Investment analyst Jon Wolfenbarger has warned that a successful BRICS currency could hurt U.S. living standards and “lead to less power for the U.S. government, similar to the weakening of the UK after World War II.” He stressed: “Due to the Russia-Ukraine war and China’s continued economic growth, the BRICS are accelerating plans to take power from the U.S.”
Impact of BRICS Currency on US Dollar and American Living Standards
Investment analyst Jon Wolfenbarger, CFA, published a blog post titled “Will a New BRICS Currency Change Anything? Maybe” on Mises Institute’s website last week. Wolfenbarger is the CEO and founder of Bull And Bear Profits, an investment website. He has more than 30 years of experience in the investment industry, having worked for over 22 years as a securities analyst at Allianz Global Investors and as an investment banker at Merrill Lynch and JPMorgan.
Commenting on de-dollarization efforts by the BRICS nations (Brazil, Russia, India, China, and South Africa), he said:
Due to the Russia-Ukraine war and China’s continued economic growth, the BRICS are accelerating plans to take power from the U.S.
He mentioned several BRICS initiatives, including the New Development Bank for infrastructure lending, a Contingent Reserve Arrangement to protect against foreign exchange pressures, and a payment system as an alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Moreover, Wolfenbarger detailed that the BRICS nations are also working on a reserve asset based on a basket of the member countries’ currencies to compete with the International Monetary Fund’s (IMF) special drawing rights (SDR).
Commenting on whether the U.S. dollar will be dethroned, the investment analyst detailed: “The BRICS countries are unlikely to seriously challenge the king dollar if their only tool is just another fiat currency they can create out of thin air.” He stressed:
The BRICS will have a much better chance if they create a hard currency backed by gold or other commodities like oil.
“The U.S. has the largest and safest government bond market, no capital controls, and a reputation for enforcing the rule of law. By contrast, the BRICS countries are hardly known for respecting laws or having strong currencies,” Wolfenbarger opined. “Of course, their competition with the dollar would ultimately end in failure, as Bretton Woods did, if the BRICS countries continue to create money out of thin air to finance their warfare and welfare spending.”
Regarding the economic and political impact of a BRICS currency on the U.S. and the USD, the former JPMorgan investment banker noted:
If the BRICS are successful and the U.S. does not change its policies to focus on a stronger dollar, less spending, and peace instead of war, it is possible the dollar will slowly lose its ‘reserve currency’ status.
“This would hurt U.S. living standards and lead to less power for the U.S. government, similar to the weakening of the UK after World War II. All empires in history have failed, and the U.S. will not likely be an exception — if the BRICS can create a successful hard currency to compete with the dollar,” he opined.
Many people agree that a successful BRICS currency could erode the U.S. dollar’s dominance, including a former White House economist. The BRICS economic bloc is gaining more influence globally; 19 countries have applied to join or have expressed interest in joining. A Swedish university professor said last week that Saudi Arabia joining the BRICS group would accelerate the Chinese yuan’s use as a trading currency.
Do you agree with investment analyst Jon Wolfenbarger about the potential impact of a successful BRICS currency? Let us know in the comments section below.