If Gold Was Just A Barbarous Relic
The comments below are an edited and abridged synopsis of an article by Jim Rickards
There’s nothing new about the Russian accumulation of gold bullion in their reserve position. It began in a material way in 2009 when Russia had about 600 tonnes of gold.
Today, Russia has 2,183 tonnes, a stunning 264% increase in less than 10 years. Russia is the sixth-largest gold power in the world after the US, Germany, the IMF, Italy and France.
Russia’s gold hoard is over 25% of the US hoard, but Russia’s economy is only 8% the size of the US economy. This gives Russia a gold-to-GDP ratio over three times that of the US.
One reason Russia is accumulating gold is as a dollar hedge. Russia is the second-largest energy producer in the world. Most of that energy is sold for dollars. Russia can hedge potential dollar inflation by buying gold.
Another reason has to do with the avoidance of US sanctions. Gold is nondigital and does not move through electronic payments systems, so it is impossible for the US to freeze on interdict.
A deeper reason is that Russia has a long-term plan to subvert the dollar’s role as the leading global reserve currency. The ruble is not positioned to be a reserve currency, but a new cryptocurrency backed by gold would be a good candidate.
Russia’s central bank will consider a new study that suggests just such a gold-backed cryptocurrency to settle balance of payments among willing participants. This plan is in its preliminary stages at this point, but the Russian endgame has been revealed. The dollar’s days as the leading reserve currency are numbered.
Russia is not the only nation accumulating gold as a means to move away from the dollar. China belongs on that list, and many others.
Malaysian Prime Minister Mahathir Mohamad recently promoted the idea of a common trading currency for East Asia that would be pegged to gold. “The currency that we propose should be based on gold because gold is much more stable,” he said.
The global monetary regime has collapsed three times over the past 100 years (1914, 1939, 1971). It seems to happen about every 30 to 40 years, and it’s been over 40 years since the last collapse, so we’re due. Got gold?
