Brazilian Economist Discusses Credit and a New BRICS Currency

A former vice president of the New Development Bank (2015-17), Brazilian economist Paulo Nogueira Batista, Jr., penned an op-ed on CGTN Aug. 21 titled, “Is a BRICS Currency Feasible?”. He goes beyond the recently common speculations about “de-dollarization” and a new BRICS currency, to link that issue implicitly to the NDB, and to the ability of such a BRICS financial institution to issue volumes of productive credit under its new President Dilma Rousseff.

Before going into that crucial issue, however, he first rejected as unworkable any ideas about a new currency, which essentially treat it only as a unit of account or a limited means of payment, and not as a store of value and not as a credit issuance. (Recall that Lyndon LaRouche, in agreement on this point with the first Treasury Secretary of the young United States, Alexander Hamilton, many times said that when a government issues a currency, it issues credit and it accepts and assumes a debt.)

The new currency would be called the R5 after the fact that the BRICS nations’ currencies all start with the letter “R” – real, ruble, rupee, renminbi, and rand. And further: “The only feasible alternative … would involve making the R5 convertible into bonds guaranteed by the five countries. The R5 Issuing Bank would also be in charge of issuing R5 bonds, denominated in BRICS currency with different maturities and interest rates. The R5 would be freely convertible into R5 bonds. ‘Backed’ by assets created by the Issuing Bank itself, the R5 would actually be a fiduciary currency of the same nature as the dollar and other internationally liquid currencies. The R5 bonds would be the concrete financial expression of the guarantee that the five countries would give to the new currency.”

In terms of U.S. history, this idea echoes the Lincoln Administration’s issuance of the Greenback currency. The currency/bonds of such a bank, as they are bought, also become lending reserves of that bank, potentially to be issued as credit to generate “assets created by the Issuing Bank itself.”