Written by Ekaterina Blinova,

De-dollarization is headed for a breakthrough due to growing global discontent with US “casino capitalism”…

“It’s a gigantic snowball all over the world. We can’t even keep up,” Pepe Escobar said in an interview on the New Rules podcast.

“What will be discussed at the BRICS summit in South Africa is very important. This will probably be the turning point where things go next.”

Escobar explained that a growing number of countries in the Global South were doing the math and concluding that the US dollar was not a safe bet. The combination of an aggressive US sanctions policy and reckless government spending has dramatically reduced the greenback’s international appeal.

“If you want to look at the patterns of these last two decades, you have to understand the fact that if you’re commodity rich and if you’re a productive capitalist nation and you decide to issue a currency, it’s going to be respected internationally because people will know that it’s based on facts, real provenance, real wealth,” he said. “This is contrary to the system we have now, which I’ve been calling ‘casino capitalism’ for years. They’re futures, they’re bets, they’re guesswork. It can go right or wrong. If you lose, you lose everything. The house mostly always wins because it’s the house that prints the currency. It’s backed by literally nothing, a country that owes 30 trillion dollars [in national debt] now and never can get it back.”

To make matters worse, aggressive interest rate hikes by the US Federal Reserve have made borrowing in dollars expensive for almost everyone in the world. Before the Fed’s move, Kristalina Georgieva, managing director of the International Monetary Fund, warned in January 2022 that rising US interest rates could be counterproductive for the global economy, and especially for countries with higher levels of dollar-denominated debt.

The ongoing US banking crisis threatens to further destabilize international financial markets. No country in the world wants to “catch a cold” when the US economy “sneezes”, while memories of the 2008 financial crisis linger.

“They say, ‘look, why do we have to subject ourselves to this kind of arrangement?’ And of course, before that, as we all know, it was the “Empire of Bases,” more than 800 military bases worldwide, “the power of the financial markets,” “the power of soft culture,” “the power to cancel culture’, but the Global South no longer feels intimidated. I think this is the first [time] in this new millennium. We haven’t had this before in the last two and a half centuries, at least,” Escobar said.

The BRICS want to establish a new currency

In January 2023, BRICS – an acronym for Brazil, Russia, India, China and South Africa – made headlines when it announced it could soon explore the possibility of creating its own currency to bypass the US dollar. The idea was floated on both sides of the Atlantic: Russian Foreign Minister Sergey Lavrov hinted at the plan during a press conference after his meeting with Angolan President Joao Lourenco on January 25.

Across the pond, Brazil’s president, Luiz Inacio Lula da Silva, discussed the issue of creating a common currency for the BRICS and Mercosur countries, a South American trading bloc, during his meeting with his Argentinian counterpart Alberto Fernández.

“Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries? Who decided the dollar was the currency (of trade) after the end of gold parity?” Lula said during an April visit to the Shanghai-based New Development Bank.

According to Escobar, the formation and development of three organizations, namely the BRICS, the Shanghai Cooperation Organization (SCO) and the Eurasian Economic Union, predetermined the end of the greenback-centric world order. BRICS members are now discussing the design of an alternative currency; similar discussions are taking place in the Eurasian Economic Union; they should start coordinating and then this will spill over into the SCO, the writer projected.

The trend has already been engulfing other blocs, Escobar continued, referring to the Association of Southeast Asian Nations (ASEAN). On March 28, ASEAN finance ministers and central bank governors held a meeting in Indonesia to discuss how to move to local currency settlements by further enhancing an ASEAN cross-border digital payment system.

Initially, the agreement on these transactions was reached between Indonesia, Malaysia, Singapore, the Philippines and Thailand in November 2022. The partnership seeks to reduce dependence not only on the US dollar, but also on the euro, the yen and the British pound in financial transactions.

“We have something that was absolutely incredible two months ago,” Escobar emphasized.

Why is de-dollarization gaining momentum?

De-dollarization has been talked about for decades. For example, Mikhail Khazin, a Russian economist and publicist who served at the Labor Center for Economic Reforms under Boris Yeltsin’s government in the 1990s, and his co-author Andrey Kobyakov predicted the demise of the dominance of the US dollar approximately 20 years ago in his book entitled “The Decline of the Dollar Empire and the End of Pax Americana”. Although the idea has been around for quite some time, why is this phenomenon only just starting to gain critical mass?

“We can even set a date for it,” Escobar replied. “In February of last year, with that freezing, confiscation, theft of Russian foreign reserves. And virtually the entire Global South began to wonder, from Latin America to Africa to Southeast Asia, “if they can do it with a nuclear superpower, they can do it with any of us.” fingers”. Because of this, coordination within these multilateral organizations and in other forums took on astronomical speed.”

To illustrate his point, the journalist referred to the rapid development of the BRICS with an astonishing 19 countries currently on the list to join the organization. Among them, the strongest candidates are Iran, Argentina, Algeria, as well as the United Arab Emirates, Turkey, Egypt, Kazakhstan and Indonesia, according to the geopolitical analyst.

“So they’re all strong mid-range powers from anywhere,” Escobar said. “And they’re going to start talking about the now-notorious BRICS alternative currency. So they need to accelerate that conversation and hopefully start discussing it jointly with the Eurasian Economic Union, which is much more advanced, and the Shanghai Cooperation Organization “.

Escobar believes that next year could produce nothing more than a breakthrough in this regard.

“It’s possible, it’s a feasible scenario,” he insisted. “Until a few months ago, this would be the ultra far-fetched scenario. Not anymore, because now the speed is incredible. Literally every day: Bangladesh, Argentina, Algeria, Southeast Asian countries.”

Last month, Russian Foreign Minister Sergey Lavrov met with his Bolivian counterpart Rogelio Mayta in the Venezuelan capital, Caracas, and introduced a new system of trade transactions to lower the US dollar and the euro and change to rubles and Bolivians.

Along with Argentina and Chile, Bolivia forms the so-called “lithium triangle”, which accounts for more than half of the world’s deposits of the silver-white alkaline metal. Bolivia’s Salar de Uyuni salt flats alone contain 21 million metric tons of lithium, widely used in rechargeable batteries for cell phones, laptops, digital cameras, and electric vehicles.

Petroyuan may dethrone Petrodollar

The most important element is the arrival of the petroyuan, according to Escobar. For decades, crude oil has been traded in US dollars. However, the petrodollar may soon be dethroned: Beijing last year asked Gulf leaders to denominate their oil and gas deals with China in yuan. The US and China remain the world’s top two crude consumers, with 18.7 million and 15.4 million barrels per day, respectively. Energy settlements in yuan could deal a heavy blow to the greenback.

“We’re on our way, something that even the very good American financial analysts who have been following this story could never have imagined would be literally just around the corner,” the reporter said. “Now, the only thing missing, in fact, is for the Chinese delegation to go to Riyadh and say: ‘OK, from now on everything will be in yuan, there will be no more Western currencies.’ And we already have a mechanism for that. I did a column about it, basically explaining that it’s a very simple mechanism.”

“You buy oil futures on the Shanghai Stock Exchange with a price in yuan. So from now on you have a new benchmark, an oil benchmark in yuan that you trade in Shanghai. The Chinese say, ‘look, it’s also tied to gold.” Want to exchange the yuan for gold? Simple. We have a gold exchange here in Shanghai and another here in Hong Kong. You can exchange anything you want for gold. That’s the way. It’s extremely simple. But not many people are aware of it. Only a few economists, actually. And I haven’t seen this discussion in the American media, that’s why,” Escobar continued.

This does not mean, however, that the dollar will be replaced by the yuan: instead, a whole set of currencies will be used to remove the hegemony of the greenback, according to the geopolitical analyst.

“I think we’re going to start with multiple replacements, and then maybe in the second stage, these multilateral organizations start thinking, okay, why don’t we think about a merger? Because we have different priorities”, he said.

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