Does the Iran war mark the beginning of the end of US dollar hegemony?

Story by Mark Swilling

It is March 2024 and I am standing on an observation tower in the middle of a solar power plant near Bangalore, India, operated by the Karnataka Solar Power Development Corporate Limited.

As far as the eye can see, just solar panels all round on 12,709 acres. This is a 2 Gigawatt solar power plant – one of India’s 55 mega solar parks. According to the Indian government’s Panchamrit Declaration at COP 26 (2021), India’s goal is 500 GW of non-fossil-fuel-based electricity. It achieved 259 GW in 2025, which is more than 50% of India’s total electricity generation, of which 129 GW was solar power.

The following year I went to China. On 25 August 2025 the board of the National Transmission Company of South Africa was sitting in the imposing boardroom of the Hubei provincial headquarters of State Grid. Against a gigantic dark green background with stark white Chinese writing, 10 Chinese men in black suits and black ties sit neatly on one side of a massive boardroom table, with the provincial chairperson, Wu Yingzi, in the middle.

It’s a smart place to bring us: Hubei’s population is similar to South Africa’s (55 million) and its electricity generation capacity is 60 GW (SA’s is 48 GW, 60 GW if you add all the utility scale and rooftop renewables). We are there to learn from the most technologically sophisticated electricity grid operator in the world – State Grid. State Grid operates a 3,000 GW grid, with more than 50% of the energy it transmits across China sourced from renewables.

Both China and India want to electrify everything and then connect all the grids to renewables. They are the electro-states of the future that will replace the petro-states that dominate North America and the Middle East. They are the global drivers of the unfolding energy transition. Their investments in renewable energy generation are larger than investments in all energy by the rest of the world combined. They are unstoppable, and with oil prices breaking through the $125 per barrel ceiling, the energy economics is on their side.

Historic meaning of the war

This is the lens through which I see the historic meaning of the bombardment of Iran that Israeli Prime Minister Benjamin Netanyahu convinced US President Donal Trump was a good idea. By destroying the Gulf’s oil infrastructure and systems, this illegal war will push up oil prices so high that it will do more to accelerate the energy transition than a hundred climate conferences.

There is plenty of evidence now that the illegal joint US-Israeli attack on Iran has triggered deeper underlying dynamics that we cannot understand if we remain attached to old ways of seeing the global financial and energy order. Two recent headlines in the 23 April edition of The Economist are the canaries in the coal mine: “Xi Jinping wants a powerful currency. America’s war has helped.” And: “Renewables are shining. The Iran war amplifies their appeal.”

The first signals the decline of the petro-dollar, and the second the acceleration of the energy transition as oil prices climb ever higher – hitting the $125 mark on 30 April. Both headlines signal shifts that arise directly from the same geopolitical shock: the regional conflagration triggered by the US-Israeli military in the Middle East that has catalysed the worst oil shock in modern history.

If US global hegemony is premised on cheap oil traded in US dollars, how do we explain a military strategy that achieves exactly the opposite? We need to look deeper into the more long-term underlying dynamics of oil, dollars and technology to understand the short-term strategic miscalculations of a hegemon in decline.

Many commentators have, since the bombardment began at the end February, pointed out that a rapidly rising (and volatile) oil price will do more to accelerate the energy transition than climate commitments. This fact is not lost on the many speakers from the 50 governments (including oil producing countries) represented at the Conference on the Transition Away from Fossil Fuels in Santa Maria, Colombia, that took place on 24-29 April at exactly the moment that the Strait of Hormuz was double blocked by Iranian and American forces.

At this meeting, Colombia’s President Gustavo Petro questioned whether “fossil-fuel capitalism” can in fact reform itself. The road to “fascism” via “barbarism” is, he argued, more likely. And the proxies of hegemons will be what makes it happen – to wit, the destruction wrought by the Israeli Defence Forces in Gaza and South Lebanon.

A renewable energy first

In a new review by the International Energy Agency (that led an irritated White House to call for a stop to it’s reports), it was reported that solar power provided 25% of the world’s new energy in 2025, higher than new gas (17%) and for the first time renewable energy produced more electricity than coal – 34% versus 33% of the global total.

Furthermore, for the first time ever, newly constructed renewables produced more electricity than the increase in demand for electricity. That is why, for the fourth time since 2000, fossil fuels produced less electricity in 2025 than the year before. The driver is not climate change, it is prices.

Renewables are cheaper in India than coal generation, even if you include the cost of batteries to provide 24/7 outputs. In China, where the largest grid in the world enables 3,000 GW of installed capacity (compared with a mere 254 GW in the whole of Africa), for the first time in 2025 total generation of electricity from renewables exceeded the 50% mark. China has four times more renewable energy than the whole of Africa from all its energy sources!

Using this asset, China is focused on electrifying everything in order to reduce its dependence on oil. As the oil price rises, many other countries in the developed and developing world are doing the same. This message was loud and clear at the historic Santa Maria conference. China is now not only the largest generator of renewables, it is the largest supplier of the equipment needed to decarbonise the global economy, and it is becoming easier to sell this kit in yuan (at lower interest rates) to countries who are building up their yuan reserves in order to make these deals.

If energy is no longer dependent on oil, then it is also no longer dependent on US dollars.

What is the petro-dollar?

So what is the petro-dollar? At the Bretton Woods Conference after World War 2, reflecting the balance of military and financial power at that historic moment, it was agreed that the US dollar would be pegged to gold, and all other currencies pegged to the US dollar. This meant the value of all US dollars equalled the value of gold reserves for the next quarter century.

When the US started to run out of money (to finance, among other things, the Vietnam war) it needed to print more money.

But this was impossible if it could only print an amount equal to the gold reserve. And so, President Nixon summarily announced on 15 August 1971 that he had, as he put it, instructed the Secretary of the Treasury to “temporarily suspend the convertibility of the dollar into gold”. Needless to say, what was supposed to be temporary became permanent because the US dollar replaced gold as the ultimate store of global value.

The global financial turbulence triggered by Nixon’s unexpected move was only calmed when Henry Kissinger travelled to Saudi Arabia after the Yom Kippur War (which, of course, is what triggered the 1973 oil crisis) to negotiate the deal that created the petro-dollar: henceforth, it was agreed, oil would be traded in US dollars thus ensuring Saudi Arabia never cut off oil to the US again.

The deal was that the Saudis would buy US Treasury Bonds and those dollars would get reinvested back into Saudi Arabia to buy the oil, and also provide loans to build modern-day Saudi Arabia. As other oil producers came online, they just joined the petro-dollar system, and so the Kissinger solution became a global solution that cemented global oil production to the US dollar.

This was the start of what Yanis Varoufakis calls the “great global surplus recycling mechanism”: US dollars flow out of the US to pay for over-consumption by US consumers, but get recycled back into the US dollar system through investments, including in Wall Street or Treasury Bonds. For example, the US allowed Germans to sell more cars to Americans on condition they invested a portion of their profits in Wall Street in US dollars.

As long as oil was traded in dollars, so the global quantity of dollars expanded in tandem (although at a faster rate) with growing oil production. This was not about pegging the quantity of dollars to the value of oil (as if oil just replaced gold); it was about enabling private banks within the post-1971 credit-based system outside the US to create dollars by extending credit (in US dollars) that was ultimately secured by a global hierarchically structured financial system secured at the top by the Federal Reserve and the US Treasury. This has become known as the Off-Shore US Dollar System.

As long as US dollars could be recycled fast enough to enable high enough returns on the dollar to be reproduced forever, the US global financial monetary empire could be assured without colonial control. Underpinned, of course, by 800 military bases in 80 countries. This is why the US economy can finance itself off the largest mountain of debt in the world.

US debt

For the first time ever, by April 2026 US debt was the same size as GDP ($31-trillion). Contrary to what many think, US debt is not irrational – it is a necessary cog in the great recycling mechanism that effectively transfers wealth from the rest of the world into the US via the Off-Shore US-Dollar System. But to survive, the global cyclical flows cannot shrink, they must always increase in size and even velocity.

In short, the central tenet of US hegemony until now was simple: the steadily increasing number of barrels of oil that supplied 60% of the world’s energy (oil) must continue to be traded in US dollars. But this is what has begun to change. Firstly, with the rise of the BRICs-plus, less and less oil is being traded in dollars. Secondly, less and less energy comes from oil as renewables expand exponentially. Put the two together, and it is obvious that the status quo cannot survive. It is also obvious where both come together – the double blockage of the Strait of Hormuz.

Venezuela started trading oil in non-US dollars, and its president was kidnapped. BRICs-plus countries that stated their desire to stop cross-border trading (of everything) in US dollars was threatened by Trump with 100% tariffs and total exclusion from the US market.

Since the US imposed sanctions on Iran (specifically exclusion from Swift), it has traded oil in Chinese yuan, Euros, Indian rupees, Russian rubles and even bartering (food or weapons for oil). The Iran Central Bank became increasingly more active in supporting non-dollar oil trading by holding ever-larger non-dollar reserves. Unsurprising, then, that the original goal of the military action against Iran was regime change. What exactly the goal is now depends entirely on the irrationality of Trump’s strategic calculus on any particular day.

As the petro-dollar gets weakened by the military actions of the very government that prints US dollars, the Chinese are taking the gap, strongly supported by the Iranians who no longer need US dollars to purchase what they need from China. Using the Chinese-built non-US dollar Cross-Border Interbank Payment System (CIPS), transactions worth 920-billion yuan were processed in March 2026 (shortly after the conflict began), jumping dramatically to 1.2-trillion yuan in April 2026.

The big jump is caused by the rapid rise in Iranian oil traded in non-US dollars, Strait of Hormuz tolls being paid in yuan, and Chinese capital fleeing the Gulf because it no longer feels protected by the US military. On a different but equally subversive platform, 95% of the rapidly expanding quantity of digital payments flowing through the payment platform called Project mBridge set up by Asian (including Chinese) and UAE Central Bankers is transacted in digital yuan currency.

As of 2026, more Chinese cross-border transactions were conducted in yuan than in dollars. Yuan denominated so-called “Panda Bonds” are proliferating, and getting bought up by non-Chinese governments that need yuan-based trading instruments, corporations that trade heavily with China, western banks (like JP Morgan) and even Western hedge funds that see opportunity in the yuan as the dollar declines relative to it.

A new ballgame

Payment systems are the rules-based coordinators of credit transactions (i.e. the IOUs that grease the wheels of the global financial system), not the conveyors of actual chunks of cash (currencies). They play a central role in expanding the asset and liability sides of the double-entry books that make it possible to create money out of nothing. And what they created until now in the Off-Shore Dollar System are US dollars. When a payment system emerges that creates credit in non-US dollars, the ballgame starts to change fundamentally.

This new ballgame was starkly evident at a conference in Dakar, Senegal, on 12-13 May 2026, on the debt crisis in Senegal: towards sustainable and progressive solutions as alternatives to the International Monetary Fund’s (IMF’s) austerity approach. Delegates were informed that China is proposing to several African Governments that it is willing to refinance US dollar loans in yuan at lower interest rates.

Senegal is facing a debt crisis despite a recent oil and gas bonanza. To effectively wrest control of this resource from US dollar circuits, the Chinese may well offer to refinance the accumulated debt at a lower interest rate. This would take the IMF out of the picture. Possibly for the first time, the conference heard, African governments have a way to escape the IMF’s dollar-based austerity programmes.

As the petro-dollar goes into decline in a multipolar multi-currency world, US debt becomes harder to service as bond yields rise and many countries extract their currency and gold reserves from the US financial system (e.g. Germany’s decision to return its gold reserves to Germany). The US needs to borrow heavily to service its debt. For decades now, the oil-producing Gulf States (following the Kissinger-Saudi deal) have enabled this by buying US debt. (Others have also, of course – in particular Japan, and also China, but declining overall since 2008.)

As oil revenues into the Gulf States decline because of the war, they have less and less free cash to continue to buy up US debt (in particular US Treasuries) and invest in US assets. And so, out of this war-triggered imbroglio (which the US brought upon itself) has emerged one of the more amazing financial deals aimed at keeping the post-1971 US dollar system afloat – the US Treasury secretary’s approval of swap lines for Gulf and Asian states.

Swap lines are essentially big chunks of cash that the US Treasury (or the Federal Reserve via Central Banks) lends to countries who run short of dollars. But the US Treasury only has authority of (the much more limited) Treasury swap lines. The plan is to use swap lines to pump US dollars into illiquid Gulf States so that these US dollars can be recycled back into the US dollar system to compensate for the loss of oil revenues suffered by the Gulf States. In short, the US is bailing itself out, not the Gulf States as the mainstream financial press has suggested.

There is now a big debate about why the Gulf states don’t just dip into their Sovereign Wealth Funds (worth $6-trillion)? Some argue that they have debt service obligations that are correlated with dwindling oil revenues, and so they may have rising debt obligations but lack the liquidity needed to service their debts. Hence the bailout.

Sinister signal

Varoufakis sees a more sinister move: this is a signal, he argues, by the US Treasury to the incoming head of the Federal Reserve that it will be necessary for the Fed to approve in future a number of much bigger swap lines (because it can – there is no limit to how much the Fed can print) to prevent the dollar system in general, and the petro-dollar system in particular, from collapsing.

In other words, Scott Bessent – the US Treasury secretary – may be engineering another 1971 moment. If the US cannot service its debt, and if the debt is not going to be cut during election time (through the mid-term to 2028), then the only solution is massive injections of dollars via the great recycling mechanism that underpins US global hegemony.

But will the recycling mechanism work this time if less and less is traded in US dollars as the BRICs Plus rise, and more and more energy is produced without having to burn more and more oil (now at 100 million barrels per day and declining)? China will play a key role. It has the largest renewables-based electricity generation system, and the largest cash surplus.

Will it continue to electrify everything and reduce dependence on oil? Will it continue to expand its yuan-based cross-border trade? And will Trump ask Xi Jinping to help save the US dollar by increasing rather than decreasing purchases of US Treasury Bonds at the US-China Summit, and what will Xi Jinping want in return? And will China continue to buy oil from Iran in yuan?

Nothing is certain in an increasingly unstable geopolitical environment. But I suspect the answers to most of these questions will be yes. More cross-border trade will be in US dollars, especially as Chinese refinances in yuan more dollar-denominated African loans at lower interest rates. As oil prices rise and stay high for long enough, the energy transition will accelerate.

Will Xi Jinping agree to prop up the US dollar by buying more Treasury Bonds when he meets Trump? Probably (and most likely not as much as Trump wants), but in return Trump may well have to agree that the Chinese can have a free hand to increase yuan-based cross-border trading and financing. And yes, this will mean China will want to continue to buy more and more oil in yuan from whomever it wants, in particular Iran and the Senegalese.

A multipolar multi-currency world

Where does this all end up? A multipolar multi-currency world. And how does this affect SA? SA benefits from being a key member of the BRICs Plus club that will be an important vehicle for expanding the yuan-based payments system and a low tariff regime for African countries.

This could help South African trade and dilute its US dollar dependency, which might be useful if Trump gets even more nasty. As after all previous oil crises, the gold price will rise (not initially, but over the medium to long term).

But if SA wants to position itself in this new world, we will have to see far more clearly what is unfolding on the global stage and how, as I argued elsewhere, this is affecting our own financial systems. De-dollarisation and the energy transition are the twin-drivers of a new world, and China is at the centre of both.

This may not be a better world, but it certainly creates more opportunities for small African countries like ours if we open our eyes wide enough and stop favouring investments that subvert our sovereignty when we have plenty of rand to redirect into fixed assets. DM

From youth bulges to graying societies: The demographic dynamics that are upending the world

Published: March 31, 2026

Author

John Rennie Short

Professor Emeritus of Public Policy, University of Maryland, Baltimore County

Government-shaking protests in Bangladesh, Iran, Nepal and Sri Lanka – to name a few – have all in recent years been linked to what demographers call a “youth bulge.” Meanwhile, the economic slowdown in China and ballooning public debt in the United States are in part due to the two powers’ aging populations. In contrast, recent economic growth in Brazil, India and Vietnam reflects a “demographic dividend” of the economically active.

Demographic trends are fueling some of the events reshaping the world. But what exactly are these age-related phenomena, and why are they having such an impact now? I explored these issues in depth in my 2024 book “Demography and the Making of the Modern World.”

Below is a rundown on some of the main demographic dynamics that are changing the world.

Young populations

Having a high proportion of a population age 14 and under is something generally found in poorer countries, and it usually means a huge demographic drag on economic performance.

We see this in Angola, Niger and Somalia, all of which have between 45% and 50% in that age group — compared to around 17% in the United States.

Having such a large proportion of society in their early childhood means fewer workers are supporting a vast number of citizens not in the workforce – and that leads to reduced savings rates and slower economic growth.

Countries still at this early stage of the demographic transition from high to low birth rates often have limited economic opportunities.

The youth bulge

Baby booms, the result of high fertility rates, are inevitably followed by a “youth bulge.” This is defined as a country with a larger than average proportion of people ages 15 to 29.

This bulge is linked to an increase in political instability and the possibility of increased political violence.

Research has found that countries with more than 60% of their population under 30 are four times more likely to experience outbreaks of civil conflict.

So it is of little surprise that countries that have experienced mass political protests of late have a significant youth bulge. In Bangladesh, which saw its government toppled by mass protests in 2024, 53% of the population is under 30. Iran, where major protests in January were brutally repressed, has between 50% and 60% under 30. And in Sri Lanka, the site of major protests in 2022, 48% of the population is under 30.

This isn’t an entirely new phenomenon. The Arab Spring uprisings of 2011-12 owe much of their origin to a youth bulge in the Middle East. At the time, the portion of the population under 30 in Egypt, one of the epicenters of the uprising, was 60%-65%.

When economies cannot create enough jobs for a large youth cohort, unemployment among educated young people can cause widespread frustration and a sense of political marginalization, which can sometimes turn into violent methods to effect change.

Societies with high percentages of young people, both under 15 or in places with a youth bulge, can have other serious global knock-on effects. For example, while there are many reasons behind new immigration flows, an underlying driver of departures – from Africa and the Middle East in particular – is a lack of opportunity at home and the promise of better opportunities abroad for this burgeoning population.

The demographic dividend

As youthful countries age, a phenomenon called a “demographic dividend” can occur. That’s when a higher proportion of people in the more economically active 15-64 age group emerges.

From 1970 to 2000, the rapid economic growth of East Asian economies, Western Europe and the U.S. was tied to this demographic dividend.

Today, countries with demographic dividends such as Vietnam, with 70% of the population ages 15-64, have the opportunity for impressive growth rates.

And while sub-Saharan Africa has many problems now, partly as a result of a large population under 15, it can look forward to the potential of a huge demographic dividend in the future.

The aging population

The window of opportunity created by the demographic dividend does not last forever. As longer life expectancy kicks in, so too does the population age.

China has now aged out of its dividend, and Brazil’s is coming to an end. In China, the population over 65 will reach 28% by 2040 – more than double what it was just 15 years ago.

In super-aged countries, such as Japan and Italy, the 65-and-over population now accounts for 25%-30% of the total population.

And that can be a huge problem.

A graying population can dampen economic growth. In the U.S., people over 65 are the fastest-growing cohort, and they tend to be high-propensity voters who pressure the government to extend retirement benefits, leading to a massive flow of wealth transfer from the shrinking working population to the expanding number of retirees. In 1950, there were 16.5 workers for every beneficiary of Social Security in the United States. By 2023, this figure had fallen to 2.7 workers per beneficiary.

A second demographic dividend can occur if an aging population has enough savings and asset accumulation to pass on to younger generations. But this wealth transfer can increase inequality, as those who receive substantial inheritance will be better positioned than those who do not.

In most graying societies, there are often acrimonious debates about how governments should pay for the benefits for an increasingly elderly population from the wages of a reduced working-age population.

Solutions such as increasing retirement age, reducing benefits or imposing higher taxes come with political costs. President Emmanuel Macron’s government in France, for example, has been periodically threatened by popular protest against cuts in social welfare, especially retirement benefits.

At the latter stages of the transition, aging richer countries now require workers from overseas – but are coming up against a nativist backlash. A combination of slowing economies and new streams of immigrants are creating a volatile politics conducive to the rise of authoritarianism and xenophobia. In this way, the rise of a populist nationalism in the U.S. and across Europe is linked to an increasingly aging population.

The shrinking world

As birth rates fall, the shrinking of a nation’s population is often worrisome for political elites, who tend to see a large population as a source of power.

It explains the official encouragement of higher birth rates in China and Russia through pronatal policies such as tax breaks and fiscal incentives. Even the U.S. administration has mused how to increase birth rates.

But governments have little power when it comes to encouraging women to have more children.

Population size can influence geopolitical rivalries. India is in the fortunate position of a demographic dividend that may last for several more decades. By 2100, the population of India is estimated to be roughly 1.5 billion; China’s is forecast to be 800 million. And that could change the dynamic between the two longtime rivals.

Meanwhile, Russia’s population continues to fall due to very low birth rates. This population crisis feeds into a post-imperial syndrome, where the decline of empire and power status invokes a sense of loss of self-importance that gives rise to resentment and an unwavering commitment to retain great power status.

How governments and societies adapt to population change is key: Demographic dividends can be squandered and aging populations can enrich societies, if played right. Demography is undoubtedly a vital force in contemporary events – but it is also not a predetermined destiny.

ASIA TIMES

Posted in Opinion

A stable and smart BRICS route to de-dollarization

BRICS basket or digital clearing unit backed by currencies and commodities could supplant the buck and fulfill Keynes’s bancor vision

by Bhim Bhurtel February 18, 2026

By any honest reading of history, the international monetary system was never neutral. It was a political settlement, forged in 1944 at Bretton Woods, that elevated one country’s currency to the status of global money.

That settlement—shaped by the ideas of Harry Dexter White and accepted despite the objections of John Maynard Keynes—served the world well for the post-World War II period. But its core asymmetry has outlived its legitimacy.

Today’s global economy is multipolar in production, consumption and distribution, but unipolar in its financial system. The dominance of the US dollar has created a structural imbalance: the issuer of the reserve currency can run persistent deficits, while the rest of the world must struggle to adjust through painful austerity, reserve accumulation or volatile capital flows.

This has created a persistent challenge for the global economy: dollars are American, but its problems are shared by developing countries. This is the very dilemma Keynes warned against when he proposed a neutral international currency, known as “bancor”, managed through a clearing union that disciplined both trade surplus and deficit countries.

Eighty years later, the case for a modern bancor has returned—not as a nostalgic revival, but as a practical necessity of the time. The most credible impetus for reform is emerging not from Washington or Brussels, but from the Global South, particularly the expanding BRICS grouping and its New Development Bank.

Beyond dollar hegemony

The debate is often caricatured as a geopolitical contest between the dollar and rival national currencies. That is the wrong frame.

Replacing one hegemonic currency with another would simply reproduce the instability of the current system. A Chinese renminbi-dominated order, for example, would raise the same concerns about asymmetry, external constraint and political leverage that now surround the greenback.

It seems that China, as the world’s largest exporter of manufactured goods and technology, does not want its currency to become a global reserve currency. Doing so would likely cause the renminbi to appreciate, making Chinese exports more expensive and potentially reducing global demand for its goods, services and technology.

The real alternative is not another national currency, but a non-national one. This is why both the Global South and Global North should consider a BRICS currency for settlement purposes rather than as a reserve currency.

A BRICS-led reserve asset, structured as a basket or digital clearing unit anchored in a diversified set of currencies and commodities, could approximate Keynes’s vision for bancor.

Its purpose would not be to displace national currencies, but to act as a neutral unit of account and settlement for international trade and finance. Crucially, it would be governed multilaterally, with no single country able to weaponize it for domestic or geopolitical ends, as the US has been doing with the dollar.

This is not a utopian idea. Elements already exist in bilateral currency swaps, local-currency settlement mechanisms and pooled reserve arrangements. What is missing is integration into a coherent clearing system with automatic stabilizers—precisely what Keynes proposed 80 years ago.

Restoring symmetry and stability

At the heart of Keynes’s design was a principle still absent from today’s system: symmetry of adjustment.

Under a modern clearing union, persistent surplus countries would face charges on excess reserves, incentivizing them to expand domestic demand or invest abroad. Deficient countries, meanwhile, would have access to overdraft facilities that prevent sudden contraction.

This is not merely a technical fix. It would rebalance the global economy away from chronic underconsumption and deflationary bias towards stable, demand-led economic growth. It would also reduce the need for developing countries to accumulate vast dollar reserves as self-insurance for payment of import and foreign debt service—a practice that diverts resources from the domestic investment and social development they desperately need.

For many countries in Africa, Asia and Latin America, such a system would offer what the current one does not: macroeconomic policy space for their economies. Governments could pursue job creation, industrialization and climate investment without the constant threat of currency crises, global North economic shocks or World Bank- and IMF-imposed austerity measures.

Critics of reform often argue that the dollar system underwrites global trade and financial openness.

Yet, in practice, it has increasingly been used as an instrument of coercion—through sanctions, financial exclusion and regulatory overreach. This erodes trust and fragments the very globalization it claims to support. It is imperative to respond to US policy instability every four years and recently to its rising protectionism.

A neutral clearing currency would delink trade from geopolitical leverage. It would make sanctions more targeted and legitimate rather than resort to system-wide disruptions. It would also encourage genuine free trade by lowering transaction costs and exchange-rate volatility across diverse currency zones.

This is not an argument against open markets. On the contrary, it is an argument for a fairer infrastructure for open global markets—one that does not privilege the domestic policy needs of a single country over the stability of the global financial system as a whole.

Multipolar order

If Bretton Woods reflected the power realities of 1945, a new settlement must reflect those of 2026. Emerging economies now account for the majority of global growth and a rising share of trade, savings and investment. Yet they remain underrepresented in the governance of Western-dominated legacy institutions such as the IMF and World Bank.

A BRICS-anchored clearing union would not replace these institutions overnight. But it would create a parallel pillar, one that is more representative, more development-oriented and less loan-conditionality-driven. Over time, it could catalyze reform within older institutions, forcing them to become more inclusive and responsive to the concerns of Global South nations.

To succeed, any new system must avoid becoming a vehicle for the dominance of its largest member. That requires transparent rules, rotating leadership and voting structures that balance economic weight with regional representation.

The principle must be clear: no country, however large, can monopolize or weaponize the global financial system. That only levels the playing field for the Global South countries.

Bottom of Form

Skeptics will note that global financial orders do not change easily. They are embedded in legal contracts, financial markets and political alliances. But history shows that they do change, often in response to crisis. The breakdown of the gold standard, the creation of Bretton Woods and the shift to floating exchange rates were all once deemed improbable before 1944. Now we are at the same moment.

The transition to a 21st-century bancor need not be abrupt. It can begin with incremental steps of expanding local-currency trade within BRICS and partner countries; issuing bonds and development loans denominated in a common unit; creating a digital clearing platform for cross-border payments; and gradually widening membership to include other emerging and advanced economies willing to participate in the system.

What matters is the direction of the trajectory: away from a system defined by a powerful nation’s privilege and towards one grounded in multilateral balance.

New Keynesian moment

At the end of day, the choice is not between the status quo and chaos in the global financial system. It is between an aging system that generates recurrent instability and a reformed one that internalizes the lessons Keynes taught eight decades ago.

To be sure, a neutral, rules-based, symmetric financial order would not eliminate crises. But it would make them less frequent, less contagious and less unjust for every country. It would allow countries to trade more freely, invest more productively and grow more inclusively together in ways that best serve their nationals.

For too long, the architecture of global financial system has been written in the language of power. It is time to rewrite it in the language of justice, fairness and inclusivity.

The Global South, through BRICS+ and beyond, now has both the incentive and the capacity to lead that effort. The question is no longer whether a new bancor is desirable. It is whether the world can afford to wait any longer to create it.

Top of Form

Bhim Bhurtel teaches Development Economics and Global Political Economy in the Master’s program at Nepal Open University. He was the executive director of the Nepal South Asia Center (2009-14), a Kathmandu-based South Asian development think-tank.

EVs and renewables are best way for South Africa to loosen oils grip

CHINA

The long shadow of the one-child policy: China pays for its biggest social experiment with a demographic crisis

The low birth rate is one of the greatest headaches for Beijing, which in just 10 years has moved from the one-child policy was perhaps the greatest social experiment in human history. With the goal of curbing population growth at all costs, for just over 35 years China only allowed families to have one child. Communist leaders outlined the measures with a slogan in 1978: “One is better, two at most, leaving a three-year gap.” In 1980 it became state policy. By 1982, 96% of families in cities were having only one child, according to the Urban Household Survey.

Through a system of fines and penalties for non-compliance, the birth rate of what was then the world’s most-populous country was brought to a screeching halt. Until the policy itself became a problem. With the population pyramid inverting, Beijing put an end to the one-child policy in 2016, allowing couples to have two children to “balance demographic development and address the challenge of an aging population.” It hasn’t succeeded. Ten years later, the declining birth rate is one of the biggest headaches for the Chinese government.

The shadow cast is long. During its implementation, the one-child policy gave rise to horrific stories of abortions, abandonment, and children who grew up unregistered. It particularly targeted girls, whom many families rejected. At the same time, a new kind of only-child society was shaped, known as “little emperors” — hyper-developed, pampered children who have grown into adults while China’s GDP grew at an average rate of 10% and the country ascended to the pantheon of superpowers.

Ma Li, 53, raised her only daughter (now 24) hoping she would have “the same rights and opportunities as a boy.” “I raised her to be brave and know how to stand up for herself,” she says over the phone. After giving birth, she had an intrauterine device (IUD) inserted, as millions of women did during the years when birth control was widely available. She maintains that in her case it was a voluntary decision, although human rights organizations have documented that it was a widespread medical practice and, in many cases, subject to administrative pressure.

She acknowledges that, had she had the option, she would have wanted more children. But she maintains the policy “freed women from having a permanent reproductive function.” “Each era has its own logic,” she reflects. “Now many don’t want to have them. Some don’t even want to get married.”

In rural areas, the rule was not always followed with the same rigor. Distance from centers of power, the need for labor, and the demographic realities themselves meant that its application was uneven and, at times, more lax. In many villages, informal exceptions, delays in registration, or births that went unnoticed by the bureaucracy were tolerated.

Some families made decisions outside the system, like that of Ms. Mei, a 49-year-old from Sichuan. “We rural people didn’t understand the reason for the controls,” she explains in a message. She describes how almost every house in her area had several children. So, when her second child was born (her firstborn was a girl), she registered him in her sister’s family registry. She regularized the situation in 2015 — the year the policy was abolished — and paid the corresponding fine, which, she says, “was no longer comparable” to what she would have had to pay in 2003. For 12 years, in the eyes of the authorities, the child was his aunt’s son.

In Ms. Mei’s opinion, raising children used to be “simple.” “Having something to eat was enough.” She attributes the low birth rate to “enormous current demands” and a combination of factors: stagnant wages, high stress levels, and a lack of shared domestic responsibility.

In China, the fertility rate continues its freefall, despite the fact that in 2021 married couples were allowed to have up to three children. According to the World Bank, only one child is born to every woman, one of the lowest replacement rates on the planet (for the population not to decline, 2.1 children must be born per woman). In 2022, the country’s population decreased for the first time since the 1960s. In 2023, it was surpassed by India as the most populous country. China is aging rapidly, and society is sustained by a shrinking number of working-age citizens. The birth rate and the number of newborns declined for seven consecutive years before experiencing a slight rebound in 2024. The United Nations projects that China’s population will shrink from its current 1.4 billion to 633 million by 2100, a change that could hinder growth.

Thus, these issues have become a “national security” priority. “The rise and fall of major powers are often profoundly affected by population conditions,” Chinese President Xi Jinping said in a 2023 speech. “Therefore, demographic security must be incorporated into the broader framework of national security and carefully planned.” The leader advocated “shifting from primarily regulating quantity to focusing on improving quality, stabilizing the total population, optimizing the demographic structure, and enhancing population mobility.” Analysts interpreted this as a shift in approach: from control to incentives.

Authorities are now promoting what they call a “new culture of marriage and parenthood.” Policies are being rolled out on numerous fronts, from longer parental leave to tax breaks. Local governments are holding mass ceremonies to encourage marriage. Since May, couples have been able to marry anywhere in the country without needing to register the union in their home district (the so-called hukou). Officials are even available to register unions at tourist resorts, nightclubs, and music festivals.

This year, for the first time, the Government Work Report, an annual document that reviews policies and sets goals, mentioned the need to “provide childcare subsidies” and develop daycare services. In July, a nationwide aid program of 3,600 yuan (around $515) per child under three was approved. And last week, the National Health Security Administration pledged to “basically achieve” that by 2026 citizens will not have to pay out of pocket for hospital childbirth expenses, which amount to about 5,000 yuan for a vaginal delivery and 10,000 yuan for a cesarean section (around $715 and $1,430, respectively), according to the Shanghai Observer. Currently, most provinces have a co-payment system for medical expenses, including those related to childbirth.

In another sign of the changing times, starting in 2026, condoms will be more expensive: 13% VAT will be applied to condoms and other contraceptives, which had been exempt since 1993 as part of the one-child policy.

“The decline in the fertility rate is inevitable, like a giant boulder rolling downhill,” says Yi Fuxian, a researcher at the University of Wisconsin-Madison. It is a consequence of developed societies, and Asia is a prime example, with plummeting rates in Japan and South Korea. “China’s one-child policy accelerated the process,” adds the author of Big Country with an Empty Nest (2007). He believes that, despite the Chinese government’s efforts, it will be very difficult to roll that boulder back uphill.

Yi believes the one-child policy has changed attitudes toward motherhood and fatherhood and “distorted moral values about life,” he writes in an email. “Having only one child or no children at all has become the social norm.” He predicts that marriages will continue to decline (despite brief upticks in 2023 and 2025) and couples will postpone having children. He doesn’t think the policies introduced will achieve much. “What China is trying to do, Japan has already done.” And unsuccessfully. The country “is aging before it gets rich,” he concludes. And “doesn’t have the financial resources to fully follow Japan’s path.”

Economist Keyu Jin, born in 1982 and an only child like the vast majority of her generation, believes that the implementation of the one-child policy led to “numerous horror stories” and has profoundly marked the country. But not only for the worse: “It can help explain the high savings rate of urban Chinese households [and] the extraordinary increase in the level of higher education,” notes this professor at the Hong Kong University of Science and Technology in The New China Playbook (2023). “In a surprising twist, having fewer children dramatically raised the status of women,” she adds.

Statistics show that there are about 30 million more men than women in China, an anomaly stemming from the preference for sons during the one-child policy. But those like Jin herself haven’t had to compete with siblings for resources, particularly in education. Numerous studies prove that women have, on average, received more years of schooling than men, she writes. And this has contributed to giving their peers greater social and professional standing.

It has also given rise to a generation of more independent women, both economically and personally, and more self-assured. “Now there are more ‘sisters’ who are raising their voices and showing others that we have to fight for more rights and autonomy,” says Winnie Tang, 27, founder of Spring Reel, a series production company, in an exchange of messages. For her, women’s “liberation” means “having the right to refuse and not accept imposed demands.” In her mother’s time, “starting a family was the highest destiny a woman could aspire to.” Her generation, however, prioritizes other goals, such as developing “a career we are passionate about” or enjoying “the pleasure of doing the things we love.”

 

Zimeng Yan contributed to the preparation of this report.

EL PAÍS USA Edition

 

South Africa’s economy collapsing one domino at a time
Shaun Jacobs • 7 September 2025

South Africa’s economy is imploding, with key industries falling one by one like a set of dominoes after 15 years of mismanagement and poor government policy.
The job cuts taking place at industrial giants such as ArcelorMittal, Goodyear South Africa, and several mining giants have resulted in the government being deeply concerned about the impact on the economy.
However, the government has failed to make meaningful changes to its approach to economic policy in South Africa and create an environment conducive to investment and growth.
The country’s economy has grown at an average annual rate of 1.1% for the past fifteen years and is now beginning to feel the consequences, with a looming financial crisis and an unemployment disaster.
All the while, the government has failed to grasp how a modern economy functions and what incentivises heavy industry to be created.
This is feedback from former Standard Bank chief economist Dr Iraj Abedian, who said the country should not be surprised by the thousands of job cuts being announced recently.
“It is an unfortunate and depressing conversation to have. It is nothing new and should have been expected over the past 15 years,” Abedian told Newzroom Afrika.
“Our industrial sector has been contracting consistently, and despite all the expressions of concern and government statements, the state has not dealt with the root causes.”
“This is not a recent issue. It is a 15-year consistent lack of attention to what makes an economy favourable for and conducive to industrialisation and the creation of high-value jobs.”
Abedian explained that the thousands of job cuts are almost the end of a 15-year process of economic mismanagement from the government.
South Africa’s key industries, such as steel manufacturing, smelting, mining, and automotive manufacturing are now collapsing under the weight of a stagnant economy and a difficult operating environment.
“All of these are now rapidly, one after the other, like a domino, falling down and imploding with thousands of job cuts,” Abedian said.

Government failures
Chief Executive of Pan-African Investment and Research Services Dr Iraj Abedian –
South Africa’s government has failed to address the root causes of the country’s economic and industrial decline, with its focus being elsewhere.
It has consistently issued statements declaring its grave concern and has appointed various committees to investigate the decline, with little policy changes occurring.
In this sense, Abedian explained that the government has failed to grasp what encourages investment and expansion from businesses in an economy.
“All that we hear from the government is an expression of concern. What is an expression of concern? A minister is not paid to be concerned,” Abedian said.
“A minister or a director-general is paid by the taxpayers to do something about it, or to prevent it, or to come up with solutions. All of us, including my granny, can express concern.”
“The minister and the Cabinet are responsible for doing things as opposed to sitting there and kicking the can down the road.”
Apart from the lack of policy changes or solutions, Abedian highlighted the collapse of infrastructure as one of the key reasons for the decline of South African industry.
South Africa’s infrastructure has collapsed to the point where it is now given a D rating by the South African Institute for Civil Engineers.
This means the country’s infrastructure is at risk of failure and cannot cope with normal demand, with the public being subject to severe inconvenience and danger.
Ten years ago, the country’s infrastructure was rated a C, which meant it was adequate for the immediate future.
Collapsed infrastructure effectively prevents the economy from experiencing any meaningful growth, as the basic resources needed for that cannot be supplied to businesses.
Stanlib chief economist Kevin Lings explained that you simply cannot grow the economy with South Africa’s poor infrastructure.
“Here is the question: Can you grow the economy at 4%? Can you grow South Africa’s economy at 4%? Could we achieve that? No,” Lings said.
“As you try and grow faster, at any rate, you will run out of things. You will run out of electricity. You will run out of water. Run out of rail capacity. Run out of port capacity.”

de-Dollarisation

First quarter 2025 – Client letter

 

Buying a Toyota Corolla instead of a BMW X3 can make you R1.2 million richer

Drikus Greyling • 31 January 2025

An analysis by Daily Investor showed buying an affordable car, like a Toyota Corolla Quest, instead of a luxury BMW X3, can make you R1.2 million richer.

In South Africa, a car is seen as an important status symbol, and many people cannot wait to buy their first luxury car.

Showing off your new BMW or Mercedes-Benz portraits that you are financially secure and have achieved career success.

However, buying an expensive luxury vehicle comes at a tremendous cost. It is a poor investment which destroys wealth.

Daily Investor compared the difference between buying a luxury vehicle and opting for a cheaper alternative and investing the savings in the S&P 500.

For this comparison, we selected two of the most popular vehicles in their respective categories and considered their financial impact over six years.

• BMW X3 xDrive 20d
• Toyota Corolla Quest Plus

We assumed that the two buyers had the same budget. The first one spent his full budget on a car, and the second selected a cheaper car and invested the rest of the money.

Both vehicles were purchased in 2019 with loans covering 100% of the purchase price at an interest rate of 13%, repayable over a 6-year term.

Both cars were insured using a constant insurance profile to make the insurance premiums comparable.

It should be noted that insurance is subjectively applied to individuals and will differ from person to person.

In this case, the insurance profile was kept the same for both vehicles, which means the insurance premiums can be compared.

Insurance quotes were obtained from Naked Insurance for brand-new models of the same vehicle and proportionally applied to their 2019 prices.

We assumed the insurer’s risk profile remained constant over the 6 years, and the premium was adjusted for inflation to cover the vehicle’s replacement value.

For the sake of simplicity, it was assumed that both vehicles were sold with a complete service plan covering all maintenance expenses over their 6-year financing period.

Only the fixed costs of the vehicles were compared. This means that costs such as fuel and tyre wear were not included.

In 2019, a new BMW X3 xDrive 20d cost R789,000 and could be comprehensively insured for R2,001 per month.

To own this car, the monthly repayment would be R15,668, paid from January 2019 to December 2024.

This brought the total fixed costs of the BMW to R17,669 per month, which gradually increased to R18,161 over the repayment period due to rising insurance.

In 2019, a new Toyota Corolla Quest Plus cost R277,000 and could be comprehensively insured for R1,109 monthly.

The monthly repayment on the vehicle for six years was R5,501 over the same period as the BMW.

This brought the total fixed costs of the Toyota Corolla to R6,610 per month, which gradually increased to R6,883 per month due to rising insurance costs.

This means that the owner of the Corolla saved R11,059 per month from the first month by not buying a BMW.

Every month, the Toyota Corolla owner invested his savings in the S&P 500, which helped him accumulate wealth while driving a cheaper car.

After six years, when both cars were paid off, the BMW X3 xDrive 20d owner can sell his car for R468,900. The car was his entire investment over the period.

The owner of the Toyota Corolla can sell his car for R209,900. However, his S&P 500 investment with the excess cash grew to R1,423,942.

This means the Toyota Corolla Quest Plus had assets of R1,633,842 after six years, much more than the BMW owner’s R468,900.

It shows that buying a more affordable car and investing the rest created an additional nest egg of R1.164 million over six years.

The table below summarises the difference between buying a luxury and a more affordable car over six years.

Measure	BMW X3 xDrive 20d	Corolla Quest Plus
Car Value after 6 years	R468,900	R209,900
S&P500	Zero	R1,423,942
Total Wealth	R468,900	R1,633,842

Articles and other information on Daily Investor is for information purposes only and is not financial or investment advice. It should not be seen as a recommendation to buy shares in any company. Our content is produced without considering the objectives, financial situation, or needs of individuals. Before making any investment decision, prospective investors should consider the appropriateness of the information to their own objectives, financial situation and needs and seek legal and taxation advice appropriate to their jurisdiction.