BRICS is a group of countries comprising Brazil, Russia, India, China, and South Africa. These countries are considered essential because they have growing economies and a lot of people. Together, they make up about 42% of the world’s population and have a lot of economic power. As BRICS becomes more influential, people start to wonder if it could threaten the US economy and the US dollar, the main currency used worldwide. This article wants to look at the different factors contributing to this debate and give a detailed analysis of how BRICS affects the US economy and the dollar as the global main currency.
The Rise Of BRICS
The countries in BRICS have been doing really well economically in the past few years. This has made them important in the global economy. China and India, especially, have become very strong economically. They have good factories and a growing group of middle-class people. This success has led to more trade between the BRICS countries and more working together in areas like money, building things, and technology.
Why Are The Brics Nations Pursuing A New Currency?
The BRICS countries want to create a new currency for a few different reasons. The challenges in the world economy and the strong actions of the United States have made them think about finding other choices. They want to protect their own economic interests and make it so the world doesn’t have to depend so much on the US dollar and the euro.
Progress In Establishing A New Currency
At the 14th BRICS Summit in the middle of 2022, Russian President Vladimir Putin said that the BRICS countries want to make a “new currency” that can be used around the world. They want to work with other fair countries on this. More recently, Brazilian President Luiz Inacio Lula da Silva also said he supports the idea of a BRICS currency. He questioned the idea that the US dollar became the main currency for trade after the gold standard ended. He suggested that the BRICS bank could make a currency that would make it easier for the member countries to trade with each other.
Mixed Reactions And Concerns
Countries that are not part of BRICS have had different reactions. Some countries, like Turkey, Egypt, and Saudi Arabia, are thinking about joining the BRICS group. Saudi Arabia has been buying more oil from Russia, which shows their interest. However, experts have different opinions on whether a BRICS currency would work. They worry about bringing together countries with different kinds of economies.
There are also concerns that the BRICS countries, except for China, might rely too much on China’s currency, called the yuan. This raises questions about how power would be shared and if there could be problems with the new currency system.
How Would The Introduction Of A New Brics Currency Impact The US economy and dollar?
For a long time, the US dollar has been the most important currency in the world. Right now, it is used in more than 74% of global trade, 90% of money exchanges, almost all oil trades, and almost 60% of the money that central banks keep as reserves. It is widely accepted and used for exchanging money, and it is a standard that other currencies are compared to in the forex market. This is why many central banks in different countries have a lot of dollars.
Although the popularity of the euro and yuan has grown, the US dollar is still the most commonly used reserve currency. It is followed by the euro, yen, pound, and yuan. While the dollar’s share as a reserve currency has gone down a bit, it is still the currency that is used the most in this way.
It’s not clear what would happen to the US economy and dollar if there was a new BRICS currency. Experts have different opinions about whether it would challenge the dominance of the dollar. But if a new BRICS currency became stable and popular, it could make US sanctions less effective and cause the value of the dollar to go down. This could also lead to an economic crisis that would affect American families.
This new currency could make the ongoing trend of using less US dollars happen faster. Countries around the world are actively looking for other options instead of using the US dollar. For example, China and Russia are trading with each other using their own currencies, and countries like India, Kenya, and Malaysia are also trying to use less US dollars or making agreements with other countries to use their own currencies or different standards for trade.
We don’t know for sure if introducing a new BRICS currency would lead to more alternatives to the US dollar. But there is a chance that it could challenge the dollar’s important role as a reserve currency. As countries start to have a more varied mix of currencies in their reserves, the US dollar might face more competition from other emerging currencies. This could change how power is distributed in global markets. The effects on the US dollar will depend on how many countries start using the new BRICS currency, how stable it seems, and if it can be a real alternative to the strong position the US dollar has had for a long time.
What Would Be The Economic Impact Of A Brics Currency?
If a BRICS currency is introduced, it could have a big impact on the North American economy and the people who invest in it. Many different parts of the economy would be affected, including:
- Oil And Gas
If a new BRICS currency is introduced, it could bring big changes to the oil and gas industry. It might affect how oil trades are done and change how prices are set and payments are made.
- Banking And Finance
If a BRICS currency is introduced, the banking and finance industry would have to adjust. It would impact how international transactions are conducted, cross-border investments are made, and the roles of global financial institutions are defined.
- Commodities
If there is a new BRICS currency, it would change how prices and trades happen in commodity markets. This includes things like valuable metals, farming products, and minerals.
- International Trade
If a BRICS currency is created, it would affect how countries trade with each other. It could change which countries trade with each other, the agreements they make, and how North American businesses compete in BRICS markets.
- Technology
If a BRICS currency is introduced, the technology industry would have to adapt to changes in how currencies work and the evolving economic relationships that come with it.
- Tourism And Travel
If a BRICS currency is introduced, the tourism and travel industry might see changes in where visitors come from and how much they spend. This would be because of how currencies work and the economic effects of having a new BRICS currency.
If a new BRICS currency is introduced, it would change which currencies are traded together, how different currencies are related to each other, and how much prices in the market change. This means investors would have to change how they invest to adapt to these changes. This will have a significant impact on US economy and dollar.
