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Rickards: The Coming Shock To The Global Monetary System

Whilst having my morning coffee, I was reading up on this article from James Rickards. His bio reads as follows: 

James G. Rickards is the editor of Strategic IntelligenceProject ProphesyCrash Speculator, and Gold Speculator. He is an American lawyer, economist, and investment banker with 40 years of experience working in capital markets on Wall Street. He was the principal negotiator of the rescue of Long-Term Capital Management L.P. (LTCM) by the U.S Federal Reserve in 1998. His clients include institutional investors and government directorates.

His work is regularly featured in the Financial Times, Evening Standard, New York Times, The Telegraph, and Washington Post, and he is frequently a guest on BBC, RTE Irish National Radio, CNN, NPR, CSPAN, CNBC, Bloomberg, Fox, and The Wall Street Journal. He has contributed as an advisor on capital markets to the U.S. intelligence community and at the Office of the Secretary of Defense in the Pentagon. He has also testified before the U.S. House of Representatives about the 2008 financial crisis.

Rickards is the author of The New Case for Gold (April 2016), and four New York Times bestsellers, Currency Wars (2011), The Death of Money (2014), The Road to Ruin (2016), and Aftermath (2019) from Penguin Random House. And his latest book, The New Great Depression, was published in January 2021.

I’ve included the article I am commenting on here


Here is a summary of the article in bullet points:

  1. Introduction of a New Currency by BRICS: The BRICS nations (Brazil, Russia, India, China, and South Africa) are planning to introduce a new currency that could potentially weaken the role of the U.S. dollar in global payments and eventually replace it as the leading payment and reserve currency.

  2. Expansion of BRICS Membership: The BRICS organization is expanding, with eight nations formally applying for membership and 17 others expressing interest. This expansion could significantly impact world trade, foreign investment, and investor portfolios.

  3. BRICS as a Credible Alternative: The BRICS nations, with their significant resources and population, present a substantial and credible alternative to Western hegemony. They are a major force in terms of population, landmass, energy output, GDP, food output, and nuclear weapons.

  4. Development of a Telecommunications System: The BRICS nations are developing an optical fiber submarine telecommunications system, named BRICS Cable, to connect its members and prevent spying by the U.S. National Security Agency.

  5. U.S. Sanctions and the Dollar: The U.S.’s use of dollar sanctions has led to an increased desire among nations to move away from the dollar as a medium of exchange for international trade. This has accelerated the push to opt out of the dollar system entirely.

  6. Creation of a BRICS+ Currency: The BRICS+ nations are making a realistic effort to de-dollarize global payments and eventually global reserves. A new BRICS+ currency could greatly accelerate the demise of the dollar as the world’s leading reserve currency.

  7. Introduction of a Gold-Linked Currency: The new BRICS+ currency is likely to be linked to a weight of gold, playing to the strengths of BRICS members Russia and China, who are the two largest gold producers in the world.

  8. Creation of a BRICS+ Currency Bond Market: The BRICS+ currency offers the opportunity to create a deep, liquid bond market that could challenge U.S. Treasuries on the world stage almost instantly. This would be achieved by creating a BRICS+ currency bond market in 20 or more countries at once, relying on retail investors in each country to buy the bonds.

What does that mean for you and me?

The global monetary system is on the brink of a major reset.

The global monetary system’s impending reset could have interesting implications for the average Australian. If the US dollar’s dominance as the world’s reserve currency is challenged, it could lead to significant fluctuations in the value of the Australian dollar. This could affect the cost of imported goods, potentially making them more expensive if the Australian dollar weakens. It could also impact the cost of travelling overseas. 

Furthermore, if Australia’s trading partners are also affected by these changes, it could influence the demand for Australian exports, which could have knock-on effects on jobs and the economy. For example, if a trading partner’s currency weakens against the Australian dollar, Australian exports could become more expensive, potentially reducing demand for them.

The rise of the BRICS nations (Brazil, Russia, India, China, and South Africa) could challenge the dominance of the US dollar. 

The economic rise of the BRICS nations and their potential introduction of a new reserve currency could have several implications for Australians. 

Firstly, it could alter the dynamics of global trade. If the BRICS nations’ new currency gains widespread acceptance, it could become important for international trade. This could require Australian businesses to adapt to trading in this new currency, which could involve facing new exchange rate risks. 

Secondly, the shift in economic power towards the BRICS nations could lead to changes in geopolitical power. This could influence Australia’s foreign policy and its strategic and defence planning, our “leaders” are heavily involved and supporting the USA in all their war mongrelly. I do not see this change anytime soon, so don’t be surprised if the BRICS countries will “flip the bird” at us. 

Lastly, the rise of the BRICS could lead to new investment opportunities for Australians. For example, developing new financial markets in the BRICS nations could offer new opportunities for Australian investors.

The International Monetary Fund (IMF) could play a role in resettlement by issuing Special Drawing Rights (SDRs). 

The potential for the IMF to issue SDRs as part of the monetary reset could also impact Australians. SDRs are an international reserve asset that IMF member countries can use to supplement their official reserves. If SDRs become a more significant part of the global financial system, it could influence Australia’s standing in international finance. 

For instance, if the Australian dollar’s value against the SDR changes, it could affect the country’s ability to borrow on international markets. This could, in turn, influence interest rates in Australia, affecting the cost of loans and mortgages for Australian citizens. Furthermore, changes in the global financial system could influence the policies of Australian banks, potentially affecting their lending practices and the services they offer customers. Considering the ongoing interest rate rises, I could be mistaken that this is already happening. Could the Reserve Bank know this is coming, prompting rate rises now so they can claim there is no change due to BRICS? Surely not….

The potential for a new gold standard.

The return to a gold standard, where currencies are backed by gold, could have several implications for Australians. Australia is one of the world’s largest gold producers, so a return to a gold standard could increase demand for Australian gold, potentially boosting the country’s gold mining industry. This could create jobs and contribute to economic growth. 

However, a gold standard could also lead to increased price levels and economic instability, as the currency’s value would be tied to the price of gold, which can be volatile. This could impact Australia’s cost of living and the Australian economy’s stability. AU, and the West for that matter, will never return to a gold standard. The simple reason for this is that our political leaders cannot spend money as they see fit. The gold standard will sort of force them to “balance the books”, and they will never allow for that. 

The role of cryptocurrencies in the future monetary system is still being determined.

The uncertainty surrounding the role of cryptocurrencies in the future monetary system could impact Australians in several ways. If cryptocurrencies become a more significant part of the financial system, they could provide new investment and commerce opportunities. 

For example, businesses could start accepting cryptocurrencies as payment, and individuals could invest in them to make a profit. However, using cryptocurrencies has risks, including high price volatility and potential regulatory changes. If the Australian government were to regulate cryptocurrencies more heavily, which they will in the near future simply because government and banks do not like competition, it could impact their value and usability. It is 

The potential for a financial crisis.

The potential financial crisis due to the monetary reset could have significant implications for Australians. A financial crisis could lead to a range of negative outcomes, including a contraction in the economy, a rise in unemployment, and a fall in the value of investments. For the average Australian, this could mean a higher risk of job loss and decreased income. It could also mean a reduction in the value of their savings and investments, which could impact their financial security and retirement plans. 

Furthermore, a financial crisis could lead to tightening credit conditions, making it harder for Australians to get loans for things like buying a house or starting a business. On the other hand, a financial crisis could also lead to lower interest rates, reducing the cost of borrowing for those who can get loans. The Australian government and the Reserve Bank of Australia would likely take actions to mitigate the impact of a financial crisis, such as implementing fiscal stimulus measures or cutting interest rates.

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