(HorizonPost.com) – The U.S. dollar’s dominance is being challenged by the rest of the world, particularly by Brazil’s new far-left President Luiz Inácio Lula da Silva, according to Newsweek. Lula reportedly pondered by every country’s transactions need to be backed by the dollar, and then proposed a common currency to trade with, effectively leaving the dollar behind.
Lula delivered his remarks at the New Development Bank (NDB) in Shanghai where the BRICS coalition meets. BRICS is an informal coalition made up of Brazil, Russia, India, China, and South Africa. A new mission among the countries has developed from the partnership, which is to replace Western-led institutions with their own.
The Bretton Woods system has become too costly, the report suggests, adding that conversion fees begin to mount up when trade is transacted in big numbers. The agreement was negotiated in 1944 between 44 countries that all currencies would be tied to the U.S. dollar and the gold that backed it up. But that agreement reportedly ended in the 1970s when President Richard Nixon took the U.S. off of the gold standard.
Zongyuan Zoe Liu, a fellow at the Council on Foreign Relations, brought this issue up when he suggested that the countries are looking for economic alternatives to reducing their costs and exchange rate risks.
Yaroslav Lissovolik, a member of the Russian International Affairs Council, said that such an initiative with close the discrepancy between the United States and other parts of the world. The U.S. reportedly leads the world’s foreign exchange reserves at 58%, followed by the European euro (20%), the Japanese yen (<6%), and the U.K.’s pound (5%). The Chinese renminbi accounts for under 3% of exchange reserves, which is why the initiative to reverse this trend is favorable to China.
Akhil Ramesh, a senior fellow at the Pacific Forum, advocated for development banks, citing their help in assisting countries with higher rates of poverty.
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