Jim Rickards: "Countries are trying to escape the dollar"

Several countries are adding gold to their reserves in order to escape the hegemony of the dollar, commentator and author Jim Rickards explained in an interview with CNN. The leading example is Russia, which has been adding precious metals to its reserves and reducing its dollar balances for years. He also notes that other countries are developing alternative payment systems so that U.S. financial sanctions will have less effect in the long run.

According to Rickards, author of the bestseller 'Currency Wars: The Making of the Next Global Crisis' and numerous other books on gold and the global monetary system, the dollar will not lose its status as the world's reserve currency overnight. He is convinced, however, that something else will eventually take its place, just as the British pound lost its status as the world's reserve currency after the Second World War. Below is the interview with CNN.

A word about Russia's strategy to buy gold. Official figures show that Russia added almost 29 tonnes of gold to its reserves in July. The central bank now has something like $76 billion in gold. How does this help Russia against U.S. sanctions?

"It definitely helps. July's purchases were notable for two reasons. Firstly, because Russia bypassed China and secondly because it is close to 2 000 tonnes, which is a nice round number. But it's important to understand that this has been going on for a decade. Ten years ago, the gold reserve of Russia was 600 tons, today it is almost 2,000 tons. So they have tripled their gold holdings in the last ten years.

The funny thing about the gold market is that it is liquid - you can always buy or sell it - but it is not traded much. So, you always have to watch out for market impact. What Russia does is they instruct dealers and banks to expand the gold supply, but they don't want to influence the market. So whether it's 10 tonnes or 20 tonnes, they keep buying and remain very transparent about it. That's smart, because it doesn't scare the market. But 10 to 30 tons of gold a month for ten years, that's how they got to 2,000 tons. So this has been going on for a long time. In 2009, I organized a financial war game for the Pentagon and we warned the Pentagon that this was going to happen. We were laughed at by the Harvard professors, but it turned out to be exactly like that."

So Russia buys gold and reduces its dollar reserves. But what impact does this have on the dollar's status as the world's reserve currency?

"The position of the dollar is currently very strong with 60% of all global reserves, 80% of all global payments and almost 100% of all oil trade. You could say that you can't do anything about this, but you could also have said that about the British pound sterling in 1913. A year later, World War I broke out and sterling had already begun a long decline. During Bretton Woods in 1944, the coin was only a footnote. So these things can change, but not overnight.

What is important to realize is that not only Russia adds gold to its reserves, but also China, Turkey, Iran and many other countries. This is what I call the new golden axis. The Pentagon understands this, but they have no say in the dollar. The U.S. Treasury Department seems to be asleep at the wheel, and at one of the main intelligence agencies, they said, "Someone has to buy it," as if it were on sale at the flea market somewhere. They're missing the bigger picture, and that is that all these countries are trying to escape dollar hegemony."

This contribution was made from Geotrendlines