Yves here. The words of India’s highly respected foreign minister Subrahmanyam Jaishankar should indicate that BRICS money is coming soon, if at all. Jaishankar raises a series of specific problems related to the point we made: that a common currency would require greater legal and institutional structure. Agreeing on a legal framework would involve a reduction in sovereignty (BRICS decisions would have to go through national courts) which seems to contradict the idea that BRICS is meant to increase, rather than decrease, national sovereignty. Jaishankar also points out, as we have done, that the BRICS countries are too economically diverse (as they often are) to make one system work easily if at all.
Jaishankar points out that the bi-lateral financial agreements are working well enough and appear to be satisfactory for most BRICS members. That leaves unresolved the point that your humble author and Michael Hudson raised: that without mechanisms to promote balanced trade like those that were part of Keynes’ Bancor, many countries are likely to face persistent trade deficits related to certain trades. partners. What happens when those countries get more money than they want? They can use it to buy goods from a country with a trade deficit, but most countries do or may impose restrictions.
Finally, Jaishankar makes a subtle observation, saying that proponents of the new BRICS currency really want to promote the use of their currency around the world. We have previously reported that China has been insisting that the renminbi be the basis of the new currency system. This was an obvious idea even before the US proceeded to alienate many former users of the dollar. However, as we and others have said, China is not willing to take on the responsibility of a reserve currency issuing company with ongoing exchange problems to have its currency held widely outside its borders. That equates to a need to export, as in jobs, one of the last things China wants.
by Jackson Mutinda. First published in East African; Cross posted to InfoBRICS
The Brics+ reserve currency will not be easy to establish, said the Minister of Foreign Affairs of India, Dr. Subrahmanyam Jaishankar, pointing out the need for many agreements to integrate it with the different monetary and fiscal policies of the member countries.
Dr Jaishankar told reporters in New Delhi that the focus is more on paying the bills in each other’s funds rather than having a new bloc unit. “Brics members have their own currency, so, many of them say, why do I need a third currency to settle among us? Which is completely understandable. Sometimes it’s a matter of money, sometimes it’s a matter of trust,” he said while talking to journalists from the Indo-Pacific region at the department.
“People have raised the issue that there must be money for Brics. But, for the countries to have the same currency, you need a greater understanding of their most important monetary policies, monetary policies, economic policies… And if you look at the levels of Brics, I think we should be realistic about the level of alignment between the members. .”
BRICS is an intergovernmental organization founded by Brazil, Russia, India, China and South Africa, and recently expanded to include Saudi Arabia, Iran, Egypt, Ethiopia and the United Arab Emirates.
There has been talk of the Brics creating a reserve currency, but this has been about shaking up the dollar, and experts doubt that the dollar’s release will help ease the balance of payments.
They point to the difficulty of creating such a currency, given that none of the founding members of BRICS wanted another currency.
“Certainly, each member state has an interest in maintaining and distributing access to its national currency,” said Richard J Grant, professor of finance and economics at Cumberland University, Tennessee, in a Free Market Foundation paper.
“Each currency serves as a domestic unit of account, a medium of exchange, a policy instrument, and a potential source of government revenue called ‘seigniorage’.”
Those who want more money are really pushing to have their currencies accepted abroad, he adds.
Ahead of the BRICS summit in South Africa in August 2023, India’s Foreign Secretary Vinay Mohan was reported to have said, “An important part of the trade and economic dialogue that has been part of the BRICS talks, so far, in a big way, has focused on how to increase trade and finance.” of the relevant country […] it is very different from the concept of ordinary money.”
Issues that have come up in discussions on the development of the Brics currency include the availability and availability of currency, exchange rate risk, banking infrastructure and international acceptance.
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