Jim Rickards: This Is The Only Russia Story That Matters

Authord by James Rickards via The Daily Reckoning,

The World Gold Council has reported that the Central Bank of Russia has more than doubled the pace of its gold purchases, bringing its reserves to the highest level since Putin took power 17 years ago.

Russia’s desire to break away from the hegemony of the U.S. dollar and the dollar payment system is well-known. Over 60% of global reserves and 80% of global payments are in dollars. The U.S. is the only country with veto power at the International Monetary Fund, the global lender of last resort.

Perhaps Russia’s most aggressive weapon in its war on dollars is gold. The first line of defense is to acquire physical gold, which cannot be frozen out of the international payments system or hacked.

With gold, you can always pay another country just by putting the gold on an airplane and shipping it to the counterparty. This is the 21st-century equivalent of how J.P. Morgan settled payments in gold by ship or railroad in the early 20th century.

Russia has now tripled its gold reserves from around 600 tonnes to 1,800 tonnes over the past 10 years and shows no signs of slowing down. Even when oil prices and Russian reserves were collapsing in 2015, Russia continued to acquire gold.

But Russia is pursuing other dollar alternatives besides gold.

For one, it’s been building nondollar payments systems with regional trading partners and China.

The U.S. uses its influence at SWIFT, the central nervous system of global money transfer message traffic, to cut off nations it considers to be threats.

From a financial perspective, this is like cutting off oxygen to a patient in the intensive care unit. Russia understands its vulnerability to U.S. domination and wants to reduce that vulnerability.

Now Russia has created an alternative to SWIFT.

The head of Russia’s central bank, Elvira Nabiullina, has reported to Vladimir Putin that “There was the threat of being shut out of SWIFT. We updated our transaction system, and if anything happens, all SWIFT-format operations will continue to work. We created an analogous system.”

Russia is also part of a reported Chinese plan to install a new international monetary order that excludes U.S. dollars.

Under that plan, China could buy Russian oil with yuan and Russia could then exchange that yuan for gold on the Shanghai exchange.

Now it appears Russia has another weapon in its anti-dollar arsenal.

Russia’s development bank, VEB, and several Russian state ministries are reportedly teaming up to develop blockchain technology. They want to create a fully encrypted, distributed, inexpensive payments system that does not rely on Western banks, SWIFT or the U.S. to move money around.

This has nothing to do with bitcoin, which is just another digital token. The blockchain technology (now often referred to as distributed ledger technology, or DLT) is a platform that can facilitate a wide variety of transfers — possibly including a new Russian-state cryptocurrency backed by gold.

“Putin coins,” anyone?

The ultimate loser here will be the dollar. That’s one more reason for investors to allocate part of their portfolios to assets such as gold.

Comments

yomutti2 Raffie Sat, 10/07/2017 - 20:30 Permalink

No, no it's not. The reason they can pay off the deby is that the state can seize businesses and other private assets so easily. And the egregious lack of property rights is one reason that Russia is such an economic wasteland. It's also a reason why about half of Russia's major companies keep their headquarters outside of Russia. 

In reply to by Raffie

Freddie 07564111 Sun, 10/08/2017 - 00:18 Permalink

Ha Ha.  The dude says Russia's economy is smaller than many US states.  He fails to mention that most of those states are bankrupt unlike Russia.   Putin made getting out of debt a priority.   I hope they clone Putin because Medvedev is not the answer in the future.What is so amazing is Russia had hundreds of years of evil and shit leaders including the dual shitizen zio-genocidal puppets.  God must have finally smiled on Russia with Putin. 

In reply to by 07564111

HopefulCynic yomutti2 Sat, 10/07/2017 - 21:20 Permalink

Shiit I can also invent BS, like: yomutti2 is actually a retarded double transgender jew nigger, on second thought, that sounds more plausible than your BS, so I take back the example and put this new example of imagined BS for you to consider: yomutti2 is a sensible intelligent person. See I can also invent BS!

In reply to by yomutti2

Volkodav yomutti2 Sat, 10/07/2017 - 23:06 Permalink

        Russia King of Gas        http://windowstorussia.com/russia-king-of-gas-1-1-trillion-cubic-meters-of-natural-gas-severneftegazprom.html         Russia Record Wheat Crop Harvest and World Largest Wheat Exporter        Russian Combine Harvesters bring US Wheat Harvest:        https://www.youtube.com/watch?v=KoGKtbFqCwI        Rostselmash Torum 860 rebadged and fitted Cummins engine for North American Market        Rostselmash  Rostov on Don  

In reply to by yomutti2

cat2005 yomutti2 Sat, 10/07/2017 - 23:16 Permalink

If you are talking about the threat to its demographics then I completely agree. Long term, Russia is at risk of disappearing as a white Christian culture with its unique blend of East and West. The national birth and death rates, as well as emigration, foretell a bleak future.

I hope Russia can save itself. It is going to take more than gold and a strong ex-KGB leader though.

In reply to by yomutti2

Nexus789 yomutti2 Sun, 10/08/2017 - 07:52 Permalink

You are deluded. Oil is used in all types of manufacturing from agriculture to pharmaceutical products. It is the foundation of hundreds of chemicals and plastics. Burning it in engines is only one use. It won't be going away any time soon. Aside from the oil and gas Russia has massive deposits of minerals and a rapidly expanding non GMO agricultural sector. 

In reply to by yomutti2

Raffie yomutti2 Sat, 10/07/2017 - 21:55 Permalink

You can have the most toys in the world, but if you are living pay check to pay check or going under nothing matter how much you pull in because you have to pay off that debt. Russia also has 2nd largest diamond mine in the world still in production. Six million carats of rough diamonds in 2014 from the mine. http://www.dailymail.co.uk/news/article-3741956/The-expensive-hole-worl… be fooled by what is known about Russian GDP, it's what is not known.

In reply to by yomutti2

Volaille de Bresse yomutti2 Sun, 10/08/2017 - 03:41 Permalink

"Nobody fucking cares what Russia does. Their economy is smaller than many US states" Think differently think outside of the MSM box : imagine countries as people. The US is a very sick 85 yo man, the EU is a very sick 75 yo man, and Russia is... a 22 yo good-looking woman.Now place your bets for the 15-25 years to come : who you gonna rely on? the old dudes or the young energtic lady?      The US (and its European valet) have been on "life support" (= massive creation of debt) since the 80's. Soon they'll die... and rebirth. But that'll take 40 years. In the meantime Russia seems like a good option if you look for a safe harbour.

In reply to by yomutti2