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BRICS On Rise?

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These Countries Are Taking Aim at the Dollar

By Larry Benedict.

In 2001, Goldman Sachs analyst Jim O’Neill tipped the first domino to end the U.S. dollar’s dominance.

He didn’t intend to. All he saw was an economic opportunity posed by several world economies – notably, Brazil, Russia, India, and China. Later, South Africa rounded out the group.

These countries became known by the acronym BRICS.

O’Neill claimed that these economies would lead the world by 2050. Due to cheap labor, rich natural resources, and promising demographics, the BRICS countries had a strong outlook.

But by 2015, it seemed like his prediction had fizzled out.

Goldman Sachs even folded its BRICS-specific investment fund into a broader emerging markets fund, saying it no longer anticipated “significant asset growth in the foreseeable future.”

Yet in recent years, BRICS has become more than just an economic theory.

The countries involved have formed a geopolitical bloc and become the chief rival of the G-7.

And now they are preparing to take aim at the dollar.

Rising Powers

The BRICS – and other countries around the world – dislike the dollar’s reserve currency status.

Nearly all trade requires the U.S. dollar, and global financial systems operate using dollars. Most sovereign debt is priced in USD as well, which can make it expensive to service that debt.

And Western countries have weaponized the dollar’s importance.

Russia, for one, faces heavy economic sanctions due to its invasion of Ukraine, including its exclusion from the SWIFT banking network.

This unprecedented move punished Russia for failing to toe the line… And other countries noted the pressure tactic with alarm.

Now the BRICS countries are getting ready to retaliate… And the threat they pose has teeth.

Together, they make up 31.5% of the global gross domestic product (GDP). In comparison, the G-7 has sunk to 30%. Plus, at least 41 other countries have petitioned to join the BRICS bloc.

And they’ve been testing out their strength lately.

As just one example, Brazil and China are settling trades in the yuan, circumventing the USD system.

Additionally, China also came up with the petroyuan, enabling oil producers to sell their oil in yuan instead of USD.

And in 2022, central banks around the world bought gold at record levels.

That continued this year. In the first two months of 2023, three BRICS countries were among the top five gold buyers. China bought nearly 40 metric tons, and Russia bought over 31 metric tons. India bought 2.8 metric tons.

These gold reserves grant them more autonomy outside the dollar-denominated system.

And that’s not where this story ends…

Project R5

The BRICS are gathering on August 22 – a little less than a month away.

There, they’ll discuss how to challenge the dollar’s global dominance.

That could accelerate Project R5… a plan to create a BRICS currency to challenge the dollar’s status. If they succeed – even partially – it will rock the financial world as we know it.

The last time something of that magnitude took place – the creation of the euro – the dollar lost as much as 45% of its value.

Commodities like oil and gold could see big movements too as a result of this shift.

And pretty much no one is prepared for such a scenario.

After all, U.S. debt has risen to more than $32 trillion.

Without the dollar’s reserve currency status, the pain of that debt would hit hard.

Interest rates would have to rise heavily to make our Treasurys attractive to foreign investors so we could keep servicing our debt.

A weaker currency would also mean more expensive imports. That would lead to soaring inflation. Most of us have seen firsthand how destructive that can be in the last couple of years.

And the consequences would ripple out from there.

For example, the U.S. would struggle to fund its military complex in this scenario – and I’m sure you can imagine the kind of blowback that would have.

So this BRICS summit should be on everyone’s radar. The potential consequences make this too big to ignore.

 

4 COMMENTS

  1. Yep. Add Korea and Japan and you have most of the world’s economy.
    Who thinks they won’t join in when they see the way the wind blows.

    Much of the world has had enough of the Catholic -Azo Nazi doctrine that drives the USA.

    Watch that space. NZ had better as had Australia.

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  2. Today in international geopolitical news:
    In a meeting African leaders Russia has forgiven $23 billion dollars of loans, and agreed to supply free grain to at least 6 nations.
    In the war with Ukraine, Russian forces have made a serious break through and deep behind Ukrainian lines, just north of Lyman city.
    Australia is signing an agreement to purchase 100 red back infantry fighting vehicles for $7 billion dollars from South Korea. They will be used to replace the vehicles they sent to Ukraine. The vehicles will be built in the Australian defense ministers electorate of Geelong. (Just a coincidence I’m sure).
    The west African Nation of Niger is relatively calm following the military coup against the elected leader. The president was the first to actually succeed a previous elected president since independence in 1960. Unlike in Sudan, Victoria Nuland was not known to have visited in the two weeks before the coup.

    That’s pretty much everything I think is actually interesting or new.

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  3. A number of countries are very interested in Joining and a fair few have Oil. If these new countries do join they will have more than half the world’s population and the majority of the Oil producing countries. Three are Nuclear superpowers right now, (and RSA had Nukes), they don’t give a flying fuck about climate change ( or human rights), and are probably the least vaxed block in the world. Compare this with the west that have climate change, LBGTQ shit and the guilt of colonialism as their main focus. And their armies are 100% vaxed, and their leaders for the most part are dementiad, weak or plain stupid. Interesting times indeed,

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