Talks about the U.S. dollar’s demise from the hands of the upcoming BRICS currency is growing louder in recent days. The BRICS currency will soon dethrone the U.S. dollar’s supremacy and bring the greenback to its knees, claim the doomsayers.
Agreed, that the de-dollarization efforts are advancing at rapid speed, but that might not dent the U.S. dollar’s hegemony. Fears of a ‘dollar collapse’ are shocking to imagine, as developing nations cannot withstand the global pressures of the financial markets.
BRICS: Why U.S. Dollar ‘Doomsayers’ Are Wrong
The U.S. dollar’s global reserve status has deep roots, and uprooting its presence will not happen through the new BRICS currency. Trading in the U.S. dollar is convenient as every country and its central banks and other financial establishments have reserves in the USD.
The central banks and financial entities use the U.S. dollar as ‘invoicing currency’ exchanging the USD with their native currency. The financial establishments charge their users based on the foreign exchange transacted in the U.S. dollar vs local currencies. Therefore, the greenback is the de facto currency in all the systems around the world.
Modern trades are not just the exchange of goods but also include supply chains from different countries. A regular import and export company anywhere in the world will not take the trouble of financing itself apart from the U.S. dollar. The stakes are high for firms to settle trade with BRICS currency, as the new tender’s fate remains uncertain in the markets.
A dip in price could come with a barrage of negative news that could send the BRICS currency into a tizzy, eating up a large portion of profits to import and export firms. The U.S. dollar is backed by the trust for more than a century, therefore remained strong despite all headwinds.
The BRICS currency could be backed by gold, but that comes with a risk of inflation and an uncontrolled market crisis. In conclusion, the BRICS currency might never be the ‘invoicing currency’, forget about world domination and dethroning the U.S. dollar.