BRICS nations take aim at dollar dominance at latest summit

Gil-Design

BRICS leaders, who are looking to transform their group into a geopolitical force that could threaten the West's dominance on the global stage, have converged for a three-day summit in South Africa that began on Monday.

A notable exclusion is Russian President Vladimir Putin, who is currently facing an international arrest warrant over alleged war crimes in Ukraine. Russian Foreign Minister Sergei Lavrov will attend in his place.

South Africa is hosting Chinese President Xi Jinping, Brazil's President Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi for the BRICS summit.

China is expected to urge the group to explore becoming a geopolitical rival to G7, given growing skepticism about a world order that it claims serves the interests of U.S. and its rich allies.

While China and Russia are pushing to expand the bloc, other members (Brazil and India) are hesitant. "Their primary motive for working with Beijing and Moscow is not necessarily that they agree with them," said Priyal Singh, senior researcher at Institute for Security Studies. "They are trying to pursue their own sense of strategic autonomy on the world stage."

BRICS nations account for more than a quarter of the global economy, but they differ vastly on political and security issues, including ties with the U.S.

Even as the new world order touted by Beijing and Moscow appears to be at risk, BRICS is moving ahead with efforts to reduce reliance on the dominant U.S. dollar (DXY).

The bloc's development bank will reportedly start lending in the South African and Brazilian currencies. Dilma Rousseff, who heads the New Development Bank, also said the bank was considering membership applications from ~15 countries and will likely approve four or five of these. "We expect to lend between $8B-$10B this year."

More on BRICS

• 'New world order' backfires on China and Russia amid economic disruption
• Putin was meant to be at BRICS summit. Why was he asked to stay away?
• Be Ready For BRICS To Disappoint High Hopes For A Dollar Alternative
• BRICS Expansion And What It Means For The U.S. Dollar

Comments

[hhill719]

Is this supposed to be a gold backed currency? I don’t think we have anything to worry about. The Bretton Woods system dissolved itself due to the global economy growing faster than we could mine gold. Of course Russia and South Africa are supportive of a gold backed currency because they are major producers of gold. This is the reason why we moved to a free floating exchange rate system, which was never meant to be permanent but has been in place for over 50 years. I do think that a new system needs to be implemented, or a new reserve currency. And perhaps a digital reserve currency could be implemented (taking the place of gold such as the days of Bretton Woods) as the reserve to put exchange rates against, but these tokens are riddled with fraud. Ultimately the US is able to keep its place as a super power in the world because of

1.) Before our Navy began protecting international trade routes global trade was very volatile. Our military plays a critical role in the global trade balance

2.) the US has a remarkable nack for innovation in technology. The US tech sector keeps the economy mostly insulated from feeling the pain of commodity price fluctuations due to the exchange rate cycle. Instead the rest of the world usually feels this pressure as a strong dollar can force emerging economies to face set backs.

It’s understandable for emerging economies to feel the need for an alternative to the dollar. The cycle of our interest rate exchanges can dampen growth, causing them to find new allies (such as opec+ selling discounted oil to Southeast Asia). I think that Brics might really be more of a new allegiance of trading partners rather than a new currency system. The only way for them to break away from the dollar would to become independent from its trade, and there would of course ramifications to this such as the loss of US military protection on trade routes.

I just don’t see a realistic outcome for this coalition. Our world is facing a new age of globalization in which our economies are more interdependent than ever. Of course there will be a new international trade system put into place, but it would likely take a black swan event. Much like the when the Bretton Woods system was developed coming out of WW2.

I’m not an economist, just a hobbies so take my opinions and references with a grain of salt. I’m fascinated by global economies and find new development riveting, I just don’t find this one (Brics+) worth losing sleep over.

[Moxx]

@hhill719 Just print more money...problems solved!!!!

[josephaoppenheim]

The US is the wealthiest civilization ever.

Per capita GDP of these nations is di minimis to the US. As if any could invent the first computer on a chip, the Internet, the Cloud, the Smartphone, develop the first commercially feasible EV, an Nvidia chip, etc, etc.

The more these midget brained nations want to align, the stronger the US gets.

[Moxx]

@josephaoppenheim Get debt free...

[HardCovenant]

corrupt Lula in Brasil going down a rathole

to even push Argentina to adopt the yuan tells you he is being paid under the table as usual, Car Wash 2.0

hopefully Javier in Argentina will win, end the Argentina inflation tsunami and do the smart strategy of USD

[AnimeSnoopy]

I just think it's interesting that the yield curve jumped way up at the exact time the BRICS conference began.

For the past week, every other day the intermediates and long duration US treasuries go up big and then are bought up the next day.

It's been weird to watch.
At first my international local treasuries would follow along, but today they decoupled hard and barely budged compared to the US treasury sell-off.

Someone is net-selling US long and intermediate treasuries, and I think the market is starting to realize.

[Darren McCammon]

@AnimeSnoopy Will TLT break support near $92.30?

[AnimeSnoopy]

@Darren McCammon
No clue.
Won't be good for the financial system if it does.

[gohabsgo70]

Bye Bye dollar within 10 years. BRICS just played a check...not check mate yet.
Lets be honest, the US is falling apart ( Canada where I live as well ). The world is changing and nothing you can do.

[Chris Lau]

BRICS as a functional organ will always hit its limitation. China is so big,strong and rich and also very undemocratic: the Chinese leader will have no doubts who calls the shots at the end of the day.

[Moxx]

The Government of America has employed imperialistic tendencies for 250 years.
Knowing how the Democrat party has become war hawkish...would not Suprise to witness another Biden attempt at war to keep American currency dominance.
Destroying the Nordstrem pipeline did not work.
Biden has proved to the world that he has weaponized the banking system and none of them are safe from his control....so BRICS will become an alternative to American control.

Aren't you all glad Biden is President?

Actions have consequences. The world is witnessing Bidenomic policies...

[AnimeSnoopy]

@Moxx
It's all leverage, baby.
Double or nothing ; )

[Hertzee]

@Moxx Weaponizing the dollar is a game played by both parties. Our elected officials are doing a wonderful job of destroying dollar dominance. The US is on path to becoming just another imperialist power of yesterday. Tragic and self-inflicted. I can't help but wonder if we aren't also creating a structural bias to higher yields on treasuries to attract foreign capital to support our out-of-control spending on financially non-productive policies.

[Darren McCammon]

1.) A gold backed BRICS+ buck is not the Yuan or Ruble. Any argument along the lines of the Yuan or Ruble not being sufficient for a reserve or world trade currency is inherently specious. No one is saying it is. Instead they are saying a gold backed BRICS+ buck could be.

2.) Trust is a significant issue. However India doesn't have to trust China, nor the West trust Russia in order for people to favor BRICS+ bucks. They have to trust in the BRICS+ buck. They have to trust it's value and ability to hold that value without ANY country being able to game it or use it as a weapon. Being exchangeable for gold (and/or other commodities) goes a long ways towards that. Additionally, we have already seen another form of currency these countries haven't been able to game/print so far (Bitcoin). Incorporate both aspects into the BRICS+ buck and it is likely to gain trust.

3.) History indicates world currencies don't fall in a day, or week, or year. Instead it is a slow multi-decade process at first, that then tips to a point where it accelerates. What that would look like is Treasury bond rates climbing as the US Treasury continues to print ever more even as other major holders sell (the Fed, Japan, China, etc.). It would also look like chronic US Dollar inflation as the US Dollar slowly loses world dominance.

seekingalpha.com/...

[LK106218]

@Darren McCammon

Who would issue this currency?

Who would secure this currency?

Who would hold reserves of this currency?

Who would collect fees or taxes on property transacted in this currency?

[Darren McCammon]

@LK106218 I don't know, but we are going to find out.

As expected, Saudi Arabia, Iran, Egypt, Argentina and the UAE have been formally invited to join BRICS+ (starting January 1, 2024). I'm sure most are aware what these countries have in common (oil and gas). (Argentina has the 2nd largest reserve of shale gas and the 4th largest reserve of shale oil worldwide.)

Is the PetroDollar going to eventually be replaced by the PetroBRICS buck? If the news you read or listen to isn't discussing this geopolitical risk, or is downplaying it, ask yourself why.

The path BRICS+ is going to try to take is pretty clear. “Redesigning today’s outdated, dysfunctional and unfair global financial architecture is necessary, but it won’t happen overnight,...” - U.N. Secretary-General António Guterres in a speech to the BRICS summit.

[RWilliam]

@Darren McCammon obviously on the Shanghai exchange, BRIKS dollar for oil, food or gold.

[mac ron]

That Bricks countries are a dictatorship or democracy is irrelevant. That they are socialist, communist or free market is also irrelevant. Further even trading in each others currency instead of needing U.S $s is concerning but doesn’t effect the U.S reserve currency. However the more trade is facilitated by counties in each others currency, the more the need to hold U.S $ in reserve will become less and less required. At some time countries will begin to realize that they do not need to hold U.S $s in reserve or at least not as much. At this realization, they may begin selling down their dollar reserves. This will become a self reinforcing feed back loop or self fulfilling prophecy. As the U.S $ weakens, interest rates will need to rise to encourage holding the greenback. As the U.S debt rolls over with low interest treasuries/bond issued with higher interest rates, the U.S debt will become unmanageable. As the debt manitainence, grows from 120% of GDP, to !20% plus, the greenback may be come toxic like a hot potato, especially if the debt is downgraded. I see the U.S $ in a precarious situation.

[gohabsgo70]

@mac ron pretty brilliant comment if I may say so

[vxmike]

@mac ron Agree. The US needs to act fast to avoid a looking catastrophe. Another $10T debt from now the situation might become unmanageable.

[Moxx]

@mac ron Gold will benefit from a weak dollar.

[PaulPG]

Interesting to see how long this happy marriage will last before they start fighting with each other.

[rando_on_the_internet]

The use of the dollar as a reserve currency is actually *against* US interests. By raising the value of the dollar, this system makes products and services from the US more expensive relative to those from the rest of the world, which hurts American industry. If other countries move away from the dollar as a reserve currency, it would provide a big boost to US manufacturing and technology industries, and greatly reduce the pressure to do offshoring.

[benjaminmaxvh]

@rando_on_the_internet lol this is garbage. Only countries with the exorbitant privilege of being able to print the world's reserve currency can run continual fiscal deficits and still be deemed a good credit risk

[PanicFirst]

@rando_on_the_internet the u.s. doesn't have the iq to manufacture

[Liberum Mercator]

@rando_on_the_internet USD is the global reserve currency because with dollars you can buy American technology and real estate (which are the best in the world because of America's economic freedom (capitalism)).

[Common Sense Here]

So... "We expect to lend between $8B-$10B this year." Is that in USD or "brics"

[RWilliam]

Thx Brandon! Nice job. The damage done to the USA world wide in last few years is immense. Most of the world’s population doesn’t agree with our proxy war status. Much of the world now views the USA as an unreliable financial partner after weaponizing the dollar to the extreme. Hence the alternative swift, the petro yuan, briks plus trading systems, new Asian trading coop.

[Mr Briggens]

@RWilliam

Consider Patrick Boyle's take on the issue.

www.youtube.com/...

[RWilliam]

@Mr Briggens long video, aware of most the points made. The U.S. debt is the big issue not the reserve currency status.

What’s not talked about is a gold back, Petro Yuan. China could call the public’s gold estimated at ~20% of the world above ground supply. Issue a gold back yuan for international trade. Gold could flow through the Shanghai exchange as notes like GLD.

Our debt, foreigners stopped funding it long ago as the video points out, next buyer was banks. Banks were forced into buying certain investment instruments like long term U.S. bonds. We know how that worked out with upside down balance sheets if marked to market. That leaves US citizens, who are currently the big buyer of the us blooming debt.

[goodfellasfinancial]

@RWilliam India and Russia as well

[rando_on_the_internet]

The terms "left-wing" and "right-wing" come from the pre-revolutionary French parliament, where representatives of the clergy and nobility sat on the right and representatives of commoners sat on the left. Ever since, the term "right-wing" has referred to ideologies that favor tradition, order, and hierarchy, while "left-wing" has referred to ideologies that favor egalitarianism. Technically, Russian and India have right-wing governments while China, Brazil, and South Africa have left-wing governments.

[RWilliam]

@rando_on_the_internet most all language comes from the left. Left controls the teachers unions, universities, etc.
The word right wing means you don’t agree with UN, WEF mandates,

[GhostFaceInvestah]

@rando_on_the_internet your comment fits your name 😂

[DividendInvestorLA]

The country that REALLY took aim at "Dollar Dominance" is.... the United States (or at least its government). If you wanted the world to lose confidence, you couldn't have done it better and faster.

[montereymd]

LOL. A corrupt group of brutal military dictatorships meeting in a failed state. What a mess

[alpha420]

BRICS (Plus 40 other nations) includes over 1/2 of the world's population and most of the world's natural resources. Think the Western world can survive it's status quo? Good Luck.

[Go and do likewise]

@alpha420 All these countries are invested in USD. Even China did Belt & Road loans in USD.

[RWilliam]

@alpha420 we may survive but the quality of life will greatly diminish. Inflation will only get worse as the dollar falls and U.S. debt skyrockets. MMT at work.

[Go and do likewise]

"We expect to lend between $8B-$10B this year."

*yawn*

[LK106218]

This group may be united in a desire for an alternative to the USD but likely are not able to commit to another currency or a means to handle transactions.

[vxmike]

@LK106218 they really just need to settle on a Gold-backed means of exchange.

[ecs34]

Will never happen as long as China is authoritarian. The deflation hiighlights their problem - when the people realize they aren't truly free and their money buys them no exclusions and the CCP is still the highest figure in the land who can just willy nilly change the rules when they see fit, people don't care about money as much. China will constantly struggle between CCP authority and letting the people "spend money how they wish" in order to encourage more economic activity. Different era same issues.