Analyst Discusses US-BRICS Power Shift — Warns of Dollar Dominance Ending

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A think tank analyst says the U.S. dollar’s dominance may be coming to an end as countries position themselves for a new international system. “As the reliance on U.S. dollars diminishes, central banks will begin dumping their dollar reserves. This will result in hyperinflation, a spike in interest rates to compensate for the loss of purchasing power, and falling asset prices, further accelerating U.S. decline,” he described.

Analyst Says ‘Dollar Dominance May Be Coming to an End’

Lowy Institute, an independent international policy think tank, published an opinion piece titled “De-dollarization: shifting power between the US and BRICS” on Aug. 3. The article is authored by Michael Roach, a management consultant and researcher for the institute.

“Will a new global reserve currency threaten the greenback’s supremacy? The short answer is yes,” Roach began. The analyst predicted:

The dollar dominance may be coming to an end.

He detailed that when Saudi Arabia and Russia signed a military cooperation agreement in 2021, the exclusive role of the U.S. as “the sole protector of the Saudi Kingdom” ceased to exist. In addition, he noted that at this year’s World Economic Forum in Davos, Saudi Arabia’s Finance Minister Mohammed Al-Jadaan announced that his country was open to trading in other currencies besides the U.S. dollar. Noting that this is “something they haven’t done in nearly 50 years,” he emphasized: “The signals of de-dollarisation were emerging.”

The analyst also mentioned that during the 2022 BRICS summit, Russian President Vladimir Putin announced that the economic bloc was working to create an “international reserve currency.” There has been speculation that the BRICS nations’ common currency will be backed by gold. However, Leslie Maasdorp, vice president and chief financial officer of the New Development Bank, also known as the BRICS Bank, said last month that the development of anything alternative to the U.S. dollar is “a medium to long-term ambition.” The BRICS nations are Brazil, Russia, India, China, and South Africa.

The Lowy Institute analyst also explained that central banks are already stockpiling gold reserves. Referencing the International Monetary Fund (IMF) Currency Composition of Official Foreign Exchange Reserves (COFER), he stressed: “Countries are positioning themselves for a new international system.”

While pointing out that de-dollarization is occurring, he said “it is not something unique.” Roach explained: “The rise and fall of empires and reserve currencies are apparent throughout history — from the Dutch Empire and the guilder to the British Empire and the pound sterling, and now the U.S. Empire and the dollar. There will inevitably be a shift in the world order, and it may well be the BRICS’ time,” he opined.

The analyst concluded:

As the reliance on U.S. dollars diminishes, central banks will begin dumping their dollar reserves. This will result in hyperinflation, a spike in interest rates to compensate for the loss of purchasing power, and falling asset prices, further accelerating U.S. decline.

Do you agree with the analysis by Lowy Institute’s Michael Roach? Let us know in the comments section below.