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The terrorist attacks of Sept. 11, 2001, were the deadliest in the nation's history, destroying lives and damaging the economy. Yet under the radar of most, another long-term threat to American power was emerging.
The New York Stock Exchange experienced its largest one-day drop to that point, worsening a recession already hurting the country. With the U.S. dollar (USD) being an international reserve currency in an increasingly globalized economy, the whole world felt the pain. Against this backdrop, the emerging economic might of several large and rapidly expanding economies was noticed, as highlighted in a Goldman Sachs thesis titled, "Building Better Global Economic BRICs," the name referring to Brazil, Russia, India and China.
Over time, the BRIC nations realized they were stronger together than separate. A Euronews article at the time of their first group summit reported that they were calling for "a more 'diversified, stable, and predictable' international monetary system," with Russia taking aim at the USD's reserve currency status ("BRIC Wants More Influence," June 16, 2009). The BRIC countries then accounted for 15 percent of the global economy, double that of a decade before.
The next year South Africa joined the group, which became known as BRICS. In 2012, the group agreed to create its own organization as an alternative to the U.S.-dominated International Monetary Fund (IMF) and the World Bank.
Fast forward to today, and the seriousness of the situation for America and the vaunted dollar from which it derives its power is coming into focus. Countries around the world, especially those that have been under the thumb of U.S. economic sanctions, could start flocking to BRICS, with more than a dozen nations vying to join the bloc.
According to one estimate, the BRICS expansion under consideration "would create an entity with a GDP 30% larger than the United States, over 50% of the global population and in control of 60% of global gas reserves" ("The New Candidate Countries for BRICS Expansion," Silk Road Briefing, Nov. 9, 2022).
This is a harbinger of trouble ahead for the dollar, ultimately foreboding significant problems for the United States. BRICS nations are presently working on a new form of currency according to Russia's State Duma Deputy Chairman Alexander Babakov. Such a currency could be backed by -- or perhaps more likely pegged to the value of -- gold, rare-earth elements, or other groups of products, with a single BRICS currency not being out of the question ("BRICS Working on a New Form of Currency -- State Duma Deputy Chairman," Sputnik, March 30, 2023).
The World Gold Council reported that central banks are accumulating gold "at the fastest pace on record in the first two months of 2023" ("Central Banks' Gold-Buying Spree: Implications for the Global Economy and Investors," Forbes, April 10, 2023). The largest purchasers include Russia, China and India, with Singapore leading the way.
Furthermore, "for the first time ever, BRICS countries' share of the global economy has surpassed that of the G7 nations (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States), on a purchasing parity basis (ibid.). In simple terms, purchasing power parity (PPP) is a measure that arrives at a theoretical exchange rate at which the same amount of goods and services can be purchased across countries. Economists adjust Gross Domestic Product (GDP) using PPP when comparing the economic strength of economies to one another.
"While the share of GDP of G7 nations based on PPP, reduced from 50.42% of the World's GDP in 1982 to 30.39% in 2022, the share of GDP of BRICS nations increased from 10.66% in 1982 to 31.59% in 2022" ("How BRICS Countries Have Overtaken the G7 in GDP Based on PPPs," The Times of India, April 9, 2023).
Yet a pooled alternative reserve currency among these would for now still represent a relatively small percentage of international commerce, as compared with the dollar.
Despite their growth, the BRICS nations face their own significant economic problems. And some have been in a "dollar trap" until now. Since most of the world's international trade occurs in USD, a dollar trap forces a country's central bank to hold massive amounts of U.S. debt instruments to keep their own currency from rising too high in comparison to the dollar (bad for exports) or falling too low (bad for imports). A new BRICS international reserve currency, backed by a precious metal standard, could offer an escape from the dollar trap while simultaneously replacing it atop the world stage.
For example, as of March, China held over $3.1 trillion in its foreign exchange reserves to keep its currency the renminbi (RMB), denominated in yuan, pegged against the dollar and keep its export engine running. To increase or decrease the value of the RMB in international markets, China must buy and sell large quantities of USD on the foreign exchange (FOREX) markets. As a result, China cannot flood the market with the dollars it holds without hurting itself.
Through maintaining such a large quantity of USD in its central bank, it bolsters the international strength of the dollar and helps maintain a world dependency for USD. Further, so long as the RMB is pegged, it is indexed to the dollar and still uses a dollar swap to convert it to the currency needed. This is the dollar trap in essence.
But what if BRICS could successfully provide an alternative international reserve currency as suggested by Babakov? In such case, the huge sums of U.S. debt instruments held by central banks (the Federal Reserve estimating in 2017 that as much as 70 percent of all dollars were held outside the United States) would no longer be needed, at least not in such enormous quantities.
If countries no longer need to stockpile U.S. dollars to keep trade going, how would America pay its vast debt, which has already outstripped its own ability to finance? With U.S. dollars flooding the foreign exchange markets, the dollar could experience an unprecedented loss in value. Sky-high inflation would follow, along with a destabilizing default by the U.S. government. Costs of everything would skyrocket.
With BRICS beginning to outpace the G7 in terms of purchasing power parity/adjusted global GDP, more and more countries will want to do business the BRICS way. Already, France has used RMB to bypass the dollar when it bought liquified natural gas from the UAE through the Shanghai Petroleum and Natural Gas Exchange ("China Completes First Yuan-Settled LNG trade," Reuters, March 29, 2023).
This came after China's President Xi Jinping called for making "full use" of the exchange for international oil and gas trades. Along with that call came a message of "noninterference" in the domestic affairs of nations using the RMB, sharply contrasting the willingness of the United States to sanction countries which operate domestic policies it does not support ("China's XI Calls for Oil Trade in Yuan at Gulf Summit in Riyadh," Reuters, Dec. 10, 2022).
This has caught the attention of Iran and Saudi Arabia. Enticed by Beijing and the BRICS potential, the adversarial countries restored diplomatic relations with each other, emboldening China to further expand its global influence by offering to broker peace between Israel and the Palestinians next ("China Ready to Broker Israel-Palestine Peace Talks, Says Foreign Minister," The Guardian, April 17, 2023). BRICS nations are beginning to feel comfortable taking the lead on the world stage.
What does this mean for the United States? While the demise of the dollar does not seem to be imminent, catastrophic world events could push more and more nations to leave the dollar for an alternative. And now that pathway is being opened. Such catastrophic events are prophesied to happen.
Echoing an episode involving ancient King Belshazzar whose great kingdom fell suddenly while toasting to its own greatness, the writing is on the wall, and right now it's a wall made of BRICS. To paraphrase the warning that prompted Paul Revere's famous ride: Sound the alarm -- the BRICS are coming!
Whatever comes of this effort, it signals grave danger to the U.S. economy. The Bible has long foretold a time when the United States will lose its economic and military dominance in a reordering of the world. Economic factors are now lining up to pave the way for that outcome.
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