On March 15, 2018, russianknowledge.com posted an article by Paul Goncharoff called “Read Between the Lines”. For those of you who remember, Paul Goncharoff was the speaker SANDSTONE sponsored to speak about de-dollarization at the 2018 Global Business Forum. If you have the time, follow the link to the article and read it. If you don’t, we've featured some of the content that really stood out for us below.
“Truths are often found by diligently following the money trail – not the emotional aspects, orchestrated discords, proxy music or spin optics.”
This quote really brings to light what we were talking about at OUTLOOK 2019 as well as what Frank Luntz discussed at CONNECTS 2018. We are living in a time when orchestrated discords and spin optics are dominating political and economic discussion. Extremism is dominating media coverage. Issues are being lost in emotion. Now more than ever, we as wealth managers - and you as citizens - need to look beyond the headlines of the day, follow the money and start to ‘read between the lines’.
“Sanctions, restrictions, treaty busting and trade tariffs…the roots often are in the politics and policies of the US dollar and the power it bestows.”
And this is where gold comes into play. In Gold Fever, we talked about how central banks around the world are increasing their gold purchases. But in this article, we get a reminder that it’s not just the central banks. The People’s Bank of China “(PBC) is not the only official government entity that holds gold in China. The State Agency for Foreign Exchange, China Investment Corporation, the military, and commercial banks are also gold buyers.”
But as we discussed at OUTLOOK, the move to gold is only one piece of a very large and very complicated de-dollarization puzzle.
“Any change in the reserve currency status of the US dollar can be hedged by investing globally in multiple currencies and gold.”
Brazil, Russia, India, China and South Africa (BRICS) are creating a single payment system rooted in Blockchain that is called BRICS Pay. This will allow them to use their own national currencies as a direct basis of exchange for external payments. BRICS Pay is another step towards de-dollarization as well as increasing the popularity of national payment systems which are gradually replacing VISA and MasterCard.
A Valdaiclub.com article explains it best “Currently, external settlements using UnionPay non-cash transactions, ruble-yuan for example, require a conversion into US dollars, which necessitates the use of US banks. This process creates additional operational risks, stemming from the threat of sanctions. Similarly, UnionPay payments involving euro cards pass through European banks. US protectionism and Trump’s trade wars are compelling the regional powers to forge financial and economic ties with their neighbours and partners outside the “dollar zone”.”
This article, if nothing else, is a good reminder to us all to look beyond the headlines – especially in US dominated media. Look for the underlying economics that are often hidden amid the hysteria. Remember that the world is a very large place and that opportunities can come from places you’d least expect.
Research and following the money is how SANDSTONE stays ahead of the macro trends and find opportunities for investment world-wide.