As I was looking through various news web sites this morning, I saw a couple of articles about agreements among BRICS (Brazil, Russia. India, China, and South Africa.) Specifically, these were economics related articles that may presage some quite different times for the US in dealing with the rest of the worldwide economic environment.
The first article was a short report from Reuters India that I found through twitter with a headline “China, Brazil sign trade, currency deal ahead of BRICS summit” and the lede:
BRICS members China and Brazil agreed on Tuesday to trade in their own currencies the equivalent of up to $30 billion per year, moving to take almost half of their trade exchanges out of the U.S. dollar zone.
The second article was from Bloomberg with the headline “BRICS Nations Plan New Bank to Bypass World Bank, IMF” and the lede:
The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.
The leaders of the so-called BRICS nations — Brazil, Russia, India, China and South Africa — are set to approve the establishment of a new development bank during an annual summit that began today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.
Now, I am not an economist (quite thankfully,) I don’t play one on TV, and I did not stay at a Holiday Inn Express last night. But I think that both of these actions will have far-reaching ramifications for the US and Europe. Taken individually, I think each of these articles are very big deals for international trade and US and European economies. Together, I think they represent a warning shot across the bows of Western Economic Hegemony. I think these nations are going to be competing with the World Bank and IMF very shortly and may well offer an alternative to the forced austerity. I think the situation on Cyprus could play out much differently if the Cypriots had an alternative to the Euro Finance Ministers requirements for a bailout.
We should all stay tuned to further developments as we continue to live the ancient (maybe not) Chinese curse, “May you live in interesting times.”
And because I can: