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Monday, March 23, 2015

Economics -- THE COMING WESTERN TRIBUNALS

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By JC Collins


Update:  The recent announcement by the Obama administration in regards to the AIIB does not mean America is suddenly joining that institution.  It would still require congressional approval, and considering the US Congress has refused to pass the 2010 IMF Reforms, which the Obama administration also supports, strongly suggests that any AIIB membership will also be refused. The Obama administration, as represented by US Treasury Secretary Jack Lew, last week called on congress again to pass the IMF reform package as America was losing influence in the world.  This reluctance by Congress is what was implied in the post below about America not being admitted into the AIIB, no matter what Obama wants.

The increasing isolation of Washington picked up speed this morning as it was announced by Christine Lagarde of the International Monetary Fund that cooperation with the new Asian Infrastructure Investment Bank will offer “massive room” for opportunity on infrastructure financing.


The AIIB, which was launched in October, 2014, is set with the objective of promoting road, rail, port, and other infrastructure construction projects in Asia, and around the world.  The establishment of the bank itself is being touted as a response to the failure of the administration in Washington to enact on supporting legislation to the IMF 2010 Quota and Governance Reforms.  These reforms were agreed upon by all members of the G20 as a response to the financial crisis of 2008, and as a means to give the emerging markets a more equitable representation in the existing international monetary system.

Initial funding for the AIIB was established at 36.3 billion SDR (considering the increasing emergence of the multilateral framework, we will no longer be stating amounts in the traditional USD method, no matter the denomination of issuance), and will grow to 72.6 billion SDR by the end of this year, if not sooner.

Considering the cooperation between the IMF and the AIIB, which has now been established, we can expect that the denomination of the actual loans made from the AIIB could very well be in SDR, as will the bonds issued from the BRICS New Development Bank, which will also be fully operational by the end of the year.  In the post The SDR Purpose of BRICS, we further explored this concept and how it will address the growing sovereign debt crisis in Europe, and elsewhere.

The SDR basket composition is being adjusted this year and will include the Chinese currency, with the possibility of other currencies as well.  The new basket will be effective on January 1, 2016.  This date aligns with the start of the New Development Bank and increased funding for the AIIB.

In a situation where the new multilateral institutions require funding before the implementation of the updated SDR composition, the yuan, or RMB, could provide the required liquidity on a temporary basis.  The role which the Special Drawing Right will play in the Sovereign Debt Restructuring Mechanism, SDRM, supports its rise to the position of global reserve unit of account.  As the reserve UoA, all multilateral financial interactions and trade mechanisms will have to be denominated in SDR.

Over the last few weeks membership in the AIIB has grown dramatically with the announcement by the United Kingdom, which was followed by similar announcements and intentions from Germany, France, Italy, Australia, New Zealand, Switzerland, India, Indonesia, and rumors of South Korea and Japan, with Japan being the final nail in the coffin of the USD hegemony which has been mandating financial and geopolitical policy on the world since 1944.

The United States is extremely unlikely to join the AIIB as the same congressional reluctance to pass IMF reform will ensure American rejection of this additional multilateral framework.  US participation in the emerging components of the Multilateral Financial System, MFS, will not happen until the desires of specific American industrial interests are no longer able to skew and unfairly influence the machinations and functioning of the system itself.

In a recent publication on the Council of Foreign Relations website, it was stated that the AIIB is a “challenge to the existing global economic order”.  This game play has been thoroughly explained in our SDR’s and the New Bretton Woods series, and among numerous other pieces over the last year.  The role of the United States is meant to be reduced as the MFS begins to emerge.  This period in time is much like the years between the two world wars, when use of the British pound was slowly being replaced by use of the USD.  By the time the official rise of the dollar as the reserve UoA was established at Bretton Woods in 1944, it was almost a foregone conclusion, much like the SDR today.

Many in the western world are still unable to accept this transition in monetary framework and reserve unit of account.  That is expected, as the British people also went through a similar process in the waning years of their once great empire.  Memories of the East India Trading Company and ocean supremacy eventually gave way to a subservient position to American hegemony.  The fact that the UK has just slipped away from that hegemony for the first time is very telling of the gravity and advancement of the multilateral transition.

The rest of the world is aware of the fundamentals at play in this transition, and America will slowly accept its acquiescence to the multilateral in the coming years.  The study of the cultural impact of this type of change on once hegemonic populations is worth further reflection.  The recent reduction in western corporation performance, such as with McDonald’s and other big chain stores, offer a potential starting place for this study.  Comparisons and benchmark cases between both Great Britain and America during these periods will offer immense information for future reference when the international community is faced with similar challenges in the decades to come.

The USD will continue as a reserve currency, much like the pound did, but not as the primary UoA. The dollar, while being reduced in the foreign reserve accounts around the world, will be re-engineered to fit into the MFS, and it’s weight in the SDR composition will be adjusted.  The dollar will not collapse, as I will review and explain in the upcoming ePublication titled Re-Engineering the Dollar. (I know many have been patiently waiting for this ebook, and I apologize for its delay, I’ve been extremely busy with work and another exciting upcoming project which is relevant and timely to our discussions here on the SDR and the multilateral framework.)

With the announcements of open relations between the IMF and both the AIIB and BRICS Development Bank, the existence of this multilateral transition can no longer be denied.  The Plan B initiatives, and “no good options” (for America) which were discussed last year in response to US Congressional failure to pass IMF reforms, is now happening real time.

Any new comers to Philosophy of Metrics would do well to review all the  material on the site in order to grasp the totality of the shift which is happening in the monetary architecture.  Most of what is currently happening internationally has already been reviewed and thoroughly discussed in the posts and comment sections.  To review all material in every new post would be futile and unreadable.

It is now time to accept the reality of this transition and begin preparing and planning for the financial realities which are now beginning to rise above the decaying framework of the USD system. There will be opportunities forthcoming for all, and these opportunities will initially create a balance in how the international monetary system works.  The coming exchange rate structure changes and re-balancing will offer opportunity for those who have the wherewithal and gumption to act on factual and realistic data.

Additional funding for the IMF, along with its functioning sublets, World Bank, AIIB and BRICS Development Bank, will come from the balancing of the exchange rate regime, and the honoring of vast amounts of sovereign debts in the form of historic bonds.  Plans are already in place for the allocation of this wealth through the establishment of foundations which will ensure effective infrastructure funding and development, as well as the cleanup of the world’s oceans and environment, themselves massive undertakings which will require even larger funding.

Advanced software has already been created and distributed to track and manage the large projects and financing of those projects which are set to spread across the world, beginning in the early part of next year. Corruption will not be tolerated. Those who wish to distract from this transition and take measures to prevent it are attempting to corrupt and /or manipulate the process for their own unfairly leveraged gain.

How long this new system can last before it also begins to self-corrupt will be determined by the acceptance of its primary mandates and machinations.  Populations around the world have, and continue to be, conditioned for functionality in the world of tomorrow.  Whether I agree with these programs and cultural engineering, through the CSI process which we have discussed many times, is somewhat irrelevant, as the changes are happening, and are upon us.  Those who wish to remain in the old word of USD corruption and imbalance will be the last to accept the changes.  Most will likely pass away in place of the acceptance of future generations.

Those who denounce socialism are the first to complain about what others have worked for, which amounts to indirect desires of socialism and collective sameness.  This contradictory perception is not meant to validate the corruption which has been built within the foundations of the existing monetary framework.  There have been those who have used the weakness in the current system for unfair leverage and gain.  The emerging multilateral has, and will continue, to address this corruption, or rent seeking, as the architecture comes clearer into focus.

Now that the international financial interests no longer need the American power which they helped create, the US military and financial power which dominated and manipulated the world for 70 years will be left to fend for itself.  Like previous empires and governments, they will be left holding the bag and responsibility for decades of war and genocide. The recent international condemnation of everything from the dropping of atomic bombs on Japan, to the massacres and fragmentation of borders and populations, as represented in the humanitarian disasters in the Middle East, Ukraine, Bosnia, Libya, Vietnam, Palestine, and many more, will be addressed with an international tribunal process.


There are those of us in the western world who have stood our ground on the wrongs that have been committed by America and it’s closes partners.  Many of us were ostracized from our friends and family for bringing attention to the lack of humanity which our governments represented. However, the coming western tribunals will ensure that the covert manipulators are once again never discovered.  America will be the new Napoleon and Hitler.  Once again human weakness has been appropriated by the international financial interests which have directed empires of the past.  We need to maintain these lessons as we move into the world of tomorrow, and all the opportunities which it brings with it, for human weakness and deficiency will again be bartered for the well-being of humanity.  Propensity to corrupt is the only constant which can be measured from time period to time period, no matter how well the multilateral is structured.  Humans will find a way.  – JC
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