In recent months, there has been a lot of talk about the gold standard.
President Donald Trump’s two nominees for the Federal Reserve have pontificated in the past about reintroducing a gold standard in the 21st century, which has generated a lot of scorn from the mainstream media.
Last year, there were reports that China was about to introduce gold-backed oil futures contracts. This would have dramatically changed oil and futures markets.
Will a gold standard happen? Unlikely.
But one report makes the suggestion that China and Russia are considering a move to a digital version of the gold standard, primarily based on the data that shows these two economic powerhouses are buying the precious metal – a lot of it.
From The Moscow Times (emphasis ours):
The purchases are unlikely to have been coordinated by Russia and China, but some mutual influence is evident: the two countries expect to benefit from the other’s purchases, which should be supportive of long-term prices.
These moves come at a moment when gold has become attractive as the anchor for new experiments in digital currencies. Gold and crypto are a marriage made in heaven, combining the stability of gold with the convenience and security of the blockchain.
The surge in interest in the concept of gold-backed cryptocurrencies has raised the question of whether one of the many experiments being launched can aspire to become a leading global currency.
Only a sovereign could amass the quantities of gold needed. Does this mean that Russia is considering the idea? Venezuela and Iran have made some attempts already. Rumors have been circulating for a while that the Russian authorities are interested in taking plans to a new level, perhaps with China and other partners.
Here is how the scheme might work. Money would circulate in the form of blockchain entries provided by a global platform and be entirely backed by gold reserves held in an international trust insulating them from state interference.
Different private financial institutions would be responsible for issuance operations and, therefore, for ultimate control over the money supply. Money transactions would be processed directly between end users, with no intermediation from banks or governments.
Russia and China have openly complained that the dollar is no longer able to fulfill its role of global currency.
While a gold standard is an improvement from the current system, a digital version would be just as concerning as a fiat hegemony and cryptocurrency because the government can still track you. If there were just a gold standard without a blockchain version, then that’d be a great step.
Again, it’s unlikely to take place.
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