That’s the claim again today, but with no official announcement. Let’s assume it’s true. What happens then?
I was asked to comment on this Tweet and said OK.
BRICS Claim
The Brics will go on a gold standard. By every definition of the word this person can think of. For key commodity regional international trade. The gold standard will likely be 40% backed at minimum physically. It will also possibly be backed up to 60% based on the future weightings of gold in each members nation’s submitted currency to the BRICS unit basket.
This has implications and has set in motion everything going on today: from sanctions, to tariffs , to supply chains of non-gold goods, to chains creation of value chains, to Fed policy changes and so on.
Related Article
I missed it at first, but here is the article: Founders: The BRICS Will Use a Gold Standard. It’s paywalled.
Redeemability
Let’s start here: “The Brics will go on a gold standard. By every definition of the word this person can think of.“
Really? What about redeemability? How can something backed by 40 percent gold or “perhaps 60 percent” be redeemable for gold?
It can’t. It is impossible to “back” something with 60 percent of something else.
Also, there is no explanation of whether the currency floats, how the currency comes into existence or any other details about how anything works. There is never anything but speculative hype.
July 7, 2023 Flashback: Supposedly, It’s Official!
Gold Standard Could be Back
Note the date, July 7, 2023. The summit offered nothing about a gold-backed currency. Heck, it offered nothing about a BRICS currency at all.
This has been going on since 2009.
BRICS Nations
On 1 January 2024, BRICS – the intergovernmental organization comprising Brazil, Russia, India, China and South Africa – admitted four new members: Egypt, Ethiopia, Iran and the United Arab Emirates.
The more nations the BRICS add, the more unwieldy the group will become. The EU and UN are prime examples.
27 nations in the EU each with veto power makes nearly impossible to get anything done.
It took the EU over two decades to work out a trade agreement with Canada because two small nations had veto power and used it.
Magic Wand
Despite the obvious BS nature of the “backed by gold” Tweet, I am going to wave my magic wand, answer key questions, and make some assumptions.
The name of the currency will be the BRICK.
Magic Wand Assumptions
- The BRICK floats
- It will be “backed” (whatever that means) by 60 percent gold. Let’s assume with 100 percent confidence the gold is there. However, you don’t have access to it.
- There will be no friction between Brazil, Russia, India, China , South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates over BRICKs administration (whatever administration means) of the currency.
- The three largest players, China, India, and Russia will set the rules and everyone will be happy with those rules.
Investor Questions
If you are an investor, would you buy BRICKs or would you rather buy gold, silver, or Bitcoin?
Let’s assume you really want to buy BRICKs. What would you do with them? Where is your balance kept? How is your balance kept? Has there been any discussion of any of this?
So, let’s make another assumption. All BRICKs transactions are on blockchain. Hooray?!
Is Blockchain untraceable? Let’s assume so for BRICK transactions.
The question still remains: If you are an investor, would you buy BRICKs or would you rather buy gold, silver, or Bitcoin?
Trade Between Nations?!
But Mish, this is not for investors, BRICKs are for trade between nations!
OK let’s march down that path with more questions. This time let’s assume you are a Brazilian farmer (BF) who sells soybeans to a Chinese merchant (CM).
CM offers BF BRICKs for soybeans.
Why would BF want BRICKs? Can BF buy fertilizer with BRICKs? Farm equipment from John Deere? Pay rent?
What possible use does BF have for BRICKs? And why would CM have BRICKs to offer in the first place?
Logical Answers
BF has no need for BRICKs. He needs the Brazilian Real or US dollars to pay his bills or buy things he needs.
Similarly, CM has no reason to hold BRICKs because his expenses are in Yuan, the official currency in China.
Think of BF as any person. Think of CM as any other person. Why would anyone, anywhere, want to trade in BRICKs?
Trade is Not Between Nations
The whole idea of a “trading currency” between nations is absurd because trade is between individuals, not nations.
Trade deficits or surpluses are the result of millions of transactions by individuals.
People who think trade is between nations ask silly questions and make silly proclamations.
Here’s a Real Lula
Flashback May 30, 2023: Reuters reports Brazil’s Lula Says he Favors Stopping Use of Dollars in Trade.
Brazilian President Luiz Inacio Lula da Silva said on Tuesday he defends the idea that countries cannot keep trading in dollars, restating his proposal for creating a common currency for the BRICS group of leading emerging economies.
“Why can’t the BRICS create a single currency? Why are we obliged to buy dollars to make trade,” he asked reporters during a press conference following a meeting with South American leaders.
A Word on Obligations
No one is “obliged” to do anything.
CM can demand yuan or BRICKs if he wants. But how easy is it for BF to get BRICKs? Does CM even want BRICKs? Why?
The US dollar is the most liquid currency in the world. All of the CMs in China, and counterparts in Japan and Europe accept us dollars because dollars are easily converted into something else or are used straight up as is.
If Brazil mandated the use of BRICKs it would be giving up control of its currency, the Real. There is no obligation. Dollars are practical.
Even if BRICKs were to be 60 percent gold-backed (whatever that means), who would use it?
I repeat: Think of BF as any person. Think of CM as any other person. Why would anyone, anywhere, want to trade in BRICKs? (Answer below but first let’s trash other bit of silliness).
Percent of the World
I constantly see hype that the BRICS nations are some huge percent of the world.
So what? India and China are nearly all of it. How does adding Egypt, Ethiopia, Iran and the United Arab Emirates do anything?
Heck, assume every nation in Africa will become a BRICS member nation. How does that do anything?
Does the Ethiopian BF or CM counterpart have any reason to trade in BRICKs?
The answer is no because Ethiopians need their local currency (the Birr) or US dollars or Euros to do anything.
The Ethiopian BF needs the Birr to pay taxes and buy goods and services locally. If there is a black market in Ethiopia, it’s in US dollars not BRICKs.
To force a trade in BRICKs, some nation will have to demand taxes be paid in BRICKs. Who will step up to the plate on that? Brazil? Russia? India? China?
For further discussion, please see BRICS+ Is Forecast to Dominate the World’s GDP, But What Does That Mean?
Sanctions
The only practical use for a BRICKs currency is sanction avoidance.
Individuals who are heavily sanctioned cannot easily conduct US dollar transactions or transactions in Euros that also go through US clearing processes.
Sanctioned individuals would welcome any currency that would be untraceable to US authorities.
Wish granted.
But in my Brazil example, that still requires BF get BRICKs to pay the sanctioned CM and the sanctioned CM then needs to convert those BRICKs to something locally usable.
Wish granted. I now assume BRICKs are as nearly as liquid as US dollars.
Wishes Granted Synopsis Revised List
- The BRICK floats
- It will be “backed” (whatever that means) by 60 percent gold but it won’t be redeemable because something cannot be backed by 60 percent of something else. By the way, even if BRICKs were 100% gold-backed, it would not be redeemable, for the obvious reason, an immediate run on the currency.
- Everyone will accept on faith, or by audits, the gold exists.
- There will be no friction between the BRICS nations on how BRICKs are administered.
- BRICKs will be very liquid.
- There will be no fear of holding BRICKs.
- China accepts BRICKs and will freely trade yuan to local merchants who receive BRICKs in trade with BRICS nations.
Assuming all the kinks are ironed out and all the above assumptions are met, sanction avoidance still remains the only practical use for BRICKs.
That’s because trade is between individuals not nations and individuals never have any expenses or taxes in BRICKs because the BRICK will not be the official currency of any nation.
Anything Else?
Yes, nations accumulate US dollars because the US constantly runs trade deficits with nearly every nation.
This is what makes the US dollar a reserve currency. China supports export mercantilism and accumulates US dollars as a result, The latest report that China is dumping US dollars is highly likely false for mathematical reasons alone.
Regardless, China runs a trade surplus with most of the world except for oil nations. If China freely accepted BRICKs (one of my added assumptions) what the heck would the Bank of China do with them?
Here’s the scenario: The local CM accepts BRICKs but has expenses in yuan and dollars and taxes in yuan.
So the CM exchanges the BRICKs to the Chinese central bank for Yuan. And what does the Bank of China do with them? Answer please!
The same question applies to Brazil. If the BF accepted BRICKs and traded them to the Brazilian central bank for Real, what the hell does the Brazilian central bank do with the BRICKs?
Note that China can buy planes and other items for its SOEs with dollars. So can the Brazilian government.
China and Brazil also collect interest on US Treasuries. Where’s the global bond market on BRICKs? Answer Please!
The Bricks Challenge
Here is a similar discussion: How Real is the BRICS Challenge to Reshuffle the World?
“It only makes sense to trade in national currencies (not freely convertible) if the trade balance between the countries is more or less equal. Russia, for example, recently sold lots of oil to India, dealing in rupees. But because India exports much less to Russia than it imports, Moscow now sits with rupees it cannot spend or convert — except to buy goods from India. China’s renminbi isn’t sufficiently convertible and lacks the deep capital markets, market transparency, independent central banks and supporting financial institutions of Western banks,” argues Jakkie Cilliers, head of African Futures and Innovation at the Institute for Security Studies in Pretoria.
BRICS has offered nothing fundamentally different in terms of alternatives. “At formulation, the BRICS idea had a lot of economic and political potential because we saw it as a challenge to the unipolar world that was been dominated by the United States of America. However, due to several reasons, including the coming into power of right-wing President in Brazil, we didn’t see a lot of progress in the organization in the past few years. We also doubt whether BRICS can challenge the US hegemony now that it has admitted countries like Saudi Arabia, United Arab Emirates and others,” says Wachira. In a similar vein, MacEbong believes that usually coalitions like BRICS are bound by either geography or some shared ideology but nothing of the sort is in operation here. “The current — expanded — BRICS will have countries with a history of tensions, like India/China and Saudi Arabia/Iran. Getting everyone on the same page will be difficult,” he added.
What Would it Take for a BRIC-Based Currency to Succeed?
Note that I waved away the cooperation issue and freely floated the BRICK. Neither changed anything.
I have discussed much of this before (See What Would it Take for a BRIC-Based Currency to Succeed?)
I like my explanation using BF and CM as examples much better today. And I made every reasonable assumption this time trying to make it all fit.
I do like my conclusion from before.
What Constitutes Success?
If we change the definition of success from a meaningful percentage of global transactions to a meaningful way of avoiding US sanctions, the Brick has a potential to be a big success.
Iran and Russia, not Brazil or China may easily be the biggest BRICS success stories.
Notably, both Trump and Biden are overly reliant on tariffs and sanctions. But the US will not be able to enforce sanctions and track transactions that it cannot see.
This would not result in a new world order as hyped, but it could put an end to US setting sanction policy for the entire world. Retaliation is coming as sanction avoidance, not as the end of US dollar dominance in trade.
Lead Question Revisited
So, to answer the lead question, “Will the BRICS Currency Use a Gold Standard?”
The answer is no, but the question is moot.
It would not matter even if that happened because the only practical use for BRICKs is sanction avoidance. Gold, since it will not be redeemable, adds nothing to that.
Let’s make one more major assumption. BRICS are to be 100 percent convertible to gold. There would be an immediate run on any country that tries that.
Yet, the hype with no details continues. There won’t be any believable details either, for all the reasons stated.
“Yes, nations accumulate US dollars because the US constantly runs trade deficits with nearly every nation.
This is what makes the US dollar a reserve currency.”
The US would run even higher trade deficits if The Fed tomorrow made just the tiniest little change to policy; and officially started handing every American qualifying for the status of Genuinely Useless Idiot, one dollar for every dollar paid to anyone in China. Simply in order to, even further, though again only slightly, rub it in that no matter how much purchasing power Chinese people earn by working; reliably regime-sycophantic Americans will be handed a thousandfold that, simply in exchange for pliantly maintaining their Useless Idiot status.
While that would be all kinds of cute; and no doubt would make accumulating free-to-print paper from the US even simpler than today; it also further (if only slightly by now) demonstrates the problem: The US produces nothing at all, _except_ paper. Hence, noone will EVER get anything of value in return from the US in exchange for all the hard work and resources they had to put in, in order to obtain those dollars.
100 million Chinese people had to work 60hr weeks for their entire life, in order to obtain a combined dollar amount less than what any entirely idle, complete moron welfare recipient in New York has been handed in exchange for nothing at all, aside from being verifiably stupid enough to be useful for a regime by and for only the rankest and most useless of pure idiots anywhere.
It is myopic in the extreme to assume the Chinese are going to continue busting their rears solely to continue facilitating that sort of extreme lopsidedness; just because America a century ago happened to be a country of some significance, such that individuals elsewhere collectively saw utility in adopting its currency as a standard in international trade.
Currently; the _only_ thing keeping the dollar afloat; is blind faith in being able to pass one off to a bigger sucker down the road.
A currency which is not a claim on anything, is very, very much living on borrowed time. And that is exactly the dollar now: The only things left of any real value in the US: Nukes, some natural resources and farmland in state-sized chunks; will not be freely handed to foreigners no matter what. And besides; The Fed will just prevent it by arbitrarily printing up another quadrillion to hand to some reliable regime sycophant anyway. Yet aside from those: America has nothing to offer in trade. Nothing that not even just China itself; but much less BRICS in aggregate; don’t already make twice as well for one third the cost. And with the delta only ever going up. At an ever accelerating rate…. The ONLY reason Americans are being handed a completely outsized cut, despite making zero real contribution, is pure historical inertia.
China has facilitated this for so long now (they’re commies, ergo not competent economists, to put it mildly…) that when they stop and people notice; it’s will reduce US purchasing power (including immediate reductions in defense spending…….. And competition for natural resources.. ) by, easily, 70%. Or more. As always, first slowly, then all at once.
Regardless hand waving of accounting identities: There IS NO getting around that any given US dollar is not ultimately backed by, or a claim on, nearly anything at all anymore: America has nothing left of much value, and there are obscene amounts of outstanding dollars floating around. They ARE, individually, fundamentally darned near worthless. Inertia is all that is currently propping them up. Effectively no different than Bugs Bunny continuing to run for awhile in mid air. Until he catches on……..
“The answer is no because Ethiopians need their local currency (the Birr) or US dollars or Euros to do anything.”
Only because China says so; and currently soft-pegs the yuan to dollars for reasons of historical inertia. Increasingly, noone in neither Ethiopia nor anywhere else needs, nor even wants, much of anything from anywhere but China.
A side note – China also runs a trade deficit with Australia, about US$82 billion a year
also putin pegged the ruble to gold via oil.
so many historical examples of gold and silver backed currencies never had anywhere near 40% of the paper currency. so many great history books on this subject. in rickards book currency wars he gave example of how a bric currency could be redeemed in a few locations……..from moscow to zurich to london………..this is probably nto going tohappen but it’s not splitting atoms. so many examples of this stuff working. i’ve been trading currencies and gold for decades……..
With the current capital control laws in place in both Brazil and China, neither BF nor CM have a choice in the currency that will be deposited in their bank accounts (real or yuan) or be used in the trade (BRICS or dollars or real or yuan), regardless of which currency the merchandise is priced in (BRICS or dollars or real or yuan or denarii).
Translating the annoucement: Nobody wants rubles, Vlad, give us gold, oil or timber.
Incidentally gold hovering near all time highs. Just a short while back the famous fraud troll artist extraordinaire who sells into strength and buys weakness was howling sell gold, sell gold. Like Ive repeatedly stated anyone who has listened to the troll (realist, makra, papascam, imgreen, jeffgreen, mposhit, etc) lost money.
What a joke, the fraud is living high with his multiple houses around the country and world with his 300$ royal oxford shirts and claims to not own a car.He catches a bus whenever he has to make a call for work purposes.
Hilarious, Too Funny
aren’t financial hucksters as american as apple pie. i learned that lesson as a teenager betting on horses at aqueduct.
Didnt take me long to figure out fraud troll multiple alias realist. 4-5 yrs ago, the troll was touting his green stocks and how the green revolution was going to create millions of jobs, etc. and he was making millions.
And of course he was claiming that anyone holding gold, silver etc to be a moron. Fast forward to today and gold and silver have doubled & anyone foolish enough to follow realists advice more often than not has lost their shirt.
The fraud claims to buy millions of T-bills at a time, buying multiple houses monthly across the states, etc.
Theres a sucker born every minute, there was some idiot just recently asking realist what else he was invested in. Funny he never mentioned the 20 green stocks that he recently purchased.
Too bad realists history cant be read. It would be a field day.
It’s really not that hard. Currencies have exchange ratios in gold and foreign countries that accumulate a specific currency can exchange it for gold based on the exchange ratio. This exchange ratio floats. This is the old gold standard and the world should return to it. It forces a country to be disciplined in its trade. There is no need for a basket of currencies in addition to gold. That just complicates it without adding anything.
After WW2 the US had most the gold and the US dollar was pegged to gold. This plus the dominance of the US (post WW2) allowed it to establish the US dollar as the reserve currency. However, this privilege was abused so the dollar was forced to abandon the gold standard and momentum has carried it forward to today. But most countries are fed up with it and the dollar is doomed. The Bricks currency is concealing out of committee, but logic dictates it will move to gold. The world is bifurcation into two trading blocks. The next crisis (which is probably not to far off) will probably usher in the change.
Missing the true intention here. Perhaps the article and all the media hype are also not getting it. The point here is that the BRIC nations no longer want to recycle the dollars they transact in into USTs.The latter is no longer considered a neatural reserve currency. Instead, nations will transact commodities such as oil with a gold settlement- the new reserve. No new currency, no new hegemony. Gold market too small for oil? Well, not at x10 the price. Stay long gold 😉
The Brics have said a lot less about a currency (union) than all the hyperventilating commentariat. We have to step back and ask what has Brics itself said?
They have explicitly stated that it is nothing like an alliance (they oppose political & military blocks). It is also not opposed to the West or the USA; they in fact would like to see co-operation on this facet as well. Brics is a format to meet, discuss, co-ordinate and to do so in space not dominated by the West like most other global institutions which have proved themselves useless and co-opted to much of the globe.
Discussions about currency are rooted in the goal of circumventing sanctions and in increasing sovereignty.
The BRICS don’t need a currency. They just need a standardized trade protocol that allows for bilateral trade with their local currencies, while allowing each country to exchange the local currency of the other to gold from the local markets and to ship that gold back should it wish to do so.
For example, let’s say Gazprom sells Gas to China for Yuan. It now has a balance of Yuan at a local Chinese bank. It would then be allowed to either buy stuff it needs with the Yuan, convert it to Ruble with another bank that has a Ruble surplus, or buy gold from the Chinese market and ship it back.
To make it even simpler, each BRICS central bank could set up a subsidiary at each other nation, that is connected to the local banking system of the other nation. So in this case, Gazprom could then just immediately exchange the Yuan it has with this subsidiary for Rubles in Russia from the central bank, while the subsidiary can immediately buy gold from the local Chinese gold market. In effect, the price of gold in these local currencies would become the exchange rate.
Yeah, the whole gold back thing is a farce. If money supply needs to be increased, you are relying on miners to do it? If it needs to be decreased, well, that is impossible. That is what caused all these panics in the 19th century. If anyone thinks that is a better idea than the Fed, why are other countries not adopting it?
A more intriguing idea would be to back a currency with an income producing asset like farmland. As the saying goes, you cannot produce more land, but does anyone think a government is going to give that up or if they do, not tax the crap out of it?
And you can not like the USA all you want, but if you think Brazil, Russia, India, and China are countries solid on fiscal discipline, think again. Germany with its financial discipline after the Weimar Republic days may have been an alternative, but they are in with the Euro.
The Euro WAS the real alternative, but with a crisis, the ECB did like the Fed and printed like crazy, but the BRIC nations are going to be more disciplined? LOL. Give me a break.
the point of BRICS is non-$USD transactions & trade settlement… it is not rocket science… no reason to complicate or dramatize matters unnecessarily.
BRICS are already bypassing $USD & settling direct trade bilaterally. intra-BRICS trade volume+efficiency will only increase.
Mish, I disagree with you. There was a time when a dollar was worth so much gold. Why should it float? Makes no sense.
They’re going to clobber the dollar when/if they back their currency with gold-even 60%.
1 = currency
0 = no currency
The more 1s you have, the more assets you can obtain, and vice versa.
What backs FIAT? CPU processors
There already is a gold backed currency unit. You just trade GLD or PHYS etc.
When you want real money in your portfolio you buy them, and when you need another currency you sell them.
The reason why they work is because they are in nations with reasonably stable legal systems there is trust, maybe diminished but still sufficient.
The reason why BRICS won’t have a common currency is that none of them have reasonably stable legal systems. There isn’t trust.
Yes, it will be backed by gold.
However, if you show up at the door with a fist full of fiat (FFF ©2024) and ask for your share in gold metal you won’t get it.
#2 If they print the currency small enough, and pound the gold thin enough, they could make gold leaf “backed” currency. It would be pretty.
Is this post comedy, or parody? Seems like copium to me.
I don’t think 85% of the world cares what Mish, or the USA say, about anything, any more.
“It is impossible to back something with 60% of something else”
Hahaha Mish, really? The US $ is backed by 100% digital ink and bullshit.
Reality check: the US $ has been in a steady decline as % of global reserves, and a trading currency, for the last 15+ years, going from IIRC 73% then to about 53% now, and falling by the hour these days, due to the colossal stupidity of seizing Russian assets, which is theft, and duly noted around the world. See today’s story from Saudi as illustration.
Seizing of Russian assets has nothing to do with dollar trade. Russian assets have been seized by other countries. Russia is a brutal kleptocracy led by an evil tyrant conducting a vicious war of aggression.
The USA dollar has declined because of profligate deficit spending, distrust of the USA, and the decline in economic power of the USA.
Assets of a State have diplomatic immunity, stemming from the same treaties that allow every nation to have Embassies, and Ambassadors – the entire under-pinnning of international relations. 1962 Vienna Treaties, IIRC.
The moronsof the West threw all of this out the window, by seizing Russian assets, moslty from Russian citizens who have nothing to do with the RUssian Government., which is also a form of collective punishment that the rest of the world finds repellant.This send a clear signal to the whole world that you cannot trust the West, or leave any of your assets there, as one day they West may decide to seize those too.
The second bigget mistake in a long line of massive geo-political self induced-errors (the first was starting the war in Ukraine in 2014), that have led to the accelerated decline of the West towards well deserved insiginificance. The Colonial Era is over, the West is a fading dead flower, and winter has arrived.
Fully cheereed on by the likes of you, because “we need to get Putin”. Except you shot yourselves in the head, repeatedly. Russia is stronger and more well liked around th e world now than they were before, the West much weaker, and much more disliked.
Yet even you admit “The USA dollar has declined because of profligate deficit spending, distrust of the USA, and the decline in economic power of the USA”. Correct, that is why the share of US $ as Global Reserve and trade currency was falling, the Ukriane Project has only served to accelerate that decline.
When the BRICS roll out the new currency, it will cause a stampede around the world, out of the US$ and Euro.
The enxt thing to happen is the rest of the world will start sanctioning the West, which will be The End, turn out the lights, the party is over. Which is one of Nostradumus Quatrains IIRC “And the world will trade with her no more”.
Basically, it’s time to sell everything and flee the West, before the catastrophic collapse phase occurs, just before WWIII goes nuclear hot.Somewhere outside the primary blast zones.
The rest of the world to “sanction” the West…?
That’s amusing. I wonder if the West would even notice….
“41 percent of DoD weapons systems & infrastructure supply chains rely on Chinese semiconductors.”
https://www.infowars.com/posts/us-military-is-made-in-china-defense-industry-report/
I agree with you 100%. Dollar is toast. A trillion a month in debt?
Try to charge $10,000 a month on your credit card and tell me how you’re doing in 10 years?
I can build a wall, or even a house with BRICKS. My Contracts are all settled in DOLLARS. I’m still trying to find a use for SHITCOINS.
You don’t need gold to back a currency. You can use real goods like land and issue the currency backed by the power to tax land. Germany broke hyperinflation by issuing the Rentenmark backed by what was a mortgage or tax on land. The Brics could do that. It would have to be productive land of course and it would avoid the price fluctuations you would get by using gold or oil. You would need a credible legal way of exchanging the bill for the underlying if certain conditions are not met. That could be tough to work out.
John Law broke the French economy with fiat backed by land.
Perhaps because land is so fungible.
Doug, I’m sure that you knew that.
True I did know that. Are you accusing me of wanting to bankrupt the Brics and when that is achieved swinging in and picking up choice assets for a song?
🙂
Gold doesn’t fluctuate. You confuse the currencies instability exchange rate to gold. Blame lie in the interference by govts
This appears to be somewhat similar to Keynes’ “Bancor”, which was proposed at Bretton Woods. It is not a currency, per se – but rather a unit of account used strictly for the settlement of international trade. Whereas the Bancor could not be exchanged for Gold (although you needed Gold to buy it), this BRICS currency (supposedly to be known as the “Unit”) would represent a basket of commodities, including Gold, payable on demand. That implies that participants would have to have components of the “Unit” on deposit at the central clearing facility. I’m not sure how this would be done with industrial commodities (future contracts, perhaps?). As such, those referring to this as a “Gold Standard” are not correct.
For about 214 years the British maintained a currency backed by gold and silver. It never had anything close to 100% gold (and silver, but mostly gold) backing for its currency.
exactly correct. without looking it up i’m recalling most of those 2 centuries it was a tiny fraction under 10%
Gamestop stawk the only true currency
Here are 2 scenarios for usage of BRICS.
In both scenarios, an alternative for trade must be used. None of the countries must give up their own currency. Just as now, they convert their currency into the trading currency. The difficulty occurs with the other end of the trade. How do they get non BRICS countries to trade in BRICS? For the second scenario, I do not see a resolution. Individuals from non BRICS countries will not want to trade in BRICS. In the first scenario, individuals will seek an alternative to the USA dollar because of dollar instability and weakness. BRICS does not seem necessary in the first scenario. Another currency will move to replace the USA dollar.
You are very clear Mish !!
Indians and Chinese would cash in a convertible gold currency for all the gold in the vault.
Anti-American propaganda. That’s all this is, for now. It’s design to promote fear as well as lack of confidence in the US economy and its ability to pay its bills. Don’t get me wrong, things will get worse economically for the US as well as the rest of the world. Even with the end of the petrodollar Saudi Arabia is issuing US bonds and buying our debt. They will require something in exchange, likely nuclear something.
The great power shift is occurring but the rest of the world does not have the confidence in the BRICS to compromise with each other nonetheless the world. The US still owns a more powerful economic, political, and military alliance – for now.
Buy physical gold. It’s a better bet.
LOL, gold as backing ripped to shreds. Other counter arguments: 1) not enough gold in the world for any currency to be gold backed. 2) the main problem is currency value is dependent on the value produced by the country of issuance. The US has stood out because of property protections and free speech. Innovation stems from this and so does US GDP growth. The currency strength matches the value supporting the currency and is why the US$ remains favored while elsewhere confiscatory governments degrade the value creation process and currencies degrade accordingly. One can never use a fixed some of gold to fix a currency’s value because at whatever benchmark you set, the value of an innovative country/culture will outstrip the amount of gold-backing. In reality one must issue enough currency to keep pace with the value creation to keep the currency stable. Not enough currency you get deflation and too much leads to inflation.
“The currency strength matches the value supporting the currency and is why the US$ remains favored while elsewhere confiscatory governments degrade the value creation process and currencies degrade accordingly.”
Just for clarification the US$ has lost 25% of its purchasing power just over the last 4 years.
That trend will continue.
Got Gold
It would be gold backed until some point down the road when they say it is no longer. Lol.