BRICS gold-backed currency coming in August | Hacker News Reader

BRICS gold-backed currency coming in August

dailyreckoning.com

29 pointssph83 comments

This thread will surely be visited only by people with some knowledge economics, or at least the history of modern currency system. /s

With that out of the way, let me tell you some harsh truths. Gold standard fell apart because it was a bad way to manage currency in a modern industrialized society. The Great Depression was effectively the final nail in it's coffin. Bretton Woods was essentially vehicle for US dollar dominance, and ended when in the 70s US government realized it wasn't worth the effort.

But sure, let's go back to that. Given our, and by that I mean Tech community, track record of monetary decisions that can only work out great. Let's "do our own research" again.

> Gold standard fell apart because it was a bad way to manage currency in a modern industrialized society

Source? From what I understand, the gold standard felt apart in WW1. Some also indicate WW1 being the first worldwide conflict because the war machine was no longer restricted by what's in the government's coffers, so you can go all in and basically have future generations pay for it (with massive inflation if you lose, but if you win you have the spoils to repay the cost of the war, and then some)

And leaving the gold standard is also viral: if your enemies can print money and pay for enormous amounts of soldiers and ammo in the short term, either you adopt it to stay apace or you get overwhelmed.

AFAIR Germany was the first to abandon the gold standard, and all European nations followed immediately thereafter. Then losing the war explains all the events leading up to the rise of Hitler.

There were plenty of examples of countries devaluing their currency before World War I. No one was ever really on the gold standard, that was just what the governments were willing to exchange it for at times. The government could always alter the exchange rate or simply stop exchanging it for gold even if they were "on the gold standard." (Look at the Confederate dollar for an example). Also, the only reason World War I is the first World War is because we called it that. There were plenty of wars which involved multiple continents before that. For example, the Napoleonic Wars involved every continent but Antarctica.

Example such as? Because the big players like Europe and USA all did during WW1, then got back to the gold standard just after the war for a few years until John Maynard Keynes convinced everyone that it was a bad idea, and we're still debating whether that's the case to this day.

I don't recall the specifics but only the USA was in a weird fiat-gold hybrid until the 70s as before that they guaranteed they would buy gold at a specific price in $

> There were plenty of examples of countries devaluing their currency before World War I.

And it's not like the gold standard stabilized prices either:

* https://www.theatlantic.com/business/archive/2012/08/why-the...

* https://archive.li/FWKcL

> Source? From what I understand, the gold standard felt apart in WW1.

Yes, and everyone went back to it in the 1920s:

* https://www.theatlantic.com/magazine/archive/1922/07/shall-w...

And then started abandoning it in the 1930s during the Great Depression. And the sooner a country (re-)abandoned it the sooner it started to recover in the 1930s. France was the last country to leave it:

> In the end, recovery from the Great Depression does not begin until countries give up on the combination of the Bagehot Rule and of commitment to sound gold-standard finance. Those countries that have central banks willing to print up enough money so that people are willing to spend it--it is when you adopt such policies that your economy begins to recover. If you don’t, you become France, which sticks to the gold standard all the way up to 1937, and never gets a recovery. When World War II begins, Nazi Germany’s production--equal to France's in 1933--had doubled between 1933 and 1939. French production had fallen by 15%.

* https://delong.typepad.com/delong_long_form/2013/10/the-grea...

But of course. Economy is a zero-sum game. You can't get massive amounts of money on "loan" by abandoning it, and expect that the economy keeps chugging along if you readopt it. The war has to be paid somehow, and abandoning the standard was the only way of each country giving themselves a loan to participate in WW1.

This is exactly what we are seeing today: we pulled money out of thin air to pay for the COVID disruption to the economy, and now we have massive inflation. And you can't blame the gold standard for it this time.

I have yet to hear someone argue why the fiat system is preferable to the gold standard without parroting Keynes or using history as proof of the validity of the choice. Macroeconomy is complex but also very simple: either you can pay for something with money you have today, or you create debt, which you will eventually have to pay, somehow.

> This is exactly what we are seeing today: we pulled money out of thin air to pay for the COVID disruption to the economy, and now we have massive inflation. And you can't blame the gold standard for it this time.

There was deflation in 2020 for a while (due to the pandemic). The 'high inflation' in 2021 was because of base effects:

* https://en.wikipedia.org/wiki/Base_effect

Inflation went high in 2022 partly because of energy costs, specifically fossil fuel energy (thanks Russia), at least according to Canadian CPI data (where I live):

* https://twitter.com/trevortombe/status/1559524236745576448

* https://twitter.com/trevortombe/status/1555662571021029376

High food prices (esp. grain/wheat) could also be traced to geopolitics (thanks Russia).

Then there's supply chain issues:

* https://www.frbsf.org/economic-research/publications/economi...

> I have yet to hear someone argue why the fiat system is preferable to the gold standard without parroting Keynes or using history as proof of the validity of the choice.

Because the gold standard does nothing to produce stable prices:

* https://www.theatlantic.com/business/archive/2012/08/why-the...

* https://archive.li/FWKcL

> The price of milk is way more stable over the last 18 years [up to 2012] when priced in dollars. In gold, we'd have gone from major inflation in the 90s, to deflation throughout the 2000s.

> So gold doesn't work for global purposes, and it doesn't even make the economy more stable.

* https://www.businessinsider.com/why-the-gold-standard-is-the...

While reducing flexibility to deal with economic cycles:

* https://delong.typepad.com/delong_long_form/2013/10/the-grea...

And why shouldn't people "parrot" Keynes? He was right after all. And why shouldn't the historical record be used as proof / evidence? It shows various economic policy experiments and what works (stimulus spending) and what doesn't (expansionary austerity; cutting taxes pays for itself, cf. "Kansas experiment").

Would you complain about people "parroting" Einstein and his General Theory?

> From what I understand, the gold standard felt apart in WW1.

Formal gold standards were only introduced in the 1870s. No matter where exactly you put the end date, it only existed for a shockingly short time frame, and has very little relation to whatever you want to call "traditional" monetary systems.

> Some also indicate WW1 being the first worldwide conflict because the war machine was no longer restricted by what's in the government's coffers, so you can go all in and basically have future generations pay for it (by massive inflation if you lose, but if you win you have the spoils to repay the cost of the war, and then some)

I can see why this line of thinking appeals to some people with rather creative interpretations of fiscal policy… but no, this is how wars have always been financed in heavily monetized societies. You always had the option of re-minting your 100% silver coins (or gold coins, for that matter, but gold rarely ever had the special status "gold standard extremists" ascribe to it) into 99% silver coins… or 90%.

Or 25%.

Or even less than 10%.

You bet that future generations were regularly crippled by this kind of ridiculously massive inflationary shocks. The Ottoman and Western Roman empires never recovered from debasing their currencies so hard.

And while the British and French Empire also didn't survive their takes on currency debasement for long (Germany didn't have much wealth left to turn into war spoils, and the other central powers didn't even exist anymore – they had abolished the gold standards before Britain/France, from what I can tell, by a month or two), the US did fabulously well after both WW1 and WW2, and that's without trying to plunder anyone.

Tying monetary policy to how much of a metal you can dig out of the ground just does not make sense.

I really encourage you folks to look up the difference between currency and money, it will make it a bit cleaner.

You can have run an economy on pounds of gold, what matters is the exchange rate to currency.

In an industrialized society, where your rate of digging gold out of the ground is fully decoupled from how well the rest of the economy is doing, you will be constantly adjusting the exchange rate. That will sooner or later lead to speculation on future adjustments blowing up your gold standard.

Your first sentence is a bit ironic. You're conflating currency with money. Gold was never really used as currency, the currency (dollar) was backed by money (gold)

The concept doesn’t really make any sense on its face. Gold is gold. A kilo of gold is worth the same in the United States as in China or India. So when you look at the nations backing this—the BRICS countries, plus a few other nations that are mostly steaming dungheaps or, at best, oil banana republics—the obvious question is why would they be pushing a standard based on a universal commodity rather than anything tied to their economies? The answer is obvious, of course. Their economies, even combined, are simply in no place to compete on the world stage. Pushing gold as a standard makes them seem stronger than they are, in an attempt to wean the world off dependence on dollars and euros… but if gold were so much better, as you say, we’d still be on it.

>> Gold standard fell apart because it was a bad way to manage currency in a modern industrialised society

Gold market is heavily manipulated by big player such as Chase, or if you go back far enough by city state like the Venetians.

Having a gold back currency is just a insurance against the central banks to not just print money too erratically. If you look around the US, several states have already created bullion repositories. Not to mention countries such Russia, China, Germany have being repatriating gold for quite some times now.

> Gold standard fell apart

As if it's only happened once in history... It's cyclical. Currencies start out pegged to gold to attract initial users. Then they become loosely defended with gold, and then they publicly decouple and become fiat. Those in power want to have more power and leverage, as usual. Nothing "wrong" so far. Then they overprint and lose credibility/stability. And the cycle repeats somewhere else.

(I think that was from Dalio's debt series.)

I'm curious how you'd start this new currency, if not backed by gold? BRICS don't want to depend on USD, and gold is commonly the denominator everyone can agree on.

No, this isn't because 'it's cyclical', this is a simplistic explanation. The issue is that this currency will probably be manipulated. And while central banks issued currencies can be protected by central banks themselves (at a cost, when they are reactive enough), it's impossible to protect gold from manipulation. Especially if US and EU authorities don't care, or pretend not to. And now, some want to peg a currency to gold prices? It's like pegging a currency to the bitcoin, except with a bitcoin on a blockchain that non one can audit.

Look into how France broke the gold standard (without really meaning to I heard from my grandfather, the goal was to pressure the US and protect the 'new franc')

> I'm curious how you'd start this new currency, if not backed by gold? BRICS don't want to depend on USD, and gold is commonly the denominator everyone can agree on.

Find a country and a currency that appears to be the most stable.

In the BRICS that's really only China, or maybe India. Brazil is something of a basket case at times, India is catching up fast but has its own challenges, Russia is actively collapsing itself in Ukraine, and S. Africa is a borderline failed state.

China is the only country of the group I'd truly call stable, and the other BRICS pegging a currency to the Yuan is about the only other option besides gold, or pegging to the Euro / USD / Yen.

Never gonna happen either, since India has a direct, albeit low-key-ish rivalry with China, and Russia has no reason to play ball when their weaker currency translates to better resource exports.

I'd echo this and add that I can't really see a BRICS "gold-backed" currency being trusted. Let's say that they launch this currency and 1 BRICSY == 1 centigram of gold (approximately $0.63). Therefore, if I have 100 BRICSY in my pocket, I can show up at the central bank of Russia or Brazil and trade it for 1 gram of gold.

Except that there would be huge incentive for any country to cheat. If I'm Russia, why not print 2x more BRICSY notes than I have gold for? Why not print 10x more. What are the odds that everyone wants to exchange their BRICSY notes for gold all at once? Not only that, if the notes are identical from country to country (like the Euro), if I run out of gold, I could simply say that you need to visit a different central bank to claim the gold. I could claim it is still backed by gold, but that the gold is in a different central bank.

In fact, this could be a brilliant plan for one of the central banks to essentially rob the others. Let's say each country starts with the same amount of gold reserves and each country prints the exact same number of BRICSY notes. Let's say I'm Russia and over the next few years I start trading my BRICSY notes for gold from the other 4 countries. I do it slowly and I launder the activity so that it seems like normal activity. Now I've taken 25% of the gold reserves of China, India, South Africa, and Brazil. A year later, China says "we'd like to exchange a bunch of BRICSY notes for some gold Russia." I say, "sorry, we've decided to discontinue the BRICSY currency."

Maybe each BRICSY will be printed with the country of origin and only convertible to gold at that country of origin. That would prevent the former from happening, but it would also mean each BRICSY would have a different value. I'd value a Chinese BRICSY higher than a Russian BRICSY. Even if you trust both countries equally, the odds I (as an American) can convert a BRICSY to gold from Russia is way lower. A BRICSY from Brazil seems safer than from China in some ways given that US-Chinese relations are a bit rocky on the economic side of things and Brazil-US relations just don't have the same geopolitical turmoil.

Over the past year, we've seen huge cryptocurrency crises with stable coins and whether they were actually backed 1:1 with USD. Given some of the countries on the BRICS list, I don't see how people would be inclined to trust their system. Even if one thinks the gold standard is good (it isn't), it still requires you to trust that the country isn't lying about its gold reserves. I don't think the gold standard is a good system, but it feels like gold-standard stans need a phrase akin to "Not your keys, not your coins" - maybe "not your metal, not your gold." People complain that a country could do something bad with fiat currency (which they can). There's nothing stopping a country from printing too much fiat currency. However, there's nothing stopping a country from printing too much gold-standard money either.

Again, we've seen this with stable coins. They can mint way more stable coins than the USD they hold in reserve because most people won't be converting them into USD. Converting cash into metal is an even more arduous process and carries substantial risk (like the metal being stolen or lost). A government could probably keep less than 10% gold reserves and no one would be the wiser.

The US government is far from perfect and the dollar isn't perfect. At the same time, I have less confidence in BRICS. Brazil had major currency problems in the past. Their conversion to the Real is an amazing economics case study to break hyperinflation, but I wouldn't be sold on trusting them to the extent that I trust the US government and the dollar. Russia is...I don't even know what to say there, but their involvement in a project would make me insanely skeptical. India wiped out 86% of its cash in 2016 (https://www.bbc.com/news/world-asia-india-37974423). What happens if they say, "people aren't paying taxes again and 90% of Indian BRICSY notes are no longer valid."

Maybe this is just a currency for trade between nations and not for individuals to hold. That still requires a lot of trust between countries that have a lot of incentive to deceive each other on this front. If I'm India, deceiving China and giving them worthless paper could let me bootstrap a manufacturing industry to rival China. Chinese companies will take payment in BRICSYs for things sold internationally. I give my Indian companies BRICSYs that are "backed by gold (but secretly not)" and have them start buying heavy manufacturing equipment. China has shown that it'll export more than it imports for a good while. If/when China comes to collect their gold, I just say that the convertibility to gold has ended. At this point, I've used monopoly money to bootstrap the industries that have made China such a globally important country - plus, in 2035 or 2050, India will have way more people than China. I've successfully tipped the balance of power in Asia from China to India because China trusted that the BRICSY would actually be convertible to gold.

Yes, with fiat currency, countries (and individuals) are trusting that things will be convertible to a certain value in the future. However, that's one of the reasons for the dollar dominance. People (and countries) trust the dollar. Yes, inflation happens and the dollar isn't perfect, but the dollar has a better track record than basically any real alternative. The Euro is getting a good reputation. Sterling isn't bad. But why am I going to trust BRICS countries that something is actually convertible to gold. Even the US ended its gold standard because it wasn't really a tenable idea. I don't want to sound too down on the BRICS countries, but they often have a much shorter track record of good, stable economic governance.

If you're trusting that someone else will convert paper into gold, it feels like you end up with the same trust that you need with a fiat currency. I don't trust stable coins to be backed 1:1 with USD - there are too many sketchy actors in the space and even a reputable company is less trustworthy than the US government in this regard. Why would I trust the BRICS countries to maintain 1:1 gold convertibility? Even the US government ended its gold standard basically without notice. If you don't hold the metal yourself, is a gold standard really that different from fiat currency? Maybe it is - at least temporarily. The US peg lasted around 30 years. Would a BRICS peg last longer?

Plus, there's all the reasons why the gold standard isn't even a good plan in the first place - even if you could trust it.

Exactly. We've been here before. People refuse to learn from history. The gold standard has failed repeatedly and caused all kinds of problems, including wars, throughout history.

Industrialized societies eventually realized that your currency should be backed by your industrial activity. "Industrial activity" used to be measured by manufacturing output, but in the 80's countries such as the United States, who was losing manufacturing to Japan at the time, redefined "industrial activity" to include services, especially financial services. I'm not arguing there aren't issues with these definitions and how they're applied, however they're all preferable to precious metals.

"history repeats itself, first as tragedy, second as farce"

>This entire turn of events — introduction of a new gold-backed currency, rapid adoption as a payment currency and gradual use as a reserve asset currency — will begin on Aug. 22, 2023, after years of development.

Is this just some goldbug talking out of his ass? I don't see any mention of an official announcement.

Edit: a much more grounded version of this "story" can be read here: https://en.wikipedia.org/wiki/BRICS#Potential_common_currenc...

That Wikipedia article makes no mention of the new currency being gold-backed.

Yeah because the best sourced location of that is an embassy twitter account [1].

BRICS is meeting to discuss the potential of a currency. Even having a common (trade-only) currency isn't 100% going to happen never mind a specific implementation of it.

[1]: https://twitter.com/russembkenya/status/1675727818888716288

I could almost _hear_ the author's breathlessness in their first few lines

didn't know you could transmit respiration rate over TCP/IP

that'd make for a good April 01 RFC

This seems like someone’s blog without any sources. Besides the US and Germany have the largest gold reserves (and London has the metal exchange) so the western powers could completely manipulate the new currency

The has been a lot of speculation that China haa been mining large quantities of gold off-market and putting it into their reserves. That's just speculation so it may not have happened, but we would only know what gold they bought openly or disclosed when mining.

Aah yes, nothing is better for a gold backed currency then rapid deflation caused by a secret huge reserve of gold.

The author bio at the bottom of the page mentions work with the US Fed, NYT, FT and Pentagon.

He may be privy to privileged information and discussion.

There are a lot of idiots who work for all those organizations.

e.g. the same people who convinced us there were chemical and nuclear weapons in Iraq?

Looking at the author's other articles on https://dailyreckoning.com/ (the quantity of which suggests the site is primarily his show and the quality of which tend to leave something to be desired) I'm inclined to be skeptical.

We moved away from gold backed currency a long time ago for a reason.

Going back to it seems like a terrible idea. It's a way for these countries to try to regain economic dominance without actually doing anything.

> We moved away from gold backed currency a long time ago for a reason

to be able to print more money to fund wars and all (which is actually how central banks emerged om the frist place btw)

gåing back to gold standard is a great idea imo

> to be able to print more money to fund wars and all (which is actually how central banks emerged om the frist place btw)

Like in the 1930s when the sooner a country abandoned the gold standard the sooner its economy started to recover from the Great Depression?

What reason and why would you believe this reason was rightly justified ?

This collective "we" hides individual people making decisions on behalf of others btw

Constraining the economy based on one proxy item isn't sensible. The current system is backed by the USA's future likely ability to extract revenue from tax payers and anyone else that it gets the idea of extracting money from.

How is it desirable that the USD is backed by the extraction/exploitation of future tax payers?

Sounds like a pyramid scheme and highly unethical. I'd prefer my money to be backed by literally any proxy item rather than by the enslavement of our children.

The current system artificially rewards centralization and in doing so, makes markets anti-competitive and monopolistic as it creates an asymmetric playing field whereby the participants who are closer to the money printer always have the upper hand over their competitors regardless of other factors. It's the Cantillon effect.

But is the gold (bitcoin/whatever) standard truly better? It's necessarily deflationary (in the long term, assuming continuous economic growth) which rewards just holding it. Rich people get richer, poor get poorer.

To some extent, yes, but because the quantity of Bitcoin is limited, at least it cannot compound ad-infinitum into the hands of the rich as is the case with fiat.

The other thing which is problematic about the current system is that because the currency is constantly losing value to inflation, governments are essentially forced to invest people's pensions into the stock market which distorts the markets in favour of certain large companies... If currency held its value, governments could just keep pensions in the form of currency and would not be compelled to interfere with the markets. Governments should not get to decide how to invest citizens' money.

A deflationary currency is good. It rewards people a little bit for staying out of the market. If you get rich, congrats, you've made it, now you have an incentive to step aside, cash out and let someone else have a go. Today, the incentive is to keep reinvesting your money even if you don't feel particularly strongly about any investment.

Today, many people invest simply because they don't want to hold cash which loses value over time. People who don't have a vision for how to improve things should not be involved in the markets at all. There should be an incentive for such people to stay out of the markets. That's what a deflationary currency would do. There needs to be a bench on the side where rich people can sit down and catch their breath before making their next investment.

What do you think happens when the profit incentive over any length of time is to neither spend nor invest and simply hold cash? It doesn't end well for that currency or the associated economy.

I don't believe that. The poor will always have an incentive to work hard to get rich. The poor will always keep the economy running. It would be easier for people to succeed (and more motivating) if they didn't have to compete against the massive capital of incumbents.

A deflationary currency only incentivizes the rich to stop working and stop participating in the markets... Which is fine IMO. They're rich, they don't need to work anymore. The best thing they can do is step aside and let someone else have a chance. Their massive capital, when put to work, would mostly serve to monopolize markets anyway... And it's a net negative for everyone.

There is a false belief that rich people are so essential that the economy would collapse without them... But if you look at history, you would see that educated poor people have repeatedly been able to pull themselves out of poverty... I.e. economic 'miracles' (e.g. Germany after WW2, Japan, South Korea...).

People should get rich and retire. There are always going to be plenty of younger motivated people with fresh perspectives to take their place.

I never mentioned anything about rich or poor. Workers can't work if nobody is hiring. Businesses can't borrow, and anyone who has borrowed faces a falling real asset value with a nominal debt accruing nominal interest. (See 2007 housing market crash for a very narrow example.)

> The poor will always have an incentive to work hard to get rich.

To get rich you need capital. But that is hard to get in a deflationary economy - the supply is finite, the rich have only a small incentive to invest since they get wealthier just by sitting on it risk-free.

As a result, getting access to capital would be very expensive with high interest rates. That applies to mundane things like mortgages as well - good luck getting a 30-year mortgage, you're destined to rent forever. Poor would stay poor, rich would get richer.

> To get rich you need capital. But that is hard to get in a deflationary economy

Believe me, it's nearly impossible to get capital in an inflationary economy so I don't understand this point. At least in a deflationary economy, it's equally difficult for everyone. In an inflationary economy, proximity to the source of inflation confers an advantage for some (Cantillon effect) so it's unequal and unfair.

Holding money means less is in circulation, which means the money is rarer, which is a gift to all others owners of that money, poor included.

When you spend money, down the line, you ask poor people to work for you. It's not necessarily good by itself

Btw, there it's nothing stopping anyone from using gold or proxy's for gold apart from the threat of extreme poverty.

You don't seem aware of how the US imposes its money on the rest of the world

Do you mean "the use of military force"? That is my model....

BTW. this is not a judgement - there has been no political system that I know of that has had any sustained presence in history that hasn't used this mechanism to sustain itself.

> Going back to it seems like a terrible idea.

Does it?... After watching savings being decimated by inflation, with the seemingly unending money-printing (the solution to Covid, Ukraine, whatever the next crisis is), a lot of people are probably wishing they'd invested in gold.

The only way to mitigating is to have a large mortgage

em... You realise the exact same thing happens with gold when the price falls right? All time highs for gold prices and falling inflation might not be the best time to buy in...

And a personal investment in gold is in no way equivalent to fixing the exchange value of your currency to it. If you think gold standards prevent manipulation of currencies, well the 1920s would like to have a word with you please.

And deflation is far more destructive than inflation.

Gold does not help deal with unexpected inflation:

* https://www.nber.org/papers/w18706

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789

* https://www.pwlcapital.com/will-gold-save-the-day/

See also The Golden Constant: The English and American Experience, 1560-1976 by Roy William Jastram:

* https://www.goodreads.com/book/show/3267510-the-golden-const...

* PDF: http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram...

Yes, there was a reason; unconstrained currency printing benefited politicians and a small number of well connected elites at the expense of essentially everyone else.

So going back seems like an excellent idea.

Bitcoin is like gold, but without the heavy lifting. It's finite, secure, and not controlled by any elite. Why dig in the past when we can mine the future?

Bitcoin needs too much power to run mining nodes.

Yup, the PoW for gold was done in supernovae so now we don't have to bother with it.

It takes enormous resources to dig gold out of the ground.

Open pits 3.5 kilometres long x 1.5 kilometres wide x 600 metres deep don't dig themselves.

And then all that material has to be graded, sorted, crushed, sieved, processed to extract fines.

https://www.superpit.com.au/

https://en.wikipedia.org/wiki/Super_Pit_gold_mine

Which is what keeps the value of gold fairly stable long term despite the natural inflation caused by digging more.

With all of its shortcomings, it is part of our economic future. It is basically the only way to trade across economic wars, embargoes, or other restrictions. That is its killer feature, and KYC laws are just trying to avoid filling an economic vacuum, and the market abhors a vacuum.

Until there is a more valid replacement to skirt around economic restrictions, Bitcoin, with its volatility, energy concerns, and especially first-mover advantage, will stick around.

Theres heavy lifting, they call it "mining." It takes tremendous energy expenditure to secure the network.

“A small number of well connected elites” benefiting in “at the expense of everyone else”.

So exactly like it was under the gold standard?

While there may be a reason to change back to a gold standard, trying to claim it was more egalitarian is certainly a take.

It worked just fine until the government confiscated the peoples gold and issued them pieces of paper with a lien attached to each note.

You talk as if people will be carrying gold bars around for payment, it doesnt work that way. As long as joe nobody can go to the bank and redeem his gold then there will be trust in the financial institution securing it.

It wasn't "a long time ago", it was in stages over the past 100 years. Given that the US dollar has lost 95% of it's purchasing power since 1970, and the whole host of other problems with nationally mandated currency (such as the coincidence of wants problem in international trade, a problem money was invented to solve) I'd say it looks to be a short lived experiment. Gold has been the standard for more than two thousand years until this little experiment.

We moved away from gold in order to finance world war 1 and 2.

The only sourcing I’ve seen for a gold backed BRICS currency was a weird announcement by the Russian Embassy in Kenya: https://m.investing.com/analysis/brics-countries-planning-ne...

I would take that with a grain of salt…

What I’ve yet to see is an explanation of how a highly tradable, commodity based, international currency won’t crater the local currencies of the BRIC block. Those currencies are notable in that they have greater currency controls than USD (or other western currencies).

A liberal highly traded currency will presumably be able to be arbitraged with other liberal currencies (especially if it’s backed by a commodity), if you are Chinese looking to have reserves and you are allowed to use that without restrictions why wouldn’t you?

At that point the dramatic capital controls in China fall apart and that doesn’t seem like a good outcome for the Chinese government.

If instead, which seems more likely, there are lots of currency controls in place then the BRIC currency is just a photo op…

The reason why we are not using gold backed standard is that growing economy and limited amount of gold on Earth would cause growing of price of gold into ludicrously insane prices. We are using gold in industry, i.e. for gold plating of connectors, that would have to stop. Do you have golden jewllery? Better not wear them out, having a golden ring would be likely enough to get you killed.

What could possibly go wrong:

> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money

* https://twitter.com/davidfrum/status/1665053372402081792

In this thread: lots of people without any historical economic knowledge. Even in the 19th century, probably the peak of gold backed currency as we would consider it today, the world's economy was wracked by a boom bust cycle every ten years or so. We like to remember the great depression, but we should not forget the major depressions from the 1870s into the 1890s, and the serious of depressions in the US from the 1830s to the 1850s.

BRICS alternative is a temporary bridge to a post-US imperium reserve currency. That will be just like the Dollar except it won't be under the control of USA and its stakeholders. All the talk about viability of a gold backed currency is missing this aspect of even the existence of BRICS, SCO, etc.

The future reserve currency will be a CBDC and BIS has already a basket of currencies for this purpose. The transition period, as seen lately, also promises the incumbent RC issuer to weaponize its control of reserve currency. The dilemma for various contenders is how to navigate the financial waters until a new global regime is established. So agreeing to use a gold backed currency amongst themselves is a step up from direct barter. The fact that it may be capped is not significant unless that cap is lower than total trade they require. This currency is not supposed to last.

Gold is past. Energy-backed currency would be a better fit for modern world, especially in a situation of the global energy crunch.

I think it would be interesting to get a currency that represented energy so you could trade 1 kWh and just use that to represent a real thing but could be used in transactions.

Sort of like how Japan used to use representations of rice.

I remember a literal version of that being a plot element in a kid's sci-fi book series. The villain was so incredibly rich he could afford to keep his hideout right next to a black hole's event horizon where nobody could afford the energy to arrest him.

Bitcoin is like a digital kilowatt-hour that you can spend anywhere.

except it's a digital kilowatt hour that requires wasting a kilowatt hour of energy per transaction to solve imaginary problems

> solve imaginary problems

Securing a ledger isn't an imaginary problem.

Business love to adopt card payments because of how big a pain it is to secure cash. It is not a trivial problem to protect money.

For the system to work it would require the correct incentives. If we could reconstitute the energy consumed to produce the bitcoin it might work.

I think this is already represented in the futures market but is inefficient. This is pretty interesting to me for a couple of reasons.

One I think it represents a time when a KWh is very predictable and stable which implies a tightly regulated energy market.

Two the tightly regulated energy market already exists and it seems like the transition to a currency could happen with nobody really noticing.

The idea of a consumable currancy is really risky. The price of goods will be correlated to the total supply of money, leaving prices unstable as the currency is created and destroyed st different rates.

You'd end up with another fractional system to keep it more stable, where the currency isn't actually pegged to a certain amount of power. You could end up with a run on the banks situation, where there are people trying to spend their money to cool their houses in the summer only to find out that more claims on energy (the money) exist than actual power available.

Interestingly, this is an emergent property of bitcoin, if energy producers begin mining bitcoin (or selling to miners) to maintain base load and recoup losses on otherwise wasted energy. After that, if a purchaser pays less than the profit from mining then energy producers will opt to mine instead. Once that happens, energy producers will de facto be pricing their energy in bitcoin, and from there it's a tiny hop to them trading energy with each other using it.

I think you're looking for the petrodollar

https://en.m.wikipedia.org/wiki/Petrocurrency

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