A system of BRICS national currencies to accelerate liberation from the US dollar

What follows is my English translation of an article by Tiziano Tanari, published on ComeDonChisciotte.org on 4th November 2024. (All formatting original).

Are we really at the beginning of a new era, the era of multilateralism? With the advent of the BRICS and the creation of their own payment platform for international trade, a new alternative structure to SWIFT is emerging. The SWIFT system has the US dollar as its reference currency, which is used as the world's reserve currency since it is also the most widely used for international trade; this gives the US a unique power that has allowed it, in very recent times, to use the SWIFT circuit also as a strong geopolitical pressure instrument.

Everyone is aware of Russia's exclusion from this platform as a result of its attack on Ukraine; this forced Putin to find alternative routes that would allow it to maintain active foreign trade. Following this unfortunate, but above all illegal and unilateral action by the US, a stronger collaboration with the other BRICS countries was implemented using, first and foremost, new platforms for payments in national currencies, the most important of which is the Chinese CIPS.

This retaliation against Russia has highlighted the precariousness and danger of belonging to a US-driven payments system from which one could be excluded at any time, should the policies of the country in question not conform to the “will of the dollar”.

This fear has brought and is continuing to bring many countries closer to the BRICS; Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates have already formalised their membership as effective members and other countries have joined as “official partners” without having, for now, any decision-making or voting power.

Here we can grasp an extremely important point: among the new members we have three major oil producers; this implies that transactions in oil products will no longer necessarily take place with the dollar but with national currencies such as, for example, the Chinese Renminbi or the Indian Rupee (1). This process, which has just begun, of increasing substitution of the dollar as a currency of exchange is called de-dollarisation and may have important repercussions on the financial markets, resulting, precisely, from the significant drop in demand for dollars that may occur in the near future. Today, 80% of oil product transactions take place in dollars; the world reserves in dollars held by various countries are slowly decreasing, from 72% in 2000 to 59% in 2023 (1). We are, however, still at very high levels above any other currency such as the €uro [sic], which holds only 20%, putting it in second place.

On the sidelines of these emerging realities, it is necessary to make an assessment of the US choice (the European Union and Great Britain are only servile extras) regarding the sanctions imposed on Russia, first and foremost the exclusion from the SWIFT circuit. The total failure of the expected results has now been indisputably ascertained: the negative impact on the economies of European countries on the one hand and the accelerating effect towards a multipolar alliance against “stars and stripes” despotism on the other. Hence the self-defeating, patently predictable effect of the US strategy. An irrational and illogical choice that may leave the most attentive observers perplexed to the point of hypothesising underlying plots that escape superficial analysis and nevertheless remain difficult to accept. There are, however, plausible “conspiracy theories” that claim there may be a global plan of forces transversal to national governments; there are objective facts and events that are apparently consistent with these hypotheses and cannot be underestimated (2). This is why it is of fundamental importance to understand the political, economic and monetary dynamics in order to assess the real geopolitical situation and the reliability or unreliability of the various global players.

We will try, in the next part of this article, to establish a few fixed points as elements for assessing future events, both in the national and, above all, international political landscape.

We are hearing more and more often, generally in the world of alternative information (alternative to mainstream disinformation and propaganda), that a democratic revolution is about to take place that will remove power from the ruling elites also through new financial instruments such as, precisely, new monetary circuits and, above all, with a probable new currency: the BRICS currency whose name is hypothesised as 5R, a currency that would have a particular characteristic that would guarantee it a certain and stable value as it would be backed by real assets such as gold and raw materials in general. The writer considers this possibility to be absolutely inconvenient as a return to a form of gold standard would put a brake on the economy and a very powerful tool in the hands of the usual powers that live on a fundamental axiom for them: to maintain a constant scarcity of money and make it appear as a limited “good”. This demolishes any optimistic predictions should the path taken by the BRICS lead to a choice like this (3).

Before the final conclusions, let us try to do a very brief history of the currency “family tree” to try to understand the true meaning of future political and geopolitical choices.

The first concept to clarify is the nature of fiat money, i.e. a currency without any underlying material goods such as gold or precious metals in general. The creation of this type of currency can take place by Central Banks without any kind of objective constraint as it is not limited by “finite goods” such as gold or any other commodity. Why is it important that the creation of money has no limits or constraints? Because a state must be able to “print” the amount needed for ITS OWN economy with which there is a direct correspondence relationship: strong economy = strong currency, weak economy = weak currency. The currency of a state is, in fact, the “identity card” of its economy; what gives value to a currency is its economy, i.e. its ability to produce goods and services. The underlying value of a fiat currency is, therefore, its country's economy. To understand the revolutionary significance of this type of currency compared to the gold standard (where the underlying value is gold, a limited commodity towards which there would be a constant quest to hoard as much of it as possible) we must understand the meaning of wealth on a macroeconomic level; we have two types: financial wealth and real wealth.

By “real wealth” we mean the goods and services we use for our living needs; these are created with OUR labour. From here we immediately understand the importance of human labour without which nothing could be built and produced. “Financial wealth” is represented by money, which was created as a means of exchanging goods and services......to replace barter. It is fundamental to understand its primary function because today, being also used as a “store of value”, its use has been totally distorted, becoming, also and above all, an object of “speculation”. Money serves to activate the labour with which goods and services are produced and for their exchange; it is, in fact, a unit of account and measure of the goods produced. If there is a poor economy, with little productive capacity, goods may be in short supply, but if they are produced in abundance, money cannot objectively be in short supply; when this happens, it is certainly a political choice but, even more, a crime against the people. This is why fiat money is fundamental to the economy as it allows for an unavoidable direct correspondence with one's own level of economy. (4)

Returning to the hypothetical future BRICS currency backed by real assets, we can predict that it would have little chance of success as it would fall back into the fixed exchange rate regimes that have done so much damage over the past decades and are still doing so with the €uro. It would be important, however, to create a system that could be an alternative to the dollar in international transactions and with its own reserve currency so that the value of the dollar itself could be reduced. This process would force the US government into a much more restrained spending policy, especially since it cannot continue to run stratospheric trade deficits with which it can afford, among other things, higher military expenditure than the rest of the world. Reducing such a massive war potential would be a good first step towards the much desired multilateralism.

The prevailing economic philosophy, neo-liberalism, imposes rules such as controlling accounts, balancing budgets, the possibility of making only microscopic deficits, all characteristic elements of an economic policy based on austerity, the devastating regulator of most of the planet's economies. Following this logic, a de facto monetary rarefaction is imposed on the economic circuit to keep inflation to a minimum, but highly penalising from the point of view of growth and employment. In this panorama, the primary actor becomes speculative finance that suffocates the real economy using the powerful weapon of the dollar.

The prevailing economic philosophy, neo-liberalism, imposes rules such as controlling accounts, balancing budgets, and the possibility of making only microscopic deficits, all characteristic elements of an economic policy based on austerity, the devastating regulator of most of the planet's economies. Following this logic, a de facto monetary rarefaction is imposed on the economic circuit to keep inflation to a minimum, but highly penalising from the point of view of growth and employment. In this panorama, the primary actor becomes speculative finance that suffocates the real economy using the powerful weapon of the dollar.

We come, therefore, to understand how de-dollarisation is a fundamental step to arrive at an accomplished multilateralism where one does not have to submit to the hegemony of any country, in this case the US. This process could be facilitated, in the writer's opinion, by the creation of a scriptural reserve currency, a simple unit of account, hence a non-circulating currency, representing a basket of national currencies of a group of countries (see BRICS) under a flexible exchange rate regime. This would greatly facilitate international trade, create greater stability in the system, and would not be a hostage or instrument of power of any country. Clearly, whatever path is taken, it requires time and expertise which, unfortunately, seems to be a very rare commodity. In conclusion, we will still see for a few years the unacceptable overpowering of the dollar, which can only be overcome by a great project of cooperation between states that truly want to work in the interest of the peoples, all of them. We can only hope and follow developments closely. The very important summit of the BRICS countries in Kazan, Russia, has just come to an end, with the impressive participation of dozens of countries interested in joining. A great new reality is taking shape that, if it respects some of its most important premises oriented towards supporting the real economy (and not finance), could constitute the beginning of a new era where cooperation between states would become the fulcrum for a future of widespread prosperity and, above all, peace at the international level, representing, moreover, an alternative to the policies of an increasingly less democratic and increasingly warmongering West. We can only hope.

NOTES:

• https://www.thewatcherpost.it/economia/dollaro-valuta-internazionale/

• https://youtu.be/8CxsH3ri0Ew?si=-jxLyJRZQ37o_85N

• https://www.orovilla.com/blog/gold-standard-cosa-e-perche-potrebbe-tornare.html

• https://mmtitalia.info/wp-content/uploads/2020/03/Manuale-di-Macroeconomia-per-i-Cittadini.pdf

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