The importance of the BRICS is no longer denied by anyone, even the President of the French Republic would like to invite himself to the next summit to be held next August, in South Africa. The BRICS are showing their desire for independence, and that of moving towards a resolutely multipolar world with its new international currency backed by gold.
The divorce has now been recorded between the BRICS bloc and the “Western” bloc composed essentially of the United States, the United Kingdom and its Commonwealth, Europe and to a certain extent Japan, noting that the latter also seems to be gradually moving away from it, the sanctions against Russia becoming impossible to maintain for the Asian archipelago.
The freezing of Russia's foreign exchange reserves (about six hundred billion US dollars) has set off alarm bells in many non-Western countries. He reminded a number of them that holding US dollars comes with political risk. This prompted many of them to restructure their international foreign exchange reserves: to hold fewer US dollars, to switch to other (smaller) currencies, but above all to buy more gold.
On July 07, 2023, international financial media announced that the BRICS were about to come up with a new gold-backed currency. This new international currency would be the only credible alternative to the US dollar in international trade and financial transactions.
China, with vast masses of gold, solid energy partnerships with Russia and the rest of the BRICS, could well launch a Yuan-Gold which would shake the international monetary system hard.
This proposal for a new currency, which would see the light of day next August, is to be taken very seriously and many economists agree that this BRICS proposal is sound, considering that the BRICS represent approximately 3.2 billion people, or approximately 40% of the world's population, with a combined economic output almost as large as the economy of the United States of America. Other countries such as Saudi Arabia, United Arab Emirates, Egypt, Iran, Algeria, Argentina, and Kazakhstan might also want to join the BRICS club.
The BRICS are a strong source of the gold produced in the world. BRICS “official” gold reserves stood at 5,452.7 tonnes in the first quarter of 2023 (current market value of around US$350 billion).
The BRICS could create a new bank (the “BRICS bank”), financed by the gold deposits of their central banks. Physically deposited gold assets would appear on the asset side of the BRICS bank's balance sheet and could be denominated, for example, in "BRICS gold", gold representing one gram of physical gold. BRICS gold could now be used by BRICS countries and their trading partners as an international currency, as an international unit of account in global trade and financial transactions.
Currently, the US dollar accounts for nearly 60% of global asset reserves, held in US Treasury bonds. The US dollar still largely dominates international trade and its market share even crushes the competition. Nearly 7 trillion US dollars are traded every day against only 2 trillion euros, its nearest competitor. The yuan comes in fifth with a paltry $500 billion a day (China holds over $3 trillion US).
The depreciation of the US dollar will have a definite impact on all world economies. All countries with a trade deficit, starting with the United States, will be the most affected.
A real economic war is underway between Western countries on one side and the rest of the world on the other, which no longer to blindly follow Uncle Sam's proposals.
This new gold-backed international trading currency will have the effect of a tsunami and could destabilize the global economic and financial structure, as it would likely lead to a sharp increase in the demand for gold from current levels, and at the same time devalue the purchasing power of the official currencies, not only the US dollar but also the BRICS currencies.
The launch of this gold-backed currency is expected to be decided at the end of August (August 22-24), at the meeting of BRICS countries in Johannesburg, South Africa.
One thing is certain, all economists and financiers on an international scale will follow this next BRICS meeting very closely...
