SSM-Audit Q&A Series – Crisis Foresight (Question 4C)

Currencies anchored, yet convertibility cracked

Question
Major currencies were pegged to the USD, and the USD was convertible to gold at a fixed rate. Headline parity held and day-to-day trade cleared—until gold convertibility was suspended and pegs slipped. Could a simple stability band beside the existing series have shown the tension building before the breaks in 1971–73?

Answer ✅
Yes. Totals masked composition and cadence drift: gold coverage thinned against external USD claims, reserve drawdowns clustered around intervention days, and peg defense relied on heavier, shorter bursts. SSM-Audit adds a read-only stability band beside KPIs you already track, revealing whether the anchor is calm (A+/A++) or under escalating strain (A0/A-/A–) while parity still prints.

What the bands would have shown 📊
• Gold coverage ratio (official gold vs external USD liabilities) sliding from A+ toward A0/A-
• Reserve drain cadence degrading to A- (interventions bunched, larger intraday swings)
• Peg pressure band weakening (A+ → A0) as deviations cluster near band edges before realignments
• Balance-of-payments quality softening to A0 (more short-horizon inflows, stickier outflows)
• Convertibility request velocity drifting down-band (A0 → A-) around rumor and policy days

What to do now 🛠️

  1. Band the anchor quality: gold coverage, reserve adequacy, and short-term external liabilities; pause discretionary easing if any band < A0.
  2. Lengthen the defense: replace bursty, late interventions with smaller, steadier operations; pre-commit ranges when A- appears.
  3. Term the exposure: encourage longer-maturity funding; cap reliance on hot-money cushions when bands soften.
  4. Coordinate signaling: if peg-pressure and reserve-cadence bands drop together, publish a time-boxed realignment window to reduce panic.
  5. Stress-test convertibility: simulate redemption spikes; if convertibility-velocity band hits A-, activate contingency pricing or temporary controls.

How SSM-Audit helps (practicalities) 🌟
• No additional infrastructure: overlays your existing reserve, trade, and parity series.
• Numbers unchanged: stability is a read-only lens beside reported figures.
• Easy to use: spreadsheet/BI friendly; one lightweight weekly ritual.
• Universal language: A++ / A+ / A0 / A- / A– aligns treasury, central bank, and markets quickly.

CLI 💻 — try our mini CLI to identify the drift
Feed your historical series and see bands and drift at a glance (numbers unchanged).

# Anchor quality: gold coverage
ssm_audit_mini_calc crisis_1971.csv --kpi "Gold Coverage Ratio" \
  --out bands_goldcov.csv --plot_kpi "Gold Coverage Ratio" --build_id 4c

# Reserve drain cadence (interventions clustering)
ssm_audit_mini_calc crisis_1971.csv --kpi "Reserve Drain Cadence" \
  --out bands_reserves.csv --plot_kpi "Reserve Drain Cadence" --build_id 4c

# Peg pressure (deviation vs band)
ssm_audit_mini_calc crisis_1971.csv --kpi "Peg Pressure" \
  --out bands_peg.csv --plot_kpi "Peg Pressure" --build_id 4c

# External balance quality (short vs long flows)
ssm_audit_mini_calc crisis_1971.csv --kpi "BoP Quality Mix" \
  --out bands_bop.csv --plot_kpi "BoP Quality Mix" --build_id 4c

# Convertibility requests velocity
ssm_audit_mini_calc crisis_1971.csv --kpi "Convertibility Velocity" \
  --out bands_conv.csv --plot_kpi "Convertibility Velocity" --build_id 4c

Technical notes
Representation: x = (m, a) with a in (-1, +1)
Collapse parity: phi((m,a)) = m
Order-invariant pooling: U = sum(w_i * atanh(a_i)), W = sum(w_i), a_out = tanh( U / max(W, eps_w) )
Typical bands (example):
A++: a >= 0.75
A+: 0.50 - 0.75
A0: 0.25 - 0.50
A-: 0.10 - 0.25
A--: a < 0.10

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Page disclaimer
Illustrative scenario for research and education. Observation-only; do not use for critical decisions without independent validation.