Concerns are mounting over the viability of the U.S. dollar as a world reserve currency. Meanwhile, China, Russia, and their allies are hatching plans for their own currency blocs.
The U.S. dollar has long been the world’s reserve currency. However, a new world order appears to be emerging from the East.
The moves come as the American banking and financial system teeters dangerously close to collapse again. Several high-profile banks have seen trouble this year, and it is only three months old.
Over the weekend, Breitbart economics editor John Carney appeared on Fox News to air his views. He said it was inevitable that the USD would not be the world’s reserve currency in the future.
Distancing From the Dollar
He noted that the dollar’s dominance is starting to drift away, adding:
“China and Russia are starting to build an alternative block of currency.”
On potential tipping point could be Saudi Arabia and what it decides to do with its oil transactions. They are currently denominated in USD, but that could all change should a new viable alternative emerge.
Carney said that the Chinese yuan is not much of a threat “because the Chinese communist system is not open enough.” Conversely, he added that the U.S. financial system is very open with free global foreign exchange.
However, there could be different blocs of countries and different blocs of currencies. All of these would be vying for global dominance as dollar hegemony diminishes.
Furthermore, it is already happening. Last week, China and Brazil decided to ditch the dollar and conduct their massive trade in their own respective currencies. India and Malaysia can now use the Indian rupee to settle their trade. China also completed its first liquefied natural gas (LNG) purchase from France using yuan settlement.
On April 2, Chinese media outlet Global Times blamed the de-dollarization on America’s “irresponsible monetary policies.”
BRICS Reserve Currency Discussed
Last week, a top Russian official reportedly claimed that the BRICS countries were working on creating their own currency. The BRICS bloc comprises Brazil, Russia, India, China, and South Africa.
State Duma Deputy Chairman Alexander Babakov said the currency’s composition:
“Should be based on inducting new monetary ties established on a strategy that does not defend the U.S. dollar or Euro … but rather forms a new currency competent of benefiting our shared objectives.”
The new currency would be backed by gold and commodities, according to Babakov.
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