Welcome to the Deep Dive! Today, we're plunging
into something, well, pretty monumental, really.
It's the accelerated push by BRICS nations to
rely less on the U .S. dollar for trade and finance.
We've got some fresh source material right from
today, August 8th, 2025, that details these these
big shifts. So our mission here is to really
unpack what de -dollarization means now in 2025,
why it's picking up so much steam and what the
surprising fallout might be for the whole global
money system. Yeah. And what's fascinating here
is just the range of things happening all at
once. You've got Russia planning this new independent
gold exchange, which is, well, a very direct
move. Then there's record Chinese gold demand,
and even this quieter trend of central banks
buying gold straight from their own miners. It's
a lot happening, all pointing in a similar direction.
OK, let's unpack this term then, de -dollarization.
Most of you listening probably know it, but just
quickly. It's basically the process where countries
actively, systematically try to use the US dollar
less. Less in trade, less in finance, even less
in their national savings, their reserves, moving
away from it as the main global currency. Exactly.
And it's not just talk, right? It involves some
complex methods. We're seeing more bilateral
currency deals, countries trading directly in
their own money. plus the development of totally
new payment systems to sort of bypass the usual
routes and definitely more use of things like
gold for settling international accounts. Historically,
this isn't totally new. If you look back, the
British pound used to be dominant. Its decline
after World War II shows that, well, these things
can change. Reserve status isn't forever. It
evolves. Right. And for you wondering, you know,
how does a currency get to be the reserve currency
anyway? Economic theory. points to a few key
things. It's about economic size, political stability,
how deep and liquid the financial markets are,
and really importantly, international trust in
institutions. So shifting to BRICS specifically,
that 17th summit in Rio, that was quite a significant
milestone for their financial independence goals.
It really built on talks from the Kazan summit
back in October 2024. That's where they started
mapping out things like the BRICS pay system
to help members trade. using their own currencies.
Okay, here's where it gets really interesting
for me, maybe a bit unexpected. The members in
Rio, they talked explicitly about moving away
from dominant reserve currencies, that's the
phrase they used, and pushing instead for deals
based on their own national currencies, their
stated goal. Less dependence on traditional Western
financial infrastructure. It sounds like a united
front, but is it really? How unified are they
on the how? That's a great question. And it reveals
something quite nuanced. The goal might be shared,
but the approach is pretty individualized. Take
Brazil, for example. During their 2025 presidency,
they've really focused on promoting local currency
trade deals, not so much pushing for one single
bricks currency that reflects practical issues
and respect for each member's monetary control.
India, too, has been clear publicly. They say
it's not about weakening the dollar per se. It's
more about gaining financial autonomy, reducing
exposure to, say, U .S. Federal Reserve decisions.
So this individual -nation approach gives them
flexibility. Each country moves at its own speed,
trying to avoid big economic shocks. It's more
about resilience, maybe, than direct confrontation.
OK. So building on the different approaches from
Brazil, India, let's look at Russia. Their strategy
seems particularly, well, bold. especially on
gold. They've got these concrete plans launching
gold trading on the St. Petersburg exchange by
year end 2025. That's a direct shot at the London
centered system, the LBMA, right? The London
Bullion Market Association, which pretty much
sets the global gold price benchmarks. Russia
wants to disrupt that. And it matters because
Russia is what? The world's second biggest gold
producer. After China. Yeah, exactly. This raises
an important question. What's the main goal there
beyond just challenging London? They've said
they want to create a competitive market price
for gold separate from those traditional benchmarks.
And this comes after years of, let's say, criticism,
even legal action against traders over suspected
manipulation in metals markets. So there's a
context. What this new exchange allows is for
Russian gold buying to directly influence the
global spot price, something they couldn't really
do effectively back in the Soviet era. It's about
getting a seat back at the price. by setting
table for a key asset. And it's not just the
market, is it? Russia's also focused on the physical
side, holding the actual gold. That's interesting.
Unlike lots of countries storing gold in London
or New York, Russia keeps its reserves at home
in domestic vaults. They see it as, well, giving
them more direct control, making them less vulnerable
to sanctions or having assets frozen. Russian
officials literally call it an important step
towards de -dollarization and financial independence
from currencies from unfriendly countries. It's
like building economic defenses. Precisely. And
it's a strategy, frankly, more governments might
be thinking about given how finance has been
used as a tool or weapon recently. Now looking
broader globally, World Gold Council data shows
something pretty striking. 53 % of central banks
that have local gold production are now buying
directly from small scale miners. That's up massively
from just 25 % last year. You see countries like
Colombia, Tanzania, Zambia, Mongolia, Ecuador,
the Philippines all doing this. And the reasons
they give. Lower costs, boosting domestic refining.
getting discounts on direct buys, and interestingly,
fewer international reporting rules. A bit more
discretion. Perhaps. And it's not just buying.
It's where they're keeping it to. Right. The
storage is shifting. In 2025, 59 percent of central
banks said they store gold domestically. That's
up from 41 percent in 2024. Although, interestingly,
the Bank of England is still the top spot for
those who do store abroad. Sixty four percent
of them use London. But that domestic trend is
clear. Now, China. We have to talk about China's
role. It's pivotal and frankly kind of jaw dropping.
The first half of 2025 saw just unprecedented
activity in their gold market. ETF demand. exchange
traded funds shot up about 400 % compared to
the average over the last decade. Wow, 400%.
That's huge. And this massive buying spree is
seen as the main reason gold prices have climbed
so much over the past 18 months. It's really
shifting the market center of gravity. Yeah,
what's really fascinating here is how this marks
a fundamental shift in global demand. You know,
historically, big gold rallies, bull markets
were often driven by Western buyers, Western
sentiment. But now... The current dynamics clearly
show emerging economies, especially China, taking
the lead in setting the price. This arguably
improves global price discovery, makes the market
deeper, and ultimately means Western influence
on gold prices just isn't what it used to be.
So the flip side then, how is the U .S. reacting
to all this activity? Well, the Trump administration
has responded pretty strongly, actually, with
trade measures aimed at BRICS. They've announced
10 percent tariffs on all BRICS members, and
there are reports suggesting threats of much
higher tariffs, like 100, even 150 percent, if
these de -dollarization moves keep going. The
administration frames these BRICS actions as
deliberately targeting U .S. economic interests.
They've described the group as set up to hurt
us and designed to, quote, degenerate our dollar
and take it off as the standard. Right. And we
connect this to the bigger economic picture.
Well, standard analysis suggests tariff costs
usually get passed on, passed on to domestic
consumers, businesses, meaning Americans likely
pay more. So this kind of approach raises worries
about, you know, potentially slowing down global
growth, creating more uncertainty for businesses.
And you have to wonder about the strategy. While
it's presented as defensive, Historical research
does suggest trade restrictions can sometimes
escalate things, potentially leading to broader
conflicts. Less economic cooperation often means
more geopolitical friction. Okay, let's try and
pull all these different threads together. What
does this all mean for the global financial system?
It really looks like these developments signal
a potential move towards maybe a multipolar monetary
system, challenging that dollar -centric setup
we've had since the 1970s after Bretton Woods
fell apart, the system that really cemented the
dollar's top spot. Indeed. And the rise of these
alternative trading systems, alternative pricing
centers like the Russian gold exchange, it could
genuinely reduce the control Western institutions
have had over the plumbing of global finance.
What's interesting is that more competition between
financial centers usually leads to better price
discovery, maybe less room for manipulation.
That's a potential upside. It kind of mirrors
history, where financial innovation often comes
from competitive pressure. Expert views differ,
of course. Some economists see it as a natural,
maybe even healthy, evolution towards a more
balanced global system, potentially more stable
in the long run by spreading risk away from just
one currency's policies. Others worry about instability
during the transition. It's bumpy. And you absolutely
have to see it in the geopolitical context, too.
These financial shifts often mirror bigger power
shifts, and there are strategic responses to
things like sanctions. Central banks diversifying.
That's just pragmatic risk management in this
environment. Hedging their bets, reducing reliance
on anyone's system. And we should remember these
new systems face hurdles in the short term. Big
technical challenges, regulatory issues. Whether
markets actually adopt them really depends on
if they prove reliable, convenient for businesses
doing global trade. Exactly. Looking further
out. long -term, the potential emergence of a
truly multipolar monetary system. That could
fundamentally change how global trade gets settled.
A transition period might be volatile, involve
coordination problems as markets adjust, but
multiple reserve currencies could, theoretically,
offer more stability by diversifying systemic
risk. Ultimately though, the dollar's ongoing
role probably depends on things like relative
economic strength, policy stability here in the
U .S., and whether these alternatives become
truly credible and widely used. Wow, okay, what
a deep dive that was. We've covered a huge shift
unfolding in global finance, driven by BRICS
nations with gold playing this increasingly central
role. And these are just, you know, abstract
theories. These are concrete actions with real
global consequences. So here's a final thought
for you to chew on. If reserve currency status
depends not just on economic power, but fundamentally
on trust, how might today's shifting geopolitics,
this drive for financial independence affect
the very foundation of trust needed for any new
global financial systems to really take root
and offer stable alternatives for the long haul.