If you read all those stories that come on the login page for your search engine, you’re doubtless seen a conspiracy theory that the dollar and the world financial system is going to face a major challenge on August 23. The stories go that it will be a day like no other. Well, what’s going to happen on August 23, that causes all this angst? In fact is what it is is the 15th meeting of the BRICS head of state. Now, if you haven’t heard of BRICS, it stands for Brazil, Russia, India, China, and South Africa. 

They’re kind of the emerging market economies, so the larger emerging market economies and they get together to discuss common problems, and they’ll be meeting in Johannesburg, South Africa, on August 23. The topic is to find alternatives to the dollar. Hence, all the nervousness and conspiracy theories. Now, the BRICS are anti colonial, anti Imperial, and are at least skeptical about the United States. 

Look, take a look at their history. Brazil gained independence from Portugal in 1822. It was then protected by the Monroe Doctrine, which was put in in 1823, that has America telling the rest of the world to stay out of the Western Hemisphere. But that was a long time ago, 200 years, and the current President President Lula who just got elected, really thinks that it’s not Portugal or Europe that’s the problem, it’s America that gets involved in south in the South American continent. And Brazil tends to view itself as dominant there. 

Then there’s Russia, who’s the poster child for not liking America. When Russia invaded Ukraine, we seize $600 billion of central bank assets that were on deposit at the Fed. Now, that is something that caused them and others to not trust the dollar as a world reserve currency. And as for the anti colonial let’s face it, Russia was the colonizer, it colonized most of eastern Europe after World War Two. 

On the other hand, it makes up with that credential for having fought America during that period. India resents British colonial rule, China considered a great humiliation, when during the last part of the 19th century and early 20th century, gunboat diplomacy following the Opium War, and seizure of places like Hong Kong, you needed needs to be redressed for China to again stand tall on the world stage. And finally, South Africa was a colony of Britain, but also had a lot of Dutch settlers. And they are not viewed kindly by the current government. 

So the dollar is viewed as a target, because it’s a way of helping to undermine the great imperialist — that’s the United States. Now, there’s only one problem: Who runs the currency? Well, it can’t be the government of Brazil, Russia, India, China or South Africa. They are simply not credible, nor can it really be a group of all five of them, because if each individual one really can’t be trusted, how can all five of them? It would be like having United Nations General Assembly run the world’s monetary policy, they’re inept at it. 

So all the suggestions are that what they’ve come up with is a gold backed currency. And gold is something that’s to be trusted. But it’s not that simple. You see, there’s not enough gold in the world to back currency of sufficient size to allow world trade to happen. So what you end up with is an elastic currency backed by gold. You might have two issues, issue $2 Or two brick dollars, I guess these would be forever $3 worth of gold or three or four. Someone’s got to make the decision. How elastic can you be? 

Now the world did this just after World War Two at something called the Bretton Woods Conference. What happened was gold was pegged to the dollar at $35 an ounce and others pegged good currency to the dollar. Well, even that case, we ran out of gold by 1970 and the US was forced to devalue. So it’s unclear that a gold back BRICS dollar is going to be a very practical solution. Not only that, the debt issued in BRICS dollars will not be a credible one because it’s not a store of wealth that people want to trust. So it’s unclear that the BRICS dollar, even if it is launched, is going to succeed. 

Now, let’s face it, the dollar is in decline. It’s been in decline for a while. Part of our problem is that we’re doing a lot of self inflicted wounds like seizing Russia’s central bank assets, and intimidating others by using our financial system. Despite that fact, there still is not really a credible alternative for people to adopt all at once. It won’t be the Chinese yuan and it won’t be the BRICS dollar. The 23rd is going to come and go and many more like it will come and go without the dollar going away and without the world financial system cracking.