The BRICS currency versus USD, was the subject for my article in Finans/Invest 4/2024 under titlen: “Kan BRICS+ udfordre USD’s globale dominans?”
The month of July marked, among other things, the 80th anniversary of the Bretton Woods agreements. Since then, the USD has been the world’s leading reserve and settlement currency. This has given the United States both political and financial advantages—advantages that many countries and unions have attempted to challenge, so far without success. BRICS+ represents the largest challenger to date in terms of economic size and population, and may gain momentum from the growing trend of trade fragmentation (rising trade barriers, etc.). However, BRICS+ would need to become politically stronger than it is today. Typically, it takes both an external adversary and a strong sense of internal cohesion for states to be willing to surrender fiscal and monetary sovereignty. If the project succeeds, it could significantly reshape the dynamics of global finance.
Many countries have sought to challenge USD's hegemony ...
Risk is the product of potential effect versus likelihood. A risk with very big effect for western economies is, if USD's central role vanishes. The likelihood is however very low, if history is a guidance for the future. Although many countries and unions have tried to take over USD's role, none have so far succeeded.
Currently, the subject is however cause for debate, that may increase in October when BRICS+ hold their annual conference. Here they expect to disclose further details on their central project: A common currency to work as the participating countries' primary settlement- and reserve currency.
Several developments may increase many countries' interest for inclusion in BRICS+. This is particularly the case for the ”trade fragmentation” tendencies, that lower global growth outlooks for the long term, cf. World Bank 2023. Alliances are the primary way in which most countries can protect against this risk of loss of export or supply routes.
Click here to read the article (in danish) ...