Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Last month, it was announced that China and Brazil had signed an agreement on trade in mutual

currencies, abandoning the use of the US dollar as an intermediary. The agreement means that the two countries

will conduct a huge amount of trade that they do with each other directly exchanging Chinese

one for Brazilian Real and vice versa instead of using the US dollar for settlements.

Brazil's new President Lula, on his first state visit to China,

called for the countries of the BRICS group of nations, which is made up of Brazil, Russia, India,

China and South Africa, to come up with their own alternative currency for use in trade.

Every night I ask myself why all countries have to

base their trade on the dollar, Lula said in his speech. Why can't we do trade based on our

own currencies, he added, to loud applause from the Brazilian and Chinese dignitaries present at the

event?

Who was it that decided that the dollar was the currency after the disappearance of the

gold standard?

The strength of the US dollar over the last year has inspired a lot of hopeful thinking

in emerging markets about reducing dependence on the US currency and economic

sensitivity to US interest rates.

The American rate hikes over the last year or so have highlighted how international monetary

conditions are tied to those in the United States.

And the Western sanctions imposed in response

to the Russian invasion of Ukraine have led to a significant concern globally about the power

the US and Europe have in the global financial system, driving many emerging markets

...