Why the BRICS Expansion Isn't the End of the Dollar

Episode #329 | October 2, 2023

Episode #329 | October 2, 2023

Why the BRICS Expansion Isn't the End of the Dollar

In This Episode

On this week's Stansberry Investor Hour, Dan and Corey are joined by renowned economist Jim Rickards. Jim details his illustrious career, the development of the BRICS (Brazil, Russia, India, China, and South Africa) currency, and its potential ramifications for the global monetary system.

Dan and Corey kick off the podcast by discussing store closures, Amazon's monopoly allegations, and commercial real estate's decline. Recently, major retailers like Target and CVS Health have announced they're shuttering more stores. While some of these closures are due to organized crime, most are because of the shift to online shopping. As Corey points out, "It's tough to be a brick-and-mortar retailer in today's environment." However, Dan notes the irony in this situation. Amazon, which is facing monopoly allegations, thrives in this competitive environment...

Here's Amazon being sued... for being a "monopoly" and doing all kinds of brutal stuff to keep its alleged monopoly in e-commerce... I was like, well, that's how you know what a fantastic business it is.

Next, Jim joins the conversation to share some of what he has learned during his storied career, specifically from being the general counsel on a hedge fund's $3.6 billion rescue deal. He also explains why he grew dissatisfied with risk management and how he became one of the first in finance to use "complexity theory." Though the idea is borrowed from physics, Jim has used it throughout his career to understand risk in the markets.

Dan then steers the conversation to the BRICS initiative – i.e., the five countries' goal to create an alternative currency that will challenge the dominance of the U.S. dollar. Jim explains the origins of BRICS, highlighting how they have created financial institutions similar to the World Bank and the International Monetary Fund. This, Jim points out, was a strategic move to gain greater control over their economic affairs...

They're recreating the Bretton Woods Institutions under their own control and in their own preferred format.

Jim stresses the significance of the BRICS currency, as it would facilitate trade among member nations without the need to rely on the U.S. dollar. By using a shared currency, countries within the agreement could conduct commerce among themselves more seamlessly...

Now you launch your BRICS currency... So now you can go shopping. You can go to Brazil and buy Embraer aircraft. You can go to China and buy semiconductors.

However, Jim emphasizes that a BRICS currency should not be interpreted as the end of the U.S. dollar's reign. Rather, it would be a formidable competitor in the global currency arena. As he stresses...

Currencies don't disappear overnight. Currencies don't dominate overnight. You can have more than one reserve currency, which we did then and do now. And so what I see is the BRICS currency will emerge, will start as a trade currency over time, [and will] become a reserve currency. It doesn't mean the end of the dollar.