Can BRICS’ New Currency Proposal Compete With The Universal Dominance Of The US Dollar?
Russia takes the lead on the currency proposal which hopes to strengthen trade and investment within what might be a new super economic bloc.
While the US Dollar is considered the universal benchmark for currency in the international market, the recent staggering of the Dollar’s strength and the rise of discussions and cross-boarder trade between BRICS (Brazil, Russia, India, China and South Africa) have led to the nations proposing an alternative to the US Dollar. It is timely then that we are passing through National Dollar Day this week as BRICS’ proposal for an alternative currency builds traction for an international coalition that Goldman Sachs economist Jim O’Neill once predicted would collectively dominate the global economy by 2050.
The proposal intends to “facilitate trade and investment within the group as a means to assure homogeneity and attractiveness,” reports ForeginPolicy.com, stating that Russia has taken the lead and is spearheading development on the new currency.
The notion of a new currency exclusive to an international coalition is not new. The European Union was after all designed specifically with the Euro in mind, to safeguard the union against expansionary forces as well as ensure a homogenous robustness of the European economy as a whole. The prospective issue as seen with the Euro is that the strength of the currency still varies between each nation’s specific economic institution.
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Prior to the Euro’s implementation in the Greek economy in 2002, Greece was suffering from structural problems including “high inflation, high fiscal and trade deficits, low growth, and problems with exchange rates” as reported by Reuters. The European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) (the Troika) eventually launched a €110 billion (approximately US$120.36 billion) bailout loan during what would come to be known as the 2009 Greek Crisis, rescuing Greece from sovereign default and bolstering its reserves till June 2013.
As for BRICS, the Brazilian Real, Russian Ruble, Indian Rupee, Chinese RMB Yuan and South Africa’s Rand all have their own values and unique issues. The Chinese Yuan has been having to firefight its own decline as of late, as Reuters reports. China’s currency regulators are asking some commercial banks to reduce or postpone their purchase of US Dollars in order to slow the Yuan’s depreciation. Reuters also reports that China is “slammed” to a record low downtrend in foreign direct investment of the last 25 years. The Biden administration is also adopting new investment restrictions on China by restricting the sale of high-tech chipmaking, along with imposing sanctions on Russia in lieu of the Ukrainian conflict.
The 2023 BRICS summit will be held later this month in South Africa where more will be discussed regarding the implementation of a new BRICS currency. The Economic Times reports that while BRICS nations may not necessarily form a political alliance or even a formal trading association, BRICS has the potential to become the next super economic bloc.
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