The IMF's New Bretton Woods Moment

With the announcement of "lockdowns" and border closures, speculators had been playing the dollar higher, anticipating an inevitable liquidity crisis.

But the senior monetary authorities had been very responsive. So much so, that on Monday, March 16, a virtual meeting of the financial leaders of the G7 discussed the debt crisis and the following Monday, a G20 of international finance announced "the suspension of the debt service" of the developing or emerging countries for at least the 6 following months.

On the chart below, we can see that a few insiders will sell their long positions early on Friday 20 at the top of the speculative bubble, before the official announcement of Monday 23, when the dollar falls sharply. It had been a “Bull-Trap”. Those who played the rise of the dollar with leverage were forced to sell their positions in disaster, accelerating the fall.

In the body of her speech, Kristalina Geogieva mentioned the "suspension of debt service", which intrigued me and my research brought me to this page of the World Bank, then to the successive meetings of the 16th and the 16th. March 23, explaining the brutal movements of the dollar.

"With the World Bank, we support extension by the G20 of the Debt Service Suspension Initiative."

Madame Georgieva encourages the continuation of this suspension of debt service by pushing public and private financiers to seek solutions to renegotiate debts. This is what happened in 1985, short- and medium-term debt had been turned into 30-year debt, more or less guaranteed by the United States.

"I am encouraged by G20 discussions on a Common framework for Sovereign Debt Resolution as well as on our call for improving the architecture for sovereign debt resolution, including private sector participation."

For a long time, Martin Armstrong had anticipated a rise in the dollar to a level higher than that of 1985, due to a liquidity crisis resulting from the swelling of the world debt. The graph below shows the debt as a percentage of GDP. In absolute terms, global debt was around $ 270,000 billions in January 2020.

If the Big Money of the World succeed in imposing a suspension of debt service for as long as the successive epidemics of seasonal flu last, the demand for the dollar can only decline... and all the more so if governments impose rules, which strongly slow down their respective economies.

Remember that iteratively, it is about establishing a "Debt Jubilee", that is to say cancellation of debts, especially sovereign ones. The subject was dealt with by Forbes on April 2, 2000, lesprodeleco in June picked up by FranceBourse and RTL. The Debt Jubilee would put the world economy back on a sounder footing.

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