The Collapse of the Dollar System

Published by Filipe R. Costa on Tue, 10/09/2013 - 13:30 in
world gold currency

(An original fictional work by Filipe R. Costa / Special thanks to Maggie Ayre for valuable corrections)

It was December 10, 2013, one of those grey and cold Tuesdays, as snowy days had already started in Moscow. It was early in the morning but there was already a lot of hustle and bustle in the streets, as the Muscovite prepared for another busy day. No one could suspect that such a Tuesday would be different from the previous Monday but Moscow was about to change the world, or the world was about to be changed from Moscow.

One month earlier, an international war was unfolding in Syria. The United States, led by Barack Obama, couldn’t wait anymore for a UN resolution giving them the green light to intervene in Syria. They were seeking to punish the government of Syria for using chemical weapons on its own population. Without Britain’s support and against Russian and Chinese opposition, the United States decided to go alone on this one and using its sophisticated new missiles and the new-generation stealth bombers, they soon destroyed key Syrian government points, cutting its force into small pieces. By December the war wasn’t formally over but most of the harm had already been done and a new government was about to replace the deposed dictator. While Americans seemed happy with the outcome, The Europeans were a little more apprehensive and hesitant as no widespread agreement was achieved at the UN. By their turn, the Russian and the Chinese were angry at the United States, as their veto power at the UN has been distorted.

Tired of seeing their GDP exposed to the Federal Reserve’s monetary policy, Brazil had been very vocal during the last few months. For several times, the Brazilian Finance Minister, Guido Mantega, blamed the United States for using the dollar to improve trade balances and alerted the world to the new currency war that was about to set in. No one took him seriously but the four other countries that make the rest of the BRICS acronym. If everything looked quite good in America, with the main stock index heading north by 16pc in the year, that was certainly not the case with Brazil and Russia, where stock markets had lost 15% of their value. Someone should do something positive once and for all. Starting from bilateral meetings between Brazil and China, the BRICS agreed to anticipate their 6th summit from 2014 to December 10, 2013. Russia and Brazil were about to propose what could be the explosion of the financial system but needed the support of all other BRICS to succeed. While preparing for the summit, Dilma Rousseff and Vladimir Putin engaged in some backdoor agreements, in particular to start buying gold in international markets.

Two hours spent into the summit, it was time for President Putin to bring the delegates attention to his objectives. He highlighted the role of an international currency, the need for monetary stability, and the strength of BRICS in the commodities market. China is the top importer and exporter for almost every commodity, while Russia is the top Natural Gas producer with an estimated 18% share of the world’s total reserves. With the United States committed to manage its huge debt pile with the help of a debased dollar, printing money out of thin air, the summit realises the need to find a real alternative to the dollar in international trade - a new currency backed by a hard asset – gold, and eventually silver.

On day 2 of the summit, Russia proposed the creation of a new currency – the WGC (standing for World Gold Currency) – which would be created under Swiss law. A new central bank with its headquarters outside the BRICS to give it more credibility, eventually in Zurich or London. The new WGC would be fully backed by gold, meaning the monetary supply would be indexed to gold holdings, making it impossible to engage in debasement policies and giving rise to a real new gold standard.

The idea was great! But how to enforce the use of WGC? The Dollar, the Euro, and all other currencies have a legal tender but that wouldn’t be the case with WGC. With commodities under the control of the BRICS, it wasn’t difficult for the summit to find a solution to the problem. Russia would insist that Natural Gas exports be paid in the newly created currency. This would guarantee a strong WGC circulation in Europe. At the same time, China was going to substitute the Yuan trade zone with a new WGC trade zone while demanding other trading partners to preferably use the new currency.

The formal announcement at the end of the summit shocked the world. The markets were shaken and the dollar dropped 3% in a single session. Gold’s negotiation had to be suspended in COMEX trading. The nuclear bomb had already been launched; people just didn’t realise it.

With Europe already against monetary easing and thin-air currency systems, it wasn’t difficult for the hard-nosed German government to accept negotiations towards the new currency after imposing some Russian concessions, and setting trade preference agreements with China. While COMEX tried to impose several restrictions in gold trading, especially through daily price change limits, it was too late. Gold was already trading in international markets in WGC. International lenders started trashing Treasury bonds, interest rates shot up, and the Federal Reserve saw the money supply shrink. Gold hit $5,000 per ounce while oil was trading at $500. A period of hyperinflation haunted America, as the dying-dollar wasn’t able to buy the commodities it used to. The Japanese Yen also sank, but the government made some agreements with China to start using the new WGC currency, dropping the Yen completely. The collapse of the dollar was then evident and the US economy plunged into a deep crisis. A new era of sound money was about to begin!

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Research & Opinion