US dollar: To be or not to be in new world order
Argentina's presidential frontrunner wants dollarisation; BRICS wants the opposite
The funny thing about world news is its iffy-ness, permitting two diametrically opposite suggested developments at the same time.
De-dollarisation and dollarisation, for example.
Argentina’s presidential frontrunner candidate, Javier Milei, is promoting dollarisation, just like happened in other South American countries, Ecuador, Panama and El Salvador.
Meanwhile, a substantial section of the world is trying to re-imagine a new world order, one that moves towards de-dollarisation.
The BRICS bloc of developing economies – Brazil, Russia, India, China and South Africa – meet this week in Johannesburg, South Africa to discuss their agenda and it’s no surprise that their agenda will include testy targets such as accelerating the shift away from the US dollar as the standard reserve currency.
I say “shift” but is there really one?
As I noted in my recent New European piece: “Internationally, the US dollar overwhelmingly retains what a 1960s French finance minister sneeringly called its ‘exorbitant privilege’ as the world’s reserve currency. The dollar’s closest competitor is the Chinese yuan. In the last decade, the yuan’s share of global payments doubled – to a measly 3%. The dollar is at roughly 60% despite muttered speculation on the issue, from Russia to Africa to the Middle East.”
So, is de-dollarisation just a long-term aspirational goal for countries that bristle at the US-led world order and seek an alternative in which the Global South has more clout?
It does seem aspirational. As South Africa’s minister for international relations and cooperation Naledi Pandor puts it, “The current geopolitical context has driven renewed interest in BRICS membership as countries of the Global South look for alternatives in a multipolar world.”
The bloc’s New Development Bank, which is supposed to combine the functions of the International Monetary Fund and the World Bank, does want to de-dollarise.
But the BRICS don’t want to get to the point of creating a common currency.
Instead, they will discuss “more trade in local currencies rather than US dollars,” according to Steven Gruzd, an analyst at the South African Institute of International affairs.
That’s do-able and safe. But it’s not rampant de-dollarisation.