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Targeting the US Dollar’s Hegemony: Russia, China, and BRICS Nations Plan to Craft a New International Reserve Currency

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While inflation data in Europe and the US rose significantly last month, Russia and the BRICS countries showed that the leaders of the five major emerging economies are in the process of “creating an international reserve currency.” Analysts believe that the BRICS reserve currency is designed to compete with the US dollar and the special drawing rights (SDR) currency of the International Monetary Fund (IMF).

Vladimir Putin spoke about the creation of a new international reserve currency at the 14th BRICS summit Turkey, Egypt and Saudi Arabia are considering the possibility of joining the BRICS

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Over the past month, the West has struggled with hot inflation and skyrocketing energy prices. Politicians in the UK, Europe and the US are trying to blame the economic disaster on a number of things, such as the war between Ukraine and Russia and Covid-19.

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Consumer price data for last month in America and Europe rose to record highs and many analysts say Western countries are in recession or about to experience one. Meanwhile, at the end of June, members of the BRICS countries met at the 14th BRICS Summit to discuss world affairs.

Targeting US dollar hegemony: Russia, China and the BRICS plan to create a new international reserve currency
Five leaders of the BRICS countries from China, Russia, Brazil, India and South Africa.
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During the BRICS summit, Russian President Vladimir Putin announced that five countries — Brazil, Russia, India, China, and South Africa — are planning to issue a “new global reserve currency.”

“The issue of creating an international reserve currency based on a basket of currencies of our countries is being considered,” Putin said. said at that time. “We are ready to work openly with all honest partners,” he added. In addition, Turkey, Egypt and Saudi Arabia is considering joining BRICS group. Analysts believe that the BRICS move to create a reserve currency is an attempt to undermine the US dollar and the IMF SDR.

Targeting US dollar hegemony: Russia, China and the BRICS plan to create a new international reserve currency
At the BRICS summit this year, Russian President Vladimir Putin announced the development of a new international BRICS currency.

“This is a move to combat perceived US hegemony in the IMF,” said Chris Turner, head of global markets at ING. explained at the end of June. “This will allow the BRICS to build their own sphere of influence and currency unit in this area.”

While the news of the BRICS-created reserve currency may come as a surprise to some, specific reports of member countries opposing the US dollar have been around for quite some time. At the end of May 2022, a report by the Global Times noted that members were called to end dependence on the global dominance of the dollar.

Relations between Russian business and the BRICS countries are intensifying Chinese President Xi Jinping said countries that are “obsessed with a position of strength” and “seek their own security at the expense of others” will fall

Insert explained the following month, “contacts between Russian business circles and the business community of the BRICS countries intensified.” The President of Russia also noted that stores of Indian retail chains would be located in Russia, and Chinese cars and equipment would be regularly imported. Putin’s recent statements and comments at the BRICS summit have led people to believe that the BRICS members are not “just a “talk shop” anymore“.

In addition to South Africa, Russia also increase in foreign aid and supplied arms to sub-Saharan Africa. In addition, Putin and other BRICS leaders, in specific statements published in the media, have targeted US hegemony and exceptionalism.

Targeting US dollar hegemony: Russia, China and the BRICS plan to create a new international reserve currency
Putin has repeatedly criticized and condemned the US and the West for financial sanctions over the years.

This year, at the St. Petersburg International Economic Forum, Putin addressed the audience with a 70-minute speech and talked about how the United States has been running the global financial system for years. “Nothing lasts forever,” Putin said. said. “[Americans] consider themselves exceptional. And if they consider themselves exceptional, then everyone else is second-rate,” the Russian president addressed the forum participants.

Speaking to Russian ambassadors in a biennial speech, he said the West is waning badly in terms of economic power. “Internal socio-economic problems exacerbated in the industrialized countries as a result of the (economic) crisis weaken the dominant role of the so-called historical West,” Putin said. noticed to the ambassadors. “Be prepared for any development of the situation, even the most unfavorable development.”

Russia and Putin have been saying for years that US dominance of the world of finance is dying. In October 2018, speaking at the Valdai Forum, Putin said that US sanctions against specific countries (including Russia) would undermine confidence in the US dollar.

The Russian President noted that most of the fallen empires made the same mistake. “This is a typical mistake of the empire,” the Russian leader said. announced at the time. “The empire always thinks that it can afford to make some small mistakes, to take on some additional expenses, because its strength is such that they do not mean anything. But the number of these costs, these errors, is inevitably growing.” Putin continued:

And there comes a moment when it cannot cope with them either in the sphere of security or in the sphere of the economy.

Moreover, in June, Bloomberg published a report on the BRICS summit and noted that Chinese President Xi Jinping proposed that NATO is responsible for countering the Russian Federation. Xi also said that some countries that support exclusivity will fail due to security vulnerabilities.

“The politicization, instrumentalization and weaponization of the world economy, using a dominant position in the global financial system to unjustly impose sanctions, would harm not only themselves but also others, causing people around the world to suffer,” Xi said. “Those who fixate on positions of power, expand their military alliance and seek their own security at the expense of others, will only get caught in the security puzzle.”

The financial world split in half: alternative payment systems, accumulation of gold and the collision of a strong dollar and ruble

The strengthening of the BRICS countries took place long before the start of the conflict in Ukraine. For example, in 2014, the Financial Message Transmission System was developed in Russia (SPFS), and later World payment system launched. In the same year, in response to the annexation of Crimea, Russia began to accumulate huge amounts of gold.

Targeting US dollar hegemony: Russia, China and the BRICS plan to create a new international reserve currency
Financial messages using SPFS have increased significantly in recent years along with the use of CIPS and the Mir payment system.

China was saving huge amount of gold and also, since both countries increased their buying gold reserves many years before the war. Russian banks have also joined the China International Payments System (CIPS), making trade between the two countries easier. Last April, China opened its borders to billions of dollars worth of gold imports. report from Reuters.

Targeting US dollar hegemony: Russia, China and the BRICS plan to create a new international reserve currency
Both China and Russia have been hoarding gold over the past few years.

After World War I, the US dollar was the world’s reserve currency, and America became the largest international creditor. Fast forward to today and the dollar is rising against a number of other currencies and the US dollar is the strongest in a generation. USD Currency Index (DXY) is up more than 10% this year and has outperformed strong currencies such as the Japanese yen.

More recently, the euro has reached parity with the dollar, and other currencies such as the Indian rupee, Polish zloty, Colombian peso and South African rand have fluctuated against the dollar recently. However, the Russian ruble has been a strong competitor to the dollar this year and has been one of the best-performing fiat currencies in 2022.

With inflation soaring and interest rates rising by the Federal Reserve, Kamakshya Trivedi, co-head of the market research group at Goldman Sachs, stressed that it’s “quite a complex mixture.” Despite the uncertainty, the Goldman Sachs analyst believes that the dollar, at least for now, will remain strong. But compared to the recent surge in the value of the dollar, much of that growth is in the past, Trivedi said. noticed.

“At this point, we continue to expect the dollar to trade at the forefront,” Trivedi wrote on July 16. “There may be a little more ahead, but probably most of the dollar’s ​​movement may well be behind us.”

What do you think about the creation by the BRICS countries of a new international reserve currency that can compete with the US dollar and the IMF SDR? Let us know what you think about it in the comments section below.

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Credit : news.bitcoin.com

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