The BRICS Won’t Kill the Dollar, US Policy Will
https://goldswitzerland.com/the-brics-wont-kill-the-dollar-us-policy-will/Below we separate the hype from the sad reality of the USD in the face of a new “BRICS currency.”
Net conclusion: The real death of the USD will be domestic not foreign.
The Bell Has Been Tolling for Years
When it comes to the “bell tolling for fiat,” we can all hear its loud chimes, but that bell has been tolling since 1971 (or frankly 1968), when the US leadership decoupled the world reserve currency from its golden chaperone.
Like any teenager throwing a house party, the lack of a parental chaperone leads to lots of crazy events and lots of broken furniture.
The same is true of post-71 politicians and central bankers suddenly freed of a gold-backed chaperone and thus suddenly loaded with drunken power to mouse-click currencies and expand deficits.
And since then, all kinds of things have been breaking, from banks to bonds to currencies.
And now, with all the extreme hype (and, yes, some genuine reality) behind the headlines of a revolutionary gold-backed BRICS trade currency, many are making sensational claims that the World Reserve Currency (i.e., USD) is nearing its end and that fiat money from DC to Tokyo is effectively toast.
Hmmm…
BRICS are Brazil, Russia, India, China, and South Africa. US domestic policies will weaken the dollar.
Needed Context for the “BRICS New Currency” Debate
As made clear literally from Day 1 of the Western sanctions against Putin, the West may have been aiming for Putin’s (or the Ruble’s) chest, but it then shot itself in the foot.
After decades of DC exporting USD inflation from Argentina to Moscow, a large swath of the developing countries of the world who owe greater than $14T in USD-denominated debt were already reeling under the pain of rate-hike gyrations which made their own debt and currency markets flip and flop like a dying fish on the dock.
Needless to say, a 500-basis-point spike in the cost of that debt under Powell didn’t help. In fact, it did little good (or goodwill) for USD friends and enemies alike, from the gilt markets in London to the fruit markets in Santiago.
Adding insult to injury, DC coupled this strong-Dollar policy with a now weaponized-Dollar policy in which a nuclear and economic power like Russia had its FX reserves frozen and access to SDRs and SWIFT transactions blocked.
Like Napoleon at Moscow, this was going a step too far…
America exported debts to other nations. The weaponization did not help either.
The USD: Supremacy (Still) vs. Hegemony (Gone)
So, no, I don’t think that the USD will fall entirely from grace or even supremacy in August of 2023, even if the trend away from its prior hegemony is becoming increasingly undeniable.
It will take more than sensational BRICS headlines to make such a rapid change, but yes, and as the Sam Cooke song says, “change is gonna come.”
My only point is that for now, and for all the reasons cited above, the trajectory and speed of those changes are likely not as sensational as the trajectory and speed of the current headlines.
No Matter What: Gold Wins
The case for gold, of course, does not change just because the debate about the speed and scope of the new BRICS+ trade currency rages today.
No matter what, the very fact that such a gold-backed trade settlement unit will inevitably come to play will be an equally inevitable tailwind for global gold demand and hence global gold pricing in all currencies, including the USD.
Dollar will remain, but hegemony is declining. American dollar has not been backed by gold for decades.
