A BRICS Currency Replacing The Dollar Is A ‘Ridiculous’ Idea,
A BRICS Currency Replacing The Dollar Is A ‘Ridiculous’ Idea, Says The Top Economist Who Named The Group—Unless China And India Become Allies
Will Daniel Updated Wed, August 16, 2023
In their push to dethrone the U.S. dollar as the world’s largest reserve currency, the BRICS nations—or Brazil, Russia, India, China, and South Africa—have been talking up the idea of a common currency for years. But Jim O’Neill, the veteran economist who coined the term BRIC (the group did not originally include South Africa) when he worked at Goldman Sachs in 2001, blasted the plan this week.
“It’s just ridiculous,” he told the Financial Times Tuesday. “They’re going to create a BRICS central bank? How would you do that? It’s embarrassing almost.”
The BRICS nations will meet for their 15th annual summit next week, but O’Neill, now senior advisor at U.K.-based think tank Chatham House, argued that the group of nations has “never achieved anything since they first started meeting” in 2009 amid consistent infighting.
The push for de-dollarization among BRICS nations has heated up since the war in Ukraine began, as crippling Western sanctions on Russia were enabled by the dollar’s dominance. In April, Brazilian President Luiz Inácio Lula da Silva urged the group to develop a serious alternative to the dollar using the combined weight of their economies.
“Why can’t we do trade based on our own currencies?” he said on a state trip to China in April, the Financial Times first reported. “Who was it that decided that the dollar was the currency after the disappearance of the gold standard?”
Despite the ongoing talk of de-dollarization, nearly 60% of global currency reserves were held in U.S. dollars in 2022, and 88% of international transactions used the dollar, according to IMF data. And Wall Street doesn’t seem to be worried about a serious competitor to the greenback either.
Dylan Kremer, co–chief investment officer at Certuity, which manages nearly $4 billion in assets, said that the development of a common BRICS currency is just a “talk track,” referencing the talking points salespeople bring to client meetings. BRICS nations, when combined, lack the political stability to make investors confident in a combined currency, he argued.
“There is not an immediate threat to the dollar over the next 10 years,” Kremer told Fortune. “Any threat to the dollar or competitor to the dollar would be a slower-moving kind of snowball effect.”
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