De-Dollarization Wave Slams US Banks, Triggering $500B in Losses

The BRICS alliance is turning up the heat on the US dollar as de-dollarization efforts gain traction. Meanwhile, 15 US banks have collapsed in the last three years, fueling fears of widespread financial instability.

Damages by the numbers:

• US banks are staring down over $500 billion in unrealized losses on investment securities as of Q2 2024; losses fell slightly from $516 billion in Q1 to $513 billion, but the damage is done.
• The US national debt has exploded past $35.7 trillion, with $345 billion added in just three days.
• The US government is bleeding $3 billion per day just to cover interest payments.

Why it’s concerning: With the BRICS nations (Brazil, Russia, India, China, and South Africa) aggressively cutting ties to the US dollar, the pressure on the US banking system is piling up. Banks are now balancing huge unrealized losses and increasing exposure to uninsured deposits—making them vulnerable to liquidity crunches.

Zoom out: Rebel Cole, Ph.D., a finance expert at Florida Atlantic University, warns that the combination of volatile treasury yields and uninsured deposits could deliver a knockout punch to the US banking sector.

• “Unrealized losses are sitting on the balance sheets, but they become a real liability when banks need liquidity,” Cole says.
• BRICS NATIONS ARE DUMPING US TREASURIES AND STOCKPILING GOLD, hedging themselves against a weakened dollar.

To the point: BRICS is pushing hard to dethrone the US dollar, pulling developing nations into its orbit. If successful, the shift could spell disaster for US banks, leaving them scrambling for liquidity in a de-dollarized world.

What to anticipate: If the US can’t stabilize its banking system and address its ballooning debt, the combination of de-dollarization and domestic financial strain could push the economy into uncharted territory—just what BRICS is betting on.