One doesn’t need to be an economist to see the writing on the wall.
Perhaps, if the dollar had remained pegged to something hard like gold, which remains in demand forever because it is a finite resource that can’t be counterfeited (i.e., “printed” via “quantitative easing”), the U.S. currency might not be in the perilous state it is.
There are, of course, many convoluted economic arguments that I don’t pretend to understand fully regarding the benefits of fiat currency over asset-backed currencies. But, to my mind, things either have intrinsic value or they don’t — and digits in a computer, when they can be so easily inflated by the governing authorities on a whim, do not.
Related: Did Saudi Arabia Just Annihilate the U.S. Petrodollar?
Via Business Insider (emphasis added):
Russian Foreign Minister Sergey Lavrov said BRICS countries are developing a payments platform that will allow them to bypass the US dollar, per TASS, a state news agency.
The initiative came from a summit of the BRICS countries in Johannesburg last year where the group — which includes the key members of Brazil, Russia, India, China, and South Africa — called for more trade and lending in their national currencies.
Lavrov said on Monday that the platform will improve the international monetary system and allow payment in national currencies for mutual trade. Russia is keen to move its trading partners away from the dollar because it faces significant sanctions from the US and its allies.
In my view, the U.S. government made a massive strategic error by weaponizing the dollar for years via sanctions and other means. By cutting out major economies like Russia from the dollar system, it forced their hand to come up with alternatives, which they have and are in the process of making real.
Via Fox Business (emphasis added):
The BRICS bloc of countries led by China and Russia are moving ahead with their efforts to move away from the U.S. dollar with an announcement that they plan to create a payment system based on blockchain.
The five-nation BRICS group, which also consists of Brazil, India and South Africa, will work on creating a payment system based on blockchain and digital technologies, Kremlin aide Yury Ushakov said in an interview with Russian agency TASS late Monday.
"We believe that creating an independent BRICS payment system is an important goal for the future, which would be based on state-of-the-art tools such as digital technologies and blockchain," Ushakov said.
Whether the BRICS currency will ever take off and achieve the kind of global embrace that the dollar has for the better part of a century is uncertain; what is certain is that something will replace the dollar — and sooner rather than later. It’s inevitable.
The farcical political persecution of Trump for a victimless New York real estate deal, which the world witnessed, also did nothing to ensure confidence that the U.S. dollar is a safe asset, as they wondered the obvious question: When will I be next? When will the government go after me for some political misdeed? Why would I invest in an uncertain asset?
This is happening; already, the vast majority of trade between Russia and China is conducted in non-dollar denominations.
