Jack Truong on Why the BRICS Currency Initiative Won’t Stand Up to the US Dollar

While some may worry about the continued dominance of the U.S. dollar in a volatile and changing world economy, according to business maverick and transformative CEO Jack Truong, America’s currency won’t be unseated from its position at the head of the table anytime soon.

The strength of the U.S. dollar, Truong says, lies in its robust, well-established systems that power seamless transactions at home and abroad, and boasts a formidable liquidity and a worldwide reputation built on decades of strategic, systematic cultivation. Truong notes that thanks to its near-universal acceptance and the complex network of international financial institutions built on its solid foundation, the U.S. dollar will continue to hold the penultimate spot as the leading global reserve currency for a long time to come. 

Rising Global Economies Aim To Shift the Balance of Power

Even so, while the dollar has been the yardstick other international currencies routinely have had to measure themselves against, in recent times a contender has risen up to test its mettle in the global economic arena. With an aim to wrest international dependence from the dollar and shift the world’s economic architecture away from U.S. dominance, a coalition of nations including Brazil, Russia, India, and China held the first BRIC summit in Yekaterinburg, Russia, on Jun. 16, 2009. The following September, South Africa was accepted as a full member and the group became known collectively as BRICS. 

By the opening of the second decade of the 21st century, the group was already a formidable presence on the world stage. On Jan. 1, 2024, these members were joined by Iran, Saudi Arabia, the United Arab Emirates, Egypt, and Ethiopia, increasing their collective geopolitical and monetary influence. Combined, the 10-member BRICS Plus alliance is home to 3.64 billion people, comprising 45.78% of the world population.

Even with the group’s growing reach and economic clout, speculation remains as to whether or not a BRICS currency initiative might effectively upend the U.S. dollar. Truong thinks not. “Despite substantial backing, the likelihood of this initiative posing a serious threat to U.S. dollar supremacy is minimal, due to [its] integral role … in global finance, the comparative stability of the U.S., and the lack of cohesion within the BRICS consortium,” Truong said. 

How the U.S. Dollar Eclipsed Other Currencies in the Global Marketplace 

In an Aug. 21, 2023, article for East Asia Forum, Michael Plummer, Eni professor of international economics at Johns Hopkins University, SAIS Europe, wrote: “The U.S. dollar’s role continues to be central to the functioning of the international financial system. The Bank of International Settlements estimates [the USD] is involved in almost 90% of foreign exchange transactions and accounts for 85% of transactions in spot, forward, and swap markets. Half of global trade and three-fourths of Asia-Pacific trade are denominated in U.S. dollars.”

As mentioned above, powered by its superior liquidity and established financial networks, the U.S. dollar remains at the head of the global pack. However, this wasn’t always the case. The dollar’s rise to the top gives context to the obstacles other currencies will likely face as they jockey for a more robust piece of global economic turf. 

“History teaches us that widespread currency adoption does not happen overnight. Despite the American economy eclipsing that of the British Empire in the early 20th century, it took decades of trust-building, rapid economic expansion, and tectonic global events — including an American-led Allied victory in WWII — for the U.S. dollar to be crowned the world’s reserve currency in 1944,” Truong explains. “BRICS currencies face a daunting task to replicate or even challenge this pathway to dominance.” 

While it’s too soon to estimate the eventual impact of the BRICS newest member’s petroleum-based economies, Truong points out that those countries are planning to back their currency with gold — including China — can’t come remotely close to matching the U.S. Central Bank’s impressive store.

Even though the central banks of China, India, and Russia have been aggressively increasing gold reserves of late, the U.S. central bank’s gold reserve is still more than 48% of the BRICS countries’ gold reserves combined, per Axios. Despite China’s growing economic prominence, the yuan (renminbi) accounts for less than 5% of global payments, giving the U.S. dollar, at 47% of global payments, an almost insurmountable lead. 

Per a 2023 research paper from the Carnegie Endowment for International Peace, “[China’s] renminbi is by far the most commonly used BRICS currency, and a variety of policy efforts in 2023 involving BRICS countries and recent BRICS invitees … signal Beijing’s aim to further grow the currency’s global use. Nevertheless, the amount of renminbi available outside of China remains quite limited relative to the dollar, and the currency’s cross-border usage in payments is greatly eclipsed by the dollar’s role (and it could be negatively affected by a weakening Chinese economy).”

How the U.S. Long-Term Track Record Will Play Out in the Global Economy

Granted, as emerging and evolving nations flex their geopolitical muscles, the world economy is growing increasingly complex. That said, evaluating the viability of any nation’s currency involves taking a deep dive into its economic and political strategies and behaviors, both in the past and moving forward. Jack Truong believes America’s long, unequaled track record for stability will ensure the dollar remains a force to be reckoned with for the foreseeable future.

“America’s diverse economy, political stability, and military prowess endow the U.S. dollar with robust integrity and strength,” Truong asserts. “U.S. institutions are known for transparency, predictability, and a strong adherence to the rule of law, cultivating a high level of global confidence in the [dollar]. Consistent U.S. policies and global engagement continue to foster strong partnerships.” 

Meanwhile, the BRICS countries, while major players in the world economy, are finding themselves hampered by serious internal and external issues that hold them back from advancing universal acceptance and confidence in their member nations’ currencies. Truong cites economic volatility, authoritarian governance issues, and geopolitical uncertainties as the main factors impeding BRICS’ goals. “Successfully creating a BRICS alternative to the U.S. dollar requires navigating these internal disparities, global trust deficits, and the unpredictability of opaque regimes — [which will be] no easy feat,” he contends. 

For BRICS, Diversity Doesn’t Always Equal Strength

Jack Truong asserts that for BRICS to realize and implement a cohesive currency strategy, it requires “consensus, cooperation, and mutual objectives.” It’s a tall task for a coalition composed of what he sees as “unique economic landscapes, divergent political and cultural ideologies, and disparate national objectives.” 

While the BRICS nations rely on their diverse assets and strategies to fuel their economies, Truong believes it’s that very diversity that stymies their efforts to establish a unified global currency. “Brazil focuses on agricultural and mining sectors, Russia on energy reserves, India on services and a burgeoning technology sector, and South Africa is in the process of diversifying its mining-centric economy,” he points out. 

“And then there is China, a manufacturing behemoth with global infrastructure investments and domestic market woes. This intricate web of competing economic agendas will quickly entangle any currency initiative. Presumably China, with its disproportionate economic influence, will adopt a dominant position within the group. But a China-centric process stands to generate distrust, overshadow collective decision-making and strategy, and broadly hinder efforts to achieve consensus.”

Jack Truong’s Final Caveat

In the final analysis, even given current geopolitical events, challenging the U.S. dollar’s global dominance will remain, according to Jack Truong, “a Herculean task, with layers of complex, interdependent challenges facing the BRICS consortium. The initiative is not just a competition of currencies but an intricate battle of economic resilience, political credibility, and strategic alignments.” 

Will BRICS members’ inability to meld into a hive mindset prevent BRICS from being a true challenger to U.S. currency’s continued reign? It’s a good bet, at least for now — however, Truong warns there are forces closer to home that may prove a more potent threat to the U.S. economy. “The true test for the U.S. dollar lies not in an external threat like the BRICS initiative, but rather from the internal challenges of achieving governmental cohesion and fiscal policy effectiveness,” he cautions. “Overcoming these domestic issues is crucial to maintaining the [dollar’s] status as the dominant currency in global trade.”