The world’s new reserve currency.
I wanna know when the fighting starts.
I’m referencing here this quote attributed to Gandhi:
First they ignore you.
Then they laugh at you.
Then they fight you.
Then you win.
We’ve already gone through the first two stages when it comes to the new BRICS currency—a plan spearheaded by China and Russia to launch a new world reserve currency backed by hard assets.
We had the “ignore you” stage over the last dozen years. It was during that time, when I was telling my readers that China and Russia were quietly working on a new, hard-asset reserve currency, that no one cared. That’s a stupid idea, Jeff! Most people believed it wasn’t worthy of a moment’s consideration.
But now here we are, well into the development of the BRICS currency everyone ignored.
Now it’s the “laughing” phase, as Western media dismiss out-of-hand the relevance of a Sino-Russian currency effort.
I’m quite confident that laughing at all of this is a mistake.
In the last few days, India’s Minister of Foreign Affairs revealed that another 30 developing countries are angling to join the BRICS bloc in 2024. As it stands now, the BRICS include the original quintet (Brazil, Russia, India, China, and South Africa) but also another five that joined last year (Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates).
The Western media and the sources they like to quote are very quick to dismiss these additional nations are bush league. I imagine lots of Americans feel the same because these countries’ economies are relatively small, or because they have stereotypically negative views about some of these countries for political and religious reasons, or because of oil price manipulation.
That’s understandable—if a bit short-sighted.
The reality is that the BRICS-10 represents 27% of the global economy and 44% of global population. (They also control 43% of the world’s proven oil reserves, which could fuel a whole other set of woes for Western nations, but we won’t get into that here.)
I’ve not seen a complete list of the 30 other nations that supposedly want to join the BRICS-10. I did, however, find a list of 21 additional countries that have at least expressed an interest in joining. Toss those countries onto the pile and suddenly BRICS represents more than a third of the global economy and about two-thirds of global population.
That’s significant voting power, for sure.
There’s no way to tell how any of that plays out this early in the game, when much of the world remains in the laughing phase.
But assuming a BRICS currency comes together as envisioned—backed by hard assets—one can safely assume that developing nations who have held big piles of dollars simply because of global trade demands, will pretty quickly convert them into BRICS Bucks.
That’s not a wild prediction.
Seems pretty obvious, actually, if only because various US administrations have pissed off a whole lot of the world, including allies in Europe. Dumping dollars backed by political divisiveness for any currency backed by gold, silver, oil, platinum, whatever, is a really easy trade to make in Riyadh, New Delhi, Brasilia, Bangkok, Jakarta, Tehran, and elsewhere.
Even if such decisions aren’t based on contempt for American government, they will be based on financial prudence. Better to own a currency backed by a real asset than one backed by stupendous amounts of debt and a political body that regularly threatens to shut down the government or default on the debt.
Recalling that Gandhi quote—this is when the “fighting” begins…
When America starts seeing the dollar dive as a BRICS currency steals the limelight… well, history tells us that an incumbent losing ground to Young Turks typically results in war—the fighting.
Do I expect that?
On some level, absolutely.
Will it be shoot’em-up war or something more sinister, like financial destruction that bankrupts America and American families?
That’s harder to say.
I would imagine China and Russia would be quite happy with a silent war of financial ruination.
I imagine the US would be much happier exercising its excessive military budget because war is always good for the economy. It would also reunite a nation divided against itself.
Either way, the fighting is coming at some point.
What about the “winning”?
The winners in this case are, quite likely, going to be those who have diversified out of the dollar…
It goes without saying: None of this is good news for the medium-term value of the greenback.
More soon…
