BRICS is intent on de-dollarization but its chances of success are slim
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BRICS wants to de-dollarize the world economy to curb the US’s power and influence. The chances of it succeeding in replacing the US Dollar are low. The US Dollar would depreciate rapidly should BRICS be successful. One of the main goals of the BRICS nations is to de-dollarize the world economy. BRICS want to topple the US Dollar’s (USD) monopoly on world trade. About 90% of global transactions involve US Dollars and 50% of all global trade is Dollar-denominated. BRICS countries' motives are not purely rooted in anti-American feeling. Reducing reliance on the US Dollar is also a form of “financial” risk management, according to Ray Dalio, CEO of Bridgewater Associates. BRICS nations want to de-dollarize, or reduce exposure to US Dollar debt in the form of US Treasury bonds, to avoid exposure to the risk of US sanctions. The effectiveness of US sanctions is dependent on the widespread use of the US Dollar. BRICS current long-term strategy is to replace the US Dollar with “R5” or the five R’s, which stand for the currencies of the founding BRICS countries – the Real, Ruble, Rupee, Renminbi and Rand. BRICS have already had some success in this endeavor. Whilst a growing amount of international trade amongst BRICS countries is now being conducted in the R5 currencies, the chances of actually replacing the US Dollar are very low, according to experts. The universal appeal and liquidity of the US Dollar is hard to replace and it is these qualities which ensure its continued use as a medium of trade between different countries. One key threat to the dominance of the US Dollar lies in the growth and popularity of the BRICS as a trade association. If the group keeps growing it could eclipse the Dollar through sheer weight of membership. Another threat to the US Dollar comes from an analysis of long-term historical cycles. A study of these cycles leads to the conclusion that the Dollar’s days as the world’s reserve currency are inevitably numbered, according to Ray Dalio. If BRICS were successful in replacing the US Dollar, USD would depreciate substantially according to many currency analysts.
#Brics #Dedollarization #UsDollar #Currency #Trade #Sanctions