Posted on 04/26/2023 10:38:57 AM PDT by NewJerseyJoe
Hello fellow FReepers, would love to pick your brain on a topic I've been thinking about. Are there any reasons why BRICS would NOT want to be the world reserve currency? Are there responsibilities and burdens that would become theirs, should they succeed in doing this?
Seems to me that, since the U.S. dollar became the world reserve currency, it is the U.S. that has shouldered the brunt of every (or most) debt, war, international bailout, humanitarian aid, and so forth. If BRICS should succeed, wouldn't these responsibilities/liabilities then transfer to them?
This is not a question of "Will or will not the dollar be replaced" -- that's a separate discussion. I am trying to unravel the negative connotations of being the world reserve currency.
If you have any external reading, please post links as well. Thanks
No, that is a function of our government's stupidity.................
one does not just declare oneself the world’s reserve currency. it does have to be earned, and with partners that have been known to manipulate their currencies, i can see this not ending well for investors...
that is why 2024 is so important... a strong American Economy is the reason for the dollar being in reserve.
Brics is mostly held up by Brazil, Russia, India, China, South America.
How stable do you believe the economies of these countries will be over 10 years?
Look at how Congress spends and imagine: in 20 years that could be my legislature....
“a strong American Economy is the reason for the dollar being in reserve”
Bingo. But most people buying into the BRICS fairy tale have no idea how modern currencies actually work, I suspect.
Well, if we thought critically about the Chinese spy balloon mapping our electricity-producing dams, and the effect of loss of power of all the data centers holding our financial information, there is no reason to believe that crypto currency has the reliability of money we can handle.
It would be sort of like a regional retail store chain - like Dillard's for example - aiming to supplant Wal-Mart as the largest retail chain in the world. Not only would Dillard's have to grow massively but Wal-Mart would have to simultaneously collapse. And even if Wal-Mart did collapse, it would take many years for Dillard's to build up the infrastrure and economy of scale that Wal-Mart had.
In other words, it's not as easy as it sounds.
Also Russia and China, two pillars of BRIC, are in demographic decline (birthrate not high enough to replace aging populations).
For the near future at least the dollar will still be used in most international trade because of the way the system is set up and it would involve a lot of extra hassle to bypass it completely. But the value of it is definitely headed down and we won’t be able to use economic sanctions any more to compel other countries to get in line.
After we confiscated (stole) $300 billion from Russia, other countries and billionaires and the like are thinking twice about holding their money in dollars. Many of them have already begun to diversify including our allies. And with our exploding deficit at some point they might quit buying our treasuries, that’s when the shtf.
You have reached the heart of something called "Triffin's Dilemma"
You can't have a "world reserve currency" without, eventually, sending your jobs, manufacturing overseas, and creating massive current account (and by consequence fiscal) deficits at home. While Triffin didn't address it, the knock-on effects are that it also empowers a globalist, well-connected, domestic political class, at the expense of the rest of the population. We are seeing this now.
The advantages are that you can export your inflation to the world. And as the world requires more US Dollars, you can generally enforce this system of control on other smaller players. Network Effects - Its like the US Dollar is Google and you have the choice to use that, or create your own search engine.
Like all human constructs, it can't last forever, and it creates at the same time its own conditions for eventual collapse.
South Africa. :)
five countries can print the same currency
just wonderful
I will add this on Triffin’s Dilemma as a very general intro
https://www.investopedia.com/financial-edge/1011/how-the-triffin-dilemma-affects-currencies.aspx
if the government keeps screwing with our economy... things might change, but monies are popular when they deliver...
The BRICS nations now have a GDP larger than the G7.
Think about that. They have the reach.
More and more nations are joining BRICs because they are sick and tired of the US starting wars and using the dollar to punish other nations with sanctions.
That is why so many are still trading with Russia.
China would benefit greatly. They could detach the Yuan from being pegged to the US dollar and it would prop up their ailing economy the same way our economy has been propped up thanks to the dollar being the world reserve currency.
It would also allevite China’s debt problem.
With regard to foreign affairs, as another FReeper said, the US is the stupid one for getting involved in everything and spending on everything around the world.
China would do no such thing and would feel no obligation to help anyone.
As the primary reserve currency, there is a constant demand for U.S. dollars by foreign governments and institutions. This demand creates an artificial value for the dollar, which leads to a stronger dollar compared to other currencies. A stronger dollar makes U.S. exports more expensive for foreign buyers, which can result in decreased demand for U.S. goods and services, contributing to a trade deficit. So one of the reasons we have a perpetual trade deficit it being the reserve currency. If China took over the reserve currency role, it would be hard on their export driven economy.
Serious question would be: could it be a net positive for Americans to lose the dollar value, become poorer relative to the rest of the world, but develop a real industrial economy again.
My view is that the expanded BRICS will never be a “reserve currency”... they will never have the mammoth ability to hold wealth with integrity.
I do believe they will circumvent the USD for trade increasingly, create a new banking system, and many nations - particularly in S. America - will renounce debt to US and instantly have credit in the new system.
Yes, the government has done its worst over the last 3 years to destroy our economy and currency, but at the same time, just about every other government in the world was doing similar things to theirs. So we’re still in comparatively good shape.
If the US had been the only country to lockdown and start printing money as a giveaway to half the country, then we’d be in real trouble.
Plenty - most of the world trades in US dollars as a standard even those countries that hate us have to convert or pay their currency’s equivalent.
Once we’re not the worlds reserve then other countries can dump the dollar and our treasury bonds will fall - the t-bills are what our banks hold to pay simple interest and back their bottom line. So once the t-bills fail so will the banks (and you’re seeing this already) Once the banks fail and thanks to Biden’s Idiocracy ALL funds are going to be covered and based on what? More fake paper printed by the Biden admin because other nations won’t buy our t-bills (which China had been doing for the past decade)
It’s BAD all around and you’re about to see us become Venezuela.
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