Why Russia is Trying to Create a New BRICS Currency

Summary

This video explores the concept of de-dollarization and Russia's efforts, particularly by President Vladimir Putin, to challenge the U.S. dollar's dominance as the world's reserve currency. It delves into the potential creation of a BRICS currency (a common currency for Brazil, Russia, India, China, and South Africa) as an alternative. However, the video concludes that the BRICS currency is unlikely to succeed due to geopolitical rivalries, economic imbalances, and structural issues between the member countries. The video also highlights Ground News, an app that helps users spot media bias and blind spots in news coverage.

Takeaways

• 🌍 The U.S. dollar has been the world's reserve currency since World War II, giving the U.S. significant geopolitical leverage.
• 🇷🇺 Russian President Vladimir Putin has long sought to reduce the world's reliance on the U.S. dollar, especially since sanctions imposed due to the Ukraine conflict.
• 💰 Russia and other BRICS countries (Brazil, Russia, India, China, and South Africa) have discussed creating a new BRICS currency as an alternative to the U.S. dollar.
• 📉 Putin’s efforts to move away from the dollar have been largely unsuccessful, with Russia still heavily reliant on the U.S. dollar and Euros in international trade.
• 💼 The BRICS currency idea is being discussed, but its chances of success are slim due to economic differences among BRICS nations and geopolitical tensions.
• ⚖️ A BRICS currency would likely be a common currency used alongside existing ones, rather than a single currency replacing national currencies.
• 🏦 There are ideas of tying the BRICS currency to a basket of commodities like gold or oil, but no concrete details have been confirmed.
• 🚫 Major obstacles to a BRICS currency include China's and India's rivalry, South Africa's economic instability, and the need for capital flow liberalization.
• 📊 Trade imbalances and vastly different economies within BRICS countries would make a unified currency problematic, as seen in other common currency unions like the Eurozone.
• 🛑 Ultimately, while the idea of a BRICS currency exists, it is highly unlikely to replace the U.S. dollar or come to fruition due to numerous challenges.

Q & A

What does it mean for the U.S. dollar to be the world's reserve currency?

Being the world's reserve currency means the U.S. dollar is the most widely used currency for international transactions, and financial institutions hold large amounts of it as part of their reserves. This gives the U.S. significant geopolitical leverage.

Why does Vladimir Putin want to move away from the U.S. dollar as the world's reserve currency?

Putin wants to move away from the U.S. dollar because it gives the U.S. immense geopolitical power, including the ability to impose financial sanctions on Russia and other countries. He also resents the dollarization of the Russian economy after the 1998 financial crisis.

What is Putin's latest idea to reduce reliance on the U.S. dollar?

Putin's latest idea is to create a common currency among BRICS nations (Brazil, Russia, India, China, and South Africa) as an alternative to the U.S. dollar.

What are BRICS countries, and why are they relevant to this new currency proposal?

BRICS is a geopolitical group of five major emerging economies: Brazil, Russia, India, China, and South Africa. These countries are considered a counterbalance to the Western G7 bloc, and Putin has proposed a common currency among them to reduce reliance on the dollar.

What are the possible forms that a BRICS currency could take?

The BRICS currency would likely be a common currency used alongside existing national currencies. Some reports suggest it could be tied to commodities like gold or oil, or function like the IMF's SDR (Special Drawing Rights), which can be exchanged for major global currencies.

Why is the creation of a BRICS currency unlikely to succeed?

The creation of a BRICS currency is unlikely because the BRICS countries have vastly different economies, imbalanced trade relationships, and strategic rivalries, especially between China and India. Additionally, countries like Russia and China would need to liberalize capital flows, which is unlikely.

What historical events have influenced Putin's desire to reduce reliance on the U.S. dollar?

Putin's desire stems partly from the 1998 financial crisis when Russia defaulted on its foreign debts, leading to the dollarization of its economy. This period was humiliating for Russia and stripped it of its monetary sovereignty.

What impact have U.S. financial sanctions had on Russia's economy since the invasion of Ukraine?

The U.S. imposed unprecedented financial sanctions on Russia, including the freezing of $300 billion in Central Bank reserves and expelling Russian banks from the SWIFT system. These sanctions have increased Russia's focus on de-dollarization.

What are some potential names for the proposed BRICS currency?

Potential names for the BRICS currency include 'the BRIC,' 'the BRIC coin,' or 'the R5,' a reference to the fact that the first letters of the BRICS countries' currencies all start with the letter 'R'.

Why do common currencies typically only work between countries with similar economies?

Common currencies work best when countries have relatively similar economies because large trade imbalances between members can cause economic instability, as seen with some deficit countries in the Eurozone. BRICS nations have very different economic profiles, making a common currency problematic.