A recent Newsweek article by Gregory Zerzan, former Deputy Assistant Secretary of the U.S. Treasury under President George W. Bush, paints BRICS as “a major threat to America’s financial security.”
Let’s take a look at some of the claims made by Zerzan and give an assessment of each one.
Dollar Depreciation: A Two-Sided Coin
While a move away from the dollar might trigger a depreciation, the value of a currency is not determined solely by geopolitical shifts. The U.S. dollar’s strength is closely tied to its status as the world’s primary reserve currency and the stability of the U.S. economy. Even if the BRICS+ successfully establishes an alternative financial system, it’s highly unlikely that the dollar’s value will plummet overnight.
Interest Rates and National Debt
Zerzan argues that a devalued dollar will lead to increasing interest rates, making it more challenging for the U.S. to service its massive national debt. The concern is legitimate, as interest payments are already a significant portion of the federal budget. However, it oversimplifies the relationship between currency value and interest rates.
Interest rates are influenced by various factors, including inflation, economic growth, and central bank policies. While a devalued dollar could contribute to inflationary pressures, it does not automatically translate into a direct correlation with interest rates. The Federal Reserve has tools to manage inflation and interest rates independently of currency values.
Sustainability of Federal Spending
The claim suggests that a devalued dollar could set off a dangerous feedback loop of borrowing to pay for higher interest, leading to an unsustainable level of federal spending. While this scenario is theoretically plausible, it ignores the U.S. government’s ability to adapt its fiscal policies in response to changing economic conditions.
The U.S. has a history of navigating economic challenges, and policymakers have the power to implement measures to maintain fiscal responsibility. The global financial system is interconnected, making drastic economic shifts less likely to occur without significant global repercussions.
Doomsday Predictions
While the success of BRICS has the potential to reshape the global economic landscape, the claim that it directly threatens the economic advantages of the United States through the devaluation of the dollar is nuanced. A shift away from the dollar’s dominance would indeed have implications, but predicting a catastrophic scenario oversimplifies the complexities of the global economy. The U.S. has demonstrated resilience in the face of economic challenges, and any potential changes in the international financial system will likely require measured responses rather than doomsday predictions.
Furthermore, it is somewhat disappointing that Zerzan chose to use his platform to paint BRICS as a threat to U.S. economic security, rather than suggesting ways that the U.S. and other major world powers can work with BRICS nations to enhance security, economic and otherwise, beyond the hemisphere of the wealthy.
