BRICS are Working to Develop “New Currency” to Challenge the United States Dollar
Towards the end of March, a Russian politician announced that the BRICS block is attempting to create a “new currency” in an effort to undermine the United States dollar.
State Duma (Russian parliament) deputy chairman Alexander Babakov said that the shift to settlements in national currencies is the first step in this de-dollarization process. He continued by noting that “The next one is to provide the circulation of digital or any other form of a fundamentally new currency in the nearest future. I think that at the BRICS [leaders’ summit], the readiness to realize this project will be announced, such works are underway.”
That summit is slated to be held on August.
Babakov revealed that BRICS member nations are developing a strategy that “does not defend the dollar or euro” and that “a single currency” would likely be developed within the BRICS framework, pegged to gold or “other groups of products, rare-earth elements, or soil.”
Brazil, Russia, India, China, and South Africa are members of the BRICS block. BRICS nations make up roughly 40% of the global population. In addition, BRICS countries account for a quarter of global gross domestic product.
Countries are clearly moving away from the dollar. The US government’s massive spending, alarming levels of borrowing, and loose monetary policy are making countries somewhat scared of using the dollar. In addition, the US government’’s fanatic use of sanctions has also made countries somewhat hesitant about using dollars for commerce.
Per figures from the International Monetary Fund (IMF), the dollar’s share of global foreign-exchange reserves went below 59% towards the end of 2021.
One curious aspect of the dollar’s declining share that the IMF observed is that it has “not been accompanied by an increase in the shares of the pound sterling, yen and euro, other long-standing reserve currencies… Rather, the shift out of dollars has been in two directions: a quarter into the Chinese renminbi, and three quarters into the currencies of smaller countries that have played a more limited role as reserve currencies.”
As Mike Maharrey of Schiff Gold noted, this transition away from the dollar poses a major threat to the dollar’s primacy as the world reserve currency. He highlighted this below:
“Uncle Sam depends on the demand for dollars to underpin its profligate borrowing and spending. The only reason the US can get away with massive budget deficits and an ever-growing national debt to the extent that it does is due to the dollar’s role as the world reserve currency.
If the demand for dollars tanks, the greenback’s value will quickly erode away. That means even worse price inflation for Americans. And in the worst-case scenario, it could collapse the dollar completely.”
The US’s reckless domestic and foreign policies are creating a geo-economic nightmare of epic proportions that could see mass inflation pop off, thereby leading to a wholesale decline in Americans’ living standard. This entire fate can be avoided if the US reduces the size of its domestic government and foreign policy endeavors. However, that will require the US to have a totally different political class for this policy change to occur.