WHEN Donald Trump and Vladimir Putin meet in Riyadh in the coming weeks, the Ukraine peace agreement will be a side issue. The main item on the agenda is the agreement of a transformational change to the International Monetary System (IMS), making the meeting the most important the world has seen in 50 years.
At the start of January, I predicted in TCW that we would see a fundamental change to current monetary order this year. I also said that any new order would most likely see gold take an integral institutional role once again in global finance. Three weeks after I wrote that article, the Financial Times reported that London was experiencing gold shortages, with American banks flying gold to New York and clients of the Bank of England being required to wait up to eight weeks to take physical ownership of their metal. This eventually compelled a Bank official unconvincingly to play down rumours around the cause of delay at a press conference in early February, asserting that delays were not extraordinary as gold is ‘very heavy’ to move.
Since then, relatively little logistical activity has been seen around the Bank of England vault because the gold almost certainly left London several weeks before the press learned of it. Interestingly, a number of people reported a mysterious two-week long blackout in the City of London’s live webcams and traffic cams at the end of November; it’s not completely conspiratorial to note that this neatly coincided with the highly sensitive transport of large volumes of physical metal out of the City.
Coinciding with the flight of gold from London have been several suggestions floated by officials within the Trump administration over recent weeks about making better use of America’s gold reserves, including a revaluation of America’s gold certificates from their old value to current prices, which would help inflate the asset values on the US Treasury’s balance sheet and provide liquidity without the need to print money. The more prominent and interesting statements have been made by Elon Musk and the President himself, with Trump repeatedly stating that he will be visiting the US Government’s vault in Fort Knox to carry out a personal audit of the metal that’s supposed to be stored there, asserting: ‘If it’s not there, we’re going to be very upset.’
The renewed attention on gold has run parallel with the negotiations between US and Russia on ending the Ukraine war. While the causes of the conflict were myriad, one of the fundamental elements of the tension between the governing Western elites and Russia over the last few decades has been energy: oil and gas. This is what I believe will be a more integral issue in the agreement that will be struck between the US and Russian governments.
It should not go unnoticed that the chosen location for the meetings between the two delegations is the capital of Saudi Arabia – the oil-producing country which was instrumental in creating the ‘petrodollar’. It is my contention that both the US and Russia are drawing up plans which will stimulate the production of greater volumes of oil – a top priority of the Trump administration – which can be achieved only by a move away from the petrodollar system towards a neutral reserve asset that is universally held and valued by central banks across the world.
If we are on the brink of a new gold-for-oil arrangement, we would expect to see frantic contacts between the negotiators and the major oil producing countries of the world to gain their approval for the system, which is why it has been interesting to note that senior officials from both American and Russian governments have been touring the Middle East: US Secretary of State Marco Rubio visiting the UAE on February 19 and Russia visiting Iran on February 25. Neither country is particularly important for the outcome of the Ukraine talks, but they are both very important as oil producers for the outcome of any new monetary system. Putin has also hosted the Chinese foreign minister and spoken to President Xi Jinping personally over the last few days.
I know many will be asking: Why now? What benefit does it have for the US Government to move away from the dollar reserve system?
The new Trump administration has said that the current level of spending on its budget deficit is unsustainable. The Musk/DOGE phenomenon, cracking down on government bureaucracy, is one element of getting this situation under control. However, Trump knows that the current global monetary system itself is working against America’s interests, causing distortions in the foreign exchange and currency markets, and more importantly threatening the stability of the US economy and society. The cost to maintain a global monetary order based on the US dollar has been burgeoning, unsustainable sums spent on the huge American military complex, and, more crucially, the offshoring of a vast part of America’s industrial capacity – an existential economic, social and national security threat which, as the astute Luke Gromen has comprehensively explained in his recent interview with Tucker Carlson, is worrying many leading players within the American establishment.
We should not be discouraged about this new monetary system: the move away from the current one, which based on debt and deficit spending, will inevitably shift politics towards the right. Perhaps this is why liberal elites across Europe have seemed more nervous than confrontational towards the second Trump Presidency and have been unrelentingly committed to Ukraine over the last few months despite a hopelessly desperate military situation.
When Trump and Putin meet in person at Riyadh the curtain will fall on the old system that has been in place since the 1970s. Both leaders have dropped hints that Ukraine will not be the only – or the main – issue on the agenda. Putin has stated that ‘broader issues of global interest’ will be discussed alongside Ukraine, while Trump said last week that he hopes to secure ‘a major economic agreement’ with Russia. This could see the creation of an International Monetary System using gold, the significance of which will be on par with the Bretton Woods agreement of 1944.
As Trump has said repeatedly since election, his Presidency will mark the start of a new ‘Golden Age’.
