![Economist: BRICS common currency is a ‘ridiculous’ idea Economist: BRICS common currency is a ‘ridiculous’ idea](https://i0.wp.com/content.fortune.com/wp-content/uploads/2023/08/GettyImages-1258808880-e1692105597697.jpg?fit=%2C&ssl=1)
The BRICS countries (Brazil, Russia, India, China and South Africa) have been talking about the idea of a common currency for years in an effort to topple the dollar as the world’s largest reserve currency. But Jim O’Neill, a veteran economist who coined the term “BRIC” (the group originally excluded South Africa) while working at Goldman Sachs in 2001, lashed out at the plan this week.
“It’s ridiculous,” he told reporters Financial Times Tuesday. “They’re going to create a BRICS central bank? What would you do? It’s almost embarrassing.”
The BRICS will hold their 15th annual summit next week, but O’Neill, now a senior adviser at the British think tank Chatham House, believes the BRICS group “hasn’t achieved anything since it first met in 2009” as it continued. among the internal strife.
Since the outbreak of the Ukrainian war, Western countries have imposed severe sanctions on Russia due to the dominance of the US dollar, and the process of de-dollarization among the BRICS countries has continued to heat up. In April, Brazilian President Luiz Inácio Lula da Silva urged the bloc to develop a serious alternative to the dollar, drawing on the combined strength of the two economies.
“Why can’t we trade based on our own currency?” he said during a state visit to China in April. FT First reported. “Who decided the dollar was money when the gold standard disappeared?”
Although de-dollarization discussions continue, by 2022 nearly 60% of the world’s currency reserves will be held in U.S. dollars, and 88% of international transactions will be in U.S. dollars, according to the International Monetary Fund data. Wall Street also doesn’t seem concerned about serious competition for the dollar.
Dylan Kremer, Co-Chief Investment Officer, Certuity, with nearly $4 billion in assets under management,
said the development of the BRICS common currency was just a “talking track”, referring to talking points brought up by sales staff at client meetings. He believes that the lack of political stability after the merger of the BRICS countries cannot give investors confidence in the merged currency.
“There is no immediate threat to the dollar over the next 10 years,” Cramer said. wealth. “Any threat to the dollar, competitors or the dollar will be a slow-moving snowball effect.”
In O’Neill’s view, the unhealthy relationship between China and India is one of the main reasons why the BRICS are unlikely to form a common currency.
“It’s a good thing for the West that China and India can’t agree on anything, because if they do, the dollar’s dominance becomes more fragile,” he told the Wall Street Journal. Financial Times. “I often say to Chinese policy makers . . . forget about your endless historical struggles and try to invite India to share leadership on some big issues because then the world might take you more seriously.”
Broken relations between China and India are dollar’s strength
The rivalry between China and India is so big and so old that in many ways it goes beyond economics.Harvard Business School’s Taron Khanna write on Harvard Business Review 2007 For thousands of years, the “Tea Horse Road” has provided the conditions of “mutual respect and admiration” for the development of the two major civilizations. The Sino-Indian war of 1962 changed all that, and mistrust has prevailed since then.The world’s most populous countries have seen violent conflict in recent years skirmish Along the 2,360-mile border, India has banned dozens of Chinese apps, sanctions Chinese investment companies retaliated.
Like the US, India is seeking to reduce its reliance on Chinese imports after experiencing the supply chain nightmare caused by the new crown epidemic in the past few years.the country enters Resilient Supply Chain Program 2021 Free Trade Negotiations with Japan and Australia and with Japan and Australia European Union last year. According to Indian media reports, Chinese President Xi Jinping condemned this shift in India’s supply chains by saying at the Shanghai Cooperation Organization virtual summit in July that he opposed “decoupling, broken chains”. CNBC translate.
Tensions over trade deals and borders also carried over to the BRICS meeting, which includes India fight back opposed China’s move this summer to expand the group’s membership.
on June 1st interview In an exchange with IC Intelligence chief economist Dr Desné Masie, O’Neill said creating a common currency that included China and India was “very challenging” to say the least, citing ongoing border disputes between rival countries.
“China and India can’t even really agree on basic issues like peaceful borders. I mean, how on earth can people trust these guys to come up with a shared currency?” he said. “It was funny. Sorry. I just thought it was whimsical.”
In the short term, then, O’Neill’s prediction that BRICS currencies would be “ridiculous” appears to be on the right track. But in the long run, thousands of years of history may tell another story.
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