The BRICS bloc's push to create a new trade and reserve currency that can serve as an alternative to the dollar could start chipping away at the greenback's hegemony in less than three months' time, former CIA and Department of Defense advisor and investment banker James Rickards has predicted.
"On August 22, about two-and-a-half months from today, the most significant development in international finance since 1971 will be unveiled," Rickards wrote in a major independent US business news outlet, referring to the start date of the upcoming BRICS Leaders’ Summit Conference in South Africa, and the day in 1971 when the US went off the gold standard.
"It involves the rollout of a major new currency that could weaken the role of the dollar in global payments and ultimately displace the US dollar as the leading payment currency and reserve currency," the observer added, predicting that this tectonic shift could take place over a period of "just a few years."
Rickards expects the push for the new currency being discussed by the BRICS countries of Brazil, Russia, India, China, and South Africa to "affect world trade, direct foreign investment and investor portfolios in dramatic and unforeseen ways," and cause a profound and "unprecedented" geopolitical shockwave" that the world may not be prepared for.
Along with the BRICS nations themselves – whose combined economic might is already greater than that of the Group of Seven Western industrial economies, Rickards cited the expansion of the bloc’s membership as "the most important development of the BRICS system," with eight countries already formally applying for membership, and over a dozen more expressing interest in joining. Among the former are global economic heavyweights like Argentina, Egypt, Indonesia, Iran, and Saudi Arabia – the latter country a keystone of the petrodollar system ensuring the stability of the dollar’s world reserve status.
"There's more to this list than just increasing the headcount at future BRICS meetings," Rickards emphasized, pointing out, for example, that "if Saudi Arabia and Russia are both members, you have two of the three largest energy producers under one tent (the US is the other member of the energy Big Three)."
Furthermore, the current BRICS countries account for 30 percent of the world's surface area and related natural resources, 50 percent of global wheat and rice production, and 15 percent of the planet’s gold reserves. BRICS also account for 40 percent of the world’s population, and, pending Saudi membership, 28 percent of nominal global GDP, and 52 percent when measuring by purchasing power parity (PPP).
"By every measure – population, landmass, energy output, GDP, food output and nuclear weapons – BRICS is not just another multilateral debating society. They are a substantial and credible alternative to Western hegemony," Rickards stressed.
Accordingly, when the bloc launches its new currency, it will not simply "fall on an empty field," but be integrated "into a sophisticated network of capital and communications," which should "greatly enhance its chances of success," he argued.
BRICS Reserve Currency’s Possible Mechanics
Rickards expects the BRICS currency to be pegged to a basket of trade commodities, or to gold, and doesn’t think it will be available in the form of paper money for ordinary, everyday transactions. Instead, he predicts, it will be a "digital currency on a permissioned ledger maintained by a new BRICS+ financial institution with encrypted message traffic to record payments due or owing by participating parties."
Furthermore, he noted that for the BRICS currency to succeed as a true reserve alternative to the dollar, it would have to create an alternative to the US’ massive Treasury market – currently seen as an unshakable powerhouse and safe store of value among investors.
"The key is to create a BRICS+ currency bond market in 20 or more countries at once, relying on retail investors in each country to buy the bonds. The BRICS+ bonds would be offered through banks and postal offices and other retail outlets. They would be denominated in BRICS+ currency, but investors could purchase them in local currency at market-based exchange rates. Since the currency is gold backed it would offer an attractive store of value compared with inflation," Rickards proposed, citing the successful example of US Liberty Bonds introduced during World War I and which fundamentally transformed global finance.
"If the BRICS+ use a kind of Liberty Bond patriotic model, they may well be able to create international reserve assets denominated in the BRICS+ currency even in the absence of developed market support. This entire turn of events – introduction of a new gold-backed currency, rapid adoption as a payment currency and gradual use as a reserve asset currency – will begin on August 22, 2023, after years of development," Rickards stressed.
US Has No One to Blame But Itself
The BRICS countries' push to escape the dollar’s hegemony has everything to do with Washington's own imperious policy, according to Rickards, and specifically, the US' attempted "weaponization of the dollar through the use of sanctions."
"On numerous occasions from 2007-2014, I warned US officials from the Treasury, Pentagon and intelligence community that overuse or abuse of dollar sanctions would lead adversaries to abandon the dollar to avoid the impact of sanctions. Such abandonment would lead to the diluted potency of sanctions, unforeseen costs imposed on the US and eventually to the collapse of confidence in the dollar itself. These warnings were mostly ignored. We have now reached the first and second stages of this forecast and are dangerously close to the third," the observer wrote.
Rickards believes the sanctions the West imposed on Moscow last year amid the Ukraine crisis served as the straw that broke the camel’s back, causing "many other nations" to realize that “they could be next if they run afoul of the US on certain issues,” and thus "greatly accelerat[ing] the push to opt out of the dollar system entirely."
Ultimately, the economic expert characterized the coming BRICS+ economic system as a "realistic effort to de-dollarize global payments and eventually global reserves" and predicted that this process could take place "much faster" than even he previously believed, not only due to the spate of local currency transactions between major economies, but also the "growing strategic relationship" between Beijing and Moscow "as the two superpowers jointly confront the United States."