THE AUGUST BRICS SUMMIT: A GOLD-BACKED CURRENCY? OR JUST A FANCY ...
Just this last Monday, you'll recall, I blogged about Brazil's Central Bank's Digital Currency code, which apparently had a few key "features", features that I and others have been trying to warn about for some time(see Monday's blog, "Brazil's Central Bank Digital Currency Code has some Intriguing "Features").
But that code is being rolled out in the context of the upcoming BRICS summit just next month, for which Russia made an announcement which, if you were watching only the American or the West's propatainment "media", you'd learn absolutely nothing, because they simply somehow "forgot" to mention it. It's an announcement with huge financial and geopolitical significance (our thanks to E.G. for spotting and sharing this version of that story):
Note these important statements from the beginning of the article:
The importance of Russia’s announcement that a new gold-backed trade currency is on the BRICS meeting agenda for August 22—24 in Johannesburg seems to have gone completely over everyone’s heads, with mainstream media not even reporting it.
This is a mistake. China and Russia know that if they are to succeed in removing the dollar from their sphere of influence, they have to come up with a better alternative. They also know they have to consolidate their trade partners into a formidable bloc, so plans are afoot to consolidate BRICS, the Shanghai Cooperation Organisation, and the Eurasian Economic Union along with those nations who wish to join in. It will be a super-group embracing most of Asia (including the Middle East), Africa, and Latin America.
The groundwork for the new currency has been laid by Sergei Glazyev and is considerably more advanced than generally realised.
This article explains why Russia and China are now prepared to fully back Glazyev’s expanded project. For Russia, it is also now imperative to destabilise the dollar as a deliberate escalation of the financial war against America and NATO. China’s priority is no longer to protect her export trade, but to ensure that her African and Latin American suppliers are not destabilised by higher dollar interest rates.
Additionally, the article contains a very helpful detailed historical review of how we came to this point. For our purposes here, I want to focus on these statements:
Since the western alliance’s sanctions, the signals coming out of Moscow have been clear: Sergei Glazyev, who is Putin’s point-man for macroeconomic policy has been waving the gold flag since then in plain sight. As a board member of the Eurasian Economic Union Commission (EAEU) since 2019, he was tasked by Putin to design a trade settlement currency for the EAEU. The initial statement through a news agency in Bishkek in early March 2022 reported that it was to be based on the currencies of the member states and a basket of undefined commodities. According to Glazyev, his brief was to create a Eurasian monetary and financial system to the exclusion of foreign currencies, particularly the dollar and euro.
The intention was also to remove exchange controls for cross- border settlements within the Eurasian membership, replacing the dollar as the commonly used settlement medium between them. A week later, in an article for Goldmoney[ii] I concluded that as stated the new currency would not work, and the only logical solution was to do away with the currency basket proposal and use gold backing solely to represent commodities. That way, it would be easy for other nations in the Shanghai Cooperation Organisation (SCO) to join in, which was the ultimate objective from the outset.
In July 2022, Glazyev was behind a move to beef up the Moscow gold exchange, the official line being that having been sanctioned from the London market Russian miners needed a more effective local market. But working in conjunction with the Shanghai Gold Exchange this was an important signal about the way Galzyev’s monetary thinking was developing. Confirmation came on 27 December last year, when he wrote an article for Vedomosti, a Moscow business paper, describing why the rouble needed to return to a gold standard. That article was co-written by his deputy on the EAEU committee designing the new trade currency and was a thinly veiled indication of the committee’s view.
Therefore, you did not have to be particularly astute to discern the trail of clues presented to us. We could assume with justification that gold was intended to be the sheet-anchor for this new currency probably from the outset, but some political hoops had to be jumped through to convince the EAEU member states that it was the solution.
The impracticality of basing a new trade currency on anything else other than gold had been established. It now turns out that this project is almost certainly a Trojan horse for something far larger. It was obvious that other members of the Shanghai Cooperation Organisation should be able to join in, and now it turns out that the invitation is being extended to members of the BRICS club as well. But that’s not all. The entire membership of the SCO, its dialog partners, and associate members will be attending the BRICS conference in Johannesburg on 22—24 August. I am assuming that the original list of 36 nations, which according to most recent reports has expanded to 41, includes the members of the EAEU who were not on the original list — at the time of writing this is yet to be confirmed.
That being the case, the BRICS currency project is not a cold start and not something to be planned for a distant future. The groundwork has already been prepared by Glazyev and the structure can be rapidly assembled once the necessary resolution is adopted. It is even possible that the necessary institution(s) exist waiting to be deployed. (Emphasis added)
You can bet your bottom dollar (if anyone will accept it) that the institutional infrastructure has already been planned out, for the very simple reason that neither Mr. Putin nor Mr. Glazyev are anyone's fools. The United States weaponized the dollar and the entire western financial system, and Russia and the rest of the BRICS nations have replied by creating an entirely new financial structure.
So how does all of this fit in with Monday's story about Brazil's central bank digital currency?
Very simply, it means that the BRICS nations are at a crossroads, and how they choose and what safeguards they build into that gold-backed system will determine whether or not their proposed currency is a real alternative to the weaponized dollar, or merely another version of financial servitude. If they erect a system where there is a real physical medium of exchange that consists of bearer-on-demand certificates of deposit that are genuinely convertible by anyone, nation-state or individual, into real physical gold upon demand, and if gold itself can be used directly to make purchases and clear transactions, then the system will be robust and, over some time will with either gradual or sudden swiftness replace the dollar. But if it is just another scheme to get everyone on board with a "digital 'currency'" that purports to be gold-backed without such convertibility and physical medium of exchange, it's just another Potemkin village with the yellow luster of gold as the lure. The latter may indeed be the ultimate goal, but even in that case, there will have to be a transition period where such convertibility is used to generate the trust in the final, cashless - and ultimately goldless - system. Indeed, a "gold-backed" central bank digital "currency" is just another way for central banks to put their fingers on the assaying scales. In short, my warning here is exactly the same as my warning about those American states that are also talking about the idea of "gold-backed" crypto-"currencies": without a real bearer-on-demand physical medium of exchange, and without real convertibility or the ability to use physical bullion in transactions, it's all talk. Fancy talk, to be sure, but still just talk.
We'll see what Mssrs. Glazyev, Lavrov, and Putin have in mind. I for one think it would be hazardous in the extreme to underestimate him. If I can see the problems with gold-backed crypto, he can too, and he may have some surprises in store to be revealed at that summit. At this juncture, my caveats notwithstanding, it would be foolhardy hubris and incompetence on the order of a Bai Den Dzho to bet against him.
See you on the flip side...
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