Achieving Monetary Sovereignty

Table of Contents

How is BRICS Bank helping to achieve monetary sovereignty?

1. Reducing Dependency on Western Financial Institutions

Alternative to IMF and World Bank: The NDB provides an alternative source of funding for development projects, reducing reliance on traditional Western-dominated institutions like the International Monetary Fund (IMF) and the World Bank. These institutions often impose stringent conditions (e.g., structural adjustment programs) that can undermine a nation’s economic sovereignty.
Local Currency Financing: The NDB has increasingly focused on lending in local currencies rather than the US dollar. This reduces the risks associated with dollar-denominated debt, such as exchange rate volatility and dependency on the US Federal Reserve’s monetary policies.

2. Promoting De-Dollarization

Encouraging Local Currency Transactions: By facilitating loans and transactions in local currencies, the NDB helps member countries reduce their dependence on the US dollar in international trade and finance. This is a key step toward achieving monetary sovereignty.
Building Currency Reserves: The NDB supports initiatives that allow countries to build reserves in their own currencies or in alternative currencies, reducing the need to hold large amounts of US dollars.

3. Strengthening Regional Financial Systems

Infrastructure Development: By funding infrastructure projects, the NDB helps member countries build the physical and economic foundations necessary for stronger, self-reliant economies. This reduces their vulnerability to external economic shocks.
Capacity Building: The NDB supports capacity-building initiatives in member states, helping them develop robust financial systems and regulatory frameworks that enhance their ability to manage their own monetary policies.

4. Enhancing Financial Inclusion

Support for Sustainable Development: The NDB focuses on financing sustainable development projects, such as renewable energy, transportation, and water management. These projects often target underserved regions, promoting economic inclusion and reducing inequality.
Empowering Local Economies: By funding projects that create jobs and stimulate local economies, the NDB helps countries build stronger domestic markets, which are less dependent on external financing.

5. Facilitating Cooperation Among BRICS Nations

Pooling Resources: The NDB allows BRICS countries to pool their financial resources, creating a collective fund that can be used to support each other’s development needs. This reduces individual countries’ reliance on external creditors.
Knowledge Sharing: The NDB serves as a platform for sharing best practices in economic and monetary policy, helping member states develop more effective strategies for achieving monetary sovereignty.

6. Supporting Alternative Payment Systems

BRICS Payment System: Discussions among BRICS nations about creating an alternative to the SWIFT payment system (e.g., a BRICS-based system) could further reduce dependency on Western financial infrastructure. The NDB plays a role in facilitating such initiatives by fostering closer financial cooperation among member states.

How to replace the reserve currency in the world

1. Emergence of a Strong Alternative Currency

A new reserve currency would need to be widely accepted, stable, and backed by a large, robust economy. Potential candidates include:
- The Euro (EUR): Already the second-most-used reserve currency, but it faces challenges due to the Eurozone’s fragmented fiscal policies and political structure.
- The Chinese Yuan (CNY): China’s economy is large enough to support the yuan as a reserve currency, but the yuan is not fully convertible, and China’s financial markets are less open and transparent than those of the US.
- A New Global Currency: Some have proposed creating a new global currency, such as a “global digital currency” issued by an international organization like the IMF (e.g., Special Drawing Rights, or SDRs).

2. Deep and Liquid Financial Markets

A reserve currency requires deep, liquid, and open financial markets where governments and institutions can easily buy and sell assets denominated in that currency.
The US Treasury market is the largest and most liquid in the world, making it attractive for holding reserves. Any alternative currency would need to develop similarly robust markets.

3. Economic and Political Stability

The issuing country or region of the new reserve currency must demonstrate long-term economic and political stability. Investors and central banks need confidence that the currency will retain its value over time.
The US has historically provided this stability, despite occasional crises. A challenger would need to prove it can offer similar reliability.

4. Global Trust and Confidence

Trust is a key factor in the adoption of a reserve currency. The US dollar benefits from the rule of law, transparent institutions, and a history of honoring its debts.
A new reserve currency would need to build similar trust, which could take decades.

5. International Agreements and Coordination

Replacing the USD would require coordinated efforts among major economies and international institutions like the IMF, World Bank, and G20.
Countries would need to agree to hold reserves in the new currency and use it for trade and financial transactions.

6. Reduction of USD Dependence

Many global systems, such as oil pricing and international trade, are currently tied to the USD. Transitioning away from the USD would require:
- Pricing commodities (e.g., oil, gold) in the new currency.
- Encouraging bilateral trade agreements that bypass the USD.
- Developing alternative payment systems (e.g., digital currencies or blockchain-based systems) to reduce reliance on the USD-dominated SWIFT system.

7. Technological Innovations

The rise of digital currencies, such as central bank digital currencies (CBDCs) or cryptocurrencies, could disrupt the traditional reserve currency system.
For example, a widely adopted CBDC issued by a major economy or an international organization could challenge the USD’s dominance.

8. Geopolitical Shifts

The USD’s dominance is closely tied to US geopolitical power. A decline in US influence or a shift toward a multipolar world could create opportunities for other currencies to rise.
For example, if China’s global influence grows significantly, the yuan could become a more prominent reserve currency.

9. Gradual Transition

Replacing the USD would likely be a gradual process rather than a sudden shift. It could involve:
- Increased use of alternative currencies in regional trade (e.g., the yuan in Asia or the euro in Europe).
- Diversification of reserve holdings by central banks to include more euros, yuan, or other currencies.
- Development of new financial instruments and systems to support the new currency.

Debt creates demand for the currency, therefore private banks create more money than government printing.

Taxation creates demand for the currency.

Taxation removes money from the economy.

The stability of a reserve currency is influenced by several factors

1. Economic Fundamentals

Economic Size and Strength: A stable reserve currency typically belongs to a country with a large, robust economy that demonstrates consistent growth and low inflation.
Monetary Policy: A credible and independent central bank that manages inflation and interest rates effectively contributes to currency stability.
Fiscal Responsibility: A country with sound fiscal policies, low debt levels, and manageable deficits is more likely to have a stable currency.

2. Global Confidence and Trust

Political Stability: Countries with stable governments, clear rule of law, and low levels of corruption are trusted more, which bolsters their currency’s stability.
Financial Market Development: A well-developed, liquid, and transparent financial market enables global investors to confidently hold and trade the currency.
Safe-Haven Status: The currency should be seen as a reliable store of value during economic uncertainty, which increases demand and stability.

3. Global Trade and Usage

International Trade: A currency widely used in global trade (e.g., the U.S. dollar for oil transactions) supports its role as a reserve currency.
Foreign Exchange Reserves: A significant portion of global foreign exchange reserves held in the currency indicates its widespread acceptance and stability.
Global Lending and Investment: If a currency is frequently used for international loans, investments, and pricing of global assets, it enhances its stability as a reserve currency.

3. Monetary Sovereignty

Definition: The ability of a nation to control its own currency and monetary policy.
Importance:
- Enables a country to manage inflation, interest rates, and money supply to stabilize its economy.
- Reduces vulnerability to external financial shocks or manipulation.
Steps to Achieve:
- Issue and control a national currency (avoid using foreign currencies as legal tender).
- Establish an independent central bank to manage monetary policy.
- Avoid excessive foreign debt denominated in foreign currencies.
- Build foreign exchange reserves to stabilize the currency.
Control Over Currency:
- A nation with monetary sovereignty issues its own currency and controls its supply.
- This allows the government to manage inflation, unemployment, and economic growth through monetary policy.
Avoiding Foreign Debt Traps:
- Countries that borrow in foreign currencies (e.g., US dollars) are vulnerable to exchange rate fluctuations and external pressure.
- Monetary sovereignty allows a nation to borrow in its own currency, reducing this risk.
Independent Central Bank:
- An independent central bank can set interest rates and regulate the money supply without political interference.
- This ensures stability and confidence in the currency.
Examples of Monetary Sovereignty:
- The United States, Japan, and the United Kingdom have strong monetary sovereignty because they control their currencies (USD, JPY, GBP) and monetary policies.
- In contrast, countries using the Euro (e.g., Greece, Italy) have limited monetary sovereignty because the European Central Bank controls the Euro.

Fiat currency

If enough force is applied and if people have enough confidence in it, it will circulate.
Until people lose confidence in it.
Currency is used as money by political decree.
Thereafter, the value of currencies are measured only in relation to each other.

Mmt – Currency is sovereignty

Attack the oligarchy
Tax the corporations
1. Incentivises them to spend on people instead of the government.
2. Incentivizes behaviour and more productive outcomes
3. Incentivises research and development.
Food, energy, tech sovereignty
Material Progress => Human Development Greed => Generosity. Competition => Cooperation Individualism + Hedonism => Social Responsibility.
Markets and economies are governed by rules set by governments. And big corporations in the West.
Economics is a social science, not a physical science
They are wealthy because of the rules of the game and not hard work.
Political donations are not free speech but legalized bribery. Political parties have become giant fund raising machines. They use the money to get elected and reelected
The free market is not fair. Each change in laws has made the rich richer and the poor poorer. Banckrupcy and bailouts favour the corporations, but not the workers.
International trade is good for everyone. Global trade is not natural, it is structured by rules decided which assets will be protected and which will not.
Trade deals protect the West from local laws.
Taxing the rich is socialism. The rich are on corporate welfare programs and the poor get pink slips. Government spending is used on the wealthy instead of the poor.
Corporates need tax cuts and profits to create jobs. Jobs are created by spreading the wealth and more middle class people spending money on goods and services, creating more demand for goods and services amd thus creating jobs.
Unions are getting smaller and weaker. We need stronger unions that can bargain for higher paying jobs.
Inflation is caused by too much government spending and wage increases. Many industries are monopolized – Meat, Airlines, pharmaceuticals, groceries. We need more competition. The government raises interest rates and that kills jobs. Break up monopolies with laws.
Unconditional growth is good. Treat the earth like everything else, a limited resource. Target sustainable rather than growth.
Life expectancy has dropped for the poor, because income and wealth has a direct effect on health and longevity. They suffer from economic stress and have taken to opioids.
Government debt is not a problem, as long the debt is it’s own currency.

Establishing Justice in the Ummah