Will oil be traded in gold. What would a gold currency system mean for the petrodollar and the American economy? The fact is that Russia and China are hoarding massive amounts of gold because they plan to kill the petrodollar. Ever since the financial collapse of 2008, all the world’s currencies have become part of the ugly baby contest. Russia and China the two leading members of the SCO (Shanghai Cooperation Organisation) realise this fact and are keen on breaking their addiction to the US Dollar. Since the 1970’s, the U.S. dollar has been the currency that the international community has used to trade oil around the globe. This has created an overwhelming demand for U.S. dollars and U.S. debt. But what happens when the rest of the globe starts rejecting the increasingly unstable U.S. dollar and figures out that gold can be used as a currency in international trade? The truth is that it doesn’t take a lot of intelligence to join the dots and get an idea of what Russian & Chinese are doing. So we can assume the demand for the U.S. dollar and U.S. debt would fall off into oblivion and there would be a rush into gold unlike anything we have ever seen before. So are Russia and China accumulating humongous amounts of gold because they eventually plan to cut the legs out from under the petrodollar before ditching the US dollar? Well lets take a look at what Vladimir Putin, the Russian czar is doing, from all accounts he is stockpiling gold as fast as he can get his hands on it.
According to the World Gold Council, Russia has more than doubled its gold reserves in the past five years. Putin has taken advantage of the financial crisis to build the world’s fifth-biggest gold pile in a handful of years, and is buying about half a billion dollars’ worth every month.
It emerged last month that financial gurus George Soros and John Paulson had also increased their bullion exposure, but it’s Putin that’s really caught my eye.
No one else in the world plays global power politics as ruthlessly as Russia’s chilling strongman, the man who effectively stole a Super Bowl ring from Bob Kraft, the owner of the New England Patriots, when they met in Russia some years ago.
As was first reported here in April of last year, according to International Monetary Fund calculations, the U.S. is on track to lose its status as the world’s biggest economy—when measured in real, purchasing-power terms—to China by 2017.
We will soon be the first people in two hundred years to live in a world not dominated by either Pax Americana or Pax Britannica. This sort of changing of the guard has never been peaceful. The declines of the Spanish, French and British empires were all accompanied by conflict. The decline of British hegemony was a leading cause of the First and Second World Wars.
What will happen as the U.S. loses its pre-eminence?
Maybe this will turn out better than similar episodes in the past. Maybe the Chinese will embrace an open society and the rule of law. If you believe that, there is probably no reason to hold any gold.