State Duma Deputy Chairman, Alexander Babakov, announced on Thursday that the BRICS countries (Brazil, Russia, India, China, and South Africa) are collaborating on the development of a new currency.
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At the forthcoming summit in South Africa in August 2023, they may share their vision for its future. Is the US dollar in trouble?
BRICS may develop a new currency
— Investro.com (@investrocom) March 31, 2023
This is nothing new. Rumors about BRICS building a new currency is a step to decrease the world’s dependence on the US dollar (USD). Several countries are reportedly tired of the USD’s dominance and want to go off, as seen in the video below.
The US is finished. The real war BRICS vs the west …., pic.twitter.com/Xz7S8srtEU
— @voice_watchman (@voice_watchman) March 4, 2023
Babakov said that the currency could also be backed by gold or other commodity. That would mean a return to an old system in a similar way, as the Gold standard died in 1971 when former president, Richard Nixon, stopped the convertibility between the US dollar and gold.
“The transition to settlements in national currencies is the first step. The next one is to provide the circulation of digital or any other form of a fundamentally new currency in the nearest future,” Babakov explained.
Several additional nations, including Argentina, Egypt, Iran, Indonesia, Turkey, and Saudi Arabia, plan to formally join the economic block. So this BRICS summit will definitely be a memorable one.
Ex-Goldman Sachs head economist, Jim O’Neill, has advised the BRICS group to grow and challenge the dollar’s dominance this week. He stated in an article that “the U.S. dollar plays a far too dominant position in global finance.”
The US dollar’s dominance is likely to fall
That could finally change in August as this topic has been in discussions for several years now. Recent economic events suggest things will change rapidly soon. Rather than paying in U.S. dollars, Kenya has agreed to pay in its own currency, the Kenyan shilling, when buying oil from Saudi Arabia and the United Arab Emirates.
Moreover, Russia’s President, Vladimir Putin, stated that almost two-thirds of trade between Russia and China is settled in yuan and ruble, and so he argued in favor of internationalizing the Chinese yuan.
China and Brazil have also agreed to conduct bilateral trade in national currencies. The move will eliminate the need for the US dollar as a go-between, giving the two countries more independence. Many other countries are following in similar footsteps, ditching the US dollar and supporting their currencies.
The US dollar is losing its reserve currency status
Here’s what you should know 🧵
— Genevieve Roch-Decter, CFA (@GRDecter) March 29, 2023
Genevieve Roch-Decter, former money manager, pointed out how the USD is slowly but surely losing its “reserve currency status” in an insightful Twitter thread.
“De-Dollarization is happening everywhere and central banks bought gold at a faster pace last year than they have in any year since 1987,” she explained.
However, the fight is far from over as the US dollar dominates the foreign exchange reserves, representing around 60%, with the euro being in the 2nd place with almost 20%. All the other currencies like the Chinese yuan, Japanese yen, Canadian dollar, British pound, and others represent only the remaining 20% together.
It seems that the dominance of the US dollar is about to be over soon, with many states looking for independence from the greenback. The BRICS summit may bring a turning point for the world to kickstart this change, so save the date.
August may be game-changing. Even Elon Musk is worried about the situation, replying to Roch-Decter:
Serious issue. US policy has been too heavy-handed, making countries want to ditch the dollar.
— Elon Musk (@elonmusk) March 29, 2023