by LUKE ZUNGA
JOHANNESBURG, (CAJ News) – THE United States (US) is in the cusp of fear, and threatening imposition of 100 percent duty for BRICS countries if they adopt a new currency.
US President-elect Donald Trump issued the warning.
BRICS is an acronym for Brazil, Russia, India, China and South Africa, but the Grouping has since expanded following the adoption of Egypt, Ethiopia, Iran and the United Arab Emirates (UAE).
The World Trade Organisation (WTO) would not allow a country to impose 100% tarrifs for offering competition.
Trump’s threats are ahead of time and premature. BRICS+ have not adopted or considered any new currency.
Western media are drumming this sentiment to create conflict to which Trump breathed dragon fire to derail BRICS+. A new alternative currency will emerge in the coming years, but not now.
BRICS countries are not seeking to replace the US Dollar, but to offer an alternative, which is competition. History shows that the US politicized the US Dollar including the Society for Worldwide Interbank Financial Telecommunications (SWIFT) payment system.
The current payment system is part of American foreign policy. Countries must follow US dictates or risk being kicked out of the SWIFT payment platform, as is the case with Russia, Iran and North Korea.
What is SWIFT? SWIFT is a global software network, controlled by the US, to facilitate trade and payments. All countries subscribe to SWIFT to conduct cross border or international payments.
Countries, through their banks, must buy the US dollar to pay another country. The US Dollar is always in high demand and strengthened by global trade volumes and global settlements.
For example, countries such as Zimbabwe have to buy the US dollar to pay South Africa which would then convert the US dollar into Rands.
In a sense the US appears to be exporting but nothing was exported. The whole world woke up to a world controlled by the US and Britain with European Union (EU) allies, what is generally called the Westbut grossly one sided. Trump is fuming because it is big money.
BRICS countries were already developing models of alternative payment systems. In 2012 when Iran was unfairly sanctioned out of SWIFT, India developed Unified Payment System Interface (UPSI), an Interbank Payment system through UCO Bank to trade with Iran. Traders for both nations would open Vostro accounts with UCO Bank, pay in local Indian Rupees and Iranian Rials currencies. UCO Bank would transfer the funds to Iranian Banks and vice versa to conduct bilateral trade between India and Iran.
Russia had developed MIR or System for Transfer of Financial Messages (SPFS), which had 23 countries connected. China developed the Cross Border Interbank Payment System (CIPS), with a few countries connected.
BRICS are exploring Cross Border Interbank Payment Systems(CBDC) using Central Bank Digital Currencies (CBDC) which are ways of paying each other, among themselves, in their currencies without having to buy the US dollar.
The de-dollarization is not to replace the Dollar, but to compliment.
BRICS meeting in Kazan , Russia considered BRICS Pay, a gold backed Block chain card and Digital Currency payment system called Unit, which is a cheaper and faster system.
The digital platform will then have to be hedged and understandably at around 55.00 to 65.00 to the US dollar to reduce volatility and to enhance stability and to standardize and create comparability.
It is not a currency, but a standard measure of value, so that there is parity in valuation of goods and prices. Readers are advised to use their own research and not rely on this article.
The use of the US dollar, as a global currency, was confirmed at the Bretton Wood Conference held from 1-to-22 July 1944 at Mt Washington Hotel, New Hampshire, US towards the end of World War 11.
The 44 countries which attended endorsed the use of the US dollar as the global currency of exchange. Europe was decimated by war and had nothing to offer.
Much of their gold had been transferred to the US to pay for needs of the European continent, and world war efforts.
A clearing house structure was created now known as SWIFT, as well as the Federal Reserve to control the functions of the American economy to support a global currency.
That meeting also facilitated the creation of the Reconstruction and Development Bank, which became the World Bank and International Monetary Fund (IMF).
The US was a vast economy, and years ahead of other countries, especially that Europe had been destroyed by war.
The US has abused this position, such as flooding the market with US dollars to finance the Vietnam war and printing money paid out as loans to other countries. As the body of countries observed the world order, it became clearly unfair.
The first BRICS summit was held on 16 June 2009 in Yekaterinburg, Russia, attended by heads of state of Brazil, Russia, India and China.
The trajectory was that by 2050 these countries would be the biggest political and economic block in the world.
The following year China invited South Africa. Jacob Zuma, who was the South African President then, took South Africa into BRICS in December 2020, and the grouping became BRICS.
These countries could read that the US, who hitherto was the global leader, was concentrating on a constellation of allies in Europe, Asia and North America and was brazenly cocky.
BRICS+ brought a dimension of an alternative political dominion, but not to replace the US and its empire.
The US is worried because there is an alternative world body, of a size big enough to tame it.
An alternative payment system would weaken the US, and cause world panic. The process has to be properly managed.
However, the BRICS+ is a powerhouse, if well managed. The BRICS+has bigger populations, covers wider ground space on the globe, has higher gross domestic product (GDP) and uses both communism and capitalists.
From my view, as a social scientist, I urged BRICS+ to identify something which is a central glue to all BRICS+ countries.
The suggestion was that BRICS+ countries should embark on a program to raise capital using technology such as mobile phones or levies on betting/gambling industry. That would be the game changer, and would support BRICS standby currency.
NB: The views expressed in this opinion piece are those of the author, Luke Zunga, and not those of CAJ News Africa.
– CAJ News