The dollar has become the most important medium of exchange in the world since the end of World War II. It is the most common major reserve currency and the currency most often used for international trade and other transactions around the world. The central role of the dollar in the global economy gives the United States certain advantages, including the ease of borrowing abroad and broadening the reach of U.S. financial sanctions.
Currency devaluation is generally a complex and controversial process involving various economic and geopolitical factors. The BRICS group (Brazil, Russia, India, China and South Africa) has no direct control over the value of the US dollar, as the value of the dollar is determined by various factors, including the economic performance of the United States, interest rate. , inflation and global demand for the dollar. The dollar is unlikely to lose its status as the world’s reserve currency anytime soon, although the expansion of the BRICS group of developing countries signals another challenge to the dollar’s dominance of the global economy.
What are BRICS?
The acronym BRIC, which initially did not include South Africa, was coined in 2001 by Jim O’Neill, then chief economist at Goldman Sachs, in a research paper highlighting Brazil’s growth potential , Russia, India and China. The bloc was founded as an informal club in 2009 to provide its members with a platform to challenge the world order dominated by the United States and its Western allies.
Are BRICS creating a new currency?
BRICS countries aim to create new economic and trade systems distinct from Western systems led by the United States, according to the group.
It was also the main topic of this year’s summit, as the group decisively discussed dedollarization, “to reduce dependence on the US dollar and promote the use of national currencies in international trade », like the yuan, the Chinese currency.
The reason for this? The US dollar affects other currencies. When the U.S. economy strengthens, the dollar strengthens as well – but that weakens other currencies. BRICS discussed ways to expand trade between their countries to become less dependent on the dollar.
BRICS influence in the Balkans
If we assume a scenario in which the BRICS countries jointly undertake actions leading in one way or another to a significant devaluation of the US dollar, this could potentially have several indirect effects on the global economy, including the Balkans Westerners. Small economies like the Balkans would not be able to withstand significant changes in the foreign exchange market.
Commodity Prices: A weaker dollar could lead to higher commodity prices, as commodities like oil are often denominated in dollars. This could affect Western Balkan countries, especially if they are importers of raw materials.
Interest Rates and Capital Flows: A significant devaluation of the dollar could lead to changes in interest rates and capital flows globally. If interest rates rise in response to a weaker dollar, this could affect borrowing costs for Western Balkan countries, which could impact investment and economic growth.
Inflation: A weaker dollar could contribute to higher inflation in some countries, depending on their economic structure and dependence on imports. Inflation can have various effects on the economy, including changes in consumption patterns and business investment.
For now, these effects are highly speculative and the actual impact on the Western Balkans would depend on a number of factors, including each country’s specific economic conditions, its trade relations and the policy responses of its governments, as well as that the path to the European Union (EU), reports Forbes.