THE EMERGENCE OF REGIONAL RESERVE CURRENCIES?

This important story was spotted and shared by M.W., with our gratitude, because by my reading of its contents "between the lines," as it were, it is confirming an hypothesis I first advanced a few months ago during one of our "quarterly wrapup" discussions with Catherine Austin Fitts on her Solari.com website.  We'll get back to this hypothesis in a moment, because what the article appears to be outlining is how it is taking shape in certain circumstances and conditions. Here's the story:

Now, as I've noted several times over the past few years, one of the key means of "dedollarization" being pursued and implemented by the various BRICS nations is direct dual-currency trade and clearing, and this remains the principal means pursed by the various BRICS nations according to this latest round of discussions as detailed by the article:

China and Russia have already made significant progress in this direction, having put their own intra-national trade on a rouble-yuan basis, with China acting as a conduit for Russia’s exports to other importers as well. As long ago as 2015, China launched her Shanghai-based CIPS (cross-border payments system), allowing banks to clear cross-border renminbi transactions onshore, instead of offshore settlements using SWIFT or New York clearing. Besides trading in gold and silver futures on the international section of the SGE, China has also established trading platforms pricing in renminbi for other key commodities: oil and copper futures in Shanghai, and on the Ganzhou Rare Metal Exchange spot prices for cobalt, tungsten, and a number of rare earth metals.

So far so good, but the problem in such a method is that it is very time consuming and, in the long run, thus not very cost effective nor efficient. After all, it would require, quite literally, such bi-lateral currency agreements with virtually every major trading partner of an individual country. In this respect, recall the event that I blogged about a few years ago, of Japan and India signing a mutual logistical assistance pact, agreeing to support the other country "logistically"  in the case of various emergencies, including military. The treaty was obviously aimed at China. But what was not specified in any public discussion of the treaty was how any such assistance was to be gauged, measured, and cleared. I speculated at the time that, given the very nature of the treaty itself as a precaution against an unforeseen emergency, that it was very likely that any secret protocols of the treaty probably made clear that such clearing was to be done directly in Japanese yen and Indian rupees, and by-passing the dollar and hence the American middleman - or muddleman as the case may be - completely.  Such expediencies may work for the short term, but as an efficient long-term solution to a problem (in this case, the problem being the weaponization of the reserve currency status of the dollar), it is clumsy.

This brings us to what the Chinese and Russians may be - and in my opinion are - up to; a modified gold standard. The article puts it this way:

But what interests us here is not so much commodity pricing but cross border trading settlements between China, Russia, other members of the SCO, BRICS+, and any other trading partners in the expanding “global south”. The solution proposed by Russia last year was to establish a gold-backed trade settlement currency which failed to make the Johannesburg agenda last August. India’s Keynesian leadership didn’t like it, and China was cautious, preferring not to rock the dollar boat. However, India is now accumulating gold and has sought the repatriation of 100 tonnes from the Bank of England, indicating that she now accepts that gold is the final solution, and that it may not be long in coming.

Other Asian central banks are similarly beefing up their gold reserves, as are the East Europeans, particularly Poland. The signal emanating from well-informed Singapore’s aggressive accumulation is important confirmation. The common story is that China and Russia are prepared to move to a gold standard, when circumstances dictate. We know that Russia has substantial reserves, perhaps as much as 12,000 tonnes including holdings in two sovereign wealth funds and she is beefing up her mine output. China has been secretly accumulating gold  off-balance sheet since 1983, became the largest gold mining nation by output over a decade ago, and she is like a Hotel California with respect to bullion imports from other nations. I believe various Chinese state accounts now hold a hidden total of over 30,000 tonnes. And we know that deliveries from the Shanghai Gold Exchange to the general public already total nearly 26,000 tonnes, not to mention the significant holdings by commercial banks on behalf of customer gold accounts retained within the SGE’s vaulting system. (Emphasis added)

While the article does not spell it out in so many words, I believe the highlighted and emphasized portions in the above quotation make clear what the "plan" is. To put it very succinctly, the plan is the hypothesis that I have been advancing in some of those discussions with Catherine Austin Fitts in previous Solari quarterly wrap-ups: regional reserve currencies, which have a built-in exchange rate mechanism based on gold.  I believe the model here is the old "snake" system that was in use in Europe prior to the establishment of the European Union. You'll recall that the "snake" system - which I outlined in some of my books - was the pegging of the smaller national currencies like the Austrian schilling, the Dutch gilder, or the Danish kroner, to the German Deutschmark. The exchange rates of those currencies were allowed to fluctuate with certain boundaries, and when they began to go outside those boundaries, the German Bundesbank would step in to restabilize those rates. The entire system, however, was entirely "fiat"; there was no bullion component to the underlying stabilization. It is this component, precisely, that I believe the Russians and Chinese was to inject into such a system. It's a clever and ingenious step, and would go a long way to accomplishing what it is designed to do: within, for example, the Eurasian trading bloc, that bloc composed of the former Soviet republics of central Asia, the Russian rouble would become the regional reserve currency in a snake-system, with local currencies pegged to the rouble in a snake-like system, but with the stabilization provided by the bullion.  It's not a return to the old pre-World War One gold standard, but it is a regional version of it.

If one looks carefully at this system it would appear perhaps to be in some measure behind the thinking of several American states with establishment of state bullion depositories and state laws recognizing specie as legal tender, and so on. From there, it is a similar step to regional compacts between states - as with the member nations of the BRICS organization - for clearing if there should be the need to replace a collapsing dollar with more stable currency arrangements, and in a world of emerging regional gold-pegged reserve currencies, it is an understandable step.

There is, however, a massive problem in all of this, and it's hinted at in the article (and indeed, I have been writing about this massive problem for years, q.v. my book Covert Wars and Breakaway Civilizations, and Covert Wars and the Clash of Civilizations):

Other Asian central banks are similarly beefing up their gold reserves, as are the East Europeans, particularly Poland. The signal emanating from well-informed Singapore’s aggressive accumulation is important confirmation. The common story is that China and Russia are prepared to move to a gold standard, when circumstances dictate. We know that Russia has substantial reserves, perhaps as much as 12,000 tonnes including holdings in two sovereign wealth funds and she is beefing up her mine output. China has been secretly accumulating gold  off-balance sheet since 1983, became the largest gold mining nation by output over a decade ago, and she is like a Hotel California with respect to bullion imports from other nations. I believe various Chinese state accounts now hold a hidden total of over 30,000 tonnes. And we know that deliveries from the Shanghai Gold Exchange to the general public already total nearly 26,000 tonnes, not to mention the significant holdings by commercial banks on behalf of customer gold accounts retained within the SGE’s vaulting system.

Clearly, China has expected and planned for the end of the dollar as a reserve currency for a considerable time, and it is therefore imperative that her international trade be made independent of its collapse. Eventually, only gold backing for SCO and BRICS+ currencies will replace the dollar, because the death of the dollar will mean the end of the entire western fiat currency system, which is why every country in Asia is ensuring they have gold reserves. But until that time there must be interim arrangements. (Emphasis added)

It is important to note that all of this speculation about gold-pegged regional currency arrangements are, as the article notes, "interim arrangements", and I suspect that everyone knows why they are interim arrangements: neither the current Chinese government, nor the American system, are stable and trustworthy; no one trusts them, and thus, neither country's currency can ever function as a reserve currency without a fundamental change in government such as to restore confidence in its integrity and rule of law. There is, in short, no major country on the global stage that has earned global respect and trust, as whatever global trust and respect the United States had at the end of World War Two has been squandered and frittered away. So the interim system that we see emerging is, in a very real way, a system dictated by geopolitical and financial realities.

This brings us to the heart of the problem: in a bullion-backed "snake" like arrangement, the problem is the bullion itself: how much is really out there? No one really knows. And as I've pointed out, in such a system, where no one really knows, the road to all sorts of fraud - in the form of re-hypothecation - is wide open.  It's a bullion trap that could, and I suspect will, catch many off-guard and unawares. The only way out is for clear and honest reporting of the amounts of actual bullion in possession of various nations and states; not paper bullion, but actual bullion. The problem here is that in order to find out how much there is, it actually has to start being used in actual financial transaction. So one of the looming questions remains: who will be first?

Given the Orient's own long experience with paper money and inflation, and hence its long tradition of personal hoarding of bullion, my bet is on the BRICS countries... and trust will have to be built and reestablished from the bottom up, rather than imposed by some central bank, top down...

See you on the flip side...