Zoltan Pozsar Says We’re Witnessing Birth of a New World Monetary Order

Credit Suisse with over $800 Billion assets under management said in a recent newsletter that “We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West.” According to Credit Suisse (CS) short-term rate strategist Zoltan Pozsar, the United States is in the midst of a commodity crisis that is spawning a new world monetary order that will eventually weaken the current dollar-based system and lead to higher inflation in the West.

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The Bretton Woods agreement (named after the conference location in Bretton Woods, New Hampshire) was negotiated by 44 countries as World War II was coming to an end, and it established gold as the basis for the US dollar, with other currencies then pegged to the greenback. This structure began to fray in the 1960s. It started to fray as the United States’ trade deficits became too large to ignore, and it collapsed completely in 1971 when the United States abandoned the dollar-gold link.

According to Pozsar, just as the first Bretton Woods era (1944-1971) was backed by gold, and Bretton Woods II (1971-present) was backed by “inside money” (basically US government paper), Bretton Woods III will be backed by “outside money” (gold and other commodities).

The day the G7 nations seized Russia’s foreign exchange reserves following the latter’s invasion of Ukraine marks the end of the current monetary regime. What was previously thought to be risk-free became risky as non-existent credit risk was instantly replaced by very real confiscation risk.

What happened isn’t lost on China, and Pozsar sees the People’s Bank of China (PBOC) facing two options to protect its interests: sell Treasury bonds to buy Russian commodities or conduct its own quantitative easing, i.e. print renminbi to buy Russian commodities. Pozsar believes that both scenarios will result in higher yields and higher inflation in the West. Pozsar ended his note with a remark about bitcoin. Pozsar anticipates that bitcoin will benefit, but only “if it still exists.”

Chaahat Girdhar
Chaahat Girdhar

I'm Chaahat Girdhar, a journalist by profession who's turning her dreams into vision and vision into reality. I'm curious and have an appetite for gaining new knowledge. So I'm looking forward to learning things in the better way possible.

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