There is much gnashing of teeth and pulling of hair by just about every leader in the West, especially by an almost apoplectic President Trump, over a so-called “sinister threat” by the BRICS nations to form a new world trade settlement mechanism that bypasses the almighty dollar. President Trump may invoke sanctions and asset confiscations similar to those invoked against Russia, the “R” in “BRICS,” in addition to his current favorite weapon, the tariff. Apparently President Trump equates the possibility of the BRICS nations forming a competing settlement system that bypasses the dollar to be close to a declaration of war. But it is not sinister, it is not a threat, and it definitely is not war. In fact, it may lead to a more stable, prosperous, and peaceful world.
The US Abandons the Gold Standard for Fiat Illusions
Toward the end of World War II, the Allies met in Bretton Woods, New Hampshire to establish a new world monetary system. At the time, the US was the world’s leading creditor nation with a predominance of the world’s central bank gold reserves. The Allies settled on a semi-gold settlement system in which central banks could redeem dollars for gold at $35 an ounce. Thus, instead of periodically shipping physical gold from country to country to settle international trade accounts, countries could transfer dollars, mostly via bank transfers. Since dollars were “good as gold,” this was safer and more efficient. But the weakness—identified by Henry Hazlitt, reporting on the conference for the New York Times—was the complete reliance on the US not to expand its monetary base beyond the point that every dollar could be redeemed in gold at the $35-per-ounce promise. Almost before the ink was dry the US was printing dollars. Roughly two decades later Lyndon Johnson’s “Guns and Butter” war and welfare spending led to an excessive build-up of dollars in foreign central banks that triggered a run on the US Treasury’s gold reserves. In 1971, Richard Nixon closed the gold window “temporarily.” That stopped the US gold drain, of course, but removed the last real brake on the expansion of fiat money printing and increasing loss of the dollar’s purchasing power.
The Fiat Dollar Hegemony Is Ending
(According to the Federal Reserve Bank of St. Louis, the US monetary base has expanded from $84 billion in 1971 to $5.648 trillion in 2025. Over the same time period, the US national debt has expanded from $424 billion to over $36 trillion. The purchasing power of the dollar is not easily measured, but the price of gold—real money—has gone from $35 per ounce in 1971 to $3,371, an increase of almost one hundred times.)
It is certain that dollar expansion will continue, possibly at an ever-increasing rate with the concomitant loss in its purchasing power possibly to zero. Combine this with the power that the US possesses to “discipline” any nation that bristles at US hegemony by cutting it out of the SWIFT messaging system for settling trade accounts with dollars or by freezing or outright seizing dollar assets held in Western banks and you have the basis for an international financial revolt. The BRICS nations clearly want a multi-polar world that bypasses the dollar, as this news release clearly states. “…initiatives like the BRICS Pay system—a cutting-edge, decentralized payment mechanism designed to reduce reliance on dollar-centric financial networks…”
Gold at the Heart of a New Trade Settlement System
As reported by esteemed monetary analyst Alasdair Macleod, who recently joined Von Greyerz AG as Strategic Advisor, China plans to establish gold vaults/banks outside its borders into which BRICS nations can deposit gold. The special administrative district of Hong Kong will have the first venue, but Saudi Arabia may be the hub. This is a major development, and one can only conclude that its goal will be to underpin a new international trade settlement system in gold, which is real money with no counterparty risk. The risk of gold misallocation or outright confiscation is reduced, since there will be multiple vaults/banks in several countries. In simple terms, regardless of the technical accounting mechanism, each country would be responsible for sending enough gold to one or more gold vaults/banks to pay for anticipated net settlements, much like the way banks settle transfers internally through their central banks using national currencies. Countries that run persistent negative settlements, meaning they owe more gold than they are paid, would be required to send more gold to one of the gold vaults/banks. This has a built-in discipline that does not require coercion by anyone. Furthermore, it is honest. No creditor nation need be concerned that its reserves held in any one or many foreign currencies might suffer loss of purchasing power, as is the case with the dollar.
A Return to the Gold Standard
A gold-backed international trade settlement system will attract more and more nations as they lose their appetite for holding ever-depreciating dollars. Joining would be beneficial for the American people too, because gold provides the underlying monetary discipline that would end massive deficits that currently are papered over with fiat dollars. An end to monetary inflation would stabilize the purchasing power of the dollar. The world would be back on a gold standard with a better chance of peace and prosperity through trade. To turn Bastiat’s dictum around somewhat, goods would cross borders and not armies and bombs.
