And Now, Some More From One Of Our BRICS Friends …….

The notion was the the BRICS would rival and supplant the traditional Western global economy and the US Dollar as the default currency of the world. 

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For a brief moment in time, it did look as if it would be possible.  But, it’s probably not, now.  Russia has become ensnared in a recession, China’s market and currency recently took huge downturns, India’s accelerated growth seems to have slowed, and now, there this from Brazil.

Brazil financial markets fall after debt rating downgrade

SAO PAULO (AP) — Brazil’s financial markets has fallen in the aftermath of credit agency Standard & Poor’s downgrading the country’s sovereign debt to “junk” status.

The Brazilian real fell 2 percent to 3.88 per U.S. dollar by early Thursday afternoon and it would have dropped even further if the Central Bank hadn’t intervened by selling some $1.5 billion on the spot market.

The benchmark Bovespa stock index was down 1.24 percent. ……

Oh, yeh, they’re in a recession, as well.

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But, that’s not where the bad news ends for Brazil.  They’re getting a double whammy!

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source for graphs is Trading Economics

Given the way they calculate inflation, this is no small thing!  They’re in huge trouble!

I don’t see this BRICS thing as particularly helpful to any of the nations which belong to it.  And, I don’t see it replacing the US Dollar anytime soon. 

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9 Responses to And Now, Some More From One Of Our BRICS Friends …….

  1. Latitude says:

    Miami is saturated with bailing Brazilians right now…
    They propped up our real estate market though.

  2. cdquarles says:

    It shouldn’t need to be said, but apparently it does. If the USD gets replaced as the global reserve currency for trade, whatever that currency is will have to be supplied by someone to the world. As long as the USD is that currency, the US *must* export USD (thus the trade deficit or gold outflow or both). Trade demand requires it. Personally, I’d rather we all go back to gold (though I’d not be upset with tungsten, but tungsten is much more chemically reactive than gold; or remain on a hydrocarbon backed currency … try really thinking about that one from an Austrian perspective).

    On the other hand, if folk think they can be autarkic, they’ll find themselves impoverished, sooner or later. Autarky is a dead end. Funny, you’d think the Chinese would know better (and they probably do), but some days I wonder.

    • DirkH says:

      Tungsten has a problem, it’s as heavy as Gold but a Tungsten coin wouldn’t get you very far.

      “As long as the USD is that currency, the US *must* export USD (thus the trade deficit or gold outflow or both).”

      USD has no Gold backing. Gold outflow would not be necessary. The opposite: USA could export Dollars and import Gold – instead of iPads.

      • cdquarles says:

        Dirk, the USD does still have gold backing and a gold weight and purity definition. That dollar does not circulate.

        What I was discussing was also partly historical. When the USD became the reserve currency, gold immediately began flowing out of the Treasury. At first that outflow was small, for the perceived Federal inflation was small. As that increased, the outflow increased. Eventually, the Federal government scrapped the Bretton Woods arrangement that was used to create that USD reserve status. The outflow stopped with that. Today’s USD IMF SDR is 25% gold, 75% petroleum. Nevertheless, USDs still had to be exported.

        The US is also a gold producer, still.

        • DirkH says:

          “Dirk, the USD does still have gold backing and a gold weight and purity definition. That dollar does not circulate. ”

          You mean the Gold standard is still “paused”?

        • cdquarles says:

          Yes, and if I am not mistaken, the Bank of International Settlements sets the required reserve amounts and asset types. I might be wrong about that, though.

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