The US dollar was the only source of currency to be used for all global transactions for nearly seven decades. Though the dollar faced challenges, it withered the storm as the greenback was the strongest currency in international markets. Things are slowly beginning to change after the BRICS bloc decided to bring the US dollar down early this year. The White House’s pressing sanctions against other developing countries led to the BRICS deciding to cut ties with the US dollar.
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While BRICS has not fully ended its dependency on the US dollar, the pattern seems to have already started. BRICS is slowly yet steadily disinvesting in the US dollar and putting its local currency forward for trade. Read here to learn how many sectors in the US could be affected if the BRICS completely ditch the dollar.
BRICS Hitting The Nail on US Dollar’s Coffin
On August 14, the Indian government directed the Indian Oil Corp. (IOC) to settle payments for 1 million oil barrels with the UAE in the rupee. IOC is India’s leading petroleum refiner, and the local currency settlement was completed with Abu Dhabi’s National Oil Company. The US dollar was not used in the transaction and this was the first time that India and the UAE used local currency for trade.
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The buck didn’t stop there. Saudi Arabia, the UAE, India, China, and Russia are all putting their local currencies forward. If payment settlements in local currencies continue, the beginning of the end for the US dollar could well begin to take shape. The rising debt crisis in the US would allow BRICS to test the waters without using the dollar. If they succeed, then the US economy might crash, and if they don’t, they have many more chances to get things right.
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BRICS has made it clear that disinvesting in the US dollar is a long-term goal. Therefore, if they don’t bring the dollar down in this decade, they could well perhaps succeed in the next.