In today’s issue:

  • How the BRICS went from boom to bust
  • Why can’t Japanese people pronounce my name?
  • Can Trump chain the world to the US dollar?

Each financial boom and bust sears a new piece of obscure finance jargon into our memory. And in 2025, we’ll be adding a new one to that list: BRICS.

The BRICS idea was supposed to be an optimistic story. Back in 2001, Goldman Sachs chief economist Jim O’Neill came up with the concept.

Brazil, Russia, India, China and South Africa would become the next great economies, he claimed. They’d even challenge the West.

Investors and companies needed to pivot to those markets to profit from the boom.

It was perhaps the first investment idea I ever encountered. Billions of people getting wealthy enough to afford what was normal to us in the West seemed like a big deal.

About ten years later I was able to thank Jim O’Neill personally for placing the pebble that changed the course of my life. For better or worse…

But the fate of the BRICS may yet prove to be associated with a crash instead of a boom. At least for us investors in the West trying to get in on the action.

Nobody knew what a sub-prime mortgage or collateralisation was in 2006. Suddenly, in 2008, everyone had a different metaphor to explain them to each other.

Debt-to-GDP ratios became front-page news in Europe in 2010 and Asia in the 1990s. Before that, they were academic.

Since the 90s, Japanese people have been able to say the world “bubble” with perfect English pronunciation. Which begs the question why they pronounce my surname “Haburu”…

Neil Woodford taught us about liquidity. Liz Truss gave us LDI. And we all know about bank deposit insurance since Northern Rock went under.

It’s not always bad news that implants the memory for a lifetime. Cryptocurrencies gave us DLT and blockchain.

But the BRICS look like they’re transitioning from a boom to a bust story thanks to geopolitics. By next year, everyone will understand what you’re about to read. I may even regret ever listening to the BBC World programme about them 20 years ago…

Will the BRICS divorce the dollar?

Last week we looked at why President-elect Trump used fentanyl as a justification for his trade war on China and Mexico. This week, he added another obscure but crucial angle for investors to understand. Again, Trump’s announcement came on Truth Social:

The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy. They can go find another “sucker!” There is no chance that the BRICS will replace the U.S. Dollar in International Trade, and any Country that tries should wave goodbye to America.

Tariffs because of the BRICS replacing the US dollar? It’s almost as bizarre as blaming opioids.

But there is some method to Trump’s madness, again. Especially in the wake of the Biden administration and EU taking Russia’s currency reserves and handing them over to Ukraine.

To understand what’s going on, you need to know how the global trading system works. It uses the US dollar as its currency. Even when two people or companies from outside the US trade outside the US, they tend to use US dollars to conduct that trade.

This creates a lot of bizarre unintended consequences. For example, it creates a huge artificial demand for US dollars and US government bonds.

If countries need US dollars to conduct trade, they tend to own a lot of them as a reserve. And they tend to invest them in US government bonds for safe keeping. That keeps the US government’s funding costs lower.

The risk is that countries come up with something better than the US dollar to use in world trade. If they do, demand for US dollars could plunge. And demand for US government bonds along with it.

The US government could struggle to finance itself. Perhaps that’s what has Trump worried. He certainly plans to add to the deficit.

But why would countries abandon the US dollar? Again, there are several reasons.

For one, there’s the “exorbitant privilege” that French politicians like to mention. While other countries must sell goods to get US dollars in order to participate in world trade, the US can simply print the money and buy goods from anywhere. Their trade deficit doesn’t cost them exports like the rest of us. It’s one reason why the US trade deficit has been so persistent.

But there’s a more topical issue. The US has a lot of power over a system that uses its currency. Here’s an example from a 2023 issue of The Fleet Street Letter:

In 2012, a Danish policeman attempted to buy Cuban cigars from a distributor in Germany. Because the $10,000 transaction used US dollars via the SWIFT payment network, it was flagged and the money was confiscated by the US government.

The Copenhagen Post reported on the minor diplomatic furore which ensured:

“It is worrying that the US is extraterritorially applying American legislation to regulate business activities outside of the US,” [foreign minister, Villy] Søvndal said. “I do not think it is fair that the US intervenes with European businesses, especially with a legal transfer of money between two European countries.”

The former head of the Danish intelligence agency, Hans Jørgen Bonnichsen added, “That the American authorities can stop a completely legal financial transaction between two European countries is an abuse of EU citizens’ rights.”

But the matter ended there. Except for a helpful update from a US treasury official who told the Copenhagen Post that, “the Cuban Assets Control Regulations generally prohibit US banks and financial institutions from providing financial services related to transactions involving Cuba.” Which, of course, the transaction did not involve at all.

Not many people took much notice of the story at the time. But they should’ve. Because it revealed the extent to which the US has unilateral and unaccountable control over the global currency and trading system via its currency.

But what if the US began using that control to gain a geopolitical advantage over more powerful enemies than cigar dealing Danish policemen? What if it abused that control a little too much? What if nations began to seek alternatives as a result?

This was followed by an analysis of the US and EU freezing and confiscating Russian assets for the war in Ukraine.

So Russia, one of the BRICS countries, would be happy to explain to anyone why the world needs a trading system that doesn’t use the US dollar. If they want to pursue their own foreign policy, they can’t afford not to.

The question is whether the BRICS now call Trump’s bluff. Will they commit to the US dollar, as he demands? Will they refuse to? Will they launch their own trading currency to bypass the dollar in response to Trump’s threats?

According to one of my guests at the Gold Summit 2025, Trump is barking up the wrong tree. The BRICS are not the ones preparing to undermine the US dollar.

The threat is coming from the countries that are carefully harmonising the amount of gold they hold relative to their GDP. That’s a precursor to launching a gold-based trading system by ensuring that everyone at the table has a “fair” amount of gold. Just as we all start a board game from the same position.

It’s also what we warned about in our issue for The Fleet Street Letter back in 2023.

To find out more, sign up to the Gold Summit now. We kick off on Monday. And there are three introductory reports you’ll want to check out before the first interview goes live.

Until next time,

Nick Hubble
Editor, Fortune & Freedom