Is the Dollar Raj finally ending?

In the 17^th century Dutch guilders dominated the global currency in the West. This was followed by the Spanish dollar. The American dollar quickly followed the British pound sterling. When President Richard Nixon ended the era of the gold standard in 1971, the dollar took over as the dominant world currency.

While it seems like the dollar will continue to rule forever, it is not so. Iraq’s Saddam Hussein and Libya’s Muhammar Gaddafi tried to delink the dollar from the oil trade but spectacularly failed.

It's not as simple as a stop in trade in dollars. The dollar is backed by the mighty American empire. That includes both financial and military muscle. It includes the Western banking and financial systems. It’s not just the dollar but the entire dollar ecosystem.

That seems to be finally crumbling. Firstly, the 50-year-old US-Saudi petrodollar deal has ended. After the Ukraine war, the Saudis, Russia, China and India are trading in alternative currencies.

After the abject surrender of US forces to the Taliban in Afghanistan, Ukraine has been another disaster. The sanctions haven’t worked, and the Russian economy is growing, nevertheless. India and Russia trade is at a record high, and an alternative global energy distribution system is being created.

After Russia was kicked off SWIFT (Society for Worldwide Interbank Financial Telecommunications) for the Ukraine war, a chink opened. Russia is pushing its alternative SPFS (System for Transmitting Financial Messages).

However, the real challenger is BRICS which started off as a fancy idea but is getting more powerful with each passing day. There are more than 20 countries, and they have the clout to pull off an alternative. If the US is the No. 1 military power, then China, Russia and India are No. 2, 3 and 4 respectively. In the economic power game, China is No. 2 and soon India will be No. 3.

A BRICS digital currency could replace the dollar. BRICS pay could replace SWIFT. The BRICS bank could pull of a parallel ecosystem.

One thing that will make it possible is technology. Tech can go deep, fast and widespread. A simple example is India’s UPI (Unified Payments Interface). The NPCI was formed in 2008, and they launched UPI in 2016. During the Covid pandemic, UPI ruled the world and crossed half of the globe’s online transactions. The UPI seamlessly handles the transactions of 1.4 billion Indians and could well take care of 8 billion in the years to come.

Cryptocurrencies. Online banks. Online payment systems. Today it’s much easier to topple a world currency and replace it with another. The dollar best watch out!