Content Editor, Dunham | 2025 ThinkAdvisor Luminary Award Winner | 2026 Wealthies Finalist — Thought Leader of the Year | Macroeconomics, markets, geopolitics & global trends
Updated January 2026
A proposed BRICS currency and de-dollarization efforts face a fatal structural flaw: BRICS nations depend on Western trade deficits to absorb their massive export surpluses. To truly replace the U.S. dollar, BRICS economies would need to abandon their export-driven growth models and massively increase domestic consumption—a painful economic restructuring they remain unwilling to endure.
Key Takeaways:
The de-dollarization paradox:Despite talk of abandoning the dollar, BRICS nations structurally rely on Western economies—particularly the U.S.—to absorb their export surpluses.
Export dependency:High domestic savings rates and chronically low domestic consumption mean BRICS economies cannot consume what they produce, forcing them to export for growth.
The structural cost of a new currency:To break from the dollar, BRICS nations would need to rebalance their economies away from exports and toward domestic consumption—a painful shift they are avoiding.
Why a BRICS currency fails the math:A global reserve currency requires the issuing bloc to run massive trade deficits to supply the world with liquidity. None of the BRICS nations are willing to run those deficits.
Over the last few months, we’ve seen a wave of hysteria regarding ‘de-dollarization’ and the formation of a BRICS currency. And many investors and clients may be spooked about this.
Now, what do I mean by de-dollarization?
Well, de-dollarization is the theoretical process of countries reducing their reliance on the U.S. dollar for global trade, central bank reserves, and financial transactions.
Simply put, it’s the concept that the global economy is moving away from the dollar and U.S. bonds.
But let’s be clear – BRICS is simply:
A diminishing growth engine in China (the C).
A golden goose that’s never laid an egg - but has potential - in India (the I).
And three anemic commodity producers in Russia (R), Brazil (B), and South Africa (S).
Headlines like “Argentina Ditching Dollar” and “Saudi Arabia Moving Towards Chinese Yuan” and “Brazil Declares War On Dollar” have spread like a fire.
But I don’t buy the hype.
Why?
Because there are imbalances within the BRICS economies - such as they all essentially run current account surpluses (except India). Have extremely high domestic savings rates. And - I believe - would most likely depend on the Chinese economy and the yuan as the backbone of a currency bloc.
This may sound like a mouthful, but I’ll explain why these things truly matter when trying to envision a BRICS currency and economic union.
Now, it’s not impossible for a BRICS currency to happen. But it would require a hefty amount of pain that these countries likely don’t want to endure.
Or rather, it’s not as easy as many mainstream talking heads claim. It would completely upend their economies and trade flows to switch from dollar reserves to their own BRICS currency.
Now, keep in mind this is a complex macroeconomic topic (although grossly underrated). And I don’t plan on covering everything.
But these are important topics that not many seem to discuss regarding a BRICS currency.
So, let’s take a closer look at all this and why it matters. . .
Why Are Current Account Surpluses a Problem for a BRICS Currency?
A current account surplus occurs when a country exports more goods, services, and savings than it imports, meaning it produces more than its own citizens consume.
In economics, it’s generally taught that a country running a current account surplus is a ‘good’ thing - and that a deficit is ‘bad’.
But I don’t look at things so black and white - especially in economics and markets.
Instead, it’s just a balancingact – neither good nor bad.
A better way to think of it is that balance of payments (BOPs – global deficits and surplus measures) are basically accounting for countries - meaning a surplus in country A is a deficit in countries B or C or D, etc. (and vice versa).
So – for example – if China runs a surplus, that necessarily means some other country ran a deficit.
Now, why does this matter?
Because currently, almost all BRICS run chronic current account surpluses (with India potentially moving towards one1).
Why Do BRICS Nations Depend on Western Deficits?
Meanwhile, the U.S. and U.K. run large current account deficits to match these (remember, it must balance).
For perspective, the International Monetary Fund (IMF) recently noted2 in 2022 the evolution of global current accounts (as a percentage of world GDP) after the Russia-Ukraine war began.
And as you can see, not only do they balance. But has actually widened since 2020 (but is expected to narrow in the coming years according to the IMF).
Figure 1: IMF. 2023
Seems ‘good’ for BRICS, right?
Well, not so fast.
These current account surpluses also indicate that BRICS (and Germany, Saudi Arabia, and Japan) have unbalanced economies.
What I mean is, they aren’t consuming what they produce, thus needing to export the rest abroad (hence the surplus).
Another way to put this is that these current account surpluses show us that BRICS have low domestic demand. And thus, depend on the Western economies to import their glut of goods and savings for growth.
In fact, according to Investopedia3, a current account surplus indicates, “low domestic demand, or may be the result of a drop in imports due to a recession.”
These chronic BRICS surpluses indicate two things:
High Savings, Low Consumption: The Achilles’ Heel of BRICS
Just look at the World Bank’s household financial consumption expenditures (HFCE – aka consumer spending) as of the end of 2021.
There’s a thick gap between consumer spending in the BRICS compared to the U.S.
Figure 2: World Bank, 2023
To put this into context, U.S. consumer spending is nearly $16 trillion – which is 50% more than allof BRICS put together ($10.8 trillion).
The consumer classes in BRICS just don’t have enough purchasing power to absorb all of what they produce and therefore depend on exports.
Thus, if it wasn’t for the deficits (excess buying) in the West, these economies would likely drown in deflation and unemployment as all their unconsumed goods sit idle (which is what we’ve seen happen in China over the last 10 months).
Or – putting it plainly – they depend on their exports to the West for growth and foreign reserves at the expense of their own anemic consumers.
Figure 3: World Bank, 2023
Note that other major current account surplus nations4 – such as Germany, Japan, South Korea, and Saudi Arabia – also have very high savings rates.
Germany is at 26%. Japan is at 25%. South Korea is at 35%. And Saudi Arabia is at 29%.
These numbers dwarf the U.S.’s 17% and U.K.’s 15% savings rates.
Keep in mind that households can only do two things with income – dissave (consume) or save (not consume).
And when there are more domestic savings on a national level, it means less consumption.
In fact, many of these BRICS and emerging economies depend on high savings (low consumption) policies to fuel export growth.
This is known as the Gerschenkron growth model5 – named after classical economist Alexander Gerschenkron.
The Gerschenkron growth model is an economic strategy where developing nations suppress domestic consumption to channel high national savings into state-backed export and industrial growth.
He essentially wrote that the more backward an economy is at the outset of development, the more likely certain conditions will occur - such as:
Government-controlled banks that channel physical and human capital into specific industries (such as oil or manufacturing).
A focus on producer goods rather than consumer goods.
An emphasis on agricultural/commodity sectors as a market for new domestic industries will be small.
More capital-intensive production rather than labor-intensive production (focus on capital for returns rather than labor efficiency).
Do all sound familiar?
This is what China, Russia, Brazil, South Africa - and even Japan, Saudi Arabia, and Germany - have done to some extent.
Thus, the high savings turn into less domestic consumption, which creates a larger current account surplus (lower imports to consumer while exporting more) – translating into more dollar reserves in state coffers.
Why Is a BRICS Currency Unlikely to Replace the U.S. Dollar?
And what do they do with these dollar reserves? They buy U.S. bonds as collateral (yield) and often use it to keep their currencies weak against the dollar – making sure export growth continues.
I know this may sound technical, but the gist is that BRICS depend on others to absorb their excess exports – mostly the Western countries (such as the U.S.).
Or rather, if Washington suddenly said it’s going to balance the budget (limit deficits), these surplus countries would feel it harshly – potentially even worse than the U.S.
Thus, breaking from the dollar would completely force these nations to rebalance their economies. Something they do not seem willing to do thus far. . .
What Does the Future Hold for the U.S. Dollar?
Now, the appeal of a BRICS currency is understandable. It promises autonomy, leverage, and insulation from U.S. policy.
But currencies don’t run on promises. They run on imbalances.
It’s just far more disruptive - and far less politically convenient - than most are willing to admit.
FAQ:
What is a BRICS currency and why does it matter? A BRICS currency is a proposed shared or settlement currency among Brazil, Russia, India, China, and South Africa designed to reduce reliance on the U.S. dollar. It matters because if viable, it would fundamentally reshape global trade flows, reserve holdings, and U.S. borrowing costs — though structural economic barriers make a functional version unlikely in the near term.
Why do BRICS nations depend on the U.S. dollar? BRICS economies are built around exports and high savings rates, not domestic consumption. They depend on Western deficits — particularly U.S. demand — to absorb their surplus production. Those export earnings accumulate as dollar reserves, which BRICS nations then use to buy U.S. bonds and suppress their own currencies to stay competitive. The dependency is structural, not incidental.
Why is de-dollarization so difficult for BRICS? Because breaking from the dollar would force BRICS economies to do the opposite of what built them — allow currencies to strengthen, shift from exports to domestic consumption, and run deficits instead of surpluses. Each step is economically painful and politically unpopular for governments whose growth models depend on export surpluses and suppressed consumer spending.
Can China replace the U.S. dollar as the global reserve currency? Not without a fundamental restructuring of its economy. Reserve currency status requires running sustained trade deficits to supply global liquidity — China runs the opposite, with record surpluses and a deliberately suppressed yuan. The yuan accounts for less than 3.7% of global payments versus the dollar's 46.5%. Beijing shows no appetite for the deficits reserve currency leadership demands.
What would happen to BRICS economies if the U.S. reduced its trade deficit? They would feel it severely. U.S. import demand is the primary engine absorbing BRICS export surpluses — before COVID, the U.S. current account deficit equaled the combined deficits of the next 19 deficit-running nations. A meaningful reduction in U.S. deficits would drain dollar liquidity globally, collapse export demand for surplus economies, and expose the structural weakness of BRICS domestic consumption.
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