JC Collins Q & A With Readers
JC Collins Q & A With Reader Comments On “The American Dollar is Dumping Vietnam”
Hugh “The stage drama is unfolding as planned and the end game is the removal of the dollar as the world’s primary reserve currency.”
…feverishly removing any remnants of gray matter remaining on lottery scratch-off; and yes, dong! dong! dong!….we may have a winner here… 
~~~
THE END OF THE MONETARY SYSTEM AS WE KNOW IT (TEOTMSAWKI)
http://www.thedailybell.com/editorials/35309/Jeffrey-Berwick-Are-Russia-and-China-About-to-Announce-the-End-of-the-US-Dollar-Era/
ozymandias3 An excellent article Mr. Collins. What is your opinions of the value of the dong now versus when Vietnam completely dumps the $USD?
Also, an important point of note. Even though China and Vietnam engaged in serious armed conflicts in Feb/Mar 1979, Vietnam never departed China’s orbit and influence.
JC Collins Vietnam will be unable to completely rid themselves of dirty dollars until the debt restructuring is completed through the SDRM process.
The SDR anchor for currencies and commodities is likely to happen at the same time. I can’t see how one currency or a group of currencies can be revalued without the whole system transition taking place first.
In regards to value, it’s difficult to say. I’m expecting that the traditional mechanics of an exchange rate system will no longer apply. Perhaps currencies will no longer be able to be exchanged directly for other currencies.
One currency will first have to be exchanged into SDR’s and then exchanged into the target currency. We could very well see cross border capital restrictions and a purchasing power parity structure.
When people discuss this much anticipated global currency reset they are filtering it through the traditional exchange rate structure. It will not work that way.
What the actual values and rates will be cannot be stated by anyone at this time. Perhaps a small handful of people know. A symbiosis of SDRM and the SDR exchange rate structure will work to determine a currencies real economic value.
I’m betting that Vietnam is going to come out strong on the economic indicators and low on the debt restructuring. We just need to be patient.
Bill Rattigan Thank you for your thought provoking work and observations.
You mention “Each area in the world where there is tension and unrest are areas where American dollar interests are attempting to maintain a foot hold or areas where those interests are being pushed out to make room for the multilateral reserve SDR.
Just who are the ones who have interest in keeping the dollar. Why not just bring in the SDR, as they control governments and everything else. Why must they bring these countries down to their knees. Regards. Bill…
JC Collin Bill, it’s a generalization to say that everyone is acting from the same script.
I use the phrase lots because it sets the correct impression. In reality the interrelationships between banking and industry are complex.
The end result is determined but how we get there or which banks and companies profit from which regions and markets are fluid events. Think of it like driving to work in the morning.
Everyone is going in the same direction but randomness and competition during the commute is very much a deciding factor on who gets there first. Hope this answers your question.
Bullion Baron (@BullionBaron) “Most of the readers here have already caught on to the fact that the IMF loan to Ukraine was paid in SDR as opposed to the traditional IMF loan denominated in dollars.”
I recalled reading that elsewhere recently, that it was a significant change (the payment to Ukraine in SDR): “The arrangement amounts to SDR 10.976 billion”
http://www.imf.org/external/np/sec/pr/2014/pr14189.htm
But when I dug back through the archives I found the wording had been used on other occasions, e.g. Greece in 2010:
“The Executive Board of the International Monetary Fund (IMF) today approved a three-year SDR 26.4 billion (€30 billion)”
http://www.imf.org/external/np/sec/pr/2010/pr10335.htm
In 2008 for Lativa:
“The Executive Board of the International Monetary Fund (IMF) today approved a 27-month SDR 1.52 billion (about €1.68 billion, or US$2.35 billion) Stand-By Arrangement for Latvia”
http://www.imf.org/external/np/sec/pr/2008/pr08345.htm
Turkey in 2006:
“The completion of the reviews will enable Turkey to draw immediately an amount equivalent to SDR 1.25 billion (about US$1.85 billion).”
http://www.imf.org/external/np/sec/pr/2006/pr06167.htm
So what is the significance for the Ukraine payment?
JC Collins The IMF loans are always listed in SDR’s but allocated in dollars, or sometimes euros, as SDR’s are only a claim on currency. Here is a more thorough IMF loan list:
http://www.imf.org/external/np/fin/tad/extarr11.aspx?memberKey1=ZZZZ&date1key=2020-02-28
The Ukraine converted the SDR loan into gold and into their currency reserves as opposed to holding dollars in their foreign currency account. This is a change from the norm.
deejj87 There is so much speculation about the dinar and dong revaluation rates when at the end of the day the rate doesn’t matter so much as what the value will be compared to what can be purchased (assets) afterwards.
The purchasing power of many currencies will change but at the end of the day it’s more about the value of a dollar/ dinar/ dong rather than a rate.
JC, when the US dollar experiences inflation (or devaluation) and thus each dollar purchases less, do you forsee the Canadian Dollar losing relatively the same ratio of value in order to continue exporting goods to the US or do you think there are enough foreign contracts to maintain the exporting of resources to countries other than the Us to maintain the purchaing power of the CAD?
Because the US is the largest importer of Canadian goods (not to mention over 50% of the CAD is backed by USD) Im thinking the CAD will lose purchasing power along with the USD in the near future while the value of the Mexican Peso increases…
All things being equal and pegged to the SDR. This will level out the playing field so to say and open up the North American Union among many treaties to regionalize the continent and essentially cement the dissolution of boarders in many ways
JC Collins I think we will see little change as America has already been experiencing increased inflation. Here are a few good links:
http://theeconomiccollapseblog.com/archives/are-you-ready-for-the-price-of-food-to-more-than-double-by-the-end-of-this-decade
http://theeconomiccollapseblog.com/archives/the-middle-class-in-canada-is-now-doing-better-than-the-middle-class-in-america-is
I would expect that Canada will do better with a more broad international diversification of exports.
Gustavsuare I am having trouble with that first sentence JC. If I hear you right you are saying much of the inflation (money printing) has already been accounted for with higher prices.
I see your best-case scenario for the US as something akin to the dollar devaluation in the 1970s. But that inflation was mitigated with the help of petrodollar recycling, aggressive rate hikes and a domestic manufacturing sector.
This time the US is losing the petrodollar, has exponentially more debt prohibiting another Volcker-type maneuver, and imports almost everything.
Even if much of that debt is (eventually) rolled into SDR, the US will be in an immediate sovereign debt crisis the moment the petrodollar ends.
Then government spending inflation can no longer be exported. They will certainly have to slash budgets but I don’t think it will be enough. This inflationary pain is something I see as part and parcel of the Hegelian Dialectic that is manifesting itself.
How do you reconcile a US dollar devaluation without massive inflation?
Also, Rickards mentions something interesting about the IMF printing trillions of SDR to bailout the next banking collapse causing hyperinflation in the US. Does this sound plausible to you?
JC Collins Yes, that does sound plausible. And your right, I’m expecting the best case scenario which is debt restructuring through the SDRM before there is a collapse. The alternative wold be horrible. I hope I’m right.
Andrew JC, you say that the May 20-21 Sino-Ruski announcement will put the final touches on the end of the USD’s reserve status, and I too believe this has the potential to be the first domino.
You then say in the comments that the best scenario is a debt restructure through the SDRM before the USD does collapse.
http://www.thedailybell.com/editorials/35309/Jeffrey-Berwick-Are-Russia-and-China-About-to-Announce-the-End-of-the-US-Dollar-Era/
ozymandias3 An excellent article Mr. Collins. What is your opinions of the value of the dong now versus when Vietnam completely dumps the $USD?
Also, an important point of note. Even though China and Vietnam engaged in serious armed conflicts in Feb/Mar 1979, Vietnam never departed China’s orbit and influence.
JC Collins Vietnam will be unable to completely rid themselves of dirty dollars until the debt restructuring is completed through the SDRM process.
The SDR anchor for currencies and commodities is likely to happen at the same time. I can’t see how one currency or a group of currencies can be revalued without the whole system transition taking place first.
In regards to value, it’s difficult to say. I’m expecting that the traditional mechanics of an exchange rate system will no longer apply. Perhaps currencies will no longer be able to be exchanged directly for other currencies.
One currency will first have to be exchanged into SDR’s and then exchanged into the target currency. We could very well see cross border capital restrictions and a purchasing power parity structure.
When people discuss this much anticipated global currency reset they are filtering it through the traditional exchange rate structure. It will not work that way.
What the actual values and rates will be cannot be stated by anyone at this time. Perhaps a small handful of people know. A symbiosis of SDRM and the SDR exchange rate structure will work to determine a currencies real economic value.
I’m betting that Vietnam is going to come out strong on the economic indicators and low on the debt restructuring. We just need to be patient.
Bill Rattigan Thank you for your thought provoking work and observations.
You mention “Each area in the world where there is tension and unrest are areas where American dollar interests are attempting to maintain a foot hold or areas where those interests are being pushed out to make room for the multilateral reserve SDR.
Just who are the ones who have interest in keeping the dollar. Why not just bring in the SDR, as they control governments and everything else. Why must they bring these countries down to their knees. Regards. Bill…
JC Collin Bill, it’s a generalization to say that everyone is acting from the same script.
I use the phrase lots because it sets the correct impression. In reality the interrelationships between banking and industry are complex.
The end result is determined but how we get there or which banks and companies profit from which regions and markets are fluid events. Think of it like driving to work in the morning.
Everyone is going in the same direction but randomness and competition during the commute is very much a deciding factor on who gets there first. Hope this answers your question.
Bullion Baron (@BullionBaron) “Most of the readers here have already caught on to the fact that the IMF loan to Ukraine was paid in SDR as opposed to the traditional IMF loan denominated in dollars.”
I recalled reading that elsewhere recently, that it was a significant change (the payment to Ukraine in SDR): “The arrangement amounts to SDR 10.976 billion”
http://www.imf.org/external/np/sec/pr/2014/pr14189.htm
But when I dug back through the archives I found the wording had been used on other occasions, e.g. Greece in 2010:
“The Executive Board of the International Monetary Fund (IMF) today approved a three-year SDR 26.4 billion (€30 billion)”
http://www.imf.org/external/np/sec/pr/2010/pr10335.htm
In 2008 for Lativa:
“The Executive Board of the International Monetary Fund (IMF) today approved a 27-month SDR 1.52 billion (about €1.68 billion, or US$2.35 billion) Stand-By Arrangement for Latvia”
http://www.imf.org/external/np/sec/pr/2008/pr08345.htm
Turkey in 2006:
“The completion of the reviews will enable Turkey to draw immediately an amount equivalent to SDR 1.25 billion (about US$1.85 billion).”
http://www.imf.org/external/np/sec/pr/2006/pr06167.htm
So what is the significance for the Ukraine payment?
JC Collins The IMF loans are always listed in SDR’s but allocated in dollars, or sometimes euros, as SDR’s are only a claim on currency. Here is a more thorough IMF loan list:
http://www.imf.org/external/np/fin/tad/extarr11.aspx?memberKey1=ZZZZ&date1key=2020-02-28
The Ukraine converted the SDR loan into gold and into their currency reserves as opposed to holding dollars in their foreign currency account. This is a change from the norm.
deejj87 There is so much speculation about the dinar and dong revaluation rates when at the end of the day the rate doesn’t matter so much as what the value will be compared to what can be purchased (assets) afterwards.
The purchasing power of many currencies will change but at the end of the day it’s more about the value of a dollar/ dinar/ dong rather than a rate.
JC, when the US dollar experiences inflation (or devaluation) and thus each dollar purchases less, do you forsee the Canadian Dollar losing relatively the same ratio of value in order to continue exporting goods to the US or do you think there are enough foreign contracts to maintain the exporting of resources to countries other than the Us to maintain the purchaing power of the CAD?
Because the US is the largest importer of Canadian goods (not to mention over 50% of the CAD is backed by USD) Im thinking the CAD will lose purchasing power along with the USD in the near future while the value of the Mexican Peso increases…
All things being equal and pegged to the SDR. This will level out the playing field so to say and open up the North American Union among many treaties to regionalize the continent and essentially cement the dissolution of boarders in many ways
JC Collins I think we will see little change as America has already been experiencing increased inflation. Here are a few good links:
http://theeconomiccollapseblog.com/archives/are-you-ready-for-the-price-of-food-to-more-than-double-by-the-end-of-this-decade
http://theeconomiccollapseblog.com/archives/the-middle-class-in-canada-is-now-doing-better-than-the-middle-class-in-america-is
I would expect that Canada will do better with a more broad international diversification of exports.
Gustavsuare I am having trouble with that first sentence JC. If I hear you right you are saying much of the inflation (money printing) has already been accounted for with higher prices.
I see your best-case scenario for the US as something akin to the dollar devaluation in the 1970s. But that inflation was mitigated with the help of petrodollar recycling, aggressive rate hikes and a domestic manufacturing sector.
This time the US is losing the petrodollar, has exponentially more debt prohibiting another Volcker-type maneuver, and imports almost everything.
Even if much of that debt is (eventually) rolled into SDR, the US will be in an immediate sovereign debt crisis the moment the petrodollar ends.
Then government spending inflation can no longer be exported. They will certainly have to slash budgets but I don’t think it will be enough. This inflationary pain is something I see as part and parcel of the Hegelian Dialectic that is manifesting itself.
How do you reconcile a US dollar devaluation without massive inflation?
Also, Rickards mentions something interesting about the IMF printing trillions of SDR to bailout the next banking collapse causing hyperinflation in the US. Does this sound plausible to you?
JC Collins Yes, that does sound plausible. And your right, I’m expecting the best case scenario which is debt restructuring through the SDRM before there is a collapse. The alternative wold be horrible. I hope I’m right.
Andrew JC, you say that the May 20-21 Sino-Ruski announcement will put the final touches on the end of the USD’s reserve status, and I too believe this has the potential to be the first domino.
You then say in the comments that the best scenario is a debt restructure through the SDRM before the USD does collapse.
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This implies a fairly rapid SDRM action does it not?
What timeframe are you expecting the SDRM to occur? I guess it also depends on when people realize there is scant gold left in the US and so the gold shorting also stops, adding to the USD downward pressure. http://philosophyofmetrics.com/2014/05/16/the-america-dollar-is-dumping-vietnam/ |
