Brazilian Economist: BRICS Countries Help Improve Global Financial Governance
Brazilian economist and director of the Brazilian China Studies Center, Ronnie Lins, wrote in China Daily on August 21 that the world is facing severe challenges and significant changes, including some countries refusing to peacefully resolve conflicts, actions deviating from objective reality, and the significant impact of technology on products and services. In this context, international organizations such as the BRICS countries should adapt to the constantly changing global situation.
The United States uses the hegemony of the US dollar to coerce other countries
The article points out that the world economy is still suffering from the impact of the COVID-19, and the continued interest rate increase of the Federal Reserve has a negative impact on the US sovereign debt, which has triggered the debt ceiling problem.
While Europe and other regions are still striving to boost their economies, the unipolar world centered around the United States has accelerated its transition to a multipolar world. The changes in the proportion of the G7 and BRICS countries to global GDP over the past 20 years indicate that significant structural adjustments in the global economy and institutions are imperative.
One of the most controversial issues is the hegemonic position of the US dollar as a global reserve currency. No one doubts the importance of the US dollar, which participates in 88% of international transactions and accounts for as much as 59% of global foreign exchange reserves.
However, this does not mean that other countries should be subject to US domestic economic policies or face political sanctions, such as disabling the Global Interbank Financial Communications Association payment system. For a long time, relying on the hegemonic position of the US dollar, the United States has used SWIFT as a political coercion tool against some countries.
The reform of the international monetary system is imperative
The article analyzes that in the above context, the international monetary system urgently needs reform. In fact, some large economies hope to use other currencies instead of the US dollar in their foreign trade. The 15th meeting of BRICS leaders may discuss the use of one currency or a basket of currencies to reduce dependence on the US dollar.
However, establishing a new monetary standard to end the dominance of the US dollar will be a complex issue with both positive and negative impacts on the market. At present, it may not be feasible to replace the global reserve currency status of the US dollar with another currency.
The US dollar may be replaced by another currency or a basket of currencies in the future, but what the world economy needs is not just to replace the US dollar. Experts have put forward several suggestions, including replacing the global reserve currency status of the US dollar with a gold standard, a basket of currencies, or BRICS digital currencies.
It is also worth mentioning that the process of introducing new currencies in global trade is crucial. Firstly, we should gradually introduce new currencies and advance them according to specific goals. The introduced currency must be used in a comprehensive payment system for international transactions. If it aligns with the interests of alloy brick countries, member states can try to introduce a unified currency similar to the euro. However, it is best for BRICS member countries to continue using their own currencies for trading at the moment.
The BRICS countries need to take new measures to promote the improvement of their governance systems. In this context, establishing a new trade currency for the BRICS countries would be of great benefit, especially in minimizing the use of the US dollar, both in terms of payment methods and reserve currencies.
Ultimately, we need to create a new mechanism to minimize political intervention and promote economic development in developing countries, which is crucial.
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