I guess I overall don’t understand entirely how currency works… that is, why is the US dollar the “reserve currency” for several nations and why would BRICS challenge that? And finally, what effect would that have on the US.
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The US dollar is the reserve currency because the US is stable, strong and currency freely convertible. The “Petrodollar” thing the other posters are alluding to only applies to Saudi Arabia. The US provides aid to KSA in exchange for them only accepting USD for their oil. All other oil producers are free to accept whatever currency they please in exchange for their oil but they choose the USD because of the reasons I stated above. Also the agreement has already expired and KSA is free to accept payment in any currency.
BRICS is a new economic bloc similar to the EU consisting of Brazil, Russia, India, China and South Africa. They’re proposing establishing a new currency to backed by their members so they don’t have to depend on the USD to try and weaken the US’ economic position. If no one needs the USD, then the US is in a weaker bargaining position when it comes to trade. A weakening USD would be a boon for US industries depending on exports (their products are now cheaper and more competitive) but would be devastating for industries depending on imports (their products are now more expensive to produce).
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