What Happened: Brazil, Russia, India, China and South Africa, a coalition of nations going by the moniker BRICS, is set to introduce a new currency backed by gold, Russian English news channel RT reported.
An official announcement in this regard will be made at the bloc’s summit in Johannesburg, South Africa, in August. “With the growing initiative, more and more countries are lining-up to join the group,” RT said.
Willem MiddelKoop, a former journalist, tweeted that 41 countries have applied for BRICS-membership.
There You Go – It’s Official
‘BRICS planning to introduce new trading currency backed by gold at August summit’
‘Gold standard will be a great benefit to strengthening single currency’
‘41 countries have applied for BRICS-membership’
Source: RT / Russian Embassy pic.twitter.com/zmqOKiXlsa
— Willem Middelkoop (@wmiddelkoop) July 7, 2023What’s BRICS Common Currency: The BRICS nations announced in April that they plan to introduce a new currency with an objective of boosting intra-BRICS trade and also eliminating higher dollar conversion costs of international transactions.
Opinions are divided over whether such a common currency would hurt the dollar’s dominance. It is unlikely to replace the dollar and would exist only as an addition to the established dollar-based global monetary system, a report by the Official Monetary and Financial Institutions Forum said. “It will be a regional initiative rather like the euro,” it added.
Why It’s Important: Such a BRICS common currency could be a shock to the global fiat money system, said economist Thorsten Polleit in a series of tweets.
“A new international transaction unit, backed by gold, sounds like good money – and it could be, first and foremost, a major challenge to the US dollar’s hegemony,” he said.
But the devil is in the details, he added.
The economist said for making the new currency as good as gold and a truly sound currency, it must be convertible into gold on demand. But whether this is what the BRICS Countries have in a mind is a question, he said.
Using gold as the unit of account would be a gamechanger and lead to a sharp devaluation of many fiat currencies including the BRICS fiat currencies, vis-à-vis gold, the economist said. It could make goods prices priced in fiat currencies explode and cause a shock to the global fiat money system, he said.
Another option before the BRICS could be to set up a new bank for foreign trade, which acquires capital in the form of gold, provided by the BRICS, Polleit said.
“Against this gold stock, the new bank could, say, grant financing loans to exporters, and issue the ‘new currency;’ or BRICS exports will be sold against the ‘new currency’ and/or gold.”
Read Next: BRICS Currency Rising? 19 Countries Desperate To Join The Powerhouse Group