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Why the dollar is finished

July 23, 2023

Why the dollar is finished

Last week in my Goldmoney Insight, I analysed the rationale for a new gold backed trade settlement currency on the agenda of the BRICS summit in Johannesburg on 22—24 August. This article is about the consequences for the dollar-based fiat currency regime.

There is strong evidence that planning for this new trade settlement currency has been in the works for some time and has been properly considered. That being so, we are witnessing the initial step away from fiat to gold backed currencies. Without the burden of expensive welfare commitments, all the attendees in Johannesburg can back or tie their currency values to gold with less difficulty than our welfare-dependent nations. And it is now in their commercial interests to do so.

We have been brainwashed with Keynesian misconceptions and the state theory of money for so long that our statist establishments and market participants fail to see the logic of sound money, and the threat it presents to our own currencies and economies. But there is a precedent for this foolishness from John Law, the proto-Keynesian who bankrupted France in 1720. I explain the similarities. That experience, and why it led to the destruction of Law’s livre currency illustrates our own dilemma and its likely outcome.

It’s not just a comparison between fiat currency and gold. America’s financial position is dire, more so than is generally realised. The euro is additionally threatened with extinction because of flaws in the euro system, and the UK is already in a deeper credit crisis than most commentators understand.

Introduction

On 7 July, news leaked out and was then confirmed by Russian state media that the BRICS meeting in Johannesburg would have a proposal on the agenda for a new gold-backed currency to be used exclusively for trade settlement and commodity pricing…

…click on the above link to read the rest…

Global South: Gold-backed currencies to replace the US dollar

January 21, 2023

Global South: Gold-backed currencies to replace the US dollar

The adoption of commodity-backed currencies by the Global South could upend the US dollar’s dominance and level the playing field in international trade.
https://media.thecradle.co/wp-content/uploads/2023/01/the-power-of-BRICS-3.jpg

Photo Credit: The Cradle
Let’s start with three interconnected multipolar-driven facts.

First: One of the key take aways from the World Economic Forum annual shindig in Davos, Switzerland is when Saudi Finance Minister Mohammed al-Jadaan, on a panel on “Saudi Arabia’s Transformation,” made it clear that Riyadh “will consider trading in currencies other than the US dollar.”

So is the petroyuan finally at hand? Possibly, but Al-Jadaan wisely opted for careful hedging: “We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations including the US and we want to develop that with Europe and other countries.”

Second: The Central Banks of Iran and Russia are studying the adoption of a “stable coin” for foreign trade settlements, replacing the US dollar, the ruble and the rial. The crypto crowd is already up in arms, mulling the pros and cons of a gold-backed central bank digital currency (CBDC) for trade that will be in fact impervious to the weaponized US dollar.

A gold-backed digital currency

The really attractive issue here is that this gold-backed digital currency would be particularly effective in the Special Economic Zone (SEZ) of Astrakhan, in the Caspian Sea.

Astrakhan is the key Russian port participating in the International North South Transportation Corridor (INTSC), with Russia processing cargo travelling across Iran in merchant ships all the way to West Asia, Africa, the Indian Ocean and South Asia.

The success of the INSTC – progressively tied to a gold-backed CBDC – will largely hinge on whether scores of Asian, West Asian and African nations refuse to apply US-dictated sanctions on both Russia and Iran.

…click on the above link to read the rest…

Is China Preparing A Gold-Backed Yuan: Beijing Greenlights Purchases Of Billions In Bullion

April 16, 2021

Is China Preparing A Gold-Backed Yuan: Beijing Greenlights Purchases Of Billions In Bullion

In 2018, the Chinese launched a gold-backed, yuan-denominated oil futures contract.  These contracts were priced in yuan, but convertible to gold, raising the prospect that “the rise of the petroyuan could be the death blow for the dollar.”

Two weeks ago, The IMF reported that the global share of US-dollar-denominated exchange reserves dropped to 59.0% in the fourth quarter, according to the IMF’s COFER data released today. This matched the 25-year low of 1995.

Also last week, Peter Thiel warned “Bitcoin should also be thought [of] in part as a Chinese financial weapon against the US… It threatens fiat money, but it especially threatens the U.S. dollar.”

All of which sets the stage for the dramatic headlines that hit this morning, as Reuters reports that China has given domestic and international banks permission to import large amounts of gold into the country,

The People’s Bank of China (PBOC), the nation’s central bank, controls how much gold enters China through a system of quotas given to commercial banks.It usually allows enough metal in to satisfy local demand but sometimes restricts the flow.

In recent weeks it has given permission for large amounts of bullion to enter, the sources said.

“We had no quotas for a while. Now we are getting them … the most since 2019,”said a source at one of the banks moving gold into China.

…click on the above link to read the rest of the article…

How We Got Here: the Global Economy’s 75-Year Stumble to the Precipice

July 5, 2020

How We Got Here: the Global Economy’s 75-Year Stumble to the Precipice

Not only will there not be a recovery, but there can’t be a recovery, as those brittle extremes have been lost for good.

How did the global economy end up teetering on a precarious financial precipice? To formulate a cogent answer, let’s take a whirlwind tour of the history of the global economy 1946-2020.

Before we start the tour, I want to return briefly to my first Musings of the year, which was posted on January 4, 2020, before Covid-19 was officially announced on January 23, 2020. (The Musings Reports are sent weekly to patrons and subscribers at the $5/month or higher level.)

Instability Rising: Why 2020 Will Be Different:
“Economically, the 11 years since the Global Financial Crisis of 2008-09 have been one relatively coherent era of modest growth, rising wealth/income inequality and coordinated central bank stimulus every time a crisis threatened to disrupt the domestic or global economy.This era will draw to a close in 2020 and a new era of destabilization and uncertainty begins.”

The long-term trends set up a row of dominoes that the pandemic has toppled. But any puff of air that toppled the first domino would have toppled all the dominoes of fragility, instability and unsustainable extremes that characterize the global economy.

The whirlwind tour of the global economy’s history must include these essential dynamics: energy, currencies, globalization, debt and financialization, which broadly speaking refers to everything that renders finance (borrowing, leverage, speculation) more profitable than actually generating goods and services.

The “glorious thirty” (Les Trente Glorieuses) years from 1946 to 1975 were decades of rising prosperity in the developed world (Europe, Japan, North America) and rapid development in the first tier of developing countries in Southeast Asia and elsewhere. (Decolonized nations and China struggled with political, social and economic turmoil.)

…click on the above link to read the rest of the article…

The Apex Predator That Will Take Down Wall Street (And K Street)

January 14, 2019

The Apex Predator That Will Take Down Wall Street (And K Street)

Grant Williams grabbed our vote for the top Alt-Finance presentation of 2017 for A World of Pure Imagination , which highlighted global stock, bond and real estate bubbles that are now showing signs of imploding.

The co-founder of RealVision TV excelled again during 2018 for Cry Wolf, an encomium for a gold-backed currency, which Williams argues would act as an “apex predator” to check government policies that have enticed Americans to borrow themselves into near-bankruptcy.

“In gold’s absence, bankers have multiplied precipitously, creating new variations on the same theme: credit,” says Williams, who likens the process to the proliferation of deer in Yellowstone National Park following extermination of wolves in the 1930s. “They have grazed the financial landscape to virtually nothing.”

Williams’ arguments are well-understood in the precious metals community, where he has taken on a growing role as a Yoda of sorts—a lonely voice arguing cogently for financial sanity.

However, Williams’ ideas are essentially unknown to ordinary investors and the general public, in part because (ironically, for what many describe as a capitalist economy) free market thinkers are essentially banned from governments, universities, and the mainstream media.

Hence the importance of Cry Wolf, which dramatically illustrates the role of what Joseph Schumpeter called “creative destruction,” whose effects Williams likens to the reintroduction of wolves in Yellowstone in 1995.

Destructive preservation: rewarding the inefficient

Right now, the U.S. economy is (in many ways) the opposite of a free market.

Much of this is directly tied to the gradual banning of gold-backed currencies, which has enabled governments to print money and distribute it to favored interest groups, often in secret, without taxpayer approval.

…click on the above link to read the rest of the article…

Russia Stockpiles Gold, But Why?

March 27, 2018

Russia Stockpiles Gold, But Why?

The US’s overhang of debt and looming trade war is worrisome on many levels as the value of the dollar keeps decreasing and the national debt spiraling. So, what should we make of the fact that the Central Bank of Russia has been steadily amassing vast gold reserves since 2015? By the end of 2017, its total gold reserves rose to 1,828.56 tons, usurping China’s place as the country with the fifth largest gold reserves.

Russia has been aggressively increasing its gold reserves for a reason. It has seen the US dollar dominate as a global currency and is working with China to end the US/Western currency supremacy. Their strategy appears to be working. Russia and China are in the midst of rumors of introducing gold-backed futures to circumvent the U.S dollar. 

The US dollar has had no gold-backing since 1933, nor has the US increased its gold reserves for a decade. See chart below.

With speculation of Russia and China working on a gold-backed currency, a shift in monetary power from the West to the East seems to be their ambitions. The situation between East and West is exacerbated by recent tensions between Russia and the UK, since the alleged Kremlin poisoning of former spy Sergei Skripal and his daughter. British Prime Minister Theresa May has ousted 23 Russian diplomats from Great Britain. Geopolitical tension is once again, high.

It seems Russian may have tossed aside Das Kapital as its economic guidebook. Not only is creating a gold-backed currency appearing more likely month over month, but Russia has also brought inflation way downover the past decade. More importantly, Russia continues to lower their national debt, while the US has been increasing its debt to a record $21 trillion.

…click on the above link to read the rest of the article…

 

Yes, it’s possible for a gold-backed renminbi to dethrone the dollar

December 15, 2014

Yes, it’s possible for a gold-backed renminbi to dethrone the dollar.

“[W]e want to use our reserves more constructively by investing in development projects around the world rather than just reflexively buying US Treasuries. In any case, we usually lose money on Treasuries, so we need to find ways to improve our return on investment.”
– Unnamed senior Chinese official, cited in an FT article, ‘Turning away from the dollar’, 10th December 2014.

“Mutually assured destruction” was a doctrine that rose to prominence during the Cold War, when the US and the USSR faced each other with nuclear arsenals so populous that they ensured that any nuclear exchange between the two great military powers would quickly lead to mutual overkill in the most literal sense.

Notwithstanding the newly dismal relations between the US and Russia, “mutually assured destruction” now best describes the uneasy stand-off between an increasingly indebted US government and an increasingly monetarily frustrated China, with several trillion dollars’ worth of foreign exchange reserves looking, it would now appear, for a more productive home than US Treasury bonds of questionable inherent value.

Until now, the Chinese have had little choice where to park their trillions, because only markets like the US Treasury market (and to a certain extent, gold) have been deep and liquid enough to accommodate their reserves.

…click on the above link to read the rest of the article…

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