The Death of Cash and the Birth of a “World Currency”

We are in the biggest market bubble in human history. When it pops, people will panic and demand that politicians do something. This will be the perfect opportunity for the globalists to finalize their pet project: a global central bank that issues a global currency.

BY THE INTERNATIONAL CHRONICLES AND ALEXANDER ACKLEY R. A.

It was perhaps The Economist’s most bizarre issue to date…

In January 1988, the magazine published a feature article titled “Get Ready for a World Currency.”

The article called for countries to give up their monetary sovereignty in favor of a world central bank, which would issue a new global currency. It suggested the name “phoenix” for the currency.

The article recognized that most governments wouldn’t participate under normal circumstances. It claimed it would take a crisis.

The 31-year-old article concluded with a prediction:

Pencil in the phoenix for around 2018, and welcome it when it comes.

Now, 2018 has come and gone. But the prospect of a global financial crisis ushering in a world central bank and a new global currency is increasingly plausible.

This is bad news for the U.S. dollar. That’s because the magnitude of a crisis is directly related to the amount of malinvestment getting flushed from the economy.

In other words, the bigger the boom, the bigger the bust.

And right now, there is an unprecedented amount of malinvestment waiting to be flushed, thanks to seven years of 0% interest rates and the $3.7 trillion the Fed “printed” after the 2008 financial crisis.

The Fed inflated the housing bubble with about two years of 1% interest rates. So it’s hard to fathom how much it distorted the economy with seven years of 0% interest rates.

The Fed ended up creating not just a housing bubble, or a tech bubble, or a bond bubble, but an “everything bubble.”

It’s the biggest bubble in human history.

When it pops, people will panic and demand that politicians do something.

This will be the perfect opportunity for the globalists to finalize their pet project: a global central bank that issues a global currency.

In that sense, The Economist’s 2018 prediction may end up close to the mark.

You see, The Economist’s global central bank and the phoenix currency were code names…

“Global central bank” and “international currency” referred to the International Monetary Fund (IMF) and the international currency it issues, known as the “Special Drawing Right” (SDR).

The IMF describes itself as an:
organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The IMF is the quintessential globalist institution. Pretty much every country in the world is a member, save for Cuba, North Korea, and a few others.

The SDR, meanwhile, is simply a basket of other leading fiat currencies. The U.S. dollar currently makes up 42%, the euro 31%, the Chinese renminbi 11%, the Japanese yen 8%, and the British pound 8%.

In other words, the SDR is a fiat currency based on other fiat currencies – a floating abstraction based on other floating abstractions.

For decades, the IMF has been using crises to build the SDR into a global currency…

Today, there are about 204 billion SDRs in existence. They’re worth about $285 billion, or about $1.39 per SDR.

In the past, the IMF hasn’t created SDRs at regular intervals. Instead, it’s created several increasingly larger tranches during or just after global financial crises.

As you can see in the chart below, the IMF created SDRs in bulk in 1972, 1981, and 2009. These were all periods of severe financial stress.

The IMF increased the supply of SDRs by almost 10 times in response to the 2008-2009 financial crisis. This was a huge incremental step towards establishing the IMF as a global central bank and the SDR as a global currency.

There’s a clear pattern here. No doubt, the IMF will use the next crisis – which promises to be even bigger than the last – to increase its prominence and that of the SDR.

As you might imagine, the average citizen can’t use SDRs…

Your neighbors don’t have any in their wallets. And that isn’t going to change.

Instead, SDRs are primarily used by governments and supranational organizations like the UN, IMF, and World Bank.

SDRs are dangerous. They give the government – in this case, a global government – more power. They’re a bridge to a powerful global monetary authority, and eventually a global currency.

At some point, they’ll also likely be used to price major commodities like oil and gold, and possibly be the reporting currency for major multinational companies. Airlines already use them to denominate some of their liabilities.

Many global elites – the types that gather in Davos, Bilderberg, etc. – are huge fans of the SDR.

Mohamed El-Erian, former CEO of PIMCO, is a huge advocate of the SDR. The infamous George Soros is also a big fan.

Expect to see the SDR used in more and more places as the globalists accelerate their push for it.

For now, the U.S. dollar is still the world’s premier reserve currency…

That’s why people and businesses everywhere in the world take U.S. dollars. For decades, they’ve had little choice about it.

Today, the biggest U.S. exports are dollars and government debt. The U.S. government can create unlimited quantities of both from nothing.

It requires no effort to “print” U.S. dollars, which can be exchanged for real things like French wine, Italian cars, electronics from Korea, or Chinese manufactured goods.

This creates an almost unlimited demand for U.S. dollars. And that helps keep price inflation in the U.S. much lower than it would otherwise be.

It’s hard to overstate how much this unique setup benefits the U.S. It’s the bedrock of the U.S. financial system.

The French have deemed it an “exorbitant privilege.”

The SDR is bad for the U.S. dollar…

If the globalists get their way, the dollar would no longer be the world’s premier reserve currency. The SDR would. And the IMF, not the U.S., would reap the enormous benefits of the “exorbitant privilege.”

In other words, the U.S. dollar would become merely a local currency, like the Canadian dollar or the Mexican peso.

Losing the exorbitant privilege – and all the artificial demand it creates – would mean massive price inflation for those holding U.S. dollars. And there’s pretty much nothing Americans can do about it.

As I mentioned earlier, the IMF has used past financial crises to bolster its prominence and that of the SDR. Now, we’re headed for a financial crisis of historic proportions as the “everything bubble” blows up under Trump’s watch.

Frankly, the next crisis is going to be the Big One. And I’m certain the IMF and the globalists will use it to advance their agenda.

Cash will die

Let’s face it, many forces are pushing for the abolition of – or at least serious restrictions on – cash.

Many businesses hate cash, because cash transactions take longer to process, and large quantities of cash pose a security risk. If you travel by air, you’ve experienced this first-hand. “Cashless cabins” are the rule for most airlines. You must purchase every glass of wine, cheese dip, or package of mixed nuts with a credit or debit card.

In Atlanta, you can’t even buy a hot dog at a pro football or soccer game with cash. In March, the operators of Mercedes-Benz Stadium, home of the Atlanta Falcons and Atlanta United, announced it would no longer accept cash at food and beverage concession stands.

Credit card companies hate cash too. And for obvious reasons – they get a cut of every purchase through the fees they charge businesses. So it’s no surprise that in 2017, Visa announced its “Cashless Challenge” and gave $10,000 to 50 small businesses that stopped accepting cash payments.

Big brother hates cash, too. For decades, governments around the globe have engaged in a War on Cash. The original justification for this war was to fight racketeering. The War on Cash then morphed into the War on Drugs, the War on Money Laundering, and subsequently, the War on Terror.

Numerous countries have placed severe limits on how much cash you can spend at one time.

Spain and France have banned cash transactions over €1,000. If you want to spend more than that, you must use a debit card, credit card, a non-transferrable check, or pay by bank transfer. In Italy, where the cash limit is €3,000, violations are punished by confiscation of up to 40% of the amount paid. In Spain, you lose “only” 25% of your cash if you violate the rules. Similar restrictions are in place in most EU countries. Later this year, Australia will ban cash transactions larger than AU$10,000 (about US$7,500).

The most ambitious effort to restrict the use of cash, though, has been in India. In 2016, the national government made 86% of the country’s cash worthless with the stroke of a pen by withdrawing all 500- and 1000-rupee notes from circulation.

The transition was anything but smooth. Tens of millions of Indian citizens without bank accounts found themselves unable to pay for daily necessities. Dozens of them died.

At the same time, it’s getting harder to get access to cash. In Sweden, hundreds of ATMs have been removed, forcing individuals who need cash to drive for miles to find one.

Some economists want to abolish cash. Harvard Professor Kenneth Rogoff argues that we need to rid the world of cash so the world’s central banks can more easily “go negative” (i.e. impose negative interest rates on savers). This initiative, he argues, would go a long way toward propping up the global economy in the event of a serious recession.

And Citigroup Chief Economist Willem Buiter made headlines in 2015 when he proposed abolishing cash to allow banks to impose negative interest rates. He suggested imposing negative annual interest rates as low as -6% in financial crises, to force banks to lend and consumers to spend.

In a cashless world with negative interest rates, governments would effectively flush out any hidden or saved wealth. You can’t save money, because negative interest rates mean you’re paying the bank. You can’t withdraw it or keep it under a mattress, because that’s impossible when there is no such thing as cash.

And don’t forget that the “bail-in” model applies to bank deposits worldwide. If a bank goes bust, depositors must share in the losses.

Not to mention what might happen if hackers succeed in infiltrating the global payments system and shut it down. Without cash, the global economy would quickly grind to a halt.

But cash isn’t dead yet. A study released in February showed that the volume of $100 bills circulating has actually doubled in the last decade. Nearly 80% of these $100s are held outside the US. While proponents of the War on Cash point to the increase as proof that large-denomination bills are tied to crime, there are equally valid reasons someone outside the US might want to keep a stash of $100s on hand. One is to avoid negative interest rates on bank deposits. Another is as a store of value in countries like Venezuela, where it takes a wheelbarrow full of the official currency to buy a loaf of bread. And many people prefer cash because the databases merchants keep of your card transactions aren’t exactly secure.

There’s also pushback on efforts by merchants to stop taking cash, spurred by the fact that cash bans disproportionately affect the poor and anyone who is “unbanked” (unable or unwilling to open a bank account). That’s more common than you might think; nearly 7% of American households rely exclusively on cash and money orders to pay the bills.

In March, New Jersey banned cashless stores. Philadelphia also passed an ordinance last month which forbids most stores from refusing to accept cash payments. Officials in Chicago, Washington, D.C., New York City, and San Francisco are debating similar measures to require merchants to accept cash payments.

Other countries have also moved to protect the right of consumers to use cash. No less an authority than the Governor of the French Central Bank announced that “The Banque de France will never drop cash.” Sweden, which has perhaps gone further than any other country to discourage the use of cash, is now considering a law which would require banks to process cash transactions. The UK is debating similar measures.

While these initiatives to protect the right of individuals to use cash are noteworthy, they’re not necessarily the last word. I suspect we’ll learn how resilient cash is during the next global economic collapse. When that happens, central banks will almost certainly “go negative.” And if consumers resist these efforts by hoarding cash, additional restrictions or outright bans on cash could quickly follow.

To defend against such measures, here are some actions you’ll want to consider:

  • Withdraw excess cash from your bank accounts and keep it in a safe place. Document the withdrawals so that you can prove the origin of the cash in the event of an India-style currency recall. Keep in mind that if you withdraw more than $10,000 at a time from a US account, the bank must file a “Currency Transaction Report” with the Treasury Department. It’s also a felony to “structure” your cash withdrawals to avoid hitting the $10,000 limit.
  • Convert a portion of your assets to gold. Store the gold securely at home or in a non-bank depository. If you have more than $100,000 of gold, consider keeping a portion of it in a private vault in another country.
  • Keep your bank-held assets in ultra-strong banks. This will help you avoid becoming a victim of the coming bail-ins.
  • Consider cryptocurrency. Cryptocurrencies could eventually render banks obsolete. It’s worth keeping some of your savings in bitcoin and other cryptos.
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