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July 10, 2023 | De-Dollarization Just Got Real, Part 2: BRICS To Introduce Gold-Backed Currency In August

John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What To Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website in 2004 and sold it in 2022.

There’s an old saying about predictions: It’s okay to forecast an event or a date, but not both. But lately, Jim Rickards has been predicting both the introduction by the BRICS coalition of gold-backed currency and the date, August 22. Here’s a short video where he lays it out.

Based on subsequent headlines, it seems that Rickards’ gamble paid off, with him nailing both parts of the story:

Russia confirms BRICS will create a gold-backed currency

(Kitco News) – Friday, according to state-run RT, the Russian government has confirmed that Brazil, Russia, India, China and South Africa, also known as BRICS nations, will introduce a new trading currency backed by gold. The official announcement is expected to be made during the BRICS summit in August in South Africa.

The latest news is adding new momentum to the ongoing de-dollarization trend unfolding in the global economy.  Since mid-2022, central banks worldwide have been buying gold at a historic pace in part to diversify their reserve away from the U.S. dollar.

For many analysts, a gold-backed currency is the next evolution in this process. Many analysts have seen China’s recent gold purchases as an attempt to bring international credibility to the yuan.

At the same time, the U.S. government’s weaponization of the U.S. dollar against Russia for invading Ukraine has created some geopolitical uncertainty among some nations allied with Russia.

What does this mean?

There’s a lot to consider here, including:

  • The introduction of a gold-backed BRICS currency is the beginning, not the end, of a long journey. It will have to survive the inevitable growing pains as technical questions are (sometimes very messily) worked out, and people will have to be convinced to use it. On the latter point, Rickards predicts that each BRICS country will issue bonds denominated in the new currency and encourage citizens to buy them, thus jumpstarting a bond market that will then go global.
  • We’ll have to see what exactly “gold-backed” means. Will the currency be convertible into gold at government offices or via bank accounts? Will participants settle trade imbalances by shipping physical gold from vault to vault? Will there be some kind of blockchain-like ledger that accounts for who owns what? Will China be in charge of everything or will decision-making be distributed?
  • The BRICS countries will have to prove they can play nice with each other, something that, based on past history and current governance styles, is not at all guaranteed. Picture the eurozone with eight different flavors of dictatorship.
  • How will the existing fiat monetary powers react to such a challenge? The US tends to respond violently to countries that nationalize their resources or otherwise deviate from dollar hegemony. A gold-backed BRICS currency would be orders of magnitude more threatening than, say, a couple of random countries trading oil in yuan. So it’s possible that the US response would be commensurately extreme. Since we’re already on the verge of WWIII in two separate theaters, any escalation from here would take the world into “inconceivable” territory.
  • Last but least, the BRICS currency is emerging at the exact time that central banks around the world — including some of the BRICS — are rolling out central bank digital currencies (CBDCs) that appear to be designed more as tools for social control than as improvements in national monetary systems. The new BRICS currency seems like a separate issue. But could it be part of the same overarching plan? Stay tuned.

Good for gold

Assuming the world manages to avoid a nuclear war, gold probably wins in two ways if a gold-backed BRICS currency gains traction in global trade.

  • The participants will need more gold to back a rising amount of currency in circulation, increasing demand for limited supplies of available metal.
  • The existence of a major gold-backed currency would lead to a public debate over the difference between and relative merits of fiat currency and sound money. Millions of newly minted gold bugs will result (since that’s just what happens when normal people actually consider these issues) leading to a big jump in retail gold demand.

To sum up, many things have to go right for the BRICS currency to launch successfully and gain traction, and a smooth introduction is probably the least likely scenario. But there’s a decent chance that it’s good for gold. In any event, it’s nice to have both an event and a date to look forward to.




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July 10th, 2023

Posted In: John Rubino Substack

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