The BRICS Juggernaut

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Rickards - >>> The Dream Is Dead

BY JAMES RICKARDS

SEPTEMBER 6, 2023


https://dailyreckoning.com/the-dream-is-dead/


The Dream Is Dead

The global desire to move away from the dollar as a medium of exchange for international trade in goods and services has gone from a discussion point to a novelty to a looming reality in a remarkably short period of time.

It’s impossible to check headlines without seeing a new story about major trading partners planning to substitute their local currencies (or in the BRICS case, a newly formed currency) for the U.S. dollar in payment channels supporting world trade.

This plan has recently been re-emphasized as the BRICS have agreed formally to admit six new members to the group, including Saudi Arabia.

The importance of the new members is obvious. By adding Saudi Arabia, the BRICS now have two of the three largest oil producers in the world (Russia and Saudi Arabia; the third member of the trio is the United States) inside their tent.

The inclusion of UAE and Iran alongside Saudi Arabia and Russia makes the BRICS a de facto OPEC+ when it comes to dictating oil output and prices.

The BRICS will now include the second, fifth-, 10th-, 11th-, 18th- and 23rd-largest economies in the world, along with five others. The total GDP of the expanded BRICS membership is approximately 30% of global GDP measured on a nominal basis and over 50% of global GDP when measured based on purchasing power parity.

Many Americans are inclined to lament declines in the dollar’s global role. But should they?

The dollar’s global role has always been a double-edged sword for the United States. A strong dollar makes exports more expensive. And even though it does allow the threat of sanctions to be part of foreign policy, that hasn’t worked out that well for the U.S. under Joe Biden.

You see, in addition to sanctioning oligarchs, banning U.S. investment in Russia, kicking Russia out of the SWIFT international messaging system and freezing and stealing assets, Biden’s sanctions went so far as to freeze and hold the U.S. dollar reserves of the Central Bank of Russia.

I wrote at the time that not only would this move fail to hurt Russia. But it would also boomerang and do extreme damage to the United States. I’m truly sad to say I was right.

When other countries saw the U.S. grab the assets of a major central bank, they asked themselves the obvious question: “What if the U.S. doesn’t like MY policies or actions in international affairs?” “Will Biden then seize my central bank assets too?”

Many countries — including China, India and Brazil decided the answer might be, “Yes.” and they immediately started selling off their holdings of U.S. Treasury debt and began to pay for imports in their own currencies.

But Biden’s blunder created an even more significant threat and the status of the dollar as the world’s global reserve currency is now in question.

So the greatest threat to the dollar comes not from abroad but from the U.S. Treasury.

Specifically, by seizing the assets of the Central Bank of Russia, the U.S. has weaponized the dollar in a way that undermines the rule of law in the United States and causes other countries to seek alternatives.

What if no other currency can easily replace the reserve currency role of the dollar? Is there any alternative at all?

Yes, gold is ready and waiting in the wings. That’s the real danger to the U.S. Treasury market — that sovereign nations turn to gold to escape the dollar.

That trend has also begun. Yet it cannot go very far without exponential increases in the dollar price of gold. Such gains should not be thought of as gold “going up.” They are best understood as the dollar going down. The implications of that are highly inflationary as we saw in the late 1970s.

We will see the results of de-dollarization efforts in the months ahead. For now, get your gold while you still can.

Below, I show you how the BRICS summit is just one more sign that the globalist dream is dead. Read on.

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