The dollar has been the global reference currency for 80 years since the end of the Second World War. It has an almost absolute priority as currency for purchases of raw materials, financial exchanges or government reserves between countries. 88% of transactions in the world are paid in dollars. developing countries they want to end this hegemony, especially China, Brazil or Russia. This BRICS (Brazil, Russia, India, China and South Africa) are leveraging the Johannesburg meeting, which began on Tuesday and ended on Thursday, to advance their monetary agendas.
They will analyze How to move forward with the “dedollarization” of their economies and how to increase the use of local currencies in trade at the expense of the dollar. Brazilian President Lula da Silva called for steps to be taken at the summit to reach some kind of common currency: “We advocate the reference currency so that we do not need another country’s currency. Why am I doing business with China and do I need dollars? “Brazil and China are big enough to do business in their own currency or any other reference currency.” [Estados Unidos]”.
For some analysts, the idea of a common currency for BRICS is an illusion because they are so diverse. While others see a common reference basket as more valid, this cannot be ignored. Chinese yuan, Russian ruble or Indian rupee) allows them to trade in less dollars. Meanwhile, the central banks of these major countries keep gold in their reserves because they want to have a backup of the precious metal. They believe that the dollar is an imperfect currency because it is not backed by anything real, and this causes inflation. This is not just an economic shock; It is a huge geopolitical game with many consequences.
The economist thinks of this paper: “The BRICS has a serious attempt to create a parallel currency circulation based on a basket of two or three currencies with the greatest potential, such as the yuan, the ruble and perhaps the rupee.” javier santacruz. “This is not a toast to the sun. It is feasible, realistic, and even convenient because it will compete with the dollar; this is an alternative that is usual in history but has existed since the end of Breton Woods (1944)”.
The analyst finds it very difficult to create a common euro-style currency because for this they would require, among other things, a non-existent level of financial coordination. The key prefers to be in the elaboration of a topic. currency basket (yuan-ruble-rupee) have a fixed exchange rate between them.
Alicia Garcia Herrero Nor does the Asia-Pacific chief economic director at investment bank Natixis think a common currency is viable for the BRICS. “These are non-integrated areas. Some have not even signed bilateral trade agreements and have completely different economic cycles,” says the expert. “You can’t create a new single currency like eating candy. What currency will they reference? The collapsing ruble? Which can’t be converted to Renminbi? Brazilian real? For Indian rupees? What will China say about this? It’s hilarious and says very little about the BRICS as a group.”
The analyst considers it reasonable to increase the use of local currencies on commercial exchanges (such as buying and selling products or raw materials). But such operations include: only one-sixth of the total volume; the rest are financial transactions, mostly in dollars. “And that won’t change because these currencies are not fully convertible except for the Brazilian real.”
Russian President Vladimir Putin bragged about the video conference at the inauguration (he did not attend to avoid being arrested in reaction to the international order). “only 28.7%” Import and export transactions in BRICS countries are already done in dollars. At the same time, the dollar, which is the reserve currency of countries, is depreciating. In 2000, 70 percent of the national coffers were green tickets, but now this rate has dropped to 59 percent.
half of humanity
The BRICS represent four out of 10 people, more than 3 billion people, mostly from China and India. They also have 23% of global gross domestic product and 18% of world trade.
The group is trying to grow. 21 countries applied to join Iran, Egypt, Algeria or Indonesia. Nearly twenty countries attended the meeting in South Africa as observers.
HE Chinese President Xi JinpingHe asked BRICS partners this Wednesday to speed up the enlargement process because he believes it will make “global governance fairer”.
BRICS is a point of attraction for non-aligned countries, although it is very diverse. It was created by Russia, a systematic challenge to the United States and NATO, now excluded by the West and China. But there are also Brazil, South Africa and India that are integrated. they withdraw from unconditional and full support to western Ukraine. In this sense, the governments of South Africa and China issued a joint statement on the margin of the summit this Wednesday, in which they propose a constructive dialogue as the “only viable way out” for resolving the crisis in Ukraine.
gold hoarding
In 1971 the United States ended the so-called “gold standard” and stopped supporting its currency with equivalent precious metal reserves. Since then, the dollar’s value has been determined by the Federal Reserve, which issues more or less money at its discretion. This situation causes the value to fluctuate due to political decisions and causes the owners of the money to lose value.
Herein lies the gist of the matter. The central rulers of India or China are harshly criticizing an inflation-inducing currency that is backed by nothing financially and harms savers. I am looking for an alternative model. And they’re hoarding gold to back it up
Russia already 23% of gold in world reservesAccording to Goldhub. India, 8%. China is officially close to 4%, although many analysts believe it is secretly buying more. Santacruz explained that Beijing has begun buying large volumes of gold since the price dropped as low as $1,000 in 2014-2015. It has now been buying at a rate of 16 tonnes per month for seven months straight.