The World Gold Council has reported that the Central Bank of Russia has more than doubled the pace of its gold purchases, bringing its reserves to the highest level since Putin took power 17 years ago.
Russia’s desire to break away from the hegemony of the U.S. dollar and the dollar payment system is well-known. Over 60% of global reserves and 80% of global payments are in dollars. The U.S. is the only country with veto power at the International Monetary Fund, the global lender of last resort.
Perhaps Russia’s most aggressive weapon in its war on dollars is gold. The first line of defense is to acquire physical gold, which cannot be frozen out of the international payments system or hacked.
With gold, you can always pay another country just by putting the gold on an airplane and shipping it to the counterparty. This is the 21st-century equivalent of how J.P. Morgan settled payments in gold by ship or railroad in the early 20th century.
Russia has now tripled its gold reserves from around 600 tonnes to 1,800 tonnes over the past 10 years and shows no signs of slowing down. Even when oil prices and Russian reserves were collapsing in 2015, Russia continued to acquire gold.
But Russia is pursuing other dollar alternatives besides gold.
For one, it’s been building nondollar payments systems with regional trading partners and China.
The U.S. uses its influence at SWIFT, the central nervous system of global money transfer message traffic, to cut off nations it considers to be threats.
From a financial perspective, this is like cutting off oxygen to a patient in the intensive care unit. Russia understands its vulnerability to U.S. domination and wants to reduce that vulnerability.
Now Russia has created an alternative to SWIFT...
- Source, Jim Rickards via the Daily Reckoning, Read More Here
