Thoughts on Brics and US Dollar?

Curious what my fellow primates thoughts are on this whole Brics coalition with China Russia Brazil India. (Think another country joined too but I forget) All I see on social media now is the talk of US Dollar decline and the end of it being the world reserve currency. Do you think this will happen? If it does happen what do you think will happen to the US and US Dollar? Inversely if BRICS fails what will happen to them?

 

The USD is 59% of the total world reserve currencies and the Chinese Yen is just 3%.  I don't see this happening in our lifetimes.

Furthermore, most of the shift away from the USD has gone to the currencies of smaller developed countries such as South Korea, Australia, Canada.  Only 25% of this shift away from the USD has gone to the Chinese Yen.  It's probably just Russian bots on Twitter, since Russia is really the only country that uses Yen as a reserve currency.

world reserve currencies

https://www.imf.org/en/Blogs/Articles/2022/06/01/blog-dollar-dominance-…

 
Pierogi Equities
Phil Leotardo

Chinese Yen

oh fuck, new Asian currency union just dropped

lol why did you get MS for this. I think they missed the joke (Chinese Yuan / Japanese Yen). 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 
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Being a reserve currency basically means that your country is the safest place to hold your money. The US and the NATO are clearly the answer to this question, because their governments are stable, their economies the largest in the world, and their militaries the most powerful. The one issue with this is that while the country may be safe, if it's going to weaponize your money with sanctions, then you may withdraw (see Saudi Arabia and Russia), because these guys are afraid that they're going to get sanctioned. This is not a safety issue with the country, but a broader concern that the safe guys are going to target you because they think you're a crook. Those are two separate things. The US needs to be extremely careful about putting up more sanctions like we saw against Russia, as it can encourage capital flight.

The BRICS coalition is similar to the G7 in the sense that it is an economic alliance. The BRICS countries constitute ~$25T in GDP while the G7 has ~$43T, so nearly half the size of the G7. The G7 countries (US, UK, FR, CA, DE, IT, JP) are all completely joined at the hip with the US and are formal military, economic, and intelligence allies. None of these would become US adversaries under any circumstances and would instantly join the US in any major war.

Russia and China are loosely economically coupled, but have become more so in recent years. These countries are pursuing an energy partnership, but there currently isn't the pipeline infrastructure to do this, and it would take many years and hundreds of billions to develop. Russia faces a hobbling and inexorable demographic decline which makes them a weak partner except for their conventional and nuclear capabilities.

India is not a military power and needs to play middle man with the US and China, so it is not going all-in on either country; it needs both. In a China-US conflict, India would not choose sides and would likely remain neutral. China could exert border pressure on India which would make it fear China more than the US and perhaps side with them, but the incentives for neutrality are strong, and India has an enormous population which would be a royal pain for China to try to subjugate and India has a nuclear deterrent as well, making them a poor target for Chinese aggression. India is a neutral country.

Brazil is the uncontested king of South America and faces little to no domestic military threats. The US poses more of a threat to Brazilian security than China does, so Brazil naturally stays in the good graces of the US and was actually named a minor US ally during the Bolsonaro administration, although Lula now drifts towards China. Brazil's politics fluctuate between right and left, which gives them no clear direction in US vs. China. The US is more economically important to Brazil than China in imports and exports, to say nothing of the broader G7 and the other South American countries which are often de facto US client states, so the US wears the pants, not China.

South Africa has an interest in maintaining commodities trade with China, although it is culturally much more like the UK and the Netherlands. South Africa is more aligned with Europe, although it may have interest in non-dollar and Euro trade.

Summary: The G7 is tightly bound around America while the BRICS coalition is around half the size and is clearly much less tightly bound with Brazil, India, and South Africa all seeming like very ambivalent economic allies, with none of them being willing to go in on a real military commitment against the US, which is the US' trump card. Russia and China face very real demographic declines, while the US is expected to continue to grow through 2100 through continued immigration. A few people are pulling out of USD because they think they may be subject to sanctions in the future, but the US and NATO are the safest place to put money for a multitude of reasons.

 

I want to push back on a couple of points. While I agree that at arms length India tries to be neutral with China despite their border disputes over Nepal, India has been tied to Russia for a lot of military resources thanks to US involvement/support with their neighbors. And South Africa seems to be pushing back and badly motivated given the disgusting racial political issues going on down there and then we have China's "Belt and Road" initiative pulling them further into that sphere. 

Don't forget KSA is also attaching themselves to BRICs. And then we have other horror stories about countries like Libya wanting to move their oil trade to gold and then that whole mess. As for a Russia-China pipeline, they've been planning on a pipeline network for between them for a while. If I had to hypothesize, I could see Indonesia linking into BRICs too with Vietnam siding with the G7. Thoughts?

In all, I think the USD is becoming it's own worst enemy lately. I want this country to be the superpower, but I think there's a lot going on that's self subverting.

The poster formerly known as theAudiophile. Just turned up to 11, like the stereo.
 

Standard points, all well taken, so let me present the standard counterpoints.

The historical military equipment stance has been because of our partnership with Pakistan, which was a marriage of convenience because they happened to help with the efforts du jour during the so-called "Wars on Terror." It's kind of dumb to side with a country that has 1/10th the GDP of India over India, particularly one with as many issues as Pakistan. I think strengthening the country's ties with India is one of the very best things the US could do. India and China are natural adversaries, and I think there's a lot to be won there.

On South Africa, you have the similarities with England and the Netherlands on the one hand (white people), and the lasting scars of apartheid on the other. The reality is that the African National Congress is a very strong left wing party which has natural alignment with China and natural reason to hate Europe. These are true. One could conceivably see a Mugabe-style, "no white people can own land" stance in South Africa, but South Africa's economy is 20x the size of Zimbabwe (thanks Pierogi) and is the regional powerhouse, so the US would probably step in with regime change or military action in such a scenario. 

On Belt and Road more broadly, it does tend to build goodwill with China, but it's been a pretty crappy program overall. The scenario that plays out is basically this:

1. China pays billions of dollars for bridges and railroads.

2. African country goes in debt to China for said bridges and railroads.

3. African country turns out its pockets to China when called to pay for said debt to China for said bridges and railroads.

A lot of it is putting good money after bad uses and having little to gain in return. It's not like you can invade the country to get the money back. It's kind of a big waste.

On Saudi Arabia, Russia is already aligned with Iran, which has a bigger economy and is the Shia leader to the world. Saudi Arabia is a smaller economy, less populous country and is Sunni leader to the world by virtue of having Medina, Mecca, and the other holy sites. Iran and Saudi Arabia are never going to be totally allied with Russia at the same time, as that would be to ally with each other. China negotiated a detente to stop the proxy wars in Yemen, with a little bit in Syria, but that's about it. Saudi Arabia needs a real military deterrent against Iran, as they have money that Iran wants to take and religion that Iran wants to overthrow, but little in terms of military. They're the world's perfect boss for a mercenary, which is what they do. They need American equipment, because Russia will not empower Saudi Arabia to defeat Iran on its own.

Indonesia is a majority Muslim country which could easily go to China. Granted. Muslim countries go to them despite this Xinjiang stuff, but whatever. No real disagreement from me.

Libya is a $121 billion GDP kleptocracy, so a bit of a rounding error. Wouldn't we all want to go to gold if we were as corrupt as they were?

EDIT: by the way, at this point, we're talking about coupling among the BRICS, which is already half the size of the G7. Saudi Arabia adds another 2% of G7 with clear Sunni-Shia problems, and Indonesia adds another 2%, so we're not talking a whole lot here. For every Indonesia, there's another emerging power like Nigeria which is clearly with Europe.

 

The weirdest thing is how the American political Left's hatred for Saudi Arabia has evolved, and there are weird, unexpected connections.

The Iranian regime deplores Israel and it also strongly dislikes (if not outright hates) Saudi Arabia over religious differences within Islam, although Saudi Arabia has traditionally also hated Israel over religious disputes and general anti-Semitism. The modern American Left (not the old-school American Left from the 1950s/60s, which are nearly gone) also hates Israel because it's a successful, Westernized, capitalist country that outright rejected socialism in the last 30 years and that also speaks English well. So you've got these 3 factions that all hate Israel. So because Iran hates Israel more than Saudi Arabia, the American Left threw its lot in with Iran, strengthening Iran's position in the Middle East. This strengthening of Iran pushed Saudi Arabia into the arms of Israel, which caused the American Left to aim its hatred toward Saudi Arabia and to further back Iran. 

Now, after feeling the fury of the Left, Saudi Arabia seems to be more afraid of them than Iran so is now starting to work out agreements with Iran, Russia, etc. to try to protect its economic interests. It's all very bizarre.

 

 The modern American Left (not the old-school American Left from the 1950s/60s, which are nearly gone) also hates Israel because it's a successful, Westernized, capitalist country that outright rejected socialism in the last 30 years and that also speaks English well.

I'm pretty sure the left's attacks on Israel are because they see them as war criminals in the conflict with Palestine, not because they are capitalist and Westernized.  I am not extremely pro-Palestine or anything like that, I just know the bare basics of the conflict, and let me tell you it's not because of "rejecting socialism" or speaking English (?).

American Left threw its lot in with Iran, strengthening Iran's position in the Middle East. This strengthening of Iran pushed Saudi Arabia into the arms of Israel, which caused the American Left to aim its hatred toward Saudi Arabia and to further back Iran

What leftists support Iran?  It is a right wing religious theocracy.  You talk about left-wingers supporting Iran as if it's some kind of objective fact, but I do not know any that do.

 

I agree with everything you said however India IS a military power and infact in a US vs China war (One that is fought without nuclear weapons) India will 100% side with US( Definitely indirectly at first but as time goes on maybe they might mobilize troops themselves), Infact I think India will be USA's biggest asset if it comes down to a war due to proximity.

The chinese have been constantly trying to fuck around with India over the last 10 years as they did recently by renaming parts of India as their own territory.

If a full scale war occurs between USA and China, no one will benefit more than India, they will be the power of asia. i mean who else is left? Not japan 100%.

Having said this, the possibility of a war breaking out is very less and the only scenario in which I think it's possible is if China attacks taiwan first.

Lastly I think there will inevitably come a time where China and USA will be stuck in an economic war( Infact I think it has already started).

 

India has nuclear capabilities, two aircraft carriers, and a high population base with decent, albeit not the most cutting edge technology. They’re a valid peer to some of the European powers militarily, and I would probably have worded things a little differently if I were writing the original again. I was trying to convey that despite their population, they don’t have the projection power of a US, China, or Russia, but I think you get that.

I think India is the great opportunist of Asia. India’s incentives in a US-China hot war are different from all the other major countries. India wants China to be weakened at minimal expense to India. If the US and the Pacific Allies can do a lot of that work, then India will be happy to ride the coattails and let their demographics wallop China over the next 80 years. India is getting paid to wait, so they’re not going to be first in line to dish it out on China, but if they can be 10th guy in line to stab Caesar, they’ll do that too. My main point in the post is that because China poses a domestic threat to India and is much stronger at the moment, India is not going to pounce unless they see a decisive path to hobbling China on a relative basis and overtaking them as the hegemon of Asia, which they can do if they play their cards right and the demographics get to play out.

 

This explains pretty much all of the reasons why the US dollar will most likely not stop being the reserve currency. A big part of it is just the sheer amount of a currency required to lube up the gears of international exchange isn't met by anything except the dollar and it's nigh on impossible for any other country or group of countries to print currency to the level we have USD without crippling consequences.

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Curious what my fellow primates thoughts are on this whole Brics coalition with China Russia Brazil India. 

CRBI? No.

It is Brazil Russia India China South Africa

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 
kellycriterion

Isaiah, it was originally BRIC, so those 4, then the equity research guy or whatever he is added S. Africa, so that was the original.

Yeah ok but he said “BRICS” then listed them out of order and left off South Africa.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

Everytime I hear this I roll my eyes.  The reserves noted in these things always seems to ignore the multiples of USD that exist solely outside of the US.  The reserves are only actual deposits of USDs that were created in the US.  The USD number should be 8 - 10x the stated numbers.  It isn't even close in reality, add up all other reserves and those will not even be 10%.

 

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