How The BRICs (Thanks To Russia) Just Kicked The G-7 Out Of The G-20

Tyler Durden's picture

By Paul Mylchreest of Monument Securities

A critical juncture

Over the course of the last century, the US Congress has been blamed for much that has gone wrong in international relations. The unwillingness of Congressional leaders in 1919 to support US participation in the League of Nations doomed from the outset that quixotic attempt to put global relations on a rational basis. Renewed world war was the eventual outcome. Then in 1930, Congressional passage of the Tariff Act, widely known as Smoot-Hawley, marked the break-out of beggar-thy-neighbour trade practices that no less an authority on that period than Mr Bernanke has maintained contributed to the length and depth of the global depression. It is no matter that some historians argue that Smoot-Hawley merely built on the Fordney-McCumber Tariff Act of 1922; that had been Congress’s doing as well. More recently, the US Congress has resisted presidential demands for ‘fast-track’ authority to tie up international trade deals. The lack of faith of the USA’s counterparties in Washington’s ability to ratify trade agreements was an important factor in the collapse of the Doha Round, which has put a brake on the development of the World Trade Organisation. Now, the US Congress is acting in a way which could have consequences at least as serious as those that followed these past examples of obduracy.

This week the US Congress is considering a bill to provide financial aid to Ukraine. President Obama had appended clauses to this bill to ratify the IMF’s 2010 decision to increase the quotas, and hence voting power, of emerging countries, chiefly at the expense of European members, and to boost the IMF’s capacity to lend. The USA enjoys a blocking minority in IMF decision-making under current quotas, and would continue to do so after the changes; it is essential, therefore, that US ratification be secured if the reform is to go ahead. However, many members of the US Congress, especially on the Republican side, are suspicious of the IMF and its activities. Specifically, that element of the reform package which would convert countries’ temporary lending to the IMF during the global financial crisis into a permanent increase in IMF resources has roused fierce opposition. For more than three years, congressional leaders have thought better of exacerbating party tensions by bringing forward proposals to approve the IMF changes. However, the G20 meeting in February ‘deeply regretted’ that the reform was still held up and urged the USA to ratify ‘before our next meeting in April’. Mr Siluanov, Russia’s finance minister, then suggested that the IMF should move ahead with the reforms without US approval, a suggestion sympathetically received by other BRICS leaders but which would threaten to split the IMF. Mr Obama’s concern to avoid this outcome is understandable and he has argued that, since the IMF will play the lead role in supporting Ukraine’s economy, approval of the new quotas is relevant to the Ukraine legislation. All the same, Mr Reid, the Democrat Majority Leader in the Senate, yesterday stripped the IMF provisions from the text, taking the view that the bill would be given a rough ride through the Senate and no chance of passage through the House of Representatives if it retained them. It now seems unlikely that the USA will complete (or, indeed, begin) legislative action on the IMF reform by the 10 April deadline the BRICS have set. The odds are moving in favour of a showdown at the G20 finance ministers’ and central bank governors’ meeting due in Washington on that date.

International discord over Ukraine does not bode well for the settlement of differences over the IMF’s future. Though the G7 is excluding Russia from its number, in retaliation for its action in Crimea, this does not amount to isolating Russia. There has been no suggestion that Russia be excluded from the G20. The USA and its allies have suspected that several other G20 members would not stand for it. This suspicion was confirmed yesterday when the BRICS foreign ministers, assembled at the international conference in The Hague, issued a statement condemning ‘the escalation of hostile language, sanctions and counter-sanctions’. They affirmed that the custodianship of the G20 belongs to all member-states equally and no one member-state can unilaterally determine its nature and character. In short, their statement read like a manifesto for a pluralist world in which no one nation, bloc or set of values would predominate.

Meanwhile, Mr Obama has also been active at The Hague fostering warmer relations between South Korea and Japan. His aim seems to be to contain China’s expansionism in the Asian region. But US worries in this regard may be exaggerated to judge by a recent article in the PLA Daily, the official media outlet of China’s military. This urged China’s leaders to study the history of the 1894-95 war with Japan, which China lost decisively despite being at least as well equipped. The concern in Beijing seems to be that problems of corruption and nepotism in the PLA today are no less serious than they were in China’s forces in 1894. That may well deter China from taking military action. However, to the extent that China lacks confidence to use military force, it may be all the more intent on wielding financial weapons in pursuing its geopolitical aims. Beijing  leaders have long dreamt of displacing, or at least dethroning, the US dollar from its reserve currency role. US dominance of the IMF is one of several effective bars to the achievement of such a goal. The kind of action Russia is advocating, the BRICS wresting control of the IMF in despite of US veto power, might have some appeal. That would mark the end of the unified global monetary system that has developed since the IMF was founded in 1945, to be replaced by a bloc of fiat currencies in the developed countries and a system in the emerging sector where currencies were linked to drawing rights in some new international fund, possibly with some material backing. It seems unlikely that convertibility between these monetary systems could be maintained for long. Consequently, the 10 April meeting is shaping up as a potentially critical juncture in world economic history.

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Peter Pan's picture

I think those BRIC members have just hit the G-Spot.

ApollyonDestroy's picture

Speaking of G-Spots, how are you Peter?

Richard Chesler's picture

Looks like Obozo picked the wrong week to stop smoking choom.

Keyser's picture

And the plot thickens. Won't be long before the BRICS abandon the green back for good. 


Stoploss's picture

Can they make the print smaller??   I can still read it.

clooney_art's picture

World's creditor countries kicking out world's poor countries out !!!!!!! yey !

jeff montanye's picture

more like world's creditor countries kicking out world's rich but soon to be poorer countries.

trying to get ukraine into nato, with subsequent missile sites established, is turning out to be one of the worst ideas generated by a series of administrations getting really famous for bad ideas.


Raynja's picture

I guess you didn't watch him talking about regional powers and nuclear bombs in manhattan yesterday, cause he was high as a mofo

Canadian Dirtlump's picture

Regional power acting out of weakness > doing lines off a toilet paper dispenser that would choke a billygoat.



Hughing's picture

All acording to plan.

screw face's picture

that's Briiics...bitchez

alfred b.'s picture


   Would this be the time to "applaud",


Omen IV's picture

this is not being reported hardly anywhere but is indicative of a complete breakdown in credibility of obama and the usa - he is finished - the lamest lame duck in history:

Lopsided vote at the Organization of American States (OAS) on Venezuela on March 7. Twenty-nine of 32 countries not only rejected Washington's attempt to get the OAS to intervene in Venezuela, but to add insult to injury, passed a resolution expressing their solidarity with the government of President Nicolás Maduro. It is hard to imagine a more resounding diplomatic defeat in a body where the U.S. government still has quite a disproportionate influence

RaiZH's picture

Is learning to speak Russian any easier than Mandarin? 

And anyone got any really good resources they could recommend to begin learning either language...


ApollyonDestroy's picture

Yes, move there. You'll know the language in a year, maybe less, if you are smart.

tom a taxpayer's picture

Moving to Brighton Beach in Brooklyn might learn him Russian language in half the time and half the cost.

With the time saved he could take the subway every other day to Manhattan's Chinatown, wash dishes in restaurant, and learn Chinese.

EatYourCornTakeyourPill's picture

HAHAHAHAH! Classic +10k up votes.

I know Russian and I wish I knew Spanish instead. A lot of you guys probably can't tell your dicks from your balls.

IridiumRebel's picture

La cunta que tu madre jueve como limpiador de alfombra.

JuliaS's picture

If Snowden can do it...

... wait, I think I hear someone knocking at my door. Back in a sec...

Boomberg's picture

Rosetta Stone can get you going with conversational Russian fast, but it's pricey. 

grok's picture

Forget Rosetta Stone. Duolingo is the new hotness and it's free. It's amazing really.

gallistic's picture

I cannot vouch for its quality, and I cannot tell you if it is "good", but RT has a free section on learning Russian which is geared towards complete neophytes. It might be worth a look.

Good luck in your learning quest.

LetThemEatRand's picture

Remind me what good has come for the American worker from the free trade agreements with these countries?   

Keyser's picture

Well, if you're lucky you might get a reach-around. 


Raynja's picture

if you own the company or work for the company?

LetThemEatRand's picture

Exactly right.  These agreements made a few people very wealthy at the expense of the U.S. middle class.  

jeff montanye's picture

in all fairness the u.s. had won ww2 with its industrial capacity and workforce largely intact; china, russia, eastern europe and india were out of the market system; and financial information was obscure and slow moving.  as the effects of these factors changed, the relative position of the u.s. worker was going to change too.  

however since growing inequality of income and wealth was already a critical flaw of capitalism, it didn't need accentuation through corrupt government.

daveO's picture

Bankers greed, not Capitalism. Huge trade imbalances are impossible with a Gold Standard or Free Market interest rates. These were abolished. Nixon's gold decision started the flood of cheap Asian imports from Japan and Taiwan. China's has been funded by 26 years of Interest Rate Suppression. 

daveO's picture

And, at the expense of Dollar holders everywhere. And, the snowball (of bad debt, caused by a lack of industrial base) is just starting to roll. 

Rakshas's picture

I remember the begining negotiations of NAFTA between Canada and the US then later Mexico, the unions bosses and Politicians {I guess that's somewhat redundant} were asking Whats in it for me the corporations were busy repositioning production facilities and the sheeple were oblivious.  After the better part of 3 decades of this bullshit the question that should be asked whenever some Political asswipe starts selling another strategic trade partnership is How are you going to fuck me out of what little I have left......... and where is my daughter....


Lore's picture

Agreed.  NAFTA is for scum.

Soul Glow's picture

The G-7 are morons.  We are witnessing some of the most moronic behavior by world leaders - can we call them leaders - ever.  


[M]any members of the US Congress, especially on the Republican side, are suspicious of the IMF and its activities.

Ha!  Yeah right.  The GOP loves "free trade" and armed banks like the IMF.

chinoslims's picture

Great, we are headed to entangling alliances again.  Thanks, United States . . . err . . . i mean . . . G-7.

Rakshas's picture

Whoa, whoa, whoa...... ain't nobody kickin' nobody out of nuthin' ........ slaves don't whip masters ...... they ..... er hold on there's someone at the door....







Dickweed Wang's picture

. . . . which has put a brake on the development of the World Trade Organisation.

And that's supposed to be a bad thing?? The WTA, NAFTA and GAT are all main reasons why the US has a shell of it's manufacturing base it had 20 years ago and why there are no good middle class jobs left anymore.  Good riddance to the IMF also . . . . may it rot in hell.

john_connor's picture

This guy implies that fast tracking international trade deals is a good thing. Just another statist, one world government douchebag.

holmes's picture

Fuck the IMF and Fuck Ukraine. They made their own bed by thowing out their elected president. Now sleep in it. Not a dime to either of them. Let that prick Soros take care of them.

Ifigenia's picture

and Vitoria Nulland with her cookies to feed the hungry ukranians.

LetThemEatRand's picture

Ukraine was really banking on its Buffet bracket.  

Ifigenia's picture

"Russia said it expects to participate in the Group of 20 meeting in Australia in November, despite warnings that it may not be welcome. Australian Foreign Minister Julie Bishop raised the possibility that Putin might be barred from the summit. Australia has joined other Western nations in placing economic sanctions on dozens of Russian leaders." in Washington Post By and ,

Published: March 25


So, it seems the Ukraine`s crisis is just a plot to camuflage the big powers battle inside the IMF. The Vitoria Nullen free cookies are begining to adquire new and big meanings.

Rising Sun's picture

Barry must be shitting BRICs

tony bonn's picture

the g20 displayed the statesmanship which is beyond the grasp of the infantile obama and frat boy coterie totalitarian juveniles

Ifigenia's picture

G-20 is the biggest boys club of the World, just a few example: Saudi Dinosaur, Sleak David Camillion, Frau Hitler, Mao Xi, Atomic Abe, Hollande the Eunuch, Kremlin Batman, Favela Dilma, Kamasutra Libido Singh, Zero-Sum Zuma and the last but not the least caddie boy uncle General Bambang.

So, is easy to conclude a caddie boy has no place there, not even by leading from behind

diluted intelligence's picture

easy on Barry - he is only trained for G18 ( 18 Greens)

NoWayJose's picture

How much longer until the G-20 become the G-19 -- without the US!

Fractal Parasite's picture

... and the G-4½ becomes the g1.

besnook's picture

the usa is a monty python movie. among many, two apprpriate lines for the current situation are, "i fart in your general direction ." and "i have not yet begun to fight."