De-dollarization Just Got Real

John Rubino, John Rubino’s Substack

The BRICS countries are meeting in a couple of weeks — in Russia with Vladimir Putin hosting — so speculation is rife on whether they’ll induct new high-profile members, update their plans for a gold-backed currency, or spring some other “October surprise” on the world.

I’ll post more specifics about this meeting as the date approaches, but in the meantime here’s a backgrounder from March of 2023 that explains why the whole BRICS thing is happening:

Originally published March 23, 2023

Since the 1970s it’s been virtually impossible for a country to function without access to US dollars. And Washington maintained this highly-favorable status quo by putting various kinds of pressure — from sanctions to asset confiscation to outright invasion — on anyone who stepped out of line.

This weaponization of the world’s reserve currency has, not surprisingly, created resentment in a lot of foreign capitals. And after a long gestation period, that resentment is now erupting into a rebellion against dollar hegemony. Among the big recent events:

The BRICS coalition has become the hottest ticket in geopolitics.

Brazil, Russia, India, China, and South Africa (the BRICS) have been toying with the idea of forming a political/monetary counterweight to U.S. dominance since 2001. But beyond some aggressive gold buying by Russia and China, there was more talk than action.

Then the floodgates opened. Whether due to the pandemic’s supply chain disruptions, heavy-handed sanctions imposed by US-led NATO during the Russia-Ukraine war, or just the fact that de-dollarization was an idea whose time had finally come, the BRICS alliance has suddenly become the hottest ticket in town. In just the past year, Argentina, Indonesia, Saudi Arabia, Iran, Mexico, Turkey, the United Arab Emirates (UAE), and Egypt have either applied to join or expressed an interest in doing so. And new bilateral trade deals that bypass the dollar are being discussed all over the place.

Combine the land mass, population, and natural resources of the BRICS countries with those of the potential new members, and the result is more or less half the world. And now things are getting real:

China brokers a peace deal between Saudia Arabie and Iran, two bitter historical enemies who want to join the BRICS alliance but can’t if they’re in an undeclared war. Should they stop competing and start cooperating they could dominate the Middle East and raise China’s clout in the region, at the petrodollar’s expense. An example of the press coverage:

Eurasia’s geo-economic integration took a great leap forward as a result of the Iranian–Saudi rapprochement, which unlocks the Gulf Cooperation Council’s (GCC) trade potential with Russia and China. Its wealthy members can now tap into two series of Iranian-transiting megaprojects in one fell swoop through this deal, with the North-South Transport Corridor (NSTC) connecting them to Russia while the China-Central Asia-West Asia Economic Corridor (CCAWAEC) will do the same vis-à-vis China…

…Only two weeks after Saudi Arabia announced an effort to establish diplomatic ties to Iran in a deal mediated by China, more news surfaced that Saudi Arabia was also planning to reopen its embassy in Syria for the first time in over a decade. Rumors are swirling that Iran, Saudi Arabia and Syria are on the verge of geopolitical and economic agreements that sidestep the U.S.

Turn Your Images On

Russia and India agree to trade oil for rupees. Russia is now India’s largest oil supplier, with 35% of that massive, growing country’s imports. The U.S. is not happy about this — but India doesn’t seem to care. From a recent article:

“Even the US itself seems to have finally accepted that it can’t reverse this trend, which is evidenced by former Indian Ambassador to Russia Kanwal Sibal recently telling TASS that “Lately, the discourse from Washington has changed and India is no longer being asked to stop buying oil from Russia. In a recent visit to India, the US Treasury Secretary actually said that India can buy discounted oil from Russia as much as it wants so long as western tankers and insurance companies are not used.”

African leaders travel to Moscow. Representatives of 40 African nations traveled to Rissia for the Second International Parliamentary Conference “Russia – Africa in a Multipolar World.” According to the press release, the attendees:

… discussed the potential for collaboration across a range of sectors, their contribution to the African continent’s economy and security, and their work in the realms of science and education, politics, and techno-military area.

During the conference, the African continent was invited to work together to form a new multipolar world order. This is especially important given the significant human resources of Africa, which is home to more than 1.5 billion people and has enormous mineral reserves in its soil.

Brazil and Argentina announce a common currency. In February, the two dominant Latin American economies announced plans for a common currency called the “sur” for use in bilateral trade. South America is a big, resource-rich place with numerous grudges against its intrusive northern neighbor. So a de-dollarization movement there, while not as immediately consequential as what’s happening in the Middle East or Asia, is both plausible and potentially serious for the dollar.

Lower Dollar, Higher Gold

Even in an emerging multi-polar world, there’s no obvious replacement for the deep, liquid US capital markets. So the dollar won’t disappear from global trade. However:

If the BRICS have the commodities and the US and its allies are left with finance, pricing power for crucial things like oil and gold will shift to Russia, China, and the Middle East.
Falling demand for dollar-denominated bonds as reserve assets will send trillions of dollars now outside the U.S. back home, raising domestic prices (which is to say lowering the dollar’s purchasing power and exchange rate).
The loss of its weaponized reserve currency will lessen the US’ ability to impose its will on the rest of the world (witness China as Middle-East peacemaker and India buying Russian oil with rupees).

To sum up, tomorrow’s world is multi-polar, and for the US and its allies, inflationary. That means a commodities bull market — at least in dollar terms — and extreme financial instability as the U.S. Empire is forced to live within its means. It won’t be pretty but for gold bugs and commodity bulls, it might be extremely profitable. ~~ John Rubino, John Rubino’s Substack

John Rubino, John Rubino’s Substack

I’ll post more specifics about this meeting as the date approaches, but in the meantime here’s a backgrounder from March of 2023 that explains why the whole BRICS thing is happening:

Originally published March 23, 2023

The BRICS coalition has become the hottest ticket in geopolitics.

Eurasia’s geo-economic integration took a great leap forward as a result of the Iranian–Saudi rapprochement, which unlocks the Gulf Cooperation Council’s (GCC) trade potential with Russia and China. Its wealthy members can now tap into two series of Iranian-transiting megaprojects in one fell swoop through this deal, with the North-South Transport Corridor (NSTC) connecting them to Russia while the China-Central Asia-West Asia Economic Corridor (CCAWAEC) will do the same vis-à-vis China…

…Only two weeks after Saudi Arabia announced an effort to establish diplomatic ties to Iran in a deal mediated by China, more news surfaced that Saudi Arabia was also planning to reopen its embassy in Syria for the first time in over a decade. Rumors are swirling that Iran, Saudi Arabia and Syria are on the verge of geopolitical and economic agreements that sidestep the U.S.

Turn Your Images On

“Even the US itself seems to have finally accepted that it can’t reverse this trend, which is evidenced by former Indian Ambassador to Russia Kanwal Sibal recently telling TASS that “Lately, the discourse from Washington has changed and India is no longer being asked to stop buying oil from Russia. In a recent visit to India, the US Treasury Secretary actually said that India can buy discounted oil from Russia as much as it wants so long as western tankers and insurance companies are not used.”

… discussed the potential for collaboration across a range of sectors, their contribution to the African continent’s economy and security, and their work in the realms of science and education, politics, and techno-military area.

During the conference, the African continent was invited to work together to form a new multipolar world order. This is especially important given the significant human resources of Africa, which is home to more than 1.5 billion people and has enormous mineral reserves in its soil.

Lower Dollar, Higher Gold

Even in an emerging multi-polar world, there’s no obvious replacement for the deep, liquid US capital markets. So the dollar won’t disappear from global trade. However:

If the BRICS have the commodities and the US and its allies are left with finance, pricing power for crucial things like oil and gold will shift to Russia, China, and the Middle East.
Falling demand for dollar-denominated bonds as reserve assets will send trillions of dollars now outside the U.S. back home, raising domestic prices (which is to say lowering the dollar’s purchasing power and exchange rate).
The loss of its weaponized reserve currency will lessen the US’ ability to impose its will on the rest of the world (witness China as Middle-East peacemaker and India buying Russian oil with rupees).

America has consistently reinvented itself in times of crisis. The founders survived monarchy. Lincoln survived disunion. We’ve survived bank panics, oil shocks, stagflation, and disco. We’ll survive deplatforming, too.

The Second American Revolution won’t be fought with muskets or manifestos. It won’t be fought with petty violence and street demonstrations. It will be written into code. And available to those who wish to take advantage of it.

Russell Kirk called the first American Revolution “a revolution not made, but prevented.” The second will be the same. We’re not tearing down the house — we’re going to rewire it in code.

The result may not be utopia. But it will be freedom you can bank on.

Treasury Secretary Scott Bessent has called stablecoins, including USDC, “a pillar of dollar strength,” estimating a $2 trillion market within five years. U.S. Treasuries back every coin.

Bessent’s formula even suggests that a broader, more efficient market for US dollars will help retain its best use case as the reserve currency of global finance… and, perhaps, help the current administration address the nation’s $37 trillion mountain of debt.

In trying to cancel a man, the establishment accidentally reinforced the dollar, and may add decades to its life as a useful currency.

As we approach the 250th anniversary of the United States, it’s worth recalling that our first Revolution wasn’t waged to destroy an order — it was fought to preserve one.

Political philosopher Russell Kirk called it “a revolution not made but prevented.” The colonists sought not chaos but continuity — the defense of their “chartered rights as Englishmen,” not the birth of an entirely new world. Kirk wrote:

“The American Revolution was a preventive movement, intended to preserve an old constitutional structure. The French Revolution meant the destruction of the fabric of society.”

The difference, Kirk argued, was moral. The American Revolution was rooted in ordered liberty; the French in ideological frenzy. The first produced a Constitution; the second, a guillotine.

Two and a half centuries later, the argument continues — only now, the battlefield is financial. Who controls access to money? Who defines legitimacy? Can a citizen’s ability to transact depend on their politics?

Trump and Powell are no buddies. They’ve been fighting over rate cuts all year—Trump demanding more, Powell holding back. Even after cutting twice, Trump called him “grossly incompetent” and said he’d “love to fire” him. The tension has been building for months.

And Trump now seems ready to install someone who shares his appetite for lower rates and easier money.

Trump has been dropping hints for weeks—saying on November 18, “I think I already know my choice,” and then doubling down last Sunday aboard Air Force One with, “I know who I am going to pick… we’ll be announcing it.”

He was referring to one Kevin Hassett, who—according to a recent Bloomberg report—has emerged as the overwhelming favorite to become the next Fed chair.