Dedollarisation Trend

Amidst the chaos of 2020, the U.S. Federal Reserve has printed 80% of all U.S. dollars in existence, an age of easy money indeed. With the U.S. dollar being the world reserve currency, this action created a domino effect that left other nations with no choice but to devalue their currencies to keep exports competitive.

This era of easy money has exposed the flaws in the U.S. dollar therefore giving a competitive advantage to BRICS. 

BRICS, short for Brazil, Russia, India, China, and South Africa, is a group of five emerging economies, formed in 2009, to come together to form a powerful alliance to promote a multipolar world order that is more balanced and fair. According to reports quoting the Russian lawmaker Alexander Babakov, the BRICS nations are creating a new medium for payments- established on a strategy that “does not defend the dollar or euro”. He reportedly indicated that the new currency would be secured by gold and other commodities such as rare-earth elements.

Here are the late threats to the greenback’s reign; in January, the Russian and Chinese central banks agreed to set up a new yuan currency swap instrument; now they are trading in their currencies. Beijing and Brazil have also dropped the dollar in bilateral trade. The UAE is selling China its gas in yuan, through a French company. Now even Europe seems to be jumping onto the anti-dollar bandwagon, with French President Emmanuel Macron warning the European countries against the dependence on the US dollar. 

When Brazilian President Luiz Inacio Lula da Silva visited the folks of Shanghai in early April this year, he made a jarring statement- a speech that sent chills down the spines:

“Why does every country need to trade in the US dollar?”

He gave a speech that called on countries to pursue a more balanced global currency system and not rely on the U.S.’s autocracy.

“Who decided it was the dollar after the disappearance of the gold standard?” he asked.

Keep in mind that Brazil is the most populous Latin American country with the largest economy, and now they will join forces with China, Russia, India, and Saudi Arabia, a demonstration that won’t be ignored any longer.

Is this the end of the dollar?

For decades, the US dollar has reigned supreme as the world’s reserve currency and is widely used in cross-border trade. Thanks to its relative price stability, investors see it as a safe haven asset in times of economic and geopolitical uncertainty.

 It all started after the Bretton Woods Agreement, where other currencies were pegged to the US dollar because of its sustainability. That is because the dollar at that time was insured by gold. 

The dollar standard created a global economy dependent on America. It is how the world operates today, with 88% of global trade done in US dollars. The disadvantage of this dependence is that; now any U.S. economic crisis could also reverberate worldwide, like the 2008 housing bubble.

Now you may be asking how we let ourselves in the position we are in today. Why didn’t the world adopt an independent and neutral international currency, like the “Bancor,” proposed by John Maynard Keynes and Harry Dexter White in 1945?

It is worth noting that the world at the time had no choice. Europe was destroyed by a world war; they were de-industrialized and at the end of World War II the United States made up nearly half of the planet’s economic output without Europe being able to bat.

Visualist Capitalist

There is a lot written about the decision to adopt the U.S. dollar; it was very controversial and no one took it lying down but eventually, they all had to submit for the good of the economy.

How’s a homeless broke country going to deny free food?

US dollar is utterly destroying the Russian ruble

Since the war in Ukraine, interest rates in Russia went to 20%, and gas and oil tax revenue dropped to their lowest levels since 2020.

Approximately 1 to 3 million young Russian males (those who had the money, aka those who were highly educated) have left the country. The Russian arms and defense industry (big industry) is not exporting anything because everything is needed in Ukraine.

And over 1,000 Western companies left Russia indefinitely.

There is no way that Russia is winning the economic war. No one can. Not with the U.S. dollar being so strong.

And if there is anything that history has taught us is that the U.S. has no mercy on threats to the dollar:

• In 2000 former Iraqi President Saddam Hussein said he would sell oil in Euros, not Dollars. Saddam was hanged by the U.S.
• In 2009 Gaddafi wanted Libya to export oil in pan-African Gold Dinars, not in dollars or Euros. US-backed Libyan rebels killed him.
• Iran has been trading oil in currencies other than US dollars since 2011. We sanctioned them.
• In 2014, Putin’s grip on power came under threat by U.S. sanctions after he started trading in non-dollars. The U.S. also began to support pro-Washington opposition leader Alexei Navalny to displace Putin.
• These aren’t the good guys — make no mistake.

But as former Secretaries of State Hillary Clinton and Condoleezza Rice agreed in an interview, many times we disrupt these countries with no plan afterward — creating a vacuum.

“The problem is, okay, Gaddafi’s gone. His horrible prisons are emptied. What comes next?” — Hillary Clinton

That means play by our rules, ignore our money printing, listen to our dubstep, and accept the U.S. dollar as your global reserve currency.

Or be left behind in the dust of neoliberalism.

What comes next?

The guys who are trying to sell you Bitcoin say, “Bitcoin.”
The guys who are trying to sell you gold say, “Gold.”
The guys who are trying to sell you oil say, “Oil.”

However, most people seem to agree that BRICS is a threat. BRICS nations have a higher GDP than the whole G7 (U.S. and allies) combined.

But BRICS has its Achilles heel. All the BRICS nations have their currency tied to the U.S. Dollar, so they can’t just switch to a new reserve without serious economic repercussions.

BRICS countries also have nothing in common culturally or politically to maintain their currency as a standard. Granted, that never stopped the Saudis and America from building a coalition.

In any matter, if the EU can’t accomplish anything with the Euro, BRICS is in for one hell of an uphill battle.

Final Thought

On the matter of the U.S. dollar, the world appears divided — either succumb to financial slavery by capitulating to America’s whims or risk freedom into a system with no history: a true Sisyphean dilemma.

(Also, that system, BRICS, is run by a country ranked nearly last in freedom)

I don’t trust America, the Federal Reserve or BRICS for that matter.

It’s all about their short-term gains and kicking cans down the road.

My advice: find what’s good for you and for now and invest in it. As they say: the wise plan ahead while fools sleep. Don’t be a fool; control what you can. The destiny of the dollar's role in our lives isn’t written yet- but make sure you’re ready for whatever comes next.

I’ve always wanted to be a financial advisor but because I am not, do not take anything in this publication as investment advice. Take it as informative and do your research.