Former White House economist Joseph Sullivan has warned that a BRICS currency would erode the U.S. dollar’s dominance. If member nations use only a common BRICS currency for international trade, “they would remove an impediment that now thwarts their efforts to escape dollar hegemony,” he described.
Former White House Economic Advisor on BRICS Currency and U.S. Dollar’s Reserve Currency Status
A former White House economic advisor, Joseph Sullivan, discussed de-dollarization and the potential impacts of a BRICS currency on the USD in an opinion piece published by Foreign Policy Monday. The BRICS nations are Brazil, Russia, India, China, and South Africa.
Sullivan was a special advisor and staff economist at the White House Council of Economic Advisers during the Trump administration. He is currently a senior advisor at the Lindsey Group, an economic advisory firm. Referring to the hypothetical BRICS currency as “the bric,” he warned:
If the BRICS used only the bric for international trade, they would remove an impediment that now thwarts their efforts to escape dollar hegemony.
“Those efforts now often take the form of bilateral agreements to denominate trade in non-dollar currencies, like the yuan, now the main currency of trade between China and Russia,” he continued.
The former White House economic advisor believes that it is “realistic to imagine the BRICS using only the bric for trade.”
He added that with the creation of a BRICS currency:
The BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions.
“Because a BRICS currency union — unlike any before it — would not be among countries united by shared territorial borders, its members would likely be able to produce a wider range of goods than any existing monetary union,” he explained.
However, Sullivan expects the BRICS currency to “raise a litany of thorny practical concerns.”
He detailed: “Used primarily for international trade rather than domestic circulation within any one country, the bric would complicate the job of national central bankers in BRICS countries. Creating a supranational central bank like the European Central Bank to manage the bric would also take work. These are challenges—but not necessarily insurmountable ones.”
The economist proceeded to discuss the BRICS currency displacing the U.S. dollar as a global reserve currency among member countries. He noted: “The dollar’s global role has always been a double-edged sword for the United States. Though it does allow Washington to add sanctions to its foreign-policy toolkit, by raising the price of the U.S. dollar, it raises the cost of American goods and services to the rest of the world, decreasing exports and costing the United States jobs.”
In conclusion, while clarifying that he believes “the dollar’s reign isn’t likely to end overnight,” the former White House advisor cautioned:
A bric would begin the slow erosion of its dominance.
A growing number of people have warned that the creation of a BRICS currency would threaten the USD’s dominance. White House economist Jared Bernstein said during a hearing on his nomination to be chairman of the Council of Economic Advisers that China wants to weaken the U.S. dollar’s reserve currency status.
Do you agree with the former White House economist about the potential impacts of a BRICS currency on the U.S. dollar? Let us know in the comments section below.