickly as they are now unfolding). I anticpate the next post will be more of a collage of bankster quotes, but this particular speech was so bold and transparent and so easily accepted that I felt it needed to stand alone in its own stark and stunning significance.