The West Can't Believe What The BRICS Bank Just Announced | A Move They Can't Ignore
The West Can't Believe What The BRICS Bank Just Announced | A Move They Can't Ignore
Tech Revolution: 10-17-2023
In a strategic move, the BRICS New Development Bank is introducing a 3-year plan aiming to decrease its dependence on the US dollar.
The bank is gearing up to foster more transactions using the local currencies of its member nations. Can you feel the ground shaking beneath the world of finance? The very essence of BRICS is evolving, and this expansion promises to reshape the bank's operations, especially in terms of its lending model.
Here's the kicker: As of now, the Shanghai-based BRICS bank conducts 22% of its transactions in its member currencies. But with this new plan in play, they're aiming for an ambitious leap, pushing that number up to 30% by the year 2026.
Can you imagine the implications of such a shift? Let's take a closer look at the heart of the BRICS bank's mission.
It was created by countries that are still growing and developing, just like a young plant. The idea was to help these countries, which are often called "developing countries," by providing them with money and support.
But here's the thing: Right now, this bank relies a lot on the U.S. dollar. About 70% of the bank's money is in dollars. It is a bit risky because if something happens to you, you might lose a lot. So, the BRICS bank is making a plan to change this.
They want to use the money of their own countries more often instead of relying so much on the U.S. dollar. They even have a goal: they want to increase the use of their own money by 8% over the next three years.
This plan is like planting seeds that will grow into a garden where BRICS countries have more say in how things work around the world.
Continuing from the exciting shift within BRICS, let's dive into a global force that has historically driven the financial sector – the U.S. dollar. But, folks, winds of change might be blowing. At the recent 15th BRICS summit held in Johannesburg, Russian President Vladimir Putin made quite a declaration. In his words: “De-dollarization is an irreversible process.”
Makes you think, doesn't it? The collective vision is crafting a financial framework that doesn't lean heavily on the U.S. dollar but rather pivots towards the stability of gold.
So, where does this lead to the future of gold, the dominance of the U.S. dollar, and the global economic structure?
The seeds of a BRICS-based currency aren't freshly sown. But, what's different now is a reinforced intent to transition away from the dollar, eyeing a gold-backed alternative.
What was the catalyst? Well, rewind a bit. Russia first floated the concept of this currency back in 2019, spurred by geopolitical motivations and an eagerness for de-dollarization. Their aspiration? A currency built on the collective strengths of BRICS nation currencies, all backed by gold, and regulated by their respective GDP shares.
Though not pitched as a daily transactional currency, this unit is seen as a trade and investment yardstick within the BRICS fraternity and its affiliates.
Russia's 2022 distancing from the dollar-heavy financial matrix, intensified after certain geopolitical events, injected momentum into discussions surrounding a new, West-independent financial paradigm.
The suggested gold-backed unit isn't your everyday shopping currency. But its introduction could be revolutionary.
Having gold at its core not only amplifies credibility but embodies a stand against geopolitical challenges and sanctions.
BRICS associates are hopping on this bandwagon, realizing the currency's potential. A notable nod came in August 2023 when Brazilian President Luiz Inacio Lula da Silva voiced his endorsement, highlighting its potential to counterbalance dollar oscillations.
To put things into perspective, the U.S. dollar is the kingpin of global finance, contributing to a staggering 59% of central bank reserves and steering the majority of international trade. This position offers the U.S. immense sway—from deploying sanctions to molding global trade norms.
Yet, it unveils chinks in other nations' armor, especially considering the ballooning U.S. debt and waning faith in the dollar. Spotting this gap, BRICS countries are eager to cut down their dollar dependencies, fortify mutual trade bonds, and usher in a more diverse financial environment.
But now, let's shift our gaze towards a nation that has always been a significant pillar of the group but may have divergent interests - India.
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