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Russia Pegs Gold To Ruble, Rebounds to Pre-War Levels

Russia has put the US in geopolitical check, looking to hybridize a new gold standard with the petrodollar — rather petroruble- dynamic. This week, Russia announced that it would buy gold at a fixed price of 5000 rubles per gram for 3 months in what is an attempt to create a new gold standard. In conjunction, Russia has begun demanding the countries seeking to purchase fossil fuels from Russia pay in either the Ruble or Gold, and is considering allowing bitcoin and alternative currencies to the dollar for “friendly” nations. Now that the ruble has completely recovered from its drastic collapse following sanctions, you have headlines like from today, “Ruble bounces back to pre-war levels. Putin’s plan is working for now”, which detailed some of the domestic policies Russia has implemented to help build support for the ruble.

An article published through Seeking Alpha summarized “Russia’s 3-Step Program To Put The Ruble On A Gold Standard”:

Step 1: Offer a premium fixed price for gold to domestic Russian banks who can’t sell their gold internationally due to sanctions, encouraging domestic gold flows into Bank of Russia.

Step 2: Strengthen the Ruble internationally by insisting on energy payments in Rubles, turning fixed price into a premium internationally as well, encouraging international gold flows into Russia.

Step 3: Turn the Ruble into a credible gold substitute at a fixed rate.

The 5000RUB window closes June 30. Does Russia declare the Ruble convertible to gold after that? At what rate? Rather than speculate on the Ruble, just buy the gold.

Step 1: Accumulate Gold

Russia has been buying up Gold on the domestic market in advance of this announcement. The US went through the particular effort of sanctioning Russia specifically on foreign gold purchases alongside the general sanctions,. About three weeks ago, Russia’s central bank did temporarily halt its gold purchases due to a “surge in demand for gold as Russians rush to invest in bullion and coins to protect their savings” and to “leave the inventory for regular consumers.”

The central bank said in a statement attached to the policy announcement:

“Currently, households’ demand for buying physical gold in bars has increased, driven, in particular, by the abolition of value-added tax on these operations,” the central bank said in a statement on Monday.”

On March 9th, Putin had signed a law repealing the 20% value-added tax on metals purchases. This was meant to encourage precious metal purchases over foreign currencies as Russian citizens try to find safe havens in wake of the ruble is collapsing.

However, the period of the central bank’s abstinence from domestic Gold purchases has come to an end as of last week as the central bank has resumed gold purchases.

Step 2: Fix Price of Gold in Rubles, Encourage Foreign Gold Inflow

As stated, this week Russia announced that for a 3 month period they would establish the buying price of one gram of Gold to 5000 rubles($60)- effectively setting a floor(below the current world market price of ~$62.5 per gram).

The head of the Russian Parliament and Chairman of the Russian Duma Committee on Energy Pavel Zavalny, said last week that if countries seek to buy oil, gas, or other resources from Russia, “let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency.”

According to investing.com, Zavalny, representing Russia, has also been encouraging China to “de-dollarize” and switch to settlements in gold, rubles, or yuan.

By recently demanding “unfriendly” countries pay largely in either the Ruble or Gold, offering a 20% discount for their oil, they are creating an avenue for the inflow of gold reserves into the country. Additionally, the dynamic of sanctions on Russia’s gold coupled with their 5000 ruble-to-gram peg creates a perpetual arbitrage opportunity for the market that generates pressure to sell gold to the central bank. “AustroLib” writing for Seeking Alpha eloquently summarizes:

This dynamic will generate consistent selling pressure of gold to Russia’s central bank due to the price differential of gold traders buying discounted Russian gold on the open market, and returning it to the central bank buying at a lower discount, to the profit of the arbitrage trader. The fixed rate for Russian Gold purchases these last 3 months is a test run of the 2nd part of that process. Being that the central bank has plenty of Ruble to spend, they will be accumulating gold, which they seek to tie the ruble to. Remember, this dynamic would not work if the US had not decided to try to isolate Russia economically by kicking them off Swift and imposing unilateral sanctions. The US is splintering the world economy by forcing an economic war, and Russia is taking advantage of that and seeking to topple the king.

One last excerpt from the piece reads:

Step 3: Tie Ruble to Gold

According to Austrolib of Seeking Alpha, the next step is to “Strengthen the Ruble And Drain Gold From the West”. It is humorous to note that on March 4th, the following headline was published: “Ottawa sells off almost all its gold reserves, leaving just 77 ounces — or less”. But, as CBC noted in the article cited above:

That doesn’t mean all governments are selling off their gold hoards, however. Countries such as Russia, India and China are currently bolstering their reserves. Central banks added 336 tonnes to their reserves in the second half of last year, a 25 percent increase from the previous year, the World Gold Council says.”

Precious metals expert Everett Millman was quoted by Kitco News saying that, Russia’s intention would be for the value of the ruble to be linked directly to the value of gold. 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 US dollar system.”

If Russia succeeds in creating a new Gold Standard, and simultaneously encourages the growth of oil purchases in the Ruble(even if the Yuan and native currencies emerge into acceptable currencies to trade oil in as well), this could be seen as a hybridization of the gold standard and petrodollar dynamic. This of course is in direct challenge to the US dollar as a reserve currency.

Zero Hedge reported in “How The West Was Lost: A Faltering World Reserve Currency”

Zerohedge would also summarize in agreeance with this article’s thesis:

Putin is predicting this as well, having recently broadcasted the message that, “Let me reiterate, the whole global economy and trade have suffered a major blow, as did the trust in the US dollar as the main reserve currency. The illegitimate freezing of some of the currency reserves of the Bank of Russia marks the end of the reliability of so-called first-class assets. In fact, the US and EU have defaulted on their [debt] obligations to Russia. Now everyone knows that financial reserves can simply be stolen, and many countries in the immediate future may begin — and I am sure this is what will happen- to convert their paper and digital assets into real reserves of raw materials: land, food, gold and other real assets.”

These Chess Moves Could Be What Topples the Dollar and Initiates a Multi-Polar World Order Composed of Regional Blocs

This month I wrote 2 pieces, “Ukraine Crisis Triggered a Massive Shift in Fundamentals for Bitcoin” on March 8th, and “US Hegemony Threatened As Saudis, UAE, India Ignore Threats of Sanctions, Turn to Russia and China” on the 19th. This is Part 3, as the predictions of the first two are being validated by recent developments, and the concepts introduced in those synthesize to support the foundation of this one.

To recap for the sake of readers who did not read the first two, the thesis points of the “Ukraine Crisis Triggered a Massive Shift in Fundamentals for Bitcoin” essentially said rising energy prices would reduce selling pressure of bitcoin, and sanctions would increase demand(for it as well as other commodities) as Russia and its trade partners seek to avoid them with its conclusion including:

In the conclusion, I largely analyzed the current state of the world through the lens of Ray Dalio’s “big cycle” of the rise and fall of empires, and how “empires nearly always end with debt crises, debasement/devaluation of an empires currency, and the diminishing role of its currency as a reserve currency”. Just as the ends of empires are marked by the decline of their reserve currency status, so too is their rise to power marked by the rise of their currency as a reserve currency. The conclusion postulated a fork in the road for humanity, we could either repeat the cycle, or start to decentralize power.

Since my article’s publication(featured on Bitboycrypto.com and CoinMonks), We’ve seen headlines such as “Goldman Admits Saudi-China Oil-Trade Signals ‘Erosion’ Of Dollar Reserve Status” and “The U.S. must bust up the new China-Russia-Saudi Axis of Oil

Just Yesterday, Russia’s foreign minister announced that Russia was aiming to build a new “democratic world order” with China. Capitalizing off the desire for sovereignty among the world’s countries and populations that find themselves pressured(or rather coerced due to both implied and explicit threats)to act as a US vassal state, Sergey Lavrov said:

We, together with you, and with our sympathizers will move towards a multipolar, just, democratic world order.”

Days before the Ukraine war, as CBS reported, in a joint statement between Russia and China to the world during the opening ceremony of the Beijing Olympics, they released a statement that “sought to portray Russia and China not as challengers of democracy and freedom on the world stage, but as purveyors of it.

Part of the joint statement read as follows:

“Some forces representing a minority on the world stage continue to advocate unilateral approaches to solving international problems and resort to power politics, practice interference in the internal affairs of other states, damaging their legitimate rights and interests, provoking contradictions, disagreements and confrontation.”

That is the message they have continued promoting, while the US promotes it as battle between democracy and autocracy.

US Bully Archeotype Will Be Its Downfall, World Has Had Enough

Many of the tactics of these so called “power politics” involve economic warfare such as sanctions, which also involve threat and the threat of violence for those that do not comply. It is what many have been saying for years, such as Tulsi Gabbard and Ron Paul. It is obvious to all who have a basic understanding of what unilateral sanctions on a country’s economy actually means, and ramifications of the ease at which the US threatens countries with this. Who wants to be ruled by a trigger happy madman ready to mass-murder your civilians if you don't comply to their demands? That's, as they say, bad for business.

Of course, besides economic warfare as a means of control, you have the more overt forms such as military action or coups. But ultimately, these forms of imperialism and disregard for sovereignty, are not sustainable as it does not build healthy relationships between countries. The vassal states often come to feel exploited, like a host of a parasite, versus a mutually beneficial relationship. Russia and China are taking this feeling and presenting themselves as a solution, broadcasting the message that they will respect the sovereignty of other countries. Ultimately, I don’t think that is their true intention, especially China, but that is not the point of this article. The point is -just like US elections- the world often finds itself choosing between the lesser of 2 evils — and the assurances from the China/Russia bloc are more appealing to many than the other option of allowing the US to continue dominating on top. The fact is, the US doesn’t respect the sovereignty of other nations, and the China/Russia axis is giving assurances that they will.

In “US Hegemony Threatened As Saudis, UAE, India Ignore Threats of Sanctions, Turn to Russia and China”, I broke down the causes of, and pointed to, the effect of the US pushing neutral countries into the arms of Russia and China. Namely Saudi Arabia, India, South Africa. Although that's becoming ever more apparent by the week as NATO continues attempting to force sides, with, for example, a recent headline reading, “Hungary’s Orban criticized for ‘neutrality’ in Ukraine war

In my first article, I concluded the following:

The concluding paragraph read:

“We could be witnessing the fall of the US empire, and its reserve currency, coincided by the rise of an emerging power structure and world economic system in which BRICS nations rise as the new dominant power of the globe.”

Since then, an increasing proportion of the media, world governmental bodies, and political commentators are increasingly acknowledging the observable reality of the situation. Yesterday, the deputy foreign minister of Russia said BRICS countries (Brazil, Russia, India, China, and South Africa) will be at the heart of a “new world order”.

Russian diplomat, Ryabkov, told RT regarding the decision to demand ruble payments for gas contracts with ‘unfriendly’[nato-allied] countries:

As previously mentioned, its not just rubles they are willing to accept for gas(or other exports), but gold. Likewise, they have been openly considering accepting bitcoin as payment to avoid sanctions for the past week — causing it the digital currency to soar. Likewise, they are willing to accept native currencies of friendly currencies which doesn’t force them to trade their native currency for another on the open market, devaluing the currency they sale and putting buying pressure on the currency they convert to.

With the mention of Lira, it is worth noting that Turkey’s Erdogan already told Putin in early March that Turkey is willing to trade in the Yuan, Ruble, or Gold. Another country we are pushing into the Russia/China block’s arms. Russia and India have made further strides in trading in the Ruble and Rupee. The recent round of India-China peace talks were said. to be “positive and constructive” by China. Meanwhile, as Antiwar.com reported on March 31st in an article titled, “US Warns India Against Significant Increase in Russian Oil Imports”, the US is continuing to threaten India for conducting trade in India’s own interest:

I covered the previous threats of sanctions in “US Hegemony Threatened As Saudis, UAE, India Ignore Threats of Sanctions, Turn to Russia and China”, explaining how this strategy is counterproductive- the implication of my first two articles in totality being even that the fact that this strategy is our immediate go-to reaction is perhaps the fundamental root reason why countries want to distance themselves in the first place:

While we are on the topic of the US pushing away countries into the arms of Russia and China through its aggression and coercion, the thesis of my last article, it is worth pointing out the recent news, “Cambodia Signs Military Deal With China After US Pressure”.

Meanwhile Putin is demanding rubles from “unfriendly “ nations — which G7 recently rejected, but others seem to be weighing options. Greece held an “emergency meeting” on the 31st at the time of writing regarding Putin’s demand for rubles.

Germany, a major member of G7, is on edge having to ration(as is many European countries like Austria). While they rejected the Ruble demand, they have yet to be cut off as trade continues, as recently, “the Russian leader said money would be paid into Gazprom Bank, which is not a subject of sanctions, and then transferred in rubles to Russia”[which still creates buying pressure on the ruble but Russia takes slight liquidity loss in payments due to conversion]. Russia is testing the waters and seeking to push back against the US sanctions and come out stronger on the other side. So far, the Ruble has done so. Time will tell how the future proceeds. It is worth noting that while Russia is taking advantage of the sanctions and attempting to transmutate them, like a martial arts fighter redirecting the force of an opponent to its advantage, these sanctions hurt the rest of the world. Antiwar.com noted in “Lavrov Says the West Has Launched a ‘Total, Hybrid War’ Against Russia

What This All Means

In Brett Arend of MarketWatch’s coverage of the recent move by Russia to peg Gold purchases to the ruble, the following was concluded:

Investing.com published an article titled “Currency Wars Center On Russia’s Goldthat nicely summed up:

Is Russia even winning the geopolitical war, or are we shooting ourselves in the foot? Either way, the path ahead is bleak in terms of economic stability. Just after my last article publication, Biden himself had said, “We are at an inflection point, I believe, in the world economy — not just the world economy, in the world. … And now is a time when things are shifting. We’re going to — there’s going to be a new world order out there, and we’ve got to lead it.”

Tulsi Gabbard would comment on it in an interview, reminding Bidenyou are not God”, going on to say that “if you try to pretend that you are, what will result — even with good intentions — what will result, unfortunately, is more suffering, more hardship for the people in the world [whom] supposedly he’s trying to save, but also for the American people.

Yesterday, the Daily Mail published the headline, “President of BlackRock investment firm warns an ‘entitled generation’ needs to brace for shock of shortages and higher inflation: Experts warn Americans will pay an EXTRA $433 a month for basic goods this year”

Essentially Blackrock is saying “Brace yourself peasants, the lordship’s siege warfare is backfiring and ye(et) serfs shall pay the cost.” France is mulling expanding food stamps. Biden said 3 days ago, and I quote, Shortages are gonna be real”. At least he is keeping it G — although some such as CSPAN formalized his quote and eliminated the contraction in their quotations if that’s even worth mentioning(in truth, I just find it humorous).

I digress, Russia seems to be outplaying the US in geopolitical chess. This is reflected by the Ruble’s recent rebound to post-war levels and the continued deterioration of US-foreign relations. The US dollar is likely to continue to fall under increased criticism as a reserve currency, the impact of the economic war the US has initiated will grow, and hedging one’s money against US hegemony, whether that’s increasing exposure to commodities, crypto, or just buying fertilizer and bullets, is likely a good idea. If Western Leadership doesn’t check itself, it is looking like Russia will checkmate it.

4/01 Update: Putin Sets Deadline For Ruble Gas Payments [April 1st]

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Mcguiremitchell

Free Assange. Bring an end to the Oligarchy, the MIC, & the entire empire. Question everything. Even yourself. Be open to change. External & internal. ❤ is 🔑