Media coverage of a proposed new currency is picking up steam. Here’s what’s going on:

What Exactly is the BRICS Alliance?

Today, it’s an annual forum comprised of still-developing economies. It is considered a geopolitical rival to the more economically advanced G7 (of which the US is a member).

*An AI-Generated Image of Currency as Bricks*

Who’s Involved in the BRICS?

Brazil, Russia, India, China, and South America were recently joined by Saudi Arabia, Argentina, Iran, and others.

What’s The Commotion?

Brazil’s President questioned why all countries need to base their trade in the dollar, which comes with its own price fluctuation and borrowing costs. Russian state media has also called for a new trading currency.

The countries can currently trade with whatever currency they need to, be it dollars, bitcoin, or domestic options. Due to its productive economy, rule of law, and taxation, the dollar has been the gold standard since, well, the gold standard.

Why would a BRICS Currency Matter?

The BRICS nations represent over 3 billion people and 30 trillion in GDP. their annual trade volume is substantial, and many of the countries thrive on exports.

How Likely is a BRICS Currency and Does it Pose a Threat To The Dollar’s Reserve Currency Status?

Along with Brazil, Russia has been making the most noise, likely out of frustration over the severe economic sanctions imposed in 2022. Invading Ukraine got their financial resources cut off from G7 nations, and international banking through SWIFT has been disabled.

However, India’s External Affairs Minister says there’s been no discussion of creating a common currency. South America’s Finance Chief affirms a common currency was never on the table.

Instead, they say discussions have focused on deepening trade between their own currencies.

Our Takeaway:

Creating a common currency requires agreement on creating a central bank, a fair monetary policy, and taxation. This is no easy feat- just ask the Europeans how things are working out with the ongoing debt crisis around the Euro.

Imagine India, China, Russia, Brazil, and Saudi Arabia agreeing on anything, given their differences in democracy and individual quests for world dominance.

Economist and creator of the term BRIC, Jim O’Neill slammed the idea of a common currency in a recent FT article: “It’s just ridiculous…it’s embarrassing almost.” They “never achieved anything since they first started meeting” he added.

As of now, the dollar looks to be a safe bet to keep its position.