Gold Backed Russian Ruble, Chinese Yuan Primed To Destroy U.S. Dollar As Global Reserve Currency

Gold Backed Russian Ruble Chinese Yuan Primed To Destroy U.S. Dollar As Global Reserve CurrencyA revolutionary transformation of the entire global monetary system is currently underway, being driven by an almost perfect storm.

The implications of this transformation are extremely profound for U.S. policy in the Middle East, which for nearly the past half century has been underpinned by its strategic relationship with Saudi Arabia.

RISE OF THE PETRODOLLAR

The dollar was established as the global reserve currency in 1944 with the Bretton Woods agreement, commonly referred to as the gold standard.

The U.S. leveraged itself into this power position by holding the largest reserve of gold in the world. The dollar was pegged at $35 an ounce — and freely exchangeable into gold.

By the 1960s, a surplus of U.S. dollars caused by foreign aid, military spending, and foreign investment threatened this system, as the U.S. did not have enough gold to cover the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the dollar was overvalued.

America temporarily embraced a new paradigm in 1971, as the dollar became a pure fiat currency (decoupled from any physical store of value), until the petrodollar agreement was concluded by President Nixon in 1973.

The quid pro quo was that Saudi Arabia would denominate all oil trades in U.S. dollars, and in return, the U.S. would agree to sell Saudi Arabia military hardware and guarantee the defense of the Kingdom.

According to a report that appeared in the Huffington Post:

As a result of this agreement, the dollar then became the only medium in which energy exchange could be transacted. This underpinned its reserve currency status through the need for foreign governments to hold dollars; recirculated the dollar costs of oil back into the U.S. financial system and — crucially — made the dollar effectively convertible into barrels of oil. The dollar was moved from a gold standard onto a crude oil standard.

U.S. interest rates were then managed so that oil exporters (who formerly looked to gold as the basis of their reserves) would be indifferent to whether they stored their currency reserves, earned from oil exports, in U.S. treasuries, or in gold. The value was equivalent.

Death of the Petrodollar

In what may ultimately wind up being the death blow to the petrodollar, since 2008, the U.S. government has maintained a policy of zero interest rates and “quantitative easing.”

Once energy producers became aware of the U.S. economic dependence on low-interest rates, they understood that they would never again be able to regulate the price of oil relative to U.S. treasuries. Anything more than a nominal hike in interest rates would effectively implode the global financial system, as the U.S. had become too financialized.

The petrodollar system, which had allowed the U.S. dollar to replace gold as the backing for the oil trade from 1973-2002, was essentially broken.

With no regard for the underlying systemic weakness of the entire petrodollar system the U.S. began to rely heavily on economic sanctions as a means of forcing geopolitical capitulation. It was virtually inevitable that potential targets of such actions would eventually attempt to mitigate these hegemonic actions by the U.S.

Although essentially a response to the aggressive posture of the West, these economic actions have potentially created an environment ripe to put the final nail in the coffin of the petrodollar.

In the greatest of irony, central banks from states such as China, Russia and Brazil, which vehemently oppose an interventionist U.S. foreign policy, ultimately finance the U.S. war machine by purchasing U.S. Treasury debt as a means of protecting their economies.

But in what appears to be an effort to hedge against U.S. imperialism, both China and Russia have become big buyers of physical gold. Russia’s present gold reserves would back 27 percent of the ruble money supply, according to the Huffington Post.

That ratio is far in excess of the U.S. Fed’s original stipulated gold coverage minimum, as well as in exceeding that of any other major country. In addition, Russia is typically is a net exporter of goods and energy, so their gold reserves are likely to continue to increase.

A report on China’s gold reserves appeared in the Financial Times, stating:

China ended years of speculation about its official gold holdings by revealing an almost 60 percent jump in its reserves since 2009.

The country’s central bank said its gold reserves were 1,658 tonnes (53.31 million fine troy ounces) as of the end of June. In April 2009, reserves were 1,054 tonnes.

The purchases show how China is seeking to diversify its reserves away from the US dollar at a time when the price of gold has fallen to near its lowest price since 2010.

“In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi [yuan] and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today,” strategic risk consultant F. William Engdahl writes in his article for New Eastern Outlook.

See also: Russia, China, India, Brazil and South Africa announce their own International Reserve Bank

Russia and China are now creating a new paradigm for the world economy and paving the way for a global de-dollarization.

“A Russian-Chinese alternative to the dollar in the form of a gold-backed ruble and gold-backed Renminbi or yuan, could start a snowball exit from the US dollar, and with it, a severe decline in America’s ability to use the reserve dollar role to finance her wars with other peoples’ money,” Engdahl concludes.

Find us here

Get news from the CSGLOBE in your inbox each weekday morning

The views and opinions expressed in this article are those of the authors/source and do not necessarily reflect the position of CSGLOBE or its staff.

Paid content

‘Mad Honey’ and 4 Other Naturally Occurring Psychedelics

Nature is full of drugs. For various reasons, evolutionary forces have led certain plants, fungi, and even animals to develop molecules that interact with...

Could the US win World War III without using nuclear weapons?

As the US, Russia and China test each other’s patience and strategic focus, speculation about the chances of a world war has hit a new high....

The 5 Cartels that Rule America and the World

Americans have been programmed to fight amongst themselves along partisan political lines, always pointing the finger at the other side of the phony left-right...

What's New Today

Georgia House Votes To Allow Citizens To Abolish Police Departments In The State

The Georgia House backed an effort on Friday to dissolve the Glynn County Police Department and any...

Leaked CDC document contradicts Pence claim that U.S. coronavirus cases ‘have stabilized’

Even as Vice President Mike Pence wrote in a Wall Street Journal op-ed published Tuesday that coronavirus...

Five bombshells about Trump from Bolton ‘s book

Excerpts from former national security adviser John Bolton ’s book about his time in the Trump administration...

Don’t Listen to Fox. Here’s What’s Really Going On in Seattle’s Protest Zone.

It seems I live in a city undergoing a “totalitarian takeover” that will lead to “fascist outcomes”...

MOST READ

What Is Agenda 21? Depopulation of 95% of the World By 2030

Most people are unaware that one of the greatest threats to their freedom may be a United Nations program which plans to depopulate 95%...

Complete List of BANKS Owned/Controlled by the Rothschild Family

What’s the significance of having a central bank within a country and why should you concern yourself, your family and colleagues? Central banks are illegally...

Racial wounds rip open under a president with a history of exploiting them

President Donald Trump has spent much of his adult life building his brand around racial divisions.

‘Mad Honey’ and 4 Other Naturally Occurring Psychedelics

Nature is full of drugs. For various reasons, evolutionary forces have led certain plants, fungi, and even animals to develop molecules that interact with...

You Have Felt it Your Entire Life

We have felt it our entire lives. Something is not quite right with our world and we are beginning to see this more clearly...

Cancer Was Cured By This Brilliant Man In 1934, Then He Was Killed

Cancer industry is making revenue of more than one hundred billion dollars a year but it is still unclear why the actual cure is...

The Power of the Mind

Living in the world under your skin is a bustling metropolis of 50 trillion cells, each of which is biologically and functionally equivalent to...

Over 40 Million Russian Citizens Mobilized to Prepare for Nuclear War

This year's Russian war simulation raises further questions regarding their true aims.  Despite the problematic issues with the U.S. and failed efforts to negotiate with Syria,...

Environmental Groups Sue To Stop Oil Companies From Injecting Industrial Waste Into California’s Water Supply

Against the backdrop of California’s historic drought, two environmental groups filed a lawsuit Thursday demanding that the state stop allowing oil industry wastewater to...

News Flash: Fukushima Is Still a Disaster

The corporate media silence on Fukushima has been deafening even though the melted-down nuclear power plant’s seaborne radiation is now washing up on American...

Pence: U.S. Ready to Use ‘Overwhelming’ Force in Response to North Korea

Keeping in lockstep with the “evil North Korea” narrative, Vice President Mike Pence said Wednesday that if Kim Jong-un decides to attack a neighboring...