BRICS New Currency vs US Dollar: The 2024 Showdown!

The Emergence of the New BRICS Currency The first point of discussion begins with understanding the emergence of the new BRICS currency. BRICS, understood as the economic grouping of Brazil, Russia, India, China, and South Africa, stands as a significant entity on the global financial stage. Recently, these nations have proposed floating a common currency, which could have a considerable impact on the US Dollar (USD). This proposition comes on the back of rising instances of unilateral actions by the USA, which has been utilizing its status as the global reserve currency to exercise diplomatic power. The concept of a new currency backed by BRICS nations incorporates the ideological quest for multipolarity and democratization of the financial world order, marking a significant shift from the unipolar rank dominated by the US Dollar. Market Dynamics The creation of a new BRICS currency would lead to an initial fluctuation in the markets as traders, and investors scramble to understand and adapt to the new circumstances. In the short-term, there could be an increased demand for the BRICS currency, leading to indirect devaluation of the USD. The new BRICS currency can potentially reduce dependence on the USD, resulting in lowered demand and a subsequent decrease in its value. This arises from the theory of Demand and Supply where a decrease in demand for a particular currency can lead to a fall in its value in the foreign exchange market. If trade among the BRICS nations and their trading partners starts operating using the new BRICS currency, this would significantly reduce the need for USD for trade transactions. Macroeconomic Perspective From a macroeconomic perspective, the BRICS countries jointly represent over 41% of the world’s population and contribute to 22% of the world’s Gross domestic product (GDP). If BRICS’s economic strength translates into the power of their new currency, it can indeed lead to a dilution of the dominance of the USD. Financial Risks The BRICS nations, together with their new currency, would also have to monitor and manage financial risks associated with it. There could be potential economic issues, including inflation, deflation, or even currency crashes if not adequately regulated. BRICS nations would need to establish a robust regulatory framework to ensure financial stability and mitigate these potential risks. Impact on Global Economic Order A new BRICS currency would symbolize a redesign of the global economic order; thus, a significant shift away from centuries-old financial structures and institutions. While a specific long-term impact on the USD