China, India, and Others Vie For Status
The United States has a significant economic advantage in having the U.S. dollar serve as the dominant form of global exchange.
But several global leaders want to change that. China and Russia have long plotted to bring the dollar down. China wants its yuan to take over as the global currency leader. It’s convincing trading partners like Argentina and Brazil to dump the dollar as a means for making trade and instead use the yuan. As Washington Post reporters Meaghan Tobin, Lyric Li, and David Feliba explained in an article today, Argentina’s economy is in crisis, and its holdings of U.S. dollars are running thin. As a result, the government agreed last month to pay for $1 billion worth of Chinese imports with yuan.
A New BRICS Currency
Brazil’s leader Luiz Inácio Lula da Silva takes a more brazen approach.
“Who decided that the dollar was the (trade) currency after the end of gold parity?” Lula said while on a state visit to Beijing in April.
Brazil and China strengthened their economic ties in 2019 under the far-right leadership of Brazilian President Jair Bolsonaro, the GER reported at the time. Today, the two countries continue to sweeten their ties under the leftist leader of Lula. The continent as a whole has shifted left and continued to do so in the wake of the Russia-Ukraine war.
Lula joined other BRICS countries–Russia, India, China, and South Africa–in floating a joint currency as a rival to the dollar. The topic is expected to be a major item on the agenda when BRICS leaders meet in South Africa in August.
Russia Driving Change
Under the steepest sanctions yet from Western countries, Russia is driving the move to dump the dollar.
India, meanwhile, recently launched its own digital currency and pushed it hard at a G20 summit this year. India’s model is one that is highly infused with a revolutionary digital tracking system that should cause concerns for privacy advocates.
Dollar Dominance Here To Stay?
Yet some observers say the efforts afoot are likely to fail. For example, Foreign Policy writer Christina Lu argues that dollar dominance is here to stay. In a recent article, she cites several sources and comes to the conclusion that the dollar offers more reliability. Furthermore, it is complicated to displace one global currency with another.
“Beijing will keep trying, and keep failing,” Lu writes. “The yuan’s not convertible, the government controls capital flows, and even its value is manipulated by Beijing. You can’t do business with IOUs, but you can always do business with a bushel of greenbacks.”
But that bold assertion applies to the here and now and might not take into account the unexpected. For example, the greatest threat to the dollar might be Washington’s lust for deficit-spending and the loose gamble its politicians play with the debt ceiling.
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