On BRICS, Rickards Drops Bombshell

Authored by: James Rickards

On Aug. 22, about 2½ months from today, the most significant BRICS development in international finance since 1971 will be unveiled.

It involves the rollout of a major new currency that could weaken the dollar's role in global payments and ultimately displace the U.S. dollar as the leading payment and reserve currency.

It could happen in just a few years. The process by which this will happen is unprecedented, and the world is unprepared for this geopolitical shock wave.

This monetary shock will be delivered by a group called the BRICS. The acronym BRICS stands for Brazil, Russia, India, China, and South Africa.

This play for global reserve currency status by the BRICS will affect world trade, direct foreign investment, and investor portfolios in dramatic and unforeseen ways.

The most crucial development in the BRICS system concerns the expansion of BRICS membership. This has led to the informal adoption of the name BRICS+ for the expanded organization.

There are currently eight nations that have formally applied for membership and 17 others that have expressed interest in joining. The eight formal applicants are Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates.

The 17 countries that have expressed interest are Afghanistan, Bangladesh, Belarus, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Senegal, Sudan, Syria, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe.

There's more to this list than increasing the headcount at future BRICS meetings.

If Saudi Arabia and Russia are both members, you have two of the three largest energy producers in the world under one tent (the U.S. is the other member of the energy Big Three).

Suppose Russia, China, Brazil, and India are all members. In that case, you have four of the seven most prominent countries in the world measured by landmass possessing 30% of the Earth's dry surface and related natural resources.

Almost 50% of the world's wheat and rice production and 15% of the world's gold reserves are in the BRICS.

Meanwhile, China, India, Brazil, and Russia are four of the nine highest-population countries on the planet, with a combined population of 3.2 billion people or 40% of the Earth's population.

China, India, Brazil, Russia, and Saudi Arabia have a combined GDP of $29 trillion or 28% of nominal global GDP. If one uses purchasing power parity to measure GDP, the BRICS share is over 54%. Russia and China have two of the three largest nuclear arsenals in the world (the other leader is the United States).

By every measure — population, landmass, energy output, GDP, food output, and nuclear weapons — BRICS is not just another multilateral debating society. They are a substantial and credible alternative to Western hegemony.

BRICS acting together is one pole of a new multipolar or even bipolar world. When the new currency launch is announced in August, the currency will not fall on an empty field. It will fall into a sophisticated network of capital and communications. This network will greatly enhance its chances of success.

The BRICS are also developing an optical fiber submarine telecommunications system connecting its members. It is being developed under the name BRICS Cable. Part of the motivation for BRICS Cable is to foil spying by the U.S. National Security Agency on message traffic carried through existing cable networks.

What's behind this quest to ditch the dollar? In no small part, the answer is the U.S. weaponization of the dollar through sanctions.

On numerous occasions from 2007–2014, I warned U.S. officials from the Treasury, Pentagon, and intelligence community that overuse or abuse of dollar sanctions would lead adversaries to abandon the dollar to avoid the impact of sanctions.

Such abandonment would lead to the diluted potency of sanctions, unforeseen costs imposed on the U.S., and eventually to the collapse of confidence in the dollar itself. These warnings were mostly ignored.

We have reached this forecast's first and second stages and are dangerously close to the third.

For years, the U.S. has used sanctions to punish nations like Iran. But the U.S. and its allies' sanctions on Russia after it invaded Ukraine last year went far beyond previous sanctions regimes. They were unprecedented.

Many other nations began to conclude that they could be next if they ran afoul of the U.S. on specific issues. And that fear has dramatically accelerated the push to opt out of the dollar system entirely.

This desire is not limited to current targets such as Russia but is shared by potential targets, including China, Iran, Turkey, Saudi Arabia, Argentina, and others.

The BRICS+ presents a realistic effort to de-dollarize global payments and, eventually, international reserves.

For years, I've argued that the dollar would remain the world's leading reserve currency for longer than most people think.

I will show why a new BRICS+ currency could significantly accelerate the dollar's demise as the world's leading reserve currency and how it could happen much faster than I thought. Read on ''The Coming Currency Shock on the Global Monetary System''.

This article was printed from TradingSig.com

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