Distrust in the American dollar has increased around the world with a loss of banking stability, and distrust in American guarantees from other countries have also decreased after incidences like the Afghanistan debacle, and poor leadership in the United States has led to poor relations with other countries to the extent that world leaders are even refusing to meet with certain officials in the Biden administration. BRICS, which is an acronym for five regional economies of Brazil, Russia, India, China, and South Africa is rapidly evolving.
World economics and trade are quickly shifting as are world alliances. Recently more and more nations (up to 19 now) are asking to join BRICS including Algeria, Argentina, Bahrain, Egypt, Honduras, Indonesia, Iran, Saudi Arabia, United Arab Emirates, Afghanistan, Bangladesh, Belarus, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Senegal, Sudan, Syria, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe. BRICS is discussing using a currency for trade other than the US Dollar with 24 countries that are ready to accept BRICS currency, and the acceptance of membership from other countries into BRICS will take place at the annual summit this year (2023). The Federal Reserve plans on challenging BRICS by launching the FedNow payment service which many are worried will continue to add to the decreased privacy of Americans with more and more digital tracking. With 24 countries accepting and trading with BRICS currency when it launches it will effectively bypass the U.S. Dollar, weaken the dollar’s dominance, and give other nations more financial power than the United States. The BRICS countries are buying up massive amounts of gold to topple the dominance of the U.S. Dollar and effectively removing the dollar as a dominator in international trade.
But how will that affect us and the world? If other countries ditch the Dollar, the U.S. will have no means to fund its deficit making the dollar weak and plummeting its value. This has wide spread implications such as in foreign policy by weakening the power of U.S. sanctions on other countries and it won’t allow the United States to dominate trade such that other countries would be able to produce a wider range of goods and circumvent trade restrictions; thus the United States would not be able to boycott the trade of certain goods or add tariffs or restrictions resulting in the loss of foreign policy mobility. However, if the U.S. loses sanction abilities, it does not raise the price of the dollar which would have then raised the cost of American goods and services to the rest of the world, decreased exports, and cost the US jobs with the end result meaning the cost to consumers actually decreases.
Currently there is a $100 million foreign currency reserve pool known as the Contingent Reserves Arrangement which is a store of foreign currency that any of the BRICS countries can dip into if needed. This protects against currency fluctuations in those countries and increases consumer confidence.
In Conclusion, world alliances are rapidly evolving and the United States is losing power on the world scene in foreign policy and trade. A rapidly declining dollar could affect our debt and our ability to apply sanctions to other countries and result in a threat to our national security. Time will show the implications of a BRICs currency on the rest of the world.