Dedollarization is underway, as evidenced by the accumulation of gold by central banks. Geopolitics and inflation redefine the rules of the game.
Gold Rush
Invesco’s annual survey of central banks and sovereign wealth funds that a growing number of countries are repatriating their gold reserves to protect themselves from Western sanctions on Russia.
For Invescolast year’s stock market rout resulted in huge losses for sovereign wealth fund managers rethinking “fundamentally” their strategies. More and more funds are convinced that rising inflation and geopolitical tensions are here to stay.
More than 85% of the 85 sovereign wealth funds and 57 central banks estimate that inflation will be higher over the next decade than over the previous one.
This is consistent with the fact that the former chief economist of the IMF pleads for central banks to raise their inflation target from 2 to 3%.
The seizure of the equivalent of $300 billion in reserves belonging to Russia is also a large part of the reason for this renewed appetite for gold. The survey shows that a “substantial part” of central banks are concerned about this precedent. Nearly 60% of respondents believe that the freezing of Russian reserves makes gold more attractive.
A central bank (Bundesbank?) said on condition of anonymity: “We had gold in London… but now we have transferred it to our own country to keep it safe”.
In 2023, 68% of central banks keep their gold reserves in their country, compared to 50% three years earlier.
By the way, Invesco is among the funds interested in launching a Bitcoin ETF. The fund is well placed to know that Bitcoin is being carved out to become the next international reserve currency…
Geopolitics
Geopolitical tensions combined with the opportunities offered by China are also encouraging some central banks to turn away from the dollar.
More than 7% of them believe that the increase in US debt is also a negative factor for the greenback.
It suffices to look at the shape of the interest payment curve on the US debt to ask questions. We are approaching 1000 billion dollars a year:
Since the US government has no intention of tightening its belt, the debt will get worse. Which doesn’t bode well for inflation.
That said, most central banks still see no alternative to the dollar as a reserve currency. Those who consider the Chinese yuan as a competitor are down to 18%, compared to 29% last year!
In other words, China has no intention of letting foreign central banks invest in its debt. The result would be a deleterious appreciation of the yuan for industry, exports and employment. The Communist Party would then be threatened.
Nearly 80% of the 142 institutions surveyed consider geopolitical tensions to be the main risk for the next decade. More than 80% are worried about inflation for the coming year.
These concerns are linked to the proxi war waged by the United States against Russia, the spearhead of dedollarization.
Bis repeated. For the dollar, for the empire!…
Former Prime Minister Dominique de Villepin said this weekend on France Inter:
“Russia has with her a large part of the peoples of the world […]. What is the lesson of Iraq? […] We did not want to push the UN inspections with Saddam Hussein (an odious character) to the end, we have reaped chaos and terrorism. We didn’t want, at one point, to push the fires with Gaddafi’s Libya, we harvested the chaos and the situation in the Sahel. So we have to learn the lessons of history. »
The BRICS initiative for a new gold-backed currency could jeopardize the dollar, euro, etc. The result would be massive inflation and an explosion of debt.
Let’s not forget that after the end of the gold standard decreed by Nixon in 1971, H. Kissinger set up the petrodollar system. The dollar was then no longer guaranteed by gold, but by oil.
Everyone who has tried to get rid of the dollar has ended very badly. Saddam Hussein was overthrown just two years after he stopped denominating his oil in dollars.
Muammar Gaddafi had the ambition to create a pan-African currency based on gold. The guide of the Great Jamahiriya wanted African exports to be paid for in gold and no longer in dollars. He was assassinated during his tenure as head of the African Union…
Today, the BRICS have taken up the torch. A return to the gold standard is in the works. The fact that Saudi Arabia has already promised to accept the yuan (convertible into gold) for its oil is a strong sign.
Hence the gesticulations of the empire which will do anything to exchange paper for energy a few more decades.
Protect yourself against the horrors of History. Bitcoin…
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