What the BRICS Payment System Means to the G7

A New Reserve Currency is Coming

So, it’s happened at last.

China has made the move we’ve been expecting for the past year or so. They have released their alternative to the US dollar as a currency for international trade. And they have done it in style. No less than 185 countries have joined the system. That means only about 20 countries haven’t. In other words 80% of the world’s population are in while the other 20% are out.

On the one hand that means the countries that haven’t joined are going to be at a disadvantage. It also means that the West has completely lost Africa, and Africa is one of the places absolutely stuffed with gold, silver, and other useful metals. In other words the G7 countries have lost a great opportunity, and valuable trade deals.

What is more important to Europe and North and Central America is the financial consequences on Western currencies. With the dollar being sidelined there is going to be a drastic reduction in the need for dollars for international trade. As I have said before, that will mean a massive repatriation of those dollars back to Uncle Sam. What’s he going to do with them? It will tank the dollar’s value even faster. The USA would seem to be heading into a very uncomfortable 2026.

The next consequence is going to be an increase in the value of other currencies, and therefore an increase in the cost of importing essential commodities for the G7 countries, which means a more expensive cost of living for everyday folk, and an increase in the balance of payments deficit for those countries.

And then there is the obvious next step. This could be a year away, or maybe even two, but it is coming. A return to a gold backed currency. With the increase in the use of the yuan for international trade, there will be an increase in the need for the currency, and that will boost its value. That in turn will make China’s exports more expensive, and the West’s imports more expensive.

Both China and Russia have been stockpiling gold, and China mines it extensively in Tibet and other areas. None of that gold ever leaves the country. That means both Russia and China can back their own currencies with a substantial stock of the ultimate financial instrument. Western countries by comparison have very little gold.

I think we have to ask where all this is leading?

Quite frankly, I suspect it means that great changes are coming, as they were for Cousin Caterpillar. (Anyone remember The Incredible String Band?)

Can the UK back its currency with gold? I think not.

Can the USA get away with backing 10% of its bonds with bitcoin?

Are we poised for a fight between Bitcoin and gold? If so I would have to back gold to win.

I’m not about to chuck in my bitcoin just yet, but I do wonder if we are about to experience a serious downturn in that particular currency, together with a prolonged period of bitcoin gloom.

One thing is crystal clear, the West is on the way down and the East is rising, and there appears to be no stopping it.

Western Europe and the USA are committing suicide. They are quite deliberately destroying their political structures, and the longer this persists, the more difficult the road to recovery will be.

This is one more reason to relocate to where things are growing rather than to stay where things are dying.

So what are we to do about this?

I’m afraid I have no idea what to say to the Americans who read this blog. You are quite clearly in one hell of a mess. Several American financial wizards have stated in the past that the most valuable asset that America possesses is the status of the dollar as the world’s reserve currency. Effectively it has allowed Washington to spend at other countries’ expense, and also to bully other countries with threats of financial dislocation.

As of today, that asset has just gone up in smoke. What comes next is anybody’s guess, but from now on Washington, instead of fighting more and more wars, needs to grab a lifebelt and start thinking about saving itself from a rather unpleasant fate.

I dont know what to say about Western Europe. Is it too late to start trying to feed its own population? Is it too late to re-industrialise? Is there an alternative?

Sadly, I cant answer those questions, but I do think such a course is impossible with the current political situation in the UK and the EU.

I’m sorry to have to say this but things are just about to get worse in the G7 hemisphere.