The US cannot afford to lose the dollar’s reserve currency status as the reaction would be devastating for the economy. The White House, the Federal Reserve, the US Treasury, and all other institutions will face scrutiny. The major impact will be felt by American businesses and the general public, as inflation is expected to soar across the homeland. The development would lead to job cuts and a stock market crash that would make 1928 feel like a child. BRICS is trying hard to topple the US dollar and replace it with local currencies.
Also Read: BRICS vs G7: Who Is Richer in 2025?
BRICS: Here’s What Will Happen If the US Dollar Loses Its Reserve Currency Status
- Demand For the US Dollar Will Drop
Not just BRICS, but all developing countries will stop buying the US dollar and avoid keeping it in their reserves. Emerging economies will use their national currencies for trade settlements and strengthen their GDP. Local currencies will start surging in the forex markets elbowing the greenback in the indices. This makes local currencies a prime investment and currency traders will take long positions and ignore the USD.
- Less Need To Buy US Bonds & Treasuries
Buying US Treasuries and bonds will be a thing of the past as America’s economy would be in turmoil. BRICS and other emerging economies might as well dump US dollar holdings from their central bank’s reserve assets and diversify with gold. Developing countries have already started diversifying assets with gold and other leading currencies and cutting ties with the USD. China, Russia, and India, among others, have been buying tonnes of gold and diversifying their reserves.
- US Will Be Forces To Buy At Higher Interest Rates
The US National Debt has crossed $36 trillion this year and if it continues, will be forced to default. To make things right, the Federal Reserve would begin printing more money and circulate it across the country. Inflation would be inevitable as the public would be the ones to suffer the consequences. If the printing does not happen, the White House will be forced to spend less dimming its hold on the global sector. This gives BRICS a win against the US dollar in the financial sector.
Also Read: America Urges India To Reject BRICS: ‘Do Business With the US’
Global Financial Power Tilting From the West To the East
America fears that the global power is slowly yet steadily shifting from the West to the East. Many developing countries are staying united on the de-dollarization goal to bring America’s supremacy down. The white House pressing sanctions on countries that don’t deem fit is what led to the rise of the de-dollarization agenda. The East is now getting united after decades of turmoil with each other due to differing views. BRICS is making emerging economies come along and target a common enemy, which is the US dollar.
The next few decades would see de-dollarization spreading further spearheaded by BRICS against the US dollar. There is no guarantee that the greenback will enjoy the power it holds today in the next 20 years. A basket of local currencies could take centerstage keeping the greenback at bay. The USD is now at the riskiest time in history and developing countries are openly challenging its hegemony.
Trump’s recent tariffs and trade wars intensified de-dollarization making America the financial enemy of the world. The BRICS bloc is leveraging the development and using the discomfort to uproot the US dollar’s global domination. Whether the alliance will succeed in its quest or falter as the years pass, only time will tell. Until then, the USD will remain the reserve currency and the majority of cross-border transactions will happen in the greenback. Currently, no other local currency is worthy of replacing it as the world’s reserve.