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New Delhi, April 27 – A BRICS currency could shake the dollar’s dominance, a former White House adviser has said.
De-dollarization moment might finally be here, Joseph Sullivan, former special advisor and staff economist at the White House Council of Economic Advisers during the Trump administration, wrote in Foreign Policy.
Talk of de-dollarization is in the air. Last month, in New Delhi, Alexander Babakov, deputy chairman of Russia’s State Duma, said that Russia is now spearheading the development of a new currency. It is to be used for cross-border trade by the BRICS nations: Brazil, Russia, India, China, and South Africa, Sullivan wrote.
Weeks later, in Beijing, Brazil’s president, Luiz Inacio Lula da Silva, chimed in. “Every night,” he said he asks himself “why all countries have to base their trade on the dollar.”
Sullivan said a currency issued by Brazil, Russia, India, China and South Africa would pose a unique threat to the dollar’s dominance.
“It’d be like a new union of up-and-coming discontents who, on the scale of GDP, now collectively outweigh not only the reigning hegemon, the United States, but the entire G-7 weight class put together,” he said in the column, Markets Insider reported.
In recent months, discourse about de-dollarization has flourished. That’s as sanctions against Russia have exposed the danger of overdependence on the dollar, paired with growing efforts to bolster other currencies, especially the Chinese yuan, Markets Insider reported.
And Brazil’s president recently reminded the world about plans for a BRICS currency based on a basket of member currencies.
A notional BRICS currency would carry key advantages over existing alternatives like bilateral deals that still result in proceeds being parked in dollar assets and have limited use with other countries, Sullivan said.
“The BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions,” he said. “Because a BRICS currency union-unlike any before it – would not be among countries united by shared territorial borders, its members would likely be able to produce a wider range of goods than any existing monetary union,” Markets Insider reported.
Non-member countries would also have reason to use a BRICS currency because each member’s economy is large enough in their respective regions to make them sought-after partners, Sullivan said.
The dollar’s share in global reserves fell ten times faster last year than over the past two decades, the CEO of London-based asset management company Eurizon, Stephen Jen, recently told Bloomberg. The process has accelerated after other countries saw Russia’s US dollar and Euro-denominated assets frozen abroad and Moscow cut off from the global financial messaging system known as SWIFT, RT reported.
US Secretary of the Treasury Janet Yellen recently admitted that the role of the dollar as the world reserve currency could diminish due to Washington using its leverage over the global financial system to pursue its geopolitical goals through sanctions, RT reported.