Peter Zeihan, a renowned geopolitical expert, recently dismissed the idea of BRICS, the group of five major emerging national economies, challenging the global order. According to Zeihan, for BRICS to pose a serious threat to the global order, China would need to internationalize its tightly controlled financial sector, a move that he considers highly unlikely.
The Chinese financial sector is one of the most regulated and controlled in the world. The Chinese government has historically kept a tight grip on the flow of money in and out of the country, making it difficult for foreign investors to participate in the Chinese market. For BRICS to challenge the global order, China would need to open up its financial sector, allowing for greater international participation and regulation. However, Zeihan believes that this is a huge hurdle, and not one that China is likely to overcome anytime soon.
Zeihan also addressed the recent headlines about Saudi Arabia ditching the petrodollar, explaining that oil trades in non-U.S. dollars are minimal and lack long-term contracts. The petrodollar refers to the U.S. dollar’s role as the standard currency in oil trading. The idea that Saudi Arabia would abandon this system is not new, but according to Zeihan, it is also not a serious threat.
He emphasizes that Saudi Arabia’s financial moves are driven by security concerns, requiring a nation with a strong navy and ground presence in the Persian Gulf. Saudi Arabia, like many other countries, is looking for ways to protect its economy and reduce its dependence on the U.S. However, Zeihan argues that there is no country out there that has the fiscal depth or the liquidity necessary to replace the U.S. dollar as the global reserve currency. Furthermore, he points out that there’s no coalition of countries that could replace the U.S. dollar, either.
Zeihan’s analysis highlights the unique position that the U.S. occupies in the global economy. The U.S. dollar is the world’s primary reserve currency, and the U.S. has a strong military presence around the world. This combination of economic and military strength makes it difficult for any other country or group of countries to challenge the U.S.’s position in the global order.
In conclusion, while there are certainly challenges to the global order, including the rise of emerging economies like BRICS and the geopolitical maneuvering of countries like Saudi Arabia, it is important to maintain a sense of perspective. According to Peter Zeihan, these challenges are not likely to result in a significant shift in the global order anytime soon. The U.S. dollar remains the world’s primary reserve currency, and the U.S. government and military remain powerful forces on the world stage. As such, while it is important for investors to stay informed about global events, they should not overreact to headlines about challenges to the global order.
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