Could the creation of a BRICS currency be robust enough to one day rival the USD as the world reserve currency?
At the heart of the great power politics of a multipolar world is the plan for Brazil, Russia, India, and China (BRICS) to develop a BRIC currency that could compete with USD as the world’s reserve currency.
But the creation of a BRICS currency, if and when it comes into existence, would be a long way off tipping USD off its reserve currency throne.
The US remains the world’s largest economy and military power. USD by a margin is the world’s most frequently used currency in global trade.
From 1999-2019, the USD accounted for 96 percent of trade, and invoicing in the Americas
In the Asia-Pacific region, the figure was 74 percent, and 79 percent in the rest of the world.
BRICS’s new currency could be the laughed-at turtle challenging the arrogant Hare in a race, in Aesop’s Fables | The Hare And The Tortoise
The US’s exuberant privileges, economically, militarily, and financially with the USD throne, reserve currency is not a divine right, as it was gained by completing, winning, and gaining trust and respect on a global scale.
From 1991 to 2017, the US enjoyed unipolarity, the king of the jungle, an unchallenged lion, free to roam and impose its world order rules on every territory it ventured into.
But lions are lazy beasts, and with few predators, they sleep most of the day. The exuberant privilege of having reserve currency, where the world saved, traded commodities, and borrowed USD, made finance and energy inexpensive for Americans.
The exuberant privilege of being the world reserve currency makes Empires fat, and lazy, and that has less of a pull of global capital flows.
BRICS’s new currency could eat US dollars of global foreign reserves, which fell below 59% at the end of 2021, extending a two-decade decline, according to IMF
“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,” added IMF.
The de-dollarisation trend has begun with only talk about the creation of a BRICS currency
What will this de-dollarisation trend look like when the BRICS currency comes into creation?
Further details of BRICS’s currency will be revealed during the BRICS bloc summit scheduled for August.
“BRICS nations are developing a strategy that “does not defend the dollar or euro” and that “a single currency” would likely emerge within BRICS, pegged to gold or “other groups of products, rare-earth elements, or soil,” deputy chairman Alexander Babakov, State Duma (the Russian legislative assembly).
How will the US fund its expanding public deficit in a backdrop of the global de-dollarisation trend accelerating and the creation of a BRICS currency?
Perhaps the Hare needs to wake up to what could be a new reality; higher inflation, or worst-case scenario, a USD crash.