BRICS Expansion: Will It Hurt Your Financial Wellbeing? – Professional Tax Services

In 1944, 44 allied countries chose the U.S. dollar as the official world reserve currency through the Bretton Woods Agreement. As a result, the U.S. dollar became the common way for countries to conduct international trade, thus requiring nations to store dollars. For decades, this provided the U.S. an economic advantage that enabled our government to run up the national debt with little consequence, and permitted Americans to enjoy greater prosperity than the citizens of virtually every other nation.
In 2009, Brazil, Russia, India, and China held their first summit to discuss a mutual trade agreement that would enable these nations, as well as non-members, to bypass using the dollar in trade with these countries. In 2010, South Africa joined this group, forming an economic alliance called BRICS (Brazil, Russia, India, China, and South Africa). As the US national debt spiraled out of hand, these countries began increasingly using other currencies, such as the Chinese Renminbi and the Russian Ruble, in trade between BRICS members. Today, due to countries losing their confidence in the US dollar because of our 34 trillion dollar indebtedness, 40 more nations have expressed interest in joining BRICS. Fortunately, the BRICS agreed to accept only six nations for now. On January 1, 2024, Ethiopia, Argentina, Saudi Arabia, the United Arab Emirates (UAE), Egypt, and Iran were approved and are now BRICS members.
What Does This Mean for the Dollar’s Future?
Of course, the major oil-producing countries the US deals with (Saudi Arabia and UAE) will cause at least somewhat of an impact on our economy. However, the US has been declining its oil purchases from Saudi Arabia for some time now. Therefore, some economists believe the impact will be minimal, while others believe this will cause a moderate “de-dollarization.”
Although the dollar’s use in trade is declining, the US dollar is still the dominant world reserve currency. However, we can expect that this will make it more difficult for Congress to continue to raise the national debt ceiling. Will this result in sharper inflation? Time will tell. And what if many more nations are soon invited to join BRICS? Should you change your investment strategy? Probably not yet. However, you might wish to review your current financial strategy with your advisor. We offer our clients unlimited complimentary advice. This includes new clients. Now might be a good time to take advantage of our offer.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information, call 661-259-1967 or visit www.scvprotaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax-planning advice to their clients.