The Micro Effect reports US Treasury Secretary
Tim Geithner shocked global markets by revealing that Washington is
"quite open" to Chinese proposals for the gradual development of a
global reserve currency run by the International Monetary Fund.
The dollar plunged instantly against the euro, yen, and sterling as the
comments flashed across trading screens. David Bloom, currency
chief at HSBC, said the apparent policy shift amounts to an earthquake
"The mere fact that the US Treasury Secretary is
even entertaining thoughts that the dollar may cease being the anchor of
the global monetary system has caused consternation," he said.
Geithner later qualified his remarks, insisting that the dollar would
remain the "worldís dominant reserve currency Ö for a long period of
time" but the seeds of doubt have been sown.
The markets appear
baffled by the confused statements emanating from Washington.
Barack Obama told a new conference hours earlier that there was no
threat to the reserve status of the dollar.
"I donít believe that
there is a need for a global currency. The reason the dollar is
strong right now is because investors consider the United States the
strongest economy in the world with the most stable political system in
the world," he said.
Flashback:Barack Obama: We Must Embrace
Globalism And The Emerging One World Economy
Obama Throws Support Behind World Tax
says: Iíve been battling the Organization for Economic Cooperation
for years, ever since the Paris-based bureaucracy unveiled its "harmful
tax competition" project in the late 1990s. Controlled by Europeís
high-tax welfare states, the OECD wants to prop up the fiscal systems of
nations such as Greece and France by hindering the flow of jobs and
capital to low-tax jurisdictions.
Guided by a radical theory know
as Capital Export Neutrality, the OECD wants to impose global tax rules
that would prevent taxpayers from ever having the ability to benefit
from better tax law in other jurisdictions. This is why, for
instance, the international bureaucrats are anxious to undermine
national tax laws -- such as Americaís favorable treatment of bank
deposits from overseas -- that enable people to escape onerous tax
Bolstered by support from the Obama Administration, the
OECD now is taking its campaign to the next level. At its Global
Tax Forum in Bermuda, which ends later today (Wednesday), the
bureaucrats unveiled a new scheme that effectively would result in the
creation of something akin to a World Tax Organization.
vehicle for this effort is a Multilateral Convention on Mutual
Administrative Assistance in Tax Matters. This may sound dry and
technical, but the OECD wants all nations to participate in this pact,
which has existed for a couple of decades but was radically expanded
last year to give high-tax governments sweeping new powers to impose bad
tax law on income generated in low-tax jurisdictions.
real smoking gun is that the OECD has put itself in charge of the
"coordinating body" that will have enormous powers to interpret the
agreement, modify the pact, and resolve disputes -- thus giving itself
the ability to serve as judge, jury, and executioner.
This is a
profoundly dangerous development with all sorts of very troubling
implications. Since Iím in Bermuda trying to destabilize this
effort, I donít have time for extensive analysis, but hereís a
press release from the Center for Freedom and Prosperity and here
are some of my immediate concerns.