The gold ruble against the crooks
A ruble more or less backed by gold will have unimaginable consequences with two entrenched camps with their ideologies and worldviews.
For the past few days, several analysts and heterodox economists have been banging their heads over a decision by the Russian Central Bank, which is to set the price for the purchase of gold at 1 gram of gold for 5,000 rubles (about 55 dollars at the time of this writing). For these economists, this is the first step, very well hidden, for us to have a ruble guaranteed by gold. It would be the first time since 1971 that a paper currency is backed by the yellow metal. In 1971, Nixon had removed the connection between gold and the dollar, allowing the printing of dollars without limit and thus, the United States could buy the whole world with a monkey currency.
However, for the Russian ruble to be said to be backed by gold, the reverse must be possible. If I have 5,000 rubles in my pocket, then I can go to the Russian Central Bank and ask for 1 gram of gold in exchange. But this is not yet possible… for the moment. Russia has several objectives with this announcement. The first is to restore confidence in the ruble because many people bought gold when the Russian currency collapsed in the early days of the war.
And this announcement had the desired effect, because the ruble has risen, on the one hand because the Russians are regaining confidence in their economy, but also because gas in countries hostile to Russia will have to be paid for in rubles. This fixing of gold by the Russian Central Bank recalls the confiscation of gold by the American government in 1933. At that time, President Frankin Roosevelt had signed an executive order for all American citizens to give their gold to the Reserve Federal in exchange for 20.65 US dollars.
If you refused, then you could be fined up to $10,000. Subsequently, the United States changed the price of gold for foreign governments to $35. That means they bought it for $20 and sold it for $35, making a huge profit. With 5,000 rubles for 1 gram of gold, Russia has just done the same thing, but in a much more discreet way. Above all, Putin’s flash of genius is that he doesn’t need the ruble to be backed by gold, because it can be backed by oil and gas.
For several years, oil and gas have been based on the petrodollar. It is an agreement that was signed in 1974 by the Americans and the Saudis. The Americans buy Saudi oil at low prices and in exchange, the Saudis invest in the United States and benefit from the military protection of the Americans. Basically, the petrodollar is oil versus debt.
In addition to announcing that European countries will have to buy gas and oil in roubles, Russia said that countries “friendly” to Russia could buy it with other currencies such as Bitcoin, gold and even local currencies like the yuan for China or the Turkish lira. In fact, Russia accepts everything except currencies from hostile countries such as the dollar and the euro. If we consider that 1 gram of gold is equivalent to 5,000 rubles and that a barrel of oil is worth 111 dollars or approximately 9,990 rubles (at the current price), this actually means that a barrel of oil is worth 1.99 grams of ‘gold.
It is an extremely brilliant system where gold, the ruble, but above all all the resources of Russia such as gas, wheat, oil will work together, without apparent direct links, to favor gold which will positively influence on Russian currency. The shot is very well thought out, but it is not certain that it will succeed in the long term. Because Russia, by offering to buy its gas with gold, does not impose a hegemony like the Americans. “If you don’t want our rouble, then surely you need our wheat, our gas, our oil, our metals, etc.” So, we don’t have to trust Russia completely since gold is gradually becoming an alternative currency.
And there are unmistakable signs. Saudi Arabia, which was the main beneficiary of the petrodollar, plans to sell its oil in yuan. Iran or Venezuela could also request that their oil be sold in gold. Again, the beauty of the system is that it does not submit the world to Russia. Instead, you have to think in a new standard where oil equals gold. At the moment, prices are high around 1.99 grams per barrel. But if we take an average price of 75 dollars, before the crisis, then we have 1.35 grams for a barrel of oil.
If your country has a lot of gold, then oil and gas will be very cheap for you. On the other hand, if you are the West who bet everything on the rotten Dollar/Euro pair, then you will have to spend a lot more dollars and euros to buy gold, or ruble, because the latter is guaranteed, in a very discreet way, by gold. For the ruble, this is all good, because a connection with gold allows it to be deflationary. This allows Russia to be very competitive. But if you have no gold and only dollars or euros, then you will be sucked into a hyper inflationary spiral.
Because everyone knows that the dollar and the euro are worthless. And it will be necessary to print more and more of them to buy gold to heat and feed your population.
Ukraine is just a small battleground in several wars with two huge global blocs that have opposing views of the world. Japan, South Korea, Europe, USA, New Zealand, Australia plead for an entirely virtual world where money has no real value and where ideology is the sole mistress of your day-to-day. Russia, India, China, Brazil, South Africa, Iran, Venezuela consider that reality is based on real resources and that it is time to come down to earth. A good part of Latin America can fall into the camp of the realists while a part of Africa needs Russian and Chinese resources.
We have 8 simultaneous wars with Ukraine which is the first warning shot. The military war with Ukraine and in a few months, the inevitable crisis in Taiwan. A cyberwar with attacks on critical infrastructures and mass hacking. The space war with hypersonic weapons, the propaganda war where each side comes up with the best of their lies, the resource war with entirely virtual Western financial markets and the others who will use oil and gold. The market war, if the dollar is no longer the reserve currency, how will Westerners assess the price of things? And the commercial war with the One Belt One Road which will transport products from Russia, China and non-aligned countries.
But still, victory is totally uncertain for both sides. And given the complexity of Russia’s plan, its very technical ramifications, it has been prepared for years… with several large partners. A certain slant-eyed people may be in on it, even though China’s trade dependence on the United States is colossal.
This explains why many countries, close to China and Russia, have become very nervous about gold. Every gram of gold is carefully guarded in central banks. The fight against traffickers is ruthless and everyone buys gold with a vengeance.
For Western countries that do not have a lot of gold, the situation could become catastrophic. Because their currency will be more and more devalued and they will have nothing to guarantee it. The prices of basic necessities will go through the roof and you will have food crises, shortages and revolts all over the world.