Lear Capital’s panel of investment professionals, including the company’s founder, Kevin DeMeritt, are advising investors to pay attention to any upcoming moves the BRICS countries — Brazil, Russia, India, China, and South Africa — make, which could influence the value of the U.S. dollar.
The group of nations’ name originated from a report written by Goldman Sachs economist Jim O’Neill in 2001, during a period when the countries were undergoing considerable growth.
After a few years of informal meetings between Brazil, Russia, India and China’s foreign ministers, in 2009, the group of nations began holding annual summits; and in 2010, South Africa joined the collective.
Reportedly, a number of countries — possibly more than 40 — could be interested in becoming part of the BRICS group, due in part to a desire to access investment, trade, and other benefits. Together, the founding countries account for over 31% of the world’s GDP.
After the 2023 summit, held in August, news broke that the group had invited six additional nations to join BRICS — Iran, Saudi Arabia, the United Arab Emirates, Egypt, Argentina and Ethiopia — which will extend the group’s scope even further.
Lately, the organization has been in the news due to rumors the BRICS countries may be preparing to introduce a joint currency, which could potentially pose a threat to the U.S. dollar’s status as the world’s reserve currency.
The resulting effect, Kevin DeMeritt says, could be far-reaching.
“People in the United States would have a gigantic wake-up call because things would become much, much more volatile,” the Lear Capital founder says. “[Oil would be] denominated in somebody else’s currency; if that currency goes up, we would pay higher product prices, just like Europe’s been doing. Eight, nine years ago, [the cost of gas] was already very, very high because their currency was not the reserve currency anymore — ours was.”
What a BRICS Currency Could Mean for the U.S.
In a recent video shared on Lear Capital’s YouTube channel, Kevin DeMeritt told legal and political commentator Judge Andrew P. Napolitano, who served as a senior judicial analyst for Fox News from 1997 to 2021, that he felt the BRICS countries may be trying to move away from the U.S. dollar standard.
“We’ve weaponized the dollar against Russia, against other countries, for different things, and they want nothing to do with that,” DeMeritt said. “It should just be the reserve currency, and we can trade in it — and that’s not what it’s led up to be at this particular point. You add in inflation, and you’re holding a dollar that’s had as high as 9% inflation, and now it’s back down to 3.5% inflation; you don’t want that, either. They want a currency that they can rely upon, that they can trade freely with.”
If the BRICS nations were to introduce a gold-backed currency, DeMeritt said that with the U.S. running an approximately $960 billion deficit, and the other involved countries operating with a surplus, it could result in a massive wealth transfer.
“The trillion dollars deficit I have is going to them in the form of gold,” he said. “What do I get back? Cars, toys, clothing — everything that depreciates.”
It’s been more than 50 years since the U.S. government backed the U.S. dollar with physical gold, yet it has continued to print significant amounts of money. More than $22 trillion in bills have been produced just since 2008, according to Lear Capital’s Kevin DeMeritt — which he says has contributed to the dollar’s decline.
“It’s a tremendous amount of money,” DeMeritt says. “After COVID, we have a supply chain problem; you don’t actually have as many goods per capita as we had four years ago. That increase in money is going to make inflation much worse — and probably last a lot longer — than what most people expect.”
A Tricky Monetary System
The federal government has used currency production in the past to grow the economy. Trillions were printed and put into circulation during the COVID-19 pandemic, for instance, to help bolster credit availability and other economic elements, according to USA Today.
Trouble can arise, however, as that type of cash infusion ripples throughout the economy.
“You have so much money that it’s going to go in different asset classes,” Kevin DeMeritt says. “It happened in 2000 with internet stocks, it happened in 2008 with real estate — and now it’s happening again with the stock market. The bubbles happen, then the Fed raises interest rates, and you get a crash. The height of the cycle and the subsequent crash is going to be much bigger when you print up this much money.”
While the U.S. may continue to issue new dollar bills in whatever quantity it would like to, whenever it wants to, the supply of precious metals in the world is unquestionably finite — more can’t be created; once the global reserves are gone, we may all be forced to rely on recycling and reuse of the metals.
Their limited nature has undoubtedly helped precious metal assets maintain — or increase — their value.
Gold prices, for instance, have primarily remained steady or grown over the past 200 years, according to National Mining Association data. At times, they’ve risen significantly — such as between 2008 and 2012, when, despite a recession, the producer price index for gold rose 101%.
“With every dollar you print, the money we hold that’s already out there becomes worth less and less,” Kevin DeMeritt says. “But [you] can only mine so much gold per year. If you add an increase in demand from paper money onto that physical supply that’s fairly limited, usually, you’re going to find prices go up over time; it’s economics 101. Paper money is probably going to continue to fall as they print more of it — it has for hundreds of years now — and the price of gold is probably going to continue to increase.”
