 |
For us, taking a long term view, it's easy to see beyond
the dollar's politically maintained currency value as
represented in exchange rates. Using the above part of
Mr. D's speech, one doesn't have to be very strategic
to dodge the coming US currency collapse.
-FOA |
The purpose of this post is to further explain and define the "clean
float" I have been implying since last June, and to show why the
dollar's collapse is an integral part of it. My view of the future
international monetary system is one of a predominantly (but not
mandated) "clean float" in currencies, which is the monetary side of
what I call "Freegold". Physical gold movements will only settle the
voluntary imbalances of
individual past and present
savers,
not aggregated imbalances as those will be corrected gradually, through
the clean float. I should add that I see this as an effect of Freegold,
not a prerequisite.
Back in January, with the dollar at 93 and rising fast, Bright Aurum asked,
"Should
the USD strengthen too much… can the FED buy euros without calling it a
peg, but say ... active monetary operations... - a strategy to shake
off speculators, and so on."
Yes, the Fed could certainly do so at the behest of the US Treasury. But
the irony of this transition is that the US itself has been running a
clean float since 1971. It's the ROW that has been running a dirty float
against the dollar.
The dirty float is any official or unofficial exchange rate fix, peg,
floor, ceiling or band defended by the public sector (CB). That's what
causes imbalances to grow to system-busting levels, because the public
sector steps in whenever the profit-driven private sector panics which
is when it would otherwise correct. Occasional FX interventions for the
purpose of combating unusual volatility, as long as there is no target
exchange rate level, can certainly happen within a clean float. I'm not a
purist. ;D
The majority of CB FX interventions are done visibly,
for all of the logical reasons,
and also empirically as well as admittedly according to a survey by the
BIS. (The rare reasons for secrecy, according to the survey, are 1. to
not actually affect the exchange rate when the goal is simply to acquire
defensive reserves, 2. in cases where the intervention is expected to
fail, 3. when the CB doesn't want to intervene but is forced to do so by
politicians, 4. where intervention is inconsistent with other policy
objectives, hence confusing signals will be given, and 5. where the
central bank is not sure what it wants to achieve.)
For the US dollar, FX interventions are executed by the Fed under the
direction of the US Treasury. This happens very rarely. In fact, it
only happened
twice from 1996 through 2006. At the end of each quarter, the Fed reveals if any interventions happened, and there were none in 2014. See
here,
here,
here and
here. The US has been philosophically and openly opposed to exchange rate manipulations of all kinds since 1971 (except for
that brief time in 1978
when it asked Germany, Switzerland and Japan to print and swap their
currencies for dollars to help Carter throw everything but the kitchen
sink at the problem).
Today's dollar is essentially in a similar position to a currency that
has been supporting its own overvalued exchange rate by running down its
foreign reserves and will inevitably collapse when they run out, only
it hasn't been doing that. The ROW has been doing it
to
the dollar, putting it in that position. Not that the US protested much
while it was getting addicted to its privilege over a half century, but
of course the ultimate irony is the ongoing protestations coming out of
Treasury calling for the ROW to
Stop Currency Manipulation!
It should be quite entertaining to watch how it all plays out next time
the dollar starts plummeting, as long as you have some of those items I
mention occasionally which let you sleep well at night. In terms of
foreign reserves to deploy, the US has
fewer than Korea, Mexico and Thailand, but slightly more than Malaysia and Indonesia.
Of course it also has its gold, but that was not earned through
running a surplus recently, it was earned through running a surplus 70
years ago and would have been long since gone were it not for the genius
of Nixon, so US gold can't really be deployed in any meaningful way
(yet). Treasury will ultimately be put in the singularly-unique
position of having to both print like Mugabe to keep the bloated
government functioning at status quo, AND simultaneously beg the same
foreigners it has been telling to stop currency manipulation to start
massively printing their own currencies to manipulate the dollar. Ouch!
It's difficult to even imagine the insane contradictions of the
situation, but I imagine that's what FOA had in mind when he wrote about
the US Treasury "shipping ever higher priced gold to defend an ever
lower valuation of dollar exchange rates," but only "within official
channels"(!), as physical gold returns "to official hands in Europe in
exchange for Euros" which will presumably be used as FX reserves to
support an ever lower dollar. "American policy has only the wish to
manipulate its currency valuations with official currency trading" (in
other words, IMO, meaning through the occasional FOREX interventions
rather than a return to BW-style CB fixing or the post-BW dirty float of
unofficial pegs and channels/bands) which is why "it will be in the US
advantage for gold prices to rise and rise strongly" so that Treasury
can get enough euros for its gold to at least slow the dollar's
collapse. Remember, gold doesn't work well in currency defense at its
discount market price, "just ask the Koreans and Indonesians". ;D
FOA (08/24/01; 10:54:30MT - usagold.com msg#101)
Part 2
=============================
I have presented this topic many times and again state that "all gold
paper will burn". Most mine values included. Then and only then will
gold values soar as physical units traded. Not before. As an adjunct,
the illusion of most American paper wealth will also burn with this
process that transitions the dollar away from reserve status.
At the right time the Euro Zone will withdraw from the IMF, leaving the
US and its factions as the only support for dollar credit assets held
overseas. Then the evolution of SDR use our guide knows so well will be
complete. This will leave the SDR interpretation open to only one avenue
to finding support: its basket currency function dissolved, gold will
have to flow from American based stocks. With most of the present
official credit gold leverage built upon IMF protocols, the US will find
itself shipping ever higher priced gold to defend an ever lower
valuation of dollar exchange rates.
With the world credit gold markets paralyzed in default and dollar
credibility placed in question along with American economic stamina;
physical gold will return to official hands in Europe in exchange for
Euros. A paradox observed as high gold places more demands upon Euros
and sends the dollar ever lower.
=====================
In all of this Alan Greenspan will say goodbye. A gentleman of his
ability and stature will find no use for a position he cannot change
from; a good general does not only retreat. Any lesser player can buy
public and treasury debt for the purpose of constant hyper inflation;
there is no policy strategy or gamesmanship in this.
As for gold being a problem to buy in the USA? Once again, I point out
that American policy has only the wish to manipulate its currency
valuations with official currency trading. It will be in the US
advantage for gold prices to rise and rise strongly. An acknowledgment
to Euro planning and a defeat for 30 years of American gold misuse. If
treasury gold is traded at all, it will be within official channels to
help control dollar values.
However, as paper gold values freeze up and their use fails the public,
physical bullion brokers will become a popular as "crude oil" is to
producers. I wish you "a deep well" in your affairs, my friend, and will
respond more for a time.
======================================
Thanks Mr. speaker,,,,
Thanks all
TrailGuide
http://fofoa.blogspot.hk/
