By Stefan J. Bos, Chief International Correspondent Worthy News
CAPE TOWN (Worthy News) – The U.S. dollar’s domination in world trade was further challenged Thursday as BRICS nations asked the bloc’s bank to investigate how a gold-backed shared currency might work.
The foreign ministers of Brazil, Russia, India, China, and South Africa, convening in Cape Town, South Africa, made clear the currency could help shield BRICS members from, for instance, sanctions imposed on Russia.
A BRICS currency, perhaps called the ‘bric,’ could challenge dollar dominance in trade partly because members could fund their import bills by themselves, according to leading economists.
“In 2022, as a whole, the BRICS reportedly ran a trade surplus, also known as a balance of payments surplus, of $387 billion – mostly thanks to China,” noted Joseph W. Sullivan, an expert.
Russia’s State Duma Deputy Chairman Alexander Babakov also suggested that the new currency could be backed by gold and other precious commodities.
Plans to back the currency by gold are praised by Sullivan, a former special advisor and staff economist at the White House Council of Economic Advisers in the Trump administration.
The BRICS’ reported “plan to back their new currency with gold and other metals with intrinsic value, like rare-earth metals, interest-paying assets denominated in the bric would resemble interest-paying gold. That’s an unusual characteristic,” he wrote in a recent assessment.
American President Richard Nixon severed the U.S. dollar’s ties to gold nearly 52 ago. Since then, the dollar has been the world’s main freely floating currency for trade.
Some have tried to shrug off threats to the dollar’s dominance, saying other countries had tried it in the past. “The dollar is high by historical standards. You have to put your money somewhere, and the dollar is a good place to put it,” said the former U.S. Treasury Secretary Lawrence Summers at an investment conference earlier this year.
He quipped about currency alternatives to the dollar: “Europe is a museum, Japan is a nursing home, China is a jail, and Bitcoin is an experiment.”
However, the U.S. dollar’s position on the currencies throne could be challenged by a gold-backed ‘bric’ currency, economists suggest.
“It is one that could make the assets denominated in the ‘bric’ attractive to investors who want both the interest-bearing property of bonds and the diversifying properties of gold,” Sullivan wrote in a recent assessment.
And Jim O’Neill, a former chief economist at investment bank Goldman Sachs, even urged the BRICS bloc to expand and challenge the dominance of the U.S. dollar.
O’Neill argued that the dollar’s dominance destabilizes other nations’ monetary policies, so BRICS should counter it. “The U.S. dollar plays a far too dominant role in global finance,” he wrote in a paper published in the Global Policy journal.
“Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic.”
Former U.S. President Donald J. Trump already predicted the global de-dollarization trend when speaking to his supporters recently. The U.S. dollar “is crashing and will no longer be the world standard, which will be our greatest defeat, frankly, in 200 years,” Trump warned.
The BRICS gathering of foreign ministers where they discussed their new currency was a precursor to an August 22-24 summit of the bloc’s heads of state currently scheduled for Johannesburg.
While they didn’t reach firm conclusions, the use of alternative currencies was among the prominent talking points, confirmed Naledi Pandor, South Africa’s minister of international relations
The BRICS want to “ensure that we do not become victims to sanctions that have secondary effects on countries that have no involvement in issues that have led to those unilateral sanctions,” Pandor stressed.
He clarified that the New Development Bank, the Shanghai-based lender created by BRICS nations, and the bloc would be asked for guidance on the new currency and other related issues.
Asked about his meeting with a Saudi Arabian delegation, Russian Foreign Minister Sergey Lavrov said they discussed the possibility of the kingdom joining the club. It comes amid broader talks about how the bloc should expand its membership.
“With regard to the issue of BRICS, it is still being shaped; it is still evolving,” he told reporters. The bloc’s prospect of adding more members was first raised at last year’s summit in China, and 13 nations have formally asked to join, with at least seven others expressing interest.
Already BRICS countries Brazil, Russia, India, China, and South Africa have overtaken the United States and its allies in the Group of Seven (G7) of leading economies in global economic output.
Data show they now provide nearly 31.5 percent of the global Gross Domestic Product (GDP), with more growth expected. However, the G7, comprising Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, reportedly contributes just 30.7 percent of the world’s GDP.
Previous International Monetary Fund data monitored by Worthy News predicted that the BRICS countries would contribute 32.1 percent of the world’s growth, compared to the G7’s 29.9 percent.
BRICS, which invited South Africa to join in 2010, and comprises 42 percent of the population, made clear Thursday it wants to punch its weight as a bloc.
Thursday’s foreign ministers meeting in Cape Town was a precursor to an August 22-24 summit of BRICS heads of state currently scheduled for Johannesburg.
South Africa is reportedly considering switching the venue to another nation to solve its dilemma over whether to execute an International Criminal Court (ICC) arrest warrant for Russian President Vladimir Putin if he arrives.
The government may ask China or neighboring Mozambique to host the BRICS summit, Bloomberg news agency quoted senior government sources as saying, to avoid a standoff with the ICC and the international community.
South Africa so far refused to condemn Russia’s invasion of Ukraine, which largely isolated Moscow on the global stage. The influential African nation, wielding moral clout for its victory over apartheid when Blacks suffered deep-rooted discrimination, says it wants to stay “neutral.”
South Africa favors peace talks to end Europe’s largest armed conflict since the Second World War— an opinion shared thousands of miles away by Hungary, a neighbor of Ukraine.
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