https://www.veteranstoday.com/2022/04/13/beware-the-coming-currency-and-commodity-trade-wars/
In order to prevent hyperinflation, the Russian Central Bank pushed the interest rates to 20%, preventing further loss of value. However, this didn’t turn back the clock. It was simply damage control. What actually turned back the clock is Russia’s announcement it will only be taking rubles for natural gas and oil payments.
That was when the Russian currency regained not just all of its value, but also exceeded the pre-sanctions exchange rate. In addition to this, Russian Central Bank also announced it will be pegging the ruble to gold. More specifically, a gram of gold will be worth 5000 rubles.
This would make it the first gold-backed currency since US President Nixon abolished the gold standard in 1971. However, some analysts have stated that Russia will also be pegging the ruble to natural gas, oil and even diamonds and other commodities, making the demand for ruble even higher.
– What do You think Russia’s end game with all this be?
– It’s very difficult to say, but I have a few ideas what Russia hopes to achieve with all this. The first consequence may very well have to do with the price of gold, more specifically the difference of the price of gold in rubles and US dollars, after Russia pegged a gram of gold to 5,000 rubles.
If the price of gold on the world market is over 1900 dollars per ounce (around 28 grams), when converted into rubles, an ounce can be bought for an equivalent of 1,500 dollars. In doing this, the Russian Central Bank artificially raises the value of the US dollar by around a quarter, which may seem like a good thing for the Americans, but it will actually lead to everyone rushing to buy these gold-backed rubles in Russia and then buy gold for a price which would effectively be 25% lower.
This could have a dramatic effect on the world financial market. The value of the ruble would begin to rise sharply due to high demand, because everyone would want to buy it with their stocks of US dollars and euros, while the value of US dollars and euros would go down in the process.
This would soon lead to other countries pegging their currency to gold, while looking to replace both US dollars and euros in order to make profit, but also to prevent a rapid devaluation of their currency due to the reliance on foreign exchange reserves. All of this would have a synergistic, almost cascading effect, an exponential growth, where one effect reinforces and pushes the other.