BRICS Gold Backed Reserve Currency

[wayneL]

It seems this is now definitely on the cards.

Poo, in motion, in vicinity of the propeller:

 

[finicky]

Got to admit it, the U.S blew it. The massive privilege of 'printing' the reserve currency of the world without needing anything tangible to back it. Then they go on endlessly and limitlessly abusing the privilege. Of course many in the world have been devising an alternative, especially the enemies of the U.S.

 

[wayneL]

Got to admit it, the U.S blew it. The massive privilege of 'printing' the reserve currency of the world without needing anything tangible to back it. Then they go on endlessly and limitlessly abusing the privilege. Of course many in the world have been devising an alternative, especially the enemies of the U.S.

It will be a miracle if this doesn't end in a hot war, as happens with every great reserve currency change (as either impetus or result of)

 

[divs4ever]

It seems this is now definitely on the cards.

Poo, in motion, in vicinity of the propeller:

View attachment 159388

it will be interesting to see how they settle the accounts , surely the world has learned from 'keeping your gold ( credits ) safe in our reserve bank ' ( in the US and UK ) will BRICS settle trade balances , say yearly with physical delivery

one consequence i see coming is the reduction in trade deficits in the BRICS community , will that be a good thing ??

 

[Sean K]

I assume this is good for gold. Must stock up on a few more Kangaroos.

Central banks

www.gold.org

Central Banks Are Purchasing Gold at Record Highs. Why?

An unprecedented shift toward gold has been led by the financial authorities of the world in what appears to be a move away from the US dollar. What's next?

fee.org

 

[Garpal Gumnut]

Thanks @wayneL for starting this thread. It is long overdue. I can see it addressing the post-Ukraine War world and the direction of the global economy markets and finance.

I would strongly agree that the poo will hit the fan as the American cousins would appear to have hit the peak of their influence.

BRICS has some heavy hitters at the top of the New Development Bank, one in particular ... Leslie Maasdorp ex prisoner just before the ANC took over and now based in Shanghai for the NDB. He is no slouch.

gg

 

[divs4ever]

I assume this is good for gold. Must stock up on a few more Kangaroos.

Central banks

www.gold.org

Central Banks Are Purchasing Gold at Record Highs. Why?

An unprecedented shift toward gold has been led by the financial authorities of the world in what appears to be a move away from the US dollar. What's next?

fee.org

but would this be good for retail level gold bugs ??

and in fact what about junior miners in some jurisdictions , some governments would be very tempted to nationalize mines , maybe even make it illegal for rivate citizens to hold gold bullion ( as the US has done once )

 

[Craton]

Great topic for discussion.

When I first heard about this many questions arose.

a) Is this just a pipe dream, can it actually fly?

b) Which country has the biggest stash/stockpile/reserve of the shiny yellow metal?
- The USA according to Investopedia.

c) Why gold and not crypto?

d) Is this a way to break the USD and America's grip on the world?
- Of course.

e) How will the gold to paper value be set and by whom?

f) Is this a closed loop just for BRICs or open to all?

g) What should Australia response be if this thing does actually takeoff?

h) etc, etc, etc.


From the Investopedia article, based on the now defunct gold standard and updated 30th April 2023.

What Are the Advantages of the Gold Standard?​

The gold standard prevents inflation as governments and banks are unable to manipulate the money supply (e.g., overissuing money). The gold standard also stabilizes prices and foreign exchange rates.

Lol, none of the BRICs "manipulate" anything...

What Are the Disadvantages of the Gold Standard?​

Under the gold standard, the supply of gold cannot keep pace with its demand, and it is not flexible under trying economic times. Also, mining gold is costly and creates negative environmental externalities.

So if gold demand outstrips supply, how can the standard or value of the gold price be set???
Thus as @divs4ever posted above, nationalization of goldies would definitely be in the crosshairs.

I'll be watching this space with great interest because as you all know, money makes the world go round.

 

[divs4ever]

So if gold demand outstrips supply, how can the standard or value of the gold price be set???

the simplistic answer is extract more gold , in practical terms there will be a problem with a cost of production , possibly mid-term
gold can be extracted from sea water , eucalyptus leaves etc just not terribly efficiently , so far

however there is a finite amount of gold on earth so some budgets will have strive for balanced trade balances , , that should be really entertaining

another thing to watch for is those 'lending gold' through various devices/instruments , remember some have a history of promising more than they deliver

 

[Garpal Gumnut]

It would appear the FT is quickly trying to catch up with @wayneL and the ASF commentators on this thread. From this mornings edition.

So there are 2 reasons for central banks to store gold.

1. Safety so that the Russian precedent does not occur and their currency is protected.

2. Better yields on loans and other lendings and borrowings for the holding country

gg

 

[sptrawler]

Just to keep the thread alive.

A BRICS Currency Could Shake the Dollar’s Dominance

De-dollarization’s moment might finally be here.

foreignpolicy.com

If the BRICS used only the bric for international trade, they would remove an impediment that now thwarts their efforts to escape dollar hegemony. Those efforts now often take the form of bilateral agreements to denominate trade in non-dollar currencies, like the yuan, now the main currency of trade between China and Russa. The impediment? Russia is unwilling to source the rest of its imports from China. So after bilateral transactions between the two countries, Russia tends to want to park the proceeds in dollar-denominated assets to buy the rest of its imports from the rest of the world, which still uses the dollar for trade,.

If China and Russia each used only the bric for trade, however, Russia would not have any need to park the proceeds of bilateral trade in dollars. After all, Russia would be using brics, not dollars, to buy the rest of its imports. Enter, at last, de-dollarization.

Is it realistic to imagine the BRICS using only the bric for trade? Yes.

For starters, they could fund the entirety of their import bills by themselves. In 2022, as a whole, the BRICS ran a trade surplus, also known as a balance of payments surplus, of $387 billion – mostly thanks to China.

The BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions. Because a BRICS currency union—unlike any before it—would not be among countries united by shared territorial borders, its members would likely be able to produce a wider range of goods than any existing monetary union. An artifact of geographic diversity, that is an opening for a degree of self-sufficiency that has painfully eluded currency unions defined by geographic concentration, like the Eurozone, also home to a $476 billion trade deficit in 2022.

 

[divs4ever]

Just to keep the thread alive.

A BRICS Currency Could Shake the Dollar’s Dominance

De-dollarization’s moment might finally be here.

foreignpolicy.com

If the BRICS used only the bric for international trade, they would remove an impediment that now thwarts their efforts to escape dollar hegemony. Those efforts now often take the form of bilateral agreements to denominate trade in non-dollar currencies, like the yuan, now the main currency of trade between China and Russa. The impediment? Russia is unwilling to source the rest of its imports from China. So after bilateral transactions between the two countries, Russia tends to want to park the proceeds in dollar-denominated assets to buy the rest of its imports from the rest of the world, which still uses the dollar for trade,.

If China and Russia each used only the bric for trade, however, Russia would not have any need to park the proceeds of bilateral trade in dollars. After all, Russia would be using brics, not dollars, to buy the rest of its imports. Enter, at last, de-dollarization.

Is it realistic to imagine the BRICS using only the bric for trade? Yes.

For starters, they could fund the entirety of their import bills by themselves. In 2022, as a whole, the BRICS ran a trade surplus, also known as a balance of payments surplus, of $387 billion – mostly thanks to China.

The BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions. Because a BRICS currency union—unlike any before it—would not be among countries united by shared territorial borders, its members would likely be able to produce a wider range of goods than any existing monetary union. An artifact of geographic diversity, that is an opening for a degree of self-sufficiency that has painfully eluded currency unions defined by geographic concentration, like the Eurozone, also home to a $476 billion trade deficit in 2022.

commentators , i listen to , say India wants to keep it's own ( fiat ) currency and i strongly suspect China will want the same , however IF the new BRICS currency was used for international trade settlements ( and that could be gold/silver pegged ) that could have wider implications , imagine if say 20 sovereign nations suddenly strove to have balanced trades ( zero trade deficits ) that would really rattle international debt markets , this could be a real can of worms , but then something has to be done to exit the global debt spiral

interesting times ahead ( i hope i have enough reserve cash in the bank to exploit this )

PS don't forget the aspiring BRICS candidates , that will be the important action , Saudi Arabia , Iran , Egypt etc . how will they balance their exports/imports , do they move towards increased self-sufficiency ??

 

[qldfrog]

commentators , i listen to , say India wants to keep it's own ( fiat ) currency and i strongly suspect China will want the same , however IF the new BRICS currency was used for international trade settlements ( and that could be gold/silver pegged ) that could have wider implications , imagine if say 20 sovereign nations suddenly strove to have balanced trades ( zero trade deficits ) that would really rattle international debt markets , this could be a real can of worms , but then something has to be done to exit the global debt spiral

interesting times ahead ( i hope i have enough reserve cash in the bank to exploit this )

PS don't forget the aspiring BRICS candidates , that will be the important action , Saudi Arabia , Iran , Egypt etc . how will they balance their exports/imports , do they move towards increased self-sufficiency ??

And add Indonesia ,Mexico as direct impact to us/the USA ..which will then need gold ..funny idea that the USD could become the Peso of yesteryears...

 

[sptrawler]

Fortunately we are such a small fish, we can adapt to whatever the reserve currency is, the U.S may have more of an issue which is really an own goal for globalisation and exploiting third world countries in the name of greater profits.

 

[divs4ever]

And add Indonesia ,Mexico as direct impact to us/the USA ..which will then need gold ..funny idea that the USD could become the Peso of yesteryears...

Indonesia mines a bit of gold and the government is part-owner of some mines , Mexico has a fair bit of silver they both should navigate a change like that comparatively well

 

[mullokintyre]

From Gainsville coins
An important change has unfolded in the global gold market. The East has been driving up the gold price, predominantly in late 2022 and the first months of 2023, breaking the West’s long standing pricing power.
Until recently, Western institutional money was driving the price of gold in wholesale markets such as London, mainly based on real interest rates. Gold was bought when real rates fell and vice versa. However, from late 2022 until June 2023 gold was up 17% while real rates were more or less flat, and Western institutions were net sellers. Most likely, Eastern central banks, and Turkish and Chinese private demand, lifted the price of gold.
For about ninety years, up until 2022, there was a pattern of above-ground gold moving from West to East and back, in sync with the gold price falling and rising. Western institutions set the price of gold and bought from the East in bull markets. In bear markets the West sold to the East. For more information read my article: The West–East Ebb and Flood of Gold Revisited.

If we zoom in on the period from 2006 through 2021 the main reason for Western institutions to buy or sell gold was the 10-year TIPS rate, which reflects the 10-year expected real interest rate (“real rate,” in short) of US government bonds.

The physical gold price was predominantly set in the London Bullion Market and to a lesser extent Switzerland. Gold trade in London can be divided in three categories:

1. Institutions buying and selling “large bars” (weighing 400 ounces) outright.
2. Trading in large bars via Exchange-Traded Funds (ETFs).
3. Arbitragers buying and selling in London to profit from price discrepancies between the COMEX futures price and London spot. In this sense London serves as a warehouse for the COMEX futures exchange.

As we will see below, the TIPS rate, UK net gold import (positive or negative), Western ETF holdings, and the COMEX open interest were all correlated to the price of gold. Until the war in Ukraine broke out late February 2022, that is, and things started to change.

 

[divs4ever]

From Gainsville coins
An important change has unfolded in the global gold market. The East has been driving up the gold price, predominantly in late 2022 and the first months of 2023, breaking the West’s long standing pricing power.
Until recently, Western institutional money was driving the price of gold in wholesale markets such as London, mainly based on real interest rates. Gold was bought when real rates fell and vice versa. However, from late 2022 until June 2023 gold was up 17% while real rates were more or less flat, and Western institutions were net sellers. Most likely, Eastern central banks, and Turkish and Chinese private demand, lifted the price of gold.
For about ninety years, up until 2022, there was a pattern of above-ground gold moving from West to East and back, in sync with the gold price falling and rising. Western institutions set the price of gold and bought from the East in bull markets. In bear markets the West sold to the East. For more information read my article: The West–East Ebb and Flood of Gold Revisited.

If we zoom in on the period from 2006 through 2021 the main reason for Western institutions to buy or sell gold was the 10-year TIPS rate, which reflects the 10-year expected real interest rate (“real rate,” in short) of US government bonds.

The physical gold price was predominantly set in the London Bullion Market and to a lesser extent Switzerland. Gold trade in London can be divided in three categories:

1. Institutions buying and selling “large bars” (weighing 400 ounces) outright.
2. Trading in large bars via Exchange-Traded Funds (ETFs).
3. Arbitragers buying and selling in London to profit from price discrepancies between the COMEX futures price and London spot. In this sense London serves as a warehouse for the COMEX futures exchange.

As we will see below, the TIPS rate, UK net gold import (positive or negative), Western ETF holdings, and the COMEX open interest were all correlated to the price of gold. Until the war in Ukraine broke out late February 2022, that is, and things started to change.
View attachment 161564
View attachment 161566
View attachment 161567

last time i looked Chinese has close to halved it's holdings of US Treasuries ( from the peak ) , now sure China is exporting less to the US and also letting some bonds mature without re-investing in US bonds , but is that cash being used to buy gold in USD , China does mine some of it's own gold , so China can accumulate if it chooses without moving the global market

 

[mullokintyre]

Another reason why the YUAn will never become a reserve currency for the world.
There must be a large, liquid, low-risk asset market where reserves can be held. Capital controls prevent reserve currency status—users need to get their money on demand.

Mick

 

[qldfrog]

Why it would be in Australia interest to join the BRICs..
But we would need a government with balls, a vision and our country interest first..not in my lifetime

 

[Garpal Gumnut]

Should a person or an entity or indeed a country go in to partnership or associateship with another then due diligence is necessary.
This would include probity, trustworthiness, risk and brand value.

I could not think of another bunch of muppet countries with less attributes than the present BRIC members with which to align.

gg