In August of this year, 2023, some economists are expecting the largest upheaval of the global financial order since 1971. You may recall that August of 1971 was when President Nixon issued the “temporary” directive to end the exchange of dollars for gold at the fixed rate of $35.00 per ounce, otherwise known as the “Nixon Shock” or “Bretton Woods 2”. The above-referenced article provides a summary of what has happened to the value of the dollar vs. gold since then. The difference this August is that it will not be the decision of a single American President that determines the outcome.
Instead, it will potentially be the decision of several world leaders representing over half of the global population that determines (in large part) what will happen to the value of the dollar in the months and years ahead. Some are calling this event “Bretton Woods 3”.
“Biggest Monetary Shock in 52 Years”
If the BRICS nations carry through on their pledge to roll out a trading currency or system of trade backed by gold, it would likely cause the dollar’s value to drop like a brick. If not overnight, then certainly over time.
With 50 years of experience as a metals economist and analyst, Simon Hunt recently gave a podcast interview in which he shared his expectation that the dollar could lose 30-40% of its purchasing power by 2025. He then explained several reasons why, centered largely around what may happen in August of 2023 at the next BRICS gathering.
For those of us who monitor this type of news, Simon Hunt is not the only experienced voice expressing concern. Gold author, economist, attorney, and analyst with CIA connections, Jim Rickards, has also publicly expressed concerns about what he calls the “Biggest Monetary Shock in 52 Years.”
Effects of a BRICS Currency
Why does it matter what other nations decide to do amongst themselves outside the realm of the dollar?
The reason it matters to us as American citizens is that the rest of the world has supported the purchasing power of our dollar for nearly eight decades. Most Americans have never experienced what it is like to lose “World Reserve Currency” status. We are all guilty of taking for granted the “exorbitant privilege” that comes with the rest of the world dependent on using our dollars for trade and reserve purposes.
Former US Treasury Secretary John Connally once famously told the world, “The dollar is our currency, but it is your problem.” The BRICS nations could soon make the dollar not only our currency but also our problem.
What Countries are in BRICS?
The BRICS nations (Brazil, Russia, India, China, South Africa) are set to expand to what has become known as “BRICS+ .” The list of nations wanting to formally join the BRICS continues to expand and currently represents over 50% of world GDP, 40% of world land mass, over 40% of the world population, 2/3 of world nuclear powers, and 2/3 of world energy suppliers.
For the last 50 years, the world used what was known as the “petrodollar” (the US Dollar) to purchase oil/energy. This is no longer the case. Increasingly, nations have begun to purchase energy amongst themselves, using gold or regional currencies to complete the trade. The upcoming BRICS conference could see non-dollar energy transactions increase from the current handful of nations to potentially 30-40 nations in the next couple of years.
With fewer nations needing to use dollars to purchase oil, gas, or other commodities, billions of those dollars will come home to roost. More importantly, nations with things to sell will want something more than our non-backed fiat currency in exchange for their goods and services. It is difficult to impose dollar sanctions when nations no longer want or need dollars. It will also become more difficult to fund the largest military budget in the world when fewer nations are willing to loan us money to do it.
They will no longer accept dollars as payment when they can’t easily spend them with other BRICS partners.
Recent sanctioning efforts have backfired for the average American, except for those who have purchased precious metals to protect themselves. In some ways, the sanctioner has become the sanctioned, as we explained last year.
BRICS of Gold
Gold is certain to play an important role in international trade following the August 2023 BRICS meeting.
Even if the exact mechanism is yet to be determined, gold will be part of it. By now, even the most naive among us have learned that official narratives often don’t tell the whole story. Simon Hunt has revealed that official gold reserves, as often reported, don’t begin to reveal the whole picture about actual gold holdings. He lays out the case in the podcast that Russia currently holds 15,000 tons of gold and China 50,000 tons of gold.
The official numbers reveal only what the central bank of each nation holds, but they have other gold reserves that go largely unreported unless you know where to look. Unless the US also has other undisclosed gold reserves, our current 8,100 tons would not be enough to dictate terms to the rest of the world.
BRICS vs. The Dollar
In April of 2022, we alerted our readers to another dangerous aspect of the upcoming BRICS announcements.
One of the architects of the upcoming BRICS trading framework has conceived a plan whereby new or existing members can simply ignore dollar-based debts or debts owed to the United States. One of the reasons the dollar has remained as strong as it has in spite of huge deficits and $31 trillion of debt outstanding is all the other dollar-based debt that exists in other countries. The demand for dollars needed to pay those debts has helped prop up the dollar. But if BRICS+ nations stop servicing dollar-based debts, many American pension funds and investors could end up high and dry, and the dollar would become toast.
“Just Buy Gold”
Even if the meeting in August does not produce an immediate result in the value of gold or the dollar, the die has been cast. World trade is moving away from the dollar and towards gold. Some thought the response to BASEL III would be immediate, but they were wrong. The effects have been substantial, however. Since this update on BASEL III in 2021, gold has been up 50% in dollar terms.
Central banks have been buying record amounts of gold, and it shows. The events at BRICS+ in August will likely speed up and extend the impact on gold and precious metals for the reasons outlined above. Jim Rickards succinctly explained what the average American can do to prepare for BRICS+. “There’s a simple solution to this coming currency crisis. Just buy gold. That’s what the BRICS are doing, and you can too.“