The exorbitant privilege that the United States enjoys by having the dollar unequivocally the world's only reserve currency is under attack again. Emerging market BRICS countries such as Brazil, Russia, India, China and South Africa are trying to attract additional supporters by stoking talk of a rival capable of overthrowing the king. These efforts will fail for the most banal, ordinary reasons. They are considered by British journalist Marcus Ashworth in an article for Bloomberg.
Last week, BRICS foreign ministers gathered in Cape Town, South Africa, along with representatives from other countries such as Saudi Arabia, the United Arab Emirates and Kazakhstan. It was a warm-up for the main event, when the heads of state would meet in Johannesburg at the end of August (although the location may change) for a decisive blow.
There are not many important issues in sight that define the nature of the gathering, a thinly disguised attempt to overthrow the world order based on the rules established after the Second World War.
The impact of the BRICS coalition could be significant, given that 42% of the world's population lives in this group. Nose economic point of view, such a union provides only 23% of world production and only 18% of trade. According to open data, the dollar is used for 42% of foreign exchange transactions. The share of the euro is 32%, but it does not have the same influence outside of Europe. The share of the Chinese yuan accounts for about 2%, since its use does not have a significant distribution even in Asia or outside of its own state.
The defining element of the reserve currency is that it is the second most used for domestic transactions. The dollar is by far the most used method of exchange in the world after each country's own currency, sometimes even surpassing the national currency. Almost every commodity, including oil and gold, is traded in dollars. Even cryptocurrencies are linked almost exclusively to the US dollar. What is also vital for a reserve currency is its use as a store of value. The International Monetary Fund estimates that 59% of global central bank reserves are in dollars, of which 20% are in euros and only 5% are in yuan.
None of the BRICS countries, nor all together, can create an alternative currency by magic and only at will. The dominance of the dollar can be tiresome, boring, but there is no alternative, even close in meaning and importance. BRICS will not stand in competition with him.
Get mad at the dollar machine all you want, but it keeps going. Trying to overcome it is the most useless exercise
- summed up the expert.