By Doug Young – 15 August 2023

falling dollars

Introduction

The US dollar’s longstanding supremacy as the world’s reserve currency is facing an unprecedented challenge.

Amidst a continuous decline in purchasing power, as indicated by the US Dollar Index, the global appetite for an alternative currency has grown.

Now, the BRICS Alliance, comprising Brazil, Russia, India, China, and South Africa, is making preparations to deliver what could be the final blow to the dollar’s reign: a new gold-backed global currency that aims to entirely replace the greenback.

Dollar Supremacy on the Decline

For years, the US dollar has held a position of dominance in international trade and finance. However, recent trends have shown that the dollar’s purchasing power is eroding.

The US Dollar Index, which measures the dollar against a basket of major currencies, has signalled yet another year of decline. This continuous downward trajectory raises concerns about the long-term stability of the dollar and its role as a reliable store of value.

The BRICS Alliance’s Ambitious Plan

The BRICS Alliance, representing five major emerging economies, has set its sights on challenging the dollar’s hegemony. With Brazil, Russia, India, China, and South Africa collectively making up over 40% of the world’s population and a significant portion of global GDP, their combined economic power presents a formidable force.

These countries have been increasingly vocal about their discontent with the dollar-dominated financial system and are now taking concrete steps to establish an alternative.

A Gold-Backed Global Currency

The BRICS Alliance’s proposed solution is a new gold-backed global currency, which aims to reduce dependence on the US dollar and foster financial stability. By anchoring the currency to gold, the alliance seeks to instil confidence and ensure intrinsic value.

Gold, historically recognized as a store of wealth, can serve as a hedge against inflation and currency fluctuations, making it an attractive alternative to a weakening dollar.

Implications for the American Economy

If the BRICS Alliance successfully introduces a gold-backed global currency, the implications for the American economy could be far-reaching.

The dollar’s status as the world’s reserve currency has provided the United States with significant economic advantages, such as lower borrowing costs and the ability to sustain large trade deficits.

A shift away from the dollar could lead to higher interest rates, reduced demand for US Treasury bonds, and increased borrowing costs, potentially burdening the American economy.

Global Economic Ramifications

The introduction of a gold-backed global currency by the BRICS Alliance would have repercussions on a global scale. It would challenge the established international financial order, potentially diminishing the influence of the United States and reshaping the dynamics of global trade.

Moreover, countries around the world, especially those with significant dollar reserves, would face significant losses as the value of their holdings diminishes, potentially triggering financial instability and capital flight.

Conclusion

As the decline of dollar supremacy becomes increasingly apparent, the BRICS Alliance’s pursuit of a gold-backed global currency represents a significant shift in the international financial landscape.

The implications for both the American and global economies are immense, with potential consequences ranging from higher borrowing costs for the United States to financial instability on a global scale.

As the BRICS Alliance moves forward with its plans, the world watches with anticipation, recognizing that the dominance of the US dollar may be nearing its end.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any government or financial institution.

See also: De-dollarization: The Global Economic Ramifications