BRICS Countries Are Ditching the U.S. Dollar.

New Money | New Money
Topics: global finance, BRICS nations, US dollar, international trade, currency dominance

Video’s main points

• The US dollar serves as the dominant international currency, with 96% of trade in Americas and 74-79% in most other regions conducted in USD
• The US leverages its reserve currency status through financial sanctions and control of international banking systems like SWIFT
• BRICS nations (Brazil, Russia, India, China, South Africa) are developing alternative payment systems including CIPS (China), SPFS (Russia), and the proposed BRICS Pay
• BRICS countries are increasing gold reserves to reduce USD dependence, with China adding 314 tons and Russia increasing purchases to 31.5% of total reserves
• The expanded BRICS alliance now represents 37.3% of global GDP and 44.35% of global oil reserves

The Shifting Landscape of Global Currency Dominance

The international financial system is witnessing a significant transformation as countries increasingly seek alternatives to the US dollar’s hegemony. This shift, primarily led by BRICS nations, represents a fundamental challenge to the established global monetary order.

Understanding Dollar Dominance

The US dollar’s position as the world’s reserve currency has historically provided America with unprecedented economic power. Nearly 96% of trade in the Americas and approximately 75% of global transactions are conducted in US dollars. This dominance extends to commodity pricing, with oil, gold, and other vital resources traditionally priced in USD.

The Weaponization of Currency

America’s ability to leverage its currency’s dominance has become increasingly apparent through financial sanctions. The US can effectively isolate countries from the global financial system by restricting access to dollar-denominated transactions and SWIFT, the primary international payment network. This power has been demonstrated through sanctions against countries like Iran and Russia, significantly impacting their economies and international trade capabilities.

The BRICS Response: Creating Alternative Systems

In response to this financial dominance, BRICS nations have accelerated the development of independent payment systems. China’s Cross-Border Interbank Payment System (CIPS) and Russia’s System for Transfer of Financial Messages (SPFS) represent initial steps toward financial independence. These systems enable member countries to conduct international transactions without relying on US-controlled networks.

The Gold Strategy

BRICS nations are significantly increasing their gold reserves as part of their de-dollarization strategy. China’s central bank has added 314 tons of gold to its reserves, while Russia has increased its gold holdings to 31.5% of total reserves. This accumulation serves multiple purposes:

• Reducing dependence on US dollar reserves
• Creating alternative value storage
• Establishing a foundation for potential new currency systems

The Expansion and Future of BRICS

The recent expansion of BRICS to include Egypt, Ethiopia, Iran, and the UAE marks a significant milestone. The enlarged alliance now represents:

• 37.3% of global GDP
• 44.35% of global oil reserves
• 45% of the world’s population
• 38.3% of global industrial production

BRICS Pay: A New Financial Frontier

The proposed BRICS Pay system represents perhaps the most ambitious attempt to create an alternative to the SWIFT network. This blockchain-based payment system aims to facilitate direct trading between member nations using their local currencies, effectively bypassing the need for US dollar intermediation.

Implications for Global Economic Order

While the US dollar is likely to maintain its status as the world’s primary reserve currency in the near term, these developments signal a significant shift in the global financial landscape. The emergence of alternative payment systems and the growing economic influence of BRICS nations suggest a trend toward a more multipolar financial world.

Future Challenges and Opportunities

The success of these initiatives will depend on several factors:

• Technical implementation of alternative payment systems
• Political cohesion among BRICS members
• Global acceptance of new financial mechanisms
• Stability and reliability of proposed alternatives

As these developments continue to unfold, the global financial system may be heading toward a new era of reduced US dollar dominance and increased monetary multipolarity.