(Newswire.net — December 8, 2018) — The association of five major emerging national economies: Brazil, Russia, India, China and South Africa are considering ditching US dollar in crude oil trading and shifting to trading physical gold, Bullionstar.com reports. Before explaining what that means, let’s review some economic and historical facts.
Printing money never fixes financial problems of countries because more money on the market means less value for the national currency. So, countries tie their currencies to gold, which means they can print as much money as they have reserve value in gold. Simply put – you can’t print gold.
In the Bretton Woods conference of 1944, the US dollar was tied to gold at a fixed rate of 35 dollars per troy ounce of gold. For the US economy, however, this wasn’t enough. A few decades later, the US president Nixon’s administration made a move that skyrocketed the value.
The US, however, has a history for being bad at balancing budgets and at the time fighting communism around the world was more expensive than anything else. In order to engage in wars oversea, the US government needed to borrow money from the US Federal Reserve (which is a private institution) and return what was loaned back with interests. However, after financing wars in Korea and Vietnam, the US had a massive fiscal deficit and its economy was close to collapse and there was no more gold to back the printing of dollars.
Then the US President Nixon persuaded the biggest crude oil producer in the world Saudi Arabia to trade oil in US dollars exclusively, which created a greater demand for the US’ currency. Soon other countries began to trade oil in US dollars, even the SSSR.
Higher demand meant greater value and every country in the world that trades oil had to have the US currency – introducing the petro-dollar. It made possible for the US to print more money without losing the value, even though it by far exceeded the amount of gold in reserve.
Also, that meant that if suddenly oil trade shifts to another currency, the US dollar would immediately lose its value and the US economy would plunge overnight.
The first countries that tried to ditch the petro-dollar were Iraq and Libya. Saddam was falsely accused of having WMDs and executed after the US invaded Iraq. After no one was really upset over this, the US proceeded to overturn Gaddafi without making up a good story to justify the attack on the sovereign country – introducing “war on terror.”
The Federal Reserves, however, get used to collect revenue every time the US “forces a democracy” onto some country so it started to invent smaller conflicts such as the one in Somalia and Ruanda but that was not nearly enough, so suddenly a new threat emerged – Introducing ISIS.
This new threat to world peace, however, backfired straight in Washington’s face. While the US was busy spending money to fund wars and military operations, Russia was able to recover and the Chinese economy exploded overtopping the US’s economy.
Soon, the Russian Federation and China agreed to trade crude oil in the Russian ruble and Chinese Juan. The US reacted quickly – introducing the Ukraine crisis.
It wasn’t hard to create a crisis in Ukraine. It needed some funding and weapons to start riots that led to a change of regime in Kiev. Again, “in the name of the democracy” a pro-Russian government was overthrown but some regions in Ukraine with a majority Russian population refused to comply and that created long term instability in the region. But the strategically important island of Crimea with a majority Russian population was immediately annexed to Russia which is not only natural but of crucial strategic importance to Moscow. That was exactly the move Washington was counting on – introducing Russophobia.
Let’s not forget the petro-dollar. Introducing sanctions to Russia, the ruble plunged and became instable. That prevented Russia from trading crude oil in its own currency. China, however, is harder to undermine because its economy growth and wealth – introducing the trade war with China.
Meanwhile, the US slips further in debt. All of the moves made by the US to preserve the petro-dollar were short term and the inevitable is coming.
The BRICS are considering an internal gold trading platform. That means setting up a trading value resistant to the US’s meddling. While inducing crises does influence the value of local currencies, gold is always gold.
The creation of a new gold standard by BRICS is also a step towards the end of the US dollar’s domination over the global economy, Russia Today reports.
“As Beijing 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 see gold as superior, or ‘real’ money, something the West has forgotten, because of all the paper wealth (credit) they have accumulated,” RT cited Claudio Grass, of Precious Metal Advisory Switzerland.
Introducing the final battle: Gold vs the US dollar
According to the Heartland Theory of Halford Mackinder, a British geostrategist at the beginning of the 21st century, we will soon face a war between physical gold and the US dollar, and this is just the beginning. There are various predictions on how it will end, but the fact is that more countries in the world are stockpiling gold.