Exploring the Revolutionary RV Potential of the BRICS Alliance’s New Gold-Backed Currency and Releasing a Global Financial Reset
In This Article:
- Introduction to the BRICS Alliance’s Bold Ambition
- Key Ingredients for the Success of a BRICS Gold-Based Currency
- Overcoming Challenges and Real-World Implications
- Overview of the New Gold-based Currency Structure
- The Transformative Impact on Global Trade and Sanctions
The BRICS Alliance is on the cusp of a financial currency and system infrastructure revolution.
They aim to disrupt the US Dollar-dominated fiat currency system with a groundbreaking gold-backed currency.
The new gold-based currency is designed to enhance trade efficiency, foster economic stability, and reduce dependency on traditional fiat currencies.
This initiative promises to reset the global financial order, offering a beacon of hope for a debt-free future. This article addresses the vital elements required for the success of this new gold-based currency, the challenges it faces, and its transformative potential on global trade and sanctions.
Introduction to the BRICS Alliance’s Bold Ambition
The BRICS Alliance represents a dynamic coalition of emerging economies determined to create a fairer, more balanced global financial system.
Their proposed gold-backed currency, has no name or currency symbol at this time, so for now I will continue to refer to it as the CTCU (for common trade currency unit).
With its introduction, the world will witness a shift towards financial freedom, trade equality and renewed prosperity.
Key Ingredients for the Success of a BRICS Gold-Based Currency
1. Ensuring Currency Stability and Free-Floating Mechanism
For the CTCU to thrive, it must be allowed to float freely in the global market. Currently, the Chinese Yuan does not meet this criterion, limiting its potential as a reserve currency. A freely floating CTCU, supported by stable and transparent economic policies from all BRICS nations, is essential for success.
2. Establishing the CTCU as a Genuine Reserve Currency
A successful CTCU would be recognized and accepted as a reserve currency by central banks worldwide. This involves building trust in the currency’s stability and reliability, backed by the economic strength and resources of the BRICS nations.
3. Development of a CTCU-Based Bond Market
A functioning bond market is crucial for the widespread use of the CTCU. It provides a mechanism for investing and lending, offering returns on CTCU holdings and enhancing its appeal to global investors.
4. Widespread Acceptance and Willingness to Trade in CTCUs
For the CTCU to succeed, businesses and individuals must be willing to trade and accept Bricks over local currencies or the US Dollar. This requires significant shifts in trading practices and confidence in the new currency.
5. Overcoming Export Mercantilism
China’s current export mercantilism—prioritizing trade surpluses and accumulating foreign reserves—must be addressed. Without changes in this policy, the CTCU would face similar challenges as the Yuan in becoming a global reserve currency.
6. Building Trust
Trust is a fundamental component of any currency’s success. The BRICS nations must demonstrate a commitment to maintaining the CTCU’s value, backed by tangible assets like gold, and ensure transparency in their financial practices.
Overcoming Challenges and Real-World Implications
Export Mercantilism and Trade Imbalances
China’s historical trade surpluses have led to the accumulation of US Dollar reserves. For the CTCU to succeed, there must be a shift towards balanced trade practices. This change would involve significant economic reforms and a willingness to move away from mercantilist policies.
Trade Dynamics and Practical Challenges
Global trade operates at the individual and business level, rather than between nations. A Brazilian business, for example, would need to convert local currency to CTCUs, engage in transactions, and ultimately manage the CTCU holdings. The lack of a CTCU-based bond market and other financial instruments complicates this process, reducing the currency’s attractiveness.
Case Study: Saudi Aramco and Brick Transactions
Consider a scenario where Saudi Arabia’s Aramco sells oil in CTCUs. The company would need to convert CTCUs to other currencies or financial instruments to utilize its earnings. Without a developed CTCU financial ecosystem, this process remains cumbersome and impractical.
The Transformative Impact on Global Trade and Sanctions
Sanction Avoidance and Digital Currencies
While the CTCU faces significant challenges as a global reserve currency, it holds promise for sanction avoidance. Countries and individuals subject to US sanctions could use the CTCU to conduct transactions beyond the reach of US financial systems.
The development of digital currencies further facilitates this process, offering a more covert means of trade.
US Sanctions and Global Retaliation
The US has extensively used sanctions as a foreign policy tool. The proliferation of a BRICS gold-based currency, coupled with decentralized digital ledger technology, would undermine this strategy by providing alternative transaction mechanisms.
This shift may not dethrone the US Dollar completely, but could significantly limit the US’s ability to enforce sanctions globally.
Long-Term Financial Stability
In the long run, a successful CTCU would contribute to a more diversified and stable global financial system.
However, this requires overcoming significant economic, political, and trust barriers. The establishment of the BRICS Common Trade Currency Unit (CTCU) and its potential gold backing illustrates ongoing efforts to achieve these goals.
Overview of the CTCU Currency Structure
The long-term stability of the BRICS Alliance’s financial vision hinges on the successful implementation of the Common Trade Currency Unit (CTCU).
This innovative currency aims to provide a stable, reliable alternative to the US Dollar, backed by tangible assets including gold. The CTCU is designed to enhance trade efficiency, foster economic stability, and reduce dependency on traditional fiat currencies.
The CTCU operates within a decentralized ecosystem facilitated by a blockchain platform. Each authorized node within this ecosystem can issue settlement and payment units denominated in CTCUs.
These units serve as a medium of exchange, unit of account, and store of value for cross-border transactions among BRICS nations.
The CTCU is pegged to a basket of assets to ensure stability and trust.
Specifically, it is anchored to 1 gram of gold, with the remaining value equally divided between two currencies from BRICS countries.
This hybrid backing provides a robust foundation for the CTCU, mitigating the volatility typically associated with fiat currencies.
Also Read: A Look Under the Hood of the Gold-backed BRICS Currency to understand how the new BRICS gold-based currency unit will RV smaller country currencies upwards against the major fiat debt currencies (such as the USD and EURO).
The Bottom Line
The BRICS Alliance’s pursuit of a gold-backed currency represents a bold move towards reshaping the global financial landscape.
While the path to success is fraught with challenges—ranging from establishing trust to developing robust financial markets—the potential benefits are substantial.
A successful CTCU would facilitate sanction avoidance, promote economic stability, and provide a meaningful alternative to the US Dollar-dominated system.
Contributing article: https://mishtalk.com/economics/what-would-it-take-for-a-bric-based-currency-to-succeed/
