Brazilian president Luiz Inácio Lula da Silva has suggested that emerging countries should move away from the U.S. dollar and strengthen their own national currencies. In a speech at the New Development Bank in Shanghai, Lula addressed his concern: “Why do all countries have to base their trade on the dollar?”
Brazilian President Demands Decrease in Greenback’s Global Control
Recent debates have revolved around the need to break the U.S. dollar’s standing as the global reserve currency, a move that might become a reality by 2023. Speaking at the New Development Bank in Shanghai, also known as the ‘BRICS Bank’, President Lula argued that the dollar’s supremacy should be abolished, as reported by the Financial Times.
“Who decided that our currencies were weak or valueless in other countries?” Lula enquired during his address. “Why can’t a bank like that of the BRICS have a currency to finance trade relations between Brazil and China or Brazil and other countries? It’s difficult because we are unaccustomed [to the thought]. Everyone depends on just one currency,” he continued.
Lula’s comments come after China completed its first Liquefied Natural Gas (LNG) payment in yuan and signed a new deal with Brazil. Furthermore, BRICS members (Brazil, Russia, India, China, and South Africa) are aiming to introduce a new BRICS-based reserve currency. In Shanghai, Lula shared his doubts regarding the world’s dependence on the greenback.
“I ask myself every night why all countries have to base their trade on the dollar,” Lula proclaimed. “Why can’t we trade using our own currencies? Who decided that the dollar would be the dominant currency after the gold standard disappeared?” he questioned.
Financial Times reporters Joe Leahy and Hudson Lockett included in their report on Lula’s statements an acknowledgment that any efforts to undermine the U.S. currency “in the near term will face a substantial challenge.” They highlighted that Brazilian miners usually engage in dollar-denominated trades. However, Brazilian and BRICS officials are not the only ones discussing the potential decline of the dollar’s predominance.
The Philippines’ central bank governor, Felipe Medalla, recently mentioned in an interview that the dollar’s power will gradually decrease. “We want a multi-currency world, but so far, other currencies do not have the necessary international markets to support [it]. This is the advantage of the U.S. dollar – there’s a vast market for government securities,” Medalla said. “I think over time, the dollar will be less and less dominant, but it’s happening very slowly,” he added.
Do you think a shift away from the U.S. dollar as the global reserve currency is inevitable, and what impact do you believe this would have on the global economy and financial systems? Share your thoughts about this subject in the comments section below.
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