Business tycoon and revolutionary CEO Jack Truong asserts that the US dollar will not be overthrown from its position as the leading currency in the world economy anytime soon, despite concerns expressed by some about its continued supremacy in a turbulent and shifting global economy.
According to Truong, the U.S. dollar’s strength is derived from its reliable, well-established systems, which facilitate smooth transactions both domestically and internationally. It also has strong liquidity and a solid international reputation that have been developed over decades of deliberate, methodical cultivation. According to Truong, the U.S. dollar will remain the top reserve currency in the world for a considerable amount of time due to its almost universal popularity and the intricate web of international financial institutions that it has established.
Growing World Economies Seek to Rebalance the Power
Nevertheless, while the dollar has long served as the benchmark by which other foreign currencies have to regularly compare themselves, a challenger has recently emerged to prove itself in the international trade sphere. The first BRIC summit was held in Yekaterinburg, Russia, on June 16, 2009, by a coalition of nations that included Brazil, Russia, India, and China. The goal of the conference was to wean the world’s economies off of U.S. domination and free up worldwide dependence on the dollar. After South Africa was admitted as a full member the following September, the group was dubbed BRICS.
The group had established themselves as a powerful force on the international scene by the start of the second decade of the twenty-first century. With the addition of Iran, Saudi Arabia, the United Arab Emirates, Egypt, and Ethiopia on January 1, 2024, these members’ combined geopolitical and monetary power increased. 3.64 billion people live in the ten-member BRICS Plus alliance collectively, making up 45.78% of the global population.
Despite the group’s increasing influence and economic might, there is still debate about whether a BRICS currency proposal would be able to seriously undermine the US dollar. Truong believes otherwise. According to Truong, “despite strong support, there is little chance that this initiative will pose a significant challenge to US dollar dominance because of [its]crucial role in global finance, the relative stability of the US, and the lack of unity within the BRICS alliance.”
How the US Dollar Overshadowed Other Coins in the World Market
Michael Plummer, an Eni professor of international economics at Johns Hopkins University, SAIS Europe, stated in an essay for East Asia Forum published on August 21, 2023, that “the U.S. dollar’s role continues to be central to the functioning of the international financial system.” According to estimates from the Bank of International Settlements, 85% of transactions in the spot, forward, and swap markets involve the USD, and nearly 90% of foreign exchange transactions involve it. Three-quarters of trade within the Asia-Pacific region and half of worldwide trade are expressed in US dollars.
The U.S. dollar continues to lead the world market due to its established financial networks and higher liquidity, as was previously indicated. This wasn’t always the case, though. The dollar’s ascent to the top places other currencies’ likely challenges in perspective as they vie for a larger share of the world economy.
It takes time for widespread currency adoption to occur, as history has shown us. The U.S. dollar was declared the world’s reserve currency in 1944, according to Truong, despite the fact that the American economy eclipsed that of the British Empire in the early 20th century. This was the result of decades of developing international relations, rapid economic growth, and seismic events such as the American-led Allied victory in World War II. “It will be extremely difficult for the BRICS currencies to emulate or even contest this path to dominance.”
Even while it’s too soon to predict the long-term effects of the petroleum-based economies of the newest BRICS member, China, among other nations, plans to back their currency with gold, but their holdings are nowhere near as substantial as those of the U.S. Central Bank.
According to Axios, the U.S. central bank’s gold stockpile still exceeds 48% of the combined gold reserves of the BRICS countries, despite the fact that the central banks of China, India, and Russia have recently been rapidly growing their gold reserves. The U.S. dollar has an almost insurmountable lead over other currencies with 47% of worldwide payments, despite China’s increasing economic prominence. The yuan (renminbi) accounts for fewer than 5% of global payments.
“[China’s] renminbi is by far the most commonly used BRICS currency, and a variety of policy efforts in 2023 involving BRICS countries and recent BRICS invitees… signal Beijing’s aim to further grow the currency’s global use,” reads a Carnegie Endowment for International Peace research paper from 2023. However, compared to the dollar, the quantity of yuan that is accessible outside of China is still very small, and the dollar plays a far larger role in cross-border payments (and it may be adversely impacted by a weaker Chinese economy).
How the Global Economy Will React to the United States’ Long-Term Track Record
Granted, the global economy is becoming more complex as developing and emerging countries exercise their geopolitical influence. Nevertheless, assessing a country’s currency’s sustainability requires analysing its political and economic policies and practices from the past and present. According to Jack Truong, the dollar will continue to be a powerful influence in the world economy for some time to come because of America’s long and unparalleled history of stability.
According to Truong, “America’s rich history of economic diversity, stable political system, and superior military might give the U.S. dollar a strong sense of integrity.” Global trust in the [dollar]is high because U.S. institutions are renowned for their openness, predictability, and steadfast adherence to the rule of law. Robust alliances are sustained by the United States’ consistent policy and worldwide participation.
Even though they are significant actors in the global economy, the BRICS countries are having difficulty gaining widespread acceptance and confidence in their member countries’ currencies due to severe internal and external problems. According to Truong, the primary obstacles to BRICS’ objectives are geopolitical unpredictability, authoritarian governance problems, and economic volatility. “It will not be easy to navigate these internal disparities, global trust deficits, and the unpredictability of opaque regimes in order to successfully create a BRICS alternative to the U.S. dollar,” he claims.
Diversity Doesn’t Always Equal Strength for the BRICS
According to Jack Truong, “consensus, cooperation, and mutual objectives” are necessary for BRICS in order to realise and carry out a coherent currency policy. A coalition with “distinct national objectives, divergent political and cultural ideologies, and unique economic landscapes” faces a formidable task.
Although the BRICS countries rely on their unique resources and business models to support their economies, Truong thinks that exact diversity is impeding their attempts to create a single worldwide currency. He notes that South Africa is currently working to diversify its mining-centric economy, while Brazil concentrates on its mining and agricultural sectors, Russia on its energy reserves, India on services, and Brazil on a growing technology sector.
And then there is China, a manufacturing giant with problems in its own home market and investments in global infrastructure. Any currency project will become entangled in this complex web of conflicting economic goals very fast. Given its enormous economic clout, it seems likely that China will take the lead in the group. However, a China-centric approach is likely to foster mistrust, eclipse group strategy and decision-making, and generally thwart attempts at reaching an agreement.
The Last Word from Jack Truong
In the end, Jack Truong claims that undermining the US dollar’s global supremacy will remain “a Herculean task, with layers of complex, interdependent challenges facing the BRICS consortium.” This is true even in light of current geopolitical events. The project is a complex struggle of political legitimacy, economic resilience, and strategic alignments more than just a currency rivalry.
Will the incapacity of BRICS members to adopt a collective attitude hinder them from posing a serious threat to the dominance of US dollars going forward? For the time being, at least, it’s a smart bet, but Truong cautions that factors closer to home could pose a greater threat to the US economy. He warns that the internal difficulties of attaining political coherence and fiscal policy efficacy will be the real test for the U.S. dollar rather than an external danger like the BRICS initiative. It is imperative that these home problems are resolved if the dollar is to continue to be the primary medium of exchange in international trade.
