______________________________________________________
Gold-backed BRICS currency will be ‘very hard’ to deliver: Lyn Alden
A common currency would be challenging for Brazil, Russia, India, China and South Africa to initiate and maintain, but it could have an impact on Bitcoin, investment strategist Lyn Alden says.
Macroeconomist Lyn Alden has cast doubt on a proposal that would see five countries work together to develop a common BRICS currency — arguing it will likely struggle to get off the ground and fail to dethrone the United States dollar.
In an interview with Cointelegraph just days before the BRICS annual summit in South Africa, Alden explained that it would be “very hard” for BRICS members — Brazil, Russia, India, China and South Africa — to form a gold-backed currency for widespread use.
Russian President Vladimir Putin first announced that BRICS proposal to create an international reserve currency at the BRICS summit in 2022 to rival the U.S. dollar as the global reserve standard. This proposal was later confirmed to come in the form of a gold-backed currency.
However, Alden argued the model is flawed.
“Backing a fractional-reserve banking system with gold only works temporarily, because the currency units multiply more quickly than the gold does,” she said.
Instead, Alden sees a more likely outcome would be that BRICS nations lessen its reliance on the USD for cross-border payments by increasingly using their own currencies for trade — particularly the Chinese yuan.
Advertisement
______________________________________________________
Alden’s comments follow a similar sentiment by former Goldman Sachs economist Jim O’Neil, who dismissed the common currency notion as “ridiculous” in a Aug. 15 interview with the Australian Financial Review.
“They’re going to create a BRICS central bank? How would you do that? It’s embarrassing almost,” O’Neil said, explaining that it simply wouldn’t be feasible.
On Aug. 21, India’s foreign secretary, Vinay Mohan Kwatra, also downplayed the possibility of BRICS forming a common currency, stating that the member states have become increasingly focused on boosting trade using their own national currencies.
Emissaries from the nations are due to appear at the 15th BRICS annual summit held in South Africa on Aug. 22-24, which will cover issues relating to the formation of a common currency, BRICS Development Bank, international trade and the Russia-Ukraine conflict.
U.S. dollar dominance could impact Bitcoin
Meanwhile, Alden added that potential moves to eat into U.S. dollars’ dominance could, in a roundabout way, cause headwinds for Bitcoin.
“This attempt at de-dollarization is likely to contribute to structurally less foreign demand for U.S. Treasuries, higher Treasury yields, and the requirement for the U.S. Federal Reserve to eventually finance a larger share of U.S. government deficits as a result.”
Advertisement
______________________________________________________
If U.S. Treasury yields increase — due to a mass de-dollarization event or not — this could cause Bitcoin’s price to face headwinds as risk assets tend to underperform under those conditions, she explained.
On the other hand, Alden also believes that the price of Bitcoin may increase if the Federal Reserve needs to bail out more banks to keep them afloat:
“In the longer-term, when the Fed has to provide a liquidity backstop for the Treasury market, that would likely be very good for bitcoin, similar to how bitcoin shot up when the Fed had to intervene in the U.S. banking system back in March 2023.”
A liquidity backstop typically occurs when a bank’s own liquid assets are no longer sufficient to meet its financial obligations, so the central bank provides them with emergency liquidity.
Source: Coin Telegraph
______________________________________________________
If you wish to contact the author of any reader submitted guest post, you can give us an email at UniversalOm432Hz@gmail.com and we’ll forward your request to the author.
______________________________________________________
All articles, videos, and images posted on Dinar Chronicles were submitted by readers and/or handpicked by the site itself for informational and/or entertainment purposes.
Dinar Chronicles is not a registered investment adviser, broker dealer, banker or currency dealer and as such, no information on the website should be construed as investment advice. We do not support, represent or guarantee the completeness, truthfulness, accuracy, or reliability of any content or communications posted on this site. Information posted on this site may or may not be fictitious. We do not intend to and are not providing financial, legal, tax, political or any other advice to readers of this website.
Copyright © 2022 Dinar Chronicles
Advertisement
______________________________________________________
