Putin, Xi Jinping, and Modi Meet at BRICs – Ep. 2

(Feat. Crypto currency, Digital Gold Bitcoin, Petro-dollar, Brazil, Russia, India, Venezuela and China Yuan Fintech; SWIFT vs. CHIPS)

Continuing from Episode 1

Read Episode 1 (No. 1 – 77)
BRICS vs. Petro-Dollar Currency

77. The U.S. cutting off Iran from SWIFT backfired in a big way.

78. It made China and Russia worry they could be blocked from SWIFT too if they had any issues with the U.S.

79. So in 2014, Russia created its own ruble payment system, and in 2015, China launched its own, called CIPS, for yuan payments.

China Digital Currency Payment System - CIPS

80. The yuan payment system has since spread to 1,280 banks in 139 countries, and now Brazil is also on board to use CIPS for payments.

81. In 2018, China started trading oil futures in yuan on the Shanghai Futures Exchange.

82. This allowed China to pay for its oil imports in yuan instead of U.S. dollars by using the futures market.

83. One major reason behind the U.S.-China trade war during the Donald Trump administration was this yuan-based oil trading system that started in 2018.

USA Dollar - China Chips : SWIFT CIPS

84. The U.S. saw this as a direct challenge to the petrodollar system, which is a critical part of its economic power.

85. Why? Because it disrupts the cycle that supports U.S. Treasury bonds.

86. The U.S. has taken serious action against countries like Iraq and Venezuela for trying to rebel against paying for oil in dollars. Iran is still under economic sanctions for the same reason.

87. Back in 2000, Iraq’s Saddam Hussein announced he would stop selling oil in dollars. This eventually led to the Iraq War, and Saddam was hanged.

Iraq War - USA

88. Venezuela’s Hugo Chávez also fought against using dollars for oil payments.

89. While Chávez personally avoided trouble since he died of cancer, Venezuela’s economy is still in ruins.

Venezuela in Numbers

90. Right now, only three countries pay for oil in yuan.

91. Russia, Iran, and Venezuela are the ones using yuan for oil payments, and Saudi Arabia is starting to make the switch too.

92. Using yuan for trade and finance is less aggressive than using it for oil payments, and that’s where CIPS comes in as an alternative to SWIFT.

93. Brazil isn’t using yuan for oil payments yet, but it’s started using yuan for trade and is also using CIPS instead of SWIFT for payments.

94. Currently, 89% of global commodities are still traded in dollars, and the yuan accounts for only about 7%.

95. Since so much is priced in dollars, when the dollar gets stronger, currencies in emerging markets fall, making imports more expensive. This leads to trade deficits and higher prices at home.

96. When you’re buying something, it’s smart to compare prices from more than one place and buy from where you get the best deal. That’s just common sense.

97. Emerging markets want to do the same by adding yuan and CIPS alongside dollar and SWIFT transactions.

98. Brazil took the first step, and it was possible because of its change in leadership.

Brazil Lula Luiz Inácio Lula da Silva - China Xi Jinping- BRICS
Brazil Lula Luiz Inácio Lula da Silva – China Xi Jinping- BRICs

99. The new president, Lula, has strong leftist beliefs. He’s all about nationalizing major companies, rejecting foreign debt payments, and pushing for major land reforms.

100. After losing two elections, he realized he needed centrist voters, so in 2002, he shifted to a more center-right position.

101. Lula served two terms as president, stepping down in 2010.

102. After he left office, Lula got caught up in the ‘Odebrecht Scandal,’ which involved widespread corruption across South America.

Odebrecht Scandal - Linking Map

103. He was found guilty of accepting a luxury apartment as a bribe and using corporate money to bribe lawmakers. He was sentenced to 12 years in prison.

104. But in March 2021, Brazil’s Supreme Court overturned the sentence, saying there was improper communication between the judge and prosecutors.

105. This didn’t mean Lula was innocent of corruption—just that there were procedural mistakes.

106. Most Brazilians don’t think Lula is completely innocent.

107. But many still support him, thinking, “Even if Lula did some shady stuff, things were better when he was president.”

108. Brazil doesn’t allow three consecutive terms, but after a 12-year break, Lula was able to run again.

109. What really appealed to voters was his promise: “I’ll work hard for just four years and won’t run again.”

Luiz Inácio Lula da Silva holds a Brazilian flag while leaving a polling station in São Paolo during Sunday's presidential runoff election, 2022
Luiz Inácio Lula da Silva holds a Brazilian flag while leaving a polling station in São Paolo during Sunday’s presidential runoff election, 2022

110. Since Lula promised not to run for re-election, he’s now pushing his leftist agenda harder during this term.

111. This is how Brazil ended up making payments in yuan.

112. But there’s a major issue with paying in yuan.

113. Even if you’re wary of the U.S. dollar, can you really trust the yuan?

114. The yuan’s exchange rate isn’t decided by the market—it’s set by the Chinese Communist Party.

115. China says “it determines the yuan rate by averaging the exchange rates of 24 different countries.”

116. The latest weights for the yuan currency basket are 19.46% for the U.S. dollar (down from 19.83%) and 18.08% for the euro (down from 18.21%)

117. China announces this rate daily at 9:15 a.m. Beijing time.

118. This explains why Asian stock markets tend to fluctuate around that time.

119. As the saying goes, “the devil is in the details.”

120. While the yuan rate looks logical with all these averages, there’s a hidden factor, known as “Counter-Cyclical Factor.”

121. This “Counter-cyclical factor” is an adjustment that reflects the real power in the calculation.

122. In the end, it means the Chinese Communist Party has the final say on the yuan’s exchange rate, no matter what the formula says.

123. This is why it’s hard to trust the yuan as a replacement for the dollar, since its value can be manipulated anytime by the Chinese government.

China - Xi Jinping is pressing red button

124. Still, China, Russia, and Brazil are pushing to make the yuan the BRICS international currency.

125. Once this first step is agreed upon, the next phase is to move toward a common digital currency.

126. This would mean BRICS countries adopting China’s digital yuan.

127. Unlike traditional currency, which flows through bank accounts, digital currency can be used for transactions without needing a bank account.

128. This makes payments and transfers easier.

129. The digital yuan even has a “bump” payment feature that allows phones to make transactions without internet access.

130. This could help the digital yuan spread quickly in BRICS countries that don’t have strong internet infrastructure, giving the yuan more influence if Phase 2 succeeds.

131. If Phase 2 works, there’s still a final, third phase.

132. The mystery behind China’s growing gold reserves will become clear.

Why Does China
Keep Buying Golds?

133. Since 2008, China has steadily increased its gold holdings. It’s the largest gold producer in the world, producing 368 tons annually, with Russia close behind at 331 tons.

134. Although China is the biggest gold producer, it doesn’t export its gold—it just keeps importing more, which has raised a lot of questions.

135. The answer lies in BRICS’ plan for a final, shared currency in Phase 3.

136. The new BRICS currency will be a cryptocurrency backed by gold and rare earth elements, meant to replace the dollar.

137. The idea is to issue a cryptocurrency with value tied directly to the gold and rare earths owned by BRICS nations.

138. This means the value of the cryptocurrency will be protected by gold and rare earths.

139. The problem with the dollar is that the U.S. can print more whenever it wants, causing inflation and devaluing the currency.

140. In contrast, BRICS’ cryptocurrency would be backed by gold and rare earths, protecting it from inflation.

141. If people don’t trust the yuan because it’s controlled by the Chinese government, they might trust a currency backed by real assets like gold and rare earths.

142. China is the largest holder of gold reserves and the biggest gold importer in the world.

143. China is also the top producer of rare earth elements.

144. BRICS countries control 70.6% of the world’s rare earth deposits, with China holding 36.7%, Brazil 18.3%, Russia 15.0%, and India 5.8%.

Brics Rear Earth Deposit - Map

145. Of the 180,000 tons of rare earths supplied globally, China provides 160,000 tons, or 90% of the world’s supply.

146. China thinks its cryptocurrency, backed by gold and rare earths, can challenge the dollar, which is backed by U.S. credit.

147. But now India is pushing back against the plan.

BRICS - Crypto Currency based on gold and rare earth

Alphazen Insights

Alphazen Dynamics - Main logo Round

BRICS is stepping up its game. By building a yuan-based payment system (CIPS) and eyeing a gold-backed cryptocurrency, they’re creating an economic alliance designed to bypass the SWIFT system and reduce dependence on the U.S. dollar. China’s relentless gold buying and digital yuan ambitions signal that they’re serious about disrupting the petrodollar. But can the world trust a yuan whose value is tightly controlled by Beijing?

And let’s not forget—India is already throwing a wrench in the plans. It’s not all smooth sailing, but if BRICS pulls this off, we could witness a major shift in global finance.

Stay tuned for Episode 3, where we’ll see if this bold strategy has what it takes to truly challenge the dollar-dominated system, or if BRICS is biting off more than it can chew.


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