Since 1944 according to the Bretton Woods Agreement of 1944, the United States dollar was established as the world’s foremost reserve currency. According to the latest reports, 88% of the world’s central banks maintain their reserve currency in USD.
For almost a century the US dollar has been stable except for a devaluation in 1971-1973 period. In the last few years there has been plans to replace USD and the countries were trying to conduct business in other currencies like Indian rupee or Chinese yuan.
With the recently completed BRICS meeting in Russia getting in the limelight in the recent news, I want to analyze more about the possibility of having a currency other than USD.
The BRICS (Brazil/Russia/India/China/South Africa) includes 10 countries – Brazil, China, Egypt, Ethiopia, India, Iran, Russian Federation, Saudi Arabia, South Africa, United Arab Emirates. Now possibly Turkey and many more join.
Loan with World Bank by the above countries. Depending on the currency they borrowed they will have to repay the loan.
Brazil – 434 projects USD – 66,731 M
India – 695 projects USD – 134,501 M
China – 448 projects USD – 68,942 M
South Africa – 19 projects USD – 6,815 M
Russia – Russia’s Official Development Assistance steadily increased from about $100 million in 2004 to $1188 million in 2017 from World Bank. It could be around 1400+ million in 2024.
When they repay the World Bank loans obviously they have to convert to USD and no one knows what will be the buying rate for USD from BRICS currencies. I guess that it’s going to be very high if they are USD loan.
With all the above points aside, if you have a couple of million US dollars, will you keep it in Chinese currency or Russia currency and trust that you can get it back when you need it, with the type of governments in Russia and China? I would rather keep it in USD or the currency in the country where I live.
Yes, the US is trying to dominate and play boss, but US is a reliable boss. Can trust US dollars more than Chinese Yuan or Indian rupee or definitely not Russian rubles. So all these rumors about USD loosing it’s value and BRICS currencies taking the lead is not going to happen.
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