by trod1234 | 2025-05-04 22:19:29+00:00
I would have liked to respond to you yesterday but people rate limited me through downvotes (to 2 posts per day). HN isn't a very good place to talk about anything serious, people who disagree or have a vested interest in useful information not being visible will brigade you and prevent you from communicating/responding seemingly along collectivist lines.

Yes, the agreement is informal, but it was highly important in driving demand for the currency, demand which is no longer there. We largely produce very vew things aside from global currency which allowed us to export our inflation through that agreement. The fact is that it no longer offers value to other countries who have been de-dollarizing. They can now join BRICS and transact for those goods in local currencies and goods. The downstream effects will be less trade because the high seas will become unsafe as we pull back our peace-keeping role, its entirely possible piracy or a more modern form of privateering returns once that is scaled back.

With these type of agreements it takes time for the effects to unwind and then be seen simply as a matter of contract expiration's some which are several year terms out. We should be seeing more of the effects by the 3-5 year mark, enough to show the definitive trend.

Depending on where you get your news, you may not have seen the fact that roughly 44% of global oil are now members of BRICS which are settling oil now in local currencies. Exchanges still have contracts in USD but there are a number of issues with loadout of contracts which are presenting financial contagion problems as well, trust has been lost, and for example the failures to deliver of gold and silver contracts now have a estimated delivery date of 16 weeks that seems to keep getting extended out, given how many of these faux commodity contracts are naked its not surprising.

Naked paper trading by GSIBs in these markets far exceeded the physical commodities (300%+ in volume), and the risk was offset through options, but options aren't perfect protection. Capital flight to gold, silver, and other commodities is happening with people opting for loadout which deplete the physical to paper, but that's not really being covered in the news in any effective way.

The Trusted News Initiative has been suppressing news on a variety of subjects including BRICS.

Regarding Basel 3 using objective value, you can get to that point just by reading the published framework at BIS, and examining the definitions that they redefine. The link for the framework is here: https://www.bis.org/baselframework/BaselFramework.pdf .

The Basel 3 system used in the US varies from that because it is a GAAP modified variant (with the GAAP loopholes and the issues inherent in the original framework). I'm not aware of a Fed document available to the public that includes a description of the changes in this variant implementation.

In a fractional reserve system, the published material by the Fed in their publication "Modern Money Mechanics" walked through how the rates limit the amount a bank can loan leaving a fractional percentage of assets for any given expansion based on those rates.

There is no such similar publication for the Basel 3 modified system, at least as far as I am aware of. The reserve requirements are limited by risk weighted assets, which are one indirection to the objective value of an asset they use as capital (they define a few but include shares/equity of the bank).

This is clear when you see how the banks are treated as a grouping, under the title of the section "Consolidation", which is misused. Consolidation is being used here so as to not set off any alarm bells about valuation, because consolidation for the tasks required must naturally require a valuation to occur first on the capital. You can't do anything in the consolidated group without first having a valuation of the assets.

If you go to the definitions under CAP you'll see that they've redefined capital very carefully. If you mark the indirect references and then followed through to the objects in question, and how they vary in valuation dramatically from time to time that's a problem. This changeover was largely adopted without any public announcement at the start of the pandemic.

Who values these, and how they are valued is left unsaid, it would seem the banks themselves do this in part, and some of the assets may include market exposure (something a systemic bank should never have as a security issue).

The fact that the market is no longer functioning as a result of price discovery failing with >50% of the volume of transactions occurring in dark pools off exchange, should give people pause and inspire great concern. Price discovery fails when around a quarter of the market transactions are invisible.

Upon careful consideration of what's read, you'll see that they are no longer limited by regulatory rates, the central bank has no effective lever to pull to hold back their debt issuance.

As long as the fiat-based asset valuations(prices) inflate with the currency they can keep issuing more debt, and this drives consolidation of the market into non-market territory taken to its logical conclusion. They'll do so right up to the point where people abandon the currency.

When you have a positive feedback system, these type of systems are prone to runaway failures. A general principle in engineering is safety, systems with safety-critical features require a higher duty of care. The food system is dependent on exchange which is dependent on money. The required duty of care is wholly lacking given the existential threat touched on by Catton/Malthus related to that.

Also importantly, there doesn't appear to be any public disclosure when the bank fails to meet the requirements (as would happen in a stock market crash regardless of weighting). If you examine the FRC failure two years ago you'll see this all happened behind the scenes, and the background process is not public (as far as I can tell), it seems they get a private notice and if they can't correct it in 30 days they get seized and the bad debt consolidated in one of the remaining dealers. Eventually only one remains, but they all operate on unsound and unsustainable principles. They are called banks, but this isn't banking in the classical sense of the term.

> I'm worried about the long-term value of the US$, but perhaps not as much as you.

I'm not worried about the long-term value of the dollar because I know there is no long-term value, and yes I've moved my assets accordingly (put my money where my mouth is).

I've been rewarded for that too, in the short time I made that change, post-pandemic, my personal capital has tripled. Its not nearly as liquid as I'd like, but its diversified sufficiently, and I'm taking other steps to hedge currency risk which is bound for despair and failure for the general market participants.

I've lost money of course, but the money I've lost were in the bucket of assets that normal people invest their retirement plans like a 401k in, where I couldn't take it out without a very large tax burden in such a short period of time. I've largely written that portion off and will be cashing that out soon to more suited investments.

I envision a time not far off where basic goods can't be gotten at any price. Not because I'm a doomer, as some might call me, but because when you have no visibility to recognize a problem, nor ability to correct underlying issues (the socialist calculation problem), the worst outcome is likely to eventually happen. Worst-case scenarios are independent of likelihood.

Trying to plot a safe path for one consolidated boat through chaos is an impossible task. People in many generations past understood enough to be humble in the knowledge that there were impossible problems that could not be solved and avoided systems that coupled their legacy's existence to the solution of those problems.

More recent generations, as consolidated in the ruling leadership (boomers) failed in upholding the generational contract, and blinded themselves through action (reducing visibility increasing corruption etc). Front-loaded benefits eventually must be paid back, but they've left their children to foot and pay the bill. This touches on Thomas Paine's writings in his Rights of Man, but I digress.

Minor shortages in key goods started about a year ago, and the grocery stores have been good at hiding it by putting things in front of the spaces so people won't notice empty shelves. That can't help but get so much worse with the tariffs in place now.

Update: Also, while I touch on market related things I didn't want to boil down into the details too much, there's a lot more. As a result I didn't even touch on the adoption of FASAB S-56 in 2019 during the Kavanaugh grilling which was used as a smokescreen. Catherine Fitts best touches on why this legislation is important and relevant to discussions of consolidation, she's done interviews.

The TL;DR is any bank that meets the requirements under this measure can legally keep separate books and modify the disclosed consolidation as needed without footnote. No measures will be available to track artificial distortions originating here except by lagging indicator (Mises, SCP, chaos).