Page 22 - May-June 2018 GSE Report Flip Book

MONETARY POLICY MJAAYNU- AJRUYNE20210818
A true global monetary reset (GMR) occurs more like every thirty to forty years. There were only three GMRs in the twentieth century: 1914, 1944 and 1971. The 1914 GMR
was when nations abandoned gold to fight the First World War. The 1944 GMR was when nations returned to a gold standard at the Bretton Woods conference. The 1971 GMR was when the U.S. abandoned the Bretton Woods gold standard and the world moved to fiat currencies and floating exchange rates.
There have been no GMRs in the twenty-first century so far. Taking the tempo of three GMRs in the 105-year period beginning in 1914 gives an average of one GMR every thirty- five years. It has been forty-seven years since the last one. Using those statistics alone, it is not a stretch to say that the world is overdue for the next GMR.
To argue that no GMR is in the cards is to argue that somehow the global elites have achieved a permanent state of monetary nirvana. Nothing could be further from the truth. The international monetary system today is a patchwork of floating exchange rates, hard pegs, dirty pegs, currency wars, open and closed capital accounts, with world money waiting in the wings. It has no anchor. It is incoherent.
By “incoherent,” ...there was no anchor for the system, no universally agreed reference point or metric by which to judge currency values. You can judge every currency in relation to another currency, but there’s no way to judge any currency by an objective standard under current rules.
... What my conversations with the global monetary elites have revealed is that while institutions like the Treasury, Fed and IMF may be powerful on paper, they are often dysfunctional and slow in practice. None of the leaders I spoke with, nor others I have followed, see the GMR coming. They share the view of David Dollar that the U.S. dollar will be the global reserve currency indefinitely and that no changes in the architecture of the international monetary system are expected.
As a result, when the GMR does happen we will be able to look back and say that no one saw it coming, at least among the elites. At the height of the storm it is likely that no one will really be in charge. The solutions that evolve are therefore far more likely to be ad hoc and temporary rather than thoughtful and long-lasting. The future does not hold a new Bretton Woods. A new Panic of 2008, but much worse is far more likely.
The catalysts for this new panic or loss of confidence in the U.S. dollar are all around us. Prime suspects include:
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