The Bottom Line:
- Saudi Arabia is considering joining BRICS, an alliance of emerging economies that could challenge US dollar dominance
- The US is now the world’s top oil producer, reducing its reliance on Saudi Arabian oil and potentially influencing Saudi Arabia’s decision
- While the oil market is significant, the US economy is still substantially larger than the combined BRICS economies
- Individuals can protect their wealth by investing in assets like real estate, stocks, and potentially cryptocurrencies to minimize exposure to dollar depreciation
- The shift away from the US dollar may reflect growing discontent and concerns about America’s declining global influence and domestic challenges
The Rise of BRICS and the Potential Challenge to US Dollar Supremacy
BRICS Expansion and Shifting Global Alliances
The BRICS group, consisting of Brazil, Russia, India, China, and South Africa, has recently expanded to include Iran, the UAE, Ethiopia, and Egypt. Saudi Arabia was initially announced as a member but later stated they are still studying the decision. Turkey has applied to join, and Malaysia and Thailand may also become members. This expansion, now referred to as BRICS+, has doubled the size of the organization since January 2024. The growing membership of BRICS+ is seen by some as a challenge to the traditional Western allies, such as the US, France, Canada, Germany, Italy, Japan, and the United Kingdom.
Saudi Arabia’s Potential Move Away from the US Dollar
Simultaneously, Saudi Arabia is considering ending a 1974 agreement with the US to sell oil exclusively in US dollars. This move, coupled with their potential membership in BRICS+, is perceived by some as a signal of the US losing its strength and influence in the international community. However, it is important to note that the US has become the world’s largest oil producer, and Saudi Arabia is no longer the top supplier of oil to the US. The US now imports less than one-third of the oil it used to from Saudi Arabia, and the need for Saudi Arabia to support the US dollar may have diminished since the 1970s when the dollar had just left the gold standard.
The Petrodollar and the US Economy
While the oil market is significant, with an estimated value of $1.4 trillion in 2022, it is important to put this into perspective. The US GDP is 24 times the size of the entire oil market, and the US economy is 40% larger than China’s. Even if all oil transactions were conducted in a currency other than the US dollar, there would still be significant demand for the dollar given the size and strength of the US economy. However, it is possible that the US could face challenges in the future, such as slowing population growth or a decline in innovation, which could potentially impact its economic dominance in the long term.
US Oil Production and Its Impact on Saudi Arabia’s Geopolitical Decisions
US Oil Production Surpasses Saudi Arabia
In recent years, the United States has become the world’s largest oil producer, surpassing Saudi Arabia. This shift in global oil production has had significant implications for the geopolitical relationship between the two countries. The US now imports less than one-third of the oil it used to from Saudi Arabia, reducing its dependence on the Middle Eastern nation. As a result, Saudi Arabia’s influence over the US economy and its ability to support the US dollar has diminished since the 1970s when the dollar had just left the gold standard.
Saudi Arabia Explores New Alliances
As the US relies less on Saudi Arabian oil, the kingdom has begun to explore new alliances and economic partnerships. Saudi Arabia is considering joining the BRICS+ group, which includes Brazil, Russia, India, China, South Africa, and several other nations. This potential move, along with the possibility of ending the 1974 agreement to sell oil exclusively in US dollars, has raised concerns about the US losing its strength and influence in the international community. However, it is important to note that these changes in Saudi Arabia’s geopolitical decisions may be driven more by practical economic considerations than a desire to undermine the US.
The Future of the US Dollar and Global Trade
Despite the potential challenges posed by Saudi Arabia’s shifting alliances and the growth of BRICS+, the US dollar remains the dominant currency in global trade. Approximately 80% of global trade is conducted in US dollars, and the US economy is significantly larger than that of any other single nation. Even if all oil transactions were to be conducted in a currency other than the US dollar, there would still be substantial demand for the dollar due to the size and strength of the US economy. However, it is crucial for the United States to remain vigilant and adapt to the changing global landscape to maintain its economic dominance in the long term.
Comparing the Economic Might of the US and BRICS Nations
Comparing Economic Strength: US vs. BRICS+
While the expansion of BRICS+ and Saudi Arabia’s potential shift away from the US dollar have raised concerns about the United States losing its global economic dominance, it is essential to put these developments into perspective. The US economy remains significantly larger than that of any individual BRICS+ member, with the US GDP being 40% larger than China’s. Additionally, the combined GDP of the original BRICS members (Brazil, Russia, India, China, and South Africa) is only half that of China alone. This highlights the substantial economic advantage the United States currently holds over the BRICS+ group.
The Role of the US Dollar in Global Trade
Despite the potential challenges posed by the growth of BRICS+ and Saudi Arabia’s possible move away from the US dollar, the American currency remains the dominant force in global trade. Approximately 80% of international transactions are conducted in US dollars, showcasing the dollar’s continued importance in the world economy. Even if the entire oil market, which was estimated to be worth $1.4 trillion in 2022, were to shift away from the US dollar, it would still represent only a fraction of the total global trade conducted in the American currency. The US economy’s sheer size and the dollar’s established role in international commerce suggest that the currency will likely maintain its prominence in the near future.
Adapting to a Changing Global Landscape
While the United States currently enjoys a significant economic advantage over the BRICS+ nations, it is crucial for the country to remain vigilant and adaptable in the face of a changing global landscape. The expansion of BRICS+ and the potential for more countries to join the group could lead to increased economic cooperation and trade among member nations, potentially reducing their reliance on the US dollar. To maintain its economic dominance in the long term, the United States must continue to foster innovation, support its domestic industries, and engage in strategic partnerships with key allies. By proactively addressing the challenges posed by the rise of BRICS+ and the shifting geopolitical landscape, the United States can work to ensure its continued economic strength and leadership in the global arena.
Strategies for Individuals to Safeguard Wealth Amidst Dollar Depreciation Concerns
Diversifying Investments to Minimize Dollar Exposure
One of the most effective strategies for individuals to safeguard their wealth amidst concerns about dollar depreciation is to diversify their investments and minimize exposure to the US dollar. This can be achieved by investing in a variety of assets, such as real estate, stocks, and potentially cryptocurrencies. By shifting wealth from dollar-denominated assets to tangible assets or other investment vehicles, individuals can reduce their vulnerability to a weakening dollar and protect their purchasing power over time.
Building a Strong Asset Portfolio
To weather potential economic uncertainties and the long-term effects of dollar depreciation, it is crucial for individuals to focus on building a strong asset portfolio. This may involve investing in real estate, which can provide a stable source of passive income and appreciate in value over time. Additionally, carefully selected stock investments can offer the potential for capital appreciation and dividend income. By constructing a well-diversified portfolio of assets, individuals can mitigate the risks associated with a declining dollar and position themselves for long-term financial success.
Staying Informed and Adaptable
As the global economic landscape continues to evolve, with the rise of BRICS+ and potential challenges to US dollar supremacy, it is essential for individuals to stay informed about these developments and remain adaptable in their investment strategies. This may involve closely monitoring market trends, seeking out educational resources to enhance financial literacy, and being open to adjusting one’s investment approach as needed. By staying proactive and responsive to changing economic conditions, individuals can better navigate the uncertainties surrounding the future of the US dollar and make informed decisions to safeguard their wealth in the long run.
Shifting Global Dynamics: Discontent with America’s Influence and Domestic Challenges
Growing Discontent Among Americans
The topic of de-dollarization has gained popularity in recent years, reflecting a growing discontent among Americans who fear that the country is losing its exceptionalism. This sentiment may stem from various factors, such as unaffordable housing, lost faith in the Federal Reserve, frustration over crime and border issues, and political polarization on social media. The expansion of BRICS and the potential for increased tensions between the group and the United States and its Western allies have further contributed to this unease.
Saudi Arabia’s Cautious Approach
Saudi Arabia’s hesitance to fully commit to joining BRICS suggests that the kingdom is aware of the potential implications of such a move. A vote for BRICS could be perceived as a vote against the United States, and Saudi Arabia may be cautious about damaging its relationship with the US too quickly. Despite the shifting global dynamics, the United States remains a dominant economic and military power, and Saudi Arabia likely recognizes the importance of maintaining a balanced approach in its foreign relations.
Focusing on Building Assets and Wealth
In light of these global economic uncertainties, individuals may benefit from focusing on building assets and wealth to protect themselves from potential dollar depreciation. This can involve investing in real estate, stocks, and other asset classes, as well as developing entrepreneurial skills and increasing productivity. By diversifying investments and acquiring valuable knowledge and skills, individuals can better position themselves to navigate the changing economic landscape and safeguard their financial future, regardless of the shifting global dynamics and the potential challenges to US dollar supremacy.
