Geopolitical Update : BRICS could push Gold & Bitcoin higher; Moscow’s tactical options?

By Christian Takushi, Macro Economist, Switzerland – 24 June 2023 (delayed and truncated for public release on 27 June 2023)

Dear reader

It is time to reveal what I am working on in recent weeks.

While the news flow has kept most people absorbed with the massive “AI” rally, the FED’s mixed signals, the tragic loss of the Titan submersible and now the Wagner Group’s mutiny, the probably most significant development in the world economy has been barely reported about: it concerns the BRICS and the likely return of a new Gold Standard just as BRICS embrace Bitcoin as well.

While we in the West have over-printed our paper money (which is backed by nothing) and built a gigantic pile of debt on it, the BRICS and emerging markets are on course to embrace decentralised crypto currencies like Bitcoin alongside launching a new currency backed by the safety of Gold.

Will our main policy of sanctions and threats keep healthy emerging nations from using their own currencies instead of the USD in their bilateral trade or from joining the BRICS currency?

The potential historic move would defy the current paradigm and expose the rarely discussed vulnerabilities of our Western economies, where in 2010 our governments seized full control of financial markets and ever since closely manage the prices of bond, equities, houses and even key commodities. Our tight control over financial, asset and even commodity prices is about to be tested. While we in the West have over-printed our paper money and built a gigantic pile of debt on it, the BRICS and emerging markets are on course to choose the safety of Gold and the upside potential of decentralised crypto currencies like Bitcoin.

Today I will share with you two risks (threats) that are gathering momentum – one is military, the other monetary. Those who are closely following our research will know that they are somewhat interconnected.

Since it is important to keep the big picture and global backdrop to these developing threats, I will also share with you the top 10 factors driving the Global Geopolitical Process & Calculus at this very moment. You cannot connect the dots and the two threats that are gathering momentum without the big picture.

As we have often said the biggest enemy of clarity and the ability to see the big picture is an overload of information, data and recycled news. The former underpins wisdom, while the latter boosts knowledge of mostly irrelevant details and momentary noise.  

If the development so requires, I may expand in the coming days on the backdrop of the BRICS currency strategy. It may matter, because there is the likelihood that those with gold holdings in the USA, EU, UK and Switzerland might not benefit from the eventual massive rise in the price of gold. Following the sanctions’ threats we have deployed against the BRICS and the nations that have requested membership, the Gold market may bifurcate following the launch of a gold-backed BRICS currency.

West vulnerable as other powers begin to respond more assertively to our weaknesses and mistakes 

Serious risks for the West emanate from the NATO-Russia confrontation and also from the new BRICS currency solution to be announced in a few weeks.

For so many years the West has controlled Foreign Policy, the fate of nations, financial markets, the perceived value of our currencies and the price of Gold. But now our extensive sanctions policies and possible miscalculations may unravel in ways Washington-London-Brussels cannot control. As often, it is all about timing and convergence.

As I have shown here recently, the BRICS have overtaken the G7 in their share of Global GDP (in PPP terms). A remarkable and historical moment that has injected additional boldness to their waning courage after two years of a five-fold barrage of shocks (energy inflation, food inflation, higher interest rate hikes, super strong USD and limited access to USD liquidity), which they emphatically saw as aimed at them to stop their imminent rise. In the eyes of New Delhi, Beijing and Brasilia the West started economic hostilities against them in 2021 already.

The big picture 

Several independent policy clusters are pointing to growing tensions leading to a potential break-up of the world economy during a transition phase that could last for 3-7 years into two rivalling camps and one neutral/opportunistic camp. One would be around the G7/NATO, the other would be around the BRICS, the third one gathers multi-aligned nations that want to trade with everyone. In fact it is rather a trifurcation. Three major groups of nations, with the group of non-aligned or multi-aligned nations being the largest.

The Biden administration has threatened a number of nations with sanctions if they do not adhere to the policies of the NATO alliance. But with the exception of smaller and indebted nations, this has been met with lots of ambiguity or defiance. Our media treats those nations as pro-Russian, but the truth is most of them are neither for Russia nor for NATO.  They want to trade with everyone and their biggest common denominator is that they are angry at the West and see the need to curtail Western monetary, fiscal and foreign policy excesses.

This is probably the biggest miscalculation by the collective West in 2022/2023: Many nations want to trade with both main camps, but we hear that key G7 leaders want to make more extensive use of sanctions to force nations to fall in line. The age of diplomacy and foreign policy has been replaced with sanctions.

It seems that the use of sanctions over the past two years is becoming a self-fulfilling problem and necessity.

Here the Top 10 factors driving or shaping the Global Geopolitical Process & Calculus

  1. The overlap of Quantum technology, AI and hypersonic technology has given Russia-China a certain advantage during 2023-2024
  2. USA has been late in advancing tactical weapons and hypersonic missile defence. While the USA is catching up fast, it is currently vulnerable
  3. The war in Ukraine is not really going very well for anyone, except maybe .. China, Norway and the USA to some extent. We cannot rule out Russia and its allies will use tactical weapons (low yield nuclear, cyber, EMP etc.) in Europe and elsewhere. Our analysis suggests China-Russia want to build military presence in the US backyard, they say  just as the USA did near China and Russia.
  4. Washington has lost committed allies and partners outside of NATO. Misled by the return of India to the table after it was threatened, Biden’s advisers think they have won back an ally. Truth is India is nobody’s exclusive ally, it is sticking to its multi-aligned strategy of dealing with everyone. It is even more committed than before to reduce US power after the White House humiliated India repeatedly in 2022.
  5. Beijing has concluded President Biden’s closest advisers will try to repeat their success of the Midterms again at the 2024 elections. Many in Beijing believe Washington is seeking a new international conflict to improve the reelection chances of Pres. Biden. As a result they are urging the Chinese leadership not to bite the bait.
  6. China’s allies (Iran and Saudi Arabia) are growing in power and influence in the Middle East. Israel is cornered and in a very difficult spot since it yielded to US Foreign Policy again. For years, its managed distance from Washington allowed Israel to build closer relations with Arab nations. An Israel-Iran conflict is likely and already brewing.
  7. The BRICS may be adapting their currency strategy against the USD to a multi-pronged strategy to build monetary resilience & commodity exchanges, letting the USD fold under its own excesses
  8. Brazil-Argentina along with Russia-India find out they can’t do bilateral trade smoothly with their own currencies alone. They need to use other currencies to settle differences. The Chinese currency and Bitcoin were reportedly suggested as temporary solution.
  9. The USA, EU and UK are re-discovering South America and try to regain influence back from China. The effort is welcome by multi-aligned open economies. The region is already highly contested by Western NGO’s and competing global powers, with China asserting the biggest influence.
  10. Despite the lack of support by US media Mr. Robert Kennedy is gaining traction among voters thanks to Twitter messages and town hall speeches. He has said that America’s violent foreign policy has brought violence to America’s homes and schools.  Since Spring emerging powers are following his campaign as he could be the biggest disruptor of the widespread belief of the unavoidable US-China War

Threat 1: Russia a step closer to the eventual use of its tactical arsenal – by design or chaos?

More than a year into a protracted Russian invasion of Ukraine and the assertive White House stance on China, tactical nuclear weapons are in the hands of two infuriated hardliners: Mr. Putin and Mr. Lukashenko. Actually one of the aims of Mr. Prigozhin’s dangerous mutiny is to get access to tactical nuclear arms. He may fail apparently, but the combined threat to Russia’s National Security is suddenly greater than over the past 14 months.

There are more possible scenarios than earlier this Spring, but the expected in-fighting has already emboldened Ukrainian forces to dare more in this war. While our media and governments may initially celebrate the mutiny, they may be also digesting disinformation and underestimating the full extent of ..

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By Christian Takushi MA UZH, Independent Macro Economist and Geopolitical Strategist. Switzerland – Sat 24 June 2023. (delayed and truncated for public release on 27 Jun 2023)

Geopolitical and economic conditions need close monitoring, because they can change suddenly. 

No part of this analysis should be taken or construed as an investment recommendation. 

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