The possibility of a forthcoming gold-backed BRICS currency has been cast into doubt by macroeconomist Lyn Alden, dismissing its feasibility and even going so far to argue it would indeed be a hard feat for the BRICS members to achieve widespread use of such a currency. The five BRICS members – Brazil, Russia, India, China, and South Africa – are seemingly intent on challenging the dominance of the U.S. dollar. However, Alden takes issue with the model backing a fractional-reserve banking system with gold, arguing that the rapid multiplication of currency units can’t keep up with that of gold.
Alden’s skepticism is mirrored by former Goldman Sachs economist Jim O’Neil, who labeled the idea as “ridiculous,” and raised concerns about the practicality of creating a BRICS central bank. Doubts have also been echoed by India’s foreign secretary, Vinay Mohan Kwatra.
Not all views on the proposal are purely negative, however. An alternative outcome suggested by Alden could be that the BRICS nations slowly reduce their reliance on USD for cross-border payments through increased use of their own currencies for trade. As such, the Chinese yuan might become more prominently used.
On a different note, Alden shared an interesting perspective on the potential effects of a decrease in the U.S. dollar’s dominance on Bitcoin. U.S. attempts at de-dollarization might lead to a fall in foreign demand for U.S. treasuries and result in higher treasury yields. Consequently, the U.S. Federal Reserve might have to prop up a larger share of U.S. government deficits. Increased U.S. treasury yields could cause Bitcoin’s price to waver, as risk assets typically underperform in such conditions.
Regardless, if the Federal Reserve is forced into a position where
Source: Cointelegraph
