> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money
Of course more countries may enrol in the system, but that dilutes the influence of the five namesake nations of BRICS.
But then you have to choose an actual currency(s) to do transactions in, so will you trust them to be stable? Or perhaps go with a 'theoretical' currency likes Keynes' bancor?
I don't understand why gold-backing is required. I'm a novice.
My understanding is that a reserve currency requires fluid markets and a stable, reliable, metrics-based currency policy. It's why the Fed is so stubborn about its relatively simple policy goals: 2% inflation and low unemployment.
China appears to be attempting to reproduce what the USD was before it was free floating.
USD is currently backed by debt and nominally military might. If the US defaults then all of the US bonds held by foreign banks become worthless. That is an enormous risk which is why countries have been divesting from US bonds. If USD was still gold, as it was before 1913, if you hold your money it cannot be made worthless by a third party. After 1913 USD became gold backed bills with partial reserve. It is why USD became the global reserve currency. But, reserve requirements were reduced and more paper was produced. In 1971 Nixon removed the convertibility of paper bills to gold metal effectively stealing the gold of any nation that asked the US to hold it.
One of my favorite bits of currency trivia is that a $20 double gold eagle coin used in circulation prior to 1933 had a gold content of 0.9675 troy ounces. Twenty dollars in your hand was literally nearly an ounce of gold.
This simplistic explanation seems to elide the very point it makes ... a gold backed currency becoming a non-gold backed currency was done via a political decision making process, just as any decision to default on US national debt would be.
You seem to suggest that people should worry about a default claiming if we had still had a gold backed currency the risk would go away ... "if you hold your money it cannot be made worthless by a third party" ... but it can be made worthless by a government any time that government chooses.
The government (having defaulted on gold-backed debt) could simply refuse to convert the paper of the debt to gold (sure, that would be bad, but hey, they've already chosen to default, so not much worse ...)
Oh no! You have found the fatal flaw of using paper currency backed by anything. Before 1913 money was gold and silver. Not paper bills backed by those metals.
Many people doubt that returning to gold and silver coinage is possible. Going to gold backed currency is a step in the right direction.
A full reserve requirement might work for paper currency. But the only way the plebs that are stuck with paper can truly secure their wealth is to use metal the same as countries do.
1. old situation: currency backed by full (gold) reserve
2. actual political decision: currency no longer backed by full reserve
3. result: currency no longer backed by full reserve
1. possible political decision: return to currency backed by full (gold) reserve
2. possible political decision: currency no longer backed by full reserve
3. result: currency no longer backed by full reserve
To whatever extent government could return a full-reserve backed currency, government can move away from that again. Thus, there's no builtin security for anyone in a return to a full reserve backed currency.
If no government in the history of the world had ever done this, then arguing for a full-reserve backed currency might have a bit more weight. But they have, and it really has done.
All reasons that a paper currency backed by gold has never lasted long. Going to paper currency is the first step to start cheating by fudging numbers. The only money that has ever lasted is actual coins/bars of metal, precious or otherwise.
> The only money that has ever lasted is actual coins/bars of metal, precious or otherwise.
1. most physical paper has a relatively short life, so one would not expect it to last as long as metal tokens
2. paper was only available in much of the world several thousand years after the first currencies began, so it's not suprising that we have little record of paper money from very old civilizations.
3. the idea that there was no cheating by fudging numbers before paper currency is completely ahistorical. The nature and ease of the fudging may have changed, but the fudging itself existed long, long before paper currencies became common.
The entire reason coinage was even a thing was exactly this! Turns out it's pretty hard to know if a coin is actually the amount of gold it represents, if the shopkeepers scales are accurate etc etc. etc
The entire concept of marking coins with trustworthy seals was exactly to basically invent fiat currency as risk mitigation: coins bearing the seal would be honored, and from that it was a short hop to "what if I just presented an IOU with the seal of the local gold merchant?"
Looks like the BRICS initiative is building towards this with an August announcement. But until it happens, this is still in rumor territory.
https://bmg-group.com/russia-confirms-brics-will-create-gold...
A semi-joke-y take on BRICS:
> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money
* https://twitter.com/davidfrum/status/1665053372402081792
Of course more countries may enrol in the system, but that dilutes the influence of the five namesake nations of BRICS.
But then you have to choose an actual currency(s) to do transactions in, so will you trust them to be stable? Or perhaps go with a 'theoretical' currency likes Keynes' bancor?
* https://en.wikipedia.org/wiki/Bancor
* https://en.wikipedia.org/wiki/World_currency#Single_world_cu...
As for gold-based currencies, see perhaps "Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts":
* http://archive.is/https://www.theatlantic.com/business/archi...
* https://www.moneyandbanking.com/commentary/2016/12/14/why-a-...
I don't understand why gold-backing is required. I'm a novice.
My understanding is that a reserve currency requires fluid markets and a stable, reliable, metrics-based currency policy. It's why the Fed is so stubborn about its relatively simple policy goals: 2% inflation and low unemployment.
Partially gold backed reduces counter-party risk. Fully gold backed, and exchangeable, eliminates counter-party risk.
China appears to be attempting to reproduce what the USD was before it was free floating.
USD is currently backed by debt and nominally military might. If the US defaults then all of the US bonds held by foreign banks become worthless. That is an enormous risk which is why countries have been divesting from US bonds. If USD was still gold, as it was before 1913, if you hold your money it cannot be made worthless by a third party. After 1913 USD became gold backed bills with partial reserve. It is why USD became the global reserve currency. But, reserve requirements were reduced and more paper was produced. In 1971 Nixon removed the convertibility of paper bills to gold metal effectively stealing the gold of any nation that asked the US to hold it.
One of my favorite bits of currency trivia is that a $20 double gold eagle coin used in circulation prior to 1933 had a gold content of 0.9675 troy ounces. Twenty dollars in your hand was literally nearly an ounce of gold.
This simplistic explanation seems to elide the very point it makes ... a gold backed currency becoming a non-gold backed currency was done via a political decision making process, just as any decision to default on US national debt would be.
You seem to suggest that people should worry about a default claiming if we had still had a gold backed currency the risk would go away ... "if you hold your money it cannot be made worthless by a third party" ... but it can be made worthless by a government any time that government chooses.
The government (having defaulted on gold-backed debt) could simply refuse to convert the paper of the debt to gold (sure, that would be bad, but hey, they've already chosen to default, so not much worse ...)
Oh no! You have found the fatal flaw of using paper currency backed by anything. Before 1913 money was gold and silver. Not paper bills backed by those metals.
Many people doubt that returning to gold and silver coinage is possible. Going to gold backed currency is a step in the right direction.
A full reserve requirement might work for paper currency. But the only way the plebs that are stuck with paper can truly secure their wealth is to use metal the same as countries do.
Congrats on missing my point.
To whatever extent government could return a full-reserve backed currency, government can move away from that again. Thus, there's no builtin security for anyone in a return to a full reserve backed currency.If no government in the history of the world had ever done this, then arguing for a full-reserve backed currency might have a bit more weight. But they have, and it really has done.
the timeframe of losing the gold backing is typically measured in decades, while reserve currencies are used in a day-to-day basis.
it took decades when the US did it. there's no inherent reason for that.
Who stores the gold? Who audits the gold? Who trusts the audits? It isn't hard to wrap gold around tungsten.
All reasons that a paper currency backed by gold has never lasted long. Going to paper currency is the first step to start cheating by fudging numbers. The only money that has ever lasted is actual coins/bars of metal, precious or otherwise.
> The only money that has ever lasted is actual coins/bars of metal, precious or otherwise.
1. most physical paper has a relatively short life, so one would not expect it to last as long as metal tokens
2. paper was only available in much of the world several thousand years after the first currencies began, so it's not suprising that we have little record of paper money from very old civilizations.
3. the idea that there was no cheating by fudging numbers before paper currency is completely ahistorical. The nature and ease of the fudging may have changed, but the fudging itself existed long, long before paper currencies became common.
Even coins were shaved and debased.
The entire reason coinage was even a thing was exactly this! Turns out it's pretty hard to know if a coin is actually the amount of gold it represents, if the shopkeepers scales are accurate etc etc. etc
The entire concept of marking coins with trustworthy seals was exactly to basically invent fiat currency as risk mitigation: coins bearing the seal would be honored, and from that it was a short hop to "what if I just presented an IOU with the seal of the local gold merchant?"