Nov 12, 2022
Could BRICS & the EU working together cause the collapse of the US dollar?
BRICS make up around 31.5% of world GDP when adjusted on a purchasing power parity basis. With Iran and Argentina added, this rises to 33% of the world GDP. This is a huge potential trade bloc, and 33% of global GDP is certainly enough to justify a reserve currency.
But beyond this, the potential for synergies between the countries is enormous. Taken together, the expanded BRICS countries currently produce around 26% of global oil output and 50% of iron ore production used to make steel. They produce around 40% of global corn production and 46% of global wheat production. If these were all traded in the new reserve currency, it would instantly become a cornerstone of the world economy.
The BRICS members have collectively attempted to disrupt the US dollar’s dominant position in the current global reserve currency structure through promoting the reform of the IMF’s SDR and supporting the renminbi’s inclusion into the SDR basket. These initiatives are part of the BRICS’ broader efforts to reform the existing multilateral international financial institutions.
Chinese officials had expressed China’s interest in restructuring the global reserves currency structure and advocated for giving the SDR a greater role several months before the first BRIC summit. In March 2009, the PBoC Governor, Zhou Xiaochuan, called for making the SDR into a “super-sovereign reserve currency”. Later, the United Nations (UN) echoed Zhou’s idea and proposed establishing a new Global Reserve System based on the IMF’s SDR. The UN proposal stated:
EU Opposes US Dollar.
French officials have for a long time advocated for strategic independence, the idea that the EU needs to be more independent from the US, for instance, by supporting its own industry. Last month, French President Emmanuel Macron suggested that the EU should also look at a “Buy European Act” to protect European carmakers.
“We need a Buy European Act like the Americans, we need to reserve [our subsidies] for our European manufacturers,” Macron said in an interview with broadcaster France 2.
The US dollar’s supremacy and US global leadership have been increasingly questioned since the 2008 global financial crisis, The fact that this crisis originated in the United States raised concerns about the reliability of US leadership and the rationality of preserving the dollar’s hegemonic position in the global financial system.
Despite the breadth of the BRICS countries’ financial cooperation and their growing interconnectedness, BRICS’ activities in the monetary realm have been understudied, Yet the stakes of BRICS’ de-dollarization initiatives are particularly high, The US dollar is the dominant currency in the global financial and monetary system and affects various aspects of global affairs, however, more and more countries seem to be pushing the idea of de-dollarisation due to the loss of confidence in the US currency as a safe haven, One of the main causes of that is US monetary tightening which is playing havoc with the world’s economies, as the dollar is the main global currency, This has reignited a desire to end the dollar’s dominance in the world economy,
A “strong BRICS” is poised to destroy the Petrodollar’s hegemony;
Brazil, Russia, India, China, and South Africa are the five main emerging economies that make up the influential group known as BRICS; The group accounts for roughly 16% of global trade, 24% of the global GDP, and 41% of the world’s population; Since the organization’s founding in 2009, all of the member nations have held yearly meetings; The 14th BRICS annual summit was largely held in China this year;
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