Wednesday, June 29, 2005

The BIS and William White

In addition to main establishment types like Paul Volcker, Robert Rubin, Peter Peterson, Steven Roach and David Walker warning about where the US economy is heading, there is now William White, head of the BIS's (Bank for International Settlement, the central bank for central banks) monetary and economics department. The problem is that they don't see any resolve on the part of management of USA, Inc. to bite the bullet and do something that makes a difference taming the massive amounts of USD (debt) being created. The longer the artificial distortion/manipulation of the US economy continues, and indirectly the artificial distortion/manipulation of other economies in the world, the worse the correction in the US. I would guess the US is looking at a depression now instead of a recession although the establishment types are not using the dreaded "depression" word. I'll bet they are privately thinking/talking in those terms.

In a few years or so, people loading up right now with *real* money (gold and silver), that which is *nobody's liability*, at these rediculously low nominal and inflation adjusted prices are going to be quite satisfied with themselves.

Unfortunately there are virtually no good honest fiat (government) or private bank currencies (financial notes, contracts) for the masses to easily flee to now a days in the world. Most people will be stuck with fiat paper and fiat digital *tokens* (the USD) and will pay a severe price in lost purchasing power.

Fortunately there are digital gold and silver *reserved* currencies existing now a days for the knowledgable to flee to in addition to the gold and silver metals themselves. Reserved meaning *redeemable* in gold or silver. The *backing* of a currency, in addition to the reserves, includes things like the character of management, the governance of the currency put in place by management, and so forth.

A list of gold and silver reserved digital currencies

Ultimately Jim Sinclair sees the gold price moving a couple of hundred USD in a day with a spread between bid and ask around USD 50, and silver moving about USD 50 per day with a spread of about USD 5.

The article about the BIS and William White in the Financial Times

BIS warns on domestic and international debt
By Chris Giles in London
Published: June 27 2005

Growing domestic and international debt has created the conditions for global economic and financial crises, the Bank for International Settlements warned on Monday.

The Basel-based organisation's annual report said no one could predict if and when such international economic imbalances would unravel but “time might well be running out”.

The warning by the world's oldest international financial institution the central bankers' bank was designed to puncture the complacency prevalent among economic policymakers after 2004's global growth, the strongest for nearly 30 years.

The BIS urged countries to act together to reduce the risks of disruption caused by “imbalances” in their own economies as well as by the ever-rising US trade deficit and corresponding trade surpluses, particularly in Asia. William White, the head of the bank's monetary and economics department, said the time had come “for a measured withdrawal of the stimulus put into the system.” The BIS report said “one obvious answer” would be to increase interest rates to curb debt-fuelled consumption and asset price booms. But it said such monetary tightening would conflict with the desire to keep unemployment low and avoid deflation.

The BIS urged the US to act first because it “probably faces the least conflict in its macroeconomic policy settings”.

“Given the size of the [US] government deficit, the obvious first step would be to cut expenditures and raise taxes”.

But the BIS report questioned the Bush administration's willingness to impose the required policies to back up its deficit reduction ambition.

Without a smaller budget deficit, lower private sector consumption and higher savings, there was little likelihood of stabilising the ballooning US current account deficit. The ever widening deficit “could eventually lead to a disorderly decline of the dollar, associated turmoil in other financial markets, and even recession”.

Asian currencies, should appreciate against the US dollar, the report said. “Obvious candidates for revaluation,” it said, were the “the Chinese renminbi and other Asian currencies that take their cue from it.”

But the BIS said it doubted politicians or central bankers had the will to implement the necessary policies.

“If what needs to be done to resolve external imbalances is reasonably clear, it also seems clear that much of it is simply not going to happen in the near term,” the report said.

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