The G7 Provides Opportunity

On June 13, the G7 Leaders’ Summit begins in Apulia, Italy, According to the White House statement, “The President and G7 leaders will discuss a range of the most pressing global issues, including the G7's unwavering support for Ukraine”.

Here’s what that statement really means.

In April, Congress passed (and Joe Biden signed) four key pieces of legislation related to national security. Three of the bills provided assistance to Ukraine, Israel, and Taiwan. They received the most attention.

The one that got the least attention was the bill that included something called the REPO Act. This act authorizes the president to steal any Russian assets, including U.S. Treasury securities, that come under U.S. jurisdiction.

The impact of the REPO Act is limited by the fact that only about $10 billion of Russian sovereign assets are actually under U.S. jurisdiction. Yet, the act contemplates this theft will be a down payment on a much larger theft to be conducted by NATO allies in Europe.

The Greatest Theft in History

The U.S. goal is to use the G7 summit as a platform for getting the other G7 members to go along with this theft of Russian assets under their jurisdiction. If Europe joins the U.S. in stealing Russian assets, Russia will retaliate by seizing billions of dollars of direct foreign investment in Russia owned by major European companies such as Siemens, Total, BP, and others.

The value of the European assets subject to seizure by Russia is greater than the value of the U.S. Treasuries owned by Russia. In fact, just days after Biden signed legislation to authorize the theft of Russian assets, a Russian court ordered $440 million to be seized from JPMorgan.

The consequences of this theft in the international monetary system would be momentous and highly adverse for the United States. There are many variations on this plan of theft that are being considered.

One plan would steal the interest only (about $6 billion) and leave the principal frozen but not confiscated. Another plan would organize a loan to Ukraine collateralized by the Russian assets. When Ukraine defaults on the loan, which they will certainly do, the lenders could seize the collateral. Another hare-brained scheme would impose a 100% tax on the assets and then collect the tax by seizing the assets. All of these variations amount to the same theft. They are wolves in sheep’s clothing.

One immediate impact would be the decline of trust in the U.S. Treasury market and an aversion to holding U.S. Treasury securities in sovereign reserves. Major holders of U.S. Treasuries such as China, Japan, Taiwan, Saudi Arabia, Brazil and others would gradually reallocate reserves away from Treasuries toward assets that cannot be frozen or seized such as gold bullion.

A Golden Opportunity

This theft of Russian assets will also give a boost to efforts by the BRICS+ members to create an alternative gold-linked trade currency (and ultimately reserve currency) for use in international transactions. This effort will take several more years to complete, but U.S. abandonment of the rule of law will accelerate that effort.

In an ironic twist, the mere talk about stealing Russian assets has caused the price of gold to increase by $600 per ounce in a matter of months. Russia has approximately 3,000 metric tonnes of gold in its reserves, which cannot be touched by Western sanctions or the REPO Act. The rally in gold prices has increased Russia’s reserve position by $50 billion without Russia lifting a finger. This is further evidence (as if any were needed) of Russian brilliance and U.S. stupidity in playing the global financial game.

If the U.S. and its NATO allies work together to steal 100% of the Russian assets located in the West, it will be the greatest theft in the history of the world. The G7 summit could be a disaster for the global monetary system. But it could provide opportunities as well.

For more details on how gold (and gold miners) will be impacted as June 13 nears, stay tuned. This story is just beginning.