2009/5/8 [ The_Draconia_Chronicles ] <autodelete66@yahoo.com>
http://www.leap2020.eu/geab-n-34-is-available!-summer-2009-the-international-monetary-system-s-breakdown-is-underway_a3129.htmlGEAB N°34 is available! Summer 2009:
The international monetary system's breakdown is underway
The next stage of the crisis will result from a Chinese dream.Indeed, what on earth can China be dreaming of, caught– if we listen to Washington – in the "dollar trap"of its 1,400-billion worth of USD-denominated debt (1)?If we believe US leaders and their scores of media experts, China is onlydreaming of remaining a prisoner, and even of intensifying the severityof its prison conditions by buying always more US T-Bonds and Dollars (2).
In fact, everyone knows what prisoners dream of?They dream of escaping of course, of getting out of prison.LEAP/E2020 has therefore no doubt that Beijing is now (3)constantly striving to find the means of disposing of, as early as possible,the mountain of « toxic » assets which US Treasuries and Dollars havebecome, keeping the wealth of 1,300 billion Chinese citizens (4) prisoner.In this issue of the GEAB (N°34),our team describes the "tunnels and galleries"Beijing has secretively begun to dig in the global financialand economic system in order to escape the « dollar trap »by the end of summer 2009.Once the US has defaulted on its debt, it will be time for the« everyman for himself » rule to prevail in the international system,in line with the final statement of the London G20 Summit which readsas a « chronicle of a geopolitical dislocation », as explainedby LEAP/E2020 in this issue of the Global Europe Anticipation Bulletin.
Quarterly Chinese foreign exchange reserves growth -Source: People's Bank of China / New York Times, 04/2009Behind London's « fools' game », where everyone pretended to believethat an event of « historical » international co-operation (5) took place,the G20 summit in fact revealed major divisions. The Americansand British (followed by a compliant Japan) desperately tried to preservetheir capacity to maintain control over the global financial system, freezingor diluting any significant reform granting more power to the other players,but in fact no longer powerful enough to enforce their aims.The Chinese, Russians, Indians, Brazilians,… strove to change the balanceof the international monetary and financial system in their favour,but were unable (or maybe, deep down, unwilling (6)) to impose their reforms.The Europeans (the EU without the United Kingdom) proved incapableof making up their minds between the only two options available:duplicating US and UK policies and sinking along with them,or questioning the very roots of the current monetary and financial systemin partnership with the Chinese, the Russians, the Indians and the Brazilians.Today the Europeans have avoided following Washington and Londonin their endless reproduction of failed past policies (7),but they do not yet dare to prepare for the future.
The ongoing collapse of world trade growthcannot be explained by past relationships– Quarterly growth rates annualized - Source: OECD, March 2009The Europeans can be held accountable if, in the remaining small windowof opportunity (less than 6 months now), they fail to undertakethe necessary steps to avoid a 10 year-long tragic crisis (8).Indeed they have the technical know-how that can help to createan international currency based on a basket of the world's mostimportant currencies, and they know which political approach is requiredto best combine the various strategic interests of a group of countrieswhose currencies would comprise the new international reserve currency.Unfortunately, EU leaders (namely Eurozone ones) clearly seem unableto face their responsibilities today, as if they preferred to let the Westernsystem break down (though claiming the contrary) rather than fightto turn it into a bridge leading to a new global system.It may be a choice (LEAP/E2020 does not believe so); it may also bethe result of the pusillanimity of EU leaders selected on the basisof their docility (vis-à-vis Washington and major European financialand economic players). In any event, this neutrality is dangerousfor the world because it prevents the launch of an effective processto avoid a decade-long tragic crisis to unwind (9).
In this issue of the GEAB, our researchers anticipate the different formsa US default will take at the end of summer 2009, a US defaultwhich can no longer be concealed concealable from this April(most taxes are collected in April in the US) onward (10).The perspective of a US default this summer is becoming cleareras public debt is now completely out of control with skyrocketing expenses(+41%) and collapsing tax revenues (-28%), as LEAP/E2020 anticipatedmore than a year ago. In March 2009 alone, the federal deficithas nearly reached USD 200-billion (way above the most pessimistic forecasts),i.e. a little less than half of the deficit recorded for the entire year 2008(a record high year) (11).The same trend can be observed at every level of the country'spublic organisation: federal state, federated states (12), counties, towns (13),everywhere tax revenues are vanishing, suffocating the whole countrywith spiraling debts that no one can control anymore (not even Washington).
US tax receipts on corporate income (1930 – 2009) - Sources:US Department of Commerce / Saint Louis Federal Reserve(Q2-Q3 2009 projection by EconomicEdge)In this issue of the GEAB (N°34), our researchers focus on how to explainthe « mystery of gold price ». Indeed, our seekers (of information, not gold)identified a number of interesting leads to understand why (14)the price of gold has been fluctuating around the same level for monthswhen the number of gold buyers is constantly increasing and demandfor coins and bars far exceeds available supply in many countries.
Finally, our team gives recommendations on how to prepare for the crisisin the coming months, with particular regard to savings and life-insurance.
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Notes:
(1) Total Chinese foreign exchange reserves amount to USD 2,000-billion,of which USD-denominated assets are 70 percent maximum,equal to USD 1,400 billion. The remaining 30 percentmainly consists of EUR-denominated assets.
(2) Most of the time, the same « experts » predicted that global economywould benefit from banking deregulation, that the Internet economywas opening up an era of endless growth, that US deficits were a signof strength, that US house prices would always go up,and that taking on debt was the modern way to get rich.
(3) The message on the necessity to switch international reserve currency,sent out by Beijing to the world – to US authorities in particular–, on the eve of London's G20 Summit, was not intended to merely testthe waters nor was it some vague attempt with no hope of success.The Chinese leaders had no illusion on the chances for this topicto be actually addressed in the G20 Summit, but they wanted itto be discussed in the backrooms, because they wanted to sendan unofficial signal to all the players of the international monetary system:in Beijing's mind,the Dollar system is over!If no one wishes to prepare for a common alternative system,the alternative system will be built some other way, knowing thatthe actions the Chinese are currently taking corroborate this intention.For instance, precisely these days (random political schedule is rare in Beijing)a book is being published, entitled « Unhappy China », arguing that Chineseleaders should stand up and impose their choices on the international arena.Source: ChinaDailyBBS, 03/27/2009
(4) This link gives the figures to the last cent: ChineInformation.
(5) Angela Merkel was closest to the truth about the G20 summitwhen she called it « an almost historical event ».The word "almost" is emblematic of what happened in London: the G20leaders "almost" created a framework for a joint action programme,they "almost" launched new stimulus plans and new international financial rules,they "almost" banned tax-havens, andthey "almost" convinced everyone that it would happen."Almost" but not "really", will make a big difference for the next stages of the crisis.
(6) In the previous issue of the GEAB (N°33), our team explained this dilemmafor the "international system" today. At some point, it is in the interestsof new players to simply wait for the current system to break downin order to build a new one, rather than strive to reform it,and suffer a long period of uncertainty.
(7) In particular, outrageous government borrowing- also called « economic stimulus » in Washington and London.
(8) The decisions taken at London's G20 summit directly contributeto the long-term crisis scenario.
(9) As regards the EU, LEAP/E2020 emphasizes the inanityof all those economic and political « analyses », producedby leading economists and experts close to the American Democrats,and circulated by all the largest international mainstream media,blaming the Europeans for not following in Washington's footsteps.Paul Krugman in mind for instance, these « very good friends » of Europe,who like it so much that they think they know better than Europewhat is best for it (and what it should become, as indeed the same expertsusually advocate its extension to Turkey, see Israel and Central Asia),whereas they would be best giving some quality advice to their own partyand their new President to prevent their own country from collapsing,as this is what is really at stake today.It is beyond belief that a panel of experts, who, in all these years,sang the praises of a system which is today collapsing under everyone's nose,still dares give lessons to the rest of the world.Basis decency suggests only one course of conduct worldwide: silence.In Europe, this position, despite the fact that it still enjoysits usual academic and media support, is too outdated to be accepted.LEAP/E2020 believes it is necessary and legitimate to cast a critical eyeon the EU, its leaders and its policies; but doing so on the sole criteriaof its conformity or otherwise with Washington's (or London's)stance is no longer acceptable. In the same way as financiers andbusiness leaders obviously failed to understand that times had changedregarding their stock-options and "golden parachutes",a number of intellectuals and politicians have not yet fully understoodthat their points of reference, values and theories now belong to the past.They should think of the elites of the Soviet bloc and they wouldunderstand how and how fast a thought system can become obsolete.
(10) Besides collapsing tax revenues, a protest movement has startedin the US against using taxes to save Wall Street and against further deficits,blaming the country's entire leading class.Sources: USAToday, 04/13/2009; MarketWatch, 04/16/2009
(11) Sources: USAToday, 04/11/2009; MarketWatch, 04/10/2009
(12) In California for instance, the first days of April suggested revenuesfar lesser than the worse forecasts, likely to result in multiplyingtwo-fold California's debt anticipated a few months ago.A similar trend is under way at the federal level, making it possibleto imagine that the annual federal deficit reaches above USD 3,500 billion,i.e. 20 percent of US GDP. Source : CaliforniaCapitol, 04/08/2009
(13) Some towns, like Auburn near Seattle for instance, are compelledto ban trucks from their major freight routes by lack of maintenancefinancial means. Source: SeattleBusinessJournal, 04/10/2009
(14)Thus enabling to anticipate upcoming trends.
Vendredi 17 Avril 2009
In the same category:
Thirteen questions and answers about the future developments of the global systemic crisis (1st episode) - 08/04/2009
Traffic Info LEAP/E2020 - May 2008 - 12/05/2008
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