BRICS aims to launch a new currency that will be backed by gold as a counter to the US dollar. A common currency will make the alliance usher into a new financial era and become a cornerstone for further developments. The upcoming summit in 2024 will shed more light on the policies that are aimed to topple the US dollar.
We live in interesting times.
Yup, something we haven’t faced in this country’s economic history. As we have always produced products that had to be purchased in dollars.
Now, all we produce IS dollars.
Russia being the largest resource holder, joining with China as the world’s largest product manufacturer. And India jumping in as the worlds upcoming labor/consumer pool? Through in Brazil because nobody likes to get stole from by inflation.
That, and nobody needs the inflationary clown-world shit-show known as the US dollar anymore. Nor the lordly managerial, self-entitled caste that comes with it.
If your country needs a product, you’re going to have to pay yuan for it sooner or later. So why buy yuan with over-inflated dollars?
The funny part? “Gold backed” is just a way of making it sound like something real.
It’s going to be fake and manipulated as any other trade currency.
But the real point is all those dollars coming back to America and landing square on top of the price of everything we buy.
And the price of gold in dollars is going to go straight up like an economic-oven thermometer. No matter how much London tries to control it.
It’s going to hurt, bad.
The trillion-dollar question (literally) is what sort of exchange rate will it get pegged at, and how with that work out in other currencies after inflation/deflation/ market melt-downs and economic realignments? When all is said and done, will it be gold at $2500 and oz, or $250,000 and oz? A closely related question is: will the Au/Ag exchange rate be at the current ~80:1, or closer to a more historical 16:1?
Yup.
Interesting times!
Bimetallic currency is a well known mistake. But gold (or silver, but pick one) would work fine. If it’s real, that is. If so, inflation isn’t an issue because prices will be controlled by the supply of gold, which is roughly stable (it changes, but not quickly). As Ludwig von Mises pointed out, the normal behavior of prices, in real money, is a slow and fairly steady decline because of increasing productivity. (There are exceptions to that, of course; computers and electronics have seen a fast and dramatic decline because there the increase in productivity has been orders of magnitude greater than with most other parts of the economy. But the principle broadly holds, for obvious reasons.)
The key question here is whether it will be gold certificates (“payable to the bearer in gold on demand”) or whether it will merely be the sort of pretend gold-based money that we had between 1913 and Nixon (or was it FDR)? The latter involved money that pretended to be backed by gold, but only national banks could get gold, not ordinary people.
Unless the paper is only a gold certificate, a more conveniently portable shorthand for the actual money which is actual gold, you don’t have hard money, you only have a con scheme.
Given who the players are (China, Russia, Brazil — seriously?) there is no reason to believe the result will be real money; it will only be a newer scam with a thin coat of gold-colored paint on it.
^^^^
This. Unless I can buy the BRICS currency on the FOREX (after all, they are going to use this currency to settle transactions, so it has to be tradable) and then convert that into real gold, it’s meaningless.
As I have also mentioned before, trust is also a huge part of this. Sure, the dollar is screwed, but so is every other currency, just as bad if not worse. Except maybe the Swiss Franc and a few others, but those currencies cannot support the daily financial transactions, there aren’t enough Swiss Francs in the world. The dollar is seen as the best of a bad bunch right now.
The last time we saw this kind of shift was when the Dollar took over from Pound Sterling. That happened after WWI and after decades of trust in the dollar being built. It will be decades before there is trust in the BRICS.
Just for some perspective, the current valuation of NVidia is I believe, larger than the valuation of entire European stock exchanges. That’s one company with a bugger market cap then an entire portfolio of European tech companies.
If you want oil out of the ground in hard-to-reach areas, right now you have a choice of US or European expertise. They will want dollars, euros or perhaps gold bars, but not some BRICS promissory note.
Pick any value-add technology above resource extraction and the story is the same, with Japan, Tiawan and Korea in the mix as well. I wonder how they feel about expanding Chinese influence. Actually, I don’t. They will avoid anything that gives China increased influence.
What can’t do on, won’t. But as Adam Smith said, “there is a great deal of ruin in a nation.”
By itself, this announcement will do nothing at all. Maybe it will start a chain of events and we see a result in a decade. For now, the can will get kicked down the road and nothing in the short term will change.
Just like the Spanish bringing loads of gold back from the new world and crashing the gold-based currencies of Europe, all it would take to crash a gold certificate currency is mining one asteroid heavy in gold and platinum.
And Elon Musk has the rockets to lift that equipment. Does he mine it himself and self-fund the expansion of SpaceX, or does he lift US government funded mining missions to crash BRICS relative to the fiat dollar?
We’ve seen this threat before. A powerful collection of countries banding together to form a currency to compete with the US Dollar. Many thought the Euro could replace the dollar. Didn’t happen.
And the Euro launched with countries much more economically astute and financially stable than the BRICS countries.
It doesn’t mean that BRICS won’t try, perhaps spiking the price of gold for a short time. But I doubt they will do even a small percentage as well as the Euro did. Frankly, I think they will fail, and the BRICS countries will end up dumping gold bullion on the market.
I would dispute that the Euro countries were “more astute” than the BRICs countries. More experienced at looting countries and enslaving their populations via usury from private banks, yes, absolutely. More corrupt and Jewish? Yup. But “astute?” No
Something tells me we’re about to see the “David Copperfield/Doug Henning/Penn&Teller Show” on government stages regarding gold.
The idea behind metals is “this is real, cannot be faked, can be tested to prove its authenticity, and everyone agrees on what it’s worth (within a well and broadly accepted narrow range of value) so you can depend on it.” And, since hauling a bucket of Krugerrands, Eagles or Maple Leafs to the realtor’s office to buy your house, much less mailing them in each month for the payments, would be a PITA, we’ll just use these certificates that show they exist.
Which is right where we’ve been for…..how long now?
Make no mistake, whether the medium is gold, platinum or hot dog buns (I suspect it will be all three, and lots of others), there will be certificates issued. The real question is “by whom, and to what degree can they be trusted?” So far, it looks like trust – everywhere, but especially in some places – is pretty fragile.
One thing a gold anchor would do is apply a lot of correction to that, once the initial confusion, hysteria and panic subsides. Certificate authenticity and reliability will have to change if hard metals is to work, and I think we’ll find some are better that that than others and for some the necessary A & R will be unattainable.
Only 40% is backed by gold, the rest is various fiat currencies. As others have noted, the whole thing needs to be back by real stuff, including but not limited to gold. And it has to be redeemable at the retail level to keep people honest