Mr. Pozsar, originally from Hungary, was an advisor to the US Treasury for a number of years, then worked for the New York Federal Reserve Bank where he was deeply involved in the response to the mess known as “2008” or the “Global Financial Crisis.” Currently, he is at Credit Suisse.
Basically, what Zoltan knows, which you and I do not, is how the financial plumbing of the Western World (the “International Community”) works. Since he is the global expert, when Zoltan speaks most people listen.
And speak he did.
On March 7, Zoltan released a note calling the end of the current monetary world order which he dubs “Bretton Woods II.”
Bretton Woods I was the period from 1945-1971 when all currencies were tied to the US Dollar and the US Dollar was tied to gold. Richard Nixon broke the link to gold, and ushered in the current era of financialization.
What Zoltan pointed out is that the current system is built on “inside money.” This is money that is issued as an asset by one party (like a bank), but is someone else’s liability. Essentially, it is debt. There is also “outside money,” which is not debt, such as anything backed by gold, or commodities, and – you guessed it – crypto.
Foreign reserves held by central banks in foreign currencies are usually considered outside money, and thus safer, but Russia’s funds were frozen by the West. Other countries are going to be leery of that action, further reducing trust in Bretton Woods II.
One country bound to be concerned is China, which Zoltan sees as the only place that can sort out the mess of Russian commodities sinking in price, while non-Russian commodities spike. Zoltan goes on to explain, in some detail, how shipping will be involved and shipping rates will also go through the roof.
Zoltan’s pessimistic forecast for the West ends with soaring inflation, the dollar much weaker, and the Renminbi much stronger and backed by a basket of commodities – yes, including gold. We will be living in “Bretton Woods III” where outside money is king. And finally, Zoltan ends with the following, which should give us all hope:
“After this war is over, money will never be the same again… and Bitcoin (if it still exists then) will probably benefit from all this.”
You heard it here on Blockster first.