No, Africa Is Not Moving Toward a Gold-Backed Currency, and Neither Is Anyone Else
Burkina Faso gold reserves, Courtesy of the African Review
Speculation has long existed that nations like China or Russia, or groups such as BRICS, ASEAN, OPEC, the Economic Community of West African States (ECOWAS), or the African Continental Free Trade Area (AfCFTA), might start using gold for trade or establish a common gold-backed currency to dethrone the dollar and impoverish America. However, gold cannot function as currency, and with the US holding the most gold, it would remain the richest country, unraveling this narrative quickly.
The countries with the largest gold reserves are the United States (8,133 metric tons), Germany (3,352 metric tons), Italy (2,452 metric tons), France (2,437 metric tons), Russia (2,336 metric tons), and China (2,264 metric tons). Even in a gold-based world, the US still has the most.
The issue with using physical gold as currency is that every point of purchase would need the ability to weigh the gold and evaluate its purity. Additionally, creating small enough gold coins for minor purchases is impractical. For instance, the average price of a pack of gum in the US is $1 to $2, equating to 0.061% of an ounce of gold. This is less than a single grain of sand, making it an almost imperceptible amount.
Since gold is not viable as a currency, the next option is a gold-backed currency. However, no country or group has enough gold to support its GDP.
As of 2024, the total value of U.S. currency in circulation is approximately $2.26 trillion. This includes currency held by the public and in depository institutions within the United States and abroad. A significant portion is held overseas, as the U.S. dollar is widely used in international transactions and foreign reserves by central banks worldwide.
The US gold reserves of 8,133 metric tons are valued at about $638.5 billion. Advocates of a foreign gold-backed currency argue that the discrepancy between US dollars in circulation and US gold reserves indicates a gold-backed currency would prevail. However, this highlights why a gold-backed currency is impossible. Neither Russia, China, nor any groupings have gold reserves close to the US, nor sufficient gold to support their currency, bank reserves, or trade. Among them, the 11 BRICS members have the largest total gold reserves at 6,600 metric tons, valued at $518.18 billion. This is not only smaller than US gold reserves but also equals just 1.69% of their $30.75 trillion combined GDP.
Gold has always fueled conspiracy theories and misinformation. Recently, headlines falsely claimed that Burkina Faso had prohibited all gold exports to establish a gold-backed currency and reduce dependence on the West. This move was celebrated by those who resent the power of the US dollar, seeing it as the start of a trend to dethrone the dollar. In reality, Burkina Faso only suspended small-scale gold exports. Large-scale exports will continue, but the government and its cronies now have a legal monopsony on the trade.
On deeper examination, Burkina Faso is not planning to convert to a gold-backed currency. The government enforced an existing law allowing it to purchase gold from domestic mines at market prices. This gold will be used to support the national currency and fund the war on terror.
Alternative media sites and Twitter accounts posted various versions of the story, including the oft-repeated fiction of a move toward a gold-backed pan-African currency. Comments on these stories often reference Muammar Gaddafi, whom alternative media claim was killed because he proposed a gold-backed pan-African currency to dethrone the dollar.
The reality is that Muammar Gaddafi, Muammar Gaddafi, the former leader of Libya, was killed by rebel forces on October 20, 2011, during the Libyan Civil War. Captured in his hometown of Sirte, he was reportedly found hiding in a drainage pipe and subsequently beaten and shot, ending his 42-year rule. There is no evidence that any real steps were taken to create a pan-African, gold-backed currency. Gaddafi was killed by his own people because he was a ruthless dictator who committed horrendous human rights violations.
Another component of the conspiracy theory around Gaddafi’s gold is that the US or another Western entity stole it all. In reality, the country was in chaos during the civil war. Gaddafi was killed by rebels, and about 20% of the gold went missing, with most remaining in the central bank. Today, Libya’s gold reserves are larger than under Gaddafi, currently at 147 metric tons, worth approximately $11.54 billion. This amount is still insufficient to back the Libyan economy, much less the entirety of Africa.
One of the only countries in recent years to attempt creating a gold-backed currency is Zimbabwe, which previously held the record for the highest inflation in the world. In mid-November 2008, inflation reached 79.6 billion percent. The currency had to be revalued three times between 2006 and 2009, with banknotes issued in denominations up to $100 trillion. Since then, Zimbabwe has launched six different currencies, all of which failed, leading citizens to prefer holding dollars over government-issued notes.
This new move toward a gold-backed currency will similarly fail. First, Zimbabwe doesn’t have enough gold to support its economy. Second, the government’s poor track record with currency would prompt anyone who receives Zimbabwean currency to immediately convert it for gold, draining the country’s reserves, which only total 2.5 tons, valued at $196.28 million.
In conclusion, poor countries are not poor due to the lack of a gold-backed currency. They are poor because their GDP is low, they carry massive debt, and their governments are highly corrupt. Additionally, gold is impractical as currency, and a gold-backed currency is nearly impossible because no country has enough gold to support their own economy or a grouping of economies.
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