Are gold and commodities the answer to the Western monetary crisis?
In this episode of ‘Straight from the vault‘ Alastair Macleod joins Andrew in an in-depth analysis of the measurable benefits of backing a currency with gold, presenting the PetroRuble as a concrete example of currency commoditization.
Drawing a sequence of historical parallels, the famous economist considers the tactical measures taken by Russia and China to protect themselves from the inflation that seems to be gradually corroding the Western monetary system.
The collapse of the Western monetary system
As the PetroRuble continually strengthens its value against the dollar, it is becoming increasingly clear that the Russia-centric sanctions imposed by the West have never brought the expected results in penalizing the country’s aggression against the Ukraine.
By pegging their currency to gold in exchange for oil and commodities, Russia has actually succeeded in exposing some of the fundamental inadequacies of the Western monetary system, which already appears to be poised on the brink of collapse.
Switch to a commodity-based monetary system
In fact, it is Western and Eastern approaches to commodities – particularly physical gold – that could play a major role in how effectively the two hemispheres deal with coming food shortages and continued poverty. monetary depreciation. By designing and issuing a currency based on commodities, China is on the path to economic independence from the dollar, protecting its citizens from the shortcomings of the Western financial system in the long term.
As prices continue to rise relentlessly in America and Europe, it might be worth questioning the Federal Reserve’s preferred narrative that the surge in inflation is a transient event and wondering if the system fiduciary is able to sustain itself longer.
History always repeats itself at some point
As the purchasing power of Western currencies plummets, the idea of creating and issuing yet another central bank currency might seem tempting. However, history is filled with failed attempts by government to create a sustainable financial solution that would earn enough public trust to stand the test of time and inflation.
It might be useful to draw a parallel between how China recovered from post-war economic misery and rose to become one of the wealthiest nations in the world, simply by reducing state intervention in the private sector.
As Alastair explains:
“The problem is that the central bank doesn’t understand money. In British law, money is not a currency. Currency is a matter of users, it is we who make this decision. This is why gold and silver have always been money because they are the basis of money. And currencies are something different.”
Reintroducing sound money as the centerpiece of the Western monetary system could force central banks to perform an acrobatic somersault. The irony of the Russian sanctions is that they could have actually opened the window of opportunity to build up physical reserves and hasten this process.