Hello BRICS fans, India provides a lesson for what will happen if the BRICS nations ever do launch a currency. 
The BRIC Concept
- Take four countries that have nothing in common (Brazil, Russia, India, and China) assign a label to them, BRIC.
- Add an S making it BRICS so that South Africa can join the club.
- Promote the idea of a gold-backed BRICS currency, a trading currency, and a death of the dollar currency. That started in 2010.
- Add ++ signs to allow anyone to join BRICS++
- Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates are now in the club.
- Hooray! Read massive amounts of ridiculous hype on Twitter and alternate media.
- Yawn
The idea that you can take a group of countries that have nothing in common then keep adding more countries that also have nothing in common, then make some tradable currency out of the mess is more than a bit silly.
India provides a lesson of what it will look like.
No Takers
CNBC reports India Finds No Takers for Rupee Payment for Oil Imports
India’s push for rupee to be used to pay for the import of crude oil has not found any takers as suppliers have expressed concern about the repatriation of funds and high transactional costs, the oil ministry told a parliamentary standing committee.
In a bid to internationalize the Indian currency, the Reserve Bank of India on July 11, 2022, allowed importers to pay with rupees and exporters to be paid in rupees.
Why Would Any Oil Exporter Want Rupees?
Unsurprisingly, none did.
Q: Why would any exporter want a BRICS currency?
A: Other than sanction avoidance, none would.
Yet, the hype goes on and on including talk of a gold-backed yuan and a gold-baked BRICs currency.
Gold-Backed Petro-Yuan Silliness
Flashback October 25, 2017: Gold-Backed Petro-Yuan Silliness
Yuan pricing and clearing of crude oil futures is the “beginning” of a broader strategic push “to support yuan pricing and clearing in commodities futures trading,” Pan Gongsheng, director of the State Administration of Foreign Exchange, said last month.
To support the new benchmark, China has opened more than 6,000 trading accounts for the crude futures contract, Reuters reported in July.
Yawn.
The idea that the yuan will soon replace the dollar as the world’s reserve currency is absurd for currency reasons, political reasons, and economic reasons.
Anyone who suggests otherwise understands neither currencies nor global trade.
Finally, given the implications of the reserve currency curse, I highly doubt China even seeks what these petro-yuan analysts claim.
Assume you are an exporter who wanted gold. Also assume there was a Gold-Backed BRIC (GBB). Would you hold a GBB or would you take payments in dollars and buy gold?
Despite the obvious answer, the stories surface again and again.
More Gold Backed BRIC Currency Silliness on Dethroning the Dollar
On July 7, 2023, I commented More Gold Backed BRIC Currency Silliness on Dethroning the Dollar
To make a currency as good as gold or act like gold it is has to freely float and be convertible on the spot into gold.
Pegs cannot and will not work.
Dollar Weaponization
It’s understandable that nations, especially Russia, want to avoid dollars. There is mistrust for many good reasons.
I discuss the anti-dollar sentiment in Dollar Weaponization Expands – FDIC Message to Foreign Depositors Is Don’t Trust the US
But where is a genuine alternative, that’s liquid, has more trust, and a large supporting bond market.
Trading Currency Silliness
On April 14, I commented Brazil’s President Calls for End to US Dollar Trade Dominance, So What?
The other ridiculous aspect of the BRICS++ venture is the notion of a trading currency to end US dollar dominance.
In general, countries don’t trade, individuals do. The US does not trade with China at all.
For example, US farmers sell wheat to Chinese merchants, and Walmart buys toys from Chinese merchants.
Q: Why would any US farmer want to hold Yuan or a BRICS currency?
A: They don’t and likely never will.
Chinese importers also buy agricultural products from Argentina, Brazil, Australia, and New Zealand. Why would any of those exporters want yuan?
Heck the yuan does not even float. And unlike US treasuries, there is no freely traded, liquid yuan product to invest.
India Frowns on Paying for Russian Oil with Yuan
On October 16, Reuters reported As India Frowns on Paying for Russian Oil with Yuan, Some Payments Held Up.
India emerged as the top importer of Russian seaborne oil this year, with refiners snapping up the crude sold at a discount after some western nations suspended imports from Moscow over its invasion of Ukraine.
Reuters reported in July that Indian refiners began using yuan to pay for some oil from Russian sellers, while continuing to use dollars and dirhams to settle most of their Russian oil purchases.
And, based on comments from officials at affected refiners, payment for at least seven cargoes is still pending. Some payments for recent cargoes delivered to at least two state refiners have been pending since the last week of September.
Two refining sources said settlement in yuan increases their costs, as rupees first need to be converted to Hong Kong dollars and then yuan, a process that costs 2-3% more than settling in dirham.
While Indian state refiners would prefer to use rupees to pay for Russian oil after the country’s central bank last year announced a mechanism to settle foreign trade in rupees, Russia in less keen to accept rupees given as the bilateral trade balance is tilted in Moscow’s favor.
India state-owned-refiners (an example of trades by a country) want to pay in Rupees, but that never happened because Russian exporters do not want Rupees.
A simple question gets to the heart of the problem.
What Would it Take for a BRIC-Based Currency to Succeed?
I discussed the answer on August 25, in What Would it Take for a BRIC-Based Currency to Succeed?
- The Brick would need to float freely. The yuan doesn’t.
- The Brick have to achieve genuine reserve currency status for widespread use.
- A large, liquid Brick-based bond market.
- A significant desire by individuals to trade in Bricks and accept Bricks rather than local currencies or the dollar.
- Willingness of China to stop export mercantilism.
- Relative trust vs the US dollar.
None of those conditions are in place.
Even if the countries concoct a market, the attempt will fail just as India failed at setting up a market to pay for oil with the rupee.
Other than limited cases of sanction avoidance by a small number of individuals, there is little if any desire by individuals outside India to hold Rupees, outside China to hold Yuan, or outside Brazil to hold the Real.
For sanction avoidance and political pandering, there may be a few instances of trade in yuan or Rupees, but until the necessary conditions for genuine success are in place, trade in yuan or BRICS is headed nowhere.
UAE sent the first cargo of crude oil paid in the Rupee. Saudi and UAE accept rupee payment using UPI from all Indian travelers who can use their local bank cards for international travel expenses. UPI has expanded in the middle east and even countries like Singapore and France now support UPI. This basically means Rupee is going global and international merchants will follow through.
link to india-briefing.com
link to business-standard.com
btw – Russia and Iran have been sending cargos and goods bought in the rupee for quite sometime.
P.S – The world has found an alternative to SWIFT and western banking. The next step is to push more trade in the new channel(s)
Just because it can’t happen soon is not the same as knowing it can’t happen. Remember “Believing you are invincible is what makes you vulnerable”. Think of Pearl Harbor or the Titantc when you read that quote.
As it stands, the only significant currencies capable of replacing the USD are…
The Euro – which is dying on it’s arse as a concept, and due to debt
The Pound – which is the former world reserve currency, which is not what it was
The Yen – which is dying on it’s arse due to debt
The Swiss Franc – which has a lot a gold potentially behind it
The Loonie – what a pointless currency
The Aussie – even more pointless
The Kiwi – even more pointlesser
The Kroners… Swedish, Norwegian, Danish… too small
The Thai Baht… come on now…
The Dirham – has a bit of black gold behind potentially behind it
Etc…
The Rupee is an idea for the future perhaps… in a few decades with a lot of reforms.
…but really, the only options are Sterling, Swissy, and whatever that thing that the BIS uses is.
…and before anyone shouts “Bitcoin!” …90+% of that isn’t even traded, never mind the volatility and speed of transactions… it’s not much better than using a commodity to barter with.
Also rans, not worth mentioning… The Korean Won, the Singdollar, and the things of big pop countries like the Rupiah, Real, Naira etc… well, as Mish alludes to… where are the bond markets for this junk? Would you? Really?!
If an oil exporter ultimately wanted gold, then trade oil for gold and cut out currency altogether.
Or EFTs?
And, yet, the WSJ published this today.
link to wsj.com
Who reads the WSJ?
Even Peter Lavelle of RT news said Brics is a joke on his show Crosstalk. RT news is paid Russian propaganda. I listened to him say it live on his show. He’s still on the air so that says a lot of what Russians think of Brics.
Brics has been around a couple of decades and hasn’t accomplish much of anything as a group. However, that could change by 2050 and drastically. They do have enormous resources and large populations. If they figure out how to manage a common currency and keep slowly moving off the dollar we probably end up with two financial systems which is what Powell hinted to briefly last year.
Who knows what happens but whatever happens will be slow and take decades. The sanctioning threats and seizing of assets by people who did nothing wrong like myself by the US is going to end though. It never did work and has the opposite effect of making people want to abandon your system and try something else. If Brics made a statement that they do not seize assets or sanction anyone as the apex of their goals people are going to want to play in their backyard more that’s for damn sure.
They don’t need a BRICS currency, just a protocol that would allow them to settle in local currencies and exchange them for gold in local markets that can be shipped back to surplus countries. It’s more costly than just settling in gold, but sanctions have shown you need (not want) an alternative.
That works until the surplus countries have ALL the gold. Then international trade ceases.
It’s the same with dollars, but gold instead. Deficit countries will borrow gold and its price would rise.
In other words, the US has the green light to print as much money without reporting the real number and no other country will do anything about it.
I will gladly take 1/4, 1/2, or 1 ounce gold coins for my tax refund. Keep your junky Greenbacks. Same applies to future social security payments.
Any currency that is in debt to their eyeballs (US and other mismanaged governments) and fiscally mismanaged (US and other mismanaged governments) does not instill confidence in me nor others.
The BRICS have a long way to go, but at least they are attempting something different than Western based chaos. South Africa has a looooong way to go, but we’re not too far behind them the way things are going.
You will still need to convert to another Currency and then ultimately US DOLLARS or EUROS or some local currency. TRADE however MUST be done in Dollars. Get more used to it.
Yeah, and which currencies are easiest to transact to get gold? GBP, CHF, SGD, EUR, USD, yes? I guess NOK/SEK/DKK and NZD/AUD/CAD are ok too.
Yes.
No, I don’t think that’s true… let’s look at things objectively… which are the wealthiest countries in the world, not just in total, but per capita? What do they have in common? They are of course, developed industrial countries with rule of law and sophisticated financial systems and in the norethern parts of the world, or populated and set up by people originally from there… which of those have lots of goodies? Gold, oil, other valuable stuff? Well, when it comes down to it, you’re looking at places like: Switzerland, Norway, Canada, Australia, UK, maybe Netherlands and Denmark at a stretch. Which of those countries have the most advanced financial systems? UK and Switzerland… which is the larger one… UK… but the Swiss have gold. The Norwegians have oil. Kroners are OK, Swiss Franc is OK, but by a process of elimination, I think Sterling remains the best bet, which is why it’s still number 3.
Where would I buy and vault gold? UK, Switzerland, Singapore, maybe NZ, mostly due to low tax and user-friendliness… the US is not as appealing to store wealth in.
The UK, unlike Switzerland has several useful tax havens… QED.
Something within 70 percent of US dollars printed physically floats globally, not just in the US. How many currencies have that bragging right? Zero. How about close? Zero. When times are tough in other countries, what currency do they want to hold? Dollars. That’s what is defined as reserve currency for the world’s masses. No country comes close. If a country needs to finance, where do they go? New York, and maybe Miami since Wall Street is moving to Florida. This all may change in the future, but not today.
I am in Thailand and visit India frequently. I do not find people in either place interested in holding Dollars. They live to hold physical gold and silver. Take a walk through and main street or shopping mall anywhere in India or Thailand and you find the shops selling gold and silver.
If you travel in Asia, you’ll find the US is totally disrespected. Yes the Dollar is used in international trade for 75 years. Habits change.
India began as a nation in what 1947? I went there the guest time in February 1974. It was a closed country. They were trying to be 100 percent self sufficient and didn’t allow any multi national corporations in the country.
Rajiv Gandhi changed that in the early 1990s.
Economically India is doing well. There is such a gigantic market internally, they really can do well without alot of exports.
There is still a messy bureaucracy. Plenty corruption. But their digital money tracking system is incredible. Scary too.
I have bank accounts in India for over 30 years. This year I got an official notice by email that I didn’t file my tax return for last year. In 30 years that’s never happened before.
I had to find a man in Kolkata to do this for me. Still hoping he gets it done by the 31st!
Modi has really done a lot of work to bring India into the present world. I don’t necessarily think it is better than 1974,but it is what it is.
Gresham’s Law, in action. The people hoard the valuable currency (gold & silver) while spending the increasingly worthless fiat money.
That is true, but Thai glow-in-the-dark 96.5% gold has little appeal compared to a proper 99.99% Swiss/Aussie/Canuck bullion.
Most of the USD are outside the US and flow through the UK or end up stashed in CH.
I have trouble believing that 90% of trade is done in the dollar (2019), given that Russia may be the 6th biggest economy together with all of the swap activity that China does.
Where did you read 90%? My understanding is that the USD accounts for 59% with the balance mostly made up of Euro, Yuan, Yen, HKD, AUD and Thai Baht. I’m not sure how much is done in Roubles but I know Egypt for example allows their trade with Russia to be done in Roubles.
Roubles could certainly increase, but Yen and Euro and Aussie are joke money… and let’s not talk about the comedy/tragedy of the Yuan and HK dolla. Kroners and Swissy are a bit bigger than some of those.
What people forget is that transactions flow in categories, and some fiat currencies are not able to dominate some categories. The Forex percentages are not a monolith where one currency pushes out another.
What’s going on with Javier Milei (not) abolishing the central bank?
Carefully think through how Argentinian banks would settle local and international payments, digitally, without a Central Bank.
Hey Mish I’m off topic once again so sorry if you don’t want to post my comments you’re probably crazy. So anyway I’m saying that football, college, NFL football entertainment is pretty much holding the American culture together for this most part truthfully in my opinion at least these days. Still I wish they would have an Asshole Bowl game against the 2 worst incompetent teams in the country to inform zoomers that life is truthfully difficult
I was looking thru the piece for what the more fundamental problem is … no one trusts dictators. Lately we’ve had a pretty unsettling increase in the numbers of dictators in this world: Russia, China, N Korea, Turkey, Half the ‘stans, Venezuela, Phillipines, Cambodia, Saudi Arabia, Qatar, Iran, Syria, Egypt, etc., etc. Why would anyone trust a country’s currency if it was issued by one of these h*llholes? Why wouldnt they just issue as much currency as they want, and lie about the gold and everything?
Correct, to a point… Singapore isn’t exactly a beacon of liberal democracy, but it does do finance well enough to keep its neck above water.
maybe they should pay in Shitcoin
The talk about a BRICS currency replacing the dollar is MAGA propaganda because the likes of Steve Bannon think that MAGA voters are completely stupid (on this one, I think even Bannon knows that he is feeding stupidity to his base).
No it’s Dumbocrat propaganda. Never encountered a MAGA who believes in BRICS.
Why did you comment on 2022 part of report but not 2023 part of report.
Also Indian EAM is in Russia right now making deals about rupee.
I feel sorry for Mish sometimes.
Mish, explain why there has been a virtual news blackout on the collapse of the dollar in the last 2 months. The Dollar has fallen 10.64% since Nov 1 equiv to 511 S&P 500 points.
Fallen 10.64% against which currency since Nov 1 (or basket of currencies)?
Tell me about it. I’m paid in Dollars, and live in Thai Baht. Weak Dollars make life harder.
Since 11/1/23, the Thai Bath has appreciated by 4.1 percent vs. the dollar. Since 8/1/23, the Thai Bath has depreciated by 0.5 percent vs. the dollar. This is called a flexible exchange rate.
Try sterling instead… the rate against the baht is fairly stable for a while now.
Russia a accumulating over $1 billion/month of Indian Rupees that it cannot use. Russia sells oil to India for Rupees. Yet India has nothing to sell that Russia needs.
Sometimes you need a loss leader. Yeah, the rupees are worthless but youve made some Indian government friends you can put the arm on..
And eventually the Russians can convert the rupees to things India produces such as machinery, arms, rice and computer related stuff and avoid buying those things from countries that have sanctioned Russia.
Are Indians willing to migrate to, work in, Russia, even if they are paid “handsomely” in rupees?
Probably they would if the salary in Rupees is agreeable. Plenty of Indians do business in Russia.
That’s unlikely. Indian programmers are the best. Lots of good food can be exported from India, like rice, sugar, mangoes, and more. Also Indian manufacturers are becoming world class.
No they’re not. The best programmers from anywhere are the best. Most people would rather take Swiss Francs over Indian Rupees any day.
IF TRUE, Just cause there were no takers NOW, doesn’t mean there will NOT BE in the FUTURE!!!!
I consider CNBC part of the PROPAGANDA NETWORK!!!
You are right….
Thank God for the truthful, honest, in-depth analysis of Newsmax!