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>The Ruble, The Dollar And The Price Of Gold – Who Is Really Winning The Economic Chess Game?
This is huge, but it isn’t being discussed much by the corporate media in the United States.
The Russians aren’t just saying that they do not recognize U.S. dollars as the reserve currency of the world any longer.
That would be bad enough.
At this point, they are actually saying that they will no longer accept U.S. dollars as a form of payment at all.
Wow.
Thirdly, the central bank in Russia has fixed the value of the ruble to the price of gold for at least the next three months…
The Russian central bank will restart buying gold from banks and will pay a fixed price of 5000 roubles ($52) per gramme between March 28 and June 30, the bank said on Friday.
But you won’t hear about this on CNN or MSNBC.
This is a move that could potentially change everything.
Once upon a time, the value of the U.S. dollar was tied to gold, and that helped the U.S. dollar become the dominant currency on the entire planet.
But then Nixon took us off the gold standard in the early 1970s, and things have gone haywire ever since.
Now Russia has linked the value of the ruble to the price of gold, and many believe that this is really going to shake things up…
“I am reminded of what the U.S. did in the middle of the Great Depression. For the next 40 years, gold’s price was pegged to the U.S. dollar at $35. There is a precedent for this. It leads me to believe that Russia’s intention would be for the value of the ruble to be linked directly to the value of gold,” Gainesville Coins precious metals expert Everett Millman told Kitco News. “Setting a fixed price for rubles per gram of gold seems to be the intention. That’s pretty important when it comes to how Russia could seek funding and manage its central bank financing outside of the U.S. dollar system.”
Others believe that this move will create great instability in the global financial system.
For example, Tom Luongo is warning that the following could soon happen…
1: At $1550 per ounce the first order effect here is that is implies a RUB/USD rate of around 75. Incentivizing those holding RUB to continue and those needing them to bid up the price from current levels.
2: This creates a positive incentive loop to bring the ruble back to pre-war levels. Then after that market effects take over as ruble demand becomes structural, based on Russia’s trade balance.
3: Once that happens and the RUB/USD falls below 75, then the USD price of gold rises structurally draining the paper gold markets and collapsing the financial system based on leveraged/hypothecated gold. Now we’re into the arb. phase @Lukegromen postulated w/ 1000bbls/oz.
Time will tell if Luongo is right or if he is wrong.
But without a doubt, things have not played out the way that Biden administration officials were hoping.
They had hoped that U.S. sanctions would crush the ruble, the Russian financial system and the entire Russian economy.
Instead, the Russians have been able to successfully prop up the value of the ruble and have made moves that directly threaten the dominance of the U.S. dollar.
No matter what happens with the ceasefire talks, I expect the United States and Russia to continue this economic conflict for the foreseeable future.
Ultimately, that will be bad for both of our nations.
And as history has shown, economic conflicts have a way of becoming shooting wars way too often. Needless to say, we definitely do not want a shooting war with Russia.
Leaders on both sides should be attempting to find ways to achieve peace and to fix the tremendous damage that has already been done.
Unfortunately, everyone seems to want to continue to escalate matters, and that should deeply alarm all of us.
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