Are the BRICS about to take over the global economy? The bloc of emerging market nations – Brazil, Russia, India, China, and South Africa – could lead the “change” that Chinese President Xi Jinping and Russian President Vladimir Putin discussed at their latest powwow. If successful, the BRICS could transform the international marketplace and establish a new order that rivals the Western hegemony of the last century. Be it economic might or geopolitical prowess, the worldwide landscape is evolving – and this is happening on President Joe Biden’s watch.
Tossing BRICS at the G7
BRICS is now the world's largest GDP bloc, according to new data published by UK-based macroeconomic research firm Acorn Macro Consulting. Today, the BRICS faction contributes 31.5% to the global GDP based on purchasing power parity (a measurement of prices in different locations). By comparison, the US-led Group of Seven (G7) adds 30.7% to the world GDP. Because it has been a steady climb for BRICS since the early 2000s – and the opposite direction for the G7 – this gap will only widen.
The latest data are another layer in the multilateral push to dethrone the US economy and dollar.
All eyes will be on this summer’s BRICS summit in Durban, South Africa, where heads of state will focus their talks about establishing a new reserve currency. This ostensibly had been the plan since Putin announced during last year’s BRICS meeting that “creating the international reserve currency based on the basket of currencies of our countries is under review.” Russia’s Deputy Chairman of the State Duma Alexander Babakov also recently noted at the St. Petersburg International Economic Forum event in New Delhi, India, that a BRICS currency would be discussed at the event.
Indeed, all the momentum is on the group’s side, with the countries establishing new non-dollar trade agreements and transaction settlements. Brazil and China put together a yuan-real deal, Beijing settled its first liquefied natural gas settlement in the yuan, India confirmed it would offer rupees to mitigate the dollar crunch, and the yuan is now the most traded currency in Russia today.
Some independent economic observers believe this could be a terrific development in the global economy.
Jim O'Neill, the former chief economist at Goldman Sachs, penned a paper in the Global Policy Journal averring that the BRICS coalition must expand to achieve its objectives. “The U.S. dollar plays a far too dominant role in global finance,” O’Neill opined. “Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic.”
Mohammed Al-Jadaan (Photo by Ilya S. Savenok/Getty Images)
Indeed, more countries are showing interest in enrolling in the BRICS organization. One of these nations? Saudi Arabia. The speculation has been rampant ever since Finance Minister Mohammed Al-Jadaan told Bloomberg TV at the World Economic Forum in Davos in January that the kingdom would be open to trading in currencies other than the greenback. Since Riyadh has been successfully undermining the current US administration, this potential development is not out of the realm of possibility.
If more countries are no longer beholden to US interests and choose to trade and settle in yuan, rubles, reals, and rupees, they can do whatever they want without fear of reprisal by Uncle Sam. Sen. Marco Rubio (R-FL) acknowledged this in a recent Fox News interview, telling host Sean Hannity that “we won’t have to talk about sanctions in five years because there will be so many countries transacting in currencies other than the dollar that we won’t have the ability to sanction them.” Put simply, the greenback weapon will fire off blanks, leaving Beijing and Moscow laughing at the White House.
Blame Washington
Ultimately, Republicans and Democrats are to blame for these advancements in the global de-dollarization campaign. Washington has successfully made the international economy addicted to dollars, allowing domestic policymakers to export inflation so they can embark upon reckless fiscal and monetary policymaking. Officials then decided to weaponize the dollar by applying sanctions, restrictions, and penalties on nations that refused to heed US edicts. As a result, the days of America exerting its influence in world affairs are slowly fading to black, with the world’s smallest violin playing in the background. While intervention begets intervention, it also triggers unintended consequences.
