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 will 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.
The BRICS hold G7 currencies as their reserves, and not the other way around. And yet, the BRICS just flipped the G7 in economic size.
Reserve practices don’t change overnight, but this is a very different environment than 10+ years ago. https://t.co/khoH1Cbvp8
— Lyn Alden (@LynAldenContact) April 11, 2023
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 they’ve 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.
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Meanwhile, Alden added that potential moves to eat into US