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Local Currencies To Replace Dollar For 5 Countries' Dealings
An anonymous reader writes "Brazil, Russia, India, China and South Africa — the BRICS group of fastest growing economies — signed an agreement to use their own currencies instead of the predominant US dollar in issuing credit or grants to each other. The world does need a new financial architecture, but the BRICS by themselves are unlikely to be able to drive that change."
This is VERY bad news to an already weakened dollar.
ENTIRE modern financial structure depends on trust. That's that. Void papers and monies backed by various privately owned central banks or private investment firms had been the perpetrator of this trust system so far. And all the world obliged by it.
If you really go down to it, there is nothing real left backing the financial and monetary values and papers right now. They are SO inflated and complicated that, one top hedge fund manager said on cnn, even he himself doesnt know the exact composition of the fund he was managing. However this fund too, is taken as a real fiscal value, and is also considered as a backer of monetary value of the country it is being traded in.
water vapor. if you erase that water vapor and overinflated stocks, you will see that nothing remains backing the money of most countries like switzerland, britain, usa.
whereas this BRIC alliance that the summary so gleefully drops down, actually PRODUCES value. they have solid backing for their money. contrary to the others, you can actually buy solid products and services with that money from those countries.
Once there is traction behind these, and the water vapor of the established financial scourge in the west is ignored, everything easily will change.
really. china produces most of the world's products now. so, what ? some investment bank from wall street, is going to threaten china ? oh boy. what will happen if china says 'give me yuan' ?
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"repatriate" your manufacturing ... WHERE will you sell your products to ? europe ? china ? russia ? india ? all the while where china produces the same product for dimes ? with its 1.5 billion population ?
in case you are not yet aware, china is the BIGGEST market on the planet, and one of its cards in his hand, is this. noone can ignore the market that is china and be set.
Read radical news here
the american economy suffered a burst bubble from an overheated real estate market in 2008. it might be a long painful recovery
but if it gets your political inclinations excited to derive deeper portents, have at it
people trade in the currency that is seen most stable RELATIVELY. some background: as the 2008 crisis began, people began to flee the dollar. then, as the crisis began to ripple across the rest of the world, some places wound up weaker than the usa, and people began to return the dollar. why? not because the dollar was stable, but because the dollar was RELATIVELY stable compared to the problems in many other places, like europe
currently, the yuan is probably the most stable currency, but china has plenty of exposure to potential problems that could blow up worse than the usa. then the dollar might again be the most RELATIVELY stable currency, or not, or some other currency. i don't know. neither do you
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Your opinion is wrong: OPEC sells in dollars because that is the world's reserve currency. America has retained it's dominance this long because everything is denominated in dollars at some level. It doesn't seem to be just your misunderstanding, the second indiatimes link makes the same mistake:
Reserve currencies are created exactly by fiat: this is how the dollar was chosen at Bretton Woods. Everything else is backwards: the dollar is the most traded, circulated and accepted currency in the world precisely because it is the international reserve.
This move by BRICs does look like the first step towards expanding special drawing rights and replacing the dollar with a weighted basket of currencies.
Slashdot: where don knuth is an idiot because he cant grasp the awesome power of php
Trade to be done in non-us dollars. That will hurt the US very very badly.
The oldest man just died recently, at 114 years of age. This means that he was born before 1900. When he was born and for a long time in his life, the British still had an empire. You wanna bet they didn't trade or loan money in USD? Who would use money from some backwards place filled with barbarous people with barely any history?
And then, the world changed. The US rose up to be the new super power. Pact Britannica, replaced by Pact USA. Not british warschips but American carriers patrolled the oceans, protecting trade... as long as it followed their rule. It is not without coincidence that oil is traded in dollars and some dare suggest that America's wrat was raised when certain oil producing countries dared consider trading in Euro's instead of dollars. Look it up and see just how many seconds it took for the US to declare the leaders in power a danger to western civilization.
All true? Partly. It is not like Saddam did not do plenty else to cause upset. Maybe it was just the straw that broke the camels back or one of the many straws already on the back. Who knows.
What is important here is that this old man saw the world change, saw certainties wiped away AND then replaced by new certainties. Many above post that US dollars are just the way things are. Yes, they are. For as long as they have been alive at least. But there are those who knew different realities in their youth, realities that seemed just as sure and to be able to last forever. Go ahead, travel back to the 1897 and declare the british empire will crumble in London. Don't worry if your timemachine can't travel forwards in time, I don't think you are going to need a return trip.
The BRICS countries are HUGE together and have tasted the downside of US dominance. Together they control more then half the world population. More resources then anyone else, more production then anyone else, more market then anyone else. And they realize this and are stirring. Should the US be worried? About as worried as the brits pre-WW1 should have been before the pound. Once the symbol of stability, now toilet paper.
And the brits didn't learn, they still cling to their ideas of empire and that the pound will beat everything else. That is why they didn't join the Euro and still beat themselves on the chest about it despite mass unemployment and mass debt that is tearing their society apart from the inside.
Is trade in another currency then dollars going to hurt the US? Yes and no. Yes because a lot of the value of the dollar hangs on the fact that it is used by everyone for trade. If this changes, a LOT of dollars will appear on the market because the need to have a huge pile in reserve to buy stuff (like oil) will disappear. Simply put, Holland needs a pile of dollars now if it wants to buy oil and a healthy reserve for emergency purchases whatever they might be. If oil trade changes to Euro's, then it doesn't need a pile of dollars anymore and even its reserves can go down since it already holds Euro's in reserve. That will lower the perceived value of dollars and might bring it down to the real value.
If the perceived value of the dollar now is equal to the real value, then the US won't be hurt. Nobody really knows but many doubt it is. On the other hand, IF the US "collapses" it could stop being the world police man, go back on itself and save a fortune on its military budget. If the dollar is worth less, then importing makes far less sense, US might start producing on its own shores again.
US bankers and the superrich won't like it. But the people of the US might be better off.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
You see, in a normal world if I printed up some paper and tried to use it to buy goods and services from you, nobody would take it. But if you tax people in that paper, and you take measures that people owe you debt denominated in that paper, and you start out with a commodity (like gold) and switch it out for certificates of promise, and then paper later on. Then you can force something that's worthless to have value. (Of course, none of this stuff can be done without the force of law to pounce the crap out of people)
In a way, this is how all fiat money works. But since the US was the world reserve currency, we had the additional ability to print money more recklessly than in other places. That is, and get away with it without causing the US to become a banana republic. I think a lot of other countries are getting fed up with that (if not jealous), which is why the game is coming to an end.
Brazil: Only major BRICS trading partner is China. Is major trading partner with US, Japan, Eurozone.
Russia: Only major BRICS trading partner is China. Is major trading partner with US, Eurozone.
India: Only major BRICS trading partner is China. Is major trading partner with US, Eurozone.
China: No BRICS states among its major trading partners. Is major trading partner with US, Japan, Eurozone.
South Africa: Only major BRICS trading partner is China. Is major trading partner with US, Japan, Eurozone.
So, the only BRICS that's an important trading partner from the perspective of any of the other BRICS is China, and none of the other BRICS are important trading partners from the Chinese perspective. That means the only BRICS currency of any real importance in inter-BRICS economic activity is the Chinese renminbi.
And what are the major characteristics of the renminbi? It neither freely floats nor is freely convertible, which means it's unusable as a reserve currency. Further, since the major components of its currency basket are the dollar, euro, and yen, any general move to the renminbi from those currencies would require China to buy them to maintain the "managed float".
Oh, and the agreement is only about credit and grants, not use in trade, which makes it particularly pointless. None of these countries are major investors in each other, or likely to be anytime soon. Is the Chinese government going to stop building plants in China to start building them in India? Really?
but the BRICS by themselves are unlikely to to be able to drive that change.
However a recent Bloomberg article pointed out that China is now Germany's #1 client, replacing the US which has held that position almost since WW2. Considering that China's growth has "slowed" to a mere 9.7% per year, it won't be long at all before they are the largest economy in the world and we will have to do as China says. Another interesting side note is that all those German imports - precision factory machinery, BMW's and other cars, electronics, etc require energy to run. China's demand for oil is about to explode, at a time where we may be nearing peak oil. This is going to be very, very interesting.
The other side of the coin is that the US dollar as the world currency reserve means that the US is in a very special situation. The US is the only country in the world that can print US dollars. Every other country needs to trade valuable goods and services to obtain one US dollar with which to purchase commodities. The US can simply print it, and in fact this is what it has been doing for a while now. However the minute the US stops being the world reserve currency the US no longer can print its way to importing vital commodities. It will have to earn them like everyone else. Historical data shows that every country that loses status as the world's reserve currency (recent example, the British Pound pre WW2) undergoes severe economic distress. Americans are in denial of this, but irresponsible monetary policy always has consequences. A big hint is the Euro at 1.44 (as if the Euro were in great shape) and the Canadian dollar at 1.04 - not to mention all the other currencies. People don't want US dollars anymore, thanks to Ben and his buddies.
Seven puppies were harmed during the making of this post.
India and China alone are over ONE THIRD of humanity.
Now, when that one third of humanity gives loans to itself (C-I, I-C) it is no longer dependent on the current or the future state of US economy, nor does it have a reason to care about possible changes it may create there.
Where will this become apparent? Fungible assets that they spend more than anyone else - like food and fuel.
They take out a loan from each other to import goods, pay goods in dollars because they have to, which influences the dollar value in a positive sense (it goes up or it doesn't go down, but since everyone else is trading in dollars it is usually invisible) - but now, the price of their loans does not increase with the amount of grain or oil they import.
As a bonus, both economies being outsourcing centers for the US economy, the positive influence their importing makes on the dollar now makes the dollars they are paid in more valuable - while their interest rates and other costs of loan don't go up along with the value of the dollar.
Bonus points if the exporter country is the lender at the same time. Like say... Russia for grain/oil/coal.
A smaller economy/country would probably not have that much of a positive effect, but we ARE talking India and China here. And Russia.
And 2.5 billion people can eat a lot of food and burn a lot of fuel.
Mit der Dummheit kämpfen Götter selbst vergebens
You take tungsten, slightly less dense than gold, and a lot cheaper, mix it with a small amount of a more dense but more expensive metal to get up to the right density, then mix and plate it with about 50% gold. Very difficult to detect if you do it right, and costs a little over half the price of real gold.
Look, Archimedes called and he wants his density method for counterfeit detection back. The method you describe may be sufficient to sell fake bullion to Ethiopia, where it seems that you don't even need to get the density right, but it will not fool any serious gold trader.
The problem is not density alone, hardness is fundamental, because practical methods to identify metals today are based on speed of sound in the metal.
Ultrasonic thickness measuring equipment is the best way to detect fake metals, it works in a principle similar to the traditional "ringing sound" method for detecting fakes. Gold coins and bullion have a precisely defined thickness, if you use an ultrasonic transducer to measure it and get a wrong result it's a fake. And, of course, the transition inside the bar from gold to tungsten is trivially detected when you have the proper equipment, which you surely have if you are trading in large amounts of gold.
In an "arms race" scenario, technology definitely works against the counterfeiters. It's much harder and more expensive to create a gold-coated tungsten bar than to detect it.
By the 1990 definition of CPI, we're at 6% (a 10% change over last year). shadowstats.com to see unemployment and inflation by older measures, before the government decided to sugar coat.