February 16th, 2014
in Op Ed
by Reverse Engineer, Doomstead Diner
Published on the Doomstead Diner on 15 February 2014
Discuss this article at the Economics Table inside the Diner
The Big Newz on the economic front over the last couple of weeks has been the ongoing collapse of various Peripheral Currencies, including but not limited to the Argentinian Peso, the Thai Bhat, the Brazilian Real, the Ruskie Rouble and the Japanese Yen. The last 3 are actually very Big Players of course, so a complete collapse of any of those currencies would wreak havoc in the world of FOREX trading, and market finance in general.
All sorts of shenanigans have been ongoing here at the same time, with at least 4 high level Banksters commiting "suicide", along with the Argentinian Banking System Archives being destroyed by Fire in a basically fireproof building. Reminds one a little of the collapsing WTC towers taking out all the Enron files.
Submitted by Tyler Durden on 02/05/2014 13:57 -0500
While we are sure it is a very sad coincidence, on the day when Argentina decrees limits on the FX positions banks can hold and the Argentine Central Bank's reserves accounting is questioned publically, a massive fire - killing 9 people - has destroyed a warehouse archiving banking system documents. As The Washington Post reports, the fire at the Iron Mountain warehouse (which purportedly had multiple protections against fire, including advanced systems that can detect and quench flames without damaging important documents) took hours to control and the sprawling building appeared to be ruined. The cause of the fire wasn't immediately clear - though we suggest smelling Fernandez' hands...
While first print is preliminary and subject to revision, the size of recent discrepancies have no precedent. This suggest that the government may be attempting to manage expectations by temporarily fudging the "estimate " of reserve numbers (first print) while not compromising "actual" final reported numbers. If this is so, it is a dangerous game to play and one likely to back-fire.
During a balance of payments crisis - as Argentina is undergoing - such manipulation of official statistics (and one so critical for market sentiment) is detrimental to the needed confidence building around the transition in the FX regime.
And today the government decrees limits on FX holdings for the banks...
Argentina's central bank published resolution late yesterday on website limiting fx position for banks to 30% of assets.
Banks will have to limit fx futures contracts to 10% of assets: resolution
Banks must comply with resolution by April 30
And then this happens...
Nine first-responders were killed, seven others injured and two were missing as they battled a fire of unknown origin that destroyed an archive of bank documents in Argentina's capital on Wednesday.
The fire at the Iron Mountain warehouse took hours to control...
The destroyed archives included documents stored for Argentina's banking industry, said Buenos Aires security minister Guillermo Montenegro.
The cause of the fire wasn't immediately clear.
Boston-based Iron Mountain manages, stores and protects information for more than 156,000 companies and organizations in 36 countries. Its Argentina subsidiary advertises that its facilities have multiple protections against fire, including advanced systems that can detect and quench flames without damaging important documents.
"There are cameras in the area, and these videos will be added to the judicial investigation, to clear up the motive of the fire and collapse," Montenegro told the Diarios y Noticias agency.
You really gotta be naive or more likely BRAIN DEAD to think all this insanity is just COINKIDINK. When FOREX markets collapse, PEOPLE DIE. This is what starts SHOOTING WARS. Currency Collapse in all these countries simultaneously is a prelude to WAR. This is what truly gets World Wars started. In a country that experiences a currency collapse, they can't get any basic necessities of life. Food doesn't get imported. The country loses access to International Letters of Credit to guarantee shipping. It has always been obvious to me that the peripheral currencies would Collapse before the Dollar, and this run is going to take out some very big players. Even combined, I do not think the PBoC and Da Fed can funnel enough liquidity fast enough to keep all these currencies floating.
Ambrose Evans-Pritchard is PANICKED that the global monetary system is on the verge of a Deflationary collapse here.
...The ECB's Mario Draghi talked up the need for a "safety margin" against deflation before Christmas but now seems strangely passive, as if beaten into submission by the Bundesbank. I heard him twice in Davos repeating - woodenly, without conviction - that core inflation is merely back to where it was in 1999 after the Asian crisis and in 2009 after the Lehman crisis, and therefore benign.We are not in remotely comparable circumstances. Those two events were at the outset of a new credit cycle. Right now we are nearly five years into an old cycle - already long in the tooth - and 80pc of the global economy is tightening or cutting stimulus. As matters stand, the next recession will push the Western economic system over the edge into deflation.The US has a slightly bigger buffer, but not much. Growth of M2 money has been slowing even faster than it did in the nine months before the Lehman crash in 2008, but then the Fed no longer pays any attention to such data so it may all too easily repeat the mistake. The Fed is surely courting fate with $10bn of bond tapering each meeting into the teeth of incipient deflation, as Minneapolis Fed chief Narayana Kocherlakota keeps warning.Those who think deflation is harmless should listen to the Bank of Japan's Haruhiko Kuroda, who has lived through 15 years of falling prices. Corporate profits dried up. Investment in technology atrophied. Innovation fizzled out. "It created a very negative mindset in Japan," he said.Japan had the highest real interest rates in the rich world, leading to a compound interest spiral as the debt burden rose on a base of shrinking nominal GDP.Any such outcome in Europe would send Club Med debt trajectories through the roof. It would doom all hope of halting Europe's economic decline or reducing mass unemployment before the democracies of the afflicted countries go into seizure. So why are they letting it happen?
Ambrose Muses at the End of this "Why are they Letting it Happen?"
Hey Ambrose! They AREN'T letting it happen! They have been pitching out the Funny Money for 5 years straight now, and it AIN'T working! The CBs are running Outta Ammo!
For those of you not that conversant in how Capital Flows work in the FOREX market, let me try to make a brief explanation for what has been going on here for the last few years.
Da Fed provides basically ZIRP money for the TBTF Banks to do "Investment" with. The PBoC in China does the same thing.
In search of High Yields, this basically Free Money has been sent to do all sorts of Malinvestment in the Emerging Markets.
In the Panic Exit phase, the "Investors" attempt to Jump Ship and exit stage left fast as they can. Sadly for them, there are no BUYERS for the Dogshit they invested in, and prices start dropping on the shit. Their only HOPIUM here is that Da Fed or the PBoC buys the dogshit from them at Par. In fact the PBoC did just buy out some Dogshit Gold Trust to keep that one from going Belly Up into this mess right now, but that basically was chump change compared to the several $Trillion in Dogshit that is over there right now.
What Ambrose would like to see is for the CBs to buy ALL the Dogshit! That would be "doing something". The CBs may eventually capitulate and try this, but the currency blowback would be enormous. Besides that, the moral hazard in the game is outrageous, and if they do it chances are good that faith is lost in their control of the situation.
So they want to pop the bubble "gradually", but not everybody is going to cooperate with that. In fact when the Prop Desks sense tightening is coming, they wanna exit stage left before their competitors do.
The rapid outflow of foreign Capital hangs many Locals over there out to dry, and they have to start liquidating other holdings to try and stay solvent and keep their creditors at bay. So Selloff happens on all the major markets Globally, simultaneously.
So far it is not out of control, but how long the PBoC, Da Fed and the ECB can keep a lid on it is an Open Question. They simply do not have leeway left here anymore with their interest rates already so low, the Balance Sheets already off the charts and the Collateral they hold NOW is dogshit. If they heap more dogshit into this pile, "investors" will smell it, and then confidence goes in the CBs.
The result of that? Monetary System Collapse, on the Grand Scale. It hasn't happened at this level probably since the Fall of the Roman Empire.
There is plenty more from the last couple of weeks on the shit going down here inside the Diner, from the European Markets to the Japanese ones, I'm not going to bother quoting it all in this article. Suffice it to say that markets all over the world have been in turmoil for a good 2 weeks now, and more bizarre stuff occurs each day. Like DEAD BANKSTERS. It's Raining Pigmen.
So why is it all going down here now? Why won't Ambrose's solution of LOTS more Toilet Paper off the Printing Presses of CBs all over the Globe get the economy Kick Started here? Aren't Central Banks Omipotent? They have UNLIMITED ability to create Money, don't they?
In a sense they do, in terms of creating credit, which the well connected have virtually unlimited access to as well. What they do not have is unlimited access to resources to buy with the credit they issue. For quite a long time here it seemed like Resources were Unlimited, and during this period the CBs and the Elite cadre of people who control them were pretty close to Omnipotent, determining the direction society took by issuing the most credit to people developing the Industrial Model. To try to simplify and visualize the problem that now exists, I drew a few simple Infographics, starting with the Dawn of Homo Sapiens in the aftermath of the Toba Supervolcanic eruption 75,000 years ago.
All the Ellipses here are not drawn to scale, they just are designed to show the progress here of the World System from the Hunter-Gatherer era through to the Industrial Era.
As we begin here in the post-Toba cleanup years, there are very FEW People, and a world chock FULL of resources. People over time divided up into two classes, the Haves and Have Nots. However, during this early time the number of Have Nots was very small, just about everyone was a Have since all you needed to do to have something was pick some berries or catch some fish. Nobody owned any land, you just set up your Shelters wherever there was some good food to eat and water to drink.
Over time of course, the world packed itself up with H-Gs, since we were a very clever and successful species and could exploit just about any decent environment on the planet. This led to reduced Mobility as various tribes staked out claims to territory, so even though there is still no Individual Land Ownership, you can't just wander anywhere willy nilly anymore to forage for food. Now if you go hunting on somebody else's Territory, it starts a little War if the Tribes can't come to some agreement here on how to share the resources. Still, it is a relatively level playing field as everyone has basically the same weaponry and nobody's population is that significantly larger than anyone else's. As a whole, the HS population is still more or less in Homeostasis with what the Earth provides because they compete with each other and nobody is taking more than what is naturally provided in the various ecosystems around the planet.
This Homeostasis comes to an end with two related Inventions, Metallurgy and Agriculture. Folks who are now basically limited to a given area who discover how to grow food crops in an intensive manner on that patch of land begin to Grow in Population Size. The Metallurgy they are using to make Farming Implements and Tools also works well for creating new Hunting Weapons, which become weapons of War also.
As they grow in size, these new Nations become further Stratified in terms of Haves and Have Nots, with the number of Haves beginning to Shrink while the number of Have Nots begins to grow. In fact many of the Have Nots of this period are Explicit Slaves of course.
These newly expanding countries develop a Military Class as well, and because of greater Numbers and Better Weaponry begin to expand and roll over any of the H-Gs surrounding them. These people are either assimilated into the growing system or they are exterminated.
By the end of the Ag Era, just about all the H-Gs are gone, except in the most remote and inaccessible locations not conducive to Agriculture. In place of many H-G Tribes, there are now relatively few large Nation-States pursuing the Ag Paradigm, again all in competition with each other. Now when Wars break out, they are pretty BIG affairs, though still pretty Regional on a global level. The Limits to Growth of this paradigm comes more or less in the late Middle Ages, and between the Plagues and the Wars, 500M or so population is where it is stuck for a while.
Two things change with the Enlightenment. First there is the discovery of the New World with a HUGE new resource base to exploit, and second is discovery of Thermodynamic principles that allow for the exploitation of a new energy source, Fossil Fuels. This begins with Coal and the Steam Engine, but progresses pretty rapidly by Cvilization standards to Oil and the Internal Combustion Engine.
The former Ag Nations which get to this stuff first now have an even BIGGER advantage over non-Industrial nations than Ag societies had over H-Gs. With these new Weapons of War such as Steam Powered Gunboats, it was relatively simple for Matthew Perry to motor over to Japan, shell Nagasaki and Edo for a few days and get the Feudal Lords of Japan to capitulate, and "join the party" so to speak. They actually had no choice in this, it was either join up or be exterminated.
As we progressed through this era, the Population expanded VASTLY as the bottom of the Infographic shows, and the number of Have Nots in the global society vastly Increased, while the number of Haves began shrinking, now to the point where even here in the Have Nation of the FSoA, there are WAY more Have Nots then Haves.
In order to manage this ever expanding system, what was at the beginning a fairly Rudimentary system of Money used for Trade began to grow itself in Size and Complexity. Let's look at a couple of basic Infographics to see how the Industrial Economy begins to shape itself.
In the beginning, the Economic World of Homo Sapiens is just one big unit of Resources and People. From the POV of Homo Sapiens, all the rest of the creatures on the Earth are just Resources to exploit, be they animals or plants. Agriculture first and Industrialization later dichotomizes this into the People on the one side, the Resources on the other. Industry is the process of taking People and Resources together and creating new products people WANT (rather than really need), and in the process creating a lot of Waste they don't want and don't need either.
To bring us back round to present day and the collapse of the Peripheral Currencies of Emerging Markets, you have to get a clear idea of how the financial system organized itself up over time to distribute out "money", centralize "capital" and make essentially the entire world dependent on its continuing functionality to prevent/delay the collapse of the Industrial system that essentially exploited the resource wealth of the Earth until it was effectively gone.
At left here is a VERY basic diagram of the main Financial Players in the game, some of whom are actual Living People, others which are just abstract concepts or conglomerations of people, so People are at the top of the chart.
People create the Banks, the Money, the Corporations, the Nations and the Derivatives that come out of all this Creative Organization. You might think Money precedes Banks in Creation, but it really doesn't. Original Banks were storage warehouses for grain, money came after that as a Token to represent credit that allowed you to have access to that grain.
Nations eventually emerged here to be the guarantors, while banks took on the role of issuing the credit. Corporations evolved in the Industrial era as supra-National entities basically controlled by a small portion of the population, the Haves in the first diagram here above. Same folks in control of these Corporations as in control of the Banking System, so for the most part Corporations have had access to Unlimited Credit, while the amount of credit the average J6P could access at any time was extremely limited.
Nation-States also had access to nearly as much Unlimited Credit as Corps did, at least up until recently anyhow. Reason for this is that the Political Leadership of any country could offer up as Collateral all the Resources that country contained, along with Labor Force of that country. Countries of all flavors and locations were over time all subsumed into the same centrally controlled Credit system, which took a couple of World Wars in the Industrial Era to consolidate, though the process has been ongoing since the Fall of the Roman Empire and that Banking system.
Again quite simplified above you will find the current organization as it evolved, with the main markets derived from this system. In it, you see only ONE Central Bank, whereas there are many of them, in fact almost every individual Nation-State has its own CB long as they still issue their own currency and are not part of a currency union like the (gag, spit, puke) Euro. However, despite the fact they have their own CBs and Currencies, all are still tied into the same system, which the Bank for International Settlements in Basel, Switzerland coordinates. They have been doing this since the end of WWII, originally under the 1st Bretton-Woods agreements, but morphing over time in various ways since to keep the system running.
The main "reserve" currency the BIS uses to do all their accounting is the DOLLAR, so regardless of whether any other country participating in Global Trade have their own CB and their own currency. All these currencies have traded with a generally accepted "range" for the past 30 years or so, with some currency arbitrage in the FOREX market through the period. Interest rates go up and down, currencies get traded back and forth all dependent on which way the people in charge direct the investment capital, through the 3 major markets you see at the bottom of the diagram, the Equity (Stock) Market, the Commodity Market and the Bond Market. Who "Invests" in these markets?
The mythology is there are millions of Small Investors who buy into each of these markets, but it is not that way at all. "Investors" are really mainly the largest TBTF Banks, which you find at the top of the diagram. Actually this also includes other institutional investors like Hedge Funds, Sovereign Wealth Funds and Pension Funds, but these days it is mainly the biggest of the TBTF Banks doing "investment". AKA, Goldman-Sachs, JP Morgan Chase, Wells Fargo, Deutche Bank et al. Where do they get their money to Invest in the various flavors of Dogshit available on these markets today? From Depositor Money? Hell no. Depositors don't have the $Trillions$ necessary these days to levitate markets. They get the money by Borrowing from the Central Banks. Why can they borrow $Billions$ every day while you have trouble getting a Mortgage or Car Loan? Because they have "collateral", which basically is just paper they bought previously, with you guessed it, loans from the CBs. LOL. This is called "leveraging". It goes along with other methods of multiplying the money you have to play with, Fractional Reserve is another, Rehypothecation still another. This all adds up to a HUGE Tower of Debt instruments everybody holds, which in theory represent something, but in fact nowadays represent nothing, or very little anyhow relative to the actual size of the tower.
Now to the question at hand, why do we see the Peripheral Currencies hitting the wall here first, and why is it mainly the Emerging Markets that are collapsing first? The reason is who got to be the "Lenders" in the Growth period versus who got to be the borrowers of the Reserve Currency of the Dollar.
The Lenders all came from the place where Industrialization developed first, Germany, England and the FSoA. They got the Ponzi started, and as we all know, the first people in on a Ponzi get really rich, while everyone else gets Hosed. In fact the Federal Reserve here in the FSoA is owned by the Private Cartel of Banks from these countries, including the Bank of Rothschild, JP Morgan Chase and of course Goldman-Sachs. So they have always been able to borrow basically as much as they like to expand the Ponzi, charge a higher rate of interest to everyone they loan money to (all the late entry countries), and collect on the spread over the last Century. A FABULOUS RACKET! In the words of Alfonse Capone
During the Expansionary period of this game, the Credit flowed Free and EZ outward to every dipshit Nation-State under the Sun. Everybody wanted the "Cargo" of Industrialization, and to buy that Cargo, you had to have the Credit issued by the people who were selling the shit.
From Jared Diamond's "Guns, Germs & Steel"
Voiceover: There have been people living in New Guinea for at least 40,000 years - much longer than on the continents of North and South America. They're among the most culturally diverse and adaptable people in the world. So why are they so much poorer than modern Americans? The question was put to Diamond bluntly by a man called Yali, whom he met on a beach more than 30 years ago.
Yali Voiceover: Why you white man have so much cargo and we New Guineans have so little?
Jared Diamond: Yali's question really threw me. It seemed so simple and obvious, and I thought it must have a simple and obvious answer, but when he asked me, I had no idea what that answer was.
Yali Voiceover: Why you white men have so much cargo and we New Guineans have so little?
Wealth in the Industrial Era demanded access to the Credit necessary to buy Industrial Goods and build Industrial Infrastructure like Power Plants and roads suitable for moving the Heavy Equipment of Industry over. The credit was issued on the Resource base of the WORLD, including the Labor Force of Homo Sapiens in any given neighborhood. Even though the Bankers issuing the credit did not "own" these resources (at least at the beginning), they acquired the ownership of them by two means.
The first and most obvious means was by WAR, or just Intimidation by virtue of superior Firepower. In the case of Japan, Cmdr. Matthew Perry brought his Steam Powered Gunships to Japan, which had been closed to Western Culture from the beginning of the Enlightment during the Feudal period of the Edo era. We covered this progression a while back here on the Diner in the article Mr. Peabody Visits Japan.
Essentially, anybody without the firepower of Industrialization had a Hobson's Choice. The ONLY realistic choice if you wanted to LIVE was to buy in to the model, borrow the money and live the Industrial Meme. Anyone who did not buy into this was Exterminated. In the case of the Potlatch civilizations of the Pacific Northwest, their whole meme of Economic Distribution through Gifting was made ILLEGAL by the folks with the Guns & Steel.
Potlatch banMain article: The Potlatch Ban (Canada)
Potlatching was made illegal in Canada in 1884 in an amendment to the Indian Act and the United States in the late 19th century, largely at the urging of missionaries and government agents who considered it "a worse than useless custom" that was seen as wasteful, unproductive, and contrary to civilized values.
The potlatch was seen as a key target in assimilation policies and agendas. Missionary William Duncan wrote in 1875 that the potlatch was "by far the most formidable of all obstacles in the way of Indians becoming Christians, or even civilized." Thus in 1884, the Indian Act was revised to include clauses banning the Potlatch and making it illegal to practice. Section 3 of the Act read,
Every Indian or other person who engages in or assists in celebrating the Indian festival known as the "Potlatch" or the Indian dance known as the "Tamanawas" is guilty of a misdemeanor, and shall be liable to imprisonment for a term not more than six nor less than two months in any gaol or other place of confinement; and, any Indian or other person who encourages, either directly or indirectly, an Indian or Indians to get up such a festival or dance, or to celebrate the same, or who shall assist in the celebration of same is guilty of a like offence, and shall be liable to the same punishment.
In 1888, the anthropologist Franz Boas described the potlatch ban as a failure:
The second reason for the discontent among the Indians is a law that was passed, some time ago, forbidding the celebrations of festivals. The so-called potlatch of all these tribes hinders the single families from accumulating wealth. It is the great desire of every chief and even of every man to collect a large amount of property, and then to give a great potlatch, a feast in which all is distributed among his friends, and, if possible, among the neighboring tribes. These feasts are so closely connected with the religious ideas of the natives, and regulate their mode of life to such an extent, that the Christian tribes near Victoria have not given them up. Every present received at a potlatch has to be returned at another potlatch, and a man who would not give his feast in due time would be considered as not paying his debts. Therefore the law is not a good one, and can not be enforced without causing general discontent. Besides, the Government is unable to enforce it. The settlements are so numerous, and the Indian agencies so large, that there is nobody to prevent the Indians doing whatsoever they like.
Eventually the potlatch law, as it became known, was amended to be more inclusive and address technicalities that had led to dismissals of prosecutions by the court. Legislation included guests who participated in the ceremony. The indigenous people were too large to police and the law too difficult to enforce. Duncan Campbell Scott convinced Parliament to change the offence from criminal to summary, which meant "the agents, as justice of the peace, could try a case, convict, and sentence". Even so, except in a few small areas, the law was generally perceived as harsh and untenable. Even the Indian agents employed to enforce the legislation considered it unnecessary to prosecute, convinced instead that the potlatch would diminish as younger, educated, and more "advanced" Indians took over from the older Indians, who clung tenaciously to the custom.
A fairly common meme you read on the Collapse Websites is that "We are All COMPLICIT" in the destruction of the Earth and the Imperialist meme simply because we participate by having Jobs inside it and Paying our Taxes, which in the end go to propping up the Military-Industrial Complex which keeps the whole show rolling. Even inside the Diner this is a powerful meme many buy into:
The Kitchen Sink / Re: Why Have We Failed?
« on: February 14, 2014, 02:44:43 AM »
Quote from: Karpatok on February 13, 2014, 05:08:40 PM
I do not know of one single person either IRL or IVL who is not in the SLIMY WHORE BIZNESS of DENIAL, denying their own culpability and blaming others. YEAH, DE NILE can fill a BIG BIG VACUUM BAG. Karpatok
Quite correct, K. Makes me think of the concept of "original sin."
Each one of us has benefitted from the excesses of the Age of Oil, from the Imperial Project, from the export of FSoA economic vitality. ("Low low prices everyday...") And few of us want to consider the implications of that, or are not interested. Far easier to reach for a bag of Cheetos than to consider alternatives.
Those who are less in denial congregate virtually in blogs like this and discuss how to become less complicit, and what next steps might look like.
In a sense you can say we are complicit, but only in the sense you are complicit if somebody sticks a gun to your head and says, "Do it MY WAY, or HIT THE HIGWAY". Anybody who did not buy the meme and use the Money and participate in this culture was rendered DEAD, or terrifically impoverished at best. Anybody born into the society either bought the meme or ended up Homeless and labelled as a "Failure". Become a Pigman yourself, strive to GET RICH inside this culture or you are NOTHING, a less than WORTHLESS Person.
The coersion here doesn't STOP with the Military end of forcing cultures by the Point of a Gun to Buy In, once you have bought in and taken the LOANS out necessary to ramp up your new Industrial Society full of all the Cargo your population wants (but does not really need), now you are forced by the Legal System constructed around this to buy into ideas like Property Ownership, Taxation and all the rest. Every avenue of trying to take yourself out of this meme is progressively removed. Back in the day, you had Mountain Men like Jeremiah Johnson who walked away from this culture, because at the time there still were places to go not Owned and Controlled by somebody else. Now those mountains and their Forests are owned by Weyerhauser or Ted Turner or some other Corporate Person or Pigman. The land belongs to THEM, accoridng to the LAW. Hell, even the fucking Water falling from the sky as Rain belongs to them! How are you complicit if you CANNOT ESCAPE? Even up here in the Bush of Alaska, you have the Parks Dept. Rangers who will fine you if you don't have a "license" to hunt or fish. Long as the matrix holds its integrity, you can't escape it, you can only try to hide inside it and plan for the day it DOES collapse, which it will, because all Ponzis always do.
To conclude here today, we often read that TPTB in charge of the Fiat money system create "Money from Nothing", but this is not really true. The Something they created the money on was the resource base of the Earth, which they basicall were in control of here in the Industrial era by virtue of Military hegemony. Capitalism was always just a Ponzi which made the initiators of the system Richer than God by exploiting the reosurces of the earth and the rest of the Have Nots populating the planet. The problem they have now is that though they still are in power to issue credit, they have little in the way of real good resources left to issue that credit out on. In reality, these folks are as BK as everyone else, in numerical terms really a lot more BK, since what they hold as "Wealth" mainly are debt instruments that will never, can never pay off.
Peripheral Currencies are the Weakest Link in the Daisy Chain of the Ponzi. As the system implodes, the "Investors" seek to exit these economies, and when they do that those economies lose access to Credit on the FOREX market denominated in Dollars. For the food Importers (many of them), their ability to access food imports at a price their population can afford to buy becomes constrained. Once that happens, Political Turmoil in extremis follows and you work your way in progression to a Failed State. See Syria, Egypt, Greece and soon enough Spain and France too on this Bandwagon. Doesn't matter whether they can create their own currency or not really, relative to population size they simply do not have resource upon which to issue credit anymore.
In a sort of Magical Thinking paradigm, the Chinese are buying up Gold, under the concept that when the Dollar Collapses, a Gold Backed Renminby can take its place as World Reserve Currency. Problem with this? The Chinese are in bigger resource deficit relative to population size than anybody else in gross numbers, with the possible exception of the Indians. Japanese are in worse situation per capita and by land mass, but it is a smaller population. Assuming the few still left Resource Rich countries will TAKE Chinese Gold for their resources after the Dollar collapses, the Chinese would quickly be divested of all their Gold in the basement safe of the PBoC.
Peripheral Currency Collapse is the Leading Indicator of a collapsing Monetary System overall here. However, once they collapse, the Jenga Puzzle of Derivatives will bring down the Dollar too, and really nothing is out there that can replace it, because the resources aren't there either. Not for such a large Global Population and certainly not for this population to try and live the lifestyle of Industrial Culture that the FSoA did for these last 200 years or so. This has mostly been burned up now, and floats around the atmosphere as molecules of CO2, exacerbating a climate change and making life ever more difficult to pursue just about everywhere.
So it will get a LOT worse here before it ever gets better, if it ever does. Negotiating this period will be extremely difficult, and there is no guarantee any strategy you try to employ here will work to make it through to the Other Side. On the other hand, no guarantee there will be a complete WIPEOUT of Homo Sapiens either, so if you want to LIVE, you try to come up with the best strategies for doing that, and that is what we do on the Diner and on SUN. It is the challenge of all of history this generation and the next faces. You only have two choices here, try to Survive or Quit and Die first. For the Heliopaths here, we will try to survive, and keep Fingers Crossed that some can make it through the Zero Point. The time of the Terminator has come.
COME WITH ME IF YOU WANT TO LIVE