One solution is two-party trade settled either by exchange of commodities that the respective partners to the trade desire, or by using their own currencies. Both alternatives are coming to be used now.
However, a more efficient system would be to replace unwanted currencies even through they are considered "safe" for states friendly to their issuers, at least as long as relations remain friendly, with another currency that the respective painters to trade would desire to save for use in future trade with another party. Sergey Glayev has been working on a commodity-linked solution, which is presented here.
This is not only a plan but also a review of the relevant history. This particular proposal is not as important as the perceived need to replace the dollar system that is no dominant and that the US has "weaponized" using both primary and secondary sanctions as means of prosecuting economic warfare. Is the term "warfare" too strong? It seems not, since the West, and chiefly the US, aimed at bringing down the Russian government using sanctions and replacing it with a Yeltsin-like government that would be effectively a US puppet.
Of course, criticism of a new gold standard — Glazyev advocates fixing oil price to a specific amount of gold instead if letting it float — would be that metal standards have resulted in mercantilism historically, with all that implies for global economics, geopolitics, and the world system.
MR Online
“Golden ruble 3.0” – How Russia can change the infrastructure of foreign trade
Sergey Glazyev, Academician of the Russian Academy of Sciences and Dmitry Mityaev, Executive Secretary of the Scientific and Technical Council under the Chairman of the EEC Board
Originally published at Russia Posts English, December 26, 2022
See also
UAE De-Dollarization Accelerates: "Crypto Will Play A Major Role In Trade Going Forward"
Tyler Durden
11 comments:
It's either pegged or floated. And if you peg it to anything you don't control, ie: other people's currency (USD) or gold( have to mine it), the peg will eventually break. Why is this so hard to understand.
I don't understand this de dollarization thing. You can already dedollarize by having your central bank exchange your trade surplus for other currency or commodity now. As Neil explains to us the reason they have dollar balance in the first place is because they are net exporters, if you don't want the dollar trade surplus, stop exporting to the USA. I guess this is why matt calls them USD zombies.
@sths
It's a matter of international settlement, which is presently largely dollar-based. The settlement system, e.g., Swift, is controlled by the West, which aims to keep it that way since it favors the dominance of the "golden billion". That is one aspect of "hegemony as the preservation of colonialism under the imperium (US-led "rules-based order") and its extension to the whole world. Obviously, those being colonized don't like this and some are now large enough and developed enough to assert their interests, chiefly Russia, China, and India but also Brazil, South Africa, and Iran.
On the upside, a single settlement system increases efficiency of transacting trade but on the downside it risks being controlled by a party or bloc of parties, with the result that it doesn't serve all equally.
So this is going to happen one way or other unless the US can force compliance with the US-led rules-based order, if not through hybrid warfare then through kinetic warfare.
Maybe operating a system equivalent to the Federal Reserve System is harder than we think it is?
Seems easy to me… but perhaps these foreign countries look at it as too complex or impossible technically…
El Salvador is just punting it to Bitcoin…
Also the Fed has been setting the example by running negative equity now at < -100B without as much as raising an eyebrow….
so all these other foreign nations look at what the US does to replicate it …
So they may start to have their own CBs run negative too and all this exchange rate stuff might go away…
@tom they cut Russia outta swift and it was supposed to apocalyptic for them being "cut off" from the international financial plumbing system. Seems the Russians just shrugged and said no worries. Mmt teaches us that it's the real resource that matters, the financial stuff whilst important is the support not the main. You can't just isolate something as big as Russia because the rest of the world still needs them even if the Americans don't. So I don't see how a settlement system is western dominated. I mean it's western owned yes but as soon as you abuse it, other just set up their own. Neil showed us it's just a large querying system anyway. You can't tell me people that can send rockets to the moon can't run a large spreadsheet. This hegemon shit only works if you have the guns to enforce it. Can't do it with just propaganda and software...
Yes, this is in the process of being worked out now. Glazyev's proposal is one that is on the table. There are others either on the table or in the works. Trade can proceed on a bilateral basis but a more efficient and flexible system can be developed. They are working on it.
There is an advantage to a commodity-tethered system, however. It addresses "the money illusion" and that is the discrepancy between nominal (price) and real (inflation adjusted) by using a commodity anchor, like gold or a basket of commodities, e.g., oil and other major natural resources. Digital currency is also a possibility owing to efficiencies. There could be a combo of digital currency and a commodity anchor.
The issue is how to set up an efficient system that is fair and in which all are equal participants, with no opportunity for any party or bloc to gain control.
This is part and parcel of the decolonization process that is going to be a major force for change in the world system for some decades. It's unlikely to be a linear process. There will be ups and downs, as well as opportunities and challenges arising from complexity.
The only thing that seems clear at this point is that the dominance of the Global North and West is now being challenged by the Global South and East as the latter develops and becomes more of a force on the world stage.
This is something that BRICS+ is focused on.
“You can't tell me people that can send rockets to the moon can't run a large spreadsheet. “
“a large spreadsheet” is a figure of speech… it’s a lot more complicated than that in real terms..,
It’s a possibility… we should consider it a possibility…
They simply might not be able to do it…
You need the whole system… a network of member institutions that will comply with regulations, etc.., educated people to staff them, etc.., IT professionals, etc.. accountants/bookkeepers, etc…
As competent/qualified as Neil is he can’t do all of that….
They don’t have all of that..,, these are mostly uneducated populations and anyone there who gets an education just comes here to work…
So they glom on to the US system or Bitcoin or gold or wtf…
Pick the country with the largest economy within your trading block, and use its currency as the "reserve" currency. And don't waste decades arranging it.
If this incompetence is any indication, the Global South and East is not going to be of any worry to the Global North and West. Nevertheless, Washington will blame all of America's ills on them.
China won't be in surplus if they intend to have free(for all) trade with the lower cost Global South. Offshoring of Chinese manufacturing has begun.
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