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The hegemonic role of the dollar as a global reserve currency is no longer viewed as a reflection of the multipolar world
The subject of de-dollarization is ever so often becoming the center of attention in the developing economies and those alternative to the Western bloc. The scenario that seemingly corresponds to the increasingly multipolar global economy keeps getting less and less dependent on the will of the US. The opportunity to launch the “BRICS currency” will become one of the hot topics of the summit that will take place next August in Johannesburg between the leaders of Brazil, Russia, India, China, and South Africa.
This issue is analyzed in detail in the article by Will McBain published in the African Business magazine.
The currency, other than the dollar, used for trading within BRICS and the countries with developing economies may be a real turning point that will accompany the global economic policy with a clearly much more multipolar character. The hegemonic role of the dollar as a global reserve currency is no longer viewed as a reflection of the multipolar world, in which China emerges decisively and watches the US domination, and is no longer synchronized with the real economy. The “monumental” role of American currency in the global economy by far exceeds USA’s contribution to the global economy, as it represents just one-tenth of the global volume. However, half of all the deals is carried out in US dollars.
In order arrive at a single currency, it is first necessary to coordinate the economic objectives and policies of BRICS themselves, while the dollar guarantees a certain stability
Moreover, the existing policy of high interest rates set by the Feds presents a serious problem for the economies of the global south, as they tend to increase the relative value of the dollar in exchange markets, thus raising the cost of their debts.
While the idea of a full-fledged BRICS currency proposed by Russia and picked up by South Africa may seem unlikely in the short-run, it is possible to implement various initiatives, such as expanding the authority of the New Development Bank (NDB), launching a payment system alternative to Swift, developing bilateral trade, using gold reserves and production of the BRICS countries, or performing transition to digital currencies.
This is not an easy process: arriving at a single currency will primarily require the coordination of policies and economic goals of BRICS themselves. Nonetheless, certain activities have already become reality, for example, performing bilateral exchanges bypassing the dollar. It is possible indeed, but very risky, because strong fluctuations of one of the two currencies will inevitably lead to partial devaluation, while the dollar guarantees a certain stability. Despite its intrinsic imperfection, the dollar always served as a safe harbor for investments and was supported by a large, relatively safe, and a less corrupted market.
On the other hand, it cannot be denied that the developed world in the conditions of the ongoing demographic decline is being confronted by a growing young world that wants and is able to play an increasingly important role. This should ultimately undermine the current domination of the dollar and change the economic narrative.
This is why the August summit will be important, regardless of whether or not it can bring changes in the short-run. Africa, which was totally ignored during the establishment of the Bretton Woods world order, will now become the center of attention, along with other world nations that have not joined the USA.
