A BRICS Common Currency Is Still a Pipe Dream

Paul O’Neill, a former US Treasury secretary, said that if America ever dropped the strong-dollar policy, he would hire a brass band at Yankee Stadium to mark the proclamation. O’Neill had reservations about the mantra, but ultimately fell into line. The musicians didn’t make it to rehearsal on his watch and Washington's support for greenback primacy lived on, with the odd tweak every now and then.

Challenges to the dollar’s vital role in the world economic and financial system are often said to be, if not imminent, then over the horizon. But somehow they never quite materialize. Don’t expect any of the current noise about the movement toward a currency shared by the BRICS nations — Brazil, Russia, India, China and South Africa — to amount to much. If any of these were to be the foundation of a single unit of exchange, it would likely be China. Precedent isn't encouraging: Seven years after the International Monetary Fund added the yuan to its basket of reserve currencies, it accounts for a very minute share of the global cache.

Nor should we be too impressed by the New Development Bank, a lender created by the quintet to become a counterweight to the IMF or World Bank, part of a journey by the Global South to some wonderland with minimal Western influence. Emerging markets chafe that an American gets to lead the World Bank and European helms the IMF. The US is, after all, the biggest stakeholder in both.

Clickbait headlines aside, such initiatives say more about who is advancing them than the shortcomings of the greenback. Potshots that appeal to domestic audiences are no substitute for economic leadership. None of the pretenders appears remotely ready.

South Africa, the host of this week's summit for BRICS leaders, has done its best in recent days to hose down some of the speculations about FX singularity. That's a long way off, officials say. The talks will focus on issues including the establishment of a common payments system, South Africa's envoy to the group said last week. What is likely is the formation of a technical committee to start considering a potential joint currency. This takes some of the heat out of the notion of a plot to dethrone the dollar.

Still the One