Preparing For A Reset Of The World's Reserve Currency
Willem Middelkoop and Terence van der Hout of the Netherlands-based Commodity Discovery Fund believe that when the world’s reserve currency is reset away from the U.S. dollar in the next decade, gold prices will rise and mining equities will follow. Van der Hout and Middelkoop tell The Gold Report that by focusing on producers, near-producers ,and turnaround stories, they plan to capitalize on the opportunities in North America, Africa and beyond.
The Gold Report: Willem, your first book predicted the collapse of the global financial system a year before the 2008 fall of Lehman Bros. In your new book “The Big Reset: War on Gold and the Financial Endgame,” you’re predicting the demise of the dollar as the reserve currency by 2020. You said it can occur as a carefully planned event or as the result of a crisis. What would these two scenarios look like?
Willem Middelkoop: Authorities always prefer to act within a well-planned scenario. The U.S. and the International Monetary Fund (IMF) understand that the U.S. dollar has to be replaced one day. It could be 2020. It could be 2018. It could be 2023. It has to be replaced by another anchor to support the worldwide monetary system.
Both the U.S. and the IMF will try to stay in the driver’s seat as they propose the transformation of the worldwide financial system. They could introduce special drawing rights (SDRs), an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. The U.S. and the IMF could propose that the SDRs be used to replace the dollar as the anchor for the worldwide financial system.
However, the IMF and its partners, the central banks around the world, will need at least five more years to prepare the system for such a change. A crisis of confidence around the dollar could occur before the IMF and its partners are ready for a reset operation. If a crisis of confidence occurs, the IMF would have to mount a rescue operation to save worldwide trade, as we saw in early 2009. We had some similar, but smaller, resets following the crisis in Germany after the Weimar hyperinflation in 1923 and, more recently, in Cyprus.
The SDRs could act like a monetary umbrella and consist of dollars, euros, British pounds and Chinese yuan after a monetary reset.
TGR: A lot of this plan is going on backstage. Most people don’t know about it. What signs should we look for to signal the shift so we can adjust our portfolios?
WM: This is a very important question. Investors need to understand that such a transformation in our monetary system might be introduced over a weekend. In Cyprus, there were not many warning signs. That’s why I started a new blog called thebigresetblog.com, where I follow the latest information, and I’m publishing the latest signs pointing toward such a reset. On March 17, I published a story that was based on an interview with George Soros. In that interview with The Financial Times, Soros said the system is broken and needs to be reconstituted. I also published an interview with Christine Lagarde, head of the IMF. She used the term “reset” multiple times in interviews during the World Economic Forum.
Another important sign is an editorial by the Chinese state press agency recently saying that the time has come for a new international reserve currency to be created to replace the dominant U.S. dollar.
Both East and West sent out specific signals pointing toward this transformation. Of course, it’s important to watch the gold and dollar charts on a daily basis, because when a reset is close, you can expect major moves. TRUNews