Podcast: BRICS Centralized Clearing Ends Dollar Dominance

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by VBL
Sunday, Jun 04, 2023 - 16:18

If BRICS agreed to centralize clearing, then they’ve already agreed on their universal settlement medium. That is Gold


Friday on ZeroHedge in Massive: Gold Closer to Centralized Clearing in BRICS Solution to SWIFT we said:

This is huge on many levels. We will gleefully break it down best we can in our Weekly post Sunday. It lies directly on the path of “things to do” when building an alternative to SWIFT.

As promised. This podcast unpacks *why* the BRICS agreeing on Centralized Clearing as a solution to counterparty risk necessitates Gold as the medium of exchange in *all* future international trade.


Podcast Flow

  1. Intro
  2. Liars Poker and Limits of Bilateral Trade
  3. Centralized Clearing
  4. Dollar Distrust
  5. Alternative Solutions
  6. Mercantilism, The Current Account, and Gold
  7. History of Money
  8. Settlement Mediums Beside Gold

Podcast Ending:

Now you all know why I am so excited about the centralized clearing announcement. They cannot centralize clearing without a previously agreed upon settlement medium.That means they’ve decided on a new medium of exchange.

It means they already have a process in place to settle international trade in something other than dollars. And if it ain’t dollars, it is Gold.

Some Basic Definitions

  • CLEARING: To guarantee the risk on both sides of a transaction. In this way, to clear the trade-risk. The settlement on each transaction is also guaranteed by the clearing house.
  • SETTLEMENT: They make sure all participants agree on how/when/where transactions will be settled. They also police the settlement medium.
  • SETTLEMENT MEDIUM: aka medium of exchange ( MOE) A portable instrument used as an intermediary to facilitate/close/satisfy deals1
Gold as Medium of Exchange

Summary: Centrally Cleared Gold as Solution to Dollar Mistrust

Centralized clearing helps scale trade efficiencies and overcome lack of bilateral counterparty trust. The trade-off is systemic risk in form of everyone trusting the central counterparty’s solvency and objectivity. One may to minimize/ police these risks is by the Central Counterparty being mutually owned by the trade members. All members, however must agree on terms of trade. Key to this is what they will use as the official settlement medium if not dollars?

Current Bilateral BRICS Trade vs Centralized Clearing and Settlement…

(a) line thickness represents notional trade. (b) loops imply self trade. Different settlement mediums and bilateral agreements on left. Uniform settlement medium, centralized counterparty clearing and potential trade network scalability effect on right
By combining Gold, Blockchain, and centralized clearing a group of trade partners can expand trade from bilateral to multilateral without diluting trust too much.

A word about Blockchain and Centralized Clearing

In November 2015, clearinghouses from several nations joined forces to create a think tank known as the Post Trade Distributed Ledger Group, which studies how blockchain technology can affect the way in which security trades are cleared, settled, and recorded. The Group, now includes around 80 financial institutions all around the world.

Their Conclusion: In short, Blockchain makes trade cheaper, faster, and more efficient without trusting2 any self-interested entity to maintain market neutrality.

GoldFix: If blockchain can maintain accounting objectivity, then gold’s monetary neutrality can be used as both SOV and MOE without needing to be shuttled around daily.


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