Jim O’Neill, former chairman of Goldman Sachs Asset Management is warning that the presently unchallenged dominance of the US dollar in international trade could be challenged with time, and under specific circumstances by the BRICS group of emerging nations.
The term BRIC was first coined by O’Neill, with South Africa later added to the group. At the time he predicted that the four nations he identified (Brazil, Russia, India, and China) were likely to reshape the world economy.
In an interview with the TV show Going Underground, the economist said, “The idea that the dollar will remain king forever, I think, is probably unlikely. This is not the first time that people have talked about the end of the dollar, it happens every other year if not with the same intensity,” however he noted, it is likely that at some point the dollar will lose its position as the dominant currency.
He added, “I do think if China and India could ever strongly agree on things as the two biggest countries in the emerging world… then that would probably hasten the end of the dollar’s dominance.”
He noted that since the advent of the BRICS concept, the nature of the global economy has changed. He pointed out that in terms of purchasing power parity, the BRICS nation’s share of the global GDP now exceeds that of the G7 in dollar terms.
He also noted that a growing number of countries are seeking to join BRICS, although entrance will be based on what the five members see any potential new members contributing to the group. He went on to say, “In that case it is possible to seriously think that the BRICS countries could be at the basis of some new kind of – not only currency – but some kind of competitor to the US financial system,” adding that, “in order for the dollar to end, there has to be some alternative.”
The foreign minister of South Africa has said it is likely the subject of a common currency to facilitate trade among member nations will be discussed at the next summit of the BRICS nations in Johannesburg August 22nd.
Speaking of Russia and the sanctions the Western nations have imposed upon it, he noted Moscow was doing better than most thought, and that was attributable to its strong ties to the BRICS member states. However he noted “it is not entirely clear whether Russia would continue to be able to cope with the persistence of sanctions, because the scale of restrictions is getting tougher.”