– Edited from an article by Nick Barisheff
Ask the man on the street where all the world’s gold is stored and he’ll likely answer Fort Knox. And up until recently, he’d be right, given the extent to which the West’s central banks have been big buyers of the yellow metal.
But central banks in the developing world have entered the fray — so much so that they’re now the biggest buyers.
Not only, for example, did Russia’s central bank buy 80 tonnes of gold in 2012, but it plans to buy a similar amount in 2013. It’s also holding on to most of its domestic production which, like China’s, is considerable.
All told, the world’s central banks scooped up 145 metric tonnes of the metal in 2012.
Indeed, in six of the last seven quarters, central bank demand has hovered around 100 metric tonnes — a sharp spike over the last three years alone.
Why the feeding frenzy? Simple. World domination. As oil, water, commodities and even land become scarcer because of explosive population growth worldwide, power alliances are fighting to control these vital resources. And they’re doing it through gold ownership.
Then, there’s the predicament of the U.S. If the U.S. dollar were to lose its status at the world’s reserve currency, America would be judged by the rating agencies in the same way they now judge Greece.
More important, America’s huge debt would trigger a big downgrade in its credit. What could be more frightening than that?
Although much effort has been made and will continue to be made to disguise the true nature of the gold/currency wars, the gold vantage point reveals much of what’s happening behind the scenes.
It may be politically incorrect to say the Iraq war, the war in Afghanistan, as well as the looming conflict with Iran, aren’t really a crusade to bring “democracy” to the Mideast. Yet, almost everyone with a brain knows there’s more to this story. These wars may serve many purposes. But from the vantage point of gold, the conflicts are deeply connected to maintaining the hegemony of the petrodollar.
In 1973, U.S. president Nixon promised Saudi Arabia that in return for propping up the petrodollar, America would protect the desert kingdom’s oilfields from the USSR and even from its neighbors. And from that day until 2001, the greenback maintained its petrodollar status against all comers. So, if you wanted to buy oil from the Organization of Petroleum Exporting Countries, you had to buy it in U.S. dollars.
But in 2001, Saddam Hussein, then dictator of Iraq, became the first to challenge the status quo, accepting euros instead of dollars.
For all of America’s rhetoric about Iraq’s weapons of mass destruction, the real threat Hussein posed was his challenge to the dollar’s hegemony.
Indeed, by 2003, his move was proving to be quite profitable, as the euro gained ground against the greenback.
In the meantime, it’s only a matter of time before the other OPEC nations begin thinking about making a similar change.
That’s why it should come as no surprise that after America succeeded in toppling Hussein, one of the first items on its agenda was to return to dollar-based oil sales.
But Iraq wasn’t the only Mideast operator to go up against the greenback. In 2005, Iran attempted to create a global oil bourse that accepted almost anything but dollars. Yet, fear that Western banks would freeze assets stopped the idea from catching on.
The bourse, also known as the Kish Bourse, opened for business in February 2008. But it’s still only trading in oil-derived products, such as feedstock for the plastics and pharmaceutical industries.
An upgrade of its operations would involve trading oil directly and could even result in a new benchmark price for Caspian crude. But this is unlikely to happen until there’s a resolution to Israel’s standoff with Iran.
In the interim, Iran has made it quite clear through its trade deals with India, China and Russia that it’s taking aim at the petrodollar.
Two years after the Kish opened for business, Libya’s Mu’ammer Gaddafi began floating the notion of an inter-African gold dinar that could be used to buy oil. The Libyan dictator had a vision for Africa — one in which its inhabitants would free themselves from those “colonial” powers that had plundered the continent’s riches.
And although Gaddafi and Hussein committed many atrocities that went unpunished by the West, they truly crossed the line when they threatened to derail the petrodollar.
Both Pakistan and North Korea have nuclear arms programs — and, as such — could legitimately be viewed as potential enemies.
But both countries lack oil. So, they go unpunished, since they pose no threat to the petrodollar.
Iran is being accused of having weapons of mass destruction that threaten its neighbors, if not the entire world.
But observers might question the real reason for the accusations. After all, it’s likely that Iran has only one or two nuclear bombs. So how much of a theat does it really pose to Israel and the U.S. which, between them, have thousands of nuclear weapons, not to mention several types of delivery systems?
The moment Iran launches a nuclear missile, early warning systems in both the U.S. and Israel will trigger an attack that will leave Iran an uninhabitable wasteland for hundreds of years.
Still, the U.S. has succeeded in forcing sanctions on Iran, although it has failed to get Iran’s neighbors to refuse to buy that country’s oil. Unfortunately, those neighbors need Iranian oil and aren’t willing to watch their own economies suffer just to preserve the petrodollar.
Indeed, to get around the sanctions, India has proposed trading gold for oil, while both China and Russia will simply continue to do business as usual.
Meanwhile, many economists have warned that alliances are forming that will alter the dynamics of the petrodollar world. China and Russia both wish to protect Iran from regime change, fearing that a new America-friendly regime there would put U.S. troops on their doorstep.
In short, the rules of the geopolitical “great game” are changing each day. And if Iran is successful in its quest to sell oil in currencies other than petrodollars, it could very well come out the winner.
Another example of this disdain for the Anglo-American empire has been the recent creation of the Community of Latin American and Caribbean States.
In the interim, other countries, both oil and non-oil producers, are moving away from greenback. They’re tired of the one-sided bargain that allows the U.S. to buy real goods and services with currency created out of thin air. They’re also fed up with seeing their holdings of U.S.dollars deteriorate thanks to constant currency debasement.