Will they, or won’t they? Many people are asking whether or not a new settlement currency for the BRICS known as the UNIT will be announced at the meeting in Russia taking place next week.

For those who may not know what the UNIT actually is, it is a currency that will be backed by 60% local currencies or commodities and 40% backed by gold. This would greatly impact the US dollar as MANY countries are looking to trade amongst themselves without a third party (USA) intervening.

As many as 59 countries have applied for membership in addition to the current 10 members.

Another interesting outcome will be to see if any expansion will be announced at this time and what the timeframe might be moving forward. Last year, 6 new members were announced. Argentina backed out after a leadership change and Saudi Arabia is in- but not fully yet. The 10 members will have to determine who, and how many, new participants will be added. This could also give us a glimpse of how fast these events may take place.

Most of the commodities, including oil, would be produced by these members and they would have substantial pricing power- taking it away from the western moneychangers that have been manipulating prices for their own benefit- and to the detriment of the producers for centuries. This would be the end of the petrodollar as we have known it since the mid-1970s. It could also be the end of keeping areas of the world- mainly in Africa- in abject poverty as the West has been exploiting the resource-rich continent for their own benefit and to the oppression of the local population- again for centuries.

A friend of mine sent me an article that said, “India rejects de-dollarization”. Nice headline. In reading the article it said that India would still use the US dollar in trade wherever it is used. To me, that is a perfect way to appease the USA. If most of the world trades without using the US dollar- which appears to be coming, then of course, they will trade in local currencies anyway. In the meantime, why poke the entity that has shown it will try to punish anyone not toing the line.

Personally, I am pretty sure that one way or another the US dollar is in its death throes and whether an announcement of a new settlement currency happens or not, it will only have an impact on the timing of the dollar’s demise.

The main point here is that regardless of the meeting next week, the move away from the US dollar is in full swing. I have covered the many reasons why in previous articles, so I will not go there.

The impact of the rest of the world NOT using the dollar in their trades is hard to fathom. Most of us have ONLY known King Dollar. We have lived FAR beyond our means because, as the dollar was needed to settle most trades, nations needed DOLLARS. This allowed us to conjure up possibly HUNDREDS of TRILLIONS of dollars and we were able to exchange a unit of currency (that costs little to nothing to produce and has NO VALUE backing it) for goods that had to be produced, refined, and shipped. It is similar to being able to get SOMETHING for NOTHING. How long can that last?

The main outcome of this is, in my opinion, inflation that most people cannot comprehend. I believe it is imperative to have a plan in place that takes into account FAR more inflation than most planning strategies plug in.

This is also the reason why I have been pounding the table for gold, silver, food, water, oil, gas and companies that produce these hard assets because as the currencies fall the amount of those currencies needed to buy those goods could skyrocket- giving you the ability to keep up with the raging inflation.

In addition, it could be that all the debt- based assets like cash and bonds could crash and burn. Companies that have huge debts that are more than their assets could default on those debts leading to a wipeout of capital of first- common stock shareholders, next preferred shareholders, then the unsecured bondholders and last- the secured bondholders.

If I look at gold it has been the top performing asset in the 2000s. It has outperformed all the stock indexes and, in my opinion, allows for those type of returns without the possibility of a counterparty not paying off a promise that they made to repay.

As food, utilities, taxes, housing prices rise- possibly uncontrollably-are you counting on your deposit accounts and other fixed-income products to keep up? Do not bet on it. As a matter of fact, if inflation was reported as it was in the 1980s- you could easily see that you are falling behind in interest-bearing accounts right now- day by day.

I know a lot of people will say that I have been saying this for 10 years. That is true. All I can say is what I have said all along. Once you go down this (money “printing”) road there is no easy way out. Stop and you risk an immediate collapse. Continue and in every single case in history the currency collapses- most of the time right along with the moral fabric of society. (See anything in the mirror?)

Continuing the conjuring up of cash buys time. It also allows people to become complacent because- look at what they have done so far- and we’re still ok. It gives a false sense of security until the inflation shows up, devalues earnings and the cracks start to show. Then, as our friend Andy Schectman often says- GRADUALLY-then ALL AT ONCE.

In this all-at-once moment I truly hope that you have a plan in place- it appears we will be needing one in the VERY near future. Even if I am wrong it couldn’t hurt to have extra food, a water source, some cash on hand, some metals and a way to protect your belongings.

Be Prepared!

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