Two Years Later: The Ruble was Never "Gold-Backed" and Hasn't Replaced the Dollar

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The ruble: still nowhere to be found

The Cautious Optimism Economics Correspondent doesn't frequently post "I told you so," but he does recall many stories from early 2022 predicting the new "gold-backed" Russian ruble was on the precipice of replacing the U.S. dollar as the world's leading reserve currency. 

The Economics Correspondent is a longtime student of history's variations of national and international gold, silver, and bimetallic standards and saw right from the beginning that the ruble was not "gold-backed." The Kremlin’s announcement that the Russian central bank would buy gold at a fixed ruble-price per ounce from March to June of 2022 immediately sent end-of-the-dollar journalists declaring Russia was “going on the gold standard” and “the ruble will quickly dethrone the dollar.”

At least two glaring problems with this narrative that doomsayers should have first understood were:

1) A policy to buy gold at a fixed price alone does not constitute a gold standard—period. It only indicates that a central bank is accumulating gold reserves.

For a currency to truly claim gold-backing the central bank must pledge not only to buy, but more importantly sell gold at a fixed ruble-price and pledge to always sell it on demand—no waiting or delays, something the CBR (unsurprisingly) never did.

2) No gold standard with an expiration date of June 30, 2022, or in three months, or in six months, etc... is credible either.

Even if the Russian central bank actually began selling its gold reserves at a fixed ruble-price, which it never did, a termination date of June 30, 2022 would serve as announcement that Russia was terminating its gold standard in three months and confidence in the stable purchasing power of the ruble would have been undermined before it ever started, very possibly leading to a run on Russia's gold reserves.

The Correspondent has plenty of complaints about the fiat U.S. dollar and especially the multiple failings of the Federal Reserve System, but the dollar is still the least dirty shirt in the laundry basket—especially when compared to any currency that alleges to offer a suitable global reserve alternative.

To learn more about the poorly understood subject of global reserve currency alternatives see the Correspondent’s two 2019 articles at:

http://www.cautiouseconomics.com/2019/05/inflation-currencies03.html

http://www.cautiouseconomics.com/2019/05/inflation-currencies04.html