The Ultimate Cheat Sheet for Understanding a BRICS Gold-Backed Currency
On August 8, 2023
As anticipation builds for the upcoming BRICS Summit in South Africa this month, the global economic landscape stands on the brink of a potential transformation. Understanding what’s truly happening around the potential for a BRICS gold-backed trading currency is a highly complex and geo-politically charged subject. So I have created the Ultimate Cheat Sheet that gives you everything you need in a convenient list of key information.
The landscape of BRICS Alliance discussions, rumors, and implications presents a complex tapestry that could reshape international finance. The Cheat Sheet below breaks down the intricate details surrounding the prospects of a BRICS gold-backed trade currency and the resurgence of a gold currency standard. All the information you need is listed under a few key categories.
Hope this helps you prepare for what may be the first, tangible blueprint and fist stage of Our Global Currency Reset (GCR)!
The Big Picture: Navigating Towards a New Financial Paradigm
From Russia’s pivotal role in spearheading an expanded BRICS trade settlement currency to discussions about reviving the gold standard, the stage is set for a paradigm shift in global finance. This ultimate cheat sheet unveils a series of interconnected points that shed light on the intricate journey towards potentially breaking free from the dominance of the US dollar and western fiat currencies. As economists, investors, and policymakers grapple with the intricate web of gold and credit relationships, the groundwork for a new financial landscape is being laid.
- Russia has confirmed the agenda for an expanded BRICS trade settlement currency at the Johannesburg summit.
- The return of gold standards is being discussed as a possibility if a new gold-backed trade settlement currency emerges.
- The currency board model is considered as a potential template for implementing gold standards.
- Gold reserves must cover the bank note issue, and both Russia and China are assessed to have ample cover to implement gold standards.
- The opportunity for other allied nations to implement currency boards with the renminbi is mentioned.
- There is a deficit of above ground gold stocks in the western alliance and nations due to vast quantities of bullion migrating from the west to the east.
- There are indications that a new gold-linked trade settlement currency will be proposed at the BRICS summit in Johannesburg.
- The specific details of the proposal, including its form and implementation, are yet to be revealed.
- Russia is leading the project, and it is speculated that Sergei Glazyev’s work may be incorporated.
- The global confidence in throwing off the dominance of the US dollar and western fiat currencies is growing.
- Economists and investors in the western alliance will need to understand the relationship between gold and credit in a gold standard system.
- Social legislation and regulations may need to be rescinded, and responsibility for individual actions handed back to them.
- Russia, China, and other countries have a stronger position to operate currency boards tied directly or indirectly to gold.
- A currency board is a system that fixed the exchange rate to an anchor currency and guarantees convertibility.
- A currency board requires sufficient foreign exchange reserves to cover the entire narrow money supply and provides confidence to holders of the currency.
- The role of the monetary authority is limited to controlling currency issuance and should be separate from government funding and banking supervision.
- The classic gold standard and currency board systems share the separation of currency issuing from banking responsibilities.
- In the classic gold standard, gold backing for the currency does not need to be 100%. Sir Isaac Newton proposed a minimum 40% formula.
- The 1844 Bank Charter Act required the Bank of England to back every additional bank note in circulation with gold.
- Critics argue that currency boards and gold standards are too inflexible, but this characteristic is intentional.
- Governments without welfare commitments can more easily avoid budget deficits under these systems.
- Weaknesses in emerging economies’ currencies are often attributed to mismanagement, lack of international credibility, and misguided monetary policies.
- African nations faced challenges in undoing progress made under colonial rule and exploring self-determination, often experiencing corruption and mismanagement.
- China now offers investment in African infrastructure through local partnerships, providing an alternative to foreign aid and potential economic growth.
Breaking Down the Gold-Backed Trade Currency: Unveiling the What, How, and Why
The cornerstone of this potential transformation lies in the establishment of a gold-backed trade settlement currency within the BRICS framework. As Russia’s agenda gains momentum, supported by key players like Saudi Arabia and Iran, the implications for energy and commodity exporters become increasingly pronounced. Unraveling the intricacies of this process, we delve into the motivations, sequential steps, and the potential consequences that could ripple through global markets.
- BRICS+ aims to establish a new industrial revolution for emerging nations, with credible gold standards as the foundation.
- A gold-backed trade settlement currency provides an alternative payment medium to the dollar, particularly appealing to energy and commodity exporters.
- Russia, supported by countries like Saudi Arabia and Iran, is motivated to devise and back a gold-backed trade settlement currency.
- The next step involves major currencies within the BRICS block transitioning to gold standards, starting with Russia and then China.
- The introduction of a gold-backed trade currency is expected to undermine the purchasing power of the dollar, leading to higher oil and gas prices.
- Rising oil prices will benefit Russia’s finances, and a gold standard would provide protection for the rouble, leading to stable interest rates.
- Sergei Glazyev and President Putin have expressed the objective of implementing a gold standard for the rouble.
- As the dollar weakens, both the rouble and renminbi are likely to seek protection through gold to mitigate potential consequences.
Breaking Down Russia’s Gold Position: A Pillar of Strength
Russia emerges as a central figure with an impressive gold position, a potential linchpin for driving this transformation. With substantial gold reserves and the capacity to exert foreign financial policies, Russia’s journey towards a gold standard gathers significance. By exploring Russia’s gold reserves, both official and unofficial, this section underlines the strategic depth of its position and how it could influence the trajectory of global finance.
- Russia officially holds 2,302 tonnes of monetary gold reserves, but there are additional unknown quantities held in the State Fund of Russia and the State Fund for Precious Metals.
- Unofficial estimates suggest that these additional funds may contain around 10,000 tonnes of gold, potentially bringing Russia’s total state holdings to over 12,000 tonnes.
- This amount of gold gives Russia the ability to pursue foreign financial policies and reduce dependence on external lenders, enhancing its reputation, credit rating, and investment attractiveness.
- Sergei Glazyev, who shares similar views to President Putin, has emphasized the importance of large gold reserves for Russia.
- Glazyev is also involved in discussions about replacing the US dollar for trade and commodity pricing in the Eurasian Economic Union, where gold is seen as a potential backing for trade settlements.
- Russia has a significant gold mine output of 325 tonnes, which is planned to be increased and was second only to China’s output of 375 tonnes.
- If Russia can monetize just 10,000 tonnes of its gold, it would provide four times cover for the monetary base (M0) and an additional 11% cover annually from mine output.
- Moving the rouble onto a gold standard would be beneficial for Russia, as it could be easily maintained by refocusing policy to exercise greater control over the monetary base.
- In the year to May, the monetary base was destructively inflated by 24%, highlighting the need for better control.
Breaking Down China’s Gold Position: The Dragon’s Hidden Arsenal
China’s carefully orchestrated accumulation of gold over decades sets the stage for a powerful influence on the unfolding narrative. Under the strategic stewardship of the People’s Bank of China, the nation’s gold reserves take on multifaceted roles. This section unravels China’s gold regulations, its production dominance, and the nuanced strategy behind its gold accumulation, all of which contribute to its substantial financial leverage.
- China implemented regulations in June 1983 to strengthen control over gold and silver, guarantee the state’s requirements, and combat smuggling, speculation, and profiteering.
- The People’s Bank of China (PBoC) is responsible for the control of gold and silver in China. It can allocate gold purchases to other state entities like the People’s Liberation Army and the Communist Party Youth Wing, retaining a small balance for reserve asset purposes.
- China has become the largest gold producer in the world, mining 6,869 tonnes since 2002, and processing this gold through state-owned refineries.
- The regulations establish the state’s monopoly over gold and silver, allowing for free importation but tightly controlling exports.
- The PBoC established the Shanghai Gold Exchange in 2002, under its control, to permit the public to acquire gold while maintaining state control over the commodities.
- China had been accumulating gold for nineteen years before allowing private ownership in 2002. It is estimated that the PBoC quietly accumulated as much as 25,000 tonnes during this period.
- The cost of China’s gold accumulation equates to roughly 10% of her exports over the period.
- The exact amount of China’s gold accumulation is speculative, but it is clear that a significant undeclared stockpile was deliberately accumulated by 2002 and allocated to various state entities.
- Deliveries of gold to the public since 2002, through the Shanghai Gold Exchange, have totaled over 22,000 tonnes, gross of returned scrap.
- Assuming China’s monetary authorities have 25,000 tonnes of gold available for monetization, it would cover the M0 money supply about 1.5 times at current gold prices.
The Combined Influence of Russia and China on a BRICS Gold Standard: A New Global Landscape
The intertwining journeys of Russia and China converge to establish a potent potential for a BRICS gold standard. The sheer weight of their combined efforts raises questions about the fate of the US dollar, the viability of existing fiat currency systems, and the prospects of a tectonic shift in international finance. Delving into the broader implications, this section examines the dynamics that could catalyze or hinder the realization of a new gold-backed financial order.
- China and Russia are moving towards protecting their currencies and their joint project for global industrialization of emerging economies by potentially adopting gold standards.
- China has been secretly accumulating gold bullion since 1983, and if the People’s Bank of China (PBoC) had accumulated 20,000-25,000 tonnes by 2002, the total could exceed 30,000 tonnes today.
- Russia accelerated its plans to acquire monetary gold following Western sanctions.
- Both China and Russia appear to be in a position to comfortably cover their narrow money supply measures, particularly bank notes issued by the monetary authority.
- Asian central banks are also reporting the accumulation of higher gold reserves, indicating a wider adoption of gold standards.
- The adoption of gold standards by China and Russia would lead to an accelerated destruction of the US dollar’s purchasing power, which is already on a path of decreasing value due to its debt trap.
- However, China’s economic objectives, particularly the protection of her export markets, may make gold standards unlikely as it would undermine major fiat currencies.
- Janet Yellen’s recent meetings in Beijing and Henry Kissinger’s subsequent visit were likely attempts to address the potential threat of a new gold-backed trade settlement currency on the dollar’s standing.
- China’s focus is increasingly on protecting her investments in Asia, Africa, and Latin America, as rising dollar interest rates can be damaging to emerging nations, which may encourage them to seek protection by joining BRICS.
Summing It All Up as We Await the Forthcoming BRICS Summit: A Glimpse into the Future
As the world’s attention turns to the impending BRICS Summit in South Africa, this guide offers a panoramic view of the multifaceted forces at play. From the fading dominance of the dollar to the potential collapse of the fiat currency system, the intricacies of global finance are dissected, providing a lens through which to understand the converging currents of change. With Russia and China at the helm of a potential transformation, this ultimate cheat sheet illuminates the journey towards a new economic era, poised on the edge of redefining the world’s financial order.
- The Russian and Chinese axis sees clear advantages in supporting a new trade settlement and commodity purchasing gold-backed currency, and the introduction of such a currency could happen rapidly, taking the world by surprise.
- The fiat currency regime based on the dollar is believed to have run its course, leaving multiple debt traps and an outlook of stagflation or worse within the western alliance.
- The world’s fiat currency regime is facing existential crises, including government debt traps, a turning credit cycle, and the inability of major central banks to rescue failing commercial banks.
- The collapse of the bullion trading system, which revolves around swaps, leases, and rehypothecations of bullion, could add to the problems and be triggered by the end of the fiat currency system.
- China and Russia have prepared for this moment, with sufficient bullion available to cover their narrow money supply and protect their currencies from a fiat currency crisis.
- Other nations may find it more difficult to move towards gold backing of their currencies due to a shortage of monetary gold caused by double counting of reserves through leasing and swaps.
- Many BRICS attendees at the Johannesburg meeting may need to rely on China’s yuan through a currency board relationship if they want to pursue gold backing for their currencies.
- The rest of the world faces the prospect of being trapped in a widespread fiat currency collapse with no visible escape.
Contributing Source Article: https://www.goldmoney.com/research/gold-is-replacing-the-dollar
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