Tag Archives: russia

Media Failure On Russia’s Official Gold Reserves

Last week I wrote how I can disagree with other media, be it mainstream or alternative, Chinese, Russian or English, on the reporting of the gold market. This week another perfect example came by, from Russian news outlet Sputnik International. According to this press agency the Russian Central Bank (CBR) currently holds 360 billion US dollars in official gold reserves and Elvira Nabiullina, head of the CBR, is determined to raise this amount to 500 billion US dollars. This is not true.

Sputnik wrote (click for link):

Russia to Increase Its Gold Reserves – Central Bank Head

The head of Russia’s Central Bank is determined to increase the country’s gold reserves to its previous levels in 2012-2013, from $360.5 billion up to $500 billion.

Russia will increase its gold reserves by up to $500 billion, said Elvira Nabiullina, the head of Russia’s Central Bank,…

…Currently, Russia owns $360.5 billion worth of gold reserves.

Let’s do some math:

Sputnik International states Russia currently owns 360 billion US dollars in gold. At a gold price of 1,200 USD an ounce this equals to

360,000,000,000/1,200 = 300,000,000 ounces

300,000,000/32151 = 9,331 metric tonnes

However, Russia currently does not own 9,331 tonnes in official gold reserves. Instead, it currently holds 1,247 tonnes – a difference of 8,084 tonnes – according to the website of the CBR and the IMF.

According to Sputnik the CBR will raise its official gold holdings from 360 billion USD to 500 billion USD. Or, converted to weight, from 9,331 tonnes to 12,960 tonnes. Suggesting the CBR is about to buy 3,629 tonnes in the coming years.

The misunderstanding can be easily cleared. Sputnik, for whatever reason, used Russia’s total International Reserves, which are currently 360 billion USD. If we head over to the (English) website of the CBR, we can see:

Screen Shot 2015-06-05 at 1.42.22 PM

International Reserves are the sum of Foreign Exchange (FX) Reserves and Gold. As of April 2015, Russia’s International Reserves stand at 356 billion USD, FX reserves are 308 billion USD and Gold is at 48 billion USD (1,247 tonnes). In Sputnik’s article total International Reserves have been mixed up with Gold Reserves.

The error can be confirmed by looking at the International Reserves level in 2012-2013, when it was about 500 billion USD. Sputnik wrote, “The head of Russia’s Central Bank is determined to increase the country’s gold reserves to its previous levels in 2012-2013, from $360.5 billion up to $500 billion”. If we look at Russia’s Gold Reserves in tonnes these were far lower in 2012-2013 than they are today (while the price of gold was much higher back then). It’s impossible Russia had more gold in reserve in 2012-2013 then today.

Russia's International Reserves

What Elvira Nabiullina actually said (June 4, 2015, St. Petersburg) we can read at Bloomberg:

Reserves should reach a “comfortable” level of about $500 billion within the next few years from about $357 billion now, Bank of Russia Governor Elvira Nabiullina told the International Banking Congress in St. Petersburg on Thursday.

This quote makes sense. Russia’s International Reserves are currently at 357 billion USD and Elvira Nabiullina is aiming to boost reserves to 500 billion USD (which Russia owned in 2012-2013, see last chart).

If we replace “Gold Reserves” in Sputnik’s article by “International Reserves”, all the numbers match up with the most recent data from the CBR and IMF. Case closed.

Sputnik’s article on a mirror server.

Willem Middelkoop: A New Gold Standard In The Making

Written by Willem Middelkoop

“Putin is the biggest gold bug”, was the title of a recent Bloomberg op-ed by Leonid Bershidsky the founding editor of Vedomosti, Russia’s top business daily. He explains why the Russian central bank has accumulated almost 100 tons of gold in the last four months of 2014. It is an acceleration of the gold buying program which started in 2007, a year before the Lehman collapse.


Besides accumulating gold the Russians have been quite active sellers of US Treasuries. Between November 2013 and December 2014 they have sold around $30 billion of US government bonds while they grew their gold reserves from $43 to over $50 billion in a clear effort to de-Americanize the Russian economy. Just like the Chinese they as well signed bilateral currency-swap-deals in a move away from the dollar.


The Russian activities can be seen as part of an all-out financial war between Russia and the West as best described by Putin’s economic advisor Sergei Glazyev in a recent interview:

I believe that in a situation of growing military and political confrontation the gold price will move up again. And let’s not forget that America’s refusal to honour their debt will undermine trust in the dollar not just in this country but also in others. It will be a step towards the end of the American financial empire. It will give us a chance to be among the first to suggest a new configuration for the world financial system, in which the role of national currencies will be significantly higher.

The Chinese, who have shown all kind of financial and economic support for Russia in recent months, have been on a gold buying spree as well. In the last ten years Chinese buyers have accumulated over 10,000 tonnes of gold.

Total Estimated Chinese Gold Reserves 1995 - 2014

While Western banks are trying to scare customers away from buying gold, the Chinese have opened up over 100.000 retail outlets to promote gold and silver among the public. In my book I quote from an article by Sun Zhaoxue, the former president of both the China National Gold Corporation (CNG) and China Gold Association (CGA), first published by gold analyst Koos Jansen:

Individual investment demand is an important component of China’s gold reserve system; we should encourage individual investment demand for gold. Practice shows that gold possession by citizens is an effective supplement to national reserves and is very important to national financial security. Because gold possesses stable intrinsic value, it is both the cornerstone of countries’ currency and credit as well as a global strategic reserve. Without exception, world economic powers established and implement gold strategies at the national level.

Mr Sun outlines why substantial national gold reserves are so important for countries like China:

In the global financial crisis, countries in the world political and economic game, we once again clearly see that gold reserves have an important function for financial stability and are an ‘anchor’ for national economic security. Increasing gold reserves should become a central pillar in our country’s development strategy. International experience shows that a country requires 10% of foreign reserves in gold to ensure financial stability while achieving high economic growth concurrently. At the moment, the US, France, Italy and other countries’ gold accounts for 70%
 of forex reserves. After the international financial crisis erupted, (our) gold reserves were increased to 1054 tons
 but gold reserves account for less than 1.6% of financial reserves – a wide gap compared to developed countries.

According to him, the Chinese government is intent on accumulating additional high quality (gold) assets:

The state will need to elevate gold to an equal strategic resource as oil and energy, from the whole industry chain to develop industry planning and resource strategies… increasing proven reserves, merger and acquisitions, base construction and opening up offshore gold resources to accelerate increase of national gold reserves. Concurrently, actively implement a globalization strategy that will exploit overseas resources and increase channels to grow China’s gold reserves. We should achieve the highest gold reserves in the shortest time.

According to Bloomberg the Chinese have stopped buying US Treasuries as well. Instead the Chinese have signed contracts worth $100’s of billions with Russia; this is a strong diplomatic sign of support for Russia. The two countries even signed a contract for a $240 billion investment for a 7000 km high-speed link between Beijing and Moscow.

These developments illustrate a growing divide between the financial interest between East and West. Now sovereign bond and deposit yields at or below zero we have reached the financial endgame, as the Saxo bank and Deutsche Bank have been writing recently. The IMF has published a report in which the economists Rogoff and Reinhart point to the need for debt restructurings in advanced economies. Debt restructurings and finding a new world reserve currency are the main aspects of a coming Monetary Reset.

Recently we have seen some more confirmation major countries are preparing for a new phase of the international monetary system. During two conferences in China last year, a coming financial reset has been discussed. At the 2014 edition of the Chinese International Finance Forum (IFF) “[..] a new global financial order has been discussed with China.” According to the former ECB President Jean-Claude Trichet. Chinese media reported the three days the forum (including U.N., World Bank, IMF participations) discussed “the new framework for the global financial and economic system”.

Preparations for a monetary reset were also confirmed by Zhou Ming, General Manager of the Precious Metals Department at ICBC during the LBMA Forum in Singapore;

With the status of the US dollar as the international reserve currency being shaky, a new global currency setup is being conceived.

In 2012 the former Bank of England Governor Mervyn King already predicted advanced economies would probably not be able to get out of the current crisis without large debt restructurings and a recapitalization of the financial system (banks):

I am not sure that advanced economies in general will find it easy to get out of their current predicament without creditors acknowledging further likely losses, a significant writing down of asset values and recapitalization of their financial systems…. Only then will it be possible to return to a more normal provision of the vital banking services so crucial to an economic recovery.

Yes even Alan Greenspan acknowledged that, ‘It is mathematically impossible to cover future government promises’. The US unfunded liabilities (pension and health costs) are as high as $128 trillion.

Japan is the best and most worrying example of the sheer magnitude of public debt, which will reach 250% of GDP in 2015. At the end of 2014 the architect of Japan’s radical economic policies, often describe as ‘Abenomics’ Koichi Hamada called the aggressive moves by the Japanese central bank a Ponzi-scheme:

In a Ponzi game you exhaust the lenders eventually, and of course Japanese taxpayers may revolt. But otherwise there are always new taxpayers, so this is a feasible Ponzi game, though I’m not saying it’s good.

One more insider who is very vocal about the need for a monetary reset and who’s views we shouldn’t ignore, is the legendary hedge fund manager George Soros:

The system we now have has broken down, only we haven’t quite recognized it. So you need to create a new one and now is the time to do it… You need a new world order where China has to be part of the process of creating it. They have to buy in [which they are doing by buying gold] … And I think this would be a more stable one where you would have coordinated policies. I think the makings of it are already there because the G20 effectively is moving in that direction… So there is a general lack of confidence in currencies and a move away from currencies into real assets…. Especially in the area of commodities.

Gold Repatriations

The gold repatriation by several European countries is another sign we are reaching an end of a monetary calm period of over 40 years. The Europeans follow in the footsteps of other countries to repatriate their physical gold holdings from the US. According to a former Director of the United States Mint:

More countries are repatriating their gold. For them, an audit is not enough. They would like their gold back. Azerbaijan, Ecuador, Iran, Libya, Mexico, Romania and Venezuela is a short list of countries that have requests into their custodians to transfer some or all their gold back to their countries.

We can only conclude gold is making a remarkable comeback into our financial system and even that a new gold standard is being born without any formal decision. At least that’s how Ambrose Evans- Pritchard, an influential international business editor of The Telegraph, described the on-going efforts by countries to lay their hands on as much physical gold as possible:

The world is moving step by step towards a de facto Gold Standard, without any meetings of G20 leaders to announce the idea or bless the project… Neither the euro nor the dollar can inspire full confidence, although for different reasons. EMU is a dysfunctional construct, covering two incompatible economies, prone to lurching from crisis to crisis, without a unified treasury to back it up. The dollar stands on a pyramid of debt. We all know that this debt will be inflated away over time – for better or worse. The only real disagreement is over the speed… The central bank (gold) buyers are of course the rising powers of Asia and the commodity bloc, now holders of two thirds of the world’s $11 trillion foreign reserves, and all its incremental reserves. It is no secret that China is buying the dips, seeking to raise the gold share of its reserves well above 2%. Russia has openly targeted a 10% share. Variants of this are occurring from the Pacific region to the Gulf and Latin America. And now the Bundesbank has chosen to pull part of its gold from New York and Paris. Personally, I doubt that Bundesbank had any secret agenda, or knows something hidden from the rest of us. It responded massive popular pressure and prodding from lawmakers in the Bundestag to bring home Germany’s gold. Yet that is not the story. The fact that this popular pressure exists – and is well organised – reflects a breakdown in trust between the major democracies and economic powers. It is a new political fact in the global system.

These latest development can have big repercussions in the future, just like the repatriation of gold in the 1960s lead to the implosion of the London gold Pool in 1968 and the rise of the gold price from $35 in 1969 to over $800 in 1980.

These indications about the coming changes for our monetary system don’t mean we have to expect a monetary reset earlier than previously expected. The planned changes will take time to discuss and to prepare. But we will experience them in the next decade for sure. They could be introduced as one worldwide monetary reset or in a series of smaller steps.

Willem Middelkoop is founder of the Commodity Discovery Fund and author of The Big Reset

Will Gold Be Part Of A New International Monetary System?

Anyone who has been paying attention to the global economy the past years can agree with me our central bankers have conducted miserable monetary policy and have taken insufficient measures to fight crises. All major economies have embarked in printing unprecedented quantities of money, but the only thing they bought was time. Quantitative easing on such a scale is like kicking the can determined to reach the end of the road. The future looks anything but sanguine.

Where is this going? Are our leaders truly gonna allow for the international monetary system to implode? Is there no plan B? And we are supposed to believe gold isn’t of any significance in economics?

In our current highly unstable economic environment the price of gold is relatively low, according to gold proponents like me. In addition, we can see immense flows of physical gold going from West to East that are guaranteed not to return in the foreseeable future. If the price of gold isn’t suppressed, my previous two observations can only be explained as physical supply outstripping demand since April 2013 – when the price of gold declined substantially to its current relative low levels. But perhaps there is more than meets the eye.

I would like to share a theoretical explanation for the observations just mentioned, supported by historic diplomatic documents that provide some guidance through the present fog.

Let’s start just before gold was removed from the system:

In the sixties France stepped out of the London Gold Pool, as it didn’t want to waste any more gold on the war the US was waging against Vietnam. The London Gold Pool was a joint effort by the US, the Netherlands, France, Germany, Italy, Belgium, Switzerland and the UK to peg the price of gold at $35 an ounce. But because the US was printing dollars to finance the war in Vietnam – this devalued US dollars – a lot of gold was required to be sold to maintain the price at $35. Shortly after France left the Pool it collapsed in March 1968. From the IMF:

While the total number of U.S. dollars circulating in the United States and abroad steadily grew, the U.S. gold reserves backing those dollars steadily dwindled. International financial leaders suspected that the United States would be forced either to devalue the dollar or stop redeeming dollars for gold.

The dollar problem was particularly troubling because of the mounting number of dollars held by foreign central banks and governments: In 1966, foreign central banks and governments held over 14 billion U.S. dollars. The United States had $13.2 billion in gold reserves, but only $3.2 billion of that was available to cover foreign dollar holdings. The rest was needed to cover domestic holdings. If governments and foreign central banks tried to convert even a quarter of their holdings at one time, the United States would not be able to honor its obligations.

The Incredible Shrinking Gold dollar IMF

And that is exactly what happened; in 1971 the US closed the gold window, no longer could foreign central banks convert dollars into gold (except on the open market). As I’ve written before: (i) Europe, most notably France was not amused and wanted to revalue gold, (ii) the US was very persistent to completely phase out gold from the monetary system in order to leverage the power of the US dollar hegemony.

I’ve found documents that connect the past with the present. On February 24, 1970, French President Pompidou met with US President Nixon in Washington DC. The oncoming quotes are from the US minutes of the meeting:

Turning to France, the President [Pompidou] said he wished to emphasize again that – as distinguished from the positions of some of his predecessors in this office – he would not comment on the independent French policy. He might have his own views but he felt that a strong independent France devoted to the same goals as we are is in the interest of the US. A strong Europe in the economic sense might seem not to be in the US interest, in the long term it was. What we need is a better balance in the West. It is not healthy to have just two superpowers; in such a situation there is more chance of a conflict than when there are more centers of power. Greater strength of the European economies, an independent French policy, and, in Asia, a stronger Japan, would eventually make for a more stable world. The position of the U. S. at the end of World War II was not healthy. Twenty-five years had passed and things were changed. This we regarded as a healthy development.

In the final analysis with three billion people on earth if civilization is to survive … this will be decided by the Soviet Union, by China, and eventually Japan, by Western Europe, by that he meant France, Britain and Germany and the United States. Africa is moving along, but it is a century away.

Latin America is also moving but it is fifty years or more away. In Asia, India and Pakistan will have enormous difficulty in simply keeping pace with their increase in population. We have a great responsibility to use the power we have to build the kind of a world that keeps the forces of expansion in check and thus give the forces of freedom a chance to grow in their own way and not like tin soldiers lined up behind the biggest one.

Pompidou’s idea was clearly to spread economic power across the globe for a more balanced, peaceful and prosperous world. We can also read the first signs of a unified Europe between the lines. Pompidou is one of the best forecasters I’ve ever read, what he said 45 years ago has more or less happened by now. However, Pompidou’s ideology could not coexist along the dollar hegemony. The US, therefor, embarked in divide and conquer, a notorious strategy to gain and maintain power. The next quotes are from a telephone conversation on March 14, 1973, between Henry Kissinger, National Security Advisor, and William Simon, Under Secretary of the Treasury: 

K: … I’ve just been called to the President. Let me tell you — Shultz has sent me a copy of the cable that Volker gave him – that Volker sent him about the interventions, and he has asked for my views. I basically have only one view right now which is to do as much as we can to prevent a united European position without showing our hand.

S: Okay. Well, I interpret that as less intervention, which is a good idea, and I think George will be very happy with that comment. Do as much as we can to prevent a unified European position.

K: I don’t think a unified European monetary system is in our interest. I don’t know what you think for technical reasons, but these guys are now helping to put it to us.

S: Yes, sir.

K: I don’t know whether that’s true in the short term, but I’m convinced that that’s true in the long.

S: I just agree with you a thousand percent.

K: So I’d rather play with them individually. You know, if it were a question of supporting an individual currency, I’d be much more inclined to do that.

S: Yes, such as the mark.

K: That’s right.

S: Yes, sir.

K: Does that make sense to you?

S: Yes it does.

K: You understand, my reason’s entirely political, but I got an intelligence report of the discussions in the German Cabinet and when it became clear to me that all our enemies were for the European solution that pretty well decided me.

S: Yes, sir. Well, I pass. I’m going to be talking to George on the telephone.

K: Be careful. Everything in Bonn is tapped.

S: I promise you I will.

Next, from Wikileaks, a report of a meeting held by all European Ministers of Finance about gold, written to the American Ministry Of Foreign Affairs on April 23, 1974 (Europe and the US were debating this issue for a few years):







Now we know what Europe was planning in seventies, this explains a lot better what occurred later on. Remember the Washington Agreement On Gold? Just before the euro was introduced in 1999, all European central banks collaborated in a program called the Central Bank Gold Agreements (CBGA), or the Washington Agreement On Gold, to jointly manage gold sales. (note, Eurozone aggregated gold reserves currently still transcend US reserves)

Central Bank Largest Sellers

In 1991 the Dutch central bank (DNB) held 1,700 tonnes in official gold reserves, currently it holds 613 tonnes. When the Dutch Minister Of Finance, J.C. de Jager, was questioned about these sales in 2011 he answered:

Question 6:  Can you confirm that since 1991 DNB has sold 1,100 tonnes of the 1,700 tonnes it owned…

Answer 6: Since 1991 DNB sold 1,100 tonnes. At the time DNB determined that from an international perspective it owned a lot of gold proportionally. It decided to equalize its gold holdings relative to other important gold holding nations. 

Right, so since the seventies Europe wanted to spread economic power across the globe, replace the dollar as the world reserve currency and sold parts of its official gold reserves “to equalize its gold holdings relative to other important gold holding nations. These types of plans aren’t realized overnight; it can take decades, it can even take more decades than estimated. Who knows? We can be in the final stage right now.  

Not so long ago I published a Wikileaks cable from 1976 wherein China expresses its particular interest in gold and SDR’s. Of course this is all just a theory, but it seems as if the redistribution of the chips, physical gold flowing form West to East, is all part of orchestrated preparations for the next international monetary system, anchored by gold. This system would require gold to be spread among the major economic power-blocks proportionally. 

Chinese mining 1949-2014 x

Total Estimated Chinese Gold Reserves 1995 - 2014

Jean-Claude Trichet, former president of the European Central Bank, said on November 4, 2014:

The global economy and global finance is at the turning point in a way, …new rules have been discussed not only inside the advanced economies, but with all emerging economies, including the most important emerging economies, namely, China.


Gold world


(h/t Freegold)

historic documents:

1970 February 24, Washington DC, US. Pompidou and Nixon. 

1971, October 28. Phone call between Nixon and Kissinger on gold.

1971, December 13 & 14, Azores. Negotiations between Kissinger and Pompidou about the value of currencies and gold.

1973, March 14, Kissinger and Simon telephone conversation. 

1973, May 18, Paris, France. Meeting Kissinger And Pompidou on value of gold.

1974, March 6, Washington, US. Note From the Deputy Assistant Secretary of State for International Finance and Development (Weintraub) to the Under Secretary of the Treasury for Monetary Affairs (Volcker): GOLD AND THE MONETARY SYSTEM: POTENTIAL US–EU CONFLICT.

1974, April 22 & 23, Zeist, The Netherlands. Meeting European Ministers Of Finance On Gold.

1974, April 25. Minutes of Secretary of State Kissinger’s Principals and Regionals Staff Meeting on gold.

Russia Is Not Selling Gold, Bought 18t In November

There are rumors doing the rounds that Russia is selling gold. My first reaction to this news was that is contradictory to what Putin stands for. Russia has been the most openly aggressive buyer of gold in the past years and Putin never made it a secret he wants to move away from the US dollar as the world reserve currency – gold potentially playing a role in a new monetary order. The last thing Russia wants to do is sell the asset they have demonstrated to value the most. Besides, the Russian central bank (CBR) also has other FX reserves that it could sell to support the Ruble, if it wants to intervene.

The rumors about Russia selling gold were spread by Yahoo, Business Insider, and Zero Hedge/SocGen. Two other bloggers already did the debunking for us; Market Update wrote about Yahoo’s article and Bron Suchecki just published a must read on Zero Hedge/SocGen/Business Insider.

The final confirmation came from Vladimir himself. Yesterday the President of Russia gave his yearly press conference. When journalist Vyacheslav Terekhov (Interfax) asked about the crisis Russia currently is in, Putin made a clear statement:

VYACHESLAV TEREKHOV: There is something I would like to clarify, Mr President. Judging by the situation in the country, we are in the midst of a deep currency crisis, one that even Central Bank employees say they could not have foreseen in their worst nightmares.

Do you believe that things will get better in two years, as you mentioned, and we will recover from this financial and economic crisis? Criticism was piled on the Government and the Central Bank for the ruble’s Black Monday and Tuesday. Do you agree with this criticism?

VLADIMIR PUTIN: I said that given the most unfavourable foreign economic situation this could last (approximately, because no one can say for certain) for about two years. However, it may not last that long and the situation could take a turn for the better sooner. It could improve in the first or second quarter of next year, by the middle of next year, or by its end

…Overall, I think it is up to the Central Bank to decide whether to reduce the interest rate or not, they should see and react accordingly. They should not hand out our gold and foreign currency reserves or burn them on the market, but provide lending resources. 

UPDATE 1:59 PM CET. The CBR just disclosed it has purchased 18 tonnes of gold in November. The total Russian official gold reserves accounted for 1,188 tonnes on December 1, 2014.

Russian Official Gold Reserves

Koos Jansen & Tuur Demeester About The Gold Repatriation Movement

Today I was interviewed, together with Tuur Demeester, by Paul Buitink about the global gold repatriation movement that is taking place right now. Additionally we discussed Bitcoin and the future of the monetary system.

Something I try to limit as much as I can in my writings is to speculate. However, the conversation led me to speak freely about all possible scenarios regarding central banks gold policy and geo-politics. To provide more background information for the topics discussed I made a list with supplementary articles and data.

3:00 – Russia has 1,151 tonnes in official gold reserves currently, not “nearly 1,100 tonnes”, according to latest data from the IMF.

Russian Official Gold Reserves

5:00 – Analysis Dutch Gold Repatriation: Why, How And WhenEurosystem Increasing Allocated Official Gold Reserves & Why Austria Is Likely To Repatriate Its Gold From London

8:00 – Belgium Investigating To Repatriate All Gold Reserves

9:20 – German Gold Repatriation Accelerating

12:10 Analysis Dutch Gold Repatriation: Why, How And When

12:50 – Dutch had euro-exit plan at height of crisis

14:35 – Why Did European Central Banks Sell Gold?

17:40 – Guest Post: Australia Audits Gold Reserves At BOE

22:00 – Is Russia selling gold to support the ruble?

23:11 – Wikileaks: US Knew Exactly How To Provoke Russia

38:25 – Tuur was right, there is a Malca-Amit vault in the Singapore Freeport. (I’m probably too much focussed on China)

Guest Post: Is Russia Selling Oil For Gold?

This article was originally published at InvestCafe.ru in Russian. The translation in English was first published at Gold-Eagle.com.

Very few people understand what Putin is doing at the moment and almost no one understands what he will do in the future.

No matter how strange it may seem, but right now Putin is selling Russian oil and gas only for physical gold.

Putin is not shouting about it all over the world and of course he still accepts US dollars as an intermediate means of payment. But he immediately exchanges all these dollars obtained from the sale of oil and gas for physical gold!

To understand this, it’s enough to look at the dynamics of growth of gold reserves of Russia and to compare this data with foreign exchange earnings coming from the sale of oil and gas over the same period.


Russia gold puchases Q3 2014

In the third quarter the purchases by Russia of physical gold reached all-time highs; it purchased an incredible amount of 55 tons. That’s more than all the central banks of all countries in the world combined (according to official data)!

In total, the central banks of all countries of the world have purchased 93 tons of the precious metal in Q3. It was the 15th consecutive quarter of net purchases of gold by central banks. Of the 93 tonnes of gold purchases by central banks around the world during this period, the staggering volume of 55 tons belongs to Russia.

Not so long ago, British scientists came to the same conclusion as was published in the conclusion of the U.S. Geological survey a few years ago. Namely: Europe will not be able to survive without energy supply from Russia. Translated from English to any other language in the world it means: “The world will not be able to survive if oil and gas from Russia is subtracted from the global balance of energy supply”.

Thus, the Western world, built on the hegemony of the petrodollar, is in a catastrophic situation in which it cannot survive without oil and gas supplies from Russia.

Russia will now only sell its oil and gas to the West in exchange for physical gold. The twist of Putin’s game is that the mechanism for the sale of Russian energy to the West only for gold now works regardless of whether the West agrees to pay for Russian oil and gas with its artificially cheap gold, or not.

Since Russia has a constant flow of dollars from the sale of oil and gas, it will be able to convert these dollars to buy gold at current gold prices, depressed by all means by the West. This equates a gold price, which has been artificially and meticulously lowered by the Fed and ESF many times via the artificially inflated purchasing power of the dollar through market manipulation.

Interesting fact:  The suppression of gold prices by the special department of the US Government – the ESF (Exchange Stabilization Fund) with the aim of stabilizing the dollar -has been made into a law in the United States.

In the financial world it is (generally) accepted as a given that gold is the anti-dollar; the gold price runs inverse to the value of the dollar.

  • In 1971, US President Richard Nixon closed the ‘gold window’, ending the free exchange of dollars for gold, guaranteed by the US in 1944 at Bretton Woods.
  • In 2014, Russian President Vladimir Putin has reopened the ‘gold window’, without asking Washington’s permission.

Right now the West spends much of its efforts and resources to suppress the price of gold and oil. On one hand to distort the existing economic reality in favor of the US dollar and on the other hand, to destroy the Russian economy, that refuses to play the role of obedient vassal of the West.

Today assets such as gold and oil look proportionally weakened and excessively undervalued against the US dollar. It is a consequence of the enormous economic effort on the part of the West.

And now Putin sells Russian energy resources in exchange for US dollars, artificially propped by the efforts of the West and with these dollar proceeds Putin immediately buys gold, artificially devalued against the US dollar by the efforts of the West itself!

There is another interesting element in Putin’s game. It’s Russian uranium. Every sixth light bulb in the USA depends on its supply, which Russia sells to the US too…for dollars.

Thus; in exchange for Russian oil, gas and uranium, the West pays Russia with dollars, having a purchasing power that is artificially inflated against oil and gold by the efforts (manipulations) of the West. However, Putin uses these dollars only to withdraw physical gold from the West in exchange at a price denominated in US dollars, artificially lowered by the same West.

This truly brilliant economic combination by Putin puts the West led by the United States in a position of a snake, aggressively and diligently devouring its own tail.

The idea of this economic golden trap for the West is probably not authored by Putin himself. Most likely it was the idea of Putin’s Advisor for Economic Affairs – Dr. Sergey Glazyev. Why seemingly not involved in business bureaucrat Glazyev, along with many Russian businessmen, was personally included by Washington on the sanction list. The idea of Dr. Glazyev was brilliantly executed by Putin, but with full endorsement from his Chinese colleague, XI Jinping.

Xi en Putin

Especially interesting in this context is the November statement of the first Deputy Chairman of Central Bank of Russia Ksenia Yudaeva, which stressed that the CBR can use the gold from its reserves to pay for imports, if needed. It’s obvious that in terms of sanctions by the Western world, this statement is addressed to the BRICS countries, and first of all China. For China, Russia’s willingness to pay for goods with Western gold is very convenient. And here’s why:

China recently announced that it will cease to increase its gold and currency reserves denominated in US dollars. Considering the growing trade deficit between the US and China (the current difference is five times in favor of China), then this statement translated from the financial language reads: “China stops selling their goods for dollars”. The world’s media chose not to notice this event in recent monetary history. The issue is not that China literally refuses to sell its goods for US dollars. China, of course, will continue to accept US dollars as an intermediate means of payment for its goods. But, having taken dollars, China will immediately get rid of them and replace with something else in the structure of its gold and currency reserves. Otherwise the statement made by the monetary authorities of China loses its meaning: “We are stopping the increase of our gold and currency reserves, denominated in US dollars.” That is, China will no longer buy United States Treasury bonds for dollars earned from trade with any country, as they did before.

Thus, China will replace all the dollars that it receives for its goods not only from the US but from all over the world with something else not to increase their gold currency reserves, denominated in US dollars. And here is an interesting question: what will China replace all the trade dollars with? What currency or asset? Analysis of the current monetary policy of China shows that most likely the dollars coming from trade, or a substantial chunk of them, China will quietly replace and de facto is already replacing with gold.

In this aspect, the solitaire of Russian-Chinese relations is extremely successful for Moscow and Beijing. Russia buys goods from China directly for gold at its current price. While China buys Russian energy resources for gold at its current price. At this Russian-Chinese festival of life there is a place for everything: Chinese goods, Russian energy resources and gold – as a means of mutual payment. Only the US dollar has no place at this festival of life. And this is not surprising because the US dollar is not a Chinese product, nor a Russian energy resource. It is only an intermediate financial instrument of settlement (an unnecessary intermediary). And it is customary to exclude unnecessary intermediaries from the interaction of two independent business partners.

It should be noted separately that the global market for physical gold is extremely small relative to the world market for physical oil supplies. Especially the world market for physical gold is microscopic compared to the entirety of world markets for physical delivery of oil, gas, uranium and goods.

Emphasis on the phrase “physical gold” is made because in exchange for physical, not ‘paper’ energy resources, Russia is now withdrawing gold from the West, but only in its physical, not paper form.  China accomplishes this by acquiring from the West the artificially devalued physical gold as a payment for physical delivery of real products to the West.

The West hopes that Russia and China will accept as payment for their energy resources and goods…the “shitcoin” or so-called “paper gold” of various kinds. However, Russia and China are only interested in real gold and only the physical metal as a final means of payment.

For reference: the turnover of the market of paper gold, only of gold futures, is estimated at $360 billion per month. But physical delivery of gold is only for $280 million a month. This equates to a ratio of paper gold versus physical gold to 1000 to 1.

Using the mechanism of active withdrawal from the market of one artificially lowered by the West financial asset (gold) in exchange for another artificially inflated by the West financial asset (USD), Putin has thereby started the countdown to the end of the world hegemony of the petrodollar. Thus, Putin has put the West in a deadlock of the absence of any positive economic prospects.

The West can spend as much of its efforts and resources to artificially increase the purchasing power of the dollar, lower oil prices and artificially lower the purchasing power of gold. The problem of the West is that the stocks of physical gold in possession of the West are limited. Therefore, the more the West devalues oil and gold against the US dollar, the faster it loses gold from its not infinite reserves.

In this brilliantly played by Putin economic combination,  physical gold from the reserves of the West is rapidly flowing to Russia, China, Brazil, Kazakhstan and India (i.e. the BRICS countries).  At the current rate of reduction of reserves of physical gold, the West simply does not have the time to do anything against Putin until the collapse of the entire Western petrodollar world. In chess the situation in which Putin has put the West is called “time trouble”.

The Western world has never faced such economic events and phenomena that are happening right now.  The former USSR rapidly sold gold during the fall of oil prices.  Today, Russia rapidly buys gold during the fall in oil prices. Thus, Russia poses a real threat to the American model of petrodollar world domination.

The main principle of the global petrodollar model is allowing Western countries, led by the United States, to live at the expense of the labor and resources of other countries, based on the role of the US currency, dominant in the global monetary system (GMS). The role of the US dollar in the GMS is that it is the ultimate means of payment. This means that the national currency of the United States in the structure of the GMS is the ultimate asset accumulator.

Led by Russia and China,  what the BRICS are doing now is actually changing the role and status of the US dollar in the global monetary system. From the ultimate means of payment and asset accumulation, the national currency of the USA, turning it into only an intermediate means of payment. Intended only to exchange this interim payment for another and the ultimate financial asset – gold. Thus, the US dollar actually loses its role as the ultimate means of payment and asset accumulation, yielding both of those roles to another recognized, denationalized and depoliticized monetary asset – GOLD!

Traditionally, the West has used two methods to eliminate the threat to the hegemony of petrodollar model in the world and the consequent excessive privileges for the West: One of these methods – colored revolutions. The second method, which is usually applied by the West, if the first fails, is military aggression and bombing. But in Russia’s case both of these methods are either impossible or unacceptable for the West.

Because, firstly, the population of Russia, unlike people in many other countries, does not wish to exchange their freedom and the future of their children for Western kielbasa (meat sausage). This is evident from the record ratings of Putin, regularly published by the leading Western rating agencies. Personal friendship of Washington protégé Navalny with Senator McCain played for him and Washington a very negative role. Having learned this fact from the media, 98% of the Russian population now perceive Navalny only as a vassal of Washington and a traitor to Russia’s national interests. Therefore Western professionals, who have not yet lost their mind, cannot dream about any color revolution in Russia.

As for the second traditional Western way of direct military aggression, Russia is certainly not Yugoslavia, not Iraq nor Libya. In any non-nuclear military operation against Russia, in the territory of Russia, the West led by the US is doomed to be defeated. And the generals in the Pentagon exercising real leadership of NATO forces are aware of this. Similarly hopeless is a nuclear war against Russia, including the concept of so-called “preventive disarming nuclear strike”.  NATO is simply not technically able to strike a blow that would completely disarm the nuclear potential of Russia in all its many manifestations. A massive nuclear retaliatory strike on the enemy or a pool of enemies would be inevitable. Its total capacity will be enough for survivors to envy the dead. That is, an exchange of nuclear strikes with a country like Russia is not a solution to the looming problem of the collapse of a petrodollar world. It is in the best case, a final chord and the last point in the history of its existence. In the worst case – a nuclear winter and the demise of all life on the planet, except for the bacteria mutated from radiation.

The Western economic establishment can see and understand the essence of the situation. Leading Western economists are certainly aware of the severity of the predicament and hopelessness of the situation the Western world finds itself in; in Putin’s economic gold trap. After all, since the Bretton Woods agreements, we all know the Golden rule: “Who has more gold sets the rules.” But everyone in the West is silent about it. Silent because no one knows now how to get out of this situation.

If you explain to the Western public all the details of the looming economic disaster, the public will ask the supporters of a petrodollar world the most horrific questions, which will sound like this:

  • How long will the West be able to buy oil and gas from Russia in exchange for physical gold?
  • And what will happen to the US petrodollar after the West runs out of physical gold to pay for Russian oil, gas and uranium, as well as to pay for Chinese goods?

No one in the west today can answer these seemingly simple questions.

And this is called “Checkmate”, ladies and gentlemen. The game is over.

The above article was translated by Kristina Rus. Edited by Koos Jansen.

Guest Post: We Are Headed For A Major Dis-location And It Revolves Around The Dollar

The United States declared economic war on Russia. It is hard to pinpoint the why of the matter but in this author’s opinion it always comes back to US dollar dominance. Russia has made no secret of its disdain for the global pricing mechanism of oil. The chart below shows what matters in the pricing of oil and it has zero to do with shale miracles or over supply.

It is the dollar and only the dollar that matters in the pricing of oil with an exception being an act of nature.


Much like the gold market, supply and demand fundamentals are completely ignored as the pricing of gold revolves around the dollar. Countries such as Russia understand fully that this dynamic of dollar dominance leaves them very vulnerable to shocks. The same is true of all resource rich countries. While some of them see the US as an ally and go along with this, Saudi being the obvious one, the Russian’s have made it clear they want change. Make no mistake about it the Russian’s will get the change they desire.

The chart below shows the dollar against the Ruble. That chart is an act of economic war as the West has attacked the currency of a sovereign nation for UNECONOMIC reasons.


Let me explain the previous sentence. Russian debt to GDP is roughly 14%. Their debt to GDP is pristine. Japan’s is 227%, Greece 175%, Italy 132%, and the US 105%. Now can someone kindly explain why a currency would implode like the Ruble when their financial condition relative to the West and Japan looks like a Ferrari among a bunch of Ford Pintos? You could argue that they are highly dependent on oil. True, but so are other nations and are you certain oil will remain this low for an extended period?

The next chart is the dollar against the Kuwati Dinar, a nation wholly dependent on hydrocarbons. Certainly the dollar has rallied against it but that chart is not even a faint resemblance to the Ruble.


Now, how is the US able to pull this off without a hitch? Ladies and Gentlemen may I show you why the Saudis are NEVER spoken ill of in the US no matter what they do. The Saudi Riyal is PEGGED to the dollar at 3.75 to 1. This occurred in 1986. Why is this crucial? Simply compare the chart below to that of the Ruble and you have your answer.


Isn’t it odd that you don’t hear anyone talking or writing about challenging this currency peg?

And finally in March of this year, Louis Woodhill began a column for Forbes with the following:

“How should the U.S. deal with Vladimir Putin’s invasion of the Ukraine?  We should do to Russia what Ronald Reagan did to its predecessor, the old Soviet Union.  We should drive them into bankruptcy by stabilizing the U.S. dollar.”

Simple question…who is we?

Written by: It’s a Mystery

Wikileaks: US Knew Exactly How To Provoke Russia

Back in 2008 the Ukraine had already expressed its plans for NATO membership at the NATO Bucharest Summit. Russian Foreign Minister Lavrov and other senior officials have reiterated strong opposition at the time, stressing that Russia would view further NATO eastward expansion as a potential military threat. From Wikileaks (2008):

NATO Enlargement “Potential Military Threat to Russia”

During his annual review of Russia’s foreign policy January 22-23, Foreign Minister Lavrov stressed that Russia had to view continued eastward expansion of NATO, particularly to Ukraine and Georgia, as a potential military threat. While Russia might believe statements from the West that NATO was not directed against Russia, when one looked at recent military activities in NATO countries (establishment of U.S. forward operating locations, etc.) they had to be evaluated not by stated intentions but by potential. …Lavrov emphasized that Russia was convinced that enlargement was not based on security reasons, but was a legacy of the Cold War.

Ukraine and Georgia’s NATO aspirations not only touch a raw nerve in Russia, they engender serious concerns about the consequences for stability in the region. Not only does Russia perceive encirclement, and efforts to undermine Russia’s influence in the region, but it also fears unpredictable and uncontrolled consequences which would seriously affect Russian security interests. Experts tell us that Russia is particularly worried that the strong divisions in Ukraine over NATO membership, with much of the ethnic-Russian community against membership, could lead to a major split, involving violence or at worst, civil war. In that eventuality, Russia would have to decide whether to intervene; a decision Russia does not want to have to face.

…Ukraine’s gradual shift towards the West was one thing, its preemptive status as a de jure U.S. military ally another.

NATO members

And so the stage was set for the US to pressure Russia’s strength in the region. What followed was a good old fashioned CIA coup in Kiev, after which 400 elite mercenaries from the notorious US private security firm Academi (formerly Blackwater) joined the Ukrainian military operation against the ethnic-Russian community in Eastern Ukraine. All part of the US its primary objective; to maintain global power and the US dollar hegemony.

Ukraine Another CIA Coup

The CIA has been involved in the Ukraine for quite some time. CIA director, Brennan, visited the Ukraine in mid April to consult with this coup government. To understand what is happening in the Ukraine we need to put this into historical context. We need to understand that the CIA has overthrown dozens of governments around the world since World War II and that’s what happened in the Ukraine. It was another CIA coup. Just like the coup that overthrew Prime Minister Mosaddegh in Iran 1953, the coup that overthrew President Allende in Chile in 1973, and so many others.

John Perkins in his book, Confessions Of An Economic Hitman, reveals he was working for this program run by the international bankers who are the real powers behind the scenes in the west, to create a world straddling empire. Using the power of usury, that is World Bank loans and financial takeovers all over the world backed up by military power. So this is an aggressive attempt to seize the Ukraine by way of a US sponsored coup, and that is why the CIA is in Kiev right now consulting with their puppet government.

The same forces that overthrew the Ukraine, tried to overthrow the government of Syria, and failed. Their attempt in the Ukraine seems to be stymie, at least in part, by the wishes of so many people in the eastern side of the Ukraine. So I think this world takeover attempt may be slowing down or stalling. I wish President Putin and the rest of the forces who are standing against this all over the world te best of luck!

Kevin Barrett.

In Gold We Trust

Golden Ruble Symbol Appears In Front Of Russian Bank

Silverdoctors published an article on April 9, 2014 titled: PUTIN SENDS THE WEST A GOLDEN MESSAGE: CENTRAL BANK OF RUSSIA CHANGES LOGO TO GOLDEN RUBLE. The article presents a “Google Translate” from the Russian website 1prime.ru and states the Russian central bank has changed it’s logo into a Golden Ruble. From Silverdoctors:

According to reports from Russian media, Putin appears to have sent the west a golden message in the aftermath of JPMorgan unilaterally deciding to block an official Russian wire transfer, as the Central Bank of Russia has introduced a new logo, which just happens to be a gold ruble.

Officials stated on the new logo: Golden Badge of the Russian national currency, officially adopted by the Central Bank of Russia, will symbolize a sign of stability and security of the ruble gold reserves of the country.

The article suggests this to be the new logo:

Russia gold bar

The first thing I noticed was that in the original Russian article I couldn’t find the new golden Ruble logo displayed by Silverdoctors. In order to get closer to the bottom of this I decided to ask a Russian friend of mine, who has no expertise in politics or economics, to translate the original Russian article:

Golden Ruble symbol appears in front of the central bank of Russia

Moscow, march 30- RIA News. A symbol of the Russian ruble appears on sunday in front of the office of a Russian joint-stock bank, organizers said.

The action took place at 15.00 in front of the bank Perevedenovskom lain in the center of Moscow (near metro “Baumanskaya”).

A golden badge of the Russian national currency officially adopted by the CBR will symbolize a sign of stability and security of the ruble gold reserves of the country – said the organizers.

Thus participants installation intends to express support to the Russian bank, who decided to work exclusively for the domestic market and only with one currency, the national currency of the Russian Federation, the Russian ruble.

US authorities in response to accession of the Crimea to the Russian Federation imposed sanctions on 20 Russians and Russian banks, including the thirty largest in the country. Consequence of the sanctions was the refusal of the international payment system Visa and Master Card to conduct non-cash transactions through Russian cards, worsening outlook on the banks and suspension of rating actions. On friday, the Bank announced that it will only work in Russia, and only with rubles.

The symbol of the Russian ruble, the letter R with a horizontal line, was approved by the Central Bank sovdirom in december 2013.


Im fully aware that “my” translation is far from perfect, though we must conclude the message the original article contains is different from that of Silverdoctors. What actually happened was that activists supporting their banks in the fight against US sanctions, build a golden colored Ruble symbol out of wood and revealed it in front of a commercial bank, as we can see in the picture below. And no, I don’t think Putin funded this action. Here is more information.

Golden Russian Ruble

In Gold We Trust

Interview Jim Rickards On The Death Of Money

I had the privilege to meet with Jim Rickards, while he was in The Netherlands for one day, to do an interview about his new book “The Death Of Money“. Accompanied by friend (and author of the book the The Big Reset) Willem Middelkoop we met at the hotel were Jim was staying and for one and a half hours we fired questions at him. Below you can read the highlights of the conversation.

March 12, 2014

Koos Jansen: Do you think there will be a collapse in the worldwide monetary system, including chaos, social unrest and bank failures because all policy makers will do too little too late?

Jim Rickards: My new book, The Death Of Money, is about the demise of the dollar. A world wide monetary collapse and the collapse of the dollar are the same thing. The dollar is the keystone of the system today, if the world loses confidence in the dollar the whole system collapses. Could there be disruptions, social unrest and other problems before the monetary system collapses? I think we’re seeing them already, in the Ukraine, in the Crimea and the Chinese navy sending vessels to these islands they are in disputes with near Japan. US monetary policy was also a contributing factor to protests in the Arab Spring’s early stages. We’re seeing signs happening already and that will continue.

I do expect that policy makers will continue to pursue the wrong policies, they won’t make the structural adjustments that are needed; unemployment remains high, growth remains weak and deflation continues to have us in its grip. These are all things that will lead to social instability, income and wealth inequality and we could see a lot of stresses before the collapse of the monetary system.

Central banks and governments have made it clear that the big banks can’t fail. That’s what they stated, all these too big to fail banks will not be allowed to fail. Now what are the consequences once they’ve said that? It invites reckless, parasitic and exploitative behaviour on behalf of the bankers. This allows them to grow too large which destabilizes the system. I don’t think we’ll see big bank failures along the way, but big banks will fail as part of the collapse. It’s the policy of too big to fail that leads to the dysfunction of the system that will lead to the collapse.

Jim Rickards Koos Jansen

Koos Jansen: Will the coming collapse of the monetary system be more severe than any prior one?

Jim Rickards: The point I’m making in the book is that the international monetary system has collapsed three times in the last one hundred year. In 1914, 1939 and 1971.  So it does happen, it’s not that unusual. When it happens it not the end of the world. What it means is that the major trading powers, the financial powers, come together and reset the system. There is actually a name for this, it’s “the rules of the game”. That’s not a phrase I made up, it goes back one hundred years. So the major powers will rewrite the rules of the game, but here’s the problem. The last crisis we had the Fed reliquify the world. There were tens of trillions of dollars in swap lines with the ECB, they guaranteed all the bank deposits in the US and they guaranteed all the money market funds in the US. It did prevent things from getting worse, but the problem is the Fed raised their own balance from $800 billion to $4 trillion after the liquidity crisis. We had a liquidity crisis in late 2008, but we haven’t had one in the last five years. So now what happens if we have a liquidity crisis tomorrow? They’ve got no more dry powder; they can’t go to $12 trillion.

The next crisis will be bigger than the last one, and it will be bigger than the Fed because they already trashed their own balance sheet. Then the only balance sheet left is the IMF’s.

Koos Jansen: Do you consider it a possibility the SDR will be the new world reserve currency backed by gold, like mentioned in Willem’s book The Big Reset? And following up on that, could it be all national currencies will be floating around such an SDR?

Jim Rickards: Yes, there is a probability the SDR will be the new global reserve currency. Gold and oil would be then be priced in SDR’s. It will be used for some of the balance of payments between countries, the creation of reserves and probably the financial accounts of the world’s largest corporations. So Siemens, General Electric and IBM will produce their financial statements in SDR’s, because they’re global corporations.

Koos Jansen: But will this SDR be backed by gold at a fixed parity?

Jim Rickards: It might be, this is where it gets interesting. That is not what our global leaders want. What they want is a paper SDR to replace the paper dollar. The question is, will people go along with that? Our global leaders may have to go back to gold not because they want to but because they need to restore confidence. It can go either way. The SDR project that will replace the dollar is already in the works. If the elites get enough time, they need about ten years, they will roll out a paper SDR. If the collapse comes sooner than that they’ll have to gold, or, if they insist on a paper SDR, they’ll have to go with martial law and neo-fascism.

Koos Jansen: Are you familiar with concept of freegold?

Jim Rickards: I’ve heard of it, I’m not really an expert on it.

Koos Jansen: Do you believe in Austrian economics?

Jim Rickards: My view is that Austrian economics has a lot to offer, but it is not a complete explanation of dynamics in capital markets. I consider myself a complexity theorist and I am one of those applying complexity theory to capital markets. Complexity theory is only about 55 years old as a science, but it is highly complementary to Austrian theory because it agrees with Hayek that the economic system has far too many autonomous agents of highly diverse views ever to be efficiently planned. If von Mises had been born 40 years later, he would have warmly embraced complexity theory.

Koos Jansen: If you were the president of the world, what would you implement as the most stable monetary system.

Jim Rickards: I favour what I call the King dollar. I’m a bit of an old school American. I don’t necessarily want the gold standard, and I don’t want the SDR’s, I want the dollar as the dominant currency in the world. I think America has the potential for a force for good in the world and therefore the American dollar as a global monetary standard to me would be a good thing. The problem is, the US government doesn’t agree. They don’t want a strong dollar, they want a weak dollar.

Willem Middelkoop: Is that the reason you began writing books? because you’re fed up with how the dollar is managed.

Jim Rickards: Absolutely.

Koos Jansen: Isn’t it always unsustainable if a national currency is used as the world reserve currency?

Jim Rickards: That doesn’t have to be, it can be. This is Triffin’s dilemma. What Triffin said in the sixties was that if one country issues the global reserve currency they need to run a persistent current account deficit because that’s the only way for the rest of the world to get enough money to finance world trade. But if you run deficits long enough you go broke. Now after 50 years the US is going broke.

There is another solution, which is real growth without money printing. What’s wrong with price stability, real price stability, why do we have to have inflation? Let people earn their dollars, or let the US maintain the value of it’s dollar with education, innovation, growth, productivity, good public policy, low taxes and a good business climate. These are the ways you drive growth, not by money printing. The answer is real growth.

Death of money, Jim Rickards, Koos Jansen, Willem Middelkoop

Koos Jansen: If the world starts to lose confidence in the dollar, will Yellen be forced to raise interest rates like Volcker did in the early eighties?

Jim Rickards: The problem is how do you raise interest rates when 50 million Americans are on food stamps, 26 million Americans unemployed or underemployed, 11 million Americans have disability, with all due respect to people with genuine disability, a lot of the disability is abused. My point being, given an extremely weak economy, given deflationary trends, given high unemployment and declining labour force participation how on earth do you raise interest rates? However, the market will raise interest rates in a way the Fed won’t be able to control. That’s when you may see… who knows? Debt restructuring of the treasury market…

Koos Jansen: More QE?

Jim Rickards: More QE and the Fed may use more financial repression. Why haven’t interest rates gone up already? Because of financial repression.

If there is a loss of confidence and the market wants to push rates higher, the Fed will respond by trying to suppress rates by printing money, which will lead to more loss in confidence. This will show up the foreign exchange market, it will show up in the price of gold and it will show up in some interest rates.

A lot of this will happen really quickly, it wouldn’t play out in one day, but we will see gold making moves of a hundred dollars in one day. People will say it’s a bubble, of course it’s not a bubble it’s a sign of panic. Then we’ll see gold moving five hundred dollars a day.

What I look at is the price of gold; to me gold is a constant. The price of gold is just the inverse of the value of the dollar. If gold goes up, what is actually happing is that the dollar goes down. When you see the price of gold jumping up what that tells you is that the dollar is collapsing. Even if the Fed is repressing interest rates, gold will tell you when the dollar is done.

Willem Middelkoop: That’s why the price of gold has to be controlled.

Jim Rickards: Yes, but a couple of thing on that. The Fed right now wants the price of gold to be higher. The Fed’s problem today is not inflation it’s deflation. The Fed wants controlled inflation and they can’t get it. So how do you get inflation? You have to change expectations. So allowing the price of gold to go up helps to increase inflationary expectations. It can’t go too far too fast, it can’t do what we just described. But the Fed wouldn’t mind if the price of gold would go to $1400, $1500, $1600 dollars because that would get people into an inflationary mindset; trying to get them spending more dollars, borrowing more etc. That’s what the Fed wants. Where the Fed is wrong is to think that they can just dial it up or down. They did do that in 2011 when gold went to $1900, the Fed was very fearful gold would go to $2000, a big psychological threshold, so they had to push it down. Right now I don’t think the Fed is doing anything to hold price of gold down, China might be.

Koos Jansen: Was it China behind the drop in the price of gold In April 2013, or was it maybe a collaboration between the US and China? A scenario could have been: China would support the dollar and in return could buy physical gold at extremely low prices.

Jim Rickards: Look, I’ll tell you what I know and what I don’t know.

When you’re a detective and you have a dead body and are looking for the killer, you’re looking for a motive. So who benefitted from the drop in the price of gold? China – they’re the most likely party. I know for a fact that SAFE, which is a Sovereign Wealth Fund that manages the foreign exchanges reserves of the People’s Bank Of China, bought 600 tons of physical gold through June and July 2013. I know this from the Perth Mint and Chinese dealers. At this moment the gold is on the balance sheet of SAFE but this can be flipped to the PBOC’s sheet like it happened in 2009.     

Whether the Chinese caused the drop price I can’t be sure, though I suspect it, but I know for sure they took advantage of it.

China right now has an interest in keeping the price low because they want to buy more. But at some point, if there will be inflation in the US, they want the price to go higher because that’s their hedge. That’s the reason they’re buying gold. All this talk about China backing the renminbi with gold is nonsense.

China has got $4 trillion dollars in reserves, their preference is a stable dollar. If the US devalues the dollar by 10 %, that’s a wealth transfer of $400 billion from China to the US. China’s hedge is gold, if the dollar would go down gold goes up.

Koos Jansen: China knows the US will need to devalue the dollar?

Jim Rickards: Correct.

Koos Jansen: Does SAFE buy it’s gold through the Shanghai Gold Exchange?

Jim Rickards: They have various ways.

Koos Jansen: How will the power be distributed in Asia after the monetary reset?

Jim Rickards: It will be based on gold.

A lot of analysts look at gold as a percentage of foreign exchange reserves, I think that’s meaningless. In the US gold represents 70 % of reserves, but the US can print dollars and they don’t need euros or Swiss francs. A better way of thinking about it is the amount of gold relative to the size of an economy in terms of GDP. Russia is on par with the US. China needs to have at least 4500 tons to get on par with the US.

In Chapter 6 of my book I write about the Shanghai Cooperation Organization, it’s not a treaty but a mutual cooperation organization between primarily Asian and central Asian powers. This is the primary forum for Russia and China to cooperate and stand up against the US. Eventually there will be two empires in Asia. Russia will have an empire comprised of Russia, eastern Europe and central Asia. China will have an empire comprised of the mainland, its immediate periphery and east Asia.

Koos Jansen: All the physical gold that’s exported to China is in 1 Kg 9999 bars. Gulf nations are remelting their 400 ounce London Good Delivery bars into 1 Kg 9999 bars through Switzerland. What’s your take on that?

Jim Rickards: In my view the 1 Kg 9999 bars will be the new Good Delivery standard. We’ll look back in a couple of years and wonder why we ever messed around in 400 ounce bars. The history of 400 ounce bars is interesting. They were intentionally made very large so people couldn’t have them – they were for central banks only or very wealthy individuals. In 1910 people used gold coins to pay for goods and services, then little by little central banks wanted to get rid of the gold coins, they wanted people to use paper certificates, which gave central banks more flexibility.

Koos Jansen: Will the Bundesbank get its gold back from the US?

Jim Rickards:  What a lot of people don’t understand is that the Bundesbank doesn’t want it’s gold back. The reason the Germans want to have it in New York is because they want to able to engage in price suppression. New York and London are markets for leasing, Frankfurt isn’t. For every ton of gold you remove from New York, there is 10 tons of paper gold that needs to be unwound. That’s why they’re taking eight years and that’s why they’re doing it in tranches.

There’s not such a leasing market in China either. Central banks are able to suppress the price of gold through the leasing market in New York. For example SAFE, a subsidiary of the PBOC, could call JP Morgan in New York and ask to actively lease their gold, which is partially stored in New York, and JP Morgan would do it.

Koos Jansen: Is the NSA Involved in financial warfare?

Jim Rickards: No, not to my knowledge. 

Willem Middelkoop: I know wealthy Americans taking measures like getting a second passport and moving their money offshore. Do you see this happening in your surroundings?

Jim Rickards: Yes, I see it all the time. There are billionaires who build vaults in their own houses because they don’t trust Brinks.

Willem Middelkoop: What does that tell you?

Jim Rickards: It tells me that they see what I see, in some ways, but their not willing to talk about it. They’re ready for the collapse but want to milk the system in the meantime.

Willem Middelkoop: Which part of all your activities do you like most?

Jim Rickards: Writing. That’s why I’ve done two books, and now I will start a new book project sooner than later. It will hopefully be a four book series. I have some sketches.

Koos Jansen: We’ll be looking forward to reading more of your books. For now, thank you very much for your time Jim.

Death of Money - Dust Jacket_150x150_p1

In Gold We Trust