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Brics+ plans gold-backed currency

by Staff reporter
16 Jul 2023 at 13:53hrs | Views
WORLD countries coalescing under the banner of the Brics alliance which brings together Brazil, Russia, India, China, and South Africa are preparing to strike a blow against the United States dollar's hegemony by launching a trading currency which will be back by gold.

The agenda is set to be deliberated when the countries meet in South Africa next month.

The plan involves the rollout of a major new currency that could weaken the role of the dollar in global payments and ultimately displace the US dollar as the leading payment currency and also the reserve currency for several countries that include Zimbabwe.

The new development in the pipeline was announced last week when the Russian embassy in Kenya declared that "The Brics countries are planning to introduce a new trading currency, which will be backed by gold."

Zimbabwe with a camatose economy will likely applaud the development as it has in the past openly castigated the dominance of the United States dollar in its domestic trade.

In 2019, Zimbabwe banned the domestic use of foreign currencies and re-introduced the Zimdollar which had been dropped in 2009, after catastrophic hyperinflation forced the adoption of the US dollar under longtime ruler Robert Mugabe.

President Emmerson Mnangagwa's current administration has also in the past complained about the dominance of the United States dollar in the country and threatened its ban last month at the height of an unprecedented fall in value of the moribund local Zimdollar currency.

A more specific framework for the much-touted gold-backed Brics currency could be announced during the Brics summit being held next month in South Africa.

Economic analysts however say investors should not expect China or other major powers to declare an immediate abandonment of the United States dollar in international trade although they agree that there exists no single, universally preferred alternative.

Leslie Maasdorp, vice-president of the Brics New Development Bank, said: "It's going to take a very long time for currency movements to take shape so any discussion of alternate currencies is indeed a much more medium and longer-term aspiration."

Stefan Gleason who is president of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group, has made his submissions on the impending Brics gold-backed currency.

He said: "It could happen in just a few years. The process by which this will happen is unprecedented, and the world is unprepared for this geopolitical shockwave. "

This monetary shock will be delivered by a group called the Brics.

The acronym Brics stands for Brazil, Russia, India, China and South Africa.

"This play for global reserve currency status by the Brics will affect world trade, direct foreign investment and investor portfolios in dramatic and unforeseen ways. "

The most important development in the Brics system concerns the expansion of Brics membership.

This has led to the informal adoption of the name Brics+ for the expanded organisation." There are currently eight nations that have formally applied for membership of Brics and 17 others that have expressed interest in joining.

The eight formal applicants are: Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia and the United Arab Emirates.

Russia has had no choice but to pursue alternatives to the dollar in response to it being blacklisted from the SWIFT international payments regime due to its unprovoked war against Ukraine.

Other nations have taken note of this retaliatory blacklisting — something the US had not even done during the Cold War — and have been increasingly repatriating their gold holdings to insure against future attacks or sanctions.

China is looking to strike back at the US as well. The United States is nearly 100% dependent on China to supply certain rare earth materials which are needed in high-tech and energy applications.

US Treasury secretary Janet Yellen went to Beijing to try to assuage the Chinese, insisting she wants the two powers to remain trading partners rather than adversaries.

 Implicit in her appeal to China is that any move on the part of the Chinese to ditch the US dollar and conduct trade in an alternative gold-backed currency would be viewed as an escalation of hostilities.

Economists also warn that the mere fact that gold is being considered by Brics countries as a basis for international trade could incentivise central banks — and individual investors — to accumulate precious metals.

If gold's role as a global alternative currency is to expand, the economists say its price will rise also.

Source - newshawks
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