Checkmate (Part 2) – A Global US Dollar Divorce and Re-Monetizing Gold to Support Our RV/GCR

Continued from Checkmate (Part 1)

The world’s financial landscape is undergoing a seismic shift, departing from the traditional US dollar-centric system towards a multi-polar era. In this new epoch, various currencies are vying for dominance, and central banks are exploring innovative solutions such as central bank digital currencies (CBDCs). This tectonic movement is driving a re-monetization of gold and fueling speculation of gold’s revaluation against existing fiat currencies, particularly the US dollar and the Euro. In this latest installment of my “Checkmate GCR” article series, we explore the reasons and facts behind this global transition, and how it could reshape the entire monetary order.

The once-unchallenged supremacy of the US dollar in the global financial system is beginning to wane. As Zoltan Poszar, the former Credit Suisse expert, points out, we are witnessing a “monetary divorce” from the US dollar hegemony, leading to a more multi-polar world. This shift is driven by factors such as de-dollarization, the rise of central bank digital currencies, and the strategic goals of nations to reduce dependency on the dollar and diversify their reserves.

De-dollarization and a Multi-polar World

The concept of “Bretton Woods III” signifies a shift away from the traditional unipolar world, dominated by the US dollar. Instead, the global economy is embracing a multi-polar approach, where various currencies gain significance. This paradigm shift is driven by Western countries seeking to reduce reliance on Chinese supply chains and Eastern nations aiming to de-risk their relationships with Western financial institutions and the US dollar.

Re-monetization of Gold

One of the key themes emerging in this monetary divorce is the resurgence of gold as a viable monetary asset. Nations that are not geopolitically aligned with the US are increasingly diversifying their reserves and shunning US Treasuries in favor of gold. This trend indicates a growing desire to achieve monetary sovereignty and distance themselves from the uncertainties associated with the US dollar.

The re-monetization of gold is a compelling aspect of the ongoing transition towards a multi-polar world and away from the US dollar-centric global financial system. As countries seek monetary sovereignty and reduce their dependence on the dollar, gold emerges as a strategic and time-tested asset, capable of providing stability and protection amidst economic uncertainties.

While the potential revaluation of gold against existing fiat currencies remains speculative, the growing demand for gold from central banks and the strategic moves made by countries to diversify their reserves speak volumes about gold’s allure in the changing financial landscape.

As the world navigates this transformative period, the role of gold in the global economy may continue to evolve, opening new possibilities and challenges. The journey towards a more multi-polar financial system is underway, and gold’s glimmering path to stability and security is one that warrants close attention from policymakers, investors, and financial observers alike.

Re-valuation of Gold Against Fiat Currencies

As the global fiat currency debt system undergoes a monetary divorce from the US dollar, speculation is rife about a potential revaluation of gold against existing fiat currencies, especially the US dollar and the Euro.

The increasing demand for gold from central banks and the growing trend of countries buying gold instead of accumulating dollars suggest a possible shift in the relative value of gold compared to fiat currencies. If this trend continues, it could lead to a reassessment of gold’s worth in relation to traditional paper currencies.

While it is essential to approach these possibilities with caution, the re-monetization of gold and the shifting dynamics of the global financial system warrant careful observation. Gold’s historical significance and its intrinsic value make it an asset that cannot be easily dismissed, and its potential revaluation may have far-reaching consequences for the entire monetary order.

Gold as a Strategic Hedge

The changing dynamics of global trade and finance have led countries to rethink their approach to financial security. With the re-monetization of gold, central banks can diversify their holdings and insulate their economies from potential shocks in the global financial system.

Moreover, as the world moves toward a multi-polar approach to currencies, gold emerges as a valuable hedge against currency fluctuations. This flexibility grants nations greater control over their financial destiny and mitigates risks associated with over-reliance on a single currency.

Central Bank Digital Currencies (CBDCs) as Cross-border Payment Game-changers

CBDCs represent a disruptive force in the global financial system. As countries explore the possibilities of creating their own digital currencies, the need for correspondent central banks arises. This network of correspondent central banks could potentially provide an alternative system for international transactions, lessening dependence on Western financial centers and the US dollar.

Correspondent central banks may soon become an integral part of the international financial system. By facilitating direct settlement of transactions between central banks, they offer an alternative to the current dollar-based system. This shift could have profound implications for dollar funding and rates markets.

For instance, CBDCs can play a significant role in boosting the internationalization of the Chinese Renminbi (RMB). Countries planning or piloting CBDCs are often linked to the People’s Bank of China (PBOC) through swap lines. The growing share of RMB in trade finance and commodity settlements suggests that the currency’s importance will likely increase in the years to come.

What it Means

The global fiat currency debt system is indeed experiencing a monetary divorce from the US dollar. As countries diversify their reserves and explore alternatives like central bank digital currencies, gold is poised to regain its historical status as a monetary anchor. The emergence of a multi-polar world is reshaping the financial landscape, creating a catalyst for gold to be revalued against existing fiat currencies, particularly the US dollar and the Euro.

As we navigate this transformative period in monetary history, it is crucial to understand the factors propelling this shift and the potential consequences for the global financial system. The journey ahead is both uncertain and full of promise, and the revaluation of gold may be the fulcrum upon which the future of the global economy pivots.

To be continued in Checkmate (Part 3) …