BRICS to introduce a new trading currency backed by gold.

According to Russia's confirmation this week, the BRICS nations may soon introduce a strong alternative to the US dollar.

A new currency backed by gold is about to be introduced, according to the BRICS group of countries, which includes Brazil, Russia, India, China, and South Africa.

This will be officially announced during the summit of the bloc in August in Johannesburg, South Africa. According to RT, "more and more countries are lining-up to join the group as the initiative grows."

What Is the Common Currency of BRICS?

In order to increase commerce inside the BRICS and reduce the higher dollar conversion costs of international transactions, the BRICS countries stated in April that they want to launch a new currency.

There is controversy about whether the dominance of the dollar would be harmed by such a single currency. According to research by the Official Monetary and Financial Institutions Forum, it is unlikely to displace the dollar and would only function as a supplement to the current dollar-based global monetary system.

Importance?

According to economist Thorsten Polleit in a series of tweets, a BRICS unified currency might come as a shock to the world's fiat money system.

A new international transaction unit that is backed by gold sounds like good money, claimed Polleit, and it might pose a serious threat to the US dollar's hegemony.

According to the economist, the new currency must be convertible into gold on demand in order to be on par with gold and a really sound currency. But it is unclear whether the BRICS Countries have this in mind.

The financial expert claimed that switching to using gold as the unit of account would be a game-changer and result in a severe depreciation of several fiat currencies, including the fiat currencies of the BRICS. According to him, it may trigger an explosion in the price of items priced in fiat currencies and disrupt the world's fiat money system.

The BRICS also have the option of establishing a new bank for foreign commerce that receives money from the BRICS in the form of gold, added Polleit

The new bank might, for example, provide financing loans to exporters against this gold stock and issue the "new currency"; alternatively, BRICS goods could be sold against the "new currency" and/or gold.

(Sources: investing.com, reuters.com, themoscowtimes.com)