The Return of Gold-backed Fiat Currencies Is On The Horizon
China’s economy has been attracting a lot of attention - both positive and negative - in recent years, which has caused a fair amount of financial turmoil. There have been talks of creating a gold-backed yuan for quite some time now, although those plans have not come to fruition just yet. On the other hand, there is the China International Payment System to keep an eye on. Exciting times, or should investors be worried?
The China International Payment System
As the name suggests, the CIPS is a direct competitor for SWIFT in the Western world. Thanks to the country’s somewhat obscure financial alliance with Russia, the Western economy has come under a lot of pressure. Especially when keeping in mind how China's economy is much larger than its US counterpart. The only silver lining is how the US Dollar remains the global currency for now, but even that situation might come to change soon.
Not too long ago, the IMF has decided to add the Chinese Yuan to their SDR reserve currency basket. While that is not out of the ordinary in its own right, it did not take long for financial experts to propose how the Chinese Yuan will become the new global currency in the next few years. Despite that semi-positive news, the Yuan started declining in value shortly after, as the Chinese government deliberately started pushing its value down.
But that hasn’t affected the CIPS by any means, as this financial network is being used for trading and monetary exchanges in China and Russia. But there is more, as the network has been embraced by the remaining BRICS, as well as members of the Shanghai Cooperation Organization. Additionally, several other countries in Eurasia have started to lean towards CIPS as well, and a global launch could happen as soon as Q3 2016.
There is no denying the CIPS will be a significant threat to SWIFT and the Western economy, and the next few months will be a defining factor. For the time being, the US government is doing what they can to disrupt BRICS nations, and they are also targeting Latin American countries to prevent them from embracing CIPS as a payment network.
The Increased Interest In Gold Is Not Coincidental
Unfortunately for the Western economy, it is entirely created on debts, rather than actual value. Ever since the US Dollar was decoupled from gold, things have become progressively worse, although the major crisis has been averted up until this point. It will not take much to create an avalanche of collapses in the Western economy, and the CIPS could be the drop that makes the bucket spill.
To make matters even more attractive, both Russia and China have been increasing their gold reserves as of late. For every Ruble in circulation right now, there is enough gold in reserve to back that value twice. China, on the other hand, has announced their gold-backed yuan in April of this year and cut all trading ties with the US dollar for the time being.
These activities have not gone by unnoticed, mind you, as US government officials are pondering over whether or not they should reintroduce the gold standard. Most people will know how President Nixon decoupled the US Dollar from the gold standard back in 1971, but that does not mean the country has stopped accumulating gold by any means.
To put this into perspective: if the gold-backed US Dollar would be reintroduced, it could actually wipe out all US debt in existence right now. But there is a different side of this shiny medallion, as such a move could come at the cost of losing most of the developing regions, which own natural resources - such as oil and minerals - the Western world so direly needs.
If this were to be the case, nothing is keeping these emerging regions from striking an alliance with either China, Russia, or both. Moreover, both of these countries have plenty of gold reserves to introduce gold-backed national currencies of their own. Combining that power with the CIPS payment network would send a massive shockwave of financial disruption throughout the world.
Very few people are aware of how the Eurasian Economic Union, together with the BRICS and SCO nations, make up more than one-third of the global economic output. Additionally, they account for half of the world’s population, making them a force to be reckoned with, to say the least. Investors and consumers around the world are also flocking to gold as a way to diversify a portfolio, and make a substantial investment for the future.
In fact, there seems to be no better time than right now to get involved in gold. Whether this is as an investment vehicle, or as a gateway to get involved in other trading instruments, is entirely up to the end user. The Vaultoro platform specializes in exchanging gold and Bitcoin, both of which hold significant promise for the future.