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Why is Dollar System Collapse Inevitable Amid Creation of BRICS Currency?

© Photo : taken from social media Screaming dollar
Screaming dollar - Sputnik International, 1920, 30.01.2023
On Sunday, Republican Congresswoman Marjorie Taylor Greene warned that the US dollar may cease to be the world's currency as a result of the Ukrainian conflict, also arguing that Russia managed to prove that it doesn't need the greenbacks in order to successfully develop economy.
Russian Foreign Minister Sergey Lavrov said last week that BRICS members are working to boost payments in national currencies over what he described as unreliable mechanisms of the dollar system.
The creation of a BRICS currency is “inevitable” process because the group’s member states “are interested in reducing their exposure to the US dollar and in internationalizing their currencies,” Gal Luft, director of the Washington-based Institute for the Analysis of Global Security, has told Sputnik.

BRICS May Create 'Gold-Backed' Currency

He suggested that if created, such a currency could be “gold-backed” and that it will be China, Russia and South Africa who could create a Gold-Standard 2.0 architecture”.
According to Luft, this architecture will be “appealing to many Global South countries as alternative to the fiat dollar system which allows the US not only to sanction and coerce them but also to enrich itself at their expense.”
Touching upon possible challenges the BRICS currency may face, he argued that “the US and other incumbent powers served by the current [dollar] system like the UK and the EU will not welcome the new kid in the block and will try to convince the less-ideological BRICS members, mostly India, that the move is too destabilizing.”
Luft stressed that when it comes to the dollar system, it is “dependent on the Fed decisions that serve first and foremost the interests of the American people and their elected officials, not taking into account the interests of the world’s poor.”
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“To the contrary, US’ exorbitant privilege allows it to borrow unlimited amounts in order to finance its ballooning deficits while poor countries are struggling to fund their own”, the analyst added.
Luft’s optimism about a BRICS currency was echoed by Ashraf Patel, senior research associate with the Institute for Global Dialogue and Member of the South Africa BRICS Think Tank Network.
He told Sputnik that the past few years have seen BRICS nations make “steady progress regarding the creation of a new currency.”
“Naturally this is a huge systemic change and in an emerging multipolar world, such initiatives are possible as the BRICS groups grows, with many anchor nations in the Developing South expressing interest in joining BRICS group.”

BRICS 'Special Cloud Platform'

Patel added that as part of “the drive to establish a common system for retail payments and transactions between the member countries,” the BRICS members are creating “a single payment system, BRICS Pay.”

“In the near future, these countries plan to introduce a special cloud platform, which will connect their national payment systems. An online wallet will be developed with access to these payment systems, as well as a mobile application similar to Apple Pay, which can be installed on smartphones for purchases in any of the five BRICS countries, regardless of which currency the payment and the money in the account of the buyer are denominated in,” he said.

According to Patel, creating BRICS currency is “one step of the long term diversification of currency in the international trade-finance system in that long road towards ‘diluting the dollars’ power in global trade.”
The remarks followed Republican Representative Marjorie Taylor Greene arguing on Sunday that despite harsh sanctions, Russia had managed to prove it doesn’t need the US dollar to successfully develop trade as she referred to the ongoing Russian special military operation in Ukraine.
In a series of tweets, Greene slammed “the US proxy war with Russia” in Ukraine”, which she claimed would “continue to hurt” America, “draining its resources and driving inflation.”
“It could also result in the dollar no longer being the world’s currency. Because of our own arrogance and ‘fight to save democracy’ in non-NATO Ukraine, heavily sanctioned Russia is proving to the world that they don’t need the US dollar or friendship to trade and thrive,” the congresswoman pointed out.
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The statement was preceded by Russian President Vladimir Putin telling the BRICS Business Forum last year that the five major emerging economies within the group (Russia, China, Brazil, India and South Africa) should establish an international reserve system based on a basket of BRICS currencies.
According to him, although it may take years for the group to create the monetary system, the final result is likely to be an equilibrium between the competing the dollar-based system and the BRICS currency basket.
In 2021, Putin pointed to the importance of Russia ditching the dollar in his decree on Russia’s updated National Security Strategy. The Russian president underscored that ensuring the country's economic security is only possible with the reduction in the use of the dollar in Russia's foreign trade transactions.
Moscow has repeatedly emphasized that Washington's sanctions policy undermines confidence in the dollar, reduces national reserves investment in the US public debt, and contributes to increasing the volume of foreign trade in rubles and other currencies. Washington and its allies slapped packages of sanction on Russia shortly after it launched a special military operation in Ukraine on February 24, 2022.
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