August 23, 2023: will the BRICS currency be born in Durban?

Until now, the currency for international trade and finance has been the US dollar, but the agreements that the BRICS could sign in Durban in South Africa, on August 23rd, could change this status, at least partially.

The dollar currently has three major problems:

• it is no longer the major outlet market for oil and energy materials;
• it has been turned into a sort of weapon by the US government, as evidenced by the crisis in Ukraine, with the exclusion of Russia from the transactions;
• the US, with a current debt of just under 130%, may be tempted to use the press and inflate the currency.

These are legitimate fears, compounded by the political fact that China and Russia are global adversaries of the US.

Both nations have actively signed "bilateral trade agreements" with other nations, meaning they can buy and sell from each other in their own currencies, rather than using the dollar as an intermediary. exchanges between countries outside the western orbit.

So the Durban accords could be a treaty, presumably to be announced on Aug. 22, to launch a new commodity-backed international currency. “Commodity-backed” matters, because it's the easiest way for a new currency to gain credibility. What currency in existence today derives its value from something other than financial hope or power?

This new BRICS currency would allow participating nations to evade US financial sanctions and avoid the problem of dollar inflation.

Initially, my sources indicate that the BRICS currency could be backed by commodities produced and traded by the BRICS nations – things like oil, industrial metals and wheat – or, more likely, gold.

Backing their new currency with gold would be an obvious move for the BRICS. China and Russia are, respectively, the number 1 and number 2 gold-mining nations in the world (South Africa and Brazil are number 13 and number 14 respectively). Both China and Russia already have sizable official gold reserves (sixth and seventh in the world). However, tying a currency to a single commodity or precious metal would be dangerous, because the currency would have a value linked to a single asset, making it subject to speculative pressures that would have an effect on the entire set of BRICS currencies.

This, in essence, is the essence of the Durban Accords:

• An alternative to US global financial domination
• A method to prevent the US dollar from being used as a weapon
• One way to avoid inflation caused by excessive printing of dollars
• A means to simplify and streamline existing bilateral trade agreements
• The Durban Accords may be the first viable and useful alternative to the US dollar.

And that's why they can be a problem for the US. Will they stand by and do nothing?

Then there is another problem: no consumer buys "Iron" or "Uranium". Buy products also made with iron and energy of which uranium is part of the mix. The real currency is chosen by the buyer rather than the seller. China will decide, among the BRICS, the currency, because it is the largest consumer.

I personally believe that, rather than a single currency, an agreement is being reached on the methods of payment for international transactions as an alternative to the one based on the dollar, but not necessarily with a new currency. We'll know for sure in a little over a week.

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The article August 23, 2023: will the BRICS currency be born in Durban? comes from Economic Scenarios .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/23-agosto-2023-a-durban-nascera-la-valuta-dei-brics/ on Tue, 15 Aug 2023 07:00:09 +0000.