2327.28
2.39
29.28
-0.32
982.24
2.26
909
-11.63

Seems Like the Whole World Wants to Replace the Dollar

Posted on January 26, 2023

Just a few years ago, we could dismiss de-dollarization as Russian phenomenon. It's waging a quiet war with the West and dumping dollars to evade sanctions. Russia being Russia and all that. That's no longer the case. These days, wherever we look, we keep hearing about BRICS. Brazil, Russia, India, China, and South Africa. The alliance of these countries has kind of been around for a while, but it was also another thing we could ignore. The U.S. is still firm in its superpower status, and who cares about these far-off rabble-rousers, really? Well…

The case of Argentina and Brazil preparing a common currency can still be dismissed. These, alongside Turkey, were two of the hardest-hit nations by inflation in the post-2019 world. But, unfortunately, that's where we can no longer ignore the signals.

Russian Foreign Minister Sergey Lavrov said BRICS nations will discuss creating a common currency. Think the European Union's euro, which is coincidentally trading above the dollar even during the greenback's best days. To Russia, this is an opportunity to lessen dependence on the Western financial system, and a considerable one. Not too long ago, you couldn't just go and ignore the SWIFT system. But it seems you can now. To China, it's an opportunity to promote the yuan as an alternative to the dollar in the Asian nation's never-ending bid to take over the world.

The remaining countries probably see this as a way to become more relevant. Lavrov says that the BRICS common currency is necessary because Western central banks have shown incompetence and malpractice. Is that not the pot calling the kettle black? But even if nobody expects BRICS nations to do better given the fairly shambly state of their economies, it's invariably going to turn into a might-makes-right thing. It does more often than we'd like.

And in the world of today, might often translates into commodities. These countries might look like something you'd want to escape from, but there's no denying they're full of natural resources. Merely agreeing to cut off the West from these natural resources would cause a very rude awakening in regards to who is holding the reins.

As it happens, gold is a commodity, too. One of the things all of these countries have in common is that their currencies are reminiscent of toilet paper. But even if it's just pretense, they appear to be willing to rectify this. Either gold or oil are being cited as backing for BRICS currencies in a world where currencies are increasingly in need of backing.

The supposed issuers of this supposed currency probably know that they can't just issue another free-floating currency and expect anyone to care. We already have the U.S. dollar, the euro, francs and so on for that. But if they issue a currency that has some solid backing, and then bolster it with fairly anti-West trade alliances, it's pretty clear to see what that spells for the currencies we know, if not love.

As an almost unnecessary blow, Saudi Arabia is probably going to de-peg its currency, and therefore oil, from the U.S. dollar. It will mean the end of the petrodollar, which has been one of the primary fuels in the engine of America's wealth for decades.

The nice thing about gold investment is that holders of bullion don't need to speculate. You don't need to wonder if, when and how the dollar will become yet another wiped-out or irrelevant currency. You don't need to wonder what the new BRICS currency will look like, or where to get it. By holding gold, you have the only currency that has maintained relevance for centuries. You would have had just as much ease exchanging it a century ago as you do today. Do we expect any different a century from now?