The US dollar could lose its status as a reserve currency, likely to compete with the BRICS system – Investor
WASHINGTON (UrduPoint News/Sputnik – September 13, 2022) The US dollar is currently on the verge of no longer being a single reserve currency, and it will likely compete with the BRICS monetary system, Gary Korolev, CEO of financial services company Sovereign Wealth Management, told Sputnik.
“The trend is for the dollar to transition into a reserve currency instead of the reserve currency,” Korolev said. “The biggest nail in the slowly closing coffin of the US dollar’s currency reserve status is the sanctions against Russia and the confiscation and/or freezing of Russian reserves. The counter-argument is that the West has frozen Venezuelan as well as Iranian and Afghan reserves in the past, however, these countries can still be seen as marginal and quite extreme players, while Russia, which is one of the largest economies and exporters in the world, is more a traditional actor.”
Korolev pointed out that for a currency to be a reliable reserve, other sovereign nations must feel confident that even if they disagree with the United States, their ability to transact and keep their economies in Dollar-denominated assets will not be threatened.
“After what happened this year, such a guarantee cannot be provided, no matter what the US government says,” Korolev said.
Korolev also said that while it may take BRICS countries years to produce a competing monetary system, the technology has provided an opportunity to move forward faster.
“The Russian-Chinese proposal to back a new international reserve currency with a basket of member currencies is the most likely candidate to challenge the dollar,” Korolev said. “The end result is likely to be a balance between the competing western dollar system and the BRICS monetary system.
Asked about the prospects for trading national currencies, for example the ruble, Korolev said: “It’s quite an inconvenient circumstance, but necessity changes the equation where convenience takes a back seat to sovereign strategic interests.”
“When countries are forced to use this option, it only facilitates and enables the technology and forms new habits of trading currencies other than the dollar,” he added. “New companies and new experts are created, sub-industries emerge to facilitate such transactions. From this new petri dish of innovation will come the facilitation of the BRICS new competitor to the US dollar.”
In July, US investment guru Jim Rogers told Sputnik that recent US actions, including the confiscation of dollars from other countries, will accelerate the abandonment of the dollar.
Rogers thinks the US dollar is “coming to an end as the primary currency,” but that won’t happen anytime soon.
Dmitry Medvedev, deputy chairman of the Russian Security Council, called in July for a move to new payment methods, including the use of national currencies, and did not rule out the creation of a new reserve currency for BRICS states.
The dollar’s rally this year – which is up 9% against a basket of six major currencies – has bolstered its position as the world’s reserve currency, helping the Federal Reserve somewhat in its aim to tackle America’s worst inflation. in 40 years. But elsewhere, central banks are also trying to increase the value of their currencies to tame the relentless inflation in their own backyards.