Wednesday, March 27, 2013

Are The BRICS Tossing One Through The United States' Window?

Clearly we should take notice. If central banks are preparing for a major change in the value of the dollar, shouldn't we? The fact remains that the US dollar cannot and will not survive the ongoing abuse heaped upon it by government planners and federal officials. That not only means the gold price will rise, but that many, if not most currencies, will lose a significant amount of purchasing power.  - Jeff Clark, Casey Research - in reference to that fact that eastern hemisphere Central Banks are loading up on gold and Bloomberg News is erroneously reporting China's involvement.
If you are at all curious about what is going on globally in terms of gold, the article which is the source of the above quote is a must-read:  LINK.

The reason why the above quote is important to this post is that it underlies a "tectonic" shift in the global financial landscape going on that is not really being reported by the U.S. media.  The BRICS countries (Brazil, Russia, India, China, South Africa) LINK met for a summit in South Africa today.  They kicked off the summit by pre-announcing two significant events:  1) a work-in-progress to establish a new development bank that would rival the World Bank/IMF;  2) Significantly, they signed a trade and currency deal in which the BRICS will conduct trade amongst themselves in their own respective currencies, altogether bypassing use of the U.S. dollar:  LINK

While both events are significant, the latter is another nail in the dollar's coffin.  I wrote about this power shift taking place in an article published by Seeking Alpha:   BRICS Game-Changer

While an agreement which would establish the new development could not be formed, the BRICS did establish a $100 billion fund designed to address any financial crises that might occur in developing economies:  LINK

I thought it was interesting that while Bloomberg News reported the inability to establish the new bank as a "failure," if you read that last link from an Indian newspaper, it would actually appear that the $100 billion fund that was established is a pre-cursor to eventually getting a new development bank formed in order to by-pass the U.S.-controlled World Bank and IMF.

The writing is on the wall for everyone to see:  at some point within the next 3-5 years, most likely, China is going to assert its economic power by rolling out some kind of gold-backed currency that will be used to replace the dollar as  the global trade reserve currency.  They have been slowly chipping away at the dollar over the last several years, although no one in the west is paying attention.  At some point I expect that the new gold-backed currency will also involve a significant upward revaluation of the price of gold.  And that will be a game-changer for everyone, especially for those have gold in their possession and, even more so, for those who don't.

As friends and colleagues of mine know, the views I have taken on over the the last 10 years with regard to the U.S. economy, political/banking corruption, housing and precious metals have been accurate (not views unique to me, of course).  In terms of my view on an eventual new currency/gold revaluation, I am 100% confident.


  1. Why not. China's already announced its plans for a free floating currency along with the ability to back it by gold as they haven't updated their gold reserves since 2009.

  2. Ecuador auctions off Amazon to Chinese oil firms

    Indigenous groups claim they have not consented to oil projects, as politicians visit Beijing to publicise bidding process

    "Ecuador is willing to establish a relationship of mutual benefit – a win-win relationship," said Ecuador's ambassador to China in opening remarks.

    Critics say national debt may be a large part of the Ecuadorean government's calculations. Ecuador owed China more than £4.6bn ($7bn) as of last summer, more than a tenth of its GDP. China began loaning billions of dollars to Ecuador in 2009 in exchange for oil shipments. More recently China helped fund two of its biggest hydroelectric infrastructure projects. Ecuador may soon build a $12.5bn oil refinery with Chinese financing.

    debt to hard assets........we'll see more of this.

  3. Is the money pump leaking?
    If the velocity of money is picking up, look out because of that giant dam of money printed up since 2008.
    We so far here have a little more honest reporting of the real inflation rate, but that's not saying much.

    OTOH, don't worry because now that we is a corporation, it's all tax deductible.

    The U.S. Security and Exchange Commission has the country of Canada registered as a corporation (

    Why, you might ask, would the country of Canada be registered with the SEC? The answer lies with the fact that the world is now being divided into ‘free enterprise zones’ or ‘multinational corporate region, which of course means the loss of sovereignty for many governments, including in this case, Canada

    1. Strong Move To Scare Big Money Out Of “Too Big To Fail” Banks

      The official 2013 Canadian budget contains an explicit provision that Canada will pursue the bail-in model for systemically important banks for future bank failures!

      Titled ECONOMIC ACTION PLAN 2013

  4. David Stockman, former director of the Office of Management and Budget under President Reagan, told Yahoo! Finance, a disproportionately large chunk of home sales has been driven by investors buying up distressed properties and betting on being able to flip them for big profits once prices rise further. But the everyday homebuyers (first-time buyers and buyers trading up for larger properties) that investors would need to sell to have been mostly staying out of the real estate market. Financial hardships, continued unemployment (albeit improving) and other factors are keeping them on the sidelines. So when prices reach a level where investors are ready to sell, there may not be many buyers to sell to -- and that could be disastrous for home prices once again.

    "I would say we have a housing bubble again," said Stockman, who recently has been working in the private equity sector. "We don't have a real organic sustainable recovery because, in a world of medicated money by the central bank, things aren't what they appear to be. ... It's happening in the most speculative subprime markets, where massive amounts of 'fast money' is rolling in to buy, to rent, on a speculative basis for a quick trade. And as soon as they conclude prices have moved enough, they'll be gone as fast as they came."

    (Eventually, a domino is going to fall and a Major Crisis in the US will give the BRICS even greater flexibilty as confidence in the US wanes.)

  5. Dave, do you think China is really far-sighted? We know that there is a huge housing bubble in China and the Chinese government is unwilling to do anything about it. If the housing bubble in China bursts, it will do great damage to the Chinese economy and cripple her economic power. In the 1980s, Japan also enjoyed a gigantic housing bubble. We all know what happened when the bubble had burst. Gold will go up. That's for sure. But gold will go up because of the new Chinese economic power? I doubt. Any thoughts?

    1. Ya I think China is that far-sighted. They have to put 1 billion to work. The whole globe has a big housing bubble and Bernanke is blowing another big one in this country.

      China is adhering to the The Golden Rule. That Rule has existed for 5,000 years. When the shit hits the fan and the globe is in chaos, possibly a world war, China will have many times more gold than the U.S. and China will make the rules.

      Whether they have similar economic issues as the U.S. is irrelevant. China owns close to 10% of the U.S.' Treasury debt, it has $3 trillion in foreign reserves and a massive trade surplus.

      What does the U.S. have?

    2. The most powerful military.
      As Mao himself said "power grows out of the barrel of a gun"
      The US will dominate.

    3. "What does the U.S. have?"

      A lot of indebted, obese people.


    Great site for information on the current housing bubble.

  7. Dave, your blog is so awesome. I come here practically every day hoping there is a new post. Thanks for your FREE insights and analysis. It is so nice to know you are being honest and not hyping or pumping just to get more "subscribers" like way too many in this sector. Here's to better precious metal price action in April. Hoping your price prediction for the end of the year comes true but guarded given the last two years!

    1. Thanks for the feedback - I really appreciate it!

  8. US doesn't have the looming demographic disaster of a 1 child policy.
    We can easily feed ourselves.
    We don't have near as serious a looming water crisis.
    We have a lot more oil and gas.
    We have lot less pollution.
    We have a democracy.
    We have housing prices that are only a few multiples of income, not 10s of multiples. See the recent 60 Minutes interview with China's leading developer.
    We have freedom of speech/press, note your blog.
    We have the power the worlds most diverse work force.
    We have property rights.


  9. CHS at Of Two Minds had these insightful few paragraphs regarding what it takes to be a reserve currency:

    "The key to understanding the dollar and Triffin's Paradox is that as the global reserve currency, the dollar serves both domestic and international markets. Of the two, the more important market is the international one.

    To act as the global reserve currency, a currency must be exported in sufficient size to facilitate the gargantuan trade in a $60 trillion global GDP/ $210 trillion global economy. There are only two ways to export enough currency to be remotely useful:

    1. Run massive trade deficits, i.e. import goods and export dollars.

    2. Loan massive quantities of dollars to nations that will place the dollars in international circulation.

    The famous Marshall Plan that helped Western Europe rebuild its economies was just that: a series of large loans of dollars to dollar-starved economies. This was necessary because the U.S. was running trade surpluses in the postwar era and was therefore not exporting dollars.

    This leads to a startling but inescapable conclusion: no exporting nation can issue the global reserve currency. That eliminates the European Union, China, Japan, Russia and every other nation running surpluses or modest deficits.

    Many commentators are drawing incorrect conclusions from various attempts to bypass the dollar in settling trade accounts. For example, China is setting up direct exchanges where buyers and sellers can exchange their own currencies for renminbi, eliminating the need for intermediary dollars.

    This is widely interpreted as the death knell for the dollar. But this misses the entire point of the reserve currency, which is that it must be available in quantity for everyone to use, not just those doing business with the domestic economy of the issuing nation."

    Obviously the USA is doing its best to slaughter the golden goose that is the reserve currency. And yes, the actions of the BRICS are symptomatic of these "efforts". But, apparently they are simply defensive, and not offensive actions.


  10. One more thing... here's a great article that ecompasses a lot of history / sociology on China. We in America have certainly got issues, but nothing like this.

  11. "As friends and colleagues of mine know, the views I have taken on over the the last 10 years with regard to the U.S. economy, political/banking corruption, housing and precious metals have been accurate (not views unique to me, of course). In terms of my view on an eventual new currency/gold revaluation, I am 100% confident."

    Anyone who tells anyone else he is "100% confident" is someone whose views are to be distrusted, normally. Weren't you the guy who predicted Weimar Republic style hyperinflation for our country? How accurate has that prediction been? Maybe you've been accurate on the predictions you wish to remind your readers of, but you are far from flawless. The word "confident", by the way, starts with the three letters "CON". You trying to con your readers again, Dave? After reading this self-congratulatory patting on the back, I need to take a shower.

    1. Good. Go read the blogs that are parroting the good news about the economy. I don't want you reading the truth about what's going on. I am 100% confident my view is right w/regard to what China is up to. You are a wishy-washy pussy who is incapable of forming an opinion. Why don't you start your own blog and publish your views. At least I do it without hiding behind the veil of "anonymous" in the bowels of the comment section of SOMEONE ELSE's hard work.

      My view will be proved out on hyperinflation too. The central planners have done a great job kicking that can down the road. I would explain how they are doing it but it would be over your head.

      By the way, the WSJ ran a piece about how health insurance will be going up significantly for most people. Some providers have announced 25-50% premium hike requests for 2014. I guess that's NOT inflationary in your view. Oh ya, you probably work for someone else who pays for your healthcare so you could give a crap. It's someone else's problem.

      Hyperinflation will hit when the Chinese no longer take unbacked paper currencies for trading and the dollar basically collapses. It happens slowly then all at once.

  12. Hi Dave,

    Really enjoy reading your posts. Very insightful and interesting. Its best to be asking ourselves these questions opposed to sitting with our heads in the sand.

    Thanks for the hard work you put in.