Investment analyst John Wolfenbarger warned that the success of the BRICS currency could harm American living standards and “lead to less strength for the US government, similar to the weakness of the United Kingdom after World War II.” He stressed that: “Because of the Russian-Ukrainian war and China’s continued economic growth, the BRICS countries are accelerating their plans to seize power from the United States.”
The impact of the BRICS currency on the US dollar and American living standards
CFA investment analyst John Wolfenbarger published a blog post titled “Will the New BRICS Currency Change Anything? Maybe” on the Mises Institute website last week. Wolfenbarger is the CEO and founder of Bull And Bear Profits, an investment site. He has over 30 years of investment experience, having worked for more than 22 years as a securities analyst at Allianz Global Investors and as an investment banker at Merrill Lynch and JPMorgan.
Commenting on the de-dollarization efforts by the BRICS countries (Brazil, Russia, India, China and South Africa), he said:
Due to the Russian-Ukrainian war and China’s continued economic growth, the BRICS countries are accelerating their plans to seize power from the United States.
He cited several BRICS initiatives, including the New Development Bank for infrastructure lending, an emergency reserve arrangement to protect against foreign exchange pressures, and a payment system as an alternative to the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
Moreover, Wolfenberger explained, the BRICS countries also operate on a reserve asset based on a basket of member countries’ currencies to compete with the International Monetary Fund (IMF) Special Drawing Rights.
Commenting on whether the US dollar will be dumped, the investment analyst elaborated, “The BRICS countries are unlikely to seriously challenge the king dollar if their only tool is just another fiat currency they can create out of thin air.” confirmed:
The BRICS countries would stand a much better chance if they created a hard currency backed by gold or other commodities such as oil.
The United States has the largest and safest market for government bonds, there are no capital controls, and it has a reputation for enforcing the rule of law. By contrast, the BRICS countries are hardly known for being law-abiding or having strong currencies. “Of course, its competition with the dollar will eventually end in failure, as Bretton Woods did, if the BRICS countries continue to create money out of thin air to fund war and welfare spending.”
Regarding the economic and political impact of the BRICS currency on the United States and the US dollar, former investment banker J.P. Morgan noted:
If the BRICS succeed and the US does not change its policies to focus on a stronger dollar, less spending, and peace rather than war, the dollar could slowly lose its “reserve currency” status.
This would hurt US living standards and lead to less strength for the US government, similar to the UK’s weakness after World War II. All empires in history have failed, and the United States will likely be no exception – if the BRICS countries can create a successful hard currency to compete with the dollar.
Many people agree that the success of the BRICS currency could undermine the dominance of the US dollar, including a former White House economist. The BRICS economic bloc is gaining more influence globally; 19 countries have applied to join or expressed interest in joining. A Swedish university professor said last week that Saudi Arabia’s accession to the BRICS group will accelerate the use of the Chinese yuan as a commercial currency.
Do you agree with investment analyst John Wolfenbarger about the potential impact of a successful BRICS currency? Let us know in the comments section below.
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