In a groundbreaking revelation, it has come to light that the "BRICS+" nations are preparing to introduce a novel currency during their annual summit conference from August 22 to 24. This momentous development is set to shake the foundations of international finance, as it directly challenges the dominance of the US dollar.
The world finds itself ill-prepared to handle this impending geopolitical shockwave.
The new currency, likely to be tied to a gold standard, plays to the strengths of the BRICS members, particularly Russia and China. As the world's largest gold producers, ranked sixth and seventh respectively among the top 100 nations with gold reserves, their strategic advantage becomes evident.
Assessing the impact of the forthcoming BRICS currency on the dollar poses certain difficulties, given that all dollar indexes compare currencies to one another. However, this approach loses meaning when the dollar, euro, and sterling face potential loss of confidence simultaneously.
To gain a clearer perspective, let's consider an example: if the price of gold were to surge from $2,000 to $10,000 per ounce, it would be more accurate to perceive this as an 80% devaluation of the dollar, plummeting from 0.0005 ounces per dollar to 0.0001 ounces per dollar. This represents a significant collapse of confidence, but such a shift may be overlooked if one solely focuses on euros or yen.
The devaluation race of these major currencies would exacerbate the situation, leading to a collective collapse.
A True Measure of the Dollar
To determine the true strength of the dollar, one must rely on the objective metric of the dollar price of gold by weight. Gold, being independent of central bank currencies, resolves any conundrum in valuation. The following principles clarify the situation:
The strength of the dollar can only be accurately measured in terms of gold.
Gold possesses intrinsic value as both money and a commodity.
BRICS countries are rich in commodities but relatively poor in dollars.
The new BRICS+ currency will be anchored to gold.
Consequently, the collapse of the dollar effectively translates into higher inflation and an elevated dollar price for gold. This, in turn, results in a proportional rise in other commodity prices, favoring the BRICS nations.
Given this dynamic, the BRICS+ currency could swiftly surpass the dollar as a dominant payment currency due to its gold linkage.
Unfortunately, the majority of the global population remains oblivious to this prospect. The eventual result will be a shock to the international monetary system, arriving within a matter of weeks.
However, the impact on investors will not dissipate once the new BRICS+ currency is introduced. Its market implications will reverberate throughout exchange rates and capital markets for years to come. Consequently, it is crucial for individuals to grasp the subject at hand, as most people currently lack the understanding needed to navigate this landscape.
Addressing Concerns About Gold's Volatility
There is a question that demands attention: Does gold's inherent volatility and susceptibility to manipulation render it unsuitable as a currency, especially when backed by gold?
Indeed, gold prices are subject to manipulation, a fact supported by hard statistical evidence, anecdotes, and forensic investigations. Conversations with industry experts have shed light on the matter.
For instance, a statistician with a renowned hedge fund discovered blatant manipulation when analyzing the opening and closing prices of gold on the COMEX market over a ten-year period.
Likewise, Professor Rosa Abrantes-Metz, a prominent expert in global price manipulation at the New York University Stern School of Business, has conducted extensive research corroborating these conclusions. Her testimony in gold manipulation cases further solidifies the argument. Thus, it is clear that manipulation occurs, and delving into the specifics is unnecessary for our current discussion.
The Key Lies in Weight
There will not be two separate prices for gold; there can only be one price, with minor discrepancies due to factors like paper versus physical gold and commissions. If two prices existed within the same currency, the difference would quickly vanish through arbitrage (buying a security in one market and simultaneously selling it in another market at a higher price).
The "price" of gold may be expressed in dollars, euros, or the BRICS+ currency. While absolute values will differ in each currency due to exchange rates, this discrepancy arises from currency valuation, not divergent gold prices.
The BRICS+ currency will be valued in terms of gold weight. Although the specific value is yet to be determined, let's consider an example: BRICS1.00 might equal 1 ounce of gold. At the current market rate, this would result in BRICS1.00 being valued at USD1,950. However, it is important to note that this is not a fixed peg.
The true peg is 1.0 ounce of gold, meaning the value of the BRICS currency remains anchored to gold.
Meanwhile, the dollar will continue to float against gold, as it has since 1971. As a consequence, the BRICS/USD exchange rate will fluctuate based on the value of gold measured in each currency. While it is possible to calculate the value of BRICS1.00 in dollars, it does not represent a fixed peg.
This situation becomes intriguing for investors and calls for careful asset allocation decisions.
The Influence of China and Russia
If the dollar price of gold rises, the value of BRICS1.00 against the dollar will also increase. Conversely, a decline in the dollar price of gold will cause the value of BRICS1.00 to decrease in relation to the dollar.
As a BRICS member, a country may desire a higher dollar price for gold to obtain US goods and services at a more favorable exchange rate. Conversely, if a BRICS nation is a commodity exporter, it may prefer a lower dollar price for gold to encourage parties with dollars to purchase more commodities.
Naturally, this undermines the purpose of the BRICS currency, which aims to move away from dollar-dominated transactions. Ultimately, China and Russia are likely to hold sway in these matters. It is plausible that they will pursue a high dollar price for gold to increase the value of their BRICS currency, thereby enhancing their own wealth and undermining confidence in the dollar.
Supported by substantial gold purchases, this policy could swiftly drive the dollar price of gold to $3,000 per ounce or even higher. In essence, such a scenario would signify the collapse of the dollar. Consequently, the dollar would lose value against gold or the BRICS currency, resulting in inflation and a diminished purchasing power for imports or overseas travel.
Seeking refuge in stocks, bonds, or savings accounts denominated in dollars will not provide adequate protection. The most straightforward solution to mitigate the impending currency crisis is to invest in gold. Gold serves as a preserver of wealth, safeguarding against inflation. If necessary, gold can be sold for cash, and its increased value would yield greater returns. The BRICS nations are pursuing this strategy, and individuals can do the same.
Therefore, it is high time to embrace the BRICS bandwagon, with gold as a trusted companion.
Stay alert, stay informed.
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