Do you people who believe in the idea of “dedollarisation” really care to address the incongruence of your theories when even the purveyors of anti-US hegemony seek out the US Dollar to build their empires?
Mohammed Bin Salman is telling you directly and explicitly that he wants to be the new West – that’s up to anyone’s interpretation whether a murderous and authoritarian barbarian butcher wants to turn Saudia Arabia into a liberal state with rule-law or he simply means that he wants a developed and diversified economy similar to a Western economy. Either way, if he wants to imitate the West, I suppose he wants and needs the best currency that is used in the West: the US Dollar. In fact, Mohammed Bin Salman needs lots of Dollars right now and that is why the Saudi Arabian government is selling a lot of US Treasuries while Mohammed bin Salman is making enterprising speeches during the G20 and the events following it.
Curb your enthusiasm US Dollar doomers. Saudi Arabia is going through a massive spending spree to diversify its economy, and it is doing so partly by building new prison cities in the desert so as to become the new “Europe.” European renaissance, indeed. As a result of massive government spending, Saudi Arabia’s debt and deficit have been growing lately, but the Kingdom is taming it back by fighting an oil-price war against the West, which so far has been doing successfully, with as a result, capturing even more US Dollars in the process. And we can safely say that the Kingdom’s success in keeping its economy growing and stable is only thanks to its ever-increasing US Dollar revenues. Foreign direct US dollar inflows are aligned with this process, and of course, the vast majority of foreign-denominated debt held by Saudi private investors is US dollar debt.
Saudi Arabia is still a massive holder of US treasuries and the theory that any BRICS nation can “dedollarise” successfully has been proven over and over again to be false. The Chinese Yuan which is the major BRICS currency that serves as a potential US Dollar alternative is also crashing in value against the US Dollar, and Russia which changed its US Dollar and Euro inflows with the Chinese Yuan, has a catastrophic monetary crisis.
Let’s say Saudi Arabia dedollarises and BRICS form a new single currency that serves as an alternative to the US Dollar. What do you think would be the outcome of that? Without speculating, we can look at the history of the Euro, which today acts very much like a US Dollar derivative and one of the best liquid alternatives to the US Dollar along with the Japanese Yen. This is the Euro’s history with the US Dollar:
Given the history that we have, I would suppose that a BRICS currency alternative to the US Dollar would behave radically differently from the history of the Euro insofar as it would go down against the US Dollar even lower and harder.
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