Russian Ruble: Soon to Be Backed by Gold?

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Russian Ruble: Soon to Be Backed by Gold?

This article originally appearded at KOPP Online. Translated for RI by Alexander Samarkin

Russia is struggling with a number of liabilities these days. The price for oil, Russia’s most important export good, has reached historical lows. During the previous weeks the Ruble could only recover slightly from its devastating slump against the Dollar, that has been lasting for a year now.

Compared to February last year, the Russian currency now has about 40% less purchase power than the Greenback. Russia and USA are in the middle of a currency war that threatens to become an armed conflict. Not even during the cold war has the „diplomatic“ talk between USA and Russia been that harsh.

Even from elitist circles come ominous warnings of an acute geopolitical danger. The continuing sanctions against Russia in the process of the Ukraine-crisis hurt the Russian economy additionally. The Russian government has to take radical measures to enhance the attractiveness of the Ruble for investors. In this context a gold backing seems more probable than ever.

As good as gold

To understand why the Ruble might face a long-term revaluation one has to take a look at the past of the USA. Since the Bretton Woods Agreement in 1944, the gold backed American Dollar prevailed as world reserve currency.

Many market observers today forget about the fact, that since 1971 the US Dollar is a pure fiat currency that can be created arbitrarily by the Fed out of thin air. At that time president Nixon closed the „gold window“ and ended Bretton Woods. Therefore all currencies pegged to the Dollar automatically became pure paper currencies as well. Ever since we all are participants in a gigantic experiment – the worldwide paper currency standard without physical backing.

A golden sign

Russia could set an example now. For generations, gold has been the anchor for stability of a currency. During the past decades this fact was totally forgotten. Not till the financial crisis in 2008 Russia, China and other BRICS countries started buying the „barbaric relic“ as John Maynard Keynes called it. According to the World Gold Council Russia’s gold reserves as of February 2015 amount to approximately 1208 tonnes, an increase of 173 tonnes in 2014.

Amazingly the Russian Rossiya Bank made a mark in April last year and placed an impressive gold coloured Ruble in front of its head office, in order to point out the stability of the Russian currency due to its underlying gold reserves. First signs for a change in central bank politics towards a gold backing?

The power structure is shaking

Russia takes up a big part of the Eurasian continent, which is the geostrategically most important on the globe. American policy advisers like Zbigniev Brzezinski and Henry Kissinger are aware of that and take advantage of the weakness of the Ruble. It can be manipulated through western interference, which prevents a resurrection of Russia. Mayer Amschel Rothschild, banker and co-founder of the Rothschild Dynasty, once said: “Give me control of a nation’s money and I care not who makes the laws”…..more here

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