SANYA: Brazil, Russia, India, China and South Africa - the BRICS group of fastest growing economies - Thursday signed an agreement to use their own currencies instead of the predominant US dollar in issuing credit or grants to each other.
BRICS credit: Local currencies to replace dollar - Economic Times
I posted this not because I lament the fall of the US dollar nor because I think it's anyone's "fault," but rather as a sign of the times. I do believe that the time is coming when the world will stop using the US dollar as a reserve currency. However, I don't think it will be a sudden shift. I think that it will happen gradually, over the next 10-15 years. This story is just one of the earliest pieces of that change.
The global economy is changing, and the US would be better off accepting that fact and trying to manage a smooth transition to an international economy based on a basket of currencies, rather than clinging to the idea of the US dollar as the world's sole reserve currency. That just isn't realistic.
I don't think it's because the US dollar is an unstable currency, or that any policy-makers in the US have done anything wrong...it's just that there are now a lot more good currencies to choose from. We're no longer the only large economy in the world, and we should welcome the fact that many of the world's poor are climbing out of poverty by growing their nations' economies.
This shift to a more internationalist economy, rather than a US-dominated global economy, will have many ramifications. For Americans who are worried about that transition, I think it's a double-edged sword. Yes, there will be some negative consequences for the US: for example, our gasoline will become much more expensive and prices will be even more volatile than they are now. However, there will also be some positive effects: Our trade deficit will shrink or disappear, our exports will become much more competitive, alternative energy will become much more economically feasible, and the US will stop living beyond its means (either by choice or by necessity).