By Gareth Vaughan
At the heart of suggestions the so-called BRICS countries may develop a new international currency system based on gold that's separate from the US dollar are some simple necessities, according to Nathan Lewis.
The United States-based Lewis spoke about this issue in a new episode of interest.co.nz's Of Interest podcast. Lewis runs New World Economics, is an author, a former analyst and money manager for institutional investors, and a fellow of the wealth and poverty programme at the Discovery Institute think tank.
As Lewis puts it, the BRICS countries - Brazil, Russia, India, China and South Africa - need or want some plumbing for trade and debt financing for their governments and corporates.
These countries have been coming together at least in part because their trust and satisfaction with the US-led global financial order, which has the US dollar as reserve currency, has been declining. This has increased as tensions between the US and China have heightened, and following Russia's invasion of Ukraine, which saw it locked out of the Western financial world including the SWIFT international payments system.
"What was low level grumbling for a long time now has become active efforts to create a new alternative," says Lewis.
"The first basic need is just to be able to buy stuff."
"Most of these countries' currencies have a history of mediocracy or outright failure, which means they tend to fall in value a lot. So no one wants to borrow or lend for any length of time in Russian rubles," Lewis says.
"They need a currency that's reliable enough so they can access the world debt markets, that international lenders will buy these bonds and their own people will buy these bonds. Historically that has meant 'pay me in dollars'."
So why gold?
"They want to land on some kind of internationally acceptable medium...There's one thing that everyone's always been able to agree on and that is gold," says Lewis.
"The reason why it [gold] has been the basis of money for literally 5000 years is because it works. And the reason it works is because it does not vary in value very much. The basic premise is that gold is stable enough [so] it doesn't really cause a problem."
The 15th BRICS Summit scheduled for Johannesburg between August 22 and 24 will be watched closely. Basically these countries want a financial system that functions even if the US does not approve, says Lewis.
If such a system gets off the ground, what might it mean for a small trading nation like New Zealand, that's close to the US but has China as its key trade partner? Lewis expects pragmatism. Ultimately, he suggests, you could; "just go down to your local office of the [Industrial and] Commercial Bank of China and open an account and you're in."
Lewis envisages a scenario where; "99.99% of the time you're just trading gold checking accounts, it's all digital. But if push came to shove yeah, 'you've got to deliver some gold buddy'."
"So I think there are ways of minimising the need for international cooperation," says Lewis.
*You can find all episodes of the Of Interest podcast here.
38 Comments
We aren't going back to a gold standard. Just not happening. Why not? For our member site's 1-yr anniversary, we've included our membership's Basics #1 to explain: what is money? To replace the Euro$ you gotta do what it really does. https://buff.ly/3Do3kOr Link
Some one with an opinion on how this might play out.
He suspects the currency will be gold-weighted, not gold-backed. Meaning the currency won't function as a reserve currency and will not be redeemable for gold, but the value of the currency will be pegged to gold, facilitating trade.
For further info..
https://usawatchdog.com/new-brics-currency-boosts-gold-destroys-dollar-jim-rickards/
SA is the basket case amongst BRICS. India seems to be back peddaling. Can't for certain verify this on India.
Brazil might be OK. In any event China and Russia seem to be doing OK between themselves.
As far as i know NZ doesn't have any gold reserves so they'll still have trade with China in USD or accept something else.
SA has been corrupted. In particular some of the top government figure heads are in financial 'partnerships' with a very undesirable Indian crime family, so they will follow what India dictates.
Putin was wise to have pulled out of going to SA for the BRICS meeting, I had a feeling the SA government were protesting their neutrality too much.
The BRICS have no intention for BTC as reserves. However,
Russia has always been a powerhouse in terms of Bitcoin hash rate – a measure of computational power being contributed to the blockchain – thanks to the availability of cheap energy and its cold climate. Russia’s share of world mining gained as China banned the industry in 2021, making it the second- or third-largest in the world, according to one of its biggest mining firms.
https://www.coindesk.com/consensus-magazine/2023/07/28/amid-sanctions-b…
Haha. "Rest of us"? What does NZ have in common with the US or Europeans that we get to sit in the same boat as them. A majority of us have the same bloodline as other Caucasians for the time being, that's it?
The West will descend back into the dark ages on the very first day without natural resources from Russia and Brazil and Chinese and Indian productive capacities.
just a load of basket case countries
What does that say about NZ as a country that one of those basket cases has NZ by the nuts on trade and we need a steady stream of workers (skilled, unskilled... doesn't matter) from another to keep our economy from turning into complete mud.
I heard on Aljazeera some countries are going straight to the Yuan as the local currency to trade in as there is a shortage of USD. The problem is there is more and more countries around the world that are basically bankrupt with massive inflation and are desperately seeking a stable currency. We really have no idea in NZ, honestly all we have is first world problems.
NZ produces food for 55 Million so 50 Million available mouths required out of 8+ Billion Mouths required and current growing world food shortage - Floods/Fires/Droughts - reduced grain exports from Russia/Ukraine and export ban on Rice ex India I suspect customers will be queuing for good food 2024.
"They are printing money. They are not manufacturing anything at all, it's printing money. This has been one of their weapons globally - the monetary system... sanctions here, sanctions there... We need a new financial architecture globally."
Isaias Afwerki, President of Eritrea
https://twitter.com/upholdreality/status/1685077255477739520
A gold-backed currency, used by tyrants, dictators and failed states. What normal person would transfer their assets into such a preposterous scheme?
Gold is no longer 'money', it's an asset, but a very poor performing one, only 'stacked' away by very few countries who think it's alternative to the USD, which incidentally, has been climbing against other currencies for the past 15 years.
Inflation-adjusted, gold is one of the worst bets out there, a non-dividend yielding piece of metal which has no utility. The USA has a pile of it which it regards as 'traditional' and is used as a tourist attraction in New York.
Times are good while every country uses a fiat currency and nobody (apart from Muammar Gaddafi) is going to call it out. The last 50 years have been a lifetime for some. So things have to be pretty bad for some countries to want to walk away from that.
Apparently Russia and China want to go to some half-way house where gold is recognised again as a measure of value without requiring the financial discipline of a gold standard.
If gold has been seen as under-performing in the last 50 years then this is because of the price management schemes (which both the East and West have benefited from as gold has not challenged their fiat currencies) via the commodity exchanges where futures are traded and relatively low amounts of metal are transferred. There is nothing conspiratorial with this, before this there was the London Gold Pool, gold is a political metal and ‘needs’ to be managed by the central bankers.
There's nothing 'political' about gold. It's a chunk of metal anyone can buy/sell online or at a store.
Anyone can trade it or short it in any number of different ways from the comfort of home, just like property, coffee, metals, meat, livestock, forest products, energy etc.
Almost everybody lives quite happily without needing to know some of the tricks to managing a fiat currency system. And even those who know pay little attention – the system has worked for so long…, trillions were loaned to bail-out banks after the GFC etc without too many problems…, the banking system has remained sound even with a lot of countries buying their own govt debt (QE)...
The attached article is over 20 years old – most people would assume he was wrong. If (a big if) anything is going to upset the $US based financial system it might be Russia and China trying to get more recognition for gold.
https://deathofthedollar.blogspot.com/2011/05/peter-warburton-debasement-of-world.html
Central banks are engaged in a desperate battle on two fronts
What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, their actions seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.
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