BRIC group plans own revolutionBy W Joseph Stroupe
Part 1: Awakening ahead on bond delusion Russia announced on June 10 that it will purchase US$10 billion of the new SDR-denominated International Monetary Fund bonds. It also announced that it will further diversify its $140 billion of US dollar holdings. Brazil will also buy $10 billion worth of the new bonds, and China will buy $50 billion of the new bonds. India will likely announce its own purchases very soon.
These are merely the opening moves by the BRIC (Brazil, Russia, India, China) countries, leaders of the emerging market economies of the world. Their summit on Tuesday in the central Russian city of Yekaterinburg, scene of the July 1918 execution of Tsar Nicholas II and his family, may prove to be a milestone in efforts to engineer the architecture of a new global order spanning financial, economic, trade, and monetary matters.
The new IMF bonds are denominated in the synthetic Special Drawing Rights (SDR) currency, which represents a basket of currencies. In effect, the purchaser enjoys enhanced insulation from currency risks associated with the US dollar. In addition, the purchaser spends US dollars to buy the new bonds, thus furthering his goal of divesting of dollars. There are also political motivations for the announced purchases - no doubt the BRIC countries are seeking to drive home to global investors the fact that the emerging economies are fundamentally healthy, able to provide funding in the midst of this terrible global crisis for aid to economies in the emerging markets that are struggling, and thus they (BRIC) are an attractive place for continued investment flows.
Also, BRIC members are making a potent bid for a much greater voice in international organizations and institutions such as the IMF, the World Bank and so forth. The old status quo where the US and Europe dominated the global order and its key institutions is rapidly changing as the emerging economies take up key positions in the global economy, international finance and trade.
BRIC members are ensuring that their leverage against the US and Europe is enhanced within such institutions just when deliberations over how to transform the present order begin to heat up. This is a pragmatic and forward-looking move on their part. As the primary global lenders, they see a real opportunity to leverage their strengths against US and European weaknesses to achieve key concessions that have to do with moving the present global order along the path of transformation to something new. .........(more)
The complete piece is at:
http://www.atimes.com/atimes/Global_Economy/KF17Dj03.html
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