The Real Threat to the Dollar System Is Not China or the BRICS

As the BRICS initiative for a common trade currency gains momentum (cf. SAS 25/24), several narratives are being produced in the West, especially among conservative and pro-Trump networks, to present it as an “attack” on the U.S. dollar or the dollar system, and to claim that its proposed use of blockchain technologies shows that the BRICS are a tool of the perfidious Davos clique, which aims to eliminate physical money.

Those characterizations are not only false, they reflect a deep ignorance of economic and monetary issues, even at the highest level of financial or academic circles.

Take for instance ECB Executive Board member Piero Cipollone (who blames inflation on climate change, cf. SAS 23/24). In an article for the ECB blog in June, he accused the BRICS of fragmenting the international monetary system, and attempting to create separate platforms as alternatives to existing global infrastructures. “For example, China, Iran and Russia have created their own cross-border payment messaging systems, while BRICS members have started to discuss a ‘bridge’ platform for linking digital payments and settlement. These developments could potentially disrupt the smooth flow of capital and reduce the efficiency of the global financial system.” https://eir.news/2024/06/news/the-ecb-accuses-the-brics-of-fragmenting-the-system/

He simply turns reality on its head. The BRICS would not be discussing “alternatives to existing global infrastructures”, had not the U.S. and the EU weaponized their currencies, by seizing Russian assets in those currencies. The “de-dollarization” move globally is a defensive move and the ECB is to blame for shooting itself in the leg, just as with all other sanctions against Russia.

Another example of the “China is going to replace the dollar” psychosis is economic populist Jim Rickards, who recently wrote that America is caught up in a financial war, and the U.S. dollar is being threatened by “BRICS nations and their new currency”. Even though the U.S. dollar will remain the world’s reserve currency, the BRICS currency could become a successful trading currency, he states correctly, adding that “That’s how confidence is lost in the United States, slowly at first and then suddenly.”

Yes, confidence in the United States is eroding, and might collapse suddenly, not because of BRICS or China, but because of its own economic policy, based on the expansion of the speculative economy and the destruction of physical values.

The BRICS/China move, which will be on the table at the group’s meeting in October, is not directed against the dollar or against any country, but will consider the creation of a system of accounts that allows a stable value of currencies and commodities, and an expansion of trade and investment credit. Among the ideas being discussed, is the creation of a unit of accounts pegged to a basket of currencies and commodities as well as a central institution to regulate bilateral flows and issue credit. In this context, it has been proposed to use blockchain technologies and a “virtual” unit of accounts, to speed up transactions. This is however limited to trade flows and investments and has nothing to do with the elimination of physical money. The BRICS currency system is to be separate from each national system of savings and bank accounts.

So, the anti-BRICS, anti-China narrative serves the power of Wall Street, which is the only entity threatened by such a new system. To avoid a catastrophic loss of confidence in the dollar, the United States should lift sanctions and clean up its own system, putting an end to the “Wall Street dollar” and re-establishing a Glass-Steagall standard in financial affairs.