Russian President Vladimir Putin is grabbing up gold “as fast as he can get his hands on it,” writes Brett Arends of MarketWatch. In fact, Russia has more than doubled its gold reserves over the last five years as a result of its buying up about half a billion dollars’ worth every month, the report adds.
Keeping in mind no one else “plays global power politics as ruthlessly as Russia’s chilling strongman,” as Arends puts it, one has to ask: What’s the angle?
MarketWatch explains the possible implications:
… according to International Monetary Fund calculations, the U.S. is on track to lose its status as the world’s biggest economy — when measured in real, purchasing-power terms — to China by 2017.
We will soon be the first people in two hundred years to live in a world not dominated by either Pax Americana or Pax Britannica. This sort of changing of the guard has never been peaceful. The declines of the Spanish, French and British empires were all accompanied by conflict. The decline of British hegemony was a leading cause of the First and Second World Wars.
What would a world look like with a diminished America?
… we may be about to enter a … turbulent and dangerous era of power politics and international competition.
Not long ago, world gold reserves were mainly in the hands of the U.S. and the Europeans, which accumulated their holdings during their centuries at the top. The U.S. has 75% of its currency reserves in gold. Many other first world powers have comparable proportions.
However, we must acknowledge certain emerging markets and their intense interest in the precious metal: China, Saudi Arabia, and Russia are now among the top five holders of gold in the world, according to the World Gold Council.
“Western European countries have been selling gold. If the current financial crisis gets any worse, they may yet sell more,” MarketWatch notes.
“Emerging markets have been buying. In most cases, gold remains a very small percentage of their total reserves. China, despite its recent buying, holds less than 2% of its currency reserves in gold,” the report adds. “But you have to wonder how long emerging countries will want to hold their reserves in any currency that is controlled by someone else.”
It seems Putin isn’t interested in holding a controlled currency. Indeed, at this point gold accounts for nine percent of Russia’s reserves.
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