Could Crypto Spark the Next Aussie Mining Boom?

Hi my name is…Vlad. I’m an unruly, powerful world ruler. I’m in charge of a government and military that isn’t exactly what you might call, ‘trustworthy’.

In fact, my country and my establishment has annoyed a few other ‘Western’ governments. In particular we’ve really annoyed the US.

We might have been developing a clandestine nuclear program. Or maybe not. We might have been facilitating payments to ‘terrorist’ organisations. Or we might not have. We might be involved in dark web arms dealings. Or…you guessed it, maybe we haven’t.

Whatever. These might be things my country and some other neighbouring countries are fine with. But if it displeases the US, well, that’s just not acceptable is it?

Thanks to our allegedly unruly behaviour the US has decided to place economic sanctions on us. That’s not ideal for our country as it does mean our economy will take a hit. Whether we like it or not, we’re still quite reliant on US trade and the ‘almighty US dollar’.

It’s not a situation we’re comfortable with. We’d love to be a nation that doesn’t have to bend to the might of the US. But it’s just not possible. Over the last 100 years the US have become a global powerhouse and their most powerful weapon is the US dollar.

That leaves our rambunctious nation state in a pickle. Well you’d think as much.

You see the US dollar might be all-powerful today. But luckily we’ve got a few new tricks to use that might just help us wrestle that power away from the US.

One of those tricks it to create our own digital currency. Or perhaps even better we could get together with a few other countries the US doesn’t like and create a shared digital currency.

That way if the US decided to impose sanctions on any of us…they couldn’t. We’d be able to just continue business as usual with our own special digital currency. It would be a big f-you to the US and their American arrogance, and it would show the rest of the world there’s a way to circumvent the US might.

This may appear to be a hypothetical I just made up. And to a degree it is. But it’s also rooted in the fact there are countries looking to digital currency to circumvent US sanctions.

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And if there are countries out there that can do this, you bet your bottom digital dollar, they will!

BRICS and Gold

According to Russian news site RBC (and Google translated):

The creation of cryptocurrency for the BRICS countries was discussed by the business council of the alliance during the forum in Brazil, said member of the council, head of the RDIF Kirill Dmitriev.

This comes off the back of a report by The Economic Times that said:

India, Russia and China are exploring an alternative to the US-dominated SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment mechanism in a bid to smoothen trade with countries facing American sanctions, people aware of the development said.

That actually makes perfect sense. The technology is available. There’s nothing the US can do to stop them. And if they all agree to it, then we could be looking at a completely US-free financial system between these ‘developing’ countries.

Imagine the ‘hurt face’ on US authorities when this develops into a reality. Yet back in the US an attempt to cut this kind of thing off at the pass (re: Libra) is hauled in front of Congress.

Facebook can see what the future looks like. And to try and keep the US dollar relevant, they’re trying to launch the Libra digital currency. The US in their archaic ways believe nothing can threaten the good ol’ USD.

They’re wrong.

But even if this does eventuate, what’s it got to do with gold?

And that’s where things get interesting. The word is, that by creating a digital non-US currency, these countries would want it backed by something. Backing it by fiat currency is somewhat pointless. That only creates a digital replication of the current problems they face.

Instead the suggestion is they could have gold as the underlying asset behind their digital currencies. Now think about the impact that would have. It would be like more than half the world’s population reverting to a gold-standard currency.

Except in this case it would be a gold-backed BRICS digital currency. And if that were to be the case, you can also be pretty sure that’s going to create a big demand for gold from these countries.

It would also not be surprising when you consider the largest purchaser of gold in recent years has been Russia.

We know the US is the largest holder of gold though. And this could put some strong upside pressure underneath the gold price as these BRICS look to sure up their holdings. That in turn could see a raft of Aussie gold miners listed on the ASX get the proverbial rocket up the backside too.

Now I reckon when I first started talking about digital currency and mining, you might have thought I’d bang on about cryptocurrency mining? Not the case.

In this outcome, which is a real possibility in the next couple years, it’s traditional mining, gold mining that stands to benefit most. It would also have flow-on effect to the wider cryptocurrency markets. But that’s not the point here.

The point is to keep a close ear to the ground for further rumblings about a BRICS digital currency. That might be your cue to dive deep back into Aussie gold miners and ride the digital currency Aussie gold boom.

Regards,

Sam Volkering,
Editor, Money Morning

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Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Port Phillip Publishing readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid. Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.


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