BRICS is loosening the $ grip on the world

The BRICS group's expansion is visibly eroding the US dollar's dominance in global trade, a shift that could reshape the world's monetary system. While the dollar remains the primary currency for oil, gas, raw materials, and most international trade, efforts to reduce reliance on it are gaining momentum. Russia, under sanctions, has accelerated energy trade in national currencies, with China and India following suit.

China is actively promoting the renminbi in energy and trade exchanges, aiming to create alternatives to the dollar and limit its impact from sanctions. While the euro is already widely used in European trade, oil and gas imports from Norway or Algeria are not always paid in euros, despite strong ties between the EU and these countries.

The overnight oil price, including the North Sea Brent reference, is still primarily quoted in dollars. Nonetheless, a European currency capable of handling more international settlements could serve as an alternative to the dollar. De-dollarization does not signal the end of the dollar but rather a gradual diversification of global reserves, potentially at the expense of US Treasury bonds.

The Norwegian case illustrates this trend, with Norges Bank recommending a reduction in government bonds in the sovereign wealth fund's benchmark, which could lower dollar bond exposure by around $80 billion. This signals a shift in foreign demand and debt levels, potentially leading to higher refinancing rates and a vicious cycle of rising interest costs, deficits, and inflation.

The most significant risk is not the dollar's demise but the gradual end of exceptionally cheap US financing, with critical consequences for US finances and the global financial system.