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Gold-backed BRICS currency will be ‘very difficult’ to produce

Macroeconomist Lyn Alden voiced skepticism about the proposal, which envisions the five countries working together to develop a common BRICS currency, arguing that this currency will likely struggle to stand up and will not dethrone the US dollar.
In an interview with Cointelegraph just days before the annual BRICS summit in South Africa, Alden explained: would be “too complicated” for participating countries – Brazil, Russia, India, China and South Africa – Creating a gold-based currency to be used on a large scale.
Russian President Vladimir Putin announced He presented the BRICS proposal for the first time at the 2022 BRICS summit to create an international reserve currency that will rival the US dollar as the global reserve standard. The proposal was later approved in the form of a gold-backed currency..
However, Alden argues that the model is flawed.
“Supporting fractional reserve banking with gold will only work temporarily because currencies will multiply faster than gold.”Announced.
But the most likely outcome, according to Alden, will be for BRICS countries to reduce their reliance on the US dollar for cross-border payments. They increasingly use their own currency for tradingespecially the Chinese yuan.

BRICS countries keep G7 currencies as reserves, but not vice versa. However, the BRICS countries surpassed the G7 in terms of economic size.
Reserve practices don’t change overnight, but this is a very different environment from 10 years ago.

Alden’s comments echo a similar judgment expressed by former Goldman Sachs economist Jim O’Neil; he, too, rejected the idea of ​​a single currency as “ridiculous”.report It was published in the Australian Financial Review on August 15.
“Will the BRICS establish a central bank? How can this be done? It’s almost embarrassing”O’Neil added that this would definitely not be possible.
On 21 August, Indian Foreign Minister Vinay Mohan Kwatra also belittled Probability of BRICS countries to create a common currency, probability of member states to create a common currency they are increasingly focusing on boosting trade using their own national currencies.
Representatives of the countries will attend 15th Annual Summit The BRICS Meeting to be held from 22-24 August in South Africa, where issues related to the creation of the common currency, the BRICS Development Bank, international trade and the conflict between Russia and Ukraine will be discussed.

US dollar dominance may affect Bitcoin

Meanwhile, Alden emphasized that potential moves negatively affect the situation. US dollar dominance can be indirectly block bitcoin.

“This de-dollarization effort will likely help structurally reduce foreign demand for U.S. Treasuries, boost bond yields, and force the Federal Reserve to finance a larger portion of U.S. government deficits.”

Six US Treasury yields should rise – whether or not due to a massive de-dollarization event – Bitcoin price may declineHe goes on to say that risky assets tend to underperform under these conditions.
On the other hand, Alden believes in Bitcoin’s price (bitcoin) Could rise if the Federal Reserve bails out other banks to keep them afloat:

“In the long run, the Fed having to provide liquidity support to the Treasury market will likely be very positive for Bitcoin, similar to how the asset rose when the Fed was forced to intervene in the US banking system in March 2023”.

Liquidity support usually occurs when a bank’s liquid assets are not sufficient to meet its financial obligations, and the central bank provides it with immediate liquidity.

Translation of Walter Rizzo

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