During the last month, the West has been struggling with red hot inflation and energy prices skyrocketing higher. Politicians in the UK, Europe, and the US have been trying to blame the economic calamity on a number of things like the Ukraine-Russia war and Covid-19.
Data from last month’s consumer prices in America and Europe have climbed to all-time highs and many analysts say Western countries are in a recession or about to experience one. Meanwhile, at the end of June, members of the BRICS nations met at the 14th BRICS Summit to discuss world affairs.
“The matter of creating the international reserve currency based on the basket of currencies of our countries is under review,” Putin said at the time. “We are ready to openly work with all fair partners,” he added. Additionally, Turkey, Egypt, and Saudi Arabia are considering joining the BRICS group. Analysts believe the BRICS move to create a reserve currency is an attempt to undermine the US dollar and the IMF’s SDRs.
普京当时表示: “根据我们国家的一篮子货币创建国际储备货币的问题正在审议之中。”。“我们愿意与所有公平的合作伙伴公开合作,”他补充说。此外，土耳其、埃及和沙特阿拉伯正在考虑加入金砖国家集团。分析人士认为，金砖国家创建储备货币的举措是为了削弱美元和 IMF 的特别提款权。
“This is a move to address the perceived US hegemony of the IMF,” ING Global Head of Markets Chris Turner, explained at the end of June. “It will allow BRICS to build their own sphere of influence and unit of currency within that sphere.”
荷兰国际集团(ING)全球市场主管克里斯•特纳(Chris Turner)6月底解释称: “此举是为了应对 IMF 眼中的美国霸权。”。“这将使金砖国家能够在这一领域建立自己的势力范围和货币单位。”
While the news of a reserve currency created by BRICS may be a surprise to some, specific accounts about the member countries countering the US dollar have been reported on for quite some time. At the end of May 2022, a Global Times report noted members were urged to end their dependence on the dollar’s global dominance.
Putin explained the following month that “contacts between Russian business circles and the business community of the BRICS countries have intensified”. The Russian President further noted that Indian retail chain stores would be hosted in Russia, and Chinese cars and hardware would be imported regularly. Putin’s recent statements and commentary at the BRICS Summit have made people believe the BRICS members are not “just a ‘talk shop’ anymore”.
In addition to South Africa, Russia has also increased foreign aid and has delivered weapons to Sub-Saharan African countries. Furthermore, Putin and other BRICS leaders have been targeting US hegemony and exceptionalism in specific statements published by the media.
At this year’s St. Petersburg International Economic Forum, Putin addressed the crowd with a 70-minute speech and talked about the US ruling the world’s financial system for years. “Nothing lasts forever,” Putin said. “(Americans) think of themselves as exceptional. And if they think they’re exceptional, that means everyone else is second class,” the Russian President told the forum attendees.
在今年的圣彼得堡国际经济论坛(St. Petersburg International Economic Forum)上，普京向与会者发表了70分钟的演讲，并谈到了美国统治世界金融体系多年的问题。“世事无常(1979年小说) ,”普京表示。“(美国人)认为自己与众不同。如果他们认为自己与众不同，那就意味着其他人都是二等公民,”俄罗斯总统告诉与会者。
Speaking with Russian ambassadors in a biennial speech, Putin said the West was weakening a great deal in terms of economic power.
“Domestic socio-economic problems that have become worse in industrialised countries as a result of the (economic) crisis are weakening the dominant role of the so-called historical West,” Putin remarked to the ambassadors. “Be ready for any development of the situation, even for the most unfavorable development.”
Russia and Putin have been saying that the US dominance in the world of finance has been dying for years now. In October 2018, speaking at the Valdai forum, Putin said the US sanctioning specific countries (including Russia) would undermine trust in the US dollar.
The Russian President noted that most of the fallen empires have made the same mistake. “It’s a typical mistake of an empire,” the Russian leader declared at the time. “An empire always thinks that it can allow itself to make some little mistakes, take some extra costs, because its power is such that they don’t mean anything. But the quantity of those costs, those mistakes inevitably grows.” Putin continued:
“And the moment comes when it can’t handle them, neither in the security sphere or the economic sphere.”
Moreover, in June, Bloomberg published a report about the BRICS Summit and noted that China’s President Xi Jinping suggested that the North Atlantic Treaty Organiaation (NATO) was responsible for antagonising the Russian Federation. Xi also said that certain countries that bolster exceptionalism will falter by suffering from security vulnerabilities.
“Politicising, instrumentalising, and weaponising the world economy using a dominant position in the global financial system to wantonly impose sanctions would only hurt others as well as hurting oneself, leaving people around the world suffering,” Xi detailed. “Those who obsess with a position of strength, expand their military alliance, and seek their own security at the expense of others will only fall into a security conundrum.”
The strengthening of the BRICS nations has been going on well before the conflict in Ukraine began. For instance, in 2014, Russia fully developed the System for Transfer of Financial Messages (SPFS), and later the Mir payment system was launched. That same year, in response to the annexation of Crimea, Russia started to stockpile gold in vast amounts.
China has been hoarding massive amounts of gold as well, as both countries hiked their gold reserve purchases a great deal a few years before the war. Russian banks also joined the China International Payments System (CIPS) making it easier for the two countries to trade. In April last year, China opened its borders to billions of dollars of gold imports, according to a report from Reuters.
Since World War I, the US dollar has been the world’s global reserve currency and America emerged as the largest international creditor. Fast forward to today, and the dollar is booming against a number of other currencies, and the US dollar is the most robust it has been in an entire generation. The US dollar currency index (DXY) gained over 10% this year and outpaced strong currencies like the Japanese yen.
Just recently, the euro met parity with the dollar, and other currencies like the Indian rupee, Polish zloty, Colombian peso, and the South African rand have faltered against the greenback in recent times. However, the Russian ruble has been a strong competitor to the dollar this year and has been one of the best-performing fiat currencies in 2022.
With inflation soaring and interest rates getting hiked by the Federal Reserve, Kamakshya Trivedi, the Co-Head of a market research group at Goldman Sachs stressed that it’s been a “pretty tough mix” to deal with. Despite the uncertainty, the analyst at Goldman Sachs thinks the dollar, at least for now, will remain robust. But in comparison to the greenback’s recent spike in value, most of that rise is in the past, Trivedi remarked.