If I’m not mistaken, I think this is how the BRICS currency is supposed to work. Like countries have a dynamic exchange rate with it but it provides a common basis for denominating trade. And that way there is a common medium of exchange so trade with one partner does not create an obligation to you since they do not gain a reserve of your own nation’s currency but of a currency acceptable to all members.
Making a reserve does seem like a more sensible approach than a unified currency, but there is still the question of who issues the currency and with what rates. It seems somewhat unnecessary (given my admittedly amateur knowledge) to create a new currency.
Setting the rates too high on the currency will stifle investment, while setting the rates too low will make using the currency unappealing. The problem is that the “ideal” rate differs depending on the profit rates in each country (which diverge significantly from each other).
trade with one partner does not create an obligation to you since they do not gain a reserve of your own nation’s currency but of a currency acceptable to all members.
I mean, the obligation still exists. The obligation is just to BRICS as a whole instead of one country. I guess that might be a nice benefit.
Of course the obligation still exists but it’s a much wider and potentially-more-beneficial-to-fulfill obligation than exists in trading in sovereign currencies directly.
If I’m not mistaken, I think this is how the BRICS currency is supposed to work. Like countries have a dynamic exchange rate with it but it provides a common basis for denominating trade. And that way there is a common medium of exchange so trade with one partner does not create an obligation to you since they do not gain a reserve of your own nation’s currency but of a currency acceptable to all members.
Making a reserve does seem like a more sensible approach than a unified currency, but there is still the question of who issues the currency and with what rates. It seems somewhat unnecessary (given my admittedly amateur knowledge) to create a new currency.
Setting the rates too high on the currency will stifle investment, while setting the rates too low will make using the currency unappealing. The problem is that the “ideal” rate differs depending on the profit rates in each country (which diverge significantly from each other).
I mean, the obligation still exists. The obligation is just to BRICS as a whole instead of one country. I guess that might be a nice benefit.
Of course the obligation still exists but it’s a much wider and potentially-more-beneficial-to-fulfill obligation than exists in trading in sovereign currencies directly.