- BRICS is discussing the creation of a new currency to replace the USD.
- As countries are already exploring possible replacements, there are calls for the adoption of Bitcoin for international trade.
The BRICS nations – Brazil, Russia, China, India, and South Africa, have agreed to create a new currency to reduce their dependency on the US dollar and the Euros. In an article on foreign policy, former White House economic advisor Joseph Sullivan stated that the newly-created currency would make BRICS members ignore the US dollar in the trading of goods and services. Sullivan observed that BRICS is made up of economic heavyweight countries in their respective regions, and patronizing their currency, “the bric” could largely affect the US Dollar.
Is it realistic to imagine the BRICS using only the bric for trade? Yes. For starters, they could fund the entirety of their import bills by themselves. In 2022, as a whole, the BRICS ran a trade surplus, also known as a balance of payments surplus, of $387 billion – mostly thanks to China. The BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions.
The massive reliance on the US dollar for trade makes it a weapon to keep countries in check in fear of facing the imposition of financial sanctions. In this case, the currency would be seriously ineffective when the bric “dethrones” it. According to Sullivan, the bric could take time to replace the USD as it has the potential.
The dollar’s reign isn’t likely to end overnight – but a bric would begin the slow erosion of its dominance.
Development of “the bric” to be presented to BRICS leaders this year
At the Indian-Russia Business Forum in New Delhi, Russian lawmaker Alexander Babakov confirmed that there is a plan to present the development of this initiative at the BRICS leaders summit.
The US Dollar is slowly losing its dominance as China’s Yuan recently surpassed it in monthly trading volume for the first time according to Bloomberg.
More troubles are coming up as Billionaire Ray Dalio has disclosed that other countries have lost interest in purchasing government debt after the recent banking crisis in the country. Speaking in an interview, he explained that there has been a dramatic rise in interest rates in the past year, affecting the value of bonds sold by the government to buyers. According to him, the prices of bonds and interest rates usually move in the opposite direction since there is competition with newer bonds that offer better yields.
Dalio believes that the Federal Reserve should be blamed for creating such an environment with tight monetary policies.
If you were to mark those (bonds) to market, you would have a terrible calamity, but what’s going to likely happen is they don’t want any more of those bonds, and we’re going to have to sell more bonds because we’re going to have a deficit. So when you have a deficit, you have to pay for it through selling debt, and there’s a lesser demand for that debt.
As countries are reducing their rate of using the USD for trade, there have been calls from the crypto community for the global economies to explore and adopt Bitcoin. It is, however, unknown if this could be a reality in the short term. Any such attempt could send the Bitcoin price to an unimaginable height.
