(Kitco News) - The BRICS expansion is a major catalyst for the ultimate demise of the U.S. dollar, with the additional five new members accelerating the de-dollarization process as they increase trade in local currencies and buy and sell oil not using the dollar, thereby further destabilizing the petrodollar, warned Andy Schectman, President and Owner of Miles Franklin Precious Metals.
As of January 1st, the BRICS bloc – Brazil, Russia, India, China, and South Africa – officially welcomed Saudi Arabia, the United Arab Emirates, Egypt, Iran, and Ethiopia as new members of the alliance.
Saudi Arabia joining the group is particularly significant given its role in maintaining the status of the petrodollar, Schectman told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.
“This is a very big deal,” Schectman said. “Saudi Arabia is the linchpin to the dollar hegemony … Whether it emanates from the BRICS or from within, the day of reckoning is coming.”
Saudi Arabia already expressed interest in considering other countries that want to buy oil in their local currencies. This development could accelerate the collapse of the petrodollar system, which originated in the mid-1970s when the United States and Saudi Arabia reached an agreement that ensured that Riyadh would sell its oil only in U.S. dollars, and in return, the U.S. promised to provide military protection and support.
On top of the shifting mindset in Saudi Arabia, there are also reports that the United Arab Emirates is ditching the U.S. dollar oil trade as it looks at individual oil and gas deals with up to 15 countries based in local currencies.
“The UAE is the seventh largest producer of oil in the world; they are an OPEC and now a BRICS member,” Schectman said. “What becomes even more provocative is the fact that Putin, who hasn't left his country but once or twice over the last few years because of the bounty on his head, just makes a very impromptu trip to the United Arab Emirates. Now, what do you think he said?”
Why was this UAE announcement downplayed? Watch the video above for Schectman’s take.
What the new BRICS Plus represents
The world is witnessing the U.S. dollar hegemony being chipped away at little by little, Schectman pointed out.
“Every OPEC country is on the Chinese Belt Road and Rail initiative – the largest infrastructure project in human history. Saudi Arabia joined the BRICS and the Shanghai Cooperation Organization - the largest regional financial and military organization on the planet, and they joined the BRICS New Development Bank,” he noted.
Russia also took over the BRICS presidency in 2024, with the group’s annual summit scheduled to take place in Kazan, Russia, this fall.
Russian President Vladimir Putin already announced his plans for 2024, including efforts to increase BRICS' role in the international financial system. Putin also recognized that BRICS Plus now includes ten countries, with 30 more wanting to join.
With the expansion, the bloc now represents a staggering over 3.5 billion people or 45% of the world’s population, with the collective GDP exceeding $28.5 trillion or about 28% of the global economy. The BRICS Plus is also now responsible for producing about 44% of the world's crude oil.
The group has made it clear that one of its primary objectives is to move away from reliance on the U.S. dollar and trade in their own currencies, Schectman told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.
“Mike Adams from The Health Ranger Report believes there are already 150 countries that have agreed to dump the U.S. dollar in unison at one point. But what is that one point? You don't see these types of moves that are accelerating without something very substantial behind it,” he noted. “I don't think you have to be a rocket scientist to put all of this together. Now, what is the fuse that ignites it, that makes that moment where countries forsake the dollar?”
Schectman also plays out how the U.S. could respond to the de-dollarization trend and how a central bank digital currency (CBDC) could be utilized by the government. For insights, watch the video above.
Accelerated de-dollarization is a ‘massive problem’ for the U.S.
As BRICS Plus expands its control over natural resources and strategic shipping lanes while moving away from the U.S. dollar, the U.S. could be looking at a monumental problem, according to Schectman.
“If the need to hold U.S. dollars is waning or is completely disincentivized, it creates a massive problem for the U.S. A country that is, in essence, insolvent, that goes around the world bullying people and doing things in a coercive manner. This is incentivizing the world to find alternatives. That's where gold and blockchain technology come into play,” he said.
De-dollarization is a phenomenon that has been years in the making. “It is accelerating now. At what point does it become substantial enough in every metric - military, GDP, natural resources, shipping lanes, human population? At what point does it become substantial enough to then they flip the switch? We're going to see that switch where there ain't nothing you can do about it,” Schectman stated.
A major sign of something brewing is the BRICS countries shedding U.S. Treasuries and replacing them with gold, with China leading the pack with central bank gold buying.
Schectman explores whether an expanded BRICS makes it harder to agree on further progress, watch the video above.
BRICS common currency is next
The BRICS common currency will be in focus this year, especially with Russia as the chair.
“There will be a moment, just like the Russian finance minister has promised, where they issue a common settlement currency. I think it will be pegged to commodities using blockchain technology to show the immutability," Schectman predicted. “There will come a common settlement currency tied to a basket of commodities. In particular, I believe it will be gold."
Schectman envisions a marriage of blockchain and commodities as the ultimate solution for the BRICS. “If you do it the right way and have it audited, have it transparent, and everyone pledges the same thing to the blockchain, you got a real fighting chance,” he described. “I don't know if it happens in 2024, but it's what they intend to do, barring any unforeseen events."
For Schectman's gold price forecast and Bitcoin outlook, watch the video above.
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