Brics

Brics is a grouping of the world economies of Brazil, Russia, India, China, and South Africa. It comprises about 27% of the world’s mass and 42% of the global population. This organization meets annually at formal summits and coordinates multilateral policies in the face of intensifying geopolitical and economic competition with the West. Brics has recently invited six additional countries (Saudi Arabia, Egypt, Argentina, Iran, and Ethiopia) to join the bloc in an effort to grow its global importance. About 40 nations in all have expressed interest in joining the Brics. Members have access to the New Development Bank, a multilateral development bank established by the Brics countries in 2014 as an alternative to traditional Western finance institutions like the World Bank and the International Monetary Fund.

Brics leaders have said they want to use their national currencies instead of the dollar for trade and some propose creating a Brics currency of its own. U.S. dollars are used in most world trade today (90 % of global forex transactions). As a result, almost all central banks worldwide hold dollars. If Brics was able to create its own currency, and the world use the dollar much less for trading, than those dollars would likely come home creating huge inflation and destroying wealth. The U.S. dollar has nothing to back it up since coming off of the gold standard in 1973. There is currently about a 33 to 1 overhang, of issued dollars verses America’s gold reserves. The dollar is therefore not backed by any hard currency or other assets. There is no way for someone to turn in their dollars for a set amount of gold or other hard assets which would prevent inflation of the dollar.

If dollars flood into the U.S. and it continues to service its 32 trillion plus debt with printed money the only possibility is for increased wealth destroying inflation as outlined in previous articles in this publication. During this current period of rising interest rates, the U.S. Treasury has inexplicably not primarily financed the debt with long-term instruments. Therefore, a large amount of the 32 trillion debt is coming due within the next few years. Currently, the U.S. is paying an average of 2.84 percent on its debt, a modestly low rate. The new debt will likely have to be refinanced at close to twice that percent, spiraling our debt even more out of control and with more dollars being printed to pay it. This is effectively a regressive tax on all, hurting the poor the most. It is little wonder that Fitch recently downgraded the U.S. government’s credit rating.

There are dark times ahead for the U.S. unless we get our financial house in order and quit the insane overspending – the responsibility of both parties. As the U.S. financially weakens this will allow our enemies to take advantage of the situation to try to strengthen their influence over developing and other nations and challenge our geopolitical and economic dominance and even our prosperous way of life at home.