What do your connections in high finance tell you?

JulieW

JulieW

Well-Known Member
Silver Stacker
Daily Reckoning:
To give you an idea, Reuters reported back in August that elite British boarding school Eton College borrowed 45 million pounds.

They locked in a fixed interest rate of 3.63% for 45 years.

It was the school's first private debt placement in 575 years of history.
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That tells me they expect interest rates to go above 3.63% sometime in the next 45 years. Tell'em they're dreaming.
 
What do they plan to do with 45 million pounds? Might give us a clue as to where we should invest?
 
GoldenEye said:
What do they plan to do with 45 million pounds? Might give us a clue as to where we should invest?
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They reckon they can make a higher rate of return than it is paying in interest. Half of it slated for investment firm Partners Capital, which already manages part of Eton's endowment fund and has delivered annual returns above 3.63 percent in the past. Keen to take advantage of historically low interest rates too. Also building new facilities and funding scholarships for "less privileged" students.

Bursar Janet Walker said: 'Of course like any financial plan it may all go horribly awry but I suppose it looks like a good bet.'

Daily Mail
 
JulieW said:
So the elite say borrow and invest?
:)
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Yes, but the whole world seems to be making the most of cheap money and my contrarian side is saying all this debt could be a problem in future. :|
 
Jim Rickards connections say this according to the Daily Reckoning. Worth a subscription - and free:
http://www.dailyreckoning.com.au/subscribe-dr/

The Truth: The US Dollar Will Not Be Overthrown in October
Jim Rickards, Strategist, Strategic Intelligence

Blogs, newsletters, and inboxes are cluttered with dire warnings about an event coming in October 2015.

This event will supposedly overthrow the US dollar as the global reserve currency and spark a meltdown of the international financial system.

Nothing of the kind is about to happen. Important and significant dealings are happening behind the scenes in the international monetary system. Global elites are meeting in Washington, Beijing, and Lima, Peru.

They are making decisions that will impact global capital markets in the years to come. There is a plan underway to solve the global debt problem by stealing your money through inflation. But elites do not operate on the 'big bang' theory.

They do not announce radical changes overnight. They prefer to make small moves, year after year, through boring technical changes that few notice or understand.

The elites have a plan to take your money. Yet they prefer a slow orderly approach, as opposed to a rapid disorderly approach. Here is a step-by-step walkthrough of what is really happening.

The October scare tactics should not frighten you. However, you should be concerned about this long term elite plan to destroy your wealth.

The centrepiece of the elite plan to wipe out debt and destroy wealth is the world money issued by the International Monetary Fund, the IMF.

This world money is called the special drawing right, or SDR. The SDR is actually not that complicated. The US Federal Reserve can print dollars, the European Central Bank (ECB) can print euros and the IMF can print SDRs it's that simple.

The main difference is that we can keep dollars or euros in our bank accounts or wallets, but SDRs are for countries only. The IMF adds them to national reserves.

Countries can swap SDRs for dollars, euros, yen or other major currencies using a secret trading facility inside the IMF in Washington. So the inflationary potential of printing trillions of SDRs is the same as printing trillions of dollars or euros once the recipients make the swap.

The main difference between SDRs and dollars or euros is that no one is accountable. When the IMF floods the world with SDRs, you won't be able to blame the Fed or ECB. Few people will have any idea what's happening.

They'll just find out the hard way that inflation has wiped out their savings.

That's the background for SDRs. But there's a chronology of coming events. As events unfold, you'll be able to see them in the proper sequence and perspective. Two of these events have already occurred.

Here's the calendar:

17 September 2015 The Fed's Open Markets Committee announces policy changes in interest rates
September 2015 President Xi of China visits the White House
9 October 2015 IMF annual meeting in Lima, Peru
November 2015 (exact date TBA) IMF Executive Board discusses 'new' SDR
30 September 2016 New SDR goes into effect

As expected, the Fed didn't raise rates at the September meeting.

The visit from President Xi was important. Chinese official want the yuan to be included in the SDR basket.

By itself, including the yuan in the SDR basket will not disrupt the international monetary system and will not overthrow the dollar as the leading global reserve currency. But it is an important sign of respect and does represent enhanced prestige, which China desperately wants.

The US has veto power over the IMF's decision to include the yuan in the SDR. The US has used its clout to put China on its best behaviour before the IMF makes the decision. This means China has to put an end to its currency war with the US and peg the yuan to the dollar.

However what you will notice from the calendar of above, is how closely IMF events relate to it.

That's reflects the fact that the IMF is closely coordinating its efforts with central banks and heads of state. In the past, the US Treasury was the primary agency involved with the exchange value of the US dollar.

The Fed focussed on the economy but did not involve itself with the dollar in international markets. That has changed.

When I met Ben Bernanke in Korea recently, he told me he was heavily involved in discussions with the IMF in 2009 and 2010 on a variety of issues including IMF voting rights, issuance of SDRs, US funding of the IMF and an increased voice for China.

This four-way interaction of the White House, Fed, Treasury and IMF is now well entrenched.

Another year of deflationary forces

The possibility of including the yuan in the SDR will certainly come up in the hallways and private dinners in Lima.

But it is not on the official agenda and will not be decided in October.

How do we know? The IMF told us!

Gerry Rice is the official spokesman for the IMF.

Here's a direct quote from Rice's press briefing on 23 July 2015, in which he discussed China and the SDR:

'The SDR process that's shorthand for the Chinese request from the government of China that the Chinese currencywould be included in our SDR basket of currencies the SDR review is going along wellwe're expecting the formal board discussion of this issue toward the end of this year probably in November, but toward the end of the year.'

That's straight from the horse's mouth no need to guess or speculate. In other words, there is no global monetary reset coming in October regardless of what you may have read elsewhere

Even the November 2015 'discussion' is not decisive. On 4 August 2015, the IMF extended the final action to update the SDR basket to 30 September 2016.

That delays any action with respect to China by another year.

More importantly, it means another year of yuan-dollar finesse and another year of deflationary forces if the Fed keeps talking tough, forcing China to go along in order to gain admission to the SDR.

Including the yuan in the SDR next year will be a highly important symbolic step, but it will have no immediate impact on the international monetary system.

The yuan is not even close to replacing the US dollar as a global reserve currency. There are not enough yuan denominated sovereign bonds for investors to park their reserves, and there is no well developed yuan bond market to provide liquidity.

China has been buying a lot of gold, but it has printed more money than the Fed the last six years and has nowhere near enough gold to launch a new gold-backed currency.

The most important thing for you to understand is that China does not want to rock the boat they want to join the club. This means the IMF's special club of SDR members.

The future world reserve currency is not the US dollar or the yuan. It's the SDR.

The impact of a September 2016 decision to include the yuan in the SDR will resemble China's recent updating of its gold reserve position. It happened, but it was not the big deal many expected it to be.

That's just how the global elites like things slow and steady. There is a plan to steal your money with inflation, but it consists of many small steps, not a few big ones.

Adding the yuan in the SDR basket in late 2016 is an important step, but it is not a game changer.

Including the yuan in the SDR will take another year.

Making the SDR the new global reserve currency will take a few more years and a lot more SDR printing.
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Bullion Baron said:
JulieW said:
So the elite say borrow and invest?
:)
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I would load myself up with debt if I could borrow for 45 years at 3.63%.
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Can't even get a 30 year fixed mortgage in Aus, which is standard in the US.
 
JulieW said:
Jim Rickards connections say this according to the Daily Reckoning. Worth a subscription - and free:
http://www.dailyreckoning.com.au/subscribe-dr/

The Truth: The US Dollar Will Not Be Overthrown in October
Jim Rickards, Strategist, Strategic Intelligence

...

The most important thing for you to understand is that China does not want to rock the boat they want to join the club. This means the IMF's special club of SDR members.

The future world reserve currency is not the US dollar or the yuan. It's the SDR.

The impact of a September 2016 decision to include the yuan in the SDR will resemble China's recent updating of its gold reserve position. It happened, but it was not the big deal many expected it to be.

That's just how the global elites like things slow and steady. There is a plan to steal your money with inflation, but it consists of many small steps, not a few big ones.

Adding the yuan in the SDR basket in late 2016 is an important step, but it is not a game changer.

Including the yuan in the SDR will take another year.

Making the SDR the new global reserve currency will take a few more years and a lot more SDR printing.
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Yep, it's all about SDRs. And the Internet doom porn merchants hate this scenario because it is realistic and gradual, not a sudden apocalyptic reset.

More from Rickards book The Big Drop when we discussed it here in August: http://forums.silverstackers.com/message-841464.html

SilverPete said:
I'm reading the book now. I think he's made some very astute observations in this one, especially with regards to SDRs as an international monetary system and how they can be used to ignite inflation in world currencies in way that can happen under the radar of most people.

Special Drawing Rights

The third scenario is a world of SDRs. I believe this is the most likely outcome.

The SDR sounds geeky it stands for Special Drawing Right. The name is by design. Global financial leaders pick strange names for what they're doing so people don't under- stand what it is.

Luckily, the SDR isn't complicated. It's very simple. The Fed has a printing press and can print dollars. The European Central Bank has a printing press and can print Euros. The IMF, the International Monetary Fund, has a printing press and can print Special Drawing Rights. The SDR is simply world money. They didn't want to call it world money because that sounds a little scary, but that's what it is.

They're not new; in fact, they've been around since 1969. The IMF can print them and in the next liquidity crisis, they will do so. In 2009, they printed hundreds of billions of dollars equivalent of SDRs. Not very many people noticed.

They'll be involved in a bigger way when the next crisis hits and we could see the SDR become the new global reserve currency. That doesn't mean the dollar goes away. It just means the dollar would be a local currency like a Mexican Peso or a Turkish Lira. We will have them for getting a taxicab or going out for drinks, but it won't be used for the big things.

When I say the big things, I mean the price of oil, the settle- ment or balance of payments between countries, probably the financial statements of the hundred or so largest corporations in the world. In the future, maybe you'll get your annual report from IBM or Volkswagen or General Electric and it'll be in SDRs.
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And...
It's happening slowly and invisibly, but you can see the momentum. That momentum is going to build until suddenly we get to the point where there is a new global reserve currency, which, of course, is highly inflationary.
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Silverthorn said:
Not convinced about the SDR thing. Would need more of a rundown on how they would work in the real world.
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You mean, despite all the articles and books on how they work in the real world, and the fact that they have existed for nearly 50 years so you can read about how they work in the real world, you'd want a rundown on how they would work in the real world?

We know how they work in the real world. The question is, could they take on far greater importance? That, of course, is speculation, but it does provide a reasonable path towards greater control.
 
SilverPete said:
Silverthorn said:
Not convinced about the SDR thing. Would need more of a rundown on how they would work in the real world.
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You mean, despite all the articles and books on how they work in the real world, and the fact that they have existed for nearly 50 years so you can read about how they work in the real world, you'd want a rundown on how they would work in the real world?
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Yes. My understanding is they have only been of limited use and I've not seen much on them myself. I don't see how big volumes of them will be traded for actual currencies to then use in the real world.
 
I guess what I mean is that in some next 'liquidity crisis' they can print them out the wazoo but that doesn't mean anything for liquidity. The market for SDR seems ad hoc. Liquidity is a function of markets itself not size.

They could become something post crisis but they would need work to become so. I imagine they'd only be a help on the margin in a liquidity crisis.
 
More from Jim Rickards who seems to have become a resident commentator on the Daily Reckoning.

Perhaps to answer the above, the SDR will have a gold component, (as Rickards has been saying), increased in value from current price, and local currencies valued against the new SDR and dependent on gold reserves and trade potentials. As he says below, immediate inflation in USD (ie effective devaulation of the current USD) and hence massive influence on trade and interest rate decisions. In the guise of 'curing inflation' interest rates rise massively - again as Rickard says, the 1970s scenario. The depression we'll have to have.

The Fed can cause massive inflation in 15 minutes.

They can call a board meeting, vote on a new policy, walk outside and announce to the world that effective immediately, the price of gold is US$5,000 per ounce.

The Fed can make that new price stick by using the Treasury's gold in Fort Knox and the major US bank gold dealers to conduct 'open market operations' in gold. They will be a buyer if the price hits US$4,950 per ounce or less and a seller if the price hits US$5,050 per ounce or higher.

They will print money when they buy and reduce the money supply when they sell via the banks. This is exactly what the Fed does today in the bond market when they pursue QE. The Fed would simply substitute gold for bonds in their dealings. The Fed would target the gold price rather than interest rates.

Of course, the point of US$5,000 gold is not to reward gold investors.

The point is to cause a generalised increase in the price level.

A rise in the price of gold from US$1,000 per ounce to US$5,000 per ounce is really an 80% devaluation of the dollar when measured in the quantity of gold that one dollar can buy.

This 80% devaluation of the dollar against gold will cause all other dollar prices to rise also. Oil would be US$400 per barrel, gas would be US$10.00 per gallon at the pump and so on.

There it is massive inflation in 15 minutes: the time it takes to vote on the new policy.

Don't think this is possible? It has happened in the US twice in the past 80 years. You may even know some people who lived through both episodes.

The first time was in 1933 when President Franklin Roosevelt ordered an increase in the gold price from US$20.67 per ounce to US$35.00 per ounce, nearly a 75% rise in the dollar price of gold.

He did this to break the deflation of the Great Depression, and it worked. The economy grew strongly from 1934 to 1936.

The second time was in the 1970s when President Richard Nixon ended the conversion of dollars into gold by US trading partners. Nixon did not want inflation, but he got it.

Gold went from US$35 per ounce to US$800 per ounce in less than nine years, a 2,200% increase. US dollar inflation was over 50% from 1977 to 1981. The value of the dollar was cut in half in those five years.

History shows that raising the dollar price of gold is the quickest way to cause general inflation.

If the markets don't do it, the government can. It works every time.

History also shows that gold not only goes up in inflation (the 1970s), but it also goes up in deflation (the 1930s). When deflation runs out of control, as it did in the 1930s, the government will raise the price of gold to break the back of deflation.

They have to otherwise, deflation will bankrupt the country.

Do I expect deflation to run out of control soon? Actually, no. Deflation is a strong force now, but I expect that eventually the Fed will get the inflation they want probably through forward guidance, currency wars and negative interest rates.

When that happens, gold will go up.

Still, if deflation does get the upper hand, gold will also go up if the Fed raises the price of gold to devalue the dollar when all else fails.

Daily Reckoning
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I've lost faith in Rickards after receiving a few of his newsletters. Seems to have sold out big time. Now that he has a frequent association with TDR, he's off my list.
 
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