InterOuts

BRICs Reserve Currency, the End of the Petrodollar?

The proposed inception of an alternative Global Reserve Currency mooted for over a year by the members of the BRICs through the auspices of Russia, China and India has both infuriated and scared the living daylights out of the USA and those in the West who follow its interests finding them in accord with their own. The USA’s hegemonic status has been upheld and expanded as it provided the only Reserve Currency that the majority of nations globally use which is the Petrodollar. Since commodities, goods and services are valued in Dollars, this has provided a constant inflow of income for the USA, its financial institutions including the World bank, the International Monetary Fund (IMF), The Federal Reserve, the European Central Bank (ECB), Western stock markets and the financial instruments like gilts, bonds etc, that they use. This reliance on the Dollar by the world’s economies meant they were subject to the weaponization of the Dollar by the USA and the West who used the ability to access the world’s financial system as the way to force the majority of the nations worldwide to comply with their demands. So much so that the USA/EU/UK/Japan and others had the ability to compete unfairly by forcing the producers of raw materials, foodstuffs and services to accept unfair terms of trade that benefitted the western nations at the expense of the producers.

With the coup in Ukraine in 2014 orchestrated by the USA and UK (with the compliance of the EU, Canada, Australia etc.), the nations of the ‘3rd’World and Global South realised that their turn was next if they refused to comply with America’s unilateral edicts and the Russian, Chinese and Indian Governments clearly saw how the game was unfolding (Brazil at the time was pro-western then more so under Bolsinaro). They took steps to avoid and extricate themselves from the USA’s trap and sidestepped it almost completely economically by instituting a change of direction with regard to their import and export markets. By 2021/2, Russia, China, India, Brazil and other smaller economies (Iran, Argentina,Venezuela etc.) had shifted their reliance on Western Technology and Markets substantially, in most cases by 60% +. They were also fully cognisant of the logistic shortfalls in their networks and so instituted major changes thereby cutting out the west and the western affiliated middlemen and substantially changing the trade routes so they were secure from western interference and the very methods of transacting they employed. Technologically, the oft stated ‘they are behind the west’ no longer applies in the main with the so called irreplaceable items like computer chips etc being replaced. Additionally, they started to value goods and services and transacted in their own local currencies and began using Roubles, Yuan or Rupees as alternative currencies that all accepted and could value their own currencies against. This obviously impacted negatively on the West’s income stream, an income they not only relied on but that they come to regard as their inalienable right.

The advent of an ‘alternative’ Reserve Currency that is both Global in scope and is ‘backed’ by a basket of hard assets like gold, precious metals and agreed commodities is the death knell for the Dollar. The current state of the Dollar in real terms is quantifiable with a mass of approximations since true hard cold data surrounding the actual value of the Dollar is hard to pinpoint. The way GDP is calculated for example is not correct as most Western nations include in consumption the sales of goods imported from other nations and producers. The stock markets are not true reflections of the world voting with its wallet as the large players like the Insurance and Pension conglomerates, the likes of Vanguard, Blackrock, the largest Banks and Tech companies with the addition of semi instantaneous computerised trading 24/7 slew the market disproportionately so ensuring the status quo (while still making a profit). The Dollars hold as the sole financial superpower has already been diminished by the BRICs overtaking the G7 in GDP putting paid to George W Bush’s prediction in 1991 of an American dominated ‘new world order’. Since the end of WW2, the USA has been the world’s leading economy to the point that it was often said ‘If America sneezes, the world catches a cold’. However, the boom/bust model of economics of the USA is not sustainable eternally and with the use of the Dollar as a weapon to force compliance with the USA’s agenda, the globe decided to move away from this reliance on America.

Figures vary but the consensus is approximately this. The BRICS = 30% of the world’s land area and resources, 15% of global gold reserves, 40/45 % of the population of the world, over 50% of wheat and rice production globally, 30% of its GDP or 50%+ if PPP (purchasing Power Parity) is used. The BRICS has already overtaken the G7 (seven industrialized nations Canada, France, Germany, Italy, Japan, Britain, and the USA) in terms of economic growth. Additionally, apart from Russia and soon to join (in August possibly) Saudi Arabia which along with the USA are the 3 main Oil producers in the world, most members of OPEC are in line to join the BRICs ( renamed afterward...well we are all guessing). As the BRICs Diplomat Anil Sookal stated “Our track record for the past 15 years has demonstrated that we have been consistent and we have been calling for a total reform of the global governance architecture… that is outdated and totally out of sync with the global reality that we have in 2023,”. Ethiopia has joined the list of applicants which include Iran, Bangladesh, Algeria as well as Indonesia and Argentina.

A good figure for Oil Production would be the BRICs = 60% + globally (a touch higher for Gas at 65). Militarily, it contains both Russia and China (America’s sworn enemies since they deny and refute the USA’s hegemonic status) as well as India and others whose capacities are constantly evolving as with Iran having ‘hypersonic missiles’, still not part of the West’s working arsenal. The requests by Iran (possibly UAE, Syria etc.), Indonesia, African nations like Mali, Senegal, Kenya, Uganda and other countries to join the BRICs has only added to the anti-Dollar swell that is about to end its dominance.

One of the mainstays of the Dollars prominence is the sale of Bonds, specifically US Government or Treasury Bonds and other means of raising money internationally using the methods available which are in the main, Dollar denominated. This has allowed the USA to keep printing the banknotes and run up vast deficits backed by the constant need for safety, security and a place to keep money safe for most nations as financial reserves. It also ensured they could participate in the international financial system thereby allowing them to borrow, lend and capitalise on the goods, services and commodities they produce. The Dollar was on the Gold Standard, a means of ensuring its worth or value was tangible and reliably secure. In 1971 it went off the Gold Standard and fiat money was born. Backed by Petroleum (Oil), it has remained so to this day. Therefore the Reserve Currency of the world was backed by the value of Oil calculated in US Dollars. No tangible, relatively easily valued and transferrable material like gold was used and the ‘unbacked’ PetroDollar was born.

However, on August 22nd, 2023, the 15th BRICs Leaders Summit Conference will commence in Johannesburg in the Republic of South Africa. If the decision is made (as expected) to go ahead with the BRICs Reserve Currency, then the next step will be the issuance of Bonds in that Currency, Bonds which will provide an alternative source for borrowing to the nations of the world. This will be the most significant change to international finance since 1971 and will expose the Dollar and all its financial institutions and methods of business to a competitor whose immediate inflow of capital will undermine the Dollars standing, importance and worth. Few nations today are willing to invest in Dollar denominated US Treasury Bonds or other traded financial instruments with the accompanying risk of having their assets frozen or confiscated as the USA did to Venezuela and the European Union (EU) and Switzerland did to Russia. China has dropped the level of its US Government Bond holdings, Russia has done the same, the Saudi Arabian holdings of US Bonds have diminished as have many OPEC producers.

The continual extension of America’s Debt (US national debt has reached over $32.3 trillion, or $96,702 for every person) as a means of financing their excess of spending, has underlined the weakness of the Dollars worth along with the inflationary pressure it along with the Western economies are experiencing, contrary to the supposed state of affairs presented by the MSM or western media. The constant underplaying of the rise in the amount and effects of inflation on the internal markets of the western nations is not borne out by the rise in the cost of living; their populations are currently suffering and complaining endlessly about.

The USA and its allies (vassals are only required when voting, media exposure or condemnation is needed ) have been hard at work trying to prevent this happening and have used various guises to implement their strategy. They started undermining South Africa’s security on the worlds currency markets with allusions regarding the joint Naval Exercises held by Russia, China and South Africa in Capetown in 2022 and maintaining a constant anti Russia bias in the South African media They then followed it up with a ‘spat’ over completely made up false accusations that South Africa was selling and supplying arms to Russia this has included the Germans and UK media and politicians commenting and stoking the flames of untruth against RSA (Republic of South Africa) and is constantly being rekindled. The recent re-inclusion of the ICC’s (International Criminal Court) purportedly “Legal’ Warrant of Arrest for Russian President Vladimir Putin on unsubstantiated charges (sight of proof/evidence has yet to occur) is yet another attempt to delay or defer the meeting to agree the inception of the BRICs Reserve Currency. Again the Germans through Annelina Baerbock, their Foreign Minister tried to pressure RSA to arrest Putin if he comes to Johannesburg for the 15th conference from August the 22nd to the 24th,2023. Unofficially, the USA has intimated it will apply Sanctions to RSA if President Putin comes to Johannesburg and is not arrested. The media carry all sorts of spurious reports regarding President Putin coming to RSA for the BRICs conference in Augustlike and the South African President, Cyril Ramaphosa announced as did Russia that President Putin will not attend the conference in person but via video link, sending Sergei Lavrov, Russia’s Foreign Minister instead as reported bythe BBC The New York Times ran with President Putin will not attend as he is ‘wanted’ for ‘war crimes’ still running the same old tired blame game to suit the USA’s excessively tedious narrative. Add to this the fact that Germany is haemorrhaging money as investors remove their capital. Capital outflow is the movement of assets out of a country. Capital outflow is understandably undesirable as it is often the result of political or economic instability. 2023 is the largest withdrawal in Germany’s history and each month increases. Instead, investors look for safe havens which are neither Dollar or Euro denominated or under the control of the USA/UK/EU who showed with their actions against Russia and Argentina that they will illegally seize and loot the assets of other nations held with them for ‘security’ (we must include the financial assets of Afghanistan and Syria which they have stolen as well).

The result of Germany’s decline is the start of the impending collapse of the Euro (Germany being the European economic powerhouse) and so the Euro, like the Dollar will decline in value measured against other currencies and as a safe haven asset. The Dollar will decline due to the Euro’s depreciation (some money from the EU will go to the USA but not an appreciable amount) as it becomes the 2nd Western Currency (which though not the ‘Global Reserve Currency’) that was seen as stable and secure, now no longer is, and the impact on the Dollar’s worth will be appreciable. This in itself will also draw more countries to apply to join the BRICs. The list of countries ready to join the BRICS alliance and accept the new currency is expanding. From 19 countries in April, the number went up to 41 at the end of June. A total of 22 new countries expressed interest to join the BRICs and stop relying on the US Dollar. On 05/07/2023, the Belarusian Ambassador to Brazil, Sergey Lukashevich gave notice to the Brazilian government confirming Minsk's intention to become a full-fledged member of BRICS.

The Alternative Reserve Currency is definitely in the news on MSM (western media) and globally with many authoritative voices joining in the discussion regarding the ramifications that will arise of this happening. All the economic and financial parameters are being scrutinised and the political (geo-political mostly) questions are being pondered. Regarding the Dollar’s worth, value and standing, the most common appraisal leads to 2 distinct answers both of which must be taken with caution. The time frame for the Dollars demise varies but 2 to 4 years is the ‘expert’ view, with as much as 7 and as little as 1 year in other views. The lessening of volume, income and status will follow a path not yet fully understood because of the cultural and social implications inherent in human cultures though we can quantify accurately economic changes and their occurrence. Then up comes the question, ‘Will it be allowed to happen?’. On the past record, empires never willingly hand over power and this is much more difficult to ascertain as the propensity of all the sages is to employ reasoned reductionism until an answer occurs that consensus approves. The alarming part is that alas, human beings do not behave according to these rules during times of extreme stress and fear and even more so, when there is the looming threat of War. Will the USA and its ‘friends’ let go of the good life they have enjoyed for decades, living at the world’s expense and forgetting that debts must be paid. The wheel always turns; otherwise we would have little history that is notable as it would be linear and constantly the same. Economically, it has passed tipping point and there is little the Dollar ‘world’ can do in the short term to turn that around given the time needed for that to happen other than creating instability and war. Not if they want to retain their position.