For almost 80 years, the US dollar has reigned supreme as the world’s reserve currency.
And its dominance has gone mostly unchallenged.
But times are changing fast.
Now, the US dollar must defend its status because….
The BRICS nations—which include Brazil, Russia, India, China, and South Africa—are cooperating to push the king of currencies off its throne.
Together, the current member nations already represent over 55% of the global population, and their combined GDP of $26 trillion accounts for about 30% of global output—or higher GDP than the entire G7 bloc combined. This gives them undeniable economic strength.
And their power base is on the rise:
Last year, Ethiopia, Egypt, Iran, and the United Arab Emirates joined BRICS, and Saudi Arabia—the world’s second-largest oil producer—has been invited to join. With at least 40 other countries lining up to join, BRICS is consolidating its global power and influence.
This, says Business Insider, “should be a key cause of concern for the US, as new members along with countries who want to join could amplify de-dollarization.”
And BRICS is flexing its financial muscles
Several initiatives are in the works or have already been implemented:
1) New Development Bank
As a financial counterweight to Western-dominated institutions like the World Bank and the IMF, BRICS has established the New Development Bank.
The bank has $100 billion available for infrastructure projects and is offering de-dollarizing nations an alternative lending source free from perceived economic and political strings.
2) BRICS Pay
In December 2023, BRICS deployed a new payment platform called, appropriately, BRICS Pay.
BRICS Pay is already making it easy for nations to bypass the US dollar and make cross-border transactions in local currencies, which could significantly reduce global reliance on the greenback for international trade and settlements.
3) Central Bank Digital Currencies
CBDCs, like China’s digital yuan and Russia’s proposed digital ruble (slated for 2025), when combined with the new BRICS payment platform, could potentially transform traditional payment systems and end dollar dependence.
4) Individual Nation Initiatives
Beyond collective de-dollarization initiatives, individual BRICS nations are implementing their own measures to reduce dependence on the dollar.
India, for example, is now settling trade with Russia in rupees more often.
And former State Department official Thomas Hill says, “It is clear that traditional US allies, such as Egypt, Saudi Arabia, and the UAE, are already exploring ways to de-dollarize and that Beijing is helping that process move forward.”
Back here in the United States…
Over the past few years, the Federal Reserve has embarked on one of the most aggressive money-printing campaigns in history. From pandemic stimulus packages to reckless deficit spending, the Fed has pumped trillions of dollars into the economy.
America is now stuck with the worst of both worlds: soaring prices and crippling borrowing costs.
Meanwhile, retirees and investors are left holding assets that are now highly vulnerable to both domestic inflation and international de-dollarization. If BRICS succeeds in undermining the dollar, the resulting impact could drastically affect retirement portfolios.
Does this mean the dollar is about to lose its reserve currency status?
The dollar still accounts for more than 80% of international transactions. And despite concerted BRICS efforts to dethrone the greenback, most analysts don’t forecast its imminent demise.
But with so many nations joining BRICS…
Washington’s own fiscal problems weakening the dollar from within…
And the rattling uncertainty that tariffs are causing global trade…
The dollar faces a long, fierce fight against a determined rival who is growing stronger every day and may stop at nothing to see the greenback tap out for good.
Please don’t hesitate to reach out to us with any questions you may have.
May you be safe and well during these uncertain times.
Todd Sawyer, Director of Client Education
Colonial Metals Group