Tags: brics | petrodollar | gold | russia | china

RT: Russia-China Gold Standard Would Bring to End Dollar's Dominance

RT: Russia-China Gold Standard Would Bring to End Dollar's Dominance
(Dreamstime)

By    |   Monday, 11 December 2017 11:01 AM

The BRICS counties are considering starting an internal gold trading platform, which will mean an end to the West’s petrodollar dominance, a precious metals expert told RT.

The amount of physical gold traded rose 43 percent to 24,338 tons in 2016 from a year earlier, said Claudio Grass, of Precious Metal Advisory Switzerland.

“We have to put the BRICS initiative into a broader context. It is just part of a geopolitical tectonic shift which started decades ago. We have seen a constant outflow of physical gold from the West to the East. At the same time, the West has lost the economic war, and as a consequence, the focus now turns to the financial system. China dominates the world economy and has displaced the U.S. as the world’s most formidable economic powerhouse,” he told RT.

The creation of a new gold standard by the BRICS countries – an acronym coined by a Goldman Sachs analyst to describe the emerging economies of Brazil, Russia, India, China and South Africa – is a step toward ending the dominance of the U.S. dollar, the Federal Reserve’s fiat currency.

“As Bejing and Moscow understand that America used the dollar to control the world, by implementing a new kind of ‘Gold standard 2.0’ they want to distance themselves from this control. Furthermore, the vast majority of the people in Asia sees gold as superior, or ‘real’ money, something the West has forgotten, because of all the paper wealth (credit) they have accumulated,” Grass said.

BRICS countries, which are some of the biggest producers and consumers of commodities, make up 40 percent of the world’s population and about 23 percent of the world’s domestic product.

"In combination with the announcement of pricing oil in yuan, using a gold-backed futures contract in Shanghai, the establishment of the Asian Infrastructure Investment Bank and the New Development Bank, China is setting up an alternative to the post-Bretton Woods establishment. This is certainly a game changer,” Grass said.

A physically backed precious metals market will hurt the trading of derivatives based on gold’s value in New York and London.

The total trading volume in the London Over-the-Counter (OTC) gold market was estimated to be the equivalent of 1.5 million tons of gold in 2016. The volume of 100-ounce gold futures on New York's COMEX reached 57.5 million contracts during 2016 or 179,000 tonnes of gold, the analyst notes.

Meanwhile, the actual amount of mined gold is much smaller.

“If we now take into consideration that only approximately 180,000 tons of gold have actually been mined up to today the scam is just gigantic and obviously unsustainable. The paper scams in London and New York will either blow up when the paper price of gold drops to zero or when just a fraction of investors insists upon receiving physical gold in return,” Grass said.

Established gold exchanges could become extinct, especially as the dollar continues to lose value every time the Fed prints money during economic slowdowns.

“They will likely become obsolete and lose their importance over time. Although one cannot predict exactly how fast this will happen, the trend is clear: OTC and COMEX are working toward their own destruction,” he said.

The U.S. government has built up record levels of debt that can only be financed with low interest rates. After all, there are two ways for a country to default: stop making debt payments, or keep printing money to make those payments more feasible.

Grass cited the Heartland Theory of Halford Mackinder, a British geostrategist who predicted a major rivalry between physical gold and the U.S. dollar.

“As per my understanding, we are moving into the final phase, the battle between currencies – one that will be backed by a hard asset which was real money since time immemorial until 1971 and the other one, backed by promises that future generations will pay through debt, inflation and ever-rising taxation,” he said.

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The creation of a new gold standard by the BRICS countries – an acronym coined by a Goldman Sachs analyst to describe the emerging economies of Brazil, Russia, India, China and South Africa – is a step toward ending the dominance of the U.S. dollar, the Federal Reserve’s fiat currency.
brics, petrodollar, gold, russia, china
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2017-01-11
Monday, 11 December 2017 11:01 AM
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