BRICS: US Banking Institution Concurs that Transitioning to Gold Standard Will Foster Price Stability.

In the US, inflation is causing concern, especially with the BRICS alliance considering moving away from the dollar. Over the past 18 months, BRICS has significantly increased its gold reserves, becoming the largest buyer of this precious metal in FY 202-24. A report from researchers at the Federal Reserve Bank of Philadelphia suggests that adopting the gold standard could help stabilize prices.

The researchers contend that transitioning to the gold standard would render money non-neutral, but it could ultimately lead the US economy towards its long-term equilibrium. According to the researchers, this shift could mitigate the impact of inflation and deflation, making them temporary phenomena. There's speculation that BRICS might be inclined towards similar ideals, potentially backing their forthcoming currency with gold.

The authors clarify that while adopting the gold standard may induce short-term disruptions, in the long run, it could establish a self-correcting economic system. They argue that although the gold standard exposes a country to short-term fluctuations in money, prices, and output due to external shocks, it ultimately ensures long-term price stability.

The authors acknowledge that due to the non-neutrality of money, these price fluctuations have real consequences, potentially causing some agents within the home country to fare worse during the transition. The gold standard was historically a prevalent monetary system for many leading economies, but its inflexibility led to its collapse in the early 20th century. BRICS may be contemplating reviving this system and potentially pegging their new currency to gold. Read more to understand the potential impact on various sectors in the US if BRICS were to move away from the dollar for trade.