India repatriates all its gold

New Delhi repatriated its gold from England, a sign that a new international monetary order is brewing. Bitcoin lying in wait.

India retrieves its gold

The Reserve Bank of India (RBI) has just transferred 100 tons of gold from its former colonizer. The last gold transfer of this magnitude was in the opposite direction, in 1991.

India officially wants to save on storage costs currently paid to the Bank of England. Unofficially, geopolitical tensions are worsening.

This gold-buying spree is not confined to India. Central bank gold purchases have hit historic records lately.

According to the World Gold Council, China has gotten hold of 225 tons of gold in 2023, approximately a quarter of the 1,037 tons purchased by all central banks. Here are the largest gold holders:

USA: 8,133 tons; Germany: 3,352 tons; Italy: 2,451 tons; France: 2,436 tons; Russia: 2,332 tons; China: 2,262 tons; Switzerland: 1,040 tons; Japan: 845 tons; India: 822 tons; Netherlands: 612 tons; Turkey: 570 tons; Taiwan: 423 tons; Portugal: 382 tons, etc.

Central banks hold 17% of all the world’s gold (36,700 tons). They’ve been net buyers since 2010 in reaction to the Fed’s QE.

Gold represents close to 10% of the RBI’s foreign exchange reserves. That’s less than the global average, which JP Morgan estimates at nearly 20%.

Les banques centrales détiennent 20 % de leurs réserves de change en or. pic.twitter.com/cM9j9zPPWa

— Nicolas Teterel (@NTeterel) May 31, 2024

Gold Standard

The RBI claims it wants to diversify its reserves, protect against inflation, and mitigate exchange rate risks. A wise decision given the “freeze” on €250 billion in Russian foreign exchange reserves…

That said, the BRICS are no longer hiding their distrust of the dollar. Any country wishing to join the club must show its credentials. For example, the Thai candidate recently signed an agreement to abandon the dollar in its trade with China. Nigeria and India did the same a week earlier.

The unspoken goal is to strip the United States of its exorbitant privilege. This privilege lies in the fact that the dollar is the international currency par excellence. This privilege was sealed by World War II (Bretton Woods agreements / Gold Standard) and later by the petrodollar.

The end of the gold standard in 1971 could have dug the dollar’s grave, but Washington managed to maintain its monetary hegemony. The strategy was simply to force OPEC nations to sell their oil in dollars. This is the famous “petrodollar system”.

This system has yielded “$10 trillion fallen from the sky” according to Vladimir Putin. The reason being that central banks accumulate dollar reserves in the form of Treasury bonds (US debt). This results in an artificial strength of the dollar that allows the United States to import much more than it exports. This is the “exorbitant privilege”.

Not for much longer. China has shed more than $50 billion worth of Treasury bonds in the first quarter. Saudi Arabia is not far behind. Its sovereign fund has just reduced its US stock portfolio by 41%.

The twilight of the dollar

The New York Fed recently tried to reassure on its blog. It recalls that the majority of foreign exchange reserves are still composed of dollars. We can read that the decline in the dollar’s share is only due to a “small group of countries (China, Russia, India, Turkey leading).

This “small” group, however, represents nearly 40% of the world’s population… And not the least. In 1995, Japan’s GDP was 15 times higher than India’s. The two countries are now neck and neck. And let’s not talk about the thirty-odd countries that wish to join the BRICS.

The dollar likely represents no more than 54% of the world’s foreign exchange reserves (equivalent to $12,332 billion according to the IMF). It was over 80% during the Gold Standard era.

For Indian Foreign Minister Subrahmanyam Jaishankar, “the dominance of the United States, which began after the end of the Cold War, has ended”.

Former Singaporean Foreign Minister George Yeo said the same thing this week: “You can print dollars, but one day you won’t be able to anymore, and you’ll have to choose between producing arms or butter. The key event will be the break in the dollar’s supremacy. And we all know that will happen, because it’s an abnormal situation”.

Even Americans are facing the truth. Former Congressman and US presidential candidate Ron Paul believes that “the dollar will be rejected as an international reserve currency in the next economic crisis”.

Power Rangers

Ceasing to finance US debt will greatly impact the standard of living of Americans. The dollar’s decline will result in inflation for all imported goods.

But the question is, what do the BRICS plan to replace the dollar with? It’s one thing to keep gold in reserve but it’s another to make international payments. Especially knowing that the United States recently threatened China with a “dollar disconnect” (from the SWIFT network).

Gold obviously cannot oil international exchanges. We often hear about a currency formed from a basket of currencies circulating via a CBDC network. As Saifedean Ammous says, “it doesn’t work like that; we are not in the Power Rangers”.

“This isn’t the power rangers”

Such a great line😂

pic.twitter.com/RZnerVeYVn

— Richard “Dick” Whitman (🌎/21M) (@GhostofWhitman) May 30, 2024

Furthermore, the United States must accept this currency. However, it is highly likely they will prefer to reduce imports from China. We would be heading towards a fragmentation of payment systems along with de-globalization.

The West could, however, be persuaded to play on a level field. For that, a reserve currency and a payment system from which no one could be excluded are needed.

We are indeed talking about Bitcoin, a currency and a payment system, two-in-one. It is the only currency existing in an absolutely finite quantity and whose transactions cannot be censored (as long as there are miners scattered around the world).

Bitcoin is what the BRICS must propose to the world during the next major economic crisis.