Putin returns to the international stage by welcoming 36 leaders to the BRICS summit in Kazan. Imperial currency is still on the menu.
Requiem for the Dollar
Despite the threat of 100% customs duties brandished by Donald Trump, the dollar remained in the crosshairs of BRICS heads of state.
“The United States abuses the privilege of the dollar and has transformed it into a weapon,” declared Dilma Rousseff, president of the “BRICS Bank” last year.during the World Peace Forum at Tsinghua University in Beijing. An accusation repeated at the BRICS table this week.
The former president of Brazil extended the pole to Russian president who has not hidden his intention to do without the greenback:
“You just said the dollar is being used as a weapon. It is true, and we experience it. I think those who decided this are making a big mistake. […]. Its use for political purposes reduces confidence in this currency, in turn reducing its scope. We are not responsible for it and do not reject the dollar or fight against it, but what should we do if they won't let us work with it? Look for alternatives and that's exactly what we do. We aspire to cooperation, but we must understand that the longer we remain under the auspices of foreign systems, the longer the transition to a new, more equitable economic and financial system will take. And the more we experience turbulence like we are currently seeing in the Middle East…”
Vladimir Putin even appeared during the summit with a symbolic note bearing the BRICS seal:
This post is, however, a joke. No new common currency is under consideration. “Regarding the question of a common currency, we are not working on it at the moment. You have to be careful. We must act gradually and without haste on this subject”had declared Vladimir Putin a few days before the summit.
BRICS and the currency war
Chinese President Xi Jinping has also called for the emergence of a new financial system.
“There is an urgent need to reform the international financial architecture. BRICS must play a leading role in promoting a new system that better reflects the profound changes in the balance of international economic forces.he declared.
The Indian president went in the same direction as his Chinese counterpart:
“Trading in national currencies and seamless cross-border payments will strengthen our economic cooperation. The Unified Payments Interface (UPI) developed by India is a great success story adopted by many countries »he said.
So, no new currency in sight, but rather an alternative to the SWIFT network from which Russian and Iranian banks are disconnected. This involves connecting the payment systems of different countries, which requires a new clearing house and connections between major banks.
China is obviously not left out. Beijing now trades more in yuan than in dollars with foreign countries. Its equivalent of the SWIFT network, the CIPS system, facilitated the transfer of 123 trillion yuan ($17 trillion) in 2023.
Russia conducts almost 100% of its trade in national currencies with China and Iran. This is the main objective of the BRICS: to internationalize their own currencies to reduce their dollar reserves and thus weaken the American empire.
The dollar indeed offers immense privileges to the United States. The world's dollar reserves reach approximately $7,000 billion (58% for the $ and 20% for the euro). Since these billions are not exchanged for national currencies, they artificially support the dollar exchange rate.
The great advantage for the Americans is to be able to import much more than they export without their currency collapsing. This is the “exorbitant privilege” that goes hand in hand with the possibility of borrowing at low rates.
Concretely?
The priority of BRICS is to strengthen the “ Correspondent Banking System » to reduce the costs of settlements in national currencies. This is similar to opening an account in a foreign bank to carry out transactions in the local currency.
The main problem with this proposal is that the United States has made it clear to banks around the world that working with Russia would cost them access to the dollar. This blackmail prevents many countries from connecting to the Russian financial messaging system SFPS.
Discussions currently revolve around the establishment of a clearing house called “BRICS Clear”. The New Development Bank (NDB) is actively participating in the development of this new financial pipeline.
Dilma Rousseff, who chairs the Shanghai-based BRICS bank, promised last year that nearly a third (30%) loans will be made in the national currencies of the NDB member countries.
In an interview with the main Chinese media CGTN, Ms. Rousseff explained last year that he “It is necessary to find ways to avoid foreign exchange risk and other problems such as dependence on a single currency like the dollar”.
“The good news is that many countries are choosing to use their own currencies for trade. China and Brazil, for example, agree to exchange in real as well as yuan »she added.
The question of foreign exchange reserves, however, remains thorny. For example, Russia for a time stopped accepting the Indian rupee as payment. The reason being that India doesn't have much to sell that interests the Russians. As a result, 70% of trade between Moscow and New Delhi is in yuan, which does not enchant the Indians.
Bitcoin, the reserve currency of the 21st century
The problems of imbalance in trade balances between the BRICS will remain alive. This is why gold retains an important place in the reserves of major exporting countries such as China, Saudi Arabia and Russia.
These problems will grow as more countries join BRICS. Everyone legitimately hopes that their currency will be more accepted by others.
Thirty-six heads of state or representatives were present to try to join the club. Thirteen countries have become “partners” of BRICS:
The bigger the club becomes, the more the geopolitical and economic objectives will diverge. The disappointment will be great if, ultimately, China inherits the exorbitant privilege by placing the yuan at the center of trade.
[Ne manquez pas notre article : « L’internationalisation du yuan est foudroyante »]
There are no miracles. The gifts will not last and the problems on a global scale will also arise on the BRICS scale. What will prevent China one day from doing like the West and seizing the yuan reserves of an allabt country against their interests?
The world needs a new reserve currency that benefits no one in particular. This stateless currency should not allow anyone to block reserves. And must be in the spirit of the Gold Standard by being a true store of value.
Only one currency ticks all the boxes: Bitcoin. Its volatility is frightening, but it is the momentary price to suffer to create a truly equitable international monetary system. There will never be more than 21 million bitcoins. This certainty is enough for the whole world to make it the pillar of their foreign exchange reserves.
The United States will refuse to give up its exorbitant privilege to China, but may ultimately resign itself to playing on equal terms…
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