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Doug Casey: Yellen and Powell are said to be economists. In fact, they are not economists. An economist is somebody who describes the way the world works in going about its business of producing and consuming. That’s not what these people attempt to do. They try to prescribe the way they think the world ought to work by creating more dollars.

Is the Gold Standard Coming Back? Doug Casey on the BRICS Gold-Backed Currency

International Man: There have long been rumors that Russia or China would create a gold-backed currency, but there was never a formal acknowledgment… until recently.

The Russian government recently stated:

“The BRICS countries are planning to introduce a new trading currency, which will be backed by gold.”

Analysts expect a formal announcement at the next BRICS summit in Johannesburg in the coming weeks.

What is your take?

Doug Casey: Let’s try to parse the words in the statement. In particular, the use of the word “trading.” I’m not sure what the difference between a “trading currency” and an ordinary currency might be. My guess is that it would only be used for settling accounts internationally. Also, if it’s going to be backed by gold, where will that gold be held? Will the amount of this currency—let’s call it the BRIC—that different governments get be based only upon the amount of gold that they have in their treasury? And will the currency be just for governments, or will it be available to companies or the average guy?

It’s unlikely to be of use to the average guy. In the first place, they won’t be printing 100 BRIC (or whatever they’ll call it) notes in this age of CBDCs. Allowing its use by the plebs would give them entirely too much freedom to take their assets across borders. Remember that almost all the countries talking about replacing the dollar now have crappy “blocked “currencies that are essentially worthless outside their home countries. My guess is that the new BRIC will be for international settlement only, just so they don’t have to use the dollar. Citizens will still have to use their crappy national currencies domestically.

There’s a basic question we have to ask ourselves, one that everyone is forgetting: Why is this new currency “backed” by gold in the first place? Why not simply use gold?

In other words, why have a government middleman there to call some amount of gold a “franc,” a “ruble,” a ‘pound,” a “dollar,” or whatever? Who needs some untrustworthy intermediary to give you paper? Why not just allow everybody to use gold itself, the world’s only historically successful money? The only reason for a currency is because they’re planning on manipulating it, which means inflating it at some point.

Of course, it will be nominally backed by gold to start with—it has to be, because none of these governments trust each other. But who among them can be trusted to store and redeem the gold? Nobody. That guarantees that although it might start out well because somebody says it’s redeemable and limited in quantity, it’ll eventually fall apart.

International Man: While the details remain unknown, how do you expect a potential BRICS gold-backed currency to work in practice?

What does this mean for the US dollar?

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