According to Brazilian President Luiz Inácio Lula da Silva, developing countries should abandon the US dollar and strengthen their own national currencies. During a speech at the New Development Bank in Shanghai, Lula expressed his late-night reflection: “Why do all countries have to base their trade on the dollar?”
Brazil’s president wants to reduce the global dominance of the US dollar
Recent discussions have focused on removing the status of the US dollar as a global reserve currency, and this idea is becoming a reality in 2023. Speaking at the New Development Bank in Shanghai, also known as the ‘BRICS Bank’, the President Lula insisted that the global dominance of the dollar should end, as reported by the Financial Times.
“Who decided that our currencies were weak or worthless in other countries?” Lula questioned during her speech. “Why can’t a bank like the BRICS have a currency to finance trade relations between Brazil and China or between Brazil and other countries? It is difficult because we are not used (to thinking). The whole world depends on a single currency,” she added.
Lula’s remarks come after China signed a new agreement with Brazil and completed its first payment of Liquefied Natural Gas (LNG) in yuan. Russia has also agreed to settle transactions using the currencies of other countries. In addition, the BRICS members (Brazil, Russia, India, China, and South Africa) are working to create a new BRICS-based reserve currency. In Shanghai, Lula expressed his curiosity about the world’s dependence on the dollar.
“I wonder every night why all countries have to base their trade on the dollar,” Lula emphasized. “Why can’t we trade using our own currencies? Who decided that the dollar would be the dominant currency after the gold standard disappeared? she inquired.
Financial Times reporters Joe Leahy and Hudson Lockett concluded their reporting on Lula’s remarks by noting that any effort to undermine the US currency “in the near term will face a substantial challenge.” They noted that Brazilian miners regularly engage in dollar-denominated transactions. However, officials from Brazil and the BRICS countries are not the only ones discussing the potential decline in the dollar’s dominance.
The governor of the central bank of the Philippines, Felipe Medalla, recently mentioned in an interview that the role of the dollar will gradually decrease. “We want a multi-currency world, but so far, other currencies don’t have the international markets to support it. This is the advantage of the US dollar: there is a great market for government securities”, stated her Medalla. “I think over time, the dollar will become less and less dominant, but it’s happening very slowly,” she added.
Do you think abandoning the US dollar as the global reserve currency is inevitable and what impact do you think this would have on the global economy and financial systems? Share your thoughts on this topic in the comments section below.
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