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BRICS members -
https://en.wikipedia.org/wiki/BRICS
Brazil
Russia
India
China
South Africa
Newest members (Jan 2024) -
Egypt
Ethiopia
Iran
United Arab Emirates
Countries that have applied for BRICS membership -
Algeria
Bahrain
Bangladesh
Belarus
Bolivia
Cuba
Kazakhstan
Kuwait
Pakistan
Palestine
Senegal
Thailan
Venezuela
Vietnam
Nigeria
Countries considering applying for BRICS membership -
Afghanistan
Angola
Comoros
DR Congo
Gabon
Guinea-Bissau
Libya
Myanmar
Nicaragua
South Sudan
Sudan
Syria
Tunisia
Turkey
Somalia
Uganda
Zimbabwe
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>>> How Xi Jinping is challenging dollar dominance with landmark Saudi deal
The Telegraph
by Melissa Lawford
December 24, 2023
https://finance.yahoo.com/news/xi-jinping-challenging-dollar-dominance-120000057.html
When Xi Jinping visited Riyadh, Saudi officials rolled out not a red but a purple carpet.
The Chinese president’s plane was escorted by Saudi jets spurting green and white smoke to symbolise the colours on the Gulf nation’s flag. Celebratory cannons were fired. A royal guard on Arabian horses escorted President Xi to the Royal Palace.
The warm reception during the visit last December was symbolic of deepening ties between China and Saudi Arabia. Long one of the US’s closest allies in the Middle East, Beijing is trying to woo the Kingdom towards the East – and Saudi leader Mohammed bin Salman appears open.
President Xi has ambitions to challenge the global dominance of the dollar. One way to do that would be to start trading oil and gas in renminbi.
Saudi Arabia, the world’s largest crude oil exporter, has traded oil entirely in dollars since 1974. But talks about pricing sales to China, Saudi’s largest trading partner, in renminbi have been accelerating. In November, China made a breakthrough.
China and Saudi Arabia signed an agreement to set up a currency swap line worth 50bn yuan (£5.5bn). The landmark deal means Saudi Arabia has free access to a supply of Chinese currency at a set exchange rate, and vice versa for Beijing and the Saudi riyal.
Swap lines in themselves are uncontroversial. China has one with the UK, and the deal with Saudi Arabia is small in scale, worth only a fraction of Saudi Arabia’s total trade with China. But the deal is a significant turning point.
If China’s oil and gas trade operates in renminbi, it will be outside the Western financial system and effectively unsanctionable.
Establishing the framework of a swap deal also allows it to be scaled up relatively easily. While 50bn yuan is small, the total size may well grow.
“It’s mostly a signal that Saudi is willing to use renminbi,” says Alicia Garci´a-Herrero, chief economist for Asia Pacific at French investment bank Natixis and a senior fellow at European think tank Bruegel.
Saudi Arabia is under pressure to accept the renminbi because Russia, China’s largest oil trading partner, already does.
The idea of China seriously challenging the dollar’s dominance has been dismissed by many economists as far-fetched. The dollar is still in a different league globally because such a large share of public and private debt worldwide is held in dollars.
The US currency is used in nearly half of all payments worldwide, while the renminbi is used in less than 4pc, according to Swift data. The dollar is freely convertible, the renminbi is not and China has restrictions on capital flows.
But the number of transactions involving the renminbi is rising at breakneck speed. In the last three years, global use of the Chinese currency in trade finance has tripled. In September, it overtook the euro as the second-most used currency in global trade. Data from the People’s Bank of China shows that, globally, central banks’ use of Chinese swap lines has roughly quadrupled since 2020.
“It is making exponential gains in the share of trade finance,” says Phyllis Papadavid, senior research advisor at Asia House. “It is making gains in its use as a reserve currency. The overall share is still quite low, but the trajectory is very rapid.”
In several decades’ time, it is feasible that the renminbi could challenge the dollar, says Julia Gurol-Haller, lecturer at the Chair for International Relations at Freiburg University.
“I think in the very, very long run this could be something that manifests.”
In the more immediate future, China may be able to protect its energy security as tension with the US intensifies.
“It takes the dollar out of the loop,” says Christopher Vassallo, a researcher at the Asia Society Policy Institute’s Center for China Analysis. “If China wants to pay Saudi Arabia for a certain amount of oil imports, they can use their currency.”
This has become a mounting concern for Beijing since the onset of the war in Ukraine.
“Beijing watched Washington impose sanctions on Russia’s dollar reserves that simply made the dollar not useful for Russia,” Vassallo says.
President Xi is more vulnerable to financial sanctions than Vladimir Putin because China’s economy is much more dependent on imports and exports. Boosting renminbi trade with allies helps to insulate China from any US intervention.
“In the short-term, it’s about the security of energy needs,” says Gurol-Haller.
The lynchpin of this strategy is the Middle East – and Saudi Arabia knows it.
“I was in Riyadh when the war broke out in Ukraine and you could immediately see this new self-consciousness rising, this sense that this is our moment,” says Gurol-Haller. “Countries in the region realised they can leverage relations with other big players in a different way.”
Before the war, Saudi Arabia operated a hedging strategy of keeping both the US and China in balance, says Gurol-Haller. “Since February 2022, we have seen quite a pivotal shift towards China as an economic partner.”
China is the number-one destination for Saudi exports by value and the Kingdom is China’s second-largest oil supplier, after Russia.
In addition to oil, the two nations have deepened their ties in the tech and science sectors, and Saudi Arabia is turning towards China for security.
In March, China brokered a reconciliation deal between Saudi Arabia and Iran, leaving the US on the sidelines.
“That shows that China is no longer viewed by regional players as just an economic partner but also as a rising political or security force,” says Gurol-Haller. “That is a paradigm shift.”
In the same month, Saudi Arabia agreed to join the Shanghai Cooperation Organisation, a security union that includes China and India. This summer, Saudi Arabia was invited to join the Brics alliance of Brazil, Russia, India, China and South Africa.
Brics members have been discussing how to make a common currency that can be used in emerging markets.
Gurol-Haller says: “It is discussed so much among this growing, non-Western or anti-US, bloc. It is the finance side to a larger geopolitical phenomenon, which is to reduce dependency from the United States in terms of security and the economy, and then also in terms of currency.”
The next step for China and Saudi Arabia could be potential stock exchange partnerships. In February, Hong Kong chief executive John Lee travelled to Saudi Arabia in a bid to encourage the national oil giant, Saudi Aramco, to pursue a secondary listing in Hong Kong.
“The overall momentum of this building of an anti-Western bloc will create geopolitical implications for the US,” says Gurol-Haller. “In the Middle East, we already see a diminishing role of the US. That is exactly the phenomenon that such swap lines make stronger.”
While dollar dominance persists for now, the Beijing-Riyadh alliance shows its primacy will not continue unchallenged.
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Rickards - >>> Another Bank Bites the Dust!
BY JAMES RICKARDS
NOVEMBER 6, 2023
Another Bank Bites the Dust!
Citizens Bank was a small bank in Iowa with about $66 million in assets. Its loan portfolio consisted largely of commercial and industrial loans.
Well, this past Friday the Federal Deposit Insurance Corporation (FDIC) announced that Citizens Bank had failed due to significant hidden loan losses totaling about $15 million.
Because Citizens Bank was not a member of FDIC, the bank’s losses will be the responsibility of the state of Iowa.
This is the sixth notable bank failure this year. As you might recall, the first five were Silicon Valley Bank (back in March), Silvergate Bank (a bridge from the crypto world), Signature Bank (another crypto conduit to the regular banking world), First Republic Bank and the giant Credit Suisse.
I warned in March that the failure of Silicon Valley Bank would be just the start. Now we’ve had five additional bank failures.
And this latest failure won’t be the last.
Veterans of such crises (and I include myself in that category) know that once the dominoes start falling, they keep falling until some government intervention of a particularly draconian kind is imposed.
We’ve seen some significant regulatory actions from the Federal Reserve, the FDIC, the U.S. Treasury and the Swiss National Bank, but the fixes have been temporary and followed quickly by new failures.
The FDIC abandoned its $250,000 deposit insurance limit and effectively guaranteed all the depositors in Silicon Valley Bank and Signature Bank, a guarantee of over $200 billion in deposits. This has impacted the FDIC insurance fund and required higher insurance premiums from solvent banks, the cost of which is ultimately borne by consumers (you).
The Federal Reserve went further and offered to lend money at par for any government securities tendered as collateral by member banks even if the collateral was worth only 80% or 90% of par. These collateralized loans are financed with newly printed money, which might exceed $1 trillion.
These actions have thrown the U.S. banking system and bank depositors into utter confusion. Are all bank deposits now insured or just the ones Janet Yellen decides are “systemically important”? What’s the basis for that decision? What about the fact that unrealized losses on U.S. bank portfolios of government securities now exceed $700 billion?
If those losses are realized to provide cash to fleeing depositors, it could wipe out much of the capital of the banking system.
Unrealized losses on securities held by FDIC-insured banks exceed $620 billion. That’s the amount of bank capital that would be wiped out if the banks were forced to sell those securities to meet demands from depositors who wanted their money back.
That would cause additional bank failures and continue the panic that began in March indefinitely.
We’re not out of the woods, and the confusion will continue.
What’s important to bear in mind is that crises of this type are not over in days or weeks.
A slow-motion rolling panic that takes a year or longer is more typical.
The 1998 crisis reached the acute stage on Sept. 28, 1998, just before the rescue of LTCM. We were hours away from the sequential shutdown of every stock and bond exchange in the world.
But that crisis began in June 1997 with the devaluation of the Thai baht and massive capital flight from Asia and then Russia. It took 15 months to go from a serious crisis to an existential threat.
Likewise, the 2008 crisis reached the acute stage on Sept. 15, 2008, with the bankruptcy filing of Lehman Bros. But that crisis began in the spring of 2007 when HSBC surprised markets with an announcement that mortgage losses had exceeded expectations.
It then continued through the summer of 2007 with the failures of two Bear Steans high-yield mortgage funds, and the closure of a Société Générale money market fund. The panic then caused the failures of Bear Stearns (March 2008), Fannie Mae and Freddie Mac (June 2008) and other institutions before reaching Lehman Bros.
For that matter, the panic continued after Lehman to include AIG, General Electric, the commercial paper market and General Motors before finally subsiding on March 9, 2009. Starting with the HSBC announcement, the subprime mortgage panic and domino effects lasted 24 months from March 2007 to March 2009.
Averaging our two examples (1998, 2008) the average duration of these financial crises is about 20 months. Since this crisis began in March (eight months ago), it could have a long way to run.
In other words, crises can unfold for a long time before they’re finally squashed by massive regulatory intervention.
Get ready for more bank failures.
I’ve written a lot about what I call Biden Bucks. That’s my term for the central bank digital currency (CBDC) the government is currently preparing.
What does the ongoing banking crisis have to do with Biden Bucks? Well, plenty, as it turns out.
Read on to see why…
Bank Runs, Biden Bucks and Money Jail
By Jim Rickards
Whether an account is in CBDC or a regular checking account doesn’t make that much difference. Bank runs today are no different than in the 1930s from a behavioral perspective.
It’s all about lost confidence, fear, not wanting to be the last person out of a burning building, rumors, word of mouth and a host of psychological factors that are part of human nature.
That part hasn’t changed since at least the 14th century with the failure of the Bardi and Peruzzi banks around 1345. What has changed is technology. Marshall McLuhan said in the 1960s that in the global village, everyone knows everything at the same time. He was right. That means when a bank run begins, there’s an immediate reaction.
The difference with the 1930s is that you don’t line up around the corner and wait for the chance to demand cash from the teller. You take out your iPhone, make a few taps and, whether it’s Venmo or a wire transfer, the money is on its way out the door.
Whether you’re a retail depositor with $1,000 or a maven with $8 billion, everyone was online moving money all at once. In that sense, CBDCs don’t matter much. Whether it’s CBDC, Venmo, wire transfer or cash from an ATM, everyone is cashing out at the same time via digital channels. But there is one huge impact of CBDCs that is entirely new and sets them apart from what’s described above…
CBDCs are programmable and controlled by the government.
This means when a run develops, the government can stop the run just by freezing CBDC account transfers. They can even claw back earlier transfers. Since the government controls the CBDC ledger, they can see where the early withdrawals went and simply reinstate them on the account of the failing bank and debit them from the accounts of the transferees. The government can do this with a few keystrokes because they see everything.
This means that once Biden Bucks is implemented, you’re locked into a system controlled by the government. You’re in a money jail.
There’s no point even starting a bank run because the government can track your movements and put the money back where it started. It’s one of many ways that Biden Bucks gives the government total control of your money and can monitor your thoughts and movements.
Cash is likely to be eliminated sooner rather than later in order to pave the way for the dominance of central bank digital currencies. A U.S. dollar CBDC is coming soon. Cash will have to be eliminated to force individuals into the CBDC world. For better or worse, the only way citizens will be able to avoid the mandatory use of CBDCs will be to use gold, silver or cryptocurrencies.
I put comparisons of gold (and silver) and Bitcoin in the same category as comparing fish and bicycles. You can do it, but what’s the point? Gold is money and Bitcoin is a hallucinogen;(or more precisely an acoustic hypnotic spell).
The idea that the U.S. Treasury, Fed and other mainstream monetary institutions are hostile to crypto is absolutely correct. For 10 years they have taken the view that they don’t like it but don’t know what to do about it. Now they know.
The solution is to kill it.
Of course, Bitcoin and other cryptos have their own ecosystem of exchanges, derivatives, custodians, payment channels, tickers, etc., etc. But so what? Cryptos are like chips in a casino.
You can make money or lose money gambling with the chips. But if you walk outside with chips in your pocket, they’re worthless.
You can change tables at the casino but you can’t leave the casino. Chips only have value inside. If you want to spend money outside, you have to visit the cashier first to cash in your chips. The cashier is the portal from the crypto world to the real world of money.
That’s why the FDIC took over Signature Bank on Sunday, March 12, when they shut down Silicon Valley Bank. Signature Bank was no worse off than a lot of other banks. If it had survived until Monday, March 13, it would have been rescued by the Federal Reserve’s Bank Term Funding Program (BTFP) along with the entire U.S. banking system. Why did Signature Bank get whacked under those circumstances?
Signature Bank got whacked because it was offering a portal to the crypto world called Signet. Once the FDIC announced a blanket deposit guarantee and the Fed offered an unlimited ability to swap bonds for cash at par, Signature would have been fine like any other bank.
Yellen used a panicked weekend to wipe out the Signet portal. As Rahm Emanuel said, never let a crisis go to waste. This is one example of how crypto is getting strangled globally. CBDCs are being set up to replace cryptos as a digital currency.
As for gold, you can manipulate the price for short periods of time by dumping gold, painting the tape, acting in concert, etc. But those techniques are not sustainable (unless you want to sell all your gold, in which case you end up with no gold and the market still goes its way).
The London Gold Pool price rigging agreement collapsed in 1968. British Chancellor of the Exchequer Gordon Brown sold almost half of the U.K.’s gold in 1999 at a near 50-year low, a notorious effort at price manipulation known as Brown’s Bottom.
Both are good examples of how manipulation always fails in the end. The government could try a replay of FDR’s gold confiscation from 1933, but it won’t work this time because there’s no trust in the government’s promises.
There are many reasons for this. No one trusts the government today, whereas in 1933 there was a belief that FDR knew what he was doing and was trying to end the Great Depression. COVID is a good example of how people were lied to about vaccines, masks, etc.
The rule today is “Don’t get fooled again.’ No one will surrender their gold except perhaps the people still wearing masks. But they probably don’t have any gold to begin with.
The other reason gold confiscation won’t work is that gold is not fixed in price as it was in 1933. Very few saw the dollar devaluation from $20/oz to $35/oz of gold coming that FDR orchestrated in 1933.
That gold price increase (really a dollar devaluation) wasn’t announced until months after the confiscation. It was the ultimate in insider trading organized by FDR. Informed citizens won’t fall for that a second time.
In a non-pegged market as we have today, the crisis will come first and gold will go to $5,000 or $10,000 per ounce or higher before the government gets around to an attempted confiscation. By that point the damage is done and gold owners have their winnings.
How should everyday Americans evaluate the crisis choice between gold and cryptos as alternatives to the dollar? Ask the following questions:
Can crypto get whacked by governments? Yes. Can gold be manipulated in the long-run? No.
Those questions and answers really answer the bigger question of how to survive the collapse of the dollar.
Gold works. Crypto doesn’t. ‘Nuff said.
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>>> Leaders from emerging economies are visiting China for the 'Belt and Road' forum
Associated Press
10-15-23
https://www.msn.com/en-us/money/companies/leaders-from-emerging-economies-are-visiting-china-for-the-belt-and-road-forum/ar-AA1igDcm?OCID=ansmsnnews11
BEIJING (AP) — Leaders of emerging market countries are arriving in Beijing for a meeting organized by the Chinese government that will mark the 10th anniversary of its Belt and Road Initiative.
More than a dozen leaders from Africa, Asia and the Mideast were flying into Beijing on Monday, following the arrivals of Chilean President Gabriel Boric and Hungarian Prime Minister Viktor Orbán on Sunday. Others are coming on Tuesday.
Under the Belt and Road Initiative, a signature policy of President Xi Jinping, Chinese companies have built ports, roads, railways, power plants and other infrastructure around the world in a bid to boost trade and economic growth.
But the massive Chinese development loans that funded the projects have also burdened some poorer countries with heavy debts.
A flurry of diplomacy is expected on the sidelines of the third Belt and Road Forum, whose main events are on Wednesday. Orbán met with Xi and Premier Li Qiang, Hungary's state news agency MTI said. The forums also were held in 2017 and 2019.
Kenyan President William Ruto will be seeking additional loans for stalled road projects despite the country's already high public debt, and an easing of the repayment of a Chinese loan for a railway project that has not proven commercially viable.
Russian President Vladimir Putin is expected to attend the forum, as are representatives of the Taliban government in Afghanistan.
Putin downplayed the idea that China, through its Belt and Road projects in Central Asia, is competing for influence in a region that Russia has long considered its backyard.
"Our own ideas on the development of the Eurasian Economic Union, for example, on the construction of a Greater Eurasia, fully coincide with the Chinese ideas proposed within the framework of the Belt and Road Initiative,” he told Chinese state broadcaster CCTV, according to a transcript posted on the Kremlin website.
The leaders who arrived on Monday included Ethiopian Prime Minister Abiy Ahmed, Sri Lankan President Ranil Wickremesinghe, Republic of Congo President Denis Sassou Nguesso, Papua New Guinean Prime Minister James Marape and Cambodian Prime Minister Hun Manet.
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Rickards - >>> The Dream Is Dead
BY JAMES RICKARDS
SEPTEMBER 6, 2023
https://dailyreckoning.com/the-dream-is-dead/
The Dream Is Dead
The global desire to move away from the dollar as a medium of exchange for international trade in goods and services has gone from a discussion point to a novelty to a looming reality in a remarkably short period of time.
It’s impossible to check headlines without seeing a new story about major trading partners planning to substitute their local currencies (or in the BRICS case, a newly formed currency) for the U.S. dollar in payment channels supporting world trade.
This plan has recently been re-emphasized as the BRICS have agreed formally to admit six new members to the group, including Saudi Arabia.
The importance of the new members is obvious. By adding Saudi Arabia, the BRICS now have two of the three largest oil producers in the world (Russia and Saudi Arabia; the third member of the trio is the United States) inside their tent.
The inclusion of UAE and Iran alongside Saudi Arabia and Russia makes the BRICS a de facto OPEC+ when it comes to dictating oil output and prices.
The BRICS will now include the second, fifth-, 10th-, 11th-, 18th- and 23rd-largest economies in the world, along with five others. The total GDP of the expanded BRICS membership is approximately 30% of global GDP measured on a nominal basis and over 50% of global GDP when measured based on purchasing power parity.
Many Americans are inclined to lament declines in the dollar’s global role. But should they?
The dollar’s global role has always been a double-edged sword for the United States. A strong dollar makes exports more expensive. And even though it does allow the threat of sanctions to be part of foreign policy, that hasn’t worked out that well for the U.S. under Joe Biden.
You see, in addition to sanctioning oligarchs, banning U.S. investment in Russia, kicking Russia out of the SWIFT international messaging system and freezing and stealing assets, Biden’s sanctions went so far as to freeze and hold the U.S. dollar reserves of the Central Bank of Russia.
I wrote at the time that not only would this move fail to hurt Russia. But it would also boomerang and do extreme damage to the United States. I’m truly sad to say I was right.
When other countries saw the U.S. grab the assets of a major central bank, they asked themselves the obvious question: “What if the U.S. doesn’t like MY policies or actions in international affairs?” “Will Biden then seize my central bank assets too?”
Many countries — including China, India and Brazil decided the answer might be, “Yes.” and they immediately started selling off their holdings of U.S. Treasury debt and began to pay for imports in their own currencies.
But Biden’s blunder created an even more significant threat and the status of the dollar as the world’s global reserve currency is now in question.
So the greatest threat to the dollar comes not from abroad but from the U.S. Treasury.
Specifically, by seizing the assets of the Central Bank of Russia, the U.S. has weaponized the dollar in a way that undermines the rule of law in the United States and causes other countries to seek alternatives.
What if no other currency can easily replace the reserve currency role of the dollar? Is there any alternative at all?
Yes, gold is ready and waiting in the wings. That’s the real danger to the U.S. Treasury market — that sovereign nations turn to gold to escape the dollar.
That trend has also begun. Yet it cannot go very far without exponential increases in the dollar price of gold. Such gains should not be thought of as gold “going up.” They are best understood as the dollar going down. The implications of that are highly inflationary as we saw in the late 1970s.
We will see the results of de-dollarization efforts in the months ahead. For now, get your gold while you still can.
Below, I show you how the BRICS summit is just one more sign that the globalist dream is dead. Read on.
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Rickards - >>> The Globalist Dream Is Dead
By Jim Rickards
https://dailyreckoning.com/the-dream-is-dead/
What exactly happened at the BRICS Summit in South Africa that concluded on Aug. 24? The answer is a lot happened with momentous consequences for the international monetary system and geopolitics more broadly. Yet the most important details were not widely reported and instead were buried beneath the standard headlines. Here’s the story:
I’ve reviewed the 26-page formal communique emerging from the BRICS Summit. It’s fine for reference purposes, but it’s mostly filled with diplomatic phrases and good intentions. It discusses “mutual respect and understanding, sovereign equality, solidarity, democracy, openness, inclusiveness, strengthened collaboration and consensus.”
That’s just diplomatic boilerplate that you can find in almost any communique from any multilateral meeting. There are some important announcements buried in the 26 pages, but I can get more information from the media and my private sources. The formal document can safely be laid to one side while we dig behind the scenes for the real news.
The News Is Huge
To review, the BRICS (Brazil, Russia, India, China and South Africa) have agreed formally to admit six new members to the group. These countries are Saudi Arabia, Iran, UAE, Ethiopia, Argentina and Egypt. These countries will become BRICS members effective Jan. 1, 2024. This is the first change in the membership since South Africa was admitted to the original BRICs in 2010.
Now that the dam has burst on new members, it’s reasonable to expect that many more on the 20-plus-country waiting list will be admitted in the years ahead, including economically powerful players like Turkey.
There was a lot of back and forth among the members regarding these admissions. China pushed hard for the inclusion of Saudi Arabia since the kingdom is the largest supplier of oil to China. Russia also supported Saudi Arabia.
India was initially opposed, but then agreed in return for China’s support to admit Iran, which is a close ally of India. South Africa lobbied for another sub-Saharan African member, which accounts for the inclusion of Ethiopia.
Brazil wanted to make sure South America was not slighted and pushed for Argentina, which is a major trading partner of Brazil. Egypt seemed an obvious choice, both because of the importance of the Suez Canal and because of Egypt’s historic close ties to Russia going back to the 1950s.
UAE is an important financial center (a key consideration as the de-dollarization effort moves forward) and fits nicely with the oil production portfolio of Saudi Arabia, Iran and Russia. In the end, everyone gained something and a consensus was reached.
The Planned Dominance of BRICS+
By adding Saudi Arabia, the BRICS now have two of the three largest oil producers in the world (Russia and Saudi Arabia; the third member of the trio is the United States) inside their tent. The inclusion of UAE and Iran alongside Saudi Arabia and Russia makes the BRICS a de facto OPEC+ when it comes to dictating oil output and prices.
The combined population of the BRICS+ is 3.6 billion, or 45% of the total population of the earth. The expanded BRICS also dominate a long list of natural resource outputs including grains, soybeans, rare earths, uranium, titanium, aluminum, and gold. The BRICS+ possess two of the three largest nuclear weapons arsenals on earth (Russia and China; the U.S. is the other member of the three).
The power of BRICS+ goes far beyond simple measures of output and population. When you look at a map of the world, you’ll see that the BRICS now control the Persian Gulf and the Straits of Hormuz (Saudi Arabia, UAE and Iran), the Suez Canal (Egypt), the Straits of Magellan (Argentina) and a large portion of the Eurasian landmass (Russia, China, and Iran).
This effort has a long way to go and the U.S. Navy still rules the seas. Transportation links from Shanghai to Rotterdam are still in the works. But the BRICS+ vision with respect to both land and sea global dominance strategies is breathtaking.
In short, whether measured by population, weapons, economic output, energy, natural resources or sheer landmass, the BRICS+ are now in a position to challenge the G7 and other developed economies for a global voice in geopolitics, economics and the global order.
This challenge will become more tangible as the BRICS add even more members in future. The battle lines between the Collective West and the Global South have now been drawn. It’s a multipolar world of a kind last seen in 1991 at the end of the Cold War. The globalist dream is dead.
What About That New Global Currency?
What about plans for a new global BRICS currency to be used first as a trading currency among members and then later as a reserve currency?
The BRICS XV Summit declaration is almost completely silent on this point. There are some positive references to the respective roles of the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA) but these are both existing entities and do not mark new initiatives.
But the fact that a new global currency was not mentioned does not mean it was not discussed privately. It simply means that no consensus was reached.
China still harbors dreams of making the yuan a global trade currency and creating a kind of “petroyuan.” India is still pushing for wider acceptance of their rupee in bilateral trade. South Africa is not a significant global player in this debate. Only Russia and Brazil seem committed to creating a true alternative to the dollar for global trade and reserves.
These issues will have to be resolved.
Importantly, the size of a currency union is the key to its success. The euro is a perfect example. There are currently 20 countries that use the euro as their home currency. The euro also ranks as a global reserve currency (with about a 26% share of reserve assets denominated in euros) because it is freely convertible into U.S. dollars and other reserve currencies such as Swiss francs, sterling and Japanese yen.
This is why the expansion of BRICS membership is integral to the vision of a new global currency. Designing and launching a new currency means little without a large group of trading partners ready to adopt it and use it in day-to-day trading.
The addition of new BRICS members is an important move in the direction of creating that large group and therefore an essential step on the road to a new global currency to rival if not displace the dollar.
The process has begun.
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Rickards - >>> BRICS Seize World’s Commanding Heights
BY JAMES RICKARDS
AUGUST 28, 2023
https://dailyreckoning.com/brics-seize-worlds-commanding-heights/
BRICS Seize World’s Commanding Heights
The BRICS Leader’s Summit ended on August 24 with a momentous decision to expand the membership of BRICS for the first time since 2010.
Saudi Arabia, the United Arab Emirates, Egypt, Argentina, Ethiopia, and Iran were all admitted to membership effective January 1, 2024. Both Brazil and India have some reservations about this move.
But in the end, Russia and China used their muscle to push through the new members despite objections. The BRICS are now BRICS+ with eleven full members and on their way to greater political power and a new currency union.
This is a momentous development, though its effects will take time to fully manifest themselves.
As a result of this expanded membership, the new BRICS currency will emerge in the year ahead.
This is because all current and prospective BRICS members and the entire Global South (including members of the Shanghai Cooperation Organization and the Eurasian Economic Union) are suffering from the weaponization of the U.S. dollar.
They fear that their dollar-denominated reserves may be frozen by the U.S., as recently happened to Russia.
Their solution is to start a new currency union big enough to offer a diverse range of goods and services (and eventually bonds) that bypasses the dollar.
It won’t happen overnight and the new currency will face challenges, but the process is getting underway.
The implications of expanded BRICS membership actually go far beyond the currency union.
With the additions of Saudi Arabia, Iran and UAE, the BRICS have now effectively surrounded the Persian Gulf. With the addition of Egypt and Saudi Arabia, they now effectively control the Red Sea and the Suez Canal.
Meanwhile, the addition of Argentina gives BRICS control of the Straits of Magellan for transit from the Atlantic to the Pacific Oceans (good luck in the Drake Passage; I’ve been there. It’s a daunting body of water).
BRICS are moving closer to the dual visions of Halford Mackinder, the geopolitical theorist whose notion of the World Island and Heartland were both based in Asia — and to Alfred Mahan, the naval strategist whose theory of sea power emphasized control of critical straits and other sea chokepoints.
The BRICS are consolidating physical control of both the land and sea pivots of history.
Expanded BRICS membership also marks the beginning of the end of the petrodollar era. Membership of Saudi Arabia in the BRICS is a large step in that direction. This is why the admission of new members and the launch of a new currency cannot be viewed in isolation.
They are two parts of a common project. The expanded membership is precisely what makes the new currency more feasible.
This is all happening under the noses of U.S. policymakers who seem ignorant both of history and current events.
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Latest from Rickards - >>> BRIC by BRIC
BY JAMES RICKARDS
AUGUST 22, 2023
https://dailyreckoning.com/bric-by-bric/
BRIC by BRIC
It’s finally here…
Today, Aug. 22, is a date I’ve been warning readers about for months.
It’s the date when a great monetary shock is set to hit the global financial system.
That’s because the BRICS nations are now meeting in South Africa, where they’ll take steps to create a new gold-backed currency as a dollar alternative.
The meeting wraps up on the 24th.
By understanding what is about to hit the global monetary system, you can better prepare to protect and even grow your wealth.
A big part of that strategy centers on my proprietary IMPACT system that I created specifically to profit from the ongoing currency wars.
Information is key, so let’s get into some common questions readers have about this crucial development.
QUESTION: Will this announcement from BRICS have a crucial impact on American citizens and international citizens on the home front in a negative way? How can we prepare?
ANSWER: The short answer is yes. If what I’m predicting takes place, Saudi Arabia will be accepted into the BRICS alliance (Brazil, Russia, India, China, South Africa). This in itself is a major power grab by the BRICS challenging the G7 countries. But if Saudi Arabia chooses to break the petrodollar agreement with America and sell its oil in currencies other than dollars…
It will be a MASSIVE blow to America and could be what leads to the dollar losing its reign as the global reserve currency of the world, weakening America’s power even more.
QUESTION: Jim, how sure are you of this event happening over the next few days? 50%? Or 90%?
ANSWER: I am 99.99% sure. This meeting is by far the most important BRICS meeting since the founding of the organization in 2006. Now I don’t know for certain if Saudi Arabia will be accepted into the BRICS or not; only the leaders of the BRICS nation know that.
But if the Saudis are accepted, I believe it will trigger a currency war unlike anything we’ve ever seen… creating a massive profit opportunity in the currency markets. My proprietary IMPACT system has already identified THREE currency trades I believe are set to be the BIGGEST WINNERS of this new currency war.
QUESTION: If the U.S. loses the distinction of having the dollar as the global currency, who will take its place? And what will happen to the dollar?
ANSWER: There is currently no alternative to the dollar in terms of its reserve currency status because of the absence of a sovereign bond market of sufficient size and operational capacity. That role will be very difficult to dislodge, perhaps taking 10 to 20 years to establish the necessary infrastructure and gain the trust of market participants.
If no other currency can easily replace the reserve currency role of the dollar, is there any alternative at all? Yes, gold is ready and waiting in the wings. That’s the real danger to the U.S. Treasury market — that sovereign nations turn to gold to escape the dollar. The impediment to another currency as a reserve currency is the absence of a bond market where reserves are actually invested.
With gold, there’s no need for a bond market to absorb reserves because you have the physical gold as the resulting asset. If this came to fruition, the dollar would become another regional currency, such as pesos are to Mexico or the pound is to the U.K.
QUESTION: Do you expect stock markets to be impacted in the U.S. as a reaction to the BRICS summit announcements during the summit on Aug. 22–24?
ANSWER: The market as a whole will not significantly be impacted since this is a gradual rollout of the new BRICS currency. All of the pieces are now in place. Since the BRICS+ currency will be gold-linked, and since participants in the scheme will continue to buy gold in order to maintain the needed backing support for the new currency, the price of gold will remain strong and steadily grow. This will be good for gold stocks as gold will effectively hitch a ride on the BRICS+ currency train and be part of the future of international finance.
QUESTION: Do you believe the Saudis will price their oil in the new BRICS currency in the future?
ANSWER: I do believe this is part of the bigger plan the Saudis have for joining the BRICS. First and foremost, joining the BRICS allows the Saudis to get away from being dependent on the U.S. This will allow them to sell their oil in other currencies (helping cause a worldwide currency war around the globe).
In the end, I believe the plan for the BRICS is to be able to trade amongst themselves with their own currency, but I believe we are still a ways away from that. In the near term, we can use this new currency war to profit from currency trading.
QUESTION: Should we take most of our money out of the stock market and put more in gold? What will the price of gold be at the end of 2023?
ANSWER: As I have often said, the key to a financially sound portfolio is diversification. That’s why I always recommend just a 10% allocation to physical gold. I would stay light in equities and put 30% in cash until the volatility of the markets subsides after the BRICS announcement. The eventual collapse of the dollar really means higher inflation and a much higher dollar price for gold. That means other commodity prices will rise in lockstep.
A commodity boom favors BRICS and emerging markets generally (as it did in the late 1970s and early 1980s). When gold goes from $2,000 to $10,000, that is better understood as an 80% devaluation of the dollar. That’s a collapse of confidence, but you’ll miss it if you’re looking at euros or yen.
Those currencies will be collapsing at the same time creating a unique opportunity to profit from their falls. After a gold-linked currency is announced, gold will rise in price, and I expect a new floor of $2,000 per ounce by the end of the year and then a sharp rise from there.
QUESTION: How much money do I need to get started?
ANSWER: I believe a $5–10K trading portfolio is a great place to start, but the truth of the matter is you can get into these currency trades with as little as a few hundred dollars. That’s because IMPACT trades have built-in leverage. This means you get the exact right amount of leverage in each trade.
And consider this: IMPACT trades also have built-in protection. This means you can’t lose more than you put in. So while there’s always the possibility a trade could turn against you, your risk is always known and strictly limited by design.
QUESTION: If your BRICS hypothesis happens, how do I protect my wealth?
ANSWER: Over time, the dynamic is the BRICS are going to be anchored to gold and the U.S. is going to be anchored to nothing, and the dollar price of gold is going to go up, which is the dollar valuation, resulting in a highly inflationary environment. So it’s not too soon to think about inflation hedges.
As mentioned above, gold and silver are excellent safe-haven investments to have with higher inflation. Other investments to preserve wealth include cash, land, energy, agriculture and U.S. Treasury notes. Investments to stay away from are stocks, corporate bonds and commercial real estate.
QUESTION: What sectors will be negatively impacted, and which sector opportunities will come from this change?
ANSWER: First and foremost, trading currencies will be far and away the most exciting opportunity over the coming weeks as the BRICS begin to make their moves. I also see the gold mining sector benefiting from the BRICS changes, as any rise in the price of gold benefits the miner’s bottom line.
The energy sector will benefit as the new changes allow broader trade in oil and gas between BRICS countries. Oil and natural gas aren’t going anywhere. We’re going to need them for the foreseeable future, and those stocks have been beaten down. I also like real estate, agriculture and particularly defense with more aggression by U.S. adversaries as de-dollarization illustrates.
In terms of sectors that’ll suffer, the technology sector could suffer by not only being in a major bubble, but the BRICS nations trading technology among themselves with the U.S. on the outside could spell trouble for many tech stocks. You’ve got huge bubble dynamics. It doesn’t mean it’s over tomorrow. It doesn’t mean you run right out today and short the Nasdaq. That might be a good way to lose money. But as these changes kick in, the tech sector could be the one that suffers the most.
I hope I’ve answered some of your most pressing questions.
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Rickards - >>> The Earthquake Starts Tomorrow
BY JAMES RICKARDS
AUGUST 21, 2023
https://dailyreckoning.com/the-earthquake-starts-tomorrow/
The Earthquake Starts Tomorrow
The BRICS Leaders’ Summit is scheduled to begin tomorrow, Aug. 22 in South Africa, which will run through the 24th.
As I’ve been warning, this meeting is the most significant development in international finance in the last 50 years.
It has the potential to displace the U.S. dollar as the leading payment currency and reserve currency from a standing start in just a few years.
This latest monetary change will be delivered by the BRICS, and the world is unprepared for this geopolitical shock to the global financial system. Of course, BRICS is an acronym for Brazil, Russia, India, China and South Africa.
Among the leaders attending the summit are President Xi Jinping of China, President Lula da Silva of Brazil and Prime Minister Modi of India. President Vladimir Putin of Russia cannot attend in person because there’s an outstanding warrant for his arrest on war crimes charges issued by the corrupt International Criminal Court (ICC) in The Hague.
South Africa is a member of the ICC and might have been required to arrest Putin on arrival. The in-person delegate for Russia will be Sergey Lavrov, Russia’s foreign minister.
Shrouded in Mystery
Even at this late date, the official agenda is shrouded in mystery. That’s not unusual considering that the members themselves, especially Russia and China, are accustomed to decision-making behind closed doors.
It’s also not an unusual feature where top leaders are involved. Negotiations tend to go down to the wire; indeed, key decisions will not even be made until the leaders actually get together in one room.
That said, we do know the top two issues that have been discussed by the leaders behind the scenes (often through so-called Sherpas, who are seasoned diplomats working in private to advance the agendas of their respective leaders and to obtain feedback from the other leaders about where points of agreement might actually lie).
What We Know
The first big issue involves new membership. The BRICS may be a five-member group, but over 67 countries have been invited to attend. Among those 67 countries, more than 20 have expressed interest in joining the BRICS, and seven have formally applied for membership.
If any new members are admitted, first on this list will be Saudi Arabia. As of now, both Russia and China favor Saudi Arabia for membership. China is the largest purchaser of Saudi Arabian oil, so a formal alliance including both countries makes sense, especially as they and others move forward on a common currency other than the U.S. dollar. (More about that in a second).
Also, Russia and Saudi Arabia are two of the three largest oil producers in the world (the other being the U.S.), so including both countries in the same group creates a forum that may be more powerful than OPEC when it comes to setting oil prices.
Brazil has been the BRICS member most opposed to admitting new members. That might be understandable in terms of not diluting Brazil’s power within the group. But Russia and China may simply force Brazil’s hand on the issue of Saudi Arabian membership.
We’ll see what happens. As of now, Saudi Arabian admission is a likely result at the summit, but it’s not a sure thing.
Here’s the Important Part
The other major issue is the launch of a new multilateral BRICS currency that might be used to settle trade balances in the short run and then evolve into a reserve currency over a longer period of time.
We know a lot about the potential shape of this new currency based on statements made over the past six months by BRICS leaders themselves as well as their foreign ministers or finance ministers.
Russia is one of the original BRICS and has the largest gold hoard of any BRICS member. The new BRICS currency to be announced is likely to be gold-linked. This will position Russia to be one of the leading backers of the new currency and the de facto BRICS banker to the world.
The BRICS currency will not involve the yuan, ruble, rupee or other national currency of the members. Those currencies will continue to exist for domestic consumption and contracts, but they will gradually be replaced by the new BRICS currency for international settlements.
How It’ll Work
The value of each unit of BRICS currency will not be tied to another currency or basket. Instead, it will be tied either to a basket of commodities (oil, gold, copper, wheat, iron ore, etc.) or simply to gold.
The commodity basket idea is unwieldy (as John Maynard Keynes discovered when he explored a similar approach in 1944), so a non-currency valuation metric is likely to end up with gold (as Keynes also discovered).
However, this may be a two-step process as Brazil and South Africa both place some weight on the role as top commodity producers.
The other key element in the launch of the currency is the expansion of the BRICS membership beyond the current five. This is important not only for the geopolitical reasons noted above but because the larger the membership in a currency union, the more valuable the currency becomes.
The success of the euro is a good example; that currency union has expanded to 19 active members with several more on the waiting list.
When you receive a multilateral currency such as the new BRICS unit in payment for your own goods and services, it’s valuable to be able to spend it in 10 or 20 countries instead of just three or four.
This new currency would be issued by a multilateral central bank controlled by the BRICS members, possibly the New Development Bank created by the BRICS in 2014.
What We Don’t Know
While the outline of the new currency is clear, it’s not clear how much actual progress will be made at this meeting. Russia and China are clearly on board. Brazil is strongly in favor also because of its dislike for the United States and desire to get away from the U.S. dollar.
The reluctant member on this issue is India. This may be due to the fact that Russia has been selling oil to India for rupees and it suits India to be able to print its own currency to buy oil. That’s a privilege that heretofore has been reserved exclusively to the United States.
India’s mini exorbitant privilege may be ending as soon as it began. Russia has put India on notice that it will soon refuse to accept rupees for further oil shipments. This means India will either have to come up with dollars (or gold) or perhaps sign on to the new BRICS currency.
These are issues that will be hashed out behind closed doors over the next few days. It’s unclear what the outcome will be. My expectation is that some announcement will be made about progress toward the new BRICS currency, but it’s premature to announce the currency itself.
Such an announcement is no less momentous to investors than the actual issue of the currency.
The Fact That It’s Happening at All Is Important
Multilateral organizations with disparate views often take a piecemeal approach to agreements of this kind. What’s important is not that everything be done at once, but that something be done at all.
That sets the wheels in motion for the biggest change in the international monetary system since 1971.
We may get some leaks or comments over the next few days, but perhaps not. If there are any, I’ll alert my readers.
Other than any other leaks, the next big news development on the BRICS summit will be the Leaders’ Final Communiqué that will be issued late Thursday. These communiqués are typically 10 pages or so, listing all the matters agreed upon and the next steps.
This formidable grouping of not just the BRICS, but a united Global South is challenging the Western rules-based order and the U.S. dollar.
It will be a busy and critical week. Stay tuned.
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According to this Reuters article, it sounds like the BRICS currency won't be on the agenda for the meeting. If true, that would be a welcome reprieve, albeit probably temporary. On the BRICS expansion side, they say that Brazil and India would prefer a slower timeline, compared to China and Russia who want a more rapid expansion. We know over 20 countries have already formally applied for BRICS membership (including Saudi Arabia), and dozens more have expressed interest. Anyway, if the timeline for all these changes is fairly slow, the financial markets might just yawn (for now) and concern themselves with other factors this Fall (Fed policy, inflation, economy, banking and commercial real estate problems, etc.)
>>> BRICS leaders meet in South Africa as bloc weighs expansion <<<
Excerpt -Boosting the use of member states' local currencies is also on the agenda. South African summit organisers, however, say there will be no discussions of a BRICS currency, an idea floated by Brazil earlier this year as an alternative to dollar-dependence.
Excerpt - Over 40 countries have expressed interest in joining BRICS, say South African officials. Of them, nearly two dozen have formally asked to be admitted.
https://www.msn.com/en-us/news/world/brics-leaders-meet-in-south-africa-as-bloc-weighs-expansion/ar-AA1fBBVF?OCID=ansmsnnews11
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>>> Here are the countries that have shown interest in joining BRICS (as of May). Even France's Macron is asking to be invited to the Aug BRICS summit meeting -
https://watcher.guru/news/brics-full-list-of-countries-that-want-to-join-alliance
Formally applied -
Algeria
Argentina
Bahrain
Egypt
Indonesia
Iran
Saudi Arabia
United Arab Emirates
Expressed interest -
Afghanistan,
Bangladesh
Belarus
Kazakhstan
Mexico
Nicaragua
Nigeria
Pakistan
Senegal
Sudan
Syria
Thailand
Tunisia
Turkey
Uruguay
Venezuela, and
Zimbabwe.
Among all the nations, Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates have formally applied to join the BRICS alliance. The other nations have only expressed their interest in joining the BRICS bloc.
https://en.wikipedia.org/wiki/BRICS
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>>> Why does Saudi Arabia want to join BRICS
Modern Diplomacy
June 18, 2023
https://moderndiplomacy.eu/2023/06/18/why-does-saudi-arabia-want-to-join-brics/
Saudi Arabia has become a dialogue partner in the SCO. She also intends to join the BRICS, which will bring certain advantages to Riyadh, the online ‘Maaal’ newspaper reported. According to the author of the article, BRICS intends to put an end to Western hegemony, which is precisely in the interests of the Arab monarchy.
The Cabinet of Ministers of Saudi Arabia approved a Memorandum on granting the Kingdom the status of a dialogue partner in the Shanghai Cooperation Organization (SCO), founded in Beijing in 2001 to oppose Western institutions. It consists of nine permanent members: China, Russia, India, Pakistan, Iran, Kazakhstan, Tajikistan, Kyrgyzstan and Uzbekistan. Egypt and Qatar have the status of observers or dialogue partners.
The decision to join Saudi Arabia to the SCO came less than three weeks after Riyadh and Tehran agreed to resume diplomatic relations mediated by China. The Shanghai Cooperation Organization seeks to secure a privileged place for itself in the new world order.
Saudi Arabia occupies a high position in the Islamic and Arab world. Saudi Arabia is the largest player in the global energy markets – 19% of the world’s oil reserves; 12% of world production; more than 20% of oil exports on world markets. Proved oil reserves are approximately 267 billion barrels, and production is more than five million barrels per day, both domestically and abroad.
The volume of gold and foreign exchange reserves, according to statistics from the Central Bank of Saudi Arabia, amounted to $693 billion at the end of 2022. Therefore, it is an important player in the global financial and investment markets. Every international organization seeks to get the Kingdom as an ally, as this ultimately has a positive effect on their strength and global influence.
The entry of Saudi Arabia into the BRICS will benefit the participating countries and strengthen the position of the organization on the world stage. The Kingdom will not be left out either. It will benefit from the markets, opportunities and resources of the BRICS countries. This organization includes the main developing economies of the world (about 41% of the world’s population). BRICS is a huge market that can absorb the exports of any economy, not to mention huge investment opportunities. In 2022, the total nominal GDP of the BRICS countries was $24.2 trillion (25% of total world output). China alone accounts for almost 70% of the total output of the BRICS group.
China and India, members of the BRICS, are the main markets for oil imports from the Gulf countries, as well as the main trading partners for Saudi Arabia and the Gulf countries. Joining the BRICS will strengthen economic cooperation between the Kingdom and the participating countries, and will contribute to the growth of the Saudi economy in the future.
Despite the obvious advantages, Riyadh’s accession to the BRICS may lead to an aggravation of relations with the West, especially with America. Therefore, he must carefully weigh all the pros and cons before making a final decision, and also take into account the following factors.
The United States is the fifth largest trading partner of Saudi Arabia with a trade volume of 151.4 billion rials. Washington considers the Kingdom to be its strategic ally in the Persian Gulf region. He is Riyadh’s largest arms exporter and largest foreign investor. US investment in Saudi Arabia is $800 billion, while China is only $100 billion.
The accession of Saudi Arabia to the BRICS will accelerate the economic diversification and development of the country and reduce its dependence on Western blocs. On the other hand, there are potential risks and challenges, the most important of which is the intensification of geopolitical competition between the West and the East, led by the BRICS, which will have a negative impact on the Kingdom, which has long been part of the Western camp.
In 2022, the global trade volume of the G7 countries amounted to $6.3 trillion (28.1% of total world exports), while imports amounted to $7.6 trillion (33.5% of total world imports). The volume of world exports of the BRICS group amounted to $4.6 trillion (20.7% of total world exports), and imports – $3.9 trillion (17% of total world imports).
Saudi Arabia wants to increase the share of non-oil exports to 50%. Thus, the possible accession of Riyadh to the BRICS will help increase Saudi energy exports in exchange for opening the Kingdom’s markets to Chinese imports and reducing dependence on imports from Western countries.
The escalation of the conflict in Ukraine into a global confrontation involving the West, on the one hand, and China, on the other. Inevitably, there will be a division of countries into eastern and western camps. No one can remain neutral. BRICS will become a kind of Eastern ‘umbrella’ that will not leave small states to be torn to pieces by Western powers.
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>>> The BRICs Go For Gold
Forbes
by Nathan Lewis
Jul 16, 2023
https://www.forbes.com/sites/nathanlewis/2023/07/16/the-brics-go-for-gold/?sh=5b386765eb35;
After months of debate about various currency and commodity baskets, a Russia- and China-led consortium has apparently settled on using gold as the basis of a planned new international currency system separate from the US dollar and euro. As recently reported by state-funded Russia Today, an upcoming meeting of leaders from Brazil, Russia, India and China in August may include the formal introduction of the new initiative.
This would be similar to the Bretton Woods meeting in 1944, where, after the floating currency chaos of the Great Depression, a new gold-based international currency architecture was laid out. The centerpiece was the US dollar, which in turn would be linked to gold at $35/oz., its gold parity since 1933. This laid the foundation for two decades of peace, prosperity, and fixed exchange rates, which sadly came to an end when the US dollar was floated from its golden anchor in 1971.
Since then, various governments have attempted to move back toward an international arrangement based on gold. In 2019, Malaysia's prime minister Mahathir Mohammad proposed a Pan-Asian currency based on gold. "At the moment we have to depend upon the U.S. dollar but the U.S. dollar is also not stable. So the currency that we propose should be based on gold because gold is much more stable," Mahathir described. This too mirrored the Bretton Woods debates, where John Maynard Keynes' "bancor" proposal, which amounted to a global floating fiat currency, was abandoned in favor of the gold-based U.S. dollar at the heart of the system.
In 2009, Libya's Muammar Gaddafi proposed a Pan-African currency, the gold dinar, echoing the gold dinar coins of the Arab Caliphates that once ruled North Africa. But, unrest in Libya in 2011 put an end to such ambitions.
Also in 2009, the head of China's central bank, Zhou Xiaochuan, wrote: "An international reserve currency should first be anchored to a stable benchmark and issued according to a clear set of rules … [Its] adjustments should be disconnected from economic conditions and sovereign interests of any single country. The acceptance of credit-based national currencies, as is the case in the current system, is a rare special case in history."
Although Xiaochuan did not say how these goals might be achieved, we can assume it would be done exactly the same way that Mao Zedong ended hyperinflation in China in 1950: By fixing the yuan to gold.
In Moscow, leading intellectual Sergey Glazyev recently proposed a "Gold Ruble 3.0," referencing the gold-based rubles of both the Czarist era, and then the Soviet Union. Russian media reported that Russia and Iran are in talks to establish a gold-based cryptocurrency for international trade.
All of this rumbling may have come to nothing, if not for the outbreak of hostilities in Ukraine. This was immediately followed by the isolation of Russia from the entirety of the Western financial system, including US and EU banks, and the SWIFT system for international bank payments. The Russian government was ready to make interest and principal payments on its euro-based bonds, but it literally could not do so. To add both insult and injury, roughly $600 billion of foreign reserves, held in custody in the US and EU, were "frozen," and likely to be confiscated.
This was a wake-up-call to all governments worldwide that held dollar or euro foreign reserves, or used the SWIFT banking system. The time had come to set up alternative arrangements.
This would also require a degree of independence from the International Monetary Fund. Although the IMF was set up at Bretton Woods in 1944 explicitly to reinforce the system built around the golden dollar, by 1978 that mission had become obsolete. In a 1978 revision to its Articles, the IMF allowed governments to link their currencies' value to anything "other than gold" (Article IV, Sec. 2a). The IMF itself would follow "the objective of avoiding the management of the price, or the establishment of a fixed price, in the gold market." (Article V, Sec. 12a) In other words, the IMF banned the gold standard among all member countries. The effect was to maintain the floating fiat dollar's primacy in international affairs.
Today, a "gold standard" proposal comes with a cloud of fallacious ideas, having to do with the "balance of payments" and other odd notions. It is best understood as simply a means to stabilize currency value. Today, many countries' currencies are linked to the euro, including Bulgaria, which uses a euro currency board. A gold standard system is the same basic idea, but using gold instead of a floating fiat euro. All of today's electronic payment systems would remain the same.
This was the principle that all of the Western World (and actually the Eastern World as well) followed for the past 600 years since the Renaissance. It worked very well. Gold was indeed tolerably stable in value, in the short and long term — stable enough that countries that stuck to it suffered no ill consequences as a result. They may have suffered for other reasons: Mao's Great Leap Forward (1958-1962) resulted in mass starvation, even though the yuan remained linked to gold. But, gold never failed to serve its role as a reliably stable standard of value.
"The only adequate guarantee for the uniform and stable value of a paper currency is its convertibility into specie [gold or silver] — the least fluctuating and only universal currency," said President James Madison, the primary author of the US Constitution. Today, much of the world wants a basis for their currencies that is stable in value, and also "universal" — that is, something everyone can agree on. Just as at Bretton Woods in 1944, there is only one thing that meets this need, and we all know what it is.
(--> GOLD baby !! But what happens to the value of my Treasuries, gulp)
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>>> BRICS countries likely to induct five new members in August summit
Saudi Arabia's entry almost certain; Indonesia, UAE, Egypt also in the fray
Business Standard
June 29, 2023
https://www.business-standard.com/economy/news/brics-countries-likely-to-add-five-new-members-during-august-summit-123062900836_1.html
The BRICS nations may agree to induct around five new members into the grouping during its August leadership summit, to be hosted by South Africa, culminating a long-pending expansion plan. Out of the 25 countries that are keen to join the grouping, while Saudi Arabia’s entry is almost certain, other frontrunners include Indonesia, the UAE, Egypt, and Argentina, a senior government official said on condition of anonymity...
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>>> How long will the dollar last as the world’s default currency? The BRICS nations are gathering in South Africa this August with it on the agenda
Fortune
BY MIHAELA PAPA
June 25, 2023
https://fortune.com/2023/06/25/dollar-reserve-currency-brics-brazil-russia-india-china-south-africa/
Could a new currency be set to challenge the dominance of the dollar? Perhaps, but that may not be the point.
In August 2023, South Africa will host the leaders of Brazil, Russia, India, China and South Africa – a group of nations known by the acronym BRICS. Among the items on the agenda is the creation of a new joint BRICS currency.
As a scholar who has studied the BRICS countries for over a decade, I can certainly see why talk of a BRICS currency is, well, gaining currency. The BRICS summit comes as countries across the world are confronting a changing geopolitical landscape that is challenging the traditional dominance of the West. And while the BRICS countries have been seeking to reduce their reliance on the dollar for over a decade, Western sanctions on Russia after its invasion of Ukraine have accelerated the process.
Meanwhile, rising interest rates and the recent debt-ceiling crisis in the U.S. have raised concerns among other countries about their dollar-denominated debt and the demise of the dollar should the world’s leading economy ever default.
That all said, a new BRICS currency faces major hurdles before becoming a reality. But what currency discussions do show is that the BRICS countries are seeking to discover and develop new ideas about how to shake up international affairs and effectively coordinate policies around these ideas.
De-dollarization momentum?
With 88% of international transactions conducted in U.S. dollars, and the dollar accounting for 58% of global foreign exchange reserves, the dollar’s global dominance is indisputable. Yet de-dollarization – or reducing an economy’s reliance on the U.S. dollar for international trade and finance – has been accelerating following the Russian invasion of Ukraine.
The BRICS countries have been pursuing a wide range of initiatives to decrease their dependence on the dollar. Over the past year, Russia, China and Brazil have turned to greater use of non-dollar currencies in their cross-border transactions. Iraq, Saudi Arabia and the United Arab Emirates are actively exploring dollar alternatives. And central banks have sought to shift more of their currency reserves away from the dollar and into gold.
All the BRICS nations have been critical of the dollar’s dominance for different reasons. Russian officials have been championing de-dollarization to ease the pain from sanctions. Because of sanctions, Russian banks have been unable to use SWIFT, the global messaging system that enables bank transactions. And the West froze Russia’s US$330 billion in reserves last year.
Meanwhile, the 2022 election in Brazil reinstated Luiz Inácio Lula da Silva as president. Lula is a longtime proponent of BRICS who previously sought to reduce Brazil’s dependence on and vulnerability to the dollar. He has reenergized the group’s commitment to de-dollarization and spoken about creating a new Euro-like currency.
The Chinese government has also clearly laid out its concerns with the dollar’s dominance, labeling it “the main source of instability and uncertainty in the world economy.” Beijing directly blamed the Fed’s interest rate hike for causing turmoil in the international financial market and substantial depreciation of other currencies. Together with other BRICS countries, China has also criticized the use of sanctions as a geopolitical weapon.
The appeal of de-dollarization and a possible BRICS currency would be to mitigate such problems. Experts in the U.S. are deeply divided on its prospects. U.S. Treasury Secretary Janet Yellen believes the dollar will remain dominant as most countries have no alternative. Yet a former White House economist sees a way that a BRICS currency could end dollar dominance.
Currency ambitions
Although talk of a BRICS currency has gained momentum, there is limited information on various models under consideration.
The most ambitious path would be something akin to the Euro, the single-currency adopted by 11 member states of the European Union in 1999. But negotiating a single currency would be difficult given the economic power asymmetries and complex political dynamics within BRICS. And for a new currency to work, BRICS would need to agree to an exchange rate mechanism, have efficient payment systems and a well-regulated, stable and liquid financial market. To achieve a global currency status, BRICS would need a strong track record of joint currency management to convince others that the new currency is reliable.
A BRICS version of the Euro is unlikely for now; none of the countries involved show any desire to discontinue its local currency. Rather, the goal appears to be to create an efficient integrated payment system for cross-border transactions as the first step and then introduce a new currency.
Building blocks for this already exist. In 2010, the BRICS Interbank Cooperation Mechanism was launched to facilitate cross-border payments between BRICS banks in local currencies. BRICS nations have been developing “BRICS pay” – a payment system for transactions among the BRICS without having to convert local currency into dollars. And there has been talk of a BRICS cryptocurrency and of strategically aligning the development of Central Bank Digital Currencies to promote currency interoperability and economic integration. Since many countries expressed an interest in joining BRICS, the group is likely to scale its de-dollarization agenda.
From BRICS vision to reality
To be sure, some of the group’s most ambitious past initiatives to set up major BRICS projects to parallel non-Western infrastructures have failed. Big ideas like developing a BRICS credit rating agency and creating a BRICS undersea cable never materialized.
And de-dollarization efforts have been struggling both at the multilateral and bilateral level. In 2014, when the BRICS countries launched the New Development Bank, its founding agreement outlined that its operations may provide financing in the local currency of the country in which the operation takes place. Yet, in 2023, the bank remains heavily dependent on the dollar for its survival. Local currency financing represents around 22% of the bank’s portfolio, although its new president hopes to increase that to 30% by 2026.
Similar challenges exist in bilateral de-dollarization pursuits. Russia and India have sought to develop a mechanism for trading in local currencies, which would enable Indian importers to pay for Russia’s cheap oil and coal in rupees. However, talks were suspended after Moscow cooled on the idea of rupee accumulation.
Despite the barriers to de-dollarization, the BRICS group’s determination to act should not be dismissed – the group has been known for defying expectations in the past.
Despite many differences among the five countries, the bloc managed to develop joint policies and survive major crises such as the 2020-21 China-India border clashes and the war in Ukraine. BRICS has deepened its cooperation, invested in new financial institutions and has been continuously broadening the range of policy issues it addresses.
It now has a huge network of interlinked mechanisms that connect governmental officials, businesses, academics, think tanks and other stakeholders across countries. Even if there is no movement on the joint currency front, there are multiple issues on which BRICS finance ministers as well as central bankers regularly coordinate – and the potential for developing new financial collaborations is particularly strong.
No doubt, talk of a new BRICS currency in itself is an important indicator of the desire of many nations to diversify away from the dollar. But I believe focusing on the BRICS currency risks missing the forest for the trees. A new global economic order will not emerge out of a new BRICS currency or de-dollarization happening overnight. But it can potentially emerge out of BRICS’ commitment to coordinating their policies and innovating – something this currency initiative represents.
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>>> BRICS’s plan to float a common currency & India’s reaction to it
Times of India
July 8, 2023
by Dr. Prashant Prabhakar Deshpande
https://timesofindia.indiatimes.com/blogs/truth-lies-and-politics/bricss-plan-to-float-a-common-currency-indias-reaction-to-it/
The BRICS alliance with Brazil, Russia, India, China & South Africa is planning to float a new currency to settle international trade payments to challenge the global reserve status of the US dollar. The bloc of the five nations is likely to jointly decide on floating a new BRICS currency during its next summit in August, 2023 to be held at Johannesburg in South Africa. Although all other countries constituting BRICS, including Brazil, Russia, China, and South Africa seem to be on the side of issuance of a common BRICS currency, India seems to be the only country that has not shown interest in the plans to launch a new currency.
India’s Stand
India’s External Affairs Minister, S. Jaishankar in a press conference held on Monday, 3rd July, 2023 said that India has no plans for a BRICS currency. He declared a month before the summit that India might back out from creating the new currency. Instead, India is focused on strengthening its national currency, the Rupee, and making Rupee stronger will be the top priority of the Indian government, Jaishankar had stated.
Justification for this stand
India is the only country in the bloc that is doing well in terms of GDP on its merit. As such, the country needs no support from BRICS and can survive without the new BRICS currency, it is claimed.
India also has good relations with the U.S. and Europe with trade and military deals worth billions of dollars. Country does not want to risk its trade with Western powers, believing in the yet-to-be-released BRICS currency.
Efforts to expand the bloc
The bloc which earlier included Brazil, Russia, India, and China has not expanded since the inclusion of South Africa in it in 2010. The increasing relevance of the global south has become an important development during the current year as the BRICS has embarked on expanding the bloc. Reportedly a host of Middle Eastern and African nations have expressed interest in joining the bloc. It is obvious, with the vast national resources held by China and Russia, nations who want to join, see the benefit of joining the BRICS Alliance, which ultimately aims to challenge the US dominance.
India, however, is likely to press for deciding well-defined criteria for the proposed addition of new members to the BRICS grouping of emerging nations, instead of extending membership solely on the basis of recommendations by present members. If BRICS nations decide on taking in new members, India therefore would want formulation of well-established criteria for qualification.
Changing Scenario since BRICS appeared on the International Stage
The US which enjoyed the global superpower status post-World War II is today being challenged by BRICS. Efforts in this direction seem to be afoot as the BRICS embarks on expanding the bloc with a goal to dominate world trade by 2050.
The bloc took a massive step with the establishment of the New Development Bank in 2014, set up with $50 billion in seed money. The New Development Bank floated assumes significance as it provides competition to the International Monetary Fund (IMF), an organization known for conducting operations based on political interest of the developed west. However, over the years BRICS is developing into much more than an economic bloc & trying to establish itself as representing a voice of the global south.
Reportedly, China remains the main force driving the BRICS expansion process with the intention of dethroning the U.S. dollar. The Chinese government is pushing nations around the world to join the bloc and accept the soon-to-be-released currency with the intention of dethroning the U.S. dollar from its global reserve status. Russia and China are also said to be fast-tracking a payment technology that could make trading with the yet-to-be-released BRICS currency easier.
Suspected Agenda of China
Reports suggest that China is using BRICS as a weapon in its quest to dethrone the U.S. dollar as the global reserve currency. The Chinese government is said to be eyeing for the U.S. dollar collapse with BRICS is believed to be the stepping stone to turn the idea into a reality. However, the other three countries India, Brazil, and South Africa seem to be skeptical about the prospects of China dominating the world. They fear that Xi Jinping could impose his vision of the global order, when the new currency appears on the international stage.
India particularly is skeptical about the intentions of China for the following reasons:
India is wary of China’s power & her prowling nature, and hence wants to remain alert of the possibility of China, a communist & authoritarian country using BRICS for her self-interest.
India feels theBRICS alliance is becoming China-centric making the communist nation the recipient of international trade deals.
India feels, Xi Jinping ledChina is trying to become a global economic and military superpower and BRICS could be the stepping stone to achieve her goal.
China is pressurising several countries to settle trade using Chinese Yuanto outdo every other member of BRICS to enable China to follow her plan of action & impose Xi Jinping’s vision of the global order, once the new currency reigns on the international stage.
China and India have been at odds for more than a decade now despite being together as members in BRICS. It is noteworthy that India previously banned Chinese goods from entering the country and placed a ban on Chinese apps, including TikTok, a short-form video hosting service and Shein, the Chinese online fast fashion retailer.
India is therefore rightfully worried that Beijing is using the platform of BRICS for imposing President Xi Jinping’s vision on the countries of the world by dethroning the US dollar & becoming a global economic & military superpower.
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>>> BRICS Draws Membership Bids From 19 Nations Before Summit
Algeria, Egypt, Indonesia have asked to join the group
Foreign ministers from the five BRICS members meet in June
Bloomberg
April 25, 2023
Nineteen countries expressed an interest in joining the BRICS group of nations as it prepares to hold an annual summit in South Africa.
The emerging-markets bloc of Brazil, Russia, India, China and South Africa will meet in Cape Town on June 2-3 to discuss its enlargement, Anil Sooklal, South Africa’s ambassador to the group, said in an interview in the city on Monday.
“What will be discussed is the expansion of BRICS and the modalities of how this will happen,” he said. “Thirteen countries have formally asked to join and another six have asked informally. We are getting applications to join every day.”
China initiated the conversation about expansion when it was BRICS chair last year, as the world’s second-biggest economy tries to build diplomatic clout to counter the dominance of developed countries in the United Nations. The proposed enlargement triggered concern among other members that their influence will be diluted, especially if Beijing’s close allies are admitted. China’s gross domestic product is more than twice the size of all four other BRICS members combined.
The foreign ministers from the five member states have all confirmed they’ll attend the discussions in June, Sooklal said. In addition to its membership, they will also discuss “hot spots” including Sudan, where a cease-fire appeared to take hold on Tuesday after 10 days of conflict.
Since its formation as the BRIC in 2006, the group has only added one new member — South Africa in 2010.
Saudi Arabia and Iran are among the countries who’ve formally asked to join, Sooklal said in February. Other countries that have expressed interest in joining include Argentina, the United Arab Emirates, Algeria, Egypt, Bahrain and Indonesia, along with two nations from East Africa and one from West Africa — which he didn’t identify.
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>>> How long will the dollar last as the world’s default currency? The BRICS nations are gathering in South Africa this August with it on the agenda
Fortune
BY MIHAELA PAPA AND THE CONVERSATION
June 25, 2023
https://fortune.com/2023/06/25/dollar-reserve-currency-brics-brazil-russia-india-china-south-africa/
Could a new currency be set to challenge the dominance of the dollar? Perhaps, but that may not be the point.
In August 2023, South Africa will host the leaders of Brazil, Russia, India, China and South Africa – a group of nations known by the acronym BRICS. Among the items on the agenda is the creation of a new joint BRICS currency.
As a scholar who has studied the BRICS countries for over a decade, I can certainly see why talk of a BRICS currency is, well, gaining currency. The BRICS summit comes as countries across the world are confronting a changing geopolitical landscape that is challenging the traditional dominance of the West. And while the BRICS countries have been seeking to reduce their reliance on the dollar for over a decade, Western sanctions on Russia after its invasion of Ukraine have accelerated the process.
Meanwhile, rising interest rates and the recent debt-ceiling crisis in the U.S. have raised concerns among other countries about their dollar-denominated debt and the demise of the dollar should the world’s leading economy ever default.
That all said, a new BRICS currency faces major hurdles before becoming a reality. But what currency discussions do show is that the BRICS countries are seeking to discover and develop new ideas about how to shake up international affairs and effectively coordinate policies around these ideas.
De-dollarization momentum?
With 88% of international transactions conducted in U.S. dollars, and the dollar accounting for 58% of global foreign exchange reserves, the dollar’s global dominance is indisputable. Yet de-dollarization – or reducing an economy’s reliance on the U.S. dollar for international trade and finance – has been accelerating following the Russian invasion of Ukraine.
The BRICS countries have been pursuing a wide range of initiatives to decrease their dependence on the dollar. Over the past year, Russia, China and Brazil have turned to greater use of non-dollar currencies in their cross-border transactions. Iraq, Saudi Arabia and the United Arab Emirates are actively exploring dollar alternatives. And central banks have sought to shift more of their currency reserves away from the dollar and into gold.
All the BRICS nations have been critical of the dollar’s dominance for different reasons. Russian officials have been championing de-dollarization to ease the pain from sanctions. Because of sanctions, Russian banks have been unable to use SWIFT, the global messaging system that enables bank transactions. And the West froze Russia’s US$330 billion in reserves last year.
Meanwhile, the 2022 election in Brazil reinstated Luiz Inácio Lula da Silva as president. Lula is a longtime proponent of BRICS who previously sought to reduce Brazil’s dependence on and vulnerability to the dollar. He has reenergized the group’s commitment to de-dollarization and spoken about creating a new Euro-like currency.
The Chinese government has also clearly laid out its concerns with the dollar’s dominance, labeling it “the main source of instability and uncertainty in the world economy.” Beijing directly blamed the Fed’s interest rate hike for causing turmoil in the international financial market and substantial depreciation of other currencies. Together with other BRICS countries, China has also criticized the use of sanctions as a geopolitical weapon.
The appeal of de-dollarization and a possible BRICS currency would be to mitigate such problems. Experts in the U.S. are deeply divided on its prospects. U.S. Treasury Secretary Janet Yellen believes the dollar will remain dominant as most countries have no alternative. Yet a former White House economist sees a way that a BRICS currency could end dollar dominance.
Currency ambitions
Although talk of a BRICS currency has gained momentum, there is limited information on various models under consideration.
The most ambitious path would be something akin to the Euro, the single-currency adopted by 11 member states of the European Union in 1999. But negotiating a single currency would be difficult given the economic power asymmetries and complex political dynamics within BRICS. And for a new currency to work, BRICS would need to agree to an exchange rate mechanism, have efficient payment systems and a well-regulated, stable and liquid financial market. To achieve a global currency status, BRICS would need a strong track record of joint currency management to convince others that the new currency is reliable.
A BRICS version of the Euro is unlikely for now; none of the countries involved show any desire to discontinue its local currency. Rather, the goal appears to be to create an efficient integrated payment system for cross-border transactions as the first step and then introduce a new currency.
Building blocks for this already exist. In 2010, the BRICS Interbank Cooperation Mechanism was launched to facilitate cross-border payments between BRICS banks in local currencies. BRICS nations have been developing “BRICS pay” – a payment system for transactions among the BRICS without having to convert local currency into dollars. And there has been talk of a BRICS cryptocurrency and of strategically aligning the development of Central Bank Digital Currencies to promote currency interoperability and economic integration. Since many countries expressed an interest in joining BRICS, the group is likely to scale its de-dollarization agenda.
From BRICS vision to reality
To be sure, some of the group’s most ambitious past initiatives to set up major BRICS projects to parallel non-Western infrastructures have failed. Big ideas like developing a BRICS credit rating agency and creating a BRICS undersea cable never materialized.
And de-dollarization efforts have been struggling both at the multilateral and bilateral level. In 2014, when the BRICS countries launched the New Development Bank, its founding agreement outlined that its operations may provide financing in the local currency of the country in which the operation takes place. Yet, in 2023, the bank remains heavily dependent on the dollar for its survival. Local currency financing represents around 22% of the bank’s portfolio, although its new president hopes to increase that to 30% by 2026.
Similar challenges exist in bilateral de-dollarization pursuits. Russia and India have sought to develop a mechanism for trading in local currencies, which would enable Indian importers to pay for Russia’s cheap oil and coal in rupees. However, talks were suspended after Moscow cooled on the idea of rupee accumulation.
Despite the barriers to de-dollarization, the BRICS group’s determination to act should not be dismissed – the group has been known for defying expectations in the past.
Despite many differences among the five countries, the bloc managed to develop joint policies and survive major crises such as the 2020-21 China-India border clashes and the war in Ukraine. BRICS has deepened its cooperation, invested in new financial institutions and has been continuously broadening the range of policy issues it addresses.
It now has a huge network of interlinked mechanisms that connect governmental officials, businesses, academics, think tanks and other stakeholders across countries. Even if there is no movement on the joint currency front, there are multiple issues on which BRICS finance ministers as well as central bankers regularly coordinate – and the potential for developing new financial collaborations is particularly strong.
No doubt, talk of a new BRICS currency in itself is an important indicator of the desire of many nations to diversify away from the dollar. But I believe focusing on the BRICS currency risks missing the forest for the trees. A new global economic order will not emerge out of a new BRICS currency or de-dollarization happening overnight. But it can potentially emerge out of BRICS’ commitment to coordinating their policies and innovating – something this currency initiative represents.
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>>> The Great Dollar Paradox
BY JAMES RICKARDS
JUNE 12, 2023
https://dailyreckoning.com/the-great-dollar-paradox-2/
The Great Dollar Paradox
The de-dollarization story is everywhere.
You see it in publications from The New York Times to The Economist and in financial media including CNBC, Fox Business and Bloomberg.
The idea is that countries around the world are preparing to ditch the dollar. This takes many forms including efforts by China to pay for imported oil from Saudi Arabia and the UAE with yuan and a major bilateral agreement between China and Brazil that allows each country to pay for exports from the other using their local currencies.
Russia got in the act by agreeing to receive rupees for oil delivered to India and paying for imports from China with rubles. All these efforts will be converging and coming to a head in late August when the BRICS (Brazil, Russia, India, China, South Africa and other invited countries) meet to announce a new BRICS+ currency linked to gold.
With all of that going on, one might expect to find the dollar in freefall. Yet that’s not the case.
The dollar has been strong lately and I expect it to get stronger in the months ahead. What gives? How can the dollar be under global attack and yet be strong at the same time?
Strong Compared to What?
The answer is found in the way you measure value in any currency. Dollar strength or weakness is typically measured in major currency indexes, including DXY (used for futures trading and quoted in The Wall Street Journal) and the Bloomberg Dollar Index.
Other major indexes include those computed by the Federal Reserve (I use the Fed indexes in my own research and analysis). What all these indexes have in common is that they compare currencies with currencies, usually the major reserve currencies.
A typical dollar index will compare the dollar with a basket consisting of euros, sterling, yen, Swiss francs and perhaps one or two others. Because of the importance of the euro in world trade and reserves (second only to the dollar), these indexes tend to be just more complicated versions of the euro/dollar cross-rate.
The emerging markets’ currencies are typically left out of such indexes. Meanwhile, the bilateral currency deals described above do not include dollars. When you look at a bilateral currency deal involving yuan or rubles, the dollar is not included at all.
So it’s entirely possible to have a strong dollar (measured mainly against euros) and a growing de-dollarization trend involving yuan, rubles and rupees. The two trends are talking past each other.
The Golden Ruler
Is there some way to tell if the dollar is actually getting stronger or weaker without making reference to reserve currencies or EM currencies?
Yes. The answer is gold. Think of gold as a ruler that measures dollar strength or weakness.
Gold is not a currency, and the comparison is made by the weight of gold, not currency-to-currency. When the dollar price of gold is lower, the dollar is stronger, and vice versa.
But the new BRICS+ currency may throw a monkey wrench into this market by linking itself to gold. In that case, Russia and China will have a strong interest in higher gold prices because that means their BRICS+ currency will be worth more. And that may trigger the real decline of the dollar.
The BRICS+ gold-backed currency is actually the reflection of a greater trend that’s been going on for over a decade…
The Trend Is Gold’s Friend
The year 2010 marked a major inflection in central bank gold purchases and the overall level of gold reserves held by central banks and finance ministries on a global basis. Let’s back up a bit…
In 1950, the United States held about 20,000 metric tonnes of gold bullion. By 1970, the U.S. gold hoard had shrunk to 9,000 metric tonnes. That gold did not disappear; it was delivered to Germany, France, Italy, Japan and other trading partners to cover U.S. trade deficits under the old gold standard.
Beginning in 1970, gold held by central banks and finance ministries declined significantly. The U.S. sold 1,000 tonnes between 1970 and 1980 and encouraged the IMF to sell about 1,000 tonnes also in a failed effort to suppress the price of gold.
After 1980, the U.S. did not sell any more gold, but encouraged the U.K. to sell over 300 tonnes in 1999. Then Switzerland sold another 1,000 tonnes between 2000 and 2010. The IMF sold 400 tonnes in 2010 also. Canada sold 100% of its gold reserves, which were not that high to begin with.
All of these efforts to suppress gold prices ultimately failed. Gold hit a then-all-time high of $1,950 per ounce in 2011 (that record was surpassed in recent years at $2,060 per ounce in 2020).
Finally, in 2009 the central banks threw in the towel and became net buyers of gold bullion. That trend has been in place ever since.
The increases have been spectacular, resulting in a rise in total official gold holdings from about 32,000 tonnes in 2008 to 35,000 tonnes today. What’s different today is the composition of the gold holders.
BRICS+: The New Gold Bloc
The U.S. has not increased its holdings since the 1950s. Nor have other major gold holders such as France and Italy. Instead, the increases are in Russia, China, Vietnam, Mexico and many other emerging-market countries.
Many of those countries with the largest increases are members of the BRICS+ currency union that will soon announce a new gold-linked currency to challenge the role of the U.S. dollar in global payments and reserves.
Overall, the first quarter of 2023 was the strongest quarter on record for central bank gold purchases with central banks buying a combined total of 228 tonnes.
We actually have a new champion in the gold purchase arena, and it’s not Russia or China — it’s Singapore.
In just the first three months of 2023, Singapore purchased an amazing 68.7 tonnes of gold bullion, making Singapore the world’s-largest central bank gold buyer for the first quarter.
One can speculate about whether this gold buying is an aspect of de-dollarization, preparation for the new BRICS+ gold-backed currency or simple prudence in an uncertain world. But the trend is undeniable.
Central banks generally know more about what is going on behind the scenes in the global monetary system than anyone. If they’re hoarding gold, maybe you should too.
There’s still time to get on the BRICS+ bandwagon.
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>>> A BRICS Currency Could Shake the Dollar’s Dominance
De-dollarization’s moment might finally be here.
Foreign Policy (Carnegie Endowment for Intl Peace)
By Joseph W. Sullivan, a senior advisor at the Lindsey Group and a former special advisor and staff economist at the White House Council of Economic Advisers during the Trump administration.
APRIL 24, 2023
https://foreignpolicy.com/2023/04/24/brics-currency-end-dollar-dominance-united-states-russia-china/
Talk of de-dollarization is in the air. Last month, in New Delhi, Alexander Babakov, deputy chairman of Russia’s State Duma, said that Russia is now spearheading the development of a new currency. It is to be used for cross-border trade by the BRICS nations: Brazil, Russia, India, China, and South Africa. Weeks later, in Beijing, Brazil’s president, Luiz Inàcio Lula da Silva, chimed in. “Every night,” he said, he asks himself “why all countries have to base their trade on the dollar.”
These developments complicate the narrative that the dollar’s reign is stable because it is the one-eyed money in a land of blind individual competitors like the euro, yen, and yuan. As one economist put it, “Europe is a museum, Japan is a nursing home, and China is a jail.” He’s not wrong. But a BRICS-issued currency would be different. It’d be like a new union of up-and-coming discontents who, on the scale of GDP, now collectively outweigh not only the reigning hegemon, the United States, but the entire G-7 weight class put together.
Foreign governments wanting to liberate themselves from reliance on the U.S. dollar are anything but new. Murmurs in foreign capitals about a desire to dethrone the dollar have been making headlines since the 1960s. But the talk has yet to turn into results. By one measure, the dollar is now used in 84.3 percent of cross-border trade—compared to just 4.5 percent for the Chinese yuan. And the Kremlin’s habitual use of lies as an instrument of statecraft offers grounds for skepticism about anything Russia says. On a litany of practical questions, like how much the other BRICS nations are on board with Babakov’s proposal, for now, answers remain unclear.
Nevertheless, at least based on the economics, a BRICS-issued currency’s prospects for success are new. However early plans for it are, and however many practical questions remain unanswered, such a currency really could dislodge the U.S. dollar as the reserve currency of BRICS members. Unlike competitors proposed in the past, like a digital yuan, this hypothetical currency actually has the potential to usurp, or at least shake, the dollar’s place on the throne.
Let’s call the hypothetical currency the bric.
If the BRICS used only the bric for international trade, they would remove an impediment that now thwarts their efforts to escape dollar hegemony. Those efforts now often take the form of bilateral agreements to denominate trade in non-dollar currencies, like the yuan, now the main currency of trade between China and Russa. The impediment? Russia is unwilling to source the rest of its imports from China. So after bilateral transactions between the two countries, Russia tends to want to park the proceeds in dollar-denominated assets to buy the rest of its imports from the rest of the world, which still uses the dollar for trade.
If China and Russia each used only the bric for trade, however, Russia would not have any need to park the proceeds of bilateral trade in dollars. After all, Russia would be using brics, not dollars, to buy the rest of its imports. Enter, at last, de-dollarization.
Is it realistic to imagine the BRICS using only the bric for trade? Yes.
For starters, they could fund the entirety of their import bills by themselves. In 2022, as a whole, the BRICS ran a trade surplus, also known as a balance of payments surplus, of $387 billion – mostly thanks to China.
The BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions. Because a BRICS currency union—unlike any before it—would not be among countries united by shared territorial borders, its members would likely be able to produce a wider range of goods than any existing monetary union. An artifact of geographic diversity, that is an opening for a degree of self-sufficiency that has painfully eluded currency unions defined by geographic concentration, like the Eurozone, also home to a $476 billion trade deficit in 2022.
But the BRICS would not even need to trade only with each other. Because each member of the BRICS grouping is an economic heavyweight in its own region, countries around the world would likely be willing to do business in the bric. If Thailand felt compelled to use the bric to do business with China, Brazil’s importers could still purchase shrimp from Thai exporters, keeping Thailand’s shrimp on Brazil’s menus. Goods produced in one country can also circumvent trade restrictions between two countries by being exported to, and then re-exported from, a third country. That’s often a consequence of new trade restrictions, like tariffs. If the United States boycotted bilateral trade with China rather than trade in the bric, its children could continue to play with Chinese-made toys that became exports to countries like Vietnam and then exports to the United States.
It’s not just Putin who has re-embraced nuclear threats. The U.S. and China are also cracking open the door.
A preview of something like the absolute worst-case scenario that could befall consumers in BRICS countries if their governments adopted “bric or bust” terms of trade comes from today’s Russia. American and European governments have prioritized Russia’s economic isolation. Nevertheless, some U.S. and European goods continue to flow into Russia. The costs for consumers are real, but not catastrophic. As officials in BRICS countries grow increasingly emphatic about their desire to de-dollarize, with today’s Russia as an upper bound of how bad it could get, the risk-reward tradeoff of de-dollarization will look increasingly attractive.
To displace the dollar as a reserve currency among BRICS, the bric would also need safe assets to be parked in when not in use for trade. Is it realistic to imagine the bric finding these? Yes.
For starters, because the BRICS run a trade and balance of payments surplus, the bric would not necessarily need to attract any foreign money at all. BRICS governments could use some combination of carrots and sticks to get their own households and firms to buy bric assets with their savings and effectively coerce and subsidize the market into existence.
But assets denominated in the bric would actually have characteristics likely to make them unusually attractive to foreign investors. Among the major drawbacks of gold as an asset class for global investors is that, in spite of its risk-reducing value as a diversifier, it does not pay interest. Since the BRICS reportedly plan to back their new currency with gold and other metals with intrinsic value, like rare-earth metals, interest-paying assets denominated in the bric would resemble interest-paying gold. That’s an unusual characteristic. It is one that could make the assets denominated in the bric attractive to investors who want both the interest-bearing property of bonds and the diversifying properties of gold.
Sure, for bric bonds to simply function as an interest-bearing version of gold, they’d need to be perceived as having a relatively low risk of default. And the debt even of sovereign governments in the BRIC countries has non-trivial default risk. But these risks could be mitigated. Issuers of debt denominated in the bric could shorten debt maturities to lower the riskiness. Investors might trust a government in South Africa to pay you back “30 from now” when the unit of time is days but not when it is years. Prices could also simply compensate investors for that risk. If market participants demanded higher yields for buying bric assets, they could likely get them. That’s because BRICS governments would be willing to pay for the viability of the bric.
The bric, to be fair, would raise a litany of thorny practical concerns. Used primarily for international trade rather than domestic circulation within any one country, the bric would complicate the job of national central bankers in BRICS countries. Creating a supranational central bank like the European Central Bank to manage the bric would also take work. These are challenges—but not necessarily insurmountable ones.
The geopolitics among BRICS members is also thorny. But a BRICS currency would represent cooperation in a well-defined area where interests align. Countries like India and China may have security interests at odds with each other. But India and China do share an interest in de-dollarizing. And they can cooperate on shared interests while competing on others.
The bric would not so much snatch the crown off of the dollar’s head as shrink the size of the territory in its domain. Even if the BRICS de-dollarized, much of the world would still use dollars, and the global monetary order would become more multipolar than unipolar.
Many Americans are inclined to lament declines in the dollar’s global role. They should think before they lament. The dollar’s global role has always been a double-edged sword for the United States. Though it does allow Washington to add sanctions to its foreign-policy toolkit, by raising the price of the U.S. dollar, it raises the cost of American goods and services to the rest of the world, decreasing exports and costing the United States jobs. But the side that cuts into America at home has been sharpening, and the side that cuts America’s enemies abroad has been dulling.
Among those who understand that the dollar’s global role comes at the expense of jobs and export competitiveness at home, at least based on comments from 2014, is Jared Bernstein, now head of the White House Council of Economic Advisors. But these costs have only grown over time as the U.S. economy shrinks relative to the world’s. Meanwhile, among the traditional benefits of the dollar’s global role is America’s ability to use financial sanctions to try to advance its security interests. But Washington sees the security interests of the United States in the 21st century as increasingly defined by competition with state actors like China and Russia. If that is correct, and if the checkered track record of sanctions on Russia is any indication, sanctions will become an increasingly ineffective tool of U.S. security policy.
If the bric replaces the dollar as the reserve currency of the BRICS, the reactions will be varied and bizarre. Applause seems poised to come loudly from officials in BRICS countries with anti-imperialist dispositions, from certain Republicans in the U.S. Senate, and from U.S. President Joe Biden’s top economist. Boos seem poised to emanate from both former U.S. President Donald Trump and the U.S. national security community that he so often feuds with. Either way, the dollar’s reign isn’t likely to end overnight—but a bric would begin the slow erosion of its dominance.
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BRICS currency in August - >>> Rickards Drops Bombshell
BY JAMES RICKARDS
JUNE 6, 2023
https://dailyreckoning.com/rickards-drops-bombshell/
Rickards Drops Bombshell
On Aug. 22, about 2½ months from today, the most significant development in international finance since 1971 will be unveiled.
It involves the rollout of a major new currency that could weaken the role of the dollar in global payments and ultimately displace the U.S. dollar as the leading payment currency and reserve currency.
It could happen in just a few years.
The process by which this will happen is unprecedented, and the world is unprepared for this geopolitical shock wave.
This monetary shock will be delivered by a group called the BRICS.
The acronym BRICS stands for Brazil, Russia, India, China and South Africa.
This play for global reserve currency status by the BRICS will affect world trade, direct foreign investment and investor portfolios in dramatic and unforeseen ways.
The most important development in the BRICS system concerns the expansion of BRICS membership. This has led to the informal adoption of the name BRICS+ for the expanded organization.
There are currently eight nations that have formally applied for membership and 17 others that have expressed interest in joining. The eight formal applicants are: Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia and the United Arab Emirates.
The 17 countries that have expressed interest are: Afghanistan, Bangladesh, Belarus, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Senegal, Sudan, Syria, Thailand, Tunisia, Turkey, Uruguay, Venezuela and Zimbabwe.
There’s more to this list than just increasing the headcount at future BRICS meetings.
If Saudi Arabia and Russia are both members, you have two of the three largest energy producers in the world under one tent (the U.S. is the other member of the energy Big Three).
If Russia, China, Brazil and India are all members, you have four of the seven largest countries in the world measured by landmass possessing 30% of the Earth’s dry surface and related natural resources.
Almost 50% of the world’s wheat and rice production as well as 15% of the world’s gold reserves are in the BRICS.
Meanwhile, China, India, Brazil and Russia are four of the nine highest-population countries on the planet with a combined population of 3.2 billion people or 40% of the Earth’s population.
China, India, Brazil, Russia and Saudi Arabia have a combined GDP of $29 trillion or 28% of nominal global GDP. If one uses purchasing power parity to measure GDP, then the BRICS share is over 54%. Russia and China have two of the three largest nuclear arsenals in the world (the other leader is the United States).
By every measure — population, landmass, energy output, GDP, food output and nuclear weapons — BRICS is not just another multilateral debating society. They are a substantial and credible alternative to Western hegemony.
BRICS acting together is one pole of a new multipolar or even bipolar world.
When the new currency launch is announced in August, the currency will not fall on an empty field. It will fall into a sophisticated network of capital and communications. This network will greatly enhance its chances of success.
The BRICS are also developing an optical fiber submarine telecommunications system that would connect its members. It is being developed under the name BRICS Cable. Part of the motivation for BRICS Cable is to foil spying by the U.S. National Security Agency on message traffic carried through existing cable networks.
What’s behind this quest to ditch the dollar? In no small part the answer is U.S. weaponization of the dollar through the use of sanctions.
On numerous occasions from 2007–2014, I warned U.S. officials from the Treasury, Pentagon and intelligence community that overuse or abuse of dollar sanctions would lead adversaries to abandon the dollar to avoid the impact of sanctions.
Such abandonment would lead to the diluted potency of sanctions, unforeseen costs imposed on the U.S. and eventually to the collapse of confidence in the dollar itself. These warnings were mostly ignored.
We have now reached the first and second stages of this forecast and are dangerously close to the third.
For years, the U.S. has used sanctions to punish nations like Iran. But the sanctions the U.S. and its allies imposed on Russia after it invaded Ukraine last year went far beyond previous sanctions regimes. They were unprecedented.
Many other nations began to conclude that they could be next if they run afoul of the U.S. on certain issues. And that fear has greatly accelerated the push to opt out of the dollar system entirely.
This desire is not limited to current targets such as Russia but is shared by potential targets including China, Iran, Turkey, Saudi Arabia, Argentina and many others.
The BRICS+ present a realistic effort to de-dollarize global payments and eventually global reserves.
For years, I’ve argued that the dollar would remain the world’s leading reserve currency for longer than most people think.
But below, I show you why a new BRICS+ currency could greatly accelerate the demise of the dollar as the world’s leading reserve currency.
How could it happen so much faster than I previously thought? Read on.
The Coming Shock to the Global Monetary System
By Jim Rickards
The global desire to move away from the dollar as a medium of exchange for international trade in goods and services is hardly new. The difference today is that it’s gone from a discussion point to a novelty to a looming reality in a remarkably short period of time.
Dubai and China have recently concluded an arrangement whereby Dubai will accept Chinese yuan in payment for oil exports from Dubai. In turn, Dubai can use the yuan to buy semiconductors or manufactured goods from China.
Saudi Arabia and China have been discussing similar oil-for-yuan arrangements but nothing definitive has yet been put in place. These discussions are made complicated by Saudi Arabia’s long-standing petrodollar deal with the U.S. Still, some progress along these lines is widely expected.
China and Brazil have recently reached a broad-based bilateral currency deal where each country accepts the currency of the other in trade. Meanwhile, there’s a growing strategic relationship between China and Russia as the two superpowers jointly confront the United States. In the trading relationship between the two nations, Russia can pay in rubles for Chinese manufactured goods and other exports while China pays in yuan for Russian energy, strategic metals and weapons systems.
Yet all these arrangements may soon be superseded by a new BRICS+ currency, which will be announced in Durban, South Africa, at the annual BRICS Leaders’ Summit Conference on Aug. 22–24.
The currency will be pegged to a basket of commodities for use in trade among members. Initially, the BRICS+ commodity basket would include oil, wheat, copper and other essential goods traded globally in specified quantities.
In all likelihood, the new BRICS+ currency would not be available in the form of paper notes for use in everyday transactions. It would be a digital currency on a permissioned ledger maintained by a new BRICS+ financial institution with encrypted message traffic to record payments due or owing by participating parties. (This is not a cryptocurrency because it is not decentralized, not maintained on a blockchain and not open to all parties without approval.)
The latest information from the BRICS working groups is that this basket valuation methodology is encountering the same problems that John Maynard Keynes encountered at the Bretton Woods meetings in 1944.
Keynes initially suggested a basket of commodities approach for a world currency he called the bancor. The difficulty is that global commodities included in any basket are not entirely fungible (there are over 70 grades of crude oil distinguished by viscosity and sulfur content among other attributes).
In the end, Keynes saw that a basket of commodities is not necessary and that a single commodity — gold — would better serve the purpose of anchoring a currency for reasons of convenience and uniformity.
Based on the impracticality of commodity baskets as uniform stores of value, it appears likely that the new BRICS+ currency will be linked to a weight of gold.
This plays to the strengths of BRICS members Russia and China, who are the two largest gold producers in the world and are ranked sixth and seventh respectively among the 100 nations with gold reserves.
These and related developments are frequently touted as the “end of the dollar as a reserve currency.” Such comments reveal a lack of understanding as to how the international monetary and currency systems actually work.
The key mistake in almost all such analyses is a failure to distinguish between the respective roles of a payment currency and a reserve currency. Payment currencies are used in trade for goods and services. Nations can trade in whatever payment currency they want — it doesn’t have to be dollars.
Reserve currencies (so-called) are different. They’re essentially the savings accounts of sovereign nations that have earned them through trade surpluses. These balances are not held in currency form but in the form of securities.
When analysts say the dollar is the leading reserve currency, what they actually mean is that countries hold their reserves in securities denominated in a specific currency. For 60% of global reserves, those holdings are U.S. Treasury securities denominated in dollars. The reserves are not actually in dollars; they’re in securities.
As a result, you cannot be a reserve currency without a large, well-developed sovereign bond market. No country in the world comes close to the U.S. Treasury market in terms of size, variety of maturities, liquidity, settlement, derivatives and other necessary features.
So the real impediment to another currency as a reserve currency is the absence of a bond market where reserves are actually invested. That’s why it’s so difficult to displace Treasuries as reserve assets even if you wanted. Again, no country in the world can come close to the U.S. in that regard.
But here’s where it gets interesting, and why the dollar could lose its leading reserve status much faster than previously thought.
That’s because the BRICS+ currency offers the opportunity to leapfrog the Treasury market and create a deep, liquid bond market that could challenge Treasuries on the world stage almost from thin air.
The key is to create a BRICS+ currency bond market in 20 or more countries at once, relying on retail investors in each country to buy the bonds.
The BRICS+ bonds would be offered through banks and postal offices and other retail outlets. They would be denominated in BRICS+ currency but investors could purchase them in local currency at market-based exchange rates.
Since the currency is gold backed it would offer an attractive store of value compared with inflation- or default-prone local instruments in countries like Brazil or Argentina. The Chinese in particular would find such investments attractive since they are largely banned from foreign markets and are overinvested in real estate and domestic stocks.
It will take time for such a market to appeal to institutional investors, but the sheer volume of retail investing in BRICS+-denominated instruments in India, China, Brazil and Russia and other countries at the same time could absorb surpluses generated through world trade in the BRICS+ currency.
In short, the way to create an instant reserve currency is to create an instant bond market using your own citizens as willing buyers.
The U.S. did something similar in 1917. From 1790–1917, the U.S. bond market was for professionals only. There was no retail market. That changed during World War I when Woodrow Wilson authorized Liberty Bonds to help finance the war.
There were bond rallies and Liberty Bond parades in every major city. It became a patriotic duty to buy Liberty Bonds. The effort worked, and it also transformed finance. It was the beginning of a world where everyday Americans began to buy stocks, bonds and securities as retail investors.
If the BRICS+ use a kind of Liberty Bond patriotic model, they may well be able to create international reserve assets denominated in the BRICS+ currency even in the absence of developed market support.
This entire turn of events — introduction of a new gold-backed currency, rapid adoption as a payment currency and gradual use as a reserve asset currency — will begin on Aug. 22, 2023, after years of development.
Except for direct participants, the world has mostly ignored this prospect. The result will be an upheaval of the international monetary system coming in a matter of weeks.
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>>> Here Are 7 Signs That Global De-Dollarization Has Just Shifted Into Overdrive
APR 04, 2023
by Michael Snyder
The Economic Collapse blog
https://www.zerohedge.com/geopolitical/here-are-7-signs-global-de-dollarization-has-just-shifted-overdrive
For decades, the U.S. dollar was the undisputed king of global currencies, but now dramatic changes are happening. China, Russia, India, Brazil, Saudi Arabia and other nations are making really big moves which will enable them to become much less dependent on the U.S. dollar in the years ahead. This is really bad news for us, because having the primary reserve currency of the world has enabled us to enjoy a massively inflated standard of living. Once we lose that status, our lifestyles will be much different than they are today. Unfortunately, most Americans don’t understand any of this. Even though our leaders have treated the stability of our currency with utter contempt in recent years, most Americans just assume that the dollar will always reign supreme. Meanwhile, much of the planet is preparing for a future in which the U.S. dollar will be far less important than it is right now.
The following are 7 signs that global de-dollarization has just shifted into overdrive…
#1 The BRICS nations account for over 40 percent of the total global population and close to one-fourth of global GDP. So the fact that they are working to develop a “new currency” should greatly concern all of us…
The Deputy Chairman of Russia’s State Duma, Alexander Babakov, said on 30 March that the BRICS bloc of emerging economies – Brazil, Russia, India, China, and South Africa – is working on developing a “new currency” that will be presented at the organization’s upcoming summit in Durban.
“The transition to settlements in national currencies is the first step. The next one is to provide the circulation of digital or any other form of a fundamentally new currency in the nearest future. I think that at the BRICS [leaders’ summit], the readiness to realize this project will be announced, such works are underway,” Babakov said on the sidelines of the Russian-Indian Strategic Partnership for Development and Growth Business Forum.
Babakov also stated that a single currency could likely emerge within BRICS, and this would be pegged not just to the value of gold but also to “other groups of products, rare-earth elements, or soil.”
#2 Two of the BRICS nations, China and Brazil, have just “reached a deal to trade in their own currencies”…
The Chinese renminbi is speeding up in expanding its global use, a trend that will help build a more resilient international monetary system, one that is less dependent on the US dollar and more conducive to trade growth, experts said on Thursday.
They commented after China and Brazil — two major emerging economies and BRICS members — reportedly reached a deal to trade in their own currencies, ditching the US dollar as an intermediary.
The deal will enable China and Brazil to conduct their massive trade and financial transactions directly, exchanging the RMB for reais and vice versa, instead of going through the dollar, Agence France-Presse reported on Wednesday, citing the Brazilian government.
#3 During a meeting last week in Indonesia, finance ministers from the ASEAN nations discussed ways “to reduce dependence on the US Dollar, Euro, Yen, and British Pound”…
An official meeting of all ASEAN Finance Ministers and Central Bank Governors kicked off on Tuesday (March 28) in Indonesia. Top of the agenda are discussions to reduce dependence on the US Dollar, Euro, Yen, and British Pound from financial transactions and move to settlements in local currencies.
The meeting discussed efforts to reduce dependence on major currencies through the Local Currency Transaction (LCT) scheme. This is an extension of the previous Local Currency Settlement (LCS) scheme that has already begun to be implemented between ASEAN members.
#4 In a move that has enormous implications for the “petrodollar”, Saudi Arabia just agreed to become a “dialogue partner in the Shanghai Cooperation Organization”…
The state-owned Saudi Press Agency said that, in a session presided by King Salman bin Abdulaziz, the Saudi cabinet on Tuesday approved a memorandum awarding Riyadh the status of dialogue partner in the Shanghai Cooperation Organization — a political, security and trade alliance that lists China, Russia, India, Pakistan and four other central Asian nations as full members.
The organization further tallies four observer states — including Iran — and nine dialogue partners, counting in Saudi Arabia, Qatar and Turkey. It is headquartered in Beijing and served by China’s Zhang Ming as secretary-general.
#5 The Chinese just completed their very first trade of liquefied natural gas that was settled in Chinese currency instead of U.S. dollars…
China has just completed its first trade of liquefied natural gas (LNG) settled in yuan, the Shanghai Petroleum and Natural Gas Exchange said on Tuesday.
Chinese state oil and gas giant CNOOC and TotalEnergies completed the first LNG trade on the exchange with settlement in the Chinese currency, the exchange said in a statement carried by Reuters.
The trade involved around 65,000 tons of LNG imported from the United Arab Emirates (UAE), the Shanghai Petroleum and Natural Gas Exchange added.
#6 The government of India is offering their currency as an “alternative” to the U.S. dollar in international trade…
India will offer its currency as an alternative for trade to countries that are facing a shortage of dollars in the wake of the sharpest tightening in monetary policy by the US Federal Reserve in decades.
Facilitating the rupee trade for countries facing currency risk will help “disaster proof” them, Commerce Secretary Sunil Barthwal said during an announcement on India’s foreign trade policy Friday in New Delhi.
#7 Saudi Arabia has actually agreed to accept Kenyan shillings as payment for oil shipments to Kenya instead of U.S. dollars…
Kenyan President William Ruto signed an agreement with Saudi Arabia to buy oil for Kenyan shillings instead of US dollars.
As the US currency exchange rate hit 145.5 shillings due to increased demand by importers, President Ruto accused oil cartels of stockpiling American dollars in response to the crisis, sparking fuel shortages throughout Kenya.
10 years ago, none of these things would have happened.
But now change is happening at a pace that is absolutely breathtaking.
At this point, John Carney is warning that a fracturing of global currency reserves is “inevitable”…
“[It’s] not only a serious threat, I think it is inevitable. We went through three stages, as you said, after World War II. The U.S. was the biggest economy in the world. In the 1970s, global banking became basically dollar central. With the fall of the Soviet Union, the entire world, more or less, came under the domination of the U.S dollar…”
“That is now drifting away. China and Russia are starting to build an alternative block of currency,” John Carney explained Sunday.
Sadly, I agree with him.
As U.S. relations with both Russia and China continue to go downhill, both of those nations will have a very strong incentive to push de-dollarization even further.
And that is really bad news for the United States, because our currency is the source of our economic power and it is the most important thing that we export.
This is a story of monumental importance, but unfortunately most Americans still believe that our leaders know exactly what they are doing and that they have everything fully under control.
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>>> BRICS’ reserve currency: An attempt to reduce the dollar’s dominance?
https://www.orfonline.org/expert-speak/brics-reserve-currency/
Whilst Russia and China are leading de-dollarisation initiatives due to their geopolitical rivalry with the US, India, Brazil, and South Africa have supported BRICS’ statements on altering the global financial system for their own interests.
In his recent address to the BRICS Business Forum, Russian President Vladimir Putin stated that the minilateral member states were working on developing a new global reserve currency. It is presumed that this global reserve currency, containing the national currencies of the BRICS member states, will be an alternative to the International Monetary Fund’s Special Drawing Right (SDR). At a time when Russia is facing unprecedented global sanctions in the wake of the Ukraine invasion, Putin’s announcement has underscored the importance of recognising the heterogeneous motives of the BRICS nations to not only facilitate intra-BRICS trade in local currencies, but also firewall their global financial interests.
Brazil
China is Brazil’s largest trade partner and it is beneficial for both countries to use local currencies for bilateral settlements. However, Brazil’s dependence on the dollar is quite evident because approximately 90 percent of Brazil’s export invoicing is denominated in dollars, even when the United States (US) receives only 17 percent of Brazil’s overall exports. This imbalance can prompt Brazilian policymakers to support forming a BRICS reserve currency. Former Brazilian President Lula Da Silva had expressed his anguish of dollar domination in Brazilian trade and encouraged the idea of using BRICS as a de-dollarisation coalition. He also stated that BRICS was not created as an instrument of defence, but as an instrument of attack.
Brazil’s dependence on the dollar is quite evident because approximately 90 percent of Brazil’s export invoicing is denominated in dollars, even when the United States (US) receives only 17 percent of Brazil’s overall exports.
However, Brazil’s stance on de-dollarisation has weakened significantly following its severe economic crisis in 2014, and the rise of the Bolsonaro administration. The Brazilian government under Bolsonaro has moved closer to the Western powers and has been inconsistent in supporting a BRICS reserve currency.
Brazil’s close economic relationship with China and its dependence on the US dollar indicates that Brazil will most likely not be at the forefront of BRICS de-dollarisation plans. However, it recognises that it stands to benefit from such initiatives as it simplifies trade relations with China and other large economies like India and Russia.
Russia
Given its geopolitical interests, Russia has always wanted to leverage BRICS to advance the idea of de-dollarisation. The near-elimination of Russia from the West-led dollar-dominated financial system after the Russia-Ukraine war in early 2022 has further strengthened the concept of an alternative financial system free from Western domination.
The Putin administration supported a de-dollarisation plan to reduce Russia’s dependence on the US dollar by limiting international settlements and conducting business using alternative currencies in late 2018. President Putin has repeatedly emphasised the need to further de-dollarise and protect Russia’s economic sovereignty.
Brazil’s close economic relationship with China and its dependence on the US dollar indicates that Brazil will most likely not be at the forefront of BRICS de-dollarisation plans.
Russia’s former Deputy Foreign Minister Sergei Ryabkov also highlighted the country’s apprehensions over dollar usage for banking and international settlements, stressing that it is vital to becoming less dependent on it. Additionally, he revealed that the BRICS members were ready to cooperate to promote international financial regulation reforms and overcome the excessive domination of a limited number of reserve currencies.
India
Antagonistic to Russia and China, the US considers India a valuable ally and strategic partner in the Indo-Pacific region. The Indian government considers Russia and China’s efforts to reduce dollar usage more ideological than practical and does not explicitly support the mobilisation of BRICS to challenge the dollar’s hegemony. Furthermore, the recent military standoffs between India and China further prevent India from supporting China’s plans to dethrone the dollar.
However, this does not fully encapsulate India’s stance on US dollar dominance. India has explored plans to reduce its dependence on the dollar in the past. For instance, in 2012, India’s Ministry of Commerce and Industry brought together a task force to analyse the idea of using the Indian Rupee in India’s bilateral trade, especially recommending the idea of utilising the rupee to trade with oil exporting countries. The Indian government also created a multi-agency task force with representatives from India’s economic policymaking agencies to compile a list of countries where India could trade in rupees.
Currency volatility and geopolitical events like US’ oil sanctions on Russia and Iran, and China’s plans to internationalise the renminbi have encouraged India to promote greater use of the rupee for international transactions. As one of the most dollarised countries in trade invoicing, the increase in global currency volatility also incentivises India to de-dollarise. However, this will be a challenge, as 86 percent of India’s imports rely on the US dollar invoicing, despite only 5 percent of India’s imports originate in the US. Similarly, 86 percent of India’s exports were invoiced in US dollars, while only 15 percent of India’s exports were to the US.
The Indian government considers Russia and China’s efforts to reduce dollar usage more ideological than practical and does not explicitly support the mobilisation of BRICS to challenge the dollar’s hegemony.
India is unlikely to play an explicit role in any BRICS plan to reduce the influence of the US dollar, however, it can help minimise dollar dependence by supporting initiatives that promote the use of local currencies in trade and finance.
China
China has persistently criticised the dollar hegemony, however, Chinese policymakers have failed to prepare a precise plan to destabilise its global reserve currency status. The souring of US-China relations has highlighted the strength of the US dollar and its ability to create roadblocks for Chinese trade and technology. Such roadblocks have encouraged China to depart from the US-dominated global system and potentially build a sphere of influence with BRICS nations. China is the world’s largest trading partner and is uniquely positioned to aid de-dollarisation regionally and internationally. China is also a big player in several Asian and African countries for development financing. Additionally, China has utilised the Belt and Road Initiative and offshore markets to internationalise the renminbi.
In the aftermath of the 2008 global financial crisis, former Governor of the People’s Bank of China (PBoC), Dr Zhou Xiaochuan, stated that the spill over effect highlighted the international monetary system’s inherent vulnerabilities and systemic risks. He called for the creation of an international reserve currency that is uncoupled from individual nations. Former Chinese President Hu Jiantao also stated that the international monetary system dominated by the dollar is a “product of the past.”
The souring of US-China relations has highlighted the strength of the US dollar and its ability to create roadblocks for Chinese trade and technology.
Similarly, Dai Xianglong, then Governor of the PBoC, critiqued the dollar-based financial system after the Asian financial crisis of 1997. He asserted the need for global reform by disaggregating the role of a few countries’ currencies as the international reserve currency, which is a source of instability in the international monetary system.
South Africa
South Africa has followed Russia and China’s de-dollarisation plans, but has neither directly promoted nor formulated any plans of its own. The relationship between the US and South Africa has improved enormously since US sanctions were lifted in 1991 following the end of apartheid. South Africa may not have a comprehensive de-dollarisation plan, but is mindful of international currency volatilities, especially of the US dollar.
During the 2011 BRICS summit, South African Trade and Industry Minister Rob Davies expressed concerns about exchange volatilities and dependence on unstable international currencies and highlighted the benefits of trading directly in the South African rand. Further, at the 2013 BRICS summit, he reiterated the need to develop protocols to settle trade in local currencies. He demonstrated that currency volatility in developing countries is directly influenced by global economic dynamics, making them price takers whose currency risk can be triggered by macroeconomic conditions beyond their control. The lack of autonomy among developing countries’ economic security is a cause for concern beyond BRICS nations. The transaction and financial risk arising from the US dollar’s hegemony has incentivised South Africa to go along with BRICS’ plans to promote the use of local currencies in trade. Recently, South Africa accepted the broader use of the Chinese renminbi and included it in its foreign exchange reserves to diversify currency risk.
The transaction and financial risk arising from the US dollar’s hegemony has incentivised South Africa to go along with BRICS’ plans to promote the use of local currencies in trade.
Conclusion
BRICS nations have displayed increased cooperation and intend to change the dollar-dominated financial system. Within BRICS, Russia and China are leading the de-dollarisation initiatives to safeguard their interests stemming from their geopolitical rivalry with the US, and considering the risk of future sanctions against them. India, Brazil, and South Africa have supported statements by BRICS on altering the global financial system and creating more opportunities to promote the use of local currencies for international trade. All BRICS members have taken steps to de-dollarise and improve their autonomy in the global financial system.
The fundamental reason for developing an SDR-like basket currency for BRICS nations is to address the US dollar hegemony and build their sphere of influence and unit of currency within that sphere. It is still unclear if all BRICS members want to transfer foreign reserves to develop this new sphere of influence. De-dollarisation, in one way or another, is a shared interest and priority for all BRICS nations to diversify and reduce the risk of exogenous shocks and currency shocks caused by the US dollar. However, while BRICS member states—collectively and individually—intend to safeguard their global financial interests by developing a reserve currency, over-dependence on the US dollar poses challenges that may make such an idea a distant reality.
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>>> Can BRICS De-dollarize the Global Financial System?
Published online by Cambridge University Press
24 February 2022
by Zongyuan Zoe Liu and Mihaela Papa
https://www.cambridge.org/core/elements/can-brics-dedollarize-the-global-financial-system/0AEF98D2F232072409E9556620AE09B0
Summary
Existing scholarship has not systematically examined BRICS (Brazil-Russia-India-China-South Africa) as a rising power de-dollarization coalition, despite the group developing multiple de-dollarization initiatives to reduce currency risk and bypass US sanctions. To fill this gap, this study develops a 'Pathways to De-dollarization' framework and applies it to analyze the institutional and market mechanisms that BRICS countries have created at the BRICS, sub-BRICS, and BRICS Plus levels. This framework identifies the leaders and followers of the BRICS de-dollarization coalition, assesses its robustness, and discerns how BRICS mobilizes other stakeholders. The authors employ process tracing, content analysis, semi-structured interviews, archival research, and statistical analysis of quantitative market data to analyze BRICS activities during 2009-2021. They find that BRICS' coalitional de-dollarization initiatives have established critical infrastructure for a prospective alternative nondollar global financial system. This title is also available as Open Access on Cambridge Core.
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>>> BRICS developing new global reserve currency – Putin
It will be based on a currency basket of the five-nation bloc, according to the Russian president
RT
June 22, 2022
https://www.rt.com/business/557627-brics-developing-global-reserve-currency/
President Vladimir Putin said on Wednesday that the BRICS countries – Brazil, Russia, India, China, and South Africa – are currently working on setting up a new global reserve currency.
“The issue of creating an international reserve currency based on a basket of currencies of our countries is being worked out,” he said at the BRICS business forum.
According to the Russian president, the member states are also developing reliable alternative mechanisms for international payments.
Earlier, the group said it was working on establishing a joint payment network to cut reliance on the Western financial system. The BRICS countries have been also boosting the use of local currencies in mutual trade.
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>>> Iran applies to join BRICS group of emerging countries
Reuters
https://www.reuters.com/world/middle-east/iran-applies-join-brics-group-emerging-countries-2022-06-27/
DUBAI, June 27 (Reuters) - Iran has submitted an application to become a member in the group of emerging economies known as the BRICS, an Iranian official said on Monday.
Iran's membership in the BRICS group, which includes Brazil, Russia, India, China and South Africa, "would result in added values for both sides," Iran's Foreign Ministry spokesperson said.
Russian Foreign Ministry spokeswoman Maria Zakharova said separately that Argentina had also applied to join the group. Argentinian officials could not be reached for immediate comment.
Argentina's President Alberto Fernandez, currently in Europe, has in recent days reiterated his desire for Argentina to join BRICS.
"While the White House was thinking about what else to turn off in the world, ban or spoil, Argentina and Iran applied to join the BRICS," Zakharova wrote on the Telegram messaging app.
Russia has long been pushing to forge closer ties with Asia, South America and the Middle East, but it has intensified its efforts recently to weather sanctions imposed by Europe, the United States and other countries over its invasion on Ukraine.
On Monday, the United States and other Western nations pledged unwavering support for Ukraine after 28 civilians were killed in several Russian attacks, including a missile strike on a crowded shopping centre.
Russia denies targeting civilians in what it calls is a "special military operation" to disarm Ukraine and protect it from fascists. Kyiv and its allies in the West say the war is an unprovoked act of aggression.
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>>> BRICS Bank To Move Away From US Dollar Loans
Aug 06, 2019
by Silk Road Briefing
https://www.silkroadbriefing.com/news/2019/08/06/brics-bank-move-away-us-dollar-loans/
The New Development Bank, commonly referred to as the “BRICS Bank” as it is co-owned equally by the 5 BRICS nations of Brazil, Russia, India, China and South Africa, is to scale back its use of the US dollar and concentrate instead of loans designated in national currencies, it has been reported in the Financial Times.
To date, the bank has approved more than US$9 billion in loans to its member countries since being founded in July 2014, and plans to double that to US$16 billion this year. The bank is seen as a challenger to established lenders such as the World Bank, Asian Development Bank and IMF. So far it has mainly relied on its dollar paid-in capital for funding, but in the future “50 per cent (of projects) should be local currency financed”, K.V. Kamath, the bank’s president, said in an interview. “We will raise dollars, we will raise euros, but at the same time there will be a significant reliance on local currencies. That would allow the bank to move away from loans denominated in dollars” Mr.Kamath stated.
RELATED NEWS
More Self Reliance than US Reliance Promoted as BRICS 2018 Summit also Calls for Expansion
The bank is headquartered in Shanghai, and issued a second RMB3 Trillion Chinese currency bond this year. It received a AA+ rating from Fitch and S&P Global in August 2018, and also plans to tap bond markets in the United States. The bank’s lending so far has mostly gone back to its founder countries, which have a collective credit rating of BBB-. This allows them to borrow at lower rates though the NDB.
There are downsides to moving away from the US dollar however, with the FT quoting an unnamed source as saying “The bank will not be able to move away from dollars entirely. There’s a constraint that you can’t disrupt the US dollar system. If you did [the US] would find a way to go after you.”
RELATED NEWS
BRICS Nations Contemplate Independent Credit Agency
BRICS New Development Bank on Course to Lend US$40 Billion in Green Infrastructure Projects
However, as we pointed out in the article China Manipulates Its Currency, Is Caught Out, So Gold Rises In Value. Who’s Been Buying Gold? China. Countries such as China and Russia are already caught up in spats with the United States and are developing alternative strategies to dealing with the US dollar, while bilateral trade between the 5 BRICS members is also increasingly being conducted in non-dollar mechanisms. Other, new tech solutions are also being found; a BRICS Cryptocurrency has been discussed, while all five nations are pushing ahead with a cloud based payment system, BRICS Pay a smartphone accessible app that will allow users in these countries access to a common system for retail payments and transactions between the member countries – using only the respective currencies and not the US dollar. These developments come after the BRICS 2018 summit called for “more self reliance” among the member states.
Whichever way the wind blows in these uncertain trade and economic times, it appears apparent that the US dollar is increasingly expected to be heading for unpredictable territory in the next year or so, with gold and several Asian currencies seen as a better hedge against this.
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>>> Brazil's Bolsonaro Blasts China Over COVID Origin, Links Pandemic To 'biological Warfare'
Brazil’s President Jair Bolsonaro on May 5 suggested that China could have developed the pathogen in a laboratory and disseminated it as “biological warfare.”
RepublicWorld.com
May 6, 2021
By Aanchal Nigam
https://www.republicworld.com/world-news/rest-of-the-world-news/brazils-bolsonaro-blasts-china-over-covid-origin-links-pandemic-to-biological-warfare.html
Brazil’s President Jair Bolsonaro on May 5 promoted conspiracy theory regarding the origin of the novel coronavirus, SARS-CoV-2 that causes COVID-19 and suggested that China could have developed the pathogen in a laboratory and disseminated it as a “biological warfare” for economic gain. According to The Brazilian Report, in an event on Wednesday, Bolsonaro posed doubts over the coronavirus origin and even questioned “are we not facing a new war?” Brazilian President’s remarks supported the preliminary conspiracy theories that budded in the early days of the COVID-19 pandemic prompting the World Health Organization (WHO) to send a team of experts to China and investigate the roots of the pathogen that has rocked the world for over a year.
"It's a new virus. Nobody knows whether it was born in a laboratory or because a human ate some animal they shouldn't have," said the far-right leader.
"But the military knows all about chemical, biological and radiological warfare. Could we be fighting a new war? I wonder. Which country's GDP has grown the most?"
While most of the world witnessed a steep decline in their economy owing to unprecedented and prolonged shutdowns of businesses, China declared a GDP increase of reportedly 2.3% in 2020 rising roughly $14.7 trillion, as per Wind Information data. At the current pace, China’s economy has the potential to surpass the United States as the world’s top economy in 2026 which is two years before than what was anticipated.
Bolsonaro, however, reportedly did not mention China but the reports of Asian country’s GDP growth amid the COVID-19 pandemic are not alien. Brazilian President and his inner circle have a history of irking China with their remarks that have sometimes aggravated the ties between Brazil and its biggest trading partner. Bolsonaro suggesting ‘germ warfare’ on Wednesday came just after in March, he replaced the foreign minister Ernesto Araujo who had denounced “Maoist China” and the nation’s plan for “world domination” with a career diplomat Carlos Franca. The move was broadly perceived as Brazil’s attempt to mend relations with China.
An Australian doctor who was part of the World Health Organization (WHO) team that visited China’s Wuhan, Dominic Dwyer wrote in a first-person account explaining why the origin of the novel coronavirus, SARS-CoV-2 is unlikely to be either the seafood market in the city or leaked from Wuhan lab. Defying major conspiracy theories claiming that the highly infectious virus was leaked from a lab researching pathogens, the Australian scientist explained why the leak from Wuhan lab is also “extremely unlikely” in a lengthy article.
He wrote that the team of international experts sent to Wuhan to investigate the origins of the novel coronavirus visited the lab in the centre of all theories, Wuhan Institute of Virology. After speaking to scientists working there, the experts found no evidence of coronavirus antibodies. The WHO team, as Dwyer explained, looked at the closest virus to SARS-CoV-2 that the researchers were working on in the lab, which is the virus RaTG13. However, all scientists had a genetic sequence for the virus and they had not been able to grow in culture.
Dwyer wrote, “We spoke to the scientists there. We heard that scientists’ blood samples, which are routinely taken and stored, were tested for signs they had been infected. No evidence of antibodies to the coronavirus was found. We looked at their biosecurity audits. No evidence.”
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>>> BRICS Summit 2021: Roundup & Analysis
Silk Road Briefing
Sep 15, 2021
By Chris Devonshire-Ellis
https://www.silkroadbriefing.com/news/2021/09/15/brics-summit-2021-roundup-analysis/
Brazil, Russia, India, China and South African Leaders meet in annual conference: new counter-terrorism and vaccine capabilities determined
The BRICS Summit is a conference on international relations in which the Heads of Government of the five member states, which include Brazil, India, Russia, China, and South Africa, participate. India hosted this year’s event – it will pass to China in 2022.
The theme of this years summit was BRICS @15: Intra-BRICS Cooperation For Continuity, Consolidation and Consensus
Brazil President Jair Bolsonaro, South African President Cyril Ramaphosa, Russian President Vladimir Putin, and Chinese President Xi Jinping headed this summit, which was headed by Prime Minister of India, Narendra Modi.
Modi discussed the many achievements of BRICS in the past one-and-a-half decades, which has transformed them into an influential voice for emerging economics the world over. He also added about the need to be more productive in the next 15 years. He went on to announce the adoption of the BRICS Counter-Terrorism Action Plan, which has concentrated on issues related to Afghanistan. Modi’s speech in full can be read here.
Russian President Vladimir Putin emphasized the crisis of Afghanistan as a threat to its neighbors and discussed the importance of the BRICS cooperation in dealing with it and related terrorism issues, stating the current global situation to be “quite turbulent”. “Afghanistan should not become a threat to its neighboring countries, a source of terrorism and drug trafficking.” Putin said. His speech in full can be read here.
Xi Jinping also recounted the achievements made by the BRICS summit in the last 15 years. The Chinese President said, “We have made solid progress in various areas of cooperation in the spirit of pragmatism, innovation and win-win cooperation. We have supported multilateralism and taken part in global governance in spirit of equity, justice and mutual assistance.” Xi’s speech is here.
President Ramaphosa meanwhile discussed Covid. He expressed South Africa’s support for the proposal made by India and South Africa at the WTO for the waiver of the TRIPS mechanism, (bypassing IP royalties) to ensure a more rapid expansion of Covid-19 vaccine production. Western nations wish to maintain the payments of royalties for Covid vaccines as part of the R&D cost and normal corporate profitability. Ramaphosa then went on to welcome the decision of the Health Ministers of BRICS nations to operationalize the vaccine development and research center. Ramaphosa’s speech is here.
Brazil’s President Bolsorano praised the India-China-Brazil partnership in their fight against the Covid-19 pandemic, especially in the areas of science, technology, energy, and health. He also called for reform of the World Trade Organization. His presence at the event would have been keenly watched by China bearing in mind he suggested China created Covid-19 to benefits its economy back in May. His BRICS speech can be read here.
BRICS Counter-Intelligence Initiative
The main two items of note in what was a fairly predictable set of speeches were the BRICS move to jointly establish a BRICS Counter-Intelligence Initiative. While China, India and Russia are members of the Shanghai Cooperation Organisation (SCO); already share intelligence and provide military assistance under the SCO counter-terrorism structure, Brazil and South Africa are not part of this. South African involvement especially adds an additional layer of counter-intelligence useful to the SCO as it will have access to African intelligence and especially the role of active groups such as Al-Queda and ISIL in Africa.
BRICS Vaccine Research and Development Centre
The BRICS nations also endorsed the concept of a BRICS Vaccine Research and Development Centre, also useful as future pandemics are equally as likely to develop from countries such as Brazil and Africa and will be looking to Chinese and Russian vaccine development capabilities along with India’s huge production abilities. This center can be expected to develop as a global early warning and reaction faculty.
Global Reform
At the end of the summit, the leaders adopted the “Declaration of New Delhi” and committed to being resolved by reinforcing and reforming the multilateral system, including at the United Nations and World Trade Organization, so that global governance is more receptive and effective. The New Delhi Declaration can be viewed here.
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>>> Twenty years on, value of BRICS forum largely symbolic
Though lacking strategic agenda, BRICS forum still affords nuanced read of tripartite relations between its Eurasian members
Taiwan News
By Liam Gibson, Tridivesh Singh Maini , Taiwan News, Contributing Writer
09-15-21
https://www.taiwannews.com.tw/en/news/4287642
TAIPEI (Taiwan News) — India’s recent chairing of the 13th BRICS Summit, virtually attended by leaders of Brazil, Russia, China and South Africa, gave us a chance to take stock of what the grouping of developing world economic heavyweights means in the 2020s.
Despite the hype surrounding BRICS having faded significantly over the past two decades since former Goldman Sachs chief economist Jim O’Neil coined the term in 2001, the diplomatic forum remains an important platform for taking the geopolitical temperature of its Eurasian members — India, China, and Russia.
Sino-Indian release
With a focus on development and economics, BRICS mechanisms can act as a release valve for pressure in the Sino-Indian relationship.
Sino-Indian strains have tightened as a result of a nine-month stand-off across the Line of Actual Control (LAC), which included a violent clash between soldiers from both countries in the Galwan Valley in Ladakh in which 20 Indian soldiers were killed.
As a result, India has shed its reticence vis-à-vis “the Quad” grouping and has joined with the U.S., Japan, and Australia in beefing up security cooperation in the Indo-Pacific. The first in-person summit of leaders from all countries will be held later this month and will be attended by Indian Prime Minister Narendra Modi who is visiting the U.S. to join the United Nations General Assembly around the same time.
Yet in the midst of tensions between India and China in December last year, the New Development Bank (NDB), the BRICS investment bank, approved five investment projects for India. After a thaw between New Delhi and Beijing in February this year, when both sides agreed to disengage from Ladakh, China extended its support for India hosting the 2021 BRICS Summit.
Clear the geopolitical air around Afghanistan
The timing of the summit was crucial, coming in the wake of the Taliban takeover of Afghanistan, and it was held just days after the announcement of the Taliban’s interim government.
The stakes are high for India, China, and Russia, each country having overlapping and somewhat conflicting interests in Afghanistan. Moscow and Beijing favor engaging the Taliban, which India has been cautious to do so far, though there have been some changes in approach in recent weeks.
On Tuesday (Aug. 31), the Indian envoy to Qatar, Deepak Mittal, met with Sher Mohammad Abbas Stanekzai, head of the Taliban's Political Office in Doha, who was sworn in as the country’s deputy foreign minister. This was the first meeting with the Taliban that India officially acknowledged.
While China has assured Afghanistan humanitarian assistance of approximately US$30 million, India too has expressed concern about the humanitarian crisis and the need for global assistance. Meanwhile, Russian President Vladimir Putin took the opportunity to criticize the withdrawal of U.S. troops and stressed Afghanistan should not pose a threat to its neighbors.
The summit also served as a point of respite from the current Afghanistan moment, as it gave the three powers a chance to focus on other issues. While the joint statement released at the end of the meeting pitched in favor of an “inclusive” Intra-Afghan dialogue and flagged the threat of using Afghan territory as a “terrorist sanctuary,” Chinese President Xi Jinping (???) was more guarded during his remarks and tried to highlight BRICS achievements in other areas rather than focusing on the beleaguered Central Asian country.
Tripartite nuance
The meeting provided three key takeaways on where India, China, and Russia stand in relation to each other as well as to the U.S.
Firstly, it signalled that while India is strengthening ties with the U.S., it still accords priority to Moscow when it comes to its immediate regional security.
Secondly, while BRICS provides India and China an avenue for cooperation amidst tensions, it also gives China a platform to project its economic and strategic importance globally.
Finally, while strains with Washington may have moved Moscow closer to Beijing, BRICS is important for Russia to assert its own relevance and show its foreign policy is not dictated by China.
Given the varying strategic priorities of India, China, and Russia and overlapping membership in other groupings, tangible security policy outcomes from BRICS summits remain unlikely for the foreseeable future.
However, with members accounting for 41% of the world’s population and 24% of global GDP, the group remains symbolically important. It is also an important vector for understanding the complex interrelatedness of India, China, and Russia in an age where the new geopolitical realities of Eurasia are rapidly transforming the global order.
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>>> The West is trying to create 'an adequate alternative' to China's New Silk Road
Yahoo Finance
by Akiko Fujita and Aarthi Swaminathan
June 17, 2021
https://finance.yahoo.com/news/west-infrastructure-china-new-silk-road-202628631.html
Group of Seven (G7) leaders announced a new initiative called Build Back Better World (B3W) this week to better compete with China when it comes to funding the world's infrastructure needs.
China’s Belt and Road Initiative (BRI), envisioned as the revival of an ancient trading route between Asia and Europe, has been plugging away since 2013. Through various infrastructure projects like ports and highways, the multi-trillion-dollar initiative is a key way that China is asserting itself on the world stage.
The West, led by the U.S., wants to counter China's colossal geopolitical project.
"There is a tremendous demand for infrastructure globally, as countries are moving from lower middle-income to middle-income countries," Kaush Arha, senior fellow at the Atlantic Council's Scowcroft Center for Strategy and Security, told Yahoo Finance. "There is a tremendous desire or hunger for an alternative to totalitarian state capitalist funding for infrastructure."
That demand hasn't been met, added Arha, and there hasn't been an "adequate alternative to meet the infrastructure aspirations" of these countries.
According to the White House's fact sheet, the B3W infrastructure initiative will be a "a values-driven, high-standard, and transparent infrastructure partnership led by major democracies to help narrow the $40+ trillion infrastructure need in the developing world."
Much like the existing U.S. approach to development finance thus far, B3W looks to mobilize private sector funds and encourage them to invest in overseas projects. (The BRI's funding comes from state-backed Chinese banks.)
The White House is expecting the B3W initiative to collectively mobilize "hundreds of billions of dollars of infrastructure investment for low- and middle-income countries in the coming years."
The competition to win over participating countries has already begun: A Indonesian Ministry of Maritime Affairs and Investment spokesperson told Reuters that that while the country welcomes the B3W, they also hoped "this time they put their money where their mouth is."
'Belt and Road has a 10-year head start'
Along with the U.S. European countries, Japan and Australia will likely be key players in the B3W.
"I think [Japan] has the most to gain, being in the region," said Josh Lipsky, Director of Atlantic Council's Geoeconomics Center. "I think they're going to want to invest in this heavily, and that would be a pretty significant statement."
Japan, already one of the largest investors in Southeast Asia and the Indo-Pacific region, is committing $10 billion for an initiative to help Association of Southeast Asian Nations (ASEAN) member countries cut green house gas emissions and move towards decarbonization. (lol)
Australia, a key Western ally in the region, recently scrapped its own BRI project with China and banned Chinese telcom companies Huawei and ZTE from building its 5G network in 2018.
Lipsky noted that playing catchup with China will be a tall task, given the sheer size of its investments and the scope of projects tied to BRI.
"Belt and Road has a 10-year head start, with projects all over the world including, by the way, in a G7 country, Italy," Lipsky said. "[B3W] was a good announcement, but a lot of questions remain about how much money is going into it. Who's funding it? What projects will be funded? And China is well on its way in terms of their infrastructure projects."
What happens to the BRI projects in Europe is an open question, particularly since EU solidarity is a crucial part to the West countering China's global infrastructure ambitions.
"The biggest entity that can move on this would be the EU," Arha said.
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>>> 13th BRICS summit
https://en.wikipedia.org/wiki/13th_BRICS_summit
Host country India India
Motto BRICS @ 15: Intra-BRICS Cooperation for Continuity, Consolidation and Consensus.[1]
Cities New Delhi
Participants
Brazil Brazil
Russia Russia
India India
China China
South Africa South Africa
Chair India Narendra Modi
Website brics2021.gov.in
Key points
Political and Security,
Economic and Financial,
Cultural and People to People.
The 2021 BRICS summit is the thirteenth annual BRICS summit, an international relations conference attended by the heads of state or heads of government of the five member states Brazil, Russia, India, China and South Africa. It will be the third time that India will be hosting the BRICS Summit after 2012 and 2016.[2][3]
India hosted the first meeting of BRICS finance and central bank deputies through video conference. The meeting was co-chaired by Michael Patra, Deputy Governor, Reserve Bank of India and Tarun Bajaj, Secretary Economic Affairs, Ministry of Finance, India.[4]
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>>> BRICS promise still awaits 20 years on
The idea was initially more about good global governance than greater growth. Sadly, there’s a lot of catching up to do as the group enters its third decade.
Financial Review
by Jim O'Neill
Feb 19, 2021
https://www.afr.com/policy/economy/brics-promise-still-awaits-20-years-on-20210219-p573yv
This November will mark the 20th anniversary of the BRIC acronym that I coined to capture the economic potential of Brazil, Russia, India and China. Many commentators will be revisiting the concept and assessing each country’s performance since 2001, so here are my own thoughts on the matter.
The BRICS brothers: from left, South Africa’s Cyril Ramaphosa, India’s Narendra Modi, China’s Xi Jinping, Russia’s Vladimir Putin and Brazil’s Jair Bolsonaro at a 2019 BRICS summit in Brasilia. AP
First, and contrary to repeated suggestions, the main point of my original November 2001 paper, The World Needs Better Economic BRICs, was neither to forecast endless growth for these economies, nor to promote some new marketing concept for investment funds. As anyone who read that paper will know, the central argument was that these economies’ probable growth in relative GDP would have important implications for global governance arrangements.
As 2001 was the third year since the introduction of the euro, I argued that large European countries – namely France, Germany, and Italy – should be represented collectively, rather than individually, at the G7, the International Monetary Fund, and other organisations, thereby making room for the world’s rising economic powers.
I then outlined four different scenarios of what the global economy might look like in 2010, three of which conjectured that the four BRIC countries’ share of global GDP would grow.
In the event, the 2000-10 decade turned out to be both absolutely and relatively better for each of the four than I had foreseen in any of my scenarios. But until the 2008 financial crisis, there was virtually no notable change of global governance structures. And while that upheaval did result in the creation of the G20 summits and some reforms within the IMF and the World Bank, it is troubling that an economic disaster was needed to effect even limited change.
Within a year of the initiation of G20 summits, the BRICS had added South Africa and formed their own geopolitical club. Yet while this development reinforced the original economic concept, it didn’t seem to accomplish much beyond that. Worse, there has been very little progress on the global governance front since then, even in the face of a deadly pandemic.
Returning to the BRIC economic story, between 2003 and 2011 my colleagues and I came up with various projections for how each economy would do between then and 2050. This work, too, led to a few misperceptions, one being that we were offering a concrete forecast.
In fact, the title of our 2003 paper, Dreaming with BRICs: The Path to 2050, made clear that we were imagining one possible, aspirational path, and we certainly didn’t predict persistently strong growth rates across the board. For the 2021-30 decade, we assumed a real (inflation-adjusted) GDP growth rate of less than 5 per cent a year for China, and suggested that only India would still be experiencing accelerating growth after 2020 (owing to its strong demographics).
It is still possible that the BRIC grouping could become as large as the G7 within the next generation.
We do not yet know the 2020 GDP numbers for major economies, but most countries’ real and nominal GDP will certainly be smaller than in 2019, and probably significantly so in the case of Brazil, India and Russia. The exception will be China, whose GDP will probably have increased by 5 per cent or more in nominal (US dollar-denominated) terms, further increasing its share of global GDP.
The pandemic comes on the tail of a decade (2011-20) that was nowhere near as fruitful as the first one. Brazil and Russia’s respective shares of global GDP are probably roughly back to their level in 2001. And while India has emerged as the world’s fifth-largest economy, it has suffered several rocky years.
China alone enjoyed remarkable success during this period. With a nominal GDP of more than US$15 trillion, its economy is about 15 times bigger than it was in 2001, triple the size of Germany and Japan, and five times the size of the UK and India. Already about three-quarters the size of the United States, its economy is on track to become the largest this decade in nominal terms, having already achieved this threshold in purchasing power parity terms.
Despite a disappointing decade for Brazil and Russia, it is still possible that the BRICS grouping could become as large as the G7 within the next generation. If international trade, investment, and financial flows between the BRICS countries and the rest of the world continue, this level of growth would be good for everyone.
But that is a big if. Much will depend on whether we can muster the political leadership to strengthen international governance and the openness to which Western democracies have long aspired. In terms of these political questions, the BRICS’ second decade has been tough. Relations between the West (the US and Europe) and China and Russia are as fraught as they have been in decades, though the recent conclusion of an EU-China investment agreement offers some good news.
One hopes that the arrival of US President Joe Biden’s administration and Britain’s chairing of the G7 will make up for lost time. There appears to be some momentum behind the idea of creating a larger Democratic Ten (D10) alliance comprising the G7 members and Australia, India, and South Korea.
From a Western perspective, this grouping would have obvious geopolitical and diplomatic advantages, and might help with the governance of cyberspace and technology; but it is unclear what purpose it would serve for the wider world.
Indeed, a D10 could raise more questions than it answers. Why not include other democracies that are already in the G20, such as Brazil, Indonesia, and Mexico? Why would South Korea want to be in a group that excludes China, its huge economic neighbour, but includes Japan, with which it is often in diplomatic spats? How relevant could the D10 possibly be in efforts to address climate change, global economic stability and equality, and issues such as the distribution of COVID-19 vaccines and antimicrobial resistance?
What the world really needs is what we called for back in 2001: genuinely representative global economic governance. Let us hope there is a renewed desire to take this path under the new US administration.
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>>> Have the BRICS hit a wall?
China is the world's second-largest economy and is fast catching up on the US amid a trade war, while Russia is, well, still Russia. So, as the BRICS meet up, we ask what is the point of this oddly divergent group.
DW
Nov 13, 2019
https://www.dw.com/en/have-the-brics-hit-a-wall/a-51182058
BRICs leaders
Cooperation among the five BRICS (Brazil, Russia, India, China, and South Africa) has set an example of a new type of international relations, Chinese State Councilor and Foreign Minister Wang Yi said recently.
The BRICS meet this week in Brasilia under the banner of "Economic Growth for an Innovative Future," with a focus on strengthening cooperation in science, technology and innovation, enhancing cooperation in the digital economy, more cooperation in the fight against transnational crime, money laundering and drug trafficking.
Wang went on to say that the BRICS had served as a stabilizer in international volatility and an example of a new type of international relations. "The BRICS should continue to promote multilateralism, take the lead in safeguarding the international system with the UN as its core and uphold the purposes and principles of the UN Charter."
Great hopes
The acronym BRIC (then excluding South Africa) was created by Goldman Sachs' analyst Jim O'Neill in 2001 for the emerging powers he believed would be, alongside the US, the five biggest economies of the world in the 21st century. Nobel Prize laureate Michael Spence soon after predicted the BRICS would replace the US and Europe as the key engines of the world economy. In a decade, Spence predicted, the BRICS' share of global GDP would exceed 50%.
Read more: Russia's comeback in Africa
Lacking access to the top jobs in international financial and development institutions, the BRICS set up the New Development Bank (NDB) in 2014 to finance infrastructure projects in the developing world. The institution was intended to rival the US- and Europe-dominated IMF and World Bank and were explicitly aimed to break the West's hold on finance and development. The bank had a total authorized capital of $100 billion (€91 billion) and was open to all members of the UN.
China's growth comes at a cost
Four years after starting operations, it had a $10.2 billion loan book and is one of the word's biggest multilateral development banks. Since then, the bank has lent over $5 billion in 21 projects. The BRICS at the same time created a Contingency Reserve Arrangement which would be accessed by BRICS members in need of funds.
Divergence
BRICS makes little sense today, S&P Global Ratings said in an emailed note in late October. It said the BRICS had lost relevance due to their diverging long-term economic trajectory. The economic performance of China and India over the past two decades contrasts with poor results in Brazil, Russia and South Africa, whose shares of global output have shrunk since 2000. India and China have exceeded the rating firm's growth predictions since the turn of the century. Russia and South Africa have failed to meet them since about 2005, Brazil since 2010.
"The diverging long-term economic trajectory of the five countries weakens the analytical value of viewing the BRICS as a coherent economic grouping," O'Neill wrote recenly. "I myself have occasionally joked that perhaps I should have called the acronym 'IC' based on the clear disappointment of the Brazilian and Russian economies in the current decade since 2011, where both have clearly significantly under-performed compared with what the 2050 scenario path laid out."
The five countries' economic models and policies are also divergent, as are their credit ratings. China's has gone up four rungs on the S&P ladder to A+, while the others have never got that high: Russia and India are five steps below and South Africa and Brazil seven and eight below respectively.
Facts and figures
South Africa was the last to enter the bloc and is the smallest of the countries with a population of about 50 million, compared to the 143 million of Russia, the 1.2 billion of India, the 1.34 billion in China and the estimated 210 million in Brazil.
BRICS together represent 42% of the global population, 23% of GDP, 30% of the territory and 18% of trade. Combined, they are bigger than the eurozone and unless China slows dramatically, the collective size of the BRICS countries will soon be as big as the US. Over the past decade, the combined BRICS' GDP has grown 179% and total trade of the member nations has risen 94%. From 2008 to 2017, the world's average growth rate was around 1%, but that of BRICS nations was about 8%.
What's it for?
"The significant question will be: How and to what extent will the BRICS take the next step in underwriting the rules of the game in an international order that is seeking leadership and direction?" Sanusha Naidu, senior researcher, University of South Africa, asked this year.
Read more: Why India pulled out of the RCEP free trade deal
The first official summit in 2009, held in Yekaterinburg, Russia, came up with a short declaration containing 15 commitments, according to the BRICS Research Group, based at the University of Toronto and the Russian Presidential Academy of National Economy and Public Administration. According to the BRICS Research Group's analysis, they show a surprisingly high rate of compliance: 77% on average, The Economist calculated. China keeps its word the most; South Africa the least, the weekly reported.
The BRICS have retained a certain credibility as "middle power," but in 2019, with Brazilian president Jair Bolsonaro's new rightwing agenda coming into focus, the situation appears fluid. His Finance Minister Paulo Guedes was named chair of NDB in April.
But one should also bear in mind that three of the five leaders head very authoritarian states, some of those most keen on an alternative to the global dominance of the US: Xi Jinping, Vladimir Putin, Jair Bolsonaro and Narendra Modi.
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>>> Italy joins China's New Silk Road project
BBC News
23 March 2019
https://www.bbc.com/news/world-europe-47679760
Italy has become the first developed economy to sign up to China's global investment programme which has raised concerns among Italy's Western allies.
A total of 29 deals amounting to €2.5bn ($2.8bn) were signed during Chinese President Xi Jinping's visit to Rome.
The project is seen as a new Silk Road which, just like the ancient trade route, aims to link China to Europe.
Italy's European Union allies and the United States have expressed concern at China's growing influence.
What is the Chinese project about?
The new Silk Road has another name - the Belt and Road Initiative (BRI) - and it involves a wave of Chinese funding for major infrastructure projects around the world, in a bid to speed Chinese goods to markets further afield. Critics see it as also representing a bold bid for geo-political and strategic influence.
China v the US: Not just a trade war
It has already funded trains, roads, and ports, with Chinese construction firms given lucrative contracts to connect ports and cities - funded by loans from Chinese banks.
The levels of debt owed by African and South Asian nations to China have raised concerns in the West and among citizens - but roads and railways have been built that would not exist otherwise:
- In Uganda, Chinese millions built a 50km (30 mile) road to the international airport
- In Tanzania, a small coastal town may become the continent's largest port
- In Europe too, Chinese firms managed to buy 51% of the port authority in Piraeus port near Athens in 2016, after years of economic crisis in Greece
What projects were signed in Rome?
On behalf of Italy, Deputy Prime Minister Luigi Di Maio, leader of the populist Five Star Movement, signed the umbrella deal (memorandum of intent) making Italy formally part of the Economic Silk Road and The Initiative for a Maritime Silk Road for the 21st Century.
Ministers then signed deals over energy, finance, and agricultural produce, followed by the heads of big Italian gas and energy, and engineering firms - which will be offered entry into the Chinese market.
China's Communications and Construction Company will be given access to the port of Trieste to enable links to central and eastern Europe. The Chinese will also be involved in developing the port of Genoa.
What's in it for Italy?
Italy is the first member of the G7 group of developed world economies to take money offered by China.
It is one of the world's top 10 largest economies - yet Rome finds itself in a curious situation.
The collapse of the Genoa bridge in August killed dozens of people and made Italy's crumbling infrastructure a major political issue for the first time in decades.
And Italy's economy is far from booming.
The country slipped into recession at the end of 2018, and its national debt levels are among the highest in the eurozone. Italy's populist government came to power in June 2018 with high-spending plans but had to peg them back after a stand-off with the EU.
Mr Di Maio told a news conference: "Italy has arrived first on the Silk Road and therefore other European countries at this moment have taken a stance on our trade decisions.
"They have taken a critical view and they have the right to this opinion."
"We do not want to override our European partners. We firmly remain in the Euro-Atlantic alliance and we remain allies of the United States in Nato," he added.
There is, however, dissent within the Italian government. Mr Di Maio's coalition partner, the other Deputy Prime Minister, Matteo Salvini, who heads the right-wing League, was conspicuously absent from all official ceremonies.
Mr Salvini has warned that he does not want to see foreign businesses "colonising" Italy.
"Before allowing someone to invest in the ports of Trieste or Genoa, I would think about it not once but a hundred times," Mr Salvini warned.
What's in it for China?
Italy's move is "largely symbolic", according to Peter Frankopan, professor of Global History at Oxford University and a writer on The Silk Roads.
But even Rome admitting the BRI is worth exploring "has a value for Beijing", he said.
"It adds gloss to the existing scheme and also shows that China has an important global role."
"The seemingly innocuous move comes at a sensitive time for Europe and the European Union, where there is suddenly a great deal of trepidation not only about China, but about working out how Europe or the EU should adapt and react to a changing world," Prof Frankopan told the BBC.
"But there is more at stake here too," he added. "If investment does not come from China to build ports, refineries, railway lines and so on, then where will it come from?"
Grappling with China's growing power
Explorer Marco Polo's travels along the Silk Road were immortalised in the "Book of Marvels"
The "made in Italy" label carries a reputation for quality worldwide, and is legally protected for products items processed "mainly" in Italy.
In recent years, Chinese factories based in Italy using Chinese labour have been challenging that mark of quality.
Better connections for cheap raw materials from China - and the return of finished products from Italy - could exaggerate that practice.
'Predatory' investment
The agreements signed in Rome come amid questions over whether Chinese firm Huawei should be permitted to build essential communications networks - after the United States expressed concern they could help Beijing spy on the West.
That was not part of the negotiations in Italy.
But a little over a week before the deal was due to be signed, the European Commission released a joint statement on "China's growing economic power and political influence" and the need to "review" relations.
As President Xi toured Rome, EU leaders in Brussels considered their approach for relations with China.
"Our aim is to focus on achieving a balanced relation, which ensures fair competition and equal market access," Donald Tusk, President of the European Council, said.
In March, US National Security Council spokesman Garrett Marquis pointed out that Italy was a major economy and did not need to "lend legitimacy to China's vanity infrastructure project".
<<<
>>> China’s Built a Railroad to Nowhere in Kenya
Beijing is withholding the $4.9 billion needed to finish the project, once a flagship for Xi Jinping’s Belt and Road initiative.
Bloomberg
By David Herbling and Dandan Li
July 18, 2019
https://www.bloomberg.com/news/features/2019-07-19/china-s-belt-and-road-leaves-kenya-with-a-railroad-to-nowhere
Gleaming concrete sleepers run across a new railway bridge in Kenya, the latest stretch of a Chinese-built line from the coast all the way to Uganda.
Only, it doesn’t quite reach the border. Instead, the railroad ends abruptly by a sleepy village about 75 miles west of the Kenyan capital, Nairobi, the tracks laid but unused.
Construction of what was intended to be a flagship infrastructure project for Eastern Africa was halted earlier this year after China withheld some $4.9 billion in funding needed to allow the line’s completion. Beijing’s sudden financial reticence appeared to catch the governments of Kenya and Uganda off guard: Both may now be forced to reinstate a colonial-era line in a bid to patch the link and boost regional trade.
Kenya’s Railway to Nowhere
Construction of a Chinese-built line across East Africa has halted
The reason for China’s attack of cold feet may lie in the project’s high profile. Chinese state media repeatedly used the Mombasa-Nairobi Standard Gauge Railway (SGR) project as a showcase for President Xi Jinping’s Belt and Road Initiative. But with concerns rising globally that Belt and Road was loading poorer nations with unsustainable debt, Xi signaled in April that Beijing would exert more control over projects and tighten oversight.
That extra rigor is beginning to be felt worldwide. A planned light-railway system that was the most high profile belt and road project in Kazakhstan is on hold after the collapse of a local bank that handled Chinese funds. In Zimbabwe, a giant solar project hit a funding shortfall after the Export Import Bank of China backed out of providing financing due to the Zimbabwean government’s legacy debts, RWR Belt and Road Monitor reported this month. Kenya’s line may be next.
The Chinese “are adopting a more cautious approach to their debt exposure in Africa,” said Piers Dawson, a consultant at London-based investment consultancy Africa Matters Ltd. He cites “increased noise around its sustainability and potential default.”
China is now the single largest financier for infrastructure in Africa, funding one-in-five projects and constructing every third one, according to a Deloitte report. With infrastructure needs that the African Development Bank estimates at $130 billion to $170 billion yearly, governments are only too willing to take out Chinese loans to plug the funding gap.
The downside is that Kenya was one of three African countries identified in a March 2018 report by the Washington-based Center for Global Development as at risk of debt distress as a result of its Belt and Road participation. The others were Egypt and Ethiopia.
Belt And Road Initiative Bolsters China’s Africa Ties
“China has its own issues it’s dealing with, including perceptions that it is ‘trapping’ many of its Belt and Road partners by drowning them in debt,” said Jacques Nel, an economist at NKC African Economics. China’s government has “put the brakes on its external expansion plans, or has at least become more focused on the viability of projects due to its own corporate debt concerns,” he said.
The first half of the Kenya-Uganda railway, a 470-kilometer (290-mile) stretch between the port city of Mombasa and Nairobi, is operational but not yet making money. Beijing balked at funding the extension to Uganda amid concerns it may be a step too far beyond viability.
Kenya and landlocked Uganda had coordinated their plans for the new railway to reduce transport costs and the time it takes to move goods from the coast across each country and further into the eastern and central Africa hinterland. Yet with the realization that China may not release more funds, Kenyan President Uhuru Kenyatta has given the go ahead to link the line to a narrower-gauge railway that’s over 90 years old. Uganda, which had banked on Chinese funding too, has decided to refurbish the colonial-era line on its side of the border.
But that still means shouldering more debt at a time when the International Monetary Fund is urging spending restraint. China is already Kenya’s biggest external creditor, with some 22% of the country’s external debt as of December, according to Treasury data.
The situation doesn’t bode well for Kenyatta’s legacy, which he was building around the railroad as the nation’s single-biggest investment since Kenya attained self-rule over five decades ago. Knowing that alternative—and probably more expensive—debt could further widen Kenya’s deficit, Kenyatta is courting private investors to build the link between the new and old railroads. Uganda will meanwhile include the $205 million needed to rehabilitate its old tracks in the budget, but hasn’t said how it plans to raise the funds.
Back in 2013, when Kenyatta asked Beijing to fund the railway, a condition was that China supply the constructors. Export-Import Bank of China financed the $3.6 billion line to Nairobi, China Road and Bridge Corp. built it, and China Communications Construction Co. was picked as the operator. Revenue from the railway is supposed to repay the loan, but critics say the cost was too high and it won’t turn a profit for a long time.
ON HOLD - CHINESE INVESTMENT IN KENYA RAIL
They point to southern neighbor Tanzania, which in 2016 canceled $7.6 billion in Chinese funding for a 2,200-kilometer railway and contracted Yapi Merkezi Insaat Ve Sanayi of Turkey and Portugal’s Engenharie and Construcao Africa to build a shorter line at roughly half the cost per kilometer.
Beijing’s tighter scrutiny of Belt and Road projects comes as China shifts the program away from low-cost loans onto a more commercial basis involving its private sector. Clearer rules for state-owned enterprises and building overseas auditing and anti-corruption mechanisms were among other steps floated by officials at the time of the Belt and Road Forum in April.
China supports the Kenya railway project but requires a reasonable and sustainable financing plan, according to a person involved with the project. Because China now requires high-quality projects and a more thorough feasibility study, the process of approving loans has slowed in general, but it doesn’t mean the project is terminated, said the person, who asked not to be named as they are not authorized to speak publicly. Related parties in the Chinese government and banks are still deliberating financing options, the person said.
China’s Ambassador to Kenya, Wu Peng, was asked in May by local newspaper the Daily Nation about expectations President Kenyatta’s visit to China that month would secure funding for the missing section of the railway, to Kisumu by Lake Victoria.
“I really don’t know where those expectations came from,” Wu was cited as saying.
<<<
>>> The BRICs were supposed to take over the global economy. What happened?
APR 14 2019
Tala Hadavi
https://www.cnbc.com/2019/04/11/what-happened-to-brazil-russia-india-and-china-as-the-brics.html
What happened to the BRICs?
The BRIC acronym was coined by Goldman Sachs chief economist Jim O’Neill in 2001. He predicted four emerging economies — Brazil, Russia, India and China — were on their way to reshape the world economy.
Opponents said the countries were too different culturally and socially to be grouped together and that ultimately, it was a Goldman Sachs marketing ploy.
Still, in the first decade, the countries met all expectations and beyond. Investment banks, think tanks and academia capitalized on the successes and everyone was talking about BRIC. In 2010, the group added South Africa, making its acronym BRICS.
The countries went from less than 20% of the world’s GPD in 2003 to about 30% 10 years later. China and India were growing exponentially, while rising commodity prices kept Brazil and Russia in good pace to meet O’Neill’s predictions.
But shortly after the financial crisis, external factors combined with serious internal turmoil proved too much for the group. While China and India are growing steadily today, Russia and Brazil have gone in the opposite direction.
<<<
>>> BRICS back 'open world economy' that benefits all nations
BBC News
26 July 2018
https://www.bbc.com/news/business-44973352
The leaders of the Brics emerging economies have signed a declaration stressing the importance of an "open world economy", in which all countries benefit from globalisation.
Brazil, Russia, India, China and South Africa also backed an "open and inclusive" multilateral trading system under World Trade Organization rules.
But they said the multilateral trading system faced unprecedented challenges.
Their comments come amid mounting trade tensions sparked by US tariffs.
The leaders have been meeting at the 10th Brics summit in Johannesburg.
US and EU retreat from brink on trade
What is a trade war and why should I worry
Trade row may hurt global growth says G20
"We reaffirm the centrality of the rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system, as embodied in the World Trade Organization, that promotes a predictable trade environment and the centrality of the WTO," the declaration signed by the five leaders said.
However, they added: "We recognise that the multilateral trading system is facing unprecedented challenges.
"We underscore the importance of an open world economy, enabling all countries and peoples to share the benefits of globalisation, which should be inclusive and support sustainable development and prosperity of all countries.
"We call on all WTO members to abide by WTO rules and honour their commitments in the multilateral trading system."
'Reject protectionism'
The Brics summit is the first since US President Donald Trump placed tariffs on billions of dollars' worth of goods from around the world, in particular China.
He has promised further levies on $200bn (£150bn) worth of Chinese products in September.
Mr Trump also wants to cut the trade deficit with China - a country he has accused of unfair trade practices since before he became president.
Mr Trump made a big point on the campaign trail about cutting the country's trade deficits.
He is convinced that they hurt US manufacturing, and has said repeatedly while campaigning and on Twitter that the US must do more to tackle them.
Speaking in Johannesburg on Thursday, Chinese President Xi Jinping said: "We must work together... to safeguard the rule-based multilateral trading regime, promote trade and investment, globalisation and facilitation, and reject protectionism outright."
On Wednesday, he said there would be no winner in a global trade war.
<<<
Belt and Road Initiative -
One look at this map and it's easy to see why the US is worried -
>>> The Belt and Road Initiative (BRI) or the Silk Road Economic Belt and the 21st-century Maritime Silk Road is a development strategy proposed by the Chinese government which focuses on connectivity and cooperation between Eurasian countries, primarily the People's Republic of China (PRC), the land-based Silk Road Economic Belt (SREB) and the ocean-going Maritime Silk Road (MSR). <<<
https://en.wikipedia.org/wiki/Belt_and_Road_Initiative
>>> China's first home-built aircraft carrier begins sea trials as Beijing ramps up its maritime might
By Neil Connor
The Telegraph
May 13, 2018
https://www.telegraph.co.uk/news/2018/05/13/chinas-first-home-built-aircraft-carrier-began-sea-trials-beijing/
China's first home-built aircraft carrier began sea trials on Sunday, a major step for Beijing as it ramps up its military might.
The carrier will be the second to enter the Chinese navy, and comes as Beijing seeks to modernise its armed forces.
The ship, which is known only as "Type 001A", set out for the trials from the north-eastern port of Dalian, where it was built.
The trail was to "test the reliability and stability of the carrier's power system and other equipment," Xinhua news agency said
"Construction on the carrier has been carried out as planned since it was launched in April last year, and equipment debugging, outfitting and mooring tests have been completed to make it ready for the trial mission at sea," it added, citing sources.
Images posted by Chinese media online showed the huge carrier not far from its dock, apparently setting off for trials with smaller vessels.
China's military has been updated and modernised since Chinese president Xi Jinping assumed power five years ago.
The carrier, which is not expected to enter service until 2020, is the latest milestone in China's military development, and comes as Beijing is asserting itself in the strategic waters of the South China Sea, and against Taiwan.
Steve Tsang, director of the China Institute at the School of Oriental and African Studies (SOAS), said: "This is clearly a landmark development, particularly in demonstrating the ambition and intention of the Chinese Government under Xi Jinping.
"Aircraft carriers are for power projection and for domination, and this is just the first of several more indigenous carriers.
"The world should take notice of Xi’s determination ‘to make China great again’."
The country's first carrier, the Liaoning, was bought second-hand from Ukraine in 1998, refitted in China, and commissioned in 2012.
Both Chinese aircraft carriers have similar "ski jump" ramps, and closely resemble Soviet style vessels.
They will "not pose major challenges" to the "US domination of the sea lanes", Prof Tsang told The Telegraph.
The US's 11 vessels are nuclear powered and have far superior technology, including catapult systems for launching aircraft.
Prof Tsang added: "But for the rest of China’s neighbours, the new carrier based doctrine of the People's Liberation Army is frightening, as none of them can remotely match China’s new naval capabilities."
<<<
>>> China Is One Signature Away From Dealing The Dollar A Death Blow
Authored by Brandon Smith via Birch Gold Group,
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=139500735
If you leave your sliding glass door open, you might let in a stray cat, raccoon, or bugs without knowing it.
Some intruders are worse than others. All can be annoying. But let in a thief, who robs your home... and it only takes that one time to change your life forever.
The U.S. has essentially left their “sliding glass door” open, and on March 26 China is set to become the intruder that may very well deal a death blow to the dollar.
China Prepares Death Blow to the Dollar
On March 26 China will finally launch a yuan-dominated oil futures contract. Over the last decade there have been a number of “false-starts,” but this time the contract has gotten approval from China’s State Council.
With that approval, the “petroyuan” will become real and China will set out to challenge the “petrodollar” for dominance. Adam Levinson, managing partner and chief investment officer at hedge fund manager Graticule Asset Management Asia (GAMA), already warned last year that China launching a yuan-denominated oil futures contract will shock those investors who have not been paying attention.
This could be a death blow for an already weakening U.S. dollar, and the rise of the yuan as the dominant world currency.
But this isn’t just some slow, news day “fad” that will fizzle in a few days.
A Warning for Investors Since 2015
Back in 2015, the first of a number of strikes against the petrodollar was dealt by China. Gazprom Neft, the third-largest oil producer in Russia, decided to move away from the dollar and towards the yuan and other Asian currencies.
Iran followed suit the same year, using the yuan with a host of other foreign currencies in trade, including Iranian oil.
During the same year China also developed its Silk Road, while the yuan was beginning to establish more dominance in the European markets.
But the U.S. petrodollar still had a fighting chance in 2015 because China’s oil imports were all over the place. Back then, Nick Cunningham of OilPrice.com wrote…
Despite accounting for much of the world’s growth in demand in the 21st Century, China’s oil imports have been all over the map in recent months. In April, China imported 7.4 million barrels per day, a record high and enough to make it the world’s largest oil importer. But a month later, imports plummeted to just 5.5 million barrels per day.
That problem has since gone away, signaling China’s rise to oil dominance…
The Slippery Slope to the Petroyuan Begins Here
The petrodollar is backed by Treasuries, so it can help fuel U.S. deficit spending. Take that away, and the U.S. is in trouble.
It looks like that time has come…
A death blow that began in 2015 hit again in 2017 when China became the world’s largest consumer of imported crude…
Now that China is the world’s leading consumer of oil, Beijing can exert some real leverage over Saudi Arabia to pay for crude in yuan. It’s suspected that this is what’s motivating Chinese officials to make a full-fledged effort to renegotiate their trade deal.
So fast-forward to now, and the final blow to the petrodollar could happen starting on March 26. We hinted at this possibility back in September 2017…
With major oil exporters finally having a viable way to circumvent the petrodollar system, the U.S. economy could soon encounter severely troubled waters.
First of all, the dollar’s value depends massively on its use as an oil trade vehicle. When that goes away, we will likely see a strong and steady decline in the dollar’s value.
Once the oil markets are upended, the yuan has an opportunity to become the dominant world currency overall. This will further weaken the dollar. <<<
>>> Trump, Davos and Free Trade
By James Rickards
February 2, 2018
https://dailyreckoning.com/trump-davos-free-trade/
Trump, Davos and Free Trade
After Trump announced the steep 30% U.S. tariffs on imports of solar panels and washing machines. the Chinese Commerce Ministry expressed “strong dissatisfaction” and said it “aggravates the global trade environment.”
Trump is not done with tariffs. In the days and weeks ahead, we can expect further announcements with regard to steel and aluminum imports to the U.S. Again, such imports come largely from China, but the tariffs will likely affect all exporters to the U.S.
Ironically these announcements came just as President Trump was preparing to go to Davos, Switzerland for the World Economic Forum.
The Davos elites vehemently oppose both trade and capital controls, preferring instead a globalist “one-world” approach. The only problem with the Davos elite theory is that it is empirically, historically and analytically wrong.
The theory of free trade is based on an idea called “comparative advantage.” This idea goes back to David Ricardo, an early 19th century British economist. Ricardo’s theory was that countries should not try to be self-sufficient in all manufacturing, mining and agriculture.
Instead countries should specialize in what they do best, and let others also specialize in what they do best. Then countries could simply trade the goods they make for the goods made by others. All sides would be better off because prices would be lower as a result of specialization in those goods where you have a natural advantage.
It’s a nice theory often summed up in the idea that Tom Brady should not mow his own lawn because it makes more sense to pay a landscaper while he practices football.
But, the theory is flawed. For one thing, comparative advantage is not static. It changes over time. Importantly comparative advantage can be created from thin air. Taiwan had no comparative advantage in semiconductors in the 1980s, but the government made a political decision to create the state-sponsored Taiwan Semiconductor Manufacturing Company.
Today Taiwan Semiconductor is the largest supplier of semiconductors in the world. The government nurtured Taiwan Semiconductor with tariffs and subsidies when it was most vulnerable to foreign competition. Today Taiwan Semiconductor is a publicly traded company that competes effectively around the world, but it would never have attained that status without government help in its early days.
If the theory of comparative advantage were true, Japan would still be exporting tuna fish instead of cars, computers, TVs, steel and much more.
The same can be said of the globalists’ view that capital should flow freely across borders. That might be advantageous in theory but market manipulation by central banks and rouge actors like Goldman Sachs and big hedge funds make it a treacherous proposition.
In the depths of the Asian financial crisis of 1997, Malaysian Prime Minister Mahathir closed Malaysia’s capital account to preserve hard currency and defend his exchange rate. Mahathir was excoriated at the time by the likes of George Soros. Soros went so far as to call Mahathir a “menace to his country.”
But scholars today agree that Mahathir made the right move. In recent years, even the IMF has said there are certain circumstances where capital controls are fully justified.
If open trade, and open capital flows are flawed ideas, why do the Davos elite support them?
The answer is that these theories, which have superficial appeal to everyday citizens, are the perfect smokescreen for the elites’ hidden agenda. That agenda is to diminish the power of the United States, and the U.S. dollar, in world affairs and to enhance the power of rising nations especially China.
If several hundred million Chinese can be pulled from poverty by leaving the U.S. market open while China subsidies its companies, imposes its own tariffs, steals intellectual property, and limits U.S. foreign direct investment, then that’s fine. If U.S. workers lose their jobs in the process, that’s fine too. The elites don’t care about the U.S.; they only care about their “one world” vision.
Trump is calling their bluff. When Trump says “America First” he means it. So does Trump’s top trade advisor Robert Lighthizer. Lighthizer is a veteran of the Reagan administration who forced the Japanese to move their auto plants to the U.S. in the 1980s by imposing steep tariffs on Japanese imported cars.
Thousands of high-paying U.S. manufacturing jobs were created as a result. Lighthizer plans to run the same playbook against the Chinese today.
Lighthizer is part of a hawkish “Trade Troika” consisting of himself, Secretary of Commerce Wilbur Ross, Jr. and White House trade advisor Peter Navarro. All three are urging President Trump to impose a set of tariffs on China involving not only washing machines and solar panels, but steel, aluminum, and theft of intellectual property.
Opposing the Trade Troika are trade doves including National Economic Advisor Gary Cohn, Chief of Staff John F. Kelly, Secretary of State Rex Tillerson and the CEOs of major global corporations such as Boeing, Apple and General Motors that all derive large profits from Chinese operations.
The hawks and doves fought each other to a standstill in 2017 because of wishful thinking about Chinese help on North Korea and the importance of a united front to pass the tax bill. With hopes for China now dispelled and the tax bill passed into law, the trade agenda is front and center.
This is not a “kick-the-can-down-the-road” situation. Trump is confronting hard deadlines on key decisions.
America has always prospered with high tariffs to protect its industries. From Alexander Hamilton’s plan for infant manufacturing to Henry Clay’s American Plan, the U.S. has always known how to protect its industries and create American jobs. Trump is returning to that tradition.
The problem is that this will not be a smooth ride. It will take years for U.S. solar panel manufacturers to get back on their feet. (One of the largest U.S. firms filed for bankruptcy protection last year, but it continues to operate in reorganization under court supervision.)
A full-scale trade war will hurt world growth even as it helps U.S. growth. Given the trillions in dollar-denominated debt in emerging markets, a full-scale foreign sovereign debt crisis could be in the making if those emerging markets countries cannot earn dollars from exports to pay their debts.
Trump did not impose these tariffs in 2017 because he needed Chinese help with the North Korean situation. But, China did not do all it could in North Korea, and there is good evidence that China is helping North Korea cheat on existing sanctions.
As if to rub salt in the wound, China reported today that its 2017 trade surplus with the U.S. was $275 billion, the highest ever.
Once China’s lack of cooperation on North Korea became clear, Trump saw no harm in confronting China on trade, something he’s been talking about since the summer of 2015 during the early days of his campaign.
The Chinese may choose to retaliate not so much with their own tariffs, but with other forms of financial warfare including its threats to persify its reserves away from U.S. Treasuries.
As China buys fewer U.S. Treasuries, the most likely substitute asset class is gold. This is one more reason to expect that the recent weak dollar and strong gold trends to continue for the remainder of this year and beyond.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Cracks in Dollar Are Getting Larger
By James Rickards
September 27, 2017
https://dailyreckoning.com/cracks-dollar-getting-larger/
Cracks in Dollar Are Getting Larger
Many Daily Reckoning readers are familiar with the original petrodollar deal the U.S made with Saudi Arabia.
It was set up by Henry Kissinger and Saudi princes in 1974 to prop up the U.S. dollar. At the time, confidence in the dollar was on shaky ground because President Nixon had ended gold convertibility of dollars in 1971.
Saudi Arabia was receiving dollars for their oil shipments, but they could no longer convert the dollars to gold at a guaranteed price directly with the U.S. Treasury. The Saudis were secretly dumping dollars and buying gold on the London market. This was putting pressure on the bullion banks receiving the dollar.
Confidence in the dollar began to crack. Henry Kissinger and Treasury Secretary William Simon worked out a plan. If the Saudis would price oil in dollars, U.S. banks would hold the dollar deposits for the Saudis.
These dollars would be “recycled” to developing economy borrowers, who in turn would buy manufactured goods from the U.S. and Europe. This would help the global economy and help the U.S. maintain price stability. The Saudis would get more customers and a stable dollar, and the U.S. would force the world to accept dollars because everyone would need the dollars to buy oil.
Behind this “deal” was a not so subtle threat to invade Saudi Arabia and take the oil by force. I personally discussed these invasion plans in the White House with Kissinger’s deputy, Helmut Sonnenfeldt, at the time. The petrodollar plan worked brilliantly and the invasion never happened.
Now, 43 years later, the wheels are coming off. The world is losing confidence in the dollar again. China just announced that any oil-exporter that accepts yuan for oil can convert the oil to gold on the Shanghai Gold Exchange and hedge the hard currency value of the gold on the Shanghai Futures Exchange.
The deal has several parts, which together spell dollar doom. The first part is that China will buy oil from Russia and Iran in exchange for yuan.
The yuan is not a major reserve currency, so it’s not an especially attractive asset for Russia or Iran to hold. China solves that problem by offering to convert yuan into gold on a spot basis on the Shanghai Gold Exchange.
This straight-through processing of oil-to-yuan-to-gold eliminates the role of the dollar.
Russia was the first country to agree to accept yuan. The rest of the BRICS nations (Brazil, India and South Africa) endorsed China’s plan at the BRICS summit in China earlier this month.
Now Venezuela has also now signed on to the plan. Russia is #2 and Venezuela is #7 on the list of the ten largest oil exporters in the world. Others will follow quickly. What can we take away from this?
This marks the beginning of the end of the petrodollar system that Henry Kissinger worked out with Saudi Arabia in 1974, after Nixon abandoned gold.
Of course, leading reserve currencies do die — but not necessarily overnight. The process can persist over many years.
For example, the U.S. dollar replaced the UK pound sterling as the leading reserve currency in the 20th century. That process was completed at the Bretton Woods conference in 1944, but it began thirty years earlier in 1914 at the outbreak of World War I.
That’s when gold began to flow from the UK to New York to pay for badly needed war materials and agricultural exports.
The UK also took massive loans from New York bankers organized by Jack Morgan, head of the Morgan bank at the time. The 1920s and 1930s witnessed a long, slow decline in sterling as it devalued against gold in 1931, and devalued again against the dollar in 1936.
The dollar is losing its leading reserve currency status now, but there’s no single announcement or crucial event, just a long, slow process of marginalization. I mentioned that Russia and Venezuela are now pricing oil in yuan instead of dollars. But Russia has taken its “de-dollarization” plans one step further.
Russia has now banned dollar payments at its seaports. Although these seaport facilities are mostly state-owned, many payments, like those for fuel and tariffs, were still conducted in dollars. Not anymore.
This is just one of many stories from around the world showing how the dollar is being pushed out of international trade and payments to be replaced by yuan, rubles, euros or gold in this case.
I believe gold is ultimately heading to $10,000 an ounce, or higher.
Now, people often ask me, “How can you say gold prices will rise to $10,000 without knowing developments in the world economy, or even what actions will be taken by the Federal Reserve?”
It’s not made up. I don’t throw it out there to get headlines, et cetera.
It’s the implied non-deflationary price of gold. Everyone says you can’t have a gold standard, because there’s not enough gold. There’s always enough gold, you just have to get the price right.
I’m not saying that we will have a gold standard. I’m saying if you have anything like a gold standard, it will be critical to get the price right.
The analytical question is, you can have a gold standard if you get the price right; what is the non-deflationary price? What price would gold have to be in order to support global trade and commerce, and bank balance sheets, without reducing the money supply?
The answer is, $10,000 an ounce.
I use a 40% backing of the M1 money supply. Some people argue for 100% backing. Historically, it’s been as low as 20%, so 40% is my number. If you take the global M1 of the major economies, times 40%, and divide that by the amount of official gold in the world, the answer is approximately $10,000 an ounce.
There’s no mystery here. It’s not a made-up number. The math is eighth grade math, it’s not calculus.
That’s where I get the $10,000 figure. It is also worth noting that you don’t have to have a gold standard, but if you do, this will be the price.
The now impending question is, are we going to have a gold standard?
That’s a function of collapse of confidence in central bank money, which is already being seen. It’s happened three times before, in 1914, 1939 and 1971. Let us not forget that in 1977, the United States issued treasury bonds denominated in Swiss francs, because no other country wanted dollars.
The United States treasury then borrowed in Swiss francs, because people didn’t want dollars, at least at an interest rate that the treasury was willing to pay.
That’s how bad things were, and this type of crisis happens every 30 or 40 years. Again, we can look to history and see what happened in 1998. Wall Street bailed out a hedge fund to save the world. What happened in 2008? The central banks bailed out Wall Street to save the world.
What’s going to happen in 2018?
We don’t know for sure.
But eventually a tipping point will be reached where the dollar collapse suddenly accelerates as happened to sterling in 1931. Investors should acquire gold and other hard assets before that happens.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Three Hidden Subplots of the G20 Hamburg Summit
By James Rickards
July 6, 2017
https://dailyreckoning.com/hidden-subplots-g20-summit/
Three Hidden Subplots of the G20 Hamburg Summit
The Group of Twenty, known as G20, is an unaccountable and powerful organization that is the closest thing on earth to a true world government. German Chancellor Angela Merkel, the rotating President of the G20, will host the next G20 meeting in the city of Hamburg, on the mouth of the Elbe River near the North Sea Coast.
G20 refers to its twenty member countries. They are a mixture of what were once the world’s seven largest economies, known as the G7, consisting of the United States, Canada, France, Germany, the UK, Italy and Japan, and some fast-growing, newly emerging economies such as Brazil, China, South Korea, Mexico, India and Indonesia. Other countries such as Russia and Saudi Arabia are included because of their natural resources or for reasons of geopolitics.
The G20 operates at many levels. Several times each year their finance ministers and central bank heads meet to discuss technical issues and try to reach consensus on specific goals. The most important meetings, however, are the leaders’ summits, attended by presidents, prime ministers and kings, which meet periodically to discuss global financial issues.
It is at these leaders’ summits, both in the formal sessions and informally on the sidelines, that the actual deals shaping the global financial system are made.
In recent years, G20 summits have focused less on financial crises and more on the one world agenda of the global elite. This elite agenda includes world taxation, climate change, terrorism, anti-money laundering and other aspects of globalized governance.
Today, financial risk is once again coming to the fore as global growth continues to slow. Nationalist leaders such as Donald Trump, Vladimir Putin, and Theresa May have emerged to challenge the globalist agenda. This puts more stress on the cohesiveness of the G20 process.
Financial risk, anti-globalism, immigration, and threats from terrorism will be on full display at this next G20 leaders’ summit. There will also be three key sub-plots happening off the main stage to watch closely.
The most important of these private meetings involve Trump and Putin, Macron and Merkel, and the BRICS.
The United States and Russia
By far, the most important encounter at the Hamburg G20 Summit will be the first face-to-face meeting between Donald Trump and Vladimir Putin.
Despite the avalanche of allegations of “collusion” between Trump and Putin to rig the 2016 U.S. presidential election (an allegation for which there is zero evidence), and the presumed sympathies between the two leaders on policies involving ISIS and terrorism, they have never met and have had only limited telephonic contact.
The bilateral agenda of the two leaders could not be more urgent.
Trump Putin G20 Summit
Despite allegations of Russian interference in the 2016 U.S. election, and the Russian scandals surrounding Trump, the two leaders have an important shared agenda including Syria, North Korea, Ukraine, trade sanctions, and energy policy.
Trump wants to build bridges to Russia in order to prepare for a coming confrontation with China. Russia, China and the U.S. are the only three superpowers in the world.
Classic balance-of-power politics dictates that if you are going to confront one power in a three-power game, it is essential to have an alliance with the other power, or at least keep it neutral. The U.S. needs a neutral or friendly Russia before it confronts China on trade, currency manipulation, North Korea and the South China Sea.
Unfortunately, Trump’s efforts at opening dialogue with Russia were handled in an amateurish way by Kushner and Flynn. Both lied about their contacts with the Russians, which fed the collusion narrative. This led to investigations, and Trump’s clumsy efforts to head off those investigations have now led to allegations of obstruction of justice.
Despite the dysfunction in the Trump White House and the media circus in Washington DC, the reasons for normalizing relations with Russia are no less urgent than when they were first pursued by Trump.
The G20 summit will be a chance for Trump to reinvigorate the U.S.-Russia dialogue outside the context of the Beltway feeding frenzy. Putin understands this and he will be an eager interlocutor.
Trump’s defense, diplomatic and national security team of James Mattis, Rex Tillerson, and H. R. McMaster are far more capable than Kushner and Flynn, and will assist in Trump’s preparation for the Putin dialogue.
The Trump-Putin dialogue in Hamburg will be the most important diplomatic event of 2017. Watch closely for both public statements and leaks about the substance of the dialogue.
This information will contain important clues about the prospects for war with North Korea, relief from economic sanctions in Europe, and the endgame for ISIS.
The BRICS
Another important highlight of recent G20 summits is the informal meeting of the BRICS on the sidelines. Hamburg will continue this tradition.
BRICS is an acronym for its member nations: Brazil, Russia, India, China, and South Africa. These nations include the four largest emerging markets economies, the two most populous nations on earth (China and India), and four of the six largest nations by landmass (Russia, China, Brazil, and India). The BRICS are the main counterpoint to the G7 inside the G20.
The BRICS have their own summit meetings and institutions, including a well-funded development bank. Yet, the G20 summit is a convenient time for the BRICS leaders to meet in person given the difficult logistics of coordinating so many leaders’ schedules.
The BRICS agenda will be lighter at this G20 summit than in years past. This is partly because the currency wars are temporarily quiet, and the BRICS development agenda has been eclipsed to some extent by China’s “One Belt, One Road” multi-trillion dollar infrastructure initiative in central and south Asia.
Still, the BRICS as a group continue to be interested in ways to bypass the U.S. dollar in global payments systems. By strengthening and expanding non-dollar payments systems, the BRICS make themselves less vulnerable to U.S. economic sanctions, which mainly operate through bank channels and dollar accounts.
Gold is also an important topic among the BRICS. Russia, China and South Africa are three of the world’s largest gold producers, while Russia, China, and India are among the world’s largest consumers of gold.
Watching the BRICS “sideline summit” at G20 for can provide information about gold, non-dollar payments, and broader efforts to diminish the international role of the U.S. dollar.
Merkel, Macron, and “More Europe”
This year, Germany will use the G20 summit to announce its support for a European “destiny” (as described by Angela Merkel) independent of U.S. preferences or fear of Russia.
In effect, a reunified Germany has finally emerged from the long shadows of World War II and the Cold War. It will take its place on the world stage as an economic superpower with its own agenda. Of course, Merkel will not announce an explicitly German agenda, only a European agenda, but Germany is the undoubted leader of the new Europe.
On the sidelines of the G20 meeting, it will be important to watch the ever closer relationship between France and Germany, in particular the growing cordiality between the new French President Emmanuel Macron and longstanding German Chancellor Angela Merkel.
Of course, there’s nothing new about Franco-German cooperation in post-World War II Europe. France and Germany were among the original six members of the European Economic Community, or “Common Market,” created by the Treaty of Rome in 1957. The Common Market was the direct predecessor to today’s European Union.
However, the degree of cooperation between these two major economic powers has waxed and waned over the years.
From 2012 to 2016, the Socialist French President Hollande was at odds with Merkel on issues such as Greek bailouts and budget austerity. Macron is much more in sync with Merkel on these and other issues.
One of the persistent criticisms of the EU from U.S. and UK economists was that the EU had created a monetary union through the Eurozone and ECB, but had failed to create a fiscal union with a unified budget and bond issuing authority.
The criticism is valid, but the typical U.S. or UK remedy was to break up the Eurozone. That was never the intention of EU leaders. Instead their solution was “More Europe,” which means unified banking regulation, a central fiscal authority and a Eurozone parliament to debate fiscal and monetary issues with a view to unified solutions.
Macron and Merkel (known to wags as “Mackerel”) are in accord on the More Europe approach and are already taking steps to implement that vision. G20 will be their first joint appearance on a world stage.
President Trump has picked fights with Europe about their financial contributions to NATO and their liberal immigration policies in the face of terrorism.
President Putin is isolated from Europe because of continuing sanctions related to his actions in Ukraine.
Merkel recognizes that Europe is increasingly on its own and needs to purse a destiny independent of the U.S. and Russia. Macron has publicly voiced the same view.
Macron appears to be the strongest French leader since Charles de Gaulle. Merkel is undoubtedly the strongest German leader since Konrad Adenauer. Together, their like-mindedness will deepen European integration and make the Eurozone and the euro stronger than ever.
The G20 meeting will be an ideal opportunity to put the new Franco-German alliance on display. This will signal to the U.S., China and Russia that EU policies will reflect EU priorities and not be mere accommodations to the preferences of the U.S.
The likely beneficiary of this new European outlook will be China. With Russia still subject to sanctions, and the U.S. in a more confrontational mode, China will be met with open arms by the new Europe.
China is looking to diversify its reserve position away from dollars towards euros. China is inherently cautious and was reluctant to invest heavily in euros while the European sovereign debt crisis rolled on from 2010 to 2015.
Now, the European crisis has passed, the economies of the periphery states of Spain, Portugal, Greece, and Ireland have stabilized, and Franco-German cooperation is growing. China is ready to take the plunge with portfolio investment in European debt and direct foreign investment in ports, airports, highway systems and other critical infrastructure as well as large stakes in key European companies.
Even China’s “One Belt, One Road” initiative envisions continuous transportation links from Shanghai to Rotterdam, and will need European participation.
While Trump and Putin are meeting privately, expect to see “Mackerel” and China’s President Xi engaged in their own trilateral diplomacy. This will be another one of the G20 sub-plots to watch closely for clues about the best investment opportunities.
This will be one of the most important G20 meetings ever. It will facilitate a Trump-Putin pro-nationalist channel of communication, and will be a platform for the emergence of the new Europe under the joint leadership of Macron and Merkel.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Philippines - Washington is not Amused, Another CIA/ISIS Joint Destabilization Campaign Underway
June 26, 2017
William Engdahl
Journal NEO
http://21stcenturywire.com/2017/06/26/philippines-washington-is-not-amused-another-ciaisis-joint-destabilization-campaign-underway/
The only word I find for it is cloddish. I refer to the latest CIA-instigated attempt to initiate regime change against outspoken Philippine President Rodrigo Duterte. The so-called ISIS terror attack in the minerals-rich southern Philippines island of Mindanao, a predominately Muslim part of the mostly Christian nation of 100 million people, took place literally in the midst of President Duterte’s talks in Moscow with Russian President Vladimir Putin.
The Duterte Putin talks in turn followed Duterte’s attendance in Beijing on May 15 for the first New Silk Road or Belt Road Forum. America’s colonial asset since 1898 was clearly walking away from the Washington “reservation.”
The terrorist siege in Marawi City is blatantly a desperate Washington try to topple the very popular (80% popularity in polls) Duterte, who successfully won the Presidency last June over a US-backed Mar Roxas, a US-educated former Wall Street banker. Since taking office Duterte has made bold and quite courageous steps to steer the former US Colony towards a Eurasian alliance with China and Russia as his major supporters. In Beijing in October last year, Duterte met China’s Xi Jinping and signed numerous trade deals with China. Critically, taking an opposite policy to his pro-US predecessor Benigno Aquino III, Duterte agreed to resolve the South China Sea dispute between Philippines and China through peaceful diplomatic talks, and to as he put it, “seek a separation from the United States.”
Since then Duterte has sought closer ties with Russia as well, in a further effort to bring his nation out from under the yoke of a de facto US control. This does not sit well with the circles of the so-called Deep State in Washington –the CIA and their nefarious friends. Should the US lose the Philippines, it would pose a devastating strategic geopolitical loss to the US military containment strategy against China and Russia in the Pacific. Devastating.
The recent attacks and siege in Mindanao were nominally done by the terrorist Maute gang and Abu Sayyaf criminal terrorist organizations, both nominally tied to the US-created ISIS fake Islamist operation, a CIA terrorist project created with Saudi money going back to the CIA’s Osama Bin Laden Al Qaeda Mujahideen Operation Cyclone during the 1980’s against the Soviets in Afghanistan.
Duterte’s Eurasian Pivot
It comes as no surprise to anyone closely following the evolving dialogues between Duterte and the leaders of China and now, Russia that the CIA would try to destabilize Duterte at this critical time. They simply hide behind the black skirts of their psychopathic drug-running Maute and Abu Sayyaf, both now tied to the CIA and Mossad-created and Saudi-financed ISIS.
In Moscow, despite having to cut short his talks with Putin to fly back home and deal with the terrorist crisis in Mindanao, the Philippine leader and his Secretaries of Defense and Foreign Affairs managed to sign a number of critical agreements with Russia. These included 10 major agreements aimed at deepening bilateral defense, strategic and economic relations. The two countries signed an Agreement on Defense Cooperation, a legal framework for military-to-military exchanges, training, intelligence-sharing. The Philippines and Russia also signed an intelligence exchange agreement to bolster counter-terror cooperation. That does not please Washington at all.
A ‘Country Bumpkin’ Not
Western mainstream media has delighted in portraying the 71-year-old veteran politician Duterte as a crude country bumpkin, a lower-than-peasant creature who is only capable of vulgar statements, such as when shortly after his inauguration he called the US Ambassador to Manila a ”gay son of a bitch“ for criticizing Duterte’s war on drug lords and dealers plaguing the country. Whether Duterte was factually correct, he clearly won sympathy of millions of his countrymen for having the courage to stand up against the American power.
After closely watching Duterte and his choice of close advisers now for almost a year, I’ve come to the conclusion a country bumpkin Duterte is definitely not. Rather, he is a shrewd political actor who is determined to bring his country out of the colonial servitude status it has held since the first Spanish colonialization in 1565.
Duterte is the first Mindanaoan to hold the Presidential office. Ethnically he is of Visayan descent. This fact is not irrelevant. The Visayans in Mindanao and other Philippine islands led a war for independence against Spanish occupation in 1896.
The United States, posing as the supporter of the Visayan-led war of independence from Spain, betrayed the trust assured the Philippines, double-crossed them and signed a Treaty with Spain, the Treaty of Paris of 1898, under which Spain ceded Cuba and The Philippines to the United States. The USA refused to recognize the independence of their erstwhile ally, the Philippines, and took the country by military force, America’s first genuine imperial grab. The nascent First Philippine Republic then formally declared war against the United States in 1899, unsuccessfully. It was put under US military control. It took until 1946 before the country could be recognized as an independent sovereign state, at least in name.
That historical heritage of Duterte as a Visayan clearly is a living fact for Duterte. He graduated Philippines University and earned a degree in law in 1972. As a lawyer, he was prosecutor in Davao City in Mindanao and later Mayor, one of the longest-serving mayors of the Philippines with seven terms over 22 years. As Mayor, Duterte passed the city’s Women Development Code, the only such code in the country. Its aim is “to uphold the rights of women and the belief in their worth and dignity as human beings.” He pushed for the Magna Carta for Women in Davao, a comprehensive women’s human rights law that seeks to eliminate discrimination against women. As President he has made a domestic focus on poverty reduction.
There is clearly more to the man than lurid western media reports reveal. Now this very popular President is determined to make his country a sovereign nation able to choose with whom it allies and for what ends, and how its economy develops. This is why the CIA and its fake Jihadist networks are being jacked up to try to get rid of Rodrigo Duterte.
ISIS: Bloody Pawprints of CIA and Mossad
The networks of the US Deep State, primarily the CIA have chosen their favorite cover, the otherwise laughable deception of head-choppers calling itself the Islamic State or ISIS or ISIL or DAESH (CIA central casting seems to have trouble settling on a name).
In reality IS, or the groups that spring up conveniently in Syria, in Iraq, in Chechnya–wherever the CIA decides it needs a terror hit squad–are trained mercenary killers, trained variously by CIA or Pentagon Special Forces; by Pakistani ISI intelligence, at least formerly, or by Mossad, also known as Israeli Secret intelligence Service, or by MI-6. In the Philippines, the IS alleged affiliates, especially the Maute group that has laid siege to Marawi City, are little more than a criminal band that finances itself by terror, occasional beheading to exert ransom in a protection racket, recruiting child fighters. Recently the networks of the CIA have been pouring in their foreign mercenaries from Syria, Libya and other places to beef up Maute’s gang for the attack on Duterte’s rule, portraying it as a religious-based “liberation struggle.”
ISIS came out of the CIA’s Al Qaeda franchise called Al Qaeda in Iraq. In 2010 its name was changed to ISIS. Then as Israeli journalists pointed out the embarrassing fact that the English acronym for the Hebrew spelling of Mossad was ISIS (Israeli Secret Intelligence Services abruptly they decided to call their band of mercenaries with their black flags and US M16 assault rifles, IS for Islamic State. Conveniently in Syria they control the very territory where competing Qatari and Iran gas pipelines to the Mediterranean would run. Curiously, despite the fact they are active in the Golan Heights where Israel has its eye on stealing a huge amount of newly-discovered Syrian oil, they have never attacked Israel. The one time an accidental hit on an Israeli target took place, IS apologized…Do real head-choppers ever apologize?
When the fake CIA Sarin gas attack in Ghouta in 2013 failed to get a UN mandate for all-out war to depose Bashar al Assad–Obama’s infamous “red line”–the NATO and NATO-linked networks created the monster they now call IS in 2014.
Today the CIA uses IS as the cover to justify keeping US forces in Iraq after the government asked them to leave; a cover to bomb Syria in order to topple Assad, something Russian presence has made embarrassingly difficult since September, 2015. And they use it to recruit thousands of young psycho recruits from over the Muslim work, train them and send them back to places like Chechnya in Russia or Xinjiang in China, or Balochistan Province in Pakistan where the Chinese have built a new deep water port at Gwadar on the Arabian Sea near Iran, the heart of its $46 billion China–Pakistan Economic Corridor (CPEC), a strategic part of its One Belt, One Road Eurasian infrastructure project.
Now the West’s favorite terrorist mercenaries are being told to take down Duterte in the Philippines. They probably are too late and have badly underestimated their adversaries. But then with the deterioration over recent decades in the quality of American university education, the current generation of strategists at Langley likely missed the basic course in Sun Tzu’s the Art of War, especially the part that cautions generals who wish to be victorious to “know yourself and know your enemy,” something that Duterte seems to have thought about. How the IS destabilization try in the Philippines unfolds in coming weeks may well determine a major turning point towards creation of the emerging China-Russia-centered Eurasian Century.
<<<
>>> U.S. and China on Collision Course
By James Rickards
December 22, 2016
https://dailyreckoning.com/u-s-china-collision-course/
China’s capital and currency markets are on a collision course with the U.S., and by extension, the entire world. Economists are fond of saying if something can’t go on forever, it won’t. That truism applies to China.
Huge profits will be made by those who see this China train wreck coming and act in time.
The idea of economic stress in China sounds strange to most ears. China has come from the chaos of the Cultural Revolution to the world’s largest economy measured on a purchasing power parity basis in just 35 years. Even using nominal GDP, my preferred metric, it is the world’s second largest economy.
China’s economy grew over 12% per year in 2006-2008, and again in 2010. Even at the depths of the global financial crisis in 2009, annual Chinese growth was still over 6%. Chinese growth ran between 8% and 6.7% from 2011 to 2016. These growth rates are extraordinary compared to the 0% to 2% annual growth achieved by the major developed economies since 2007.
But, beneath that glossy surface all is not well. Much of China’s growth was completely artificial. It would not be counted if China were subject to more rigorous accounting standards.
China’s growth consisted of about 45% investment. That compares with about 30% investment in developed economies. Investment is fine if the investments have positive expected returns and are not financed with excessive debt. But, China fails both of those tests.
Much Chinese investment is completely wasted on “ghost cities” (major metropolitan complexes that are completely empty). As well as white elephant prestige projects such as the multi-billion dollar Nanjing South train station with 128 mostly unused escalators. Assuming half of Chinese investment is wasted, then GDP should be reduced 22.5%. This turns 6.7% growth into 5.2% growth at best.
The situation gets even worse when you consider the amount of debt being used to finance this wasted investment. China’s bank assets have grown from about $2.5 trillion to $40 trillion in the past 10 years, a 1,500% increase. And that’s just the tip of the iceberg.
Most Chinese debt is “off the books” in so-called wealth management products (something like the CDOs that sank Lehman Brothers in 2008), and derivatives. China has a huge “shadow banking” system of provincial guarantees, inter-company loans and offshore transfer pricing schemes. When all of this debt is taken into account, China looks like the greatest Ponzi scheme in history.
If the situation is so unstable and overleveraged, why hasn’t it collapsed already? The answer is that China is the greatest currency manipulator of all time. China used a 35% “maxi-devaluation” of the yuan in 1994 to make its currency globally competitive and boost its exports. Then it used central bank intervention from 1994 to 2006 to keep its currency at that depressed level.
This 12-year currency manipulation enabled China to build its factories, create jobs, pile-up dollar surpluses and prop up its banking system. Of course, much of this growth came at the expense of U.S. manufacturing jobs that were being lost by the millions over this same period. Only after 2007 under intense U.S. political pressure did China allow the yuan to appreciate to a more reasonable level given its factor inputs and terms of trade.
Now China is again resorting to its currency wars playbook. Since 2014, China has allowed the yuan to devalue from 6.0 to 1 dollar down to 6.9 to 1 dollar. Right now the yuan is poised to break through the significant benchmark of 7.0 to 1 dollar.
The difference between now and 1994 is that the U.S. is paying attention. In particular, President-elect Donald J. Trump has threatened to label China a “currency manipulator” on his first day in office on January 20, 2017.
This escalation of currency wars tension comes at a time when there is heightened risk of a real war with China. Soon after his election, Trump received a congratulatory phone call from the president of Taiwan. That might seem like a routine courtesy, but not from the Communist Chinese perspective.
Beijing views Taiwan as a “breakaway province” and not a separate country. U.S. politicians usually tiptoe around this issue, but not Trump. He not only chatted with Taiwan’s president, but he questioned the U.S. “One China” policy in a tweet.
Trump’s actions set off alarms in Beijing. The Communist leadership decided to send Trump a message by stealing one of our Navy underwater drones operating in Philippine waters, nowhere near the disputed South China Sea waters claimed by China.
The underwater drone was later returned, (after Trump tweeted that the Chinese should “keep it”), but the point was made. Geopolitical tensions between China and the U.S. are definitely on the rise.
With China heading for a credit crisis, and U.S.-China political relations strained, what does this portend for the Chinese yuan and a budding currency war?
The first indication is that a new Chinese maxi-devaluation may already have begun. Of course, the Chinese will not move 35% at one time as they did in 1994. They are moving in small steps.
But, even a 3% devaluation on August 10, 2015 was enough to send U.S. stock markets down 11% in the next three weeks.
A 10% maxi-devaluation today, less than one-third of what China did in 1994, would send U.S. stocks plunging 30% in days at the prospect of an all-out trade war with China.
How likely is a new maxi-devaluation? It could be coming in a matter of weeks.
The reason the yuan has been going down lately is not government manipulation but capital flight. Wealthy Chinese are trying to get their money out of China as fast as they can because they fear a new maxi-devaluation is coming.
China has burned through $1 trillion of foreign exchange reserves in the past two years to accommodate the demand for dollars from this capital flight. China’s holdings of U.S. Treasury debt have crashed from $1.265 trillion in November 2015 to $1.115 trillion as of October 2016 according to U.S. Treasury data.
China’s overall reserves have fallen from about $4 trillion in 2014 to $3 trillion today. Of that amount, about $1 trillion is illiquid and another $1 trillion will be needed to bailout China’s banks in the coming credit crisis. That only leaves $1 trillion as a precautionary reserve to defend the yuan. China’s capital flight continues at about $100 billion per month. This means China will be broke in one year.
If China wants to avoid going broke, it only has three choices according to Mundell’s “Impossible Trinity.” It can raise interest rates to defend the currency, slap on capital controls, or devalue the yuan.
Interest rate hikes will kill the economy and accelerate the credit crisis. Capital controls will choke off new foreign direct investment and force capital flight into illegal channels without actually stopping it. A maxi-devaluation is the simplest and easiest way out of the box for China.
Why hasn’t China devalued already? Part of the reason is to avoid being labeled a “currency manipulator” by the U.S. This could cause retaliation in the form of tariffs. That is why China has been pursuing a slow, steady devaluation instead of a maxi-devaluation.
But, now Trump says he will label China a currency manipulator anyway. Perhaps with one of his “first day” executive orders as soon as he is inaugurated. If Trump does that, and he well may, then China has no reason to delay its maxi-devaluation because the U.S. will have taken away China’s only motivation to play nice.
The resulting currency and trade war will make the 11% stock market correction of 2015 look like a picnic. All global markets will be affected. The U.S. will suffer, but China will suffer more.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Duterte aligns Philippines with China, says U.S. has lost
Reuters
http://www.msn.com/en-us/news/world/duterte-says-us-has-lost-aligns-philippines-with-china/ar-AAjaEvu?OCID=ansmsnnews11
BEIJING, Oct 20 (Reuters) - Philippine President Rodrigo Duterte announced his "separation" from the United States on Thursday, declaring he had realigned with China as the two agreed to resolve their South China Sea dispute through talks.
Duterte made his comments in Beijing, where he is visiting with at least 200 business people to pave the way for what he calls a new commercial alliance as relations with longtime ally Washington deteriorate.
"In this venue, your honors, in this venue, I announce my separation from the United States," Duterte told Chinese and Philippine business people, to applause, at a forum in the Great Hall of the People attended by Chinese Vice Premier Zhang Gaoli.
"Both in military, not maybe social, but economics also. America has lost."
Duterte's efforts to engage China, months after a tribunal in the Hague ruled that Beijing did not have historic rights to the South China Sea in a case brought by the previous administration in Manila, marks a reversal in foreign policy since the 71-year-old former mayor took office on June 30.
His trade secretary, Ramon Lopez, said $13.5 billion in deals would be signed during the China trip.
"I've realigned myself in your ideological flow and maybe I will also go to Russia to talk to (President Vladimir) Putin and tell him that there are three of us against the world - China, Philippines and Russia. It's the only way," Duterte told his Beijing audience.
Duterte's remarks will prompt fresh concern in the United States, where the Obama administration has seen Manila as an important ally in its "rebalance" of resources to Asia in the face of a rising China.
The administration agreed a deal with Duterte's predecessor granting U.S. forces rotational access to bases in the Philippines and further doubts will be raised about the future of this arrangement.
In Washington, the U.S. State Department said it was "baffled" by Duterte's comments and would seek an explanation when Daniel Russel, the top U.S. diplomat for East Asian and Pacific Affairs, visits Manila this weekend.
"We are going to be seeking an explanation of exactly what the president meant when he talked about separation from the U.S.," said State Department spokesman John Kirby. "It's not clear to us exactly what that means in all its ramifications."
Both the State Department and the White House portrayed Duterte's comments as being at odds with the close, long-standing alliance between the two countries. They said Washington would welcome closer ties between Beijing and Manila, however.
"The U.S.-Philippine alliance is built on a 70-year history, rich people to people ties and a long list of shared security concerns," White House spokesman Eric Schultz told reporters, noting that the administration has not received any request from Filipino officials to alter bilateral cooperation.
A few hours after Duterte's speech, his top economic policymakers released a statement saying that, while Asian economic integration was "long overdue," that did not mean the Philippines was turning its back on the West.
"We will maintain relations with the West but we desire stronger integration with our neighbors," said Finance Secretary Carlos Dominguez and Economic Planning Secretary Ernesto Pernia in a joint statement. "We share the culture and a better understanding with our region."
RED CARPET WELCOME
China has pulled out all the stops to welcome Duterte, including a marching band complete with baton-twirling band master at his official greeting ceremony outside the Great Hall of the People, which is not extended to most leaders.
President Xi Jinping, meeting Duterte earlier in the day, called the visit a "milestone" in ties.
Xi told Duterte that China and the Philippines were brothers and they could "appropriately handle disputes," though he did not mention the South China Sea in remarks made in front of reporters.
"I hope we can follow the wishes of the people and use this visit as an opportunity to push China-Philippines relations back on a friendly footing and fully improve things," Xi said.
Following their meeting, during which Duterte said relations with China had entered a new "springtime," Chinese Vice Foreign Minister Liu Zhenmin said the South China Sea issue was not the sum total of relations.
"The two sides agreed that they will do what they agreed five years ago, that is to pursue bilateral dialog and consultation in seeking a proper settlement of the South China Sea issue," Liu said.
China claims most of the energy-rich South China Sea through which about $5 trillion in ship-borne trade passes every year. Neighbors Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.
In 2012, China seized the disputed Scarborough Shoal and denied Philippine fishermen access to its fishing grounds.
Liu said the shoal was not mentioned and he did not answer a question about whether Philippine fishermen would be allowed there. He said both countries had agreed on coastguard and fisheries cooperation, but did not give details.
SEA DISPUTE TAKES 'BACK SEAT'
Duterte's tone towards Beijing is in stark contrast to the language he has used against the United States, after being infuriated by U.S. criticism of his bloody war on drugs.
He has called U.S. President Barack Obama a "son of a bitch" and told him to "go to hell," while alluding to severing ties with the old colonial power.
On Wednesday, to the cheers of hundreds of Filipinos in Beijing, Duterte said Philippine foreign policy was veering towards China.
"I will not go to America anymore. We will just be insulted there," Duterte said. "So time to say goodbye my friend."
The same day, about 1,000 anti-U.S. protesters gathered outside the U.S. Embassy in Manila calling for the removal of U.S. troops from the southern island of Mindanao.
Duterte's abrupt pivot from Washington to Beijing is unlikely to be universally popular at home, however. On Tuesday an opinion poll showed Filipinos still trust the United States far more than China.
Duterte on Wednesday said the South China Sea arbitration case would "take the back seat" during talks, and that he would wait for the Chinese to bring up the issue rather than doing so himself.
Xi said issues that could not be immediately be resolved should be set aside, according to the Chinese foreign ministry.
China has welcomed the Philippines approaches, even as Duterte has vowed not to surrender any sovereignty to Beijing, which views the South China Sea Hague ruling as null and void.
China has also expressed support for his drug war, which has raised concern in Western capitals about extrajudicial killing.
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>>> Russia and Turkey finalize plans for gas pipeline that will allow Moscow to bypass Ukraine
Olesya Astakhova and Nick Tattersall
Reuters
http://www.businessinsider.com/russia-and-turkey-finalize-plans-for-turkstream-gas-pipeline-2016-10
ISTANBUL (Reuters) - Turkey and Russia signed an agreement on Monday for the construction of a major undersea gas pipeline and vowed to seek common ground on the war in Syria, accelerating a normalization in ties nearly a year after Turkey shot down a Russian warplane.
Turkish President Tayyip Erdogan hosted Russia's Vladimir Putin at an Ottoman-era villa in Istanbul for talks which touched on energy deals, trade and tourism ties, defense and the conflict in Syria, where the two leaders back opposing sides.
"Today has been a full day with President Putin of discussing Russia-Turkish relations ... I have full confidence that the normalization of Turkish-Russian ties will continue at a fast pace," Erdogan told a joint news conference.
The warming relations between NATO member Turkey and Russia comes as both countries are dealing with troubled economies and strained ties with the West.
Putin said Moscow had decided to lift a ban on some food products from Turkey, imposed after the Turks shot down a Russian fighter jet near the Syrian border last November, and that both leaders had agreed to work toward the full-scale normalization of bilateral ties.
They signed a deal on the TurkStream undersea gas pipeline, which will allow Moscow to strengthen its position in the European gas market and cut energy supplies via Ukraine, the main route for Russian energy into Europe.
turkstream
Russia's drive to reroute gas to Europe around Ukraine, including by expanding the Nord Stream pipeline to Germany, has met with heated opposition in Brussels since Moscow annexed Ukraine's Crimea region in March 2014. Reuters
The plan for TurkStream emerged after Russia dropped plans to build the South Stream pipeline to Bulgaria due to opposition from the European Union, which is trying to reduce its dependence on Russian gas.
Erdogan also said plans for a Russian-built nuclear power plant in Turkey would be accelerated. Time lost on the Akkuyu project because of strained relations would be made up, he said.
In 2013, Russia's state nuclear corporation Rosatom won a $20 billion contract to build four reactors in what was to become Turkey's first nuclear plant, but construction was halted after the downing of the Russian jet.
Deep divisions on Syria
Putin received Erdogan in a Tsarist-era palace outside his home city of St Petersburg in August, when the two leaders, both powerful figures ill-disposed to dissent, announced plans for an acceleration in trade and energy ties.
But progress on Syria, over which they remain deeply divided, has been more problematic. Erdogan described the topic as "very sensitive", but said he had discussed Turkey's military operations in Syria with Putin on Monday.
Both men said they had agreed on the importance of delivering aid to the city of Aleppo, whose opposition-held eastern sector has been encircled by Russian-backed Syrian forces for all but a short period since July.
"We have a common position that everything must be done to deliver humanitarian aid to Aleppo. The only issue is ... ensuring the safety of aid delivery," Putin said, adding he had agreed with Erdogan to intensify military contacts.
Russia has backed Syrian President Bashar al-Assad with a year-long air campaign against the rebels fighting him. Turkey backs the rebels and wants to see Assad out of power.
On Saturday, Russia vetoed a French-drafted U.N. Security Council resolution that would have demanded an end to air strikes and military flights over Aleppo. A rival Russian draft text failed to get a minimum nine votes in favor.
Erdogan said there would be further talks with Russia over the conflict in Syria. But there was little sign of any concrete progress toward reconciling their differences.
"We discussed ... how we can cooperate on this matter, especially on humanitarian aid to Aleppo, what strategy can we implement so people in Aleppo can find peace," Erdogan said.
"We will come together with our foreign ministries and top military leaders and intelligence officers."
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>>> The Russian Resurgence
James Rickards
September 28, 2016
http://dailyreckoning.com/the-russian-resurgence/
The Russian Resurgence
U.S. relations with Russia have run hot and cold for the past ten years.
In March 2009, shortly after the Obama administration first came into office, Hillary Clinton met with Russian Foreign Minister Sergei Lavrov in Geneva. It was her first meeting with Lavrov since Clinton had become secretary of state.
Relations between Russia and the United States had been under stress because of Russia’s invasion of Georgia in 2008 during the George W. Bush administration. Obama and Clinton wanted to reset the relationship and move into a less adversarial posture.
As a goodwill gesture, Clinton asked her aides to create a large red reset button (similar to the “easy” buttons used in the old Staples advertising campaign) with the word “reset” in Russian. The button was put in a case and presented to Lavrov as a gift at the Geneva summit.
There was only one problem. State Department experts used the Russian word “??????????” on the button for the English “reset.” Lavrov looked at the gift and politely informed Secretary Clinton that ?????????? actually means, “overcharge.” Oops.
Clinton and Lavrov pushed the button anyway for the cameras. Russian-U.S. relations have been downhill ever since.
When Obama and Clinton came into office, the President of Russia was Dmitry Medvedev. At the time, Vladimir Putin was Prime Minister. Putin had been president from May 2000 to May 2008, but was subject to term limits. Medvedev and Putin simply switched roles with Medvedev becoming president and Putin becoming prime minister.
Technically this made Medvedev the chief executive and commander-in-chief in Russia. Yet, few doubted that Putin still controlled Russia from his slightly subordinate position.
This de facto relationship was confirmed in May 2012 when Putin again assumed the role of president. Medvedev stepped aside and assumed his former role as prime minister. It was a complicated game of musical chairs, which gave Putin the presidency until at least 2020.
Nevertheless, Obama and Clinton found Medvedev (who was president in 2009) to be more to their liking than Putin. Medvedev is more diplomatic and has a more global outlook than Putin, who is a staunch Russian nationalist. From 2009 to 2011, Russian – U.S. relations warmed slightly, notwithstanding the red button gaffe.
In 2012, Russian-U.S. relations were again strained due to U.S. plans to put an anti-missile shield in Poland. During the 2012 U.S. election cycle, Obama distanced himself further from Russia because he was appealing for ethnic votes from anti-Russian Poles, and other Eastern Europeans living in the U.S.
Still, Obama wanted to keep lines of communication open and looked forward to diplomatic deals with Russia. On March 26, 2012, just seven months before the U.S. election, Obama was caught on camera at a summit conference whispering to Medvedev that he would have “more flexibility” after the election. Medvedev promised to pass that message to Putin who was about to replace Medvedev as president.
Russian-U.S. relations had another thaw early in 2013 after Obama’s reelection, but it was short-lived. On the night of November 21, 2013, demonstrations broke out in Independence Square (Maidan Nezalezhosti) in Kiev against the Russian-backed government of Viktor Yanukovych. The protests peaked in February 2014. Yanukovych and his cronies fled the Ukraine.
Putin suspected that the Maidan protests were secretly funded by the British intelligence agency MI6, and the CIA. In order to secure Russian interests in Ukraine, Putin invaded Crimea, and began supporting anti-Kiev ethnic Russians in eastern Ukraine. In response, the U.S. and its NATO allies imposed harsh economic sanctions on Russia.
The sanctions included a ban on major Russian companies (such as Gazprom and Rosneft) refinancing their euro-denominated debt in western capital markets. Since Russian companies could not refinance their debts, they began to draw on central bank hard currency reserves to retire the debt. In turn, this began to deplete Russia’s reserves and force higher interest rates and a devaluation of the ruble.
The ruble sank like a stone beginning in March 2014. It fell from about 28 rubles to the dollar to 70 rubles to the dollar by early 2015 when relations were at their worst. (On an inverted RUB/USD scale, this fall would be from $0.035 to $0.014).
The ruble regained some strength to the 50:1 level ($0.020) when it became clear that the Russian economy, although weakened, was more resilient than U.S. financial warriors had expected.
Then Russia got whacked a second time with the collapse in oil prices. This collapse began in mid-2014 around the time of the Ukraine crisis. It reached its most intense phase in mid-2015 when oil fell below $40 per barrel on its way to $29.00 per barrel by early 2016.
Russia is the world’s third largest oil producer (after the U.S. and Saudi Arabia), and second largest oil exporter (after Saudi Arabia). The damage to the Russian fiscal situation was immediate and led to a recession in the world’s ninth largest economy.
This second blow to the Russian economy pushed the ruble to 81:1 ($.012) by January 2016. The Russian economy was in crisis.
Then a confluence of factors emerged to cause a rally in the ruble and a turnaround in the Russian economy. Here’s where they stand today:
•Despite recent volatility, oil prices are staging a rebound. From a low of $29.00 per barrel, they are over $44.00 per barrel today. This is a major lifeline for Russia.
•Iran is now open for business after concluding a nuclear deal with the U.S. Many U.S. and European companies are reluctant to re-enter the Iranian market because there is still ambiguity about the scope of sanctions relief. Russia has no such reluctance. They are moving ahead with deals in nuclear power, weapons, refineries, and other infrastructure.
•The cheap ruble actually helped Russian companies keep expenses under control, and convert dollar earnings into more rubles to pay local operating costs. This has bolstered the earnings of major Russian companies.
•The Central Bank of Russia has been aggressively buying gold with its dollar reserves. This was a brilliant strategy. They bought gold when the dollar was strong and gold prices were near seven-year lows. The dollar strengthened recently but should now enter another weakening phase. With the dollar weakening and gold holding firm above $1,300 Russian gold reserves (priced in dollars or SDRs) should get a boost.
•With a weaker dollar, other commodity prices should rise. Russia is a major exporter of nickel, palladium, iron and timber.
•U.S. allies, especially Germany and France, are growing tired of the sanctions regime, and are looking for opportunities to get back to business as usual with Russia.
In short, all of the factors that were working against Russia from 2014 to 2016 (cheap oil, strong dollar, sanctions, and low commodity prices) should now work in Russia’s favor.
From the perspective of a U.S. investor, the Russian stock market offers two ways to win big. The first is a fundamental rebound in the Russian economy. The second is a stronger ruble, which means that the dollar price of Russian stocks goes up even faster than the ruble price if the currency is unhedged.
The mainstream media would have you believe Russia is a basket case. It really isn’t, and smart investors see strong opportunity.
Regards,
Jim Rickards
for The Daily Reckoning
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>>> Syria Explained...In A Nutshell: (And we wonder why the rest of the world thinks the USA is evil)
It’s All About Pipelines In Syria——Assad’s Death Warrant
by Mike Whitney
September 17, 2016
“Secret cables and reports by the U.S., Saudi and Israeli intelligence agencies indicate that the moment Assad rejected the Qatari pipeline, military and intelligence planners quickly arrived at the consensus that fomenting a Sunni uprising in Syria to overthrow the uncooperative Bashar Assad was a feasible path to achieving the shared objective of completing the Qatar/Turkey gas link. In 2009, according to WikiLeaks, soon after Bashar Assad rejected the Qatar pipeline, the CIA began funding opposition groups in Syria.”
— Robert F. Kennedy Jr., Why the Arabs don’t want us in Syria, Politico
The conflict in Syria is not a war in the conventional sense of the word. It is a regime change operation, just like Libya and Iraq were regime change operations.
The main driver of the conflict is the country that’s toppled more than 50 sovereign governments since the end of World War 2. (See: Bill Blum here.) We’re talking about the United States of course.
Washington is the hands-down regime change champion, no one else even comes close. That being the case, one might assume that the American people would notice the pattern of intervention, see through the propaganda and assign blame accordingly. But that never seems to happen and it probably won’t happen here either. No matter how compelling the evidence may be, the brainwashed American people always believe their government is doing the right thing.
But the United States is not doing the right thing in Syria. Arming, training and funding Islamic extremists — that have killed half a million people, displaced 7 million more and turned the country into an uninhabitable wastelands –is not the right thing. It is the wrong thing, the immoral thing. And the US is involved in this conflict for all the wrong reasons, the foremost of which is gas. The US wants to install a puppet regime in Damascus so it can secure pipeline corridors in the East, oversee the transport of vital energy reserves from Qatar to the EU, and make sure that those reserves continue to be denominated in US Dollars that are recycled into US Treasuries and US financial assets. This is the basic recipe for maintaining US dominance in the Middle East and for extending America’s imperial grip on global power into the future.
The war in Syria did not begin when the government of Bashar al Assad cracked down on protestors in the spring of 2011. That version of events is obfuscating hogwash. The war began in 2009, when Assad rejected a Qatari plan to transport gas from Qatar to the EU via Syria. As Robert F Kennedy Jr. explains in his excellent article “Syria: Another pipeline War”:
“The $10 billion, 1,500km pipeline through Saudi Arabia, Jordan, Syria and Turkey….would have linked Qatar directly to European energy markets via distribution terminals in Turkey… The Qatar/Turkey pipeline would have given the Sunni Kingdoms of the Persian Gulf decisive domination of world natural gas markets and strengthen Qatar, America’s closest ally in the Arab world. ….
In 2009, Assad announced that he would refuse to sign the agreement to allow the pipeline to run through Syria “to protect the interests of our Russian ally….
Assad further enraged the Gulf’s Sunni monarchs by endorsing a Russian approved “Islamic pipeline” running from Iran’s side of the gas field through Syria and to the ports of Lebanon. The Islamic pipeline would make Shia Iran instead of Sunni Qatar, the principal supplier to the European energy market and dramatically increase Tehran’s influence in the Mid-East and the world…”
Naturally, the Saudis, Qataris, Turks and Americans were furious at Assad, but what could they do? How could they prevent him from choosing his own business partners and using his own sovereign territory to transport gas to market?
What they could do is what any good Mafia Don would do; break a few legs and steal whatever he wanted. In this particular situation, Washington and its scheming allies decided to launch a clandestine proxy-war against Damascus, kill or depose Assad, and make damn sure the western oil giants nabbed the future pipeline contracts and controlled the flow of energy to Europe. That was the plan at least. Here’s more from Kennedy:
“Secret cables and reports by the U.S., Saudi and Israeli intelligence agencies indicate that the moment Assad rejected the Qatari pipeline, military and intelligence planners quickly arrived at the consensus that fomenting a Sunni uprising in Syria to overthrow the uncooperative Bashar Assad was a feasible path to achieving the shared objective of completing the Qatar/Turkey gas link. In 2009, according to WikiLeaks, soon after Bashar Assad rejected the Qatar pipeline, the CIA began funding opposition groups in Syria.
Repeat: “the moment Assad rejected the Qatari pipeline”, he signed his own death warrant. That single act was the catalyst for the US aggression that transformed a bustling, five thousand-year old civilization into a desolate Falluja-like moonscape overflowing with homicidal fanatics that were recruited, groomed and deployed by the various allied intelligence agencies.
But what’s particularly interesting about this story is that the US attempted a nearly-identical plan 60 years earlier during the Eisenhower administration. Here’s another clip from the Kennedy piece:
“During the 1950's, President Eisenhower and the Dulles brothers … mounted a clandestine war against Arab Nationalism — which CIA Director Allan Dulles equated with communism — particularly when Arab self-rule threatened oil concessions. They pumped secret American military aid to tyrants in Saudi Arabia, Jordan, Iraq and Lebanon favoring puppets with conservative Jihadist ideologies which they regarded as a reliable antidote to Soviet Marxism….
The CIA began its active meddling in Syria in 1949 — barely a year after the agency’s creation…. Syria’s democratically elected president, Shukri-al-Kuwaiti, hesitated to approve the Trans Arabian Pipeline, an American project intended to connect the oil fields of Saudi Arabia to the ports of Lebanon via Syria. (so)… the CIA engineered a coup, replacing al-Kuwaiti with the CIA’s handpicked dictator, a convicted swindler named Husni al-Za’im. Al-Za’im barely had time to dissolve parliament and approve the American pipeline before his countrymen deposed him, 14 weeks into his regime…..
(CIA agent Rocky) Stone arrived in Damascus in April 1956 with $3 million in Syrian pounds to arm and incite Islamic militants and to bribe Syrian military officers and politicians to overthrow al-Kuwaiti’s democratically elected secularist regime….
But all that CIA money failed to corrupt the Syrian military officers. The soldiers reported the CIA’s bribery attempts to the Ba’athist regime. In response, the Syrian army invaded the American Embassy taking Stone prisoner. Following harsh interrogation, Stone made a televised confession to his roles in the Iranian coup and the CIA’s aborted attempt to overthrow Syria’s legitimate government….(Then) Syria purged all politicians sympathetic to the U.S. and executed them for treason.” (Politico)
See how history is repeating itself? It’s like the CIA was too lazy to even write a new script, they just dusted off the old one and hired new actors.
Fortunately, Assad –with the help of Iran, Hezbollah and the Russian Airforce– has fended off the effort to oust him and install a US-stooge. This should not be taken as a ringing endorsement of Assad as a leader, but of the principal that global security depends on basic protections of national sovereignty, and that the cornerstone of international law has to be a rejection of unprovoked aggression whether the hostilities are executed by one’s own military or by armed proxies that are used to achieve the same strategic objectives while invoking plausible deniability. The fact is, there is no difference between Bush’s invasion of Iraq and Obama’s invasion of Syria. The moral, ethical and legal issues are the same, the only difference is that Obama has been more successful in confusing the American people about what is really going on.
And what’s going on is regime change: “Assad must go”. That’s been the administration’s mantra from the get go. Obama and Co are trying to overthrow a democratically-elected secular regime that refuses to bow to Washington’s demands to provide access to pipeline corridors that will further strengthen US dominance in the region. That’s what’s really going on behind the ISIS distraction and the “Assad is a brutal dictator” distraction and the “war-weary civilians in Aleppo” distraction. Washington doesn’t care about any of those things. What Washington cares about is oil, power and money. How can anyone be confused about that by now? Kennedy summed it up like this:
“We must recognize the Syrian conflict is a war over control of resources indistinguishable from the myriad clandestine and undeclared oil wars we have been fighting in the Mid-East for 65 years. And only when we see this conflict as a proxy war over a pipeline do events become comprehensible.”
That says it all, don’t you think?
http://www.counterpunch.org/2016/09/15/assads-death-warrant/
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