Central Banks and The Dollar Hitting the BRICS

central banks

“We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US $100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.... The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.”

Parallel phenomena are trickling their way up from the darkness in monetary sentiment. It may be symbolic for now, but the politics in the U.S. with the symbolic and the organizing structure of alternative reserve currencies represent yet another shift toward a phase transition in dollar confidence.

The BRICS and Their $3 Billion

Ultimately, these BRIC- sovereigns are acting the same as any prudent investor.

They are diversifying. They are venturing out as a natural consequence of the dollars fading preeminence.

They are attempting to reduce dollar exposure. But they are also testing the limits.

They can't do it too fast, or they will miss the opportunity.

And then there was this...

End the Fed whispers, political limits of printing coincide with the final frontier of fiat.

Earlier this week, politicians proposed a bill that would limit the powers of the Federal Reserve.

The actions this week by House Republicans indicate that there is a legitimate risk that the Fed "may reach the political limits of money printing."

This is a bit late and purely symbolic.

The Fed is fully captured by the Treasury.

Politics will not stand for deflation - as it would destroy the banking system and the elite oligarchs.

It is the same issue with the debt ceiling. The debt ceiling can never be permanently removed without triggering the end of what is left of dwindling confidence in the dollar.

Everyone knows we are in a currency war - but no one "wants" to understand in a visceral way.

But it’s too late. Bailouts will happen again to the surprise of everyone, including lawmakers.

Confidence is like skin in the game and the current financial system is the poster child for the absence of flesh.

Which isn't much of a stretch considering that the entire house of cards is based on debt and confidence to begin with.

The inflection point will come and change everyone's perspective all at once.

At this point it is like attempting to explain certain phenomena that can only be experienced on a personal sense in order to fully embrace it.

I have spent a lifetime in the ocean, surfing in large swell conditions.

My home beach is a typical beach-break set up. Exposed to open ocean energy. Waves break along outer sandbars and come straight in toward the beach. The journey to the outside where wave energy first reaches outer sandbars is often a brutal ordeal.

One faces rolling trains of exploding energy in sets of 10 or more a few seconds apart - and no channel around them.

It requires a lot of patience, endurance, and a bit of strategy and luck.

Much like being a long term physical precious metals investor enduring decades of blatant manipulation and very little reward.

The rest of the world has a different idea of surfing. Dreams of lifestyle and a different idea of money and currency.

The rest of the world partakes in a point break, where waves gently wrap around an elbow of land and anyone can access the impact zone by paddling around the inside.

This can be dangerous because too soon people often find themselves in a situation that in reality is much different than what they originally planned for.

Mike Tyson is often attributed with the expression "Everyone has a plan when they step into the ring...until they get hit in the face."

There is an advantage to paying dues - with skin in the game; especially when it comes to the phase transition.

The Black Swan will be like the first punch in the face. Most think they will see it coming and have time to react. The reality is always different.

All of the bubbling exuberance we see - what appears to be a slow tributary often relegated to the fringe, is just part of a larger phenomenon. The fall of paper currencies will occur gradually and then arrive all at once in one big confusing geometric collapse that no one saw coming except for a tiny few.



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