BRICS Take Aim at Dollar
April 15th, 2011The U.S. Dollar Index has not yet crossed into the crisis territory that I wrote about recently, but here’s what I thought might happen if it does:
I’d say that capital controls, some kind of IMF SDR (Special Drawing Rights) ‘Global Reserve’ confetti bucks, and a global financial crisis management organization, like the IMF on steroids are possible.
Now, look at this, keeping in mind that the shit hasn’t even hit the fan yet.
Via: Reuters:
The BRICS group of emerging-market powers kept up the pressure on Thursday for a revamped global monetary system that relies less on the dollar and for a louder voice in international financial institutions.
The leaders of Brazil, Russia, India, China and South Africa also called for stronger regulation of commodity derivatives to dampen excessive volatility in food and energy prices, which they said posed new risks for the recovery of the world economy.
Meeting on the southern Chinese island of Hainan, they said the recent financial crisis had exposed the inadequacies of the current monetary order, which has the dollar as its linchpin.
What was needed, they said in a statement, was “a broad-based international reserve currency system providing stability and certainty” — thinly veiled criticism of what the BRICS see as Washington’s neglect of its global monetary responsibilities.
The BRICS are worried that America’s large trade and budget deficits will eventually debase the dollar. They also begrudge the financial and political privileges that come with being the leading reserve currency.
“The world economy is undergoing profound and complex changes,” Chinese President Hu Jintao said. “The era demands that the BRICS countries strengthen dialogue and cooperation.”
In another dig at the dollar, the development banks of the five BRICS nations agreed to establish mutual credit lines denominated in their local currencies, not the U.S. currency.
…
The leaders reviewed the global role of the Special Drawing Right, the IMF’s accounting unit and reserve asset, which some experts believe could grow into a partial substitute for the dollar.
But they stepped around the issue of whether the yuan should join the SDR, saying only that they welcomed discussion of the composition of the SDR’s basket of currencies.
…
On the hot topic of capital flows, the BRICS called “for more attention” to the risks posed by massive cross-border flows of money but went no further.
it’s all part of the master plan