I was talking to a currency trader, Thursday on the train going home. He knows I’m a business editor at a large paper in New York City.
He was telling me how Fx traders were not taking any positions after the end of this year. How the markets were constricting and said it was a huge problem and perhaps a bigger story.
I asked why? Was there a global currency coming or perhaps a reset?
All he could tell me as we got off the train was that I should look into it.
I researched over the weekend, and could not come up with anything. Now admittedly, I don’t usually look that deep into the currency trading world. It’s a closed community that’s not very transparent or accessible.
However this morning I did see that James Rickards, author of “Currency War,” among other titles and cited here before, put out an open letter to President Trump warning him of problems in the US dollar.
The nutshell of the letter is that beginning Jan. 2018 the International Monetary Fund — using blockchain technology, which is the same technology that bitcoin and other cryptocurrencies use, will be issuing Special Drawing Rights (SDR) as a new world currency to replace the dollar.
Now I find his letter highly doubtful given the quick timing of implementation, however I have this currency trader from Deutsche Bank telling me there are problems in the Fx markets, prior to the paper being published.
So I have two sources essentially saying the same thing.
Rickards does cite white papers and statements from IMF chief Christine Lagarde talking about SDRs and certainly Rickards has a long history of talking up the SDR as a world currency, replacing the dollar.
So what does this mean in the big picture? Rickards writes:
Just look what happened the last time we had a big change in our global financial system. In 1971, Nixon announced the U.S. would no longer officially trade dollars for gold. That created a lot of uncertainties, turning that decade into a nightmare for stock investors.
Take a look… the Dow Jones, an index of “stable” blue chip stocks (the kind most retirees like to hold), was cut in half. Stock investors bailed out of the market and, for the most part, didn’t come back for a decade.
I expect something similar once Distributed Ledgers go live.
The transition from a U.S. dollar system to a new system dominated by SDRs will be messy. Stocks will collapse… and will stay down.
There will be no recovery this time, because the U.S. government won’t be able to come to the rescue like they did in 2008.
You [President Trump] won’t even have funding for normal operations, let alone enough funds to save stock investors.
There has been a plenty of selling of the dollar recently, but that’s against other currencies like the euro and pound, If the IMF’s plan is true those currencies would also be devalued, so that is not a good indication of the plan.
Unless you figure in a currency trading scenario where the 800-lbs gorilla is the dollar and it is weakened, then all other currencies in the world will gain.
If crude can be traded in any currency, then there is big trouble in not only the currency market — a small backwater trading operation — but Treasury trading will implode.
That’s where Rickard’s nightmare scenario comes to fruition.
9-11-01: Never Forget