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The idea of a BRICS common currency is almost 'embarrassing,' the economist who named the group says

Aug 15, 2023, 21:38 IST
Business Insider
CFOTO/Future Publishing via Getty Images
  • The economist who coined the term BRICS says the bloc's plans for a common currency are ridiculous.
  • Jim O'Neill rejected the possibility of the group of countries challenging the dollar's dominance.
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Lord Jim O'Neill, a former Goldman Sachs economist who first gave the BRICS bloc its name, has slammed the idea of the five nations ever collaborating to create a common currency.

The group — which comprises Brazil, Russia, India, China, and South Africa — has been calling for ways to end the dollar's dominance as the world's premier reserve currency, and Brazilian President Luiz Inácio Lula da Silva has called for a common trading note between them.

But O'Neill, who coined the bloc's name in a 2001 research paper, is unconvinced.

"It's just ridiculous," he told the Financial Times in an interview on Monday. "They're going to create a BRICS central bank? How would you do that? It's embarrassing almost."

The economist spoke ahead of the 15th BRICS summit next week, where the nations will meet to decide whether to expand membership to other countries and may also float the idea of the common currency — though South Africa denies that this is on the agenda.

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Dedollarization is the latest buzzword to capture the market's imagination and refers to efforts aimed at undermining the greenback's command of global trade by promoting the use of other currencies.

Proponents of the idea point to the fact that the dollar's share of global reserves has fallen over the past two decades — though it still makes up nearly 60% of the world's foreign-exchange holdings, according to the International Monetary Fund.

In the interview, O'Neill criticized the dollar's role in directing the movements of other currencies around the world.

"The dollar's role is not ideal for the way the world has evolved," he said. "You've got all these economies who live on this cyclical never-ending twist of whatever the [US Federal Reserve] decides to do in the interests of the US."

But he does not see a future in which the renminbi, yen, or euro can surpass the US currency.

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"None of these things will ever happen until those countries want to have their currencies used by people in other parts of the world," he said.

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