New “Red Gold Standard” Threatens the Dollar From Peter Reagan at Birch Gold Group
GNN Note – As soon as countries begin, realistically, discussing gold as money, gold in circulation as payment for anything, anything at all…well, bad things tend to start happening to that country. Libya, for example, followed by Iran. Both countries merely mentioned, in public, that gold would be welcomed as payment and look at both of those countries today. There are no coincidences in life. Now we have Nord Stream 1 and 2 / END
This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Credit currencies no more, how a $300 jump in gold could happen this autumn, and money managers’ pros and cons of owning gold.
Are we looking at a rebirth of the gold standard under an Asian Bretton-Woods?
This recent analysis of Russian and Chinese economic developments caught my eye. An in-depth review of the current state of the global financial system, combined with speculation regarding the ultimate goals of the latest agreements between Russia and China, leads us in uncomfortable directions.
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As we know, sanctions have punished the West without stopping Russia’s invasion of Ukraine. This is not debatable – it’s simply fact. The U.S. has seen diminishing returns from levying financial sanctions against unfriendly nations for decades now. Sanctions are a form of economic warfare that don’t put soldiers’ lives at risk, that cost a fraction as much as military action and are far more politically palatable than armed conflict.
But they’re not working any longer. Rather than denying our adversaries resources, we’ve made them more resourceful.
With that in mind, it’s unsurprising that Russia may be preparing an Asian Bretton Woods-type financial pact with China. This effort, which has apparently been in the works for a while, rests on a few factors. Despite the ineffectiveness of Western sanctions, the world now knows that the U.S. dollar’s role as a global reserve currency can be turned into a weapon against any nation at any time.
And if a nation can completely evade sanctions by simply not using the U.S. dollar, how long until other players in the financial system start getting ideas?
We don’t need to tell you what the establishment of the ruble and the yuan as global reserve currencies would do to the West. That one spells itself out. But perhaps it’s worth going into the how of it all.
Their methods aren’t pretty, but there is no arguing that China is the most powerful economy in the world. Anyone who wants to argue this point in favor of the U.S. or Germany needs only reach for their nearest piece of electronics. While Russia doesn’t really have much in the way of economy, it has managed to form a junkie-dealer relationship with Europe, getting much of NATO hooked on Russian energy exports.
No more elements are needed to usurp the greenback, but we know that gold is going to end up being even more important in this scheme. After all, Bretton Woods wasn’t so much about economic strength or exports as it was central bank gold holdings. The original agreement was quite simple: it guaranteed convertibility of any participating nation’s currencies for U.S. dollars, and convertibility of U.S. dollars to gold. Bretton Woods meant the values of all currencies were connected to gold.
These days, we’re hearing that Russia holds 12,000 tons of gold and China holds 25,000 tons of gold. That’s some 4-5x more than the current U.S. gold reserve.
If we truly see this attempt to return the world’s #2 and #11 economies to a gold standard, it will be the economic equivalent of shooting the hostage. I expect we’d see 1971 in reverse – with nations around the world scrambling to peg their currencies to gold once again, just to stay current in the new world of sound money.
Such a move would grant massive economic benefits to early movers, and effectively render all unbacked fiat currencies obsolete. Gold would return to its historic role as money.
