LSE’s Lord Desai Warns: Gold-Backed SDR Is Quite Likely To Happen
Tyler Durden: As many are increasingly coming to terms with the ‘obvious failure of fiat currency’, the inevitable question arises “what next?” Earlier this year, we discussed the possibility of a Chinese- or Russian-currency backed by gold, amid the increasing calls (domestically and abroad) for an end to USD Reserve hegemony; but this weekend, as Bloomberg reports, Lord Meghnad Desai, chairman of The Official Monetary and Financial Institutions Forum, stated that IMF Special Drawing Rights (SDR) should contain some gold to help stabilize the currency.
As Bloomberg reports,
“A bit of gold” could help stabilize SDRs, Lord Meghnad Desai, chairman of Official Monetary and Financial Institutions Forum, says at precious metals conference in Dubai.
“We could ask that gold be nominated as part of the SDR. That is one thing I think is quite likely to happen”
This will be easier if China increases its official gold holdings.
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This is not the first time such a suggestion has been made…(as JC Collins of PhilosophyOfMetrics.com detailed)
The Coming SDR Gold Standard
Sometimes what at first appears to be conflicting information is anything but, and what was originally considered to be opposing forces or ideals can quickly become unified for the greater good.
There has been much discussion and division over whether the world was moving towards a multilateral super-sovereign reserve currency by way of the Special Drawing Right of the International Monetary Fund or towards a new gold standard by which all currencies would be valued once again on gold.
Positions have taken up defense on both sides and all waited to see which side was going to be right. Were the BRICS countries going to overthrow the western banking cabal? Was the US dollar going to inflate into oblivion? Was the SDR going to become the new reserve currency? Was a new gold standard going to be implemented instead?
So many questions with no clear outline or determinations on what exactly was going to happen.
I have contested all along that the SDR was going to become the super-sovereign reserve currency of the emerging multilateral financial system. The supporters of a new gold standard have found this idea unworkable because gold is considered to be the only method of creating stability within the larger architecture of the global financial system.
But what if everyone is right? Or more correctly, what if all the obvious points and leverage of each potential system can be utilized to create the larger macro stability from which the multilateral will inevitably emerge?
In the post Renminbi is Already a De Facto Reserve Currency, I discussed how the Chinese currency was being internationalized and would be added to the SDR basket valuation.
This basket is currently made up of four currencies, being the US dollar, the Japanese yen, the Euro, and the British pound. Adding the renminbi to the basket is both important and necessary for any changes to the global financial architecture.
But this theory has never accounted for the importance obviously placed on gold and the manipulation and mass movement of the precious metal which has taken place over the last few years.
No doubt the gold moving east has a lot to due with balancing old sovereign bond debts and building up reserves to support the renminbi denominated contracts which have just begun at the Shanghai Gold Exchange.
But this doesn’t fully explain the demand by other countries for gold, such as Russia and India, or even Germany demanding its gold back from the United States.
But nether does a gold standard fit the facts as all participating countries and economies have stated in official publications and speeches that a new gold standard is unworkable and the SDR provided the best opportunity moving forward to balance the financial structure of the world.
In posts such as:
I have attempted to explain and describe how the BRICS countries are aligned with the larger macro mandates of the SDR multilateral system and do not plan on overthrowing the western banks. It is in fact a situation where the western and eastern banks are all controlled by the Bank for International Settlements.
It is interesting that over the last few days even certain conspiracy theorists which have been promoting the overthrow of the western banking cabal are now stating that the BIS and its central bank system will remain.