The BRICS countries are made up of Brazil, Russia, India, China, and South Africa. It is basically an economic partnership between countries.

At the most recent BRICS summit, it was announced that invitations were being extended to Argentina, Egypt, Iran, Ethiopia, Saudi Arabia, and the United Arab Emirates. Membership of these new countries would take effect on January 1, 2024.

Leading up to the meeting, there was talk from the gold bug community that the BRICS might announce a new BRICS currency backed or partially backed by gold.

As far as I know, this didn’t happen, and it didn’t surprise me one bit. While these countries are trying to become less reliant on the U.S. dollar, the representative leaders of these countries were not going to tie themselves down to such an extent.

The reason that so many libertarians like gold and favor something of a gold standard is because it restrains the power of government. It forces governments to pay for things through taxation instead of inflating a currency.

Unlike Joe Biden, the leaders of these countries probably actually want to have a somewhat prosperous economy for their respective countries. But they aren’t going to do so at the expense of their own power. So it is going to take more change before we get some kind of gold-backed currency.

Local Currencies

One thing that did come out of the summit was the BRICS encouraging the use of local currencies more often.

This has been an obvious solution for many years, so I’m not sure why now they are going in this direction. I guess nobody thought of it before?

The bullying and dictating coming from Washington DC finally got too much to handle. This was especially true for Russia, which has seen major sanctions coming from the U.S., along with a default on promises.

Why did the U.S. dollar have to be the middleman for so long? It has been considered the world’s reserve currency since the end of World War 2.

With today’s exchange markets, there is no reason that countries can’t do business using their own currencies. As long as the currency is easily convertible, then there shouldn’t be a problem.

The Petro Dollar

For some reason, oil producing countries have found it necessary to use the dollar when selling oil. It is probably because these countries feared the U.S. government. It is also because the U.S. has provided some backing for them, implicitly or explicitly.

If the U.S. didn’t support Saudi Arabia in return for using dollars, then the House of Saud may have fallen a while ago from its own population.

And this was probably the most interesting development coming out of the BRICS summit. It is no surprise that a country like Iran would join. But for Saudi Arabia to attend and get an invitation to join the economic alliance, that is another thing.

Saudi Arabia is the face of the Petro dollar. This country is a major oil producer. Will Saudi Arabia completely abandon the dollar and rely on China and Russia for some protection?

So while we are not getting any kind of a gold currency, we are getting farther away from the dollar as the reserve currency of the world.

Gold and the Dollar

Gold is still a good long-term play. Even if there is no gold-backed currency, it can still be used for international trade. It can still be used as reserves by countries to give an implicit backing to their currencies.

If you are an American and your income and expenses are in dollars, then gold will be your friend. As the dollar slowly loses its status as the world’s reserve currency, the dollar price of gold will go higher.

There won’t be any one replacement for the dollar. Countries will just trade using their own currencies instead of using dollars as the middleman. But gold holders will be the long-term beneficiaries.

The dollar has remained strong because the Federal Reserve has been the least bad of the major central banks lately. The Fed has actually maintained a relatively tight monetary policy over the last couple of years.

All of this could change quickly with a major recession or banking crisis. But for now, the Fed is the least bad, so the dollar has stayed somewhat strong in spite of the insane policies coming out of Washington DC.

The U.S. government is actually fighting against the Fed at this point. Jerome Powell and company are trying to save the dollar while the Biden administration is alienating major countries and doing its best to get other countries to reject using U.S. dollars.

The long-term trend is for countries to move away from dollars unless actually trading with the United States. This will hurt the U.S. government’s ability to run up debt at low interest rates. In the long run, this may be a positive development for the average American.