Countries are going to remove #USD from their international transactions. Now the challenge is to choose a currency for transactions between two countries. For example #China and #Russia should debate together to select #Ruble or #Yuan for their transactions. This is a problem. Not a small problem. Why do not countries use #gold for transactions?
@RezaHoss if I'm not mistaken, BRICS members plan on creating a new currency, backed by gold and other rare earth elements.
@hirad
For people's use yes, but for transaction between countries gold is better. When a country send one ship oil from a continent to another one, sending a consignment of gold has no difficulty.
@RezaHoss Actually its the exact opposite. Its nearly impossible to pay in cash or any other physical form of currency in such large transactions. One reason being that most of such transactions are financed and no money is transferred directly.
That's why US can impose sanctions (among other reasons). Because money doesn't change hand. In many cases it doesn't even change country.
@RezaHoss
I don't know how much you're aware of gold standard. But gold backed currency has the strength of gold, but without selling off your wealth for import. That's why it was so popular.
Cuz the very first outcome of using actual gold is that weaker countries become weaker and the rich country become richer.
@hirad
Why do weaker countries become weaker and the rich country become richer? If my money is in USA or other countries, they can block my money if they want. This is not a good event.
@RezaHoss That's the problem with fiat money. Let me explain with a simple example. Lets say you want to have gold backed currency called fosh.
You have 1kg of gold and you print 1000 fosh. every fosh worth 1g gold. Now. What will happen if US seize your money. Did you lose anything? The wealth/value is still locked in your reserve.
But if it was fiat money, you'd lose it cuz its not backed by any real value (current currencies)
@hirad
I have 1 kg gold and 1000 fosh. I give you 100 fosh to buy something. If you ask me the equal gold, I can not give you the gold.
@hirad
As I know many transactions between countries are paid with gold. Like Iran and Venesoela's transaction.
Not to change hand money and staying in one country is good? I can't understand the argunment!
@RezaHoss Not many. Cuz its just not viable. But its done as last resort cuz there is no other alternative. Its like food for oil.
Money not changing hands isn't "good" or "bad" per se. Its a necessity, specially for countries with large trades.
When Iran sell oil to, lets say Korea, it keeps the money there to use it to buy and import Korean goods. Money doesn't leave Korean banks and that's why US can sanction others easily.
@hirad
1- We want to forbid countries from sanction!
2- Large trade is large because of volume of sold or bought goods, but gold does not have much volume. Iran sells hundreds and thousands barrels of oil to korea. The ship can take one or two m3 of gold and return to Iran. This is not difficult. Also it is easy for large trades like oil trades.
@RezaHoss
1. Its dangerous. You need to ensure the shipment for the gold and that would cost a lot of money.
2. Iran then has to send the golds back just to import goods from Korea.
3. Gold ensures the power of economy. That's why countries try increase their gold reserve. Spending gold is like selling bodyparts.
4. With gold you can't finance the purchases. You must pay all upfront.
5. With currency you can get interest when keeping them in bank.
6. Countries can run out of gold that way.
@hirad
1- The ship will return. With or without gold. And about the danger, Is its danger more than sanction or blocking money?
2- Yes. Iran should send a ship for receiving goods from Korea. It can send gold via the ship. Ship with gold or without it does not have much change in shipment! Also maybe Iran won't buy something from Korea. Its money should be in Korea's hands?
3- Yes gold is important. So when Iran sells Korea oil should receive gold itself not a promise of gold. This is a good incentive for countries to improve their productions and this is a good event.
4- I did not understand.
5- If your meaning is the security I should say saving gold in countries central banks are too secure way to save it.
6- You sell me and I buy from you. It is your right to get valuable thing and I must lose something to buy something from you. This is very logical. If I buy more than my sell, I will lose all my assets.
@RezaHoss There are many reasons for the use of currencies. Ease of use, security, and the most relevant reason the fact that in vast majority of transactions are electronic and via wire transfer.
So the solution is having a currency backed by a valuable commodity. Which is usually gold. That's how it used to be in the past for almost all currencies around the world.