Will Gold backed SDRs signal the end of the Dollar as a reserve currency?


A post- American dollar world can emerge sooner than you think with a global reserve currency that could be backed by gold, according to Currency Wars author Jim Rickards argues in his latest book.

In 1971, President Nixon imposed national price controls and took the United States off the gold standard, an extreme measure intended to end an ongoing currency war that had destroyed faith in the U.S.
Currency wars have happened before-twice in the last century alone-and they always end badly.

Time and again, paper currencies have collapsed, assets have been frozen, gold has been confiscated, and capital controls have been imposed.

With a continued collapsing of the global economy and a resulting demise of the US dollar as the reserve currency could trigger a move to the International Monetary Fund’s (IMF) Special Drawing Rights, which may then be backed by gold at $9,000 per ounce, Rickards says.

In a post-dollar world, Rickard’s predicts the creation of regional currencies, a fiat SDR or a gold-backed SDR.

“As far as gold is concerned, we know Russia has increased its gold reserves 70 percent in the last four years, and China has increased its gold reserves several hundred percent. Other central banks have stopped selling – many of them are actively acquiring,” Rickards says

Central banks were net buyers of gold in most of 2013, with developing nations leading the charge. Central banks added a net 37.3 tonnes of gold to their coffers in December, with those of Russia and Turkey accounting for around 90 percent of that figure.

“And so we see a trend towards some sort of gold standard or at least to use gold as a hedge against paper liabilities,” he adds.

“(He adds) if we look at Crimea, it has a new currency – it is called the ruble (codeRUB) . And even if the ruble isn’t ready to fulfill the role of a regional currency yet, if Putin continues to reconstruct the Russian empire, it may be able to fulfill that role in the future.”

Somebody sent me an email asking me about a couple of SDR theories floating around that maybe considered a threat to free-gold.

The way I understand it, if you hold an SDR, you hold drawing rights to a basket of currencies, but the SDR itself is nothing but a unit of account used to calculate how much of any one of the individual currencies in the basket it is worth.

If you ask for one of those currencies, they will likely be printed for you by that currency’s issuer and his SDR count will increase.

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