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."

Comments

Bad News for USD

[hinesbrad]

This is VERY bad news to an already weakened dollar.

Re:Bad News for USD

[Anonymous Coward]

The dollar is kept artificially high in value due to international trade. The current status quo kind of subsidizes the US way of life.

The US has had the ability to influence and bargain what are essentially one way "free trade " agreements. This is all about to come to an end.

  The dollar will drop somewhat on Monday and unless something big happens within 10- 15 years the US will eventually become like Germany in 1923.
Not to sound like chicken little but Americans should prepare for the worst, international currency and economic policy is changing with less regard taken for preserving US$ backed wealth than you would think.

Internationally, Ghadaffi was pushing for a gold backed currency (US gold reserves are actually quite small and has had counterfeiting problems) the problem with this is that to keep the same amount of paper money in circulation gold would be valued at almost $20,000 an oz. To counter this we would need to set back $$$ values and circulation to levels seen pre WWII.

Re:Bad News for USD

[rve]

This is VERY bad news to an already weakened dollar.

The dollar has been overvalued for decades, and look at the result: manufacturing jobs have moved overseas, and a vastly negative trade balance. With an over valued currency, It's simply cheaper to import something than to produce it locally.

A high exchange rate doesn't make a currency strong anyway, long term stability and low inflation are more important.

Re:Bad News for USD

[Hognoxious]

Call on line 1. Something about an excluded middle.

Re:Bad News for USD

[Runaway1956]

In more practical terms, the dollar loses it's importance to the world. Remember the '70's (if you're old enough) when the oil producing countries decided that they wouldn't accept the dollar as payment for their products. They wanted something real to back up the payments. Gold.

All by itself, this erosion of faith in the dollar wouldn't mean diddly. But, this is just a streamlet which feeds a good sized river. One day, the dollar won't even be accepted in half the countries of the world. "Your green money is no good here, white man - go exchange it for real money, then we'll barter!"

Re:Bad News for USD

[TheLink]

The less the rest of the world uses the US dollar, the worse it becomes for the USA. This is actually a serious issue for the USA.

Analogy: in Zimbabwe when Mugabe printed lots of Zimbabwe dollars, he was basically taxing everyone who held Zimbabwe dollars. He transferred wealth from them to him and his cronies (who I assume got some of it). The rest of the world mostly didn't care or laughed because they didn't use Zimbabwe dollars.

The rest of the world however is living in USA's "Zimbabwe" because petroleum, grain, CPUs, country-sized loans and lots of other stuff are all in US dollars. Many countries hold billions or trillions in US dollars to trade stuff with each other.

So in the past the US could create money at will and thus "tax" the rest of the world ( everyone who holds net positive amounts of US dollars including net creditors[1]). They could spend the created money on big projects and pay (or owe) the rest of the world in US dollars for oil, food, toys etc. As long as they didn't over do it, nobody seemed to notice or care.

Recently the US created trillions of US dollars (google for Federal Reserve trillions) but rather than the money going into making most of the USA richer, those trillions went to bail-out cronies who lost/siphoned/wasted trillions in the first place.

The rest of the world is probably starting to notice that created trillions whether directly or indirectly, hence they are switching from the US dollar. They cannot switch too fast because if they start a panic, their billions or more in US dollars could become worth even less.

[1] Take China as an example. The USA owes China trillions. Foolish people think that means the USA is screwed. But imagine if Hasbro owed their suppliers millions in Monopoly money. Who really is screwed here? Creating US dollars in computers is a lot cheaper than printing Monopoly money ;).

The USA is only screwed if China says, you can't owe us in US dollars any more. It has to be paid in Euro or RMB.

So this news is certainly bad for the USA.

Re:Bad News for USD

[Anonymous Coward]

The US is always giving someone the finger. It's called "US foreign policy". Recently the US tacked on a clause to a treaty with my country that guaranteed immunity from prosecution for war crimes for US citizens while in this country. My country rejected the treaty.

Then you wonder why people hate you, and why things like 9/11 happen. How about learning to live with the rest of the planet, instead of trying to tell it what to do all the time? The US is certainly not an example to follow - its economy stinks, they're not world leaders in anything (except perhaps waste produced per capita), its empty promises of freedom and democracy have been raped and usurped by its own self serving politicians, its human rights record is appalling, its warmongering is not tolerable. What's to like about the US? You can keep it.

Re:Bad News for USD

[Omestes]

, not space flight (rocked the moon)

Err... how long ago was that? And looking around, we're going to not have any form of space program pretty soon. We're down to leasing use of Russian capsules to actually get people in space now. Hell, we aren't even able to replicate the aging technology that got us to the Moon in the first place. As a space nerd, these are very depressing times.

May I reiterate? We need Russian technology and approval to get a human in space! Sounds like we're winning, no?

We won the space battle, but completely lost the space war.

Thank god too, because who wants the responsibility of helping the whole goddamned world.

Vast swaths of the world (I'm thinking South America especially) would be very happy if the U.S. never "helped" it. Actually many of the problems we're today "fixing" were caused by us in the first place. U.S. foreign policy is very much damage control over past U.S. foreign policy.

I'm an American, and I'm not particularly anti-American, I just don't think that we're really the best at anything anymore. I find "exceptionalism" to be a bit odd, what are we really exceptional at? Metrics that matter? Education, not too exceptional. Health, not really that much better off than the rest of the "first world". Standard of living, we're so-so. Technology, falling all the time. Crime, I suppose we're exceptional in a bad way there. Etc... All exceptionalism means is hubris and the lack of ability to learn from more successful countries.

America should STRIVE to be better, and not just sit around claiming it is, empirically we aren't.

But then again I've always been suspicious of patriotism. How can we be "#1" when most of the world also claims that the land and people within their fictional borders are also "#1". Most patriotism boils down to the simple tautology "America is the best because we do everything better. We do everything better because America is the best!".

I like my country. Its terribly flawed, and growing more flawed every day. I'm deeply ashamed of some of our actions, and embarrassed for some of our people. Our government isn't something to really be proud of. Our respect and empathy for the average American (i.e. anyone not in our club) is deplorable and depressing. Our public debate is less mature than that which can be heard in a 3rd grade playground. Our institutions and infrastructure is decaying, and now much worse than other first world countries. Our government looks out for the rich at the expense of the other 90% of the population. We're barely literate. We're morbidly obese. We commit war-time atrocities and torture people.

I like my country and would like it to be better. We can live up to our ideals. But if we just sit around patting each other on the back for the accidental features of our birth, we're really not going to get anywhere, and will probably continue down of downward spiral.

Liking something is also admitting its faults, and striving to make it better. Blind pride is stupidity and generally only leads to decline.

That said, I will always hold my friends and family above any grand concept of "America". I more view myself as a citizen of the desert southwest than an American, really. Proximity breads importance, distance mere abstractness. What does "America" really even mean? We don't share a universal ideal, a universal value system, a universal culture. We somewhat share a language, but that's rapidly changing, and we will be fully bilingual by the time I die.

Pile of bullshit.

[SEE]

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?

Re:Archimedes called from Syracuse...

[Doc Ruby]

1. You wouldn't collect SS if you were a committed Randian because your principles would stop you. Like every one of her fictional characters would refuse to collect.

2. SS doesn't steal your money. It forces you to invest it in the safest available investment, US debt, that returns about 50% interest. That also invests in running your country, which keeps all your investments safe.

If you're really just committed to grabbing as much money as you can, without any actual consistent principles, then you can do as Ayn Rand did. If you're willing to leave the majority of old people with losses instead of gains in their retirement investments, then you can get rid of Social Security. Congratulations! You're a reckless greedmonger, the kind that steered our country and its millions of old people into the grinding poverty of the Great Depression. AKA "Randian". Even if Ayn Rand herself was not. She was merely a hypocrite and a fiction writer.