Tag Archives: dollar

Observations of an Expat: The Almighty Dollar

By Tom Arms | Sun 27th August 2023 - 3:35 pm

The Almighty Dollar is a bit too mighty for a growing number of countries. They want to curb it.

That was one of the driving forces behind this week’s 5-nation BRICS meeting in Johannesburg and the reason why another 40 want to join the latest political/economic organisation. Six of the applicants were admitted to the club this week.

BRICS is the acronym for Brazil, Russia, India, China and South Africa—the current membership of the 14-year-old organisation. It controls 26 percent of the world’s GDP as opposed to the G7’s 30.7 percent, although the G7 is dropping and will drop further faster with BRICS expansion.

For BRICS you could easily substitute China which dominates the BRICS economies. And for G7 just say America. Which means the two economic groupings have become political/economic weapons in the Sino-American clash.

BRICS has thus become a diplomatic vehicle for the Chinese attempt to constrain the dollar as the world’s reserve currency or replace it altogether.

It has its work cut out for it. The dollar is indeed almighty. Eighty-seven percent of the world’s trade is conducted in dollars. The currencies of 65 countries are pegged to the value of the dollar and the American greenback is the official currency of five US territories and 11 foreign countries.

Being the world’s reserve currency bestows advantages on the US economy and the government that controls it. Chief among them is lower borrowing costs on the international market, which allows America to carry a bigger public spending debt then other countries.