Bitcoin was born as an alternative to the existing financial system, and today it has evolved into something entirely different. Change has always been inevitable throughout history. New systems, different forms of governance, and much more. One of the heated debates these days is the dominance of the dollar worldwide. Attempts are being made to create an alternative, led by the Eastern Bloc.
Statements from the Treasury Secretary
South Africa has extended its invitation for the upcoming BRICS meeting next month. Notably, it has invited all African countries outside the group. The BRICS, composed of Brazil, Russia, India, China, and South Africa, aim to create an alternative to Western dominance in the existing financial system. Their primary and largest goal is to eliminate the risk of dollarization.
Countries are already facing tough times due to global developments, rising food prices, and energy costs. On top of that, the strengthening of the dollar worldwide is putting pressure on local currencies, effectively doubling the felt inflation. This has happened in the past, but for the first time, the EU and other countries, unions are drawing attention to this issue.
Now, BRICS, along with some of the strongest players in the East, led by China, is working to build a world where the dollar is not dominant. US Treasury Secretary Yellen had the following to say about this today;
“I do not think the plan of Russia, Brazil, India, and China to create a new currency will threaten the dollar. I can’t foresee an alternative that could replace the dollar in the foreseeable future. All data shows that the dollar is maintaining its dominance in international transactions.”
Now, at the meeting to be held on August 22, it is expected that the BRICS group will introduce a currency based on gold. Whether it will be successful or not will be shown in time.
Will the Dollar End?
The dollar will likely remain the reserve currency for today and the foreseeable future. The United States, holding political and economic power, has a currency valid worldwide. Moreover, it has the freedom to print and introduce as much dollar as it wants into the market, considering the inflation that will occur. However, the situation is different for currencies like the Yuan and the Russian Ruble. Transactions with these are limited. Because people can’t easily shop anywhere in the world if they buy Yuan. Just like Bitcoin, the value of currencies other than the dollar is calculated over the dollar. For this system to change in the near future, the US would have to suffer a massive military and economic blow. Unless a nuclear war breaks out and the country is destroyed, this seems unlikely.
So what could happen? Many developing countries like Turkey are feeling the negative effects of dollarization on their economy firsthand. The new currency issued by BRICS and based on commodities (gold) could be tested in bilateral trades in the east. Countries outside the group like Turkey, but eager to create an alternative to the dollar, could participate in these trials. However, in the best-case scenario, it is expected that this currency will become widespread in trade between Eastern countries. For example, it won’t be feasible for Turkey to use this in trade with the US or the EU region.
In summary, Yellen seems right for now. If the world is not evolving into a more strictly bipolar future, it’s not very likely for the new currency to devastate the dollar.
