Abridged from the December "Monthly Market Commentary" at GordonTLong.com
Since Bretton Woods and the creation of post WWII Monetary structure, US obligations were considered risk free and its debt instruments rated as AAA. Global risk and spreads have traditionally been priced off this foundation. A crippled dollar and US debt worries has the potential to trigger a global credit melt down. The 2008 financial crisis with Bear Stearns and Lehman gave us just an inkling of the magnitude of the problem.
This is forcing a game of Risk Free Counterfeiting to now be played out. It will end, and end badly. However, at the present time it is considered the only politically palatable solution.
This has forced the Bank of International Settlements (BIS) to facilitate what can only be called a Currency Cartel to alleviate the daunting global pressures which the eroding need for US dollars is causing. As the Central Bankers' Central Bank, the BIS exercises control over the settlement of the balance of payments and the problems stemming from growing global imbalances.
Effectively, what appears to have emerged is a forced alliance between fiat currency based regimes, to protect themselves and sustain the faulty system that emerged from post WWII Bretton Woods. When the US jettisoned its obligations, and in August of 1971 took itself off the gold standard, the US effectively defaulted on its obligations as the world reserve currency. Since then it has been primarily the 'good faith and credit' of the US, that has sustained an acknowledged failed and broken system. The current US Fiscal Cliff machinations only bring to the fore the seriousness of any longer considering the US as "Risk Free" and being a realist foundation for a sound and sustainable global currency reserve. As true as this is, it is not going to change as long as the status quo can be protected, and protected it must be!
Similar to the OPEC Oil Cartel protecting the price of 'black' gold, we now have a Currency Cartel protecting the US dollar, and more specifically, the fiat currency system which they all are inextricably tied to. It is the basis for their collusion.
The Currency Cartel is effectively Colluding to Counterfeit "Risk Free".
The US Council on Foreign Relations aptly described why a concept called the "Triffin Paradox" (we will discuss in more detail) becomes unsustainable:
"To supply the world's risk-free asset, the center country (US) must run a current account deficit and in doing so become ever more indebted to foreigners, until the risk-free asset that it issues ceases to be risk free. Precisely because the world is happy to have a dependable asset to hold as a store of value, it will buy so much of that asset that its issuer will become unsustainably burdened."
We have reached the point where the Currency Cartel and the $67T Shadow Banking System (monitored, but not supervised by the Financial Stability Board (FSB)) is the only thing standing between us and a violent Fiat Currency Collapse.
Cartel Board Meetings
Place & Time: Bank of International Settlements (BIS), Basel Switzerland Monthly, Sunday Evening Supper
Ben Bernanke (US-Federal Reserve)
William C Dudley, (New York Fed)
Mervyn King (UK - BOE)
Mario Draghi (EU-ECB)
Jens Weidmann (Bundesbank)
(Japan - BOJ)
Mark Carney, (Chair FSB)
Continue reading: http://www.safehaven.com/article/28095/currency-cartel-counterfeiti...