The US Dollar and the BRICS Challenge - Heading Toward a New Global Financial Order

By Hermann Selchow

The upcoming BRICS summit is just around the corner. The five BRICS nations are reportedly planning their own gold-based reserve currency. This rumor gains traction due to several events. Firstly, the world is currently undergoing structural changes. NATO's expansion towards the east and north in Europe continues, with Sweden currently on the agenda. Sweden boasts one of the largest gold reserves globally. An immediate consequence of NATO's eastward expansion is the military conflicts in Ukraine.

Russia has been excluded from the SWIFT system. This exclusion means that Russian banks can no longer directly communicate with other international banks for cross-border transactions. Without access to the SWIFT network, Russia is cut off from most international payment and settlement systems. This could complicate trade with other countries and impact economic relationships. Such isolation could destabilize Russian financial markets and erode investor confidence. The exclusion from the SWIFT system is a serious measure and is to be understood as a political leverage.

 

Thus, it's not surprising that the rumor about a potentially Yuan-backed new reserve currency is gaining momentum. Additionally, the evidently unsuccessful visit of American Secretary of State Blinken to China resulted in a sharp drop in the US dollar's value. China holds massive dollar reserves due to its trade surplus.

 

However, the global economy is a complex network influenced by various actors and circumstances. In recent decades, the dominance of the US dollar as the world's reserve currency has played a significant role. The dollar has shaped the international trade landscape for many decades and profoundly influenced geopolitical relations. Yet, in recent years, new powers have risen, challenging the status quo. The BRICS nations - Brazil, Russia, India, China, and South Africa - have gained increasing economic importance and are pushing for a reform of the international financial system.

My book, "The US Dollar and the BRICS Challenge," aims to bring readers closer to the history of dollar dominance and the emerging BRICS nations as potential counterbalances. It should be seen as an attempt to shed light on current events in the world and help better understand ongoing upheavals and restructuring. The book delves into the backgrounds that have led to the power struggles of our time and offers insights into a possible future, analyzing the implications for the global economy. The various aspects of the topic are explored, starting from the historical events that led to the emergence of dollar dominance, all the way to the current efforts of the BRICS nations to break free from this dominance and strengthen their own positions.

We will examine the roots of dollar dominance, covering key milestones from the 1944 Bretton Woods Conference to the abandonment of the gold standard in 1971. The crucial role of the United States as a superpower and its economic and political interests in maintaining dollar dominance will also be scrutinized.

Another part of the book focuses on the BRICS nations and their rise as economic heavyweights. Each country is examined individually to analyze its specific economic, political, and social developments. While all five countries face different challenges and opportunities, they all strive to have their voices heard in the global economic order. Their efforts to build alternative currency and financial structures are also thoroughly examined.

 

Furthermore, the conflicts and tensions between the US dollar and the BRICS nations are closely examined. I aim to illustrate how the United States defends its dominance in the world economy by all means and takes measures to preserve the dollar's status. Simultaneously, the BRICS nations are forming their own economic alliance and seeking ways to break free from dollar dependency.

• Language: English
• Publisher: Hermann Selchow
• Release date: Aug 12, 2023
• ISBN: 9798223793069

Hermann Selchow

Ich wurde sozialisiert (wie man heutzutage sagt) in einem Land vor dieser Zeit. Ich war in der evangelischen Jugend, verweigerte den Reservedienst, verlor meinen Job, machte Gelegenheitsjobs für die evangelische Kirche, wurde unregelmäßig von zwei Herren im Trenchcoat besucht. Die üblichen Spielereien der Macht. Also nichts was nicht Hunderte / Tausende andere genauso oder schlimmer erlebt hätten. Ich war nicht der Typ, der mit gesenktem Kopf und erhobener Faust durch die Gegend lief. Ich nahm die „Bonzen“ einfach nur beim Wort. Das genügte um sie vorzuführen und sich bei ihnen unbeliebt zu machen.

Book preview

The US Dollar and the BRICS Challenge

Heading Toward a New Global Financial Order

"The value of money does not reside in the coin or the note,

but in the trust we place in it."

Ralph Waldo Emerson

Table of Contents:

The Challenge of Dollar Dominance

The Emergence of the BRICS Nations

The Economic Potential of the BRICS Nations

Challenges to Dollar Supremacy

Potential for Collaboration and Synergies

The Bretton Woods System

The Role of the Dollar in the International Financial System

The Petrodollar System and the BRICS Nations

BRICS Nations as an Alternative to the Dollar

The Motivation of BRICS Nations

The Collaboration of BRICS Nations in the Financial Realm

The Impact of BRICS Countries on the Global Economy"

China's Role for the BRICS Nations

Russia's Role for the BRICS Nations

Brazil's Role for the BRICS Nations

India's Role in the BRICS Nations

South Africa's Role for the BRICS Nations

The Geopolitical Implications of the BRICS Nations

The Security and Independence of the BRICS Nations

Challenges to Dollar Supremacy by the BRICS Nations

The Role of American Capital in the United States

Military and Political Influences of both

The Security Collaboration of BRICS Nations

The Future of BRICS Nations and the International Financial System

The United States' Response to the BRICS Countries

The BRICS nations and Regional Integration

The BRICS Nations and Sustainable Development

The BRICS nations and the Mercosur bloc

BRICS Nations and Trade with the EU

The Afrimex Bank, the dollar & the BRICS-Nations

The BRICS nations and the USA's Self-Perception

Perspectives on Dollar Domination and the BRICS Nations

Conclusion

Introduction

The upcoming BRICS summit is just around the corner. The five BRICS nations are reportedly planning their own gold-based reserve currency. This rumor gains traction due to several events. Firstly, the world is currently undergoing structural changes. NATO's expansion towards the east and north in Europe continues, with Sweden currently on the agenda. Sweden boasts one of the largest gold reserves globally. An immediate consequence of NATO's eastward expansion is the military conflicts in Ukraine.

Russia has been excluded from the SWIFT system. This exclusion means that Russian banks can no longer directly communicate with other international banks for cross-border transactions. Without access to the SWIFT network, Russia is cut off from most international payment and settlement systems. This could complicate trade with other countries and impact economic relationships. Such isolation could destabilize Russian financial markets and erode investor confidence. The exclusion from the SWIFT system is a serious measure and is to be understood as a political leverage.

Thus, it's not surprising that the rumor about a potentially Yuan-backed new reserve currency is gaining momentum. Additionally, the evidently unsuccessful visit of American Secretary of State Blinken to China resulted in a sharp drop in the US dollar's value. China holds massive dollar reserves due to its trade surplus.

Following that, former US Secretary of State Henry Kissinger visited China, albeit privately and without any diplomatic mandate. The 100-year-old Henry Kissinger is highly respected in China, mainly due to his role in normalizing relations between the United States and the People's Republic of China in the 1970s. As the former US Secretary of State, he played a pivotal role in secret negotiations with Chinese leader Zhou Enlai.

However, whether his visit can dissuade China and the BRICS countries from their financial plans remains to be seen. Russia and China are among the top four countries globally in terms of gold purchases. In the second quarter of 2021, Brazil increased its gold reserves by 53.75 tonnes, nearly doubling its holdings. India has a strong presence with 787.40 tonnes of gold reserves and has acquired over 150 tonnes in recent years. China holds 2,010.51 tonnes of gold. The country is also the world's largest gold producer, contributing around twelve percent of global production. Nonetheless, Russia tops the list with 2,301.64 tonnes of gold reserves. Over the past five years, Russia has spent approximately 36 billion euros to bolster its reserves and reduce dependence on the US dollar, surpassing even China. Russia's gold industry is worth billions, which means there's little need for significant gold imports. The country's gold reserves increased by 6.22 tonnes in the third quarter of 2021.

The BRICS nations can leverage this gold to significantly reduce their reliance on the US dollar. China, furthermore, holds immense dollar reserves. If China were to sell off its substantial dollar reserves, it would have significant repercussions on the global economy and financial markets. Selling large amounts of US dollars would lead to an oversupply, reducing the dollar's value against other currencies. A depreciation of the US dollar would have far-reaching effects on the international trading community, especially countries heavily reliant on trade with the US. On the flip side, China is also dependent on the US, as a significant portion of its goods is exported there. A sudden devaluation of the US dollar could impede the competitiveness of Chinese exports, making them more expensive for US customers. This could negatively affect Chinese economic growth. The sale of dollar reserves could thus lead to losses for China if the dollar depreciates during the sale.

However, the global economy is a complex network influenced by various actors and circumstances. In recent decades, the dominance of the US dollar as the world's reserve currency has played a significant role. The dollar has shaped the international trade landscape for many decades and profoundly influenced geopolitical relations. Yet, in recent years, new powers have risen, challenging the status quo. The BRICS nations - Brazil, Russia, India, China, and South Africa - have gained increasing economic importance and are pushing for a reform of the international financial system.

My book, The US Dollar and the BRICS Challenge, aims to bring readers closer to the history of dollar dominance and the emerging BRICS nations as potential counterbalances. It should be seen as an attempt to shed light on current events in the world and help better understand ongoing upheavals and restructuring. The book delves into the backgrounds that have led to the power struggles of our time and offers insights into a possible future, analyzing the implications for the global economy. The various aspects of the topic are explored, starting from the historical events that led to the emergence of dollar dominance, all the way to the current efforts of the BRICS nations to break free from this dominance and strengthen their own positions.

We will examine the roots of dollar dominance, covering key milestones from the 1944 Bretton Woods Conference to the abandonment of the gold standard in 1971. The crucial role of the United States as a superpower and its economic and political interests in maintaining dollar dominance will also be scrutinized.

Another part of the book focuses on the BRICS nations and their rise as economic heavyweights. Each country is examined individually to analyze its specific economic, political, and social developments. While all five countries face different challenges and opportunities, they all strive to have their voices heard in the global economic order. Their efforts to build alternative currency and financial structures are also thoroughly examined.

Furthermore, the conflicts and tensions between the US dollar and the BRICS nations are closely examined. I aim to illustrate how the United States defends its dominance in the world economy by all means and takes measures to preserve the dollar's status. Simultaneously, the BRICS nations are forming their own economic alliance and seeking ways to break free from dollar dependency. This power struggle has implications for global stability and may potentially lead to a reconfiguration of the international financial architecture.

Additionally, a glimpse into the future is provided. What might the world economy look like in the next few decades? What role will the BRICS nations and the dollar play? What scenarios are conceivable, and how might they affect various actors? These questions are discussed based on current developments and trends, exploring both optimistic and pessimistic scenarios.

It is important to emphasize that this book cannot provide definitive answers. The dynamics between the US dollar and the BRICS nations are complex and multifaceted, and developments are still ongoing. Instead, this book aims to encourage contemplation about the current world order and the potential changes that directly affect each and every one of us. This book offers a wealth of information, analysis, and perspectives that allow readers to form their own opinions and stimulate further discussions.

The dominance of the dollar and the rising BRICS nations are topics that concern not only economic and financial experts but all of us. The decisions made in the coming years could profoundly shape the global economy and realign geopolitical relations. It is up to us to understand these developments and actively participate. It is up to us to connect the dots between the present-day events that directly impact us and these global events. We must comprehend that the current developments in politics and economics are closely tied to the struggles between these two contenders.

This book is an invitation to engage with this topic and take a look behind the scenes of the global economy. It invites you to explore the history, present, and future of dollar dominance and the BRICS nations. It is an invitation to immerse yourself in this world with me, a world full of challenges, opportunities, and uncertain perspectives. The decisions made by these two contenders could directly impact each and every one of us - therefore, we should strive to understand them, discuss them, and potentially influence them.

Hermann Selchow

The Challenge of Dollar Dominance

The global financial landscape is shaped by a dominant currency - the US Dollar. Since the end of World War II, the Dollar has maintained its position as the world's reserve currency, significantly influencing international trade, financial markets, and geopolitical relations. However, in recent years, more voices have emerged discussing the challenges and risks of Dollar dominance.

The rise of the Dollar as the globally accepted reserve currency began after World War II with the establishment of the Bretton-Woods system. In this system, most global currencies were tied to the Dollar, which was in turn pegged to gold. This gold connection provided stability and confidence to the Dollar, making it the preferred currency for international transactions. However, the Bretton-Woods system collapsed in the 1970s as the USA abandoned the gold peg, and the Dollar became a freely floating currency.

Despite the collapse of the Bretton-Woods system, the Dollar retained its position as the reserve currency. This was partly due to the strong American economy and the USA's significant political influence globally. Additionally, many countries chose the Dollar as an anchor currency to stabilize their own currency and instill confidence in their economy. As a result, a majority of global foreign exchange reserves were held in Dollars, and the Dollar dominated international trade.

Nevertheless, concerns and criticisms of Dollar dominance have been increasing. One reason is the world economy's high dependency on the Dollar. Since the Dollar is the primary trading currency, many countries are compelled to hold substantial Dollar reserves to sustain their trade activities. Relying on a single currency poses risks, particularly if the USA makes political or economic decisions that could jeopardize Dollar stability.

Another issue is the unilateral power of the USA to impose sanctions and embargoes on other countries. Given the Dollar's widespread international reserve status, the USA can restrict other countries' access to the global financial system by denying them access to the Dollar. This has far-reaching consequences for affected countries, potentially leading to economic turmoil and political tensions.

Furthermore, the USA's expansionary monetary policy in recent years has raised concerns. Through low interest rates and quantitative easing programs, the USA has injected significant amounts of Dollars into the global economy. This has led to an inundation of global markets with Dollar liquidity, potentially contributing to financial imbalances and speculative bubbles.

In light of these challenges, some countries are seeking alternatives to the Dollar. For example, China has bolstered the international role of the Chinese Yuan and is attempting to establish it as an alternative reserve currency. Russia and other emerging economies have reduced their Dollar reserves and increased investments in other currencies and gold to lessen their dependence on the Dollar.

Moreover, there are efforts to utilize digital currencies like Bitcoin or other cryptocurrencies as alternatives to the Dollar. These decentralized digital currencies offer new opportunities for cross-border transactions and could potentially challenge traditional currencies in the future.

The evolution of the challenge of Dollar dominance remains to be seen. The USA still possesses a robust economy and benefits from the widespread use of the Dollar. Nonetheless, discussions and efforts toward greater diversity and stability in the global financial system cannot be ignored. The future of Dollar dominance hinges on various factors, including economic developments, geopolitical changes, and countries' willingness to embrace alternative currencies.

Overall, the challenge of Dollar dominance is a multifaceted topic that continues to be vigorously debated. Relying on a single currency carries risks and uncertainties for global financial market stability. The quest for alternatives and the endeavor for greater diversity in the international monetary system represent significant steps toward a more resilient and balanced global economic order. It is hopeful that these discussions will lead to positive changes, fostering a more equitable balance of power and laying the foundation for a more stable and sustainable global financial system.

The discussion on the challenge of Dollar dominance also impacts the geopolitical landscape. Some countries, especially those affected by US sanctions, are seeking ways to bypass the Dollar and establish alternative trade routes. This has led to the emergence of new economic alliances and initiatives aiming to diminish Dollar dominance.

A notable example of this is the establishment of the Asian Infrastructure Investment Bank (AIIB) by China in 2015. The AIIB is intended to serve as an alternative to the World Bank and finance projects in Asia. China has also intensified efforts to forge bilateral trade agreements and conduct international trade in Yuan. These measures aim to reduce Dollar influence in the region and strengthen the role of the Yuan.

Internationally, there are endeavors to decrease reliance on the Dollar. An example is the formation of the BRICS bloc, comprising Brazil, Russia, India, China, and South Africa. These emerging economies have heightened their efforts to conduct trade in their own currencies, thereby diminishing the Dollar's influence. Additionally, they have put forth proposals for a new global reserve currency to enhance international financial system stability.

The European Union has also discussed the possibility of strengthening the Euro as an alternative to the Dollar. As the world's second-largest reserve currency, the Euro could have played a more significant role in international financial markets, challenging Dollar dominance. The EU took initial steps to promote the Euro as a trading currency and reduce Dollar use in certain sectors. However, these plans have faced various interventions and complications, influenced by internal rivalries among EU member states and the economic interests of European major industries.

It is crucial to note that challenging Dollar dominance won't be without obstacles. The Dollar's dominance rests on various factors, including the size and strength of the American economy, the depth of financial markets, and the Dollar's reliability as a reserve currency. Disrupting or replacing this dominance will not be a straightforward task.

Furthermore, there are concerns about potential alternatives to the Dollar. While the rise of cryptocurrencies like Bitcoin has garnered attention, they still come with significant volatility and uncertainties. It remains questionable whether they will be able to offer the stability and