During the BRICS Summit that was held in Johannesburg, South Africa, Brazil’s President Lula da Silva called for the BRICS nations to create a common currency for trade and investment between each other, as a means of reducing their vulnerability to dollar exchange rate fluctuations. The idea of a BRICS currency has been floated for several years, but there is no concrete plan to create it yet.
There are several reasons why the BRICS countries might want to create a common currency. First, it would reduce their dependence on the US dollar, which is currently the world's reserve currency. This would give them more control over their own economies and financial systems. Second, a BRICS currency would make it easier for the countries to trade with each other. Currently, they often have to convert their currencies into dollars, which can be expensive and time-consuming. A BRICS currency would eliminate this need.
However, there are also some challenges to creating a BRICS currency. First, the countries would need to agree on the value of the currency and how it would be managed. This could be difficult, given the different economic and political systems of the BRICS countries. Second, the countries would need to have a high degree of trust in each other. This is important because a BRICS currency would be backed by the reserves of all five countries. If one country defaulted on its debts, it could damage the value of the currency for all the other countries.
Could the BRICS currency be more powerful than the U.S. dollar? It is highly unlikely that the BRICS currency, if implemented, would supersede the U.S. dollar. The reality is that the U.S. dollar is still the most widely used currency in the world. It is used in international trade, investment, and finance. This gives the dollar a lot of inertia, and it will be difficult for any other currency to replace it.
Furthermore, the U.S. economy remains the largest economy in the world. This gives the dollar a lot of stability and makes it a safe haven for investors. The U.S. government is seen as the most reliable borrower, which means that investors are confident that the U.S. government will repay its debts, which helps to support the value of the dollar.
The reality is that for the BRICS currency to truly supersede the U.S. dollar, the world’s financial system shall no longer depend on Wall Street and the New York Stock Exchange (NYSE). Indeed, the power, influence, and reliability of high-finance is intrinsically linked to Wall Street. So long as the world’s financial system will continue to be tied to Wall Street, no currency would be able to supersede the U.S. dollar. The U.S. financial system is a well-regulated system. Investors will not feel confident in investing in a system they aren’t familiar with.
The value of the U.S. dollar may have depreciated over the decades due to excessive money printing and borrowing, but it is the currency that most people know and trust. Let us not forget that the value of currency is based on the confidence that people have in it. So long as people continue to trust the U.S. dollar, it will remains the world’s reserve currency.