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BRICS challenges US ‘dollar dominance’, Saudi considers selling oil in other currencies: New multipolar economic order

BRICS is “developing a fairer system of monetary exchange” to challenge the “dominance of the dollar”, South Africa revealed. Saudi Arabia is considering selling oil in other currencies. Economist Zoltan Pozsar says the US “unipolar era” is over.
 
by Ben Norton 

Part 4 - Prominent Credit Suisse economist describes new multipolar order challenging US dollar’s ‘exorbitant privilege’

These historic developments in the BRICS and Saudi Arabia are part of an international shift to a multipolar economic order.

Prominent economist Zoltan Pozsar, global head of short-term interest rate strategy at Swiss investment bank Credit Suisse, described this transition in a January 20 op-ed in the Financial Times, titled “Great power conflict puts the dollar’s exorbitant privilege under threat“.

Pozsar, who is something of a celebrity in contemporary economics and has been described as a “superstar” by the financial press, wrote that the “unipolar era” following the end of the first cold war, in which “the US was the undisputed hegemon”, is now coming to an end.

In this increasingly multipolar world, “China is proactively writing a fresh set of rules”, he said, “creating a new type of globalisation through institutions such as the Belt and Road Initiative, the Brics+ group of emerging economies and the Shanghai Cooperation Organisation”.

We are seeing a bifurcation of global economic and political institutions, in what “may eventually lead to ‘one world, two systems'”, Pozsar explained, referencing China’s model for Hong Kong of “one country, two systems”.

He wrote that the “dollar-based monetary order is already being challenged in multiple ways”, in particular by “the spread of de-dollarisation efforts and central bank digital currencies (CBDCs)”.

Recently, the pace of de-dollarisation appears to have picked up”, he observed.

Pozsar pointed out:

              China and India have been paying for Russian commodities in renminbi, rupees and UAE dirhams. India has launched a rupee settlement mechanism for its international transaction while China asked GCC countries to make full use of the Shanghai Petroleum and Natural Gas Exchange for the renminbi settlement of oil and gas trades over the next three to five years. With the expansion of Brics to beyond Brazil, Russia, India and China, the de-dollarisation of trade flows may proliferate.

Major countries like China, Russia, and Saudi Arabia are exporting more than ever, which means they have record current account surpluses, Pozsar noted. But their central banks are not buying US Treasury securities; instead they are investing in gold, commodities, and projects like the Belt and Road Initiative.

If less trade is invoiced in US dollars and there is a dwindling recycling of dollar surpluses into traditional reserve assets such as Treasuries, the ‘exorbitant privilege’ that the dollar holds as the international reserve currency could be under assault”, the Credit Suisse economist concluded.

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