The United Arab Emirates (UAE), Kingdom of Saudi Arabia and Egypt are among six nations that have been invited to join the BRICS group of nations, and will join it in Janurary 2024
What do you guys think what effects it will have on the global economy?
So…the US dollar is the world’s “reserve currency”. Most international trade is actually conducted in USD, and central banks have to hold billions of USD in reserve as part of their basic operations.
This gives the US two massive geopolitical advantages:
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Because central banks like to hold their reserves in US Treasury bonds (which are considered safe but also pay interest) it artificially lowers the interest rate on those bonds. It’s estimated this saves the US hundreds of billions of dollars annually in borrowing costs.
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Unless you want to use literal truckloads of cash, the only way to obtain and hold USD is through the global dollar-denominated banking system, which itself MUST comply with US sanctions. In practice this means that the US can “sanction” individuals, companies and countries - and thus nearly freeze them out of global trade and finance.
I think it’s best to see BRICS as a direct response to that reality. The more these countries trade with each other in their own currencies, the more they weaken “dollar supremacy”.
Over time, (20 years?) I personally would predict that the effectiveness of the US sanctions will degrade to the point of irrelevance. You can already see this (IMO) in the “chip wars” and Huawei’s “escape”. I think the proportion of global trade denominated in dollars will steadily decline, and borrowing costs will start to normalize to the rest of the world, and possibly spike.
So…the US dollar is the world’s “reserve currency”.
Correct. But it’s not a binary thing, but a spectrum. Look at it in the prospective of the last, let’s say, 30 years.
How much has USD declined from usage? How much have the trades in the local currencies increased?
How about the last 2 years in particular? Moreover, the counries of BRICS trade mainly in the local currencies.
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Where did you get your information from?
The sanction have “hit” Russia such hard that Putin has been smiling ever since. He’d, perphaps, wish more of the sanctions any day.
Who’s in resession now - Russia or Europe? Europe. Russia, on the other hand, expects the growth of 2-2.5% this year. Higher than previously expected. Higher than US. Even the US firms have forecasted this.
And Russia has been able to localize a lot of manufacturing too, ncluding engines, tourbines and similar hight-tech stuff, thus breaking dependence on the West. Every week there’ll get open new manufacturing.
There’ve been some downsides for Russia too, but mainly - upsides.
Not to mention rushing to switch trade from USD to the local currencies or RMB.
…whilst under 15k sanctions.
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What? I’ll always read the 1st sentense. And it’s enough.
What a boring topic. Who created it?