In June during the 14th annual BRICS summit, it was announced that the five economies would be seeking to create a new world reserve currency to replace the U.S. dollar.
This is equivalent in economic terms to the BRICS countries saying that they would militarily depose the United States of all 800 oversea military installations; in a word, it’s a world-changing development.
Yet economists have been shaking off ideas that other large economies could usurp the need to transact in U.S. dollars for years, and as the Dollar Index rapidly gained strength over this summer’s interest rate hikes, they seemed to be correct once again.
Last year, the Russian Federation signed a security cooperation agreement with Saudi Arabia. It was originally a security cooperation agreement with Saudi Arabia that gave the United States dollar its reserve currency status — nations needed to transact in dollars to buy Saudi oil.
In March of this year, China and Saudi Arabia revived years-old discussions about settling some oil accounts in Chinese RMB, leading to talk of a “petro-yuan” that would potentially drag $600 billion to $1 trillion worth of transactions out of the dollar a month.
All things considered, there’s never been a greater flurry of activity to suggest that the United States is about to lose much of the dominance she enjoys over the world economy. Saudi Arabia has potential new protectors and arms dealers, a new currency may be used for buying and selling oil, and the governments of 41% of the world population, 24% of the world GDP, and 16% share in world trade, are looking to create a new inter-state currency.