Published Date: 2023-08-08T15:00:09Z

In this conversation, Stephanie Pomboy interviews Jim Rickards about the future of the US dollar as a reserve currency. They discuss the rise of the BRICS countries (Brazil, Russia, India, China, South Africa) as a powerful bloc and the efforts they have made to create viable alternatives to the US dollar over the past 20 years. They mention the creation of institutions like the new development Bank and the contingent Reserve Arrangement, which mirror the functions of the World Bank and the IMF. They also discuss the potential addition of other countries like Saudi Arabia to the BRICS, which would further increase their power and influence. Finally, they mention the Eurasian Economic Union and the Shanghai Cooperation Organization as other groups that could potentially join forces with the BRICS countries. Overall, they argue that the US dollar’s status as a reserve currency is increasingly being challenged by these alternative arrangements. The speaker is discussing the formation of the BRICS (Brazil, Russia, India, China, South Africa) and its potential impact on the global economy. The BRICS have created a new currency that is determined by the weight of gold, allowing them to free ride on the dollar gold system. They are betting that the dollar will eventually collapse in terms of gold value. This is not a gold standard or the end of the US dollar, but a way for the BRICS to strengthen their collective economic and population power. The Russian contribution to the financial system is creating a new currency that references gold. This allows countries to trade within their own block without worrying about the strength of the dollar. The move is a response to the United States freezing Russian treasuries, breaking trust and causing other countries to question the security of their own treasuries. The new currency, backed by gold, offers a more stable and trustworthy alternative. This threatens the dollar’s reserve standing as countries increasingly opt for trade agreements outside of the dollar. The Federal Reserve will likely have to monetize the increasing deficit, which could eventually weaken the dollar. China is not a contender for global reserve currency status due to a lack of necessary elements and mechanics. The passage discusses how the rise of the BRICS countries (Brazil, Russia, India, China, South Africa) threatens the US dollar’s status as the global reserve currency. While the BRICS countries still need to build deep enough markets to recycle their surpluses, their trade agreements conducted in currencies other than the US dollar reduce the amount of money flowing into the US treasury. This means that the Federal Reserve becomes the only buyer left and has to monetize the deficits until eventually the dollar collapses under the weight. The passage also mentions the potential for the BRICS currency to become a reserve currency, as they could build an indigenous bottom-up retail bond market that attracts enough investors. Additionally, it discusses the development of a BRICS submarine telecommunications cable to protect their communications and payment channels, as they have been excluded from Western systems. The passage concludes by mentioning the upcoming BRICS leaders’ summit and the potential impact of Putin’s absence due to an arrest warrant issued by the International Criminal Court. Despite this, the absence may further galvanize the other BRICS countries against Western hegemony. The International Criminal Court has issued an arrest warrant for Putin on charges of war crimes, but South Africa, a member of the court, has refused to arrest him. The opposition party in South Africa has filed a petition with the Supreme Court to get an arrest warrant. Putin has decided to skip the BRICS Summit and participate via Zoom. This move is seen as an example of Western bullying and is likely to infuriate the rest of the BRICS members. The BRICS countries are planning to introduce a new currency, based on gold, which is similar to what John Maynard Keynes proposed. The US is facing an untenable issue of financing its deficits, and if the Fed has to restart quantitative easing, it could lead to the dollar’s decline. The election in 2024 may not shift the urgency of policymakers in Washington towards the dollar’s status, as they currently do not view alternative financial setups as a threat. The tempo of shocks in the world is accelerating, with conflicts like the war in Ukraine, and this could lead to more frequent financial crises.