PETER ST ONGE: Despite the frenzied hype about BRICs finally killing the US dollar, the best they could come up with was a silly little currency basket that will fail

The much-hyped BRICS dollar threat is fading fast as their annual summit ditches the gold-backed currency for a goofy “basket” of currencies.

The dollar’s not out of the woods -- especially with gold soaring.

But it now depends on Washington, not Beijing and Moscow. pic.twitter.com/QP1UdpFeOk

— Peter St Onge, Ph.D. (@profstonge) October 28, 2024

If you happen to own US dollars, you can breathe a sigh of relief. China and Russia are not coming for you, at least not yet.  Last week, the BRICs group of anti-dollar countries held their annual meeting, of course, in Russia, which is lonely and needs friends.  Despite frenzied hype about BRICs finally killing the US dollar, the best they could come up with was a silly little currency basket that will fail.  So if you're just tuning in, BRICs is a group of anti-dollar countries led by China and Russia along with oil producers like Saudi Arabia, Dubai, and Iran, plus some big countries like India and Egypt that takes it to roughly half the population of the earth.  Now beyond its size, BRICs is interesting because it's increasingly uniting all of the countries that actually make stuff, so manufacturing in China, natural resources in Russia, Saudi Arabia, and Dubai.  And given America and Europe are de-industrializing and banning fossil fuels to entertain environmental activists, this could potentially mortgage our future to countries who don't like us.  Still the immediate fear has been BRIC's long stated goal to dethrone the US dollar in order to end America's imperialist hegemony.  Concretely, the key parts are a BRICs payment system that would replace the Western dominated SWIFT payment system for bank transfers, more ambitiously a BRICs currency to replace the US dollar.  Now that takes us to this year's meeting where it looks like bricks is making grinding progress on the SWIFT payments which would insulate them from Western sanctions.  But on the big one, currency, they seriously dropped the ball.  So Russia had been floating for years now a gold back BRICs that would actually challenge the dollar since gold holds its value unlike paper.  Alas, they whiffed with a boring old currency basket basket that if they are dumb enough to do it will fail.  So a bricks currency basket means you throw all of their crappy currencies into a basket the ruble, the yuan, the rupee and you take the average.  This is a terrible idea since most BRICs countries are monetary basket cases.  Brazil has a long relationship with hyperinflation.  Russia and Iran are close.  A basket of basket cases does not stand a snowball's chance of replacing the dollar.  At least outside trade between BRICs countries, say between China and Russia, but that inter BRICs trade amounts to a tiny fraction of global trade, about 1.5%, while the BRICs currency share of international reserves, that's money that governments hold, it's another big source of currency demand and there BRICs is not much better at maybe 5%.  So with those numbers a basket of BRICs will barely make a dent in the dollar while the BRICs threat is receding for now, the dollar is not out of the woods not only because Russia could revive the gold bricks once their war ends but also because forget trade and International reserves, the single biggest determinant of the dollar's value is supply, how many dollars they print and that is largely a function of federal deficits.  With the US deficits nearing $2 trillion and rising fast, the dollar could be in for a very bumpy ride.  In fact, the recent run in gold prices is saying exactly that.  So for now at least, the odds are the dollars executioners will not come from Beijing or Moscow.  Moscow.  They will come from Washington.