a groundbreaking development, an international alliance consisting of multiple countries is intensifying efforts to dethrone the US dollar as the world’s reserve currency. The alliance, known as BRICS, originally comprised Brazil, Russia, India, China, and South Africa. However, on January 1st, the group expanded, adding Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates to its ranks. This move, driven by the desire to transform the global economic order, has caught the attention of financial experts and policymakers worldwide.
BRICS: A Growing Force
The BRICS alliance now represents almost half of the world’s population and controls a significant portion of the global oil supply. Its mission revolves around challenging the supremacy of the US dollar in international trade and finance. With the inclusion of new key members, BRICS has signaled its determination to reshape how the world conducts business.
The Origins and Expansion of BRICS
Originally formed as an acronym for its founding members, BRICS doubled in size with the addition of Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. Moreover, over 30 other nations have expressed interest in joining this alliance, indicating a widespread desire to explore alternatives to the US dollar in global transactions.
Dethroning the Dollar: Motivations and Criticisms
The push to dethrone the dollar stems from concerns about the weaponization of the currency by the United States. Critics, including currency expert James Rickards, argue that the US government’s use of the dollar as a geopolitical tool has prompted other nations to seek alternatives. The fear of potential economic sanctions or freezes on reserves has led countries like China, Brazil, and India to consider moving away from the dollar-centric global economic order.
However, the feasibility of BRICS creating a currency that surpasses the dollar remains a topic of debate. While the alliance’s aspirations make some nervous, many experts point out significant obstacles hindering the creation of a currency to rival the dollar. Approximately 60% of global reserves are in securities denominated in dollars, making the US dollar the dominant reserve currency.
Obstacles to Overtaking the Dollar
Financial analyst Peter Earl emphasized the challenges BRICS would face in developing a currency superior to the dollar. Despite various ideas, including a return to the gold standard or the introduction of a stable coin, experts assert that unseating the dollar requires a robust and widely accepted alternative. The absence of a securities market comparable to the dollar adds another layer of complexity to the challenge.
Political Dynamics within BRICS
While BRICS presents a united front in its mission to reduce dependence on the dollar, the alliance faces political instability within its ranks. Decisions within BRICS require unanimous agreement, and the inclusion of countries with conflicting interests poses challenges. Political tensions between existing members, such as India and China, as well as new entrants like Egypt and Ethiopia, add a layer of complexity to the alliance’s objectives.
Impact on the Dollar and Global Economy
By reducing the use of the dollar as a payment currency between member nations, BRICS could weaken the dollar’s role in the global economy. This shift could potentially lead to a decrease in demand for dollars, impacting their value. While such a development could be inflationary for the United States, completely replacing the dollar as the world’s reserve currency appears unlikely in the near future.
Concerns Over US Deficit Spending and Monetization of Debt
The news report delves into concerns raised by Congressman Adam Schiff about the implications of the alliance’s efforts on the United States. Schiff highlights the risk of the US government’s deficit spending, currently at $32 trillion, and the potential monetization of debt. The Congressman suggests that the world’s realization of the US using the dollar as a global credit card may be driving the desire to overthrow the dollar.
Saudi Arabia and BRICS Payments
The report also anticipates shifts in international transactions, with Saudi Arabia expected to sell its oil to China using the new BRICS payments. Brazil is likely to follow suit. This move could reduce the demand for dollars, intensifying the impact of the US deficit.
The Long-Term Implications and US Response
While the dethroning of the dollar may not happen immediately, experts acknowledge the potential long-term implications for the global economic order. As the world seeks alternatives, the United States may need to reassess its economic policies and reliance on deficit spending. The report concludes by underlining the urgency for policymakers to address the conce