The BRICs Are Morphing Into An Anti-Dollar Alliance

Tyler Durden's picture

While numerous massively indebted administrations around the world hope to divert the attention of what's left of their struggling middle class away from its daily impoverished existence and distract it with flashing lights and glitzy animations showing another all time market high on a daily basis, a significantly more important shift taking place behind the scenes is appreciated by very few: the ongoing de-dollarization of the world. For the latest example of how increasingly more countries are setting the stage for the final currency war, we go again to Russia where VOR's  Valentin Mândr??escu explains that slowly but surely the BRICS - that proud Goldman acronym which was conceived to perpetuate the great American way of life by releasing trillions in US-denominated debt in heretofore untapped markets - are morphing into an anti-dollar alliance.

BRICS is morphing into an anti-dollar alliance, From VOR

Before the crucial visit to Beijing next week, the governor of the Russian Central Bank, Elvira Nabiullina met Vladimir Putin to report on the progress of the upcoming ruble-yuan swap deal with the People's Bank of China and Kremlin used the meeting to let the world know about the technical details of its international anti-dollar alliance.

On June 10th, Sergey Glaziev, Putin's economy advisor published an article outlining the need to establish an international alliance of countries willing to get rid of the dollar in international trade and refrain from using dollars in their currency reserves. The ultimate goal would be to break the Washington's money printing machine that is feeding its military-industrial complex and giving the US ample possibilities to spread chaos across the globe, fueling the civil wars in Libya, Iraq, Syria and Ukraine. Glaziev's critics believe that such an alliance would be difficult to establish and that creating a non-dollar-based global financial system would be extremely challenging from a technical point of view. However, in her discussion with Vladimir Putin, the head of the Russian central bank unveiled an elegant technical solution for this problem and left a clear hint regarding the members of the anti-dollar alliance that is being created by the efforts of Moscow and Beijing:

“We've done a lot of work on the ruble-yuan swap deal in order to facilitate trade financing. I have a meeting next week in Beijing”, she said casually and then dropped the bomb: “We are discussing with China and our BRICS parters the establishment of a system of multilateral swaps that will allow to transfer resources to one or another country, if needed. A part of the currency reserves can be directed to [the new system].” (Prime news agency)

It seems that Kremlin chose the all-in-one approach for establishing its anti-dollar alliance. Currency swaps between the BRICS central banks will facilitate trade financing while completely bypassing the dollar. At the same time, the new system will also act as a de facto replacement of the IMF, because it will allow the members of the alliance to direct resources to finance the weaker countries. As an important bonus, derived from this “quasi-IMF” system, the BRICS will use a part (most likely the “dollar part”) of their currency reserves to support it, thus drastically reducing the amount of dollar-based instruments bought by some of the biggest foreign creditors of the US.

Skeptics will surely claim that a BRICS-based anti-dollar alliance will not manage to deprive the dollar of its global reserve currency status. Instead of arguing against this line of thought, it is easier to point out that Washington is doing its best to enlarge the ranks of the enemies of the dollar. Asked by the Russia 24 channel to comment on Nabiullina statements, Sergey Kostin, the president of the state-owned VTB bank and one of the staunchest supporters of anti-dollar policies, offered an interesting perspective on the situation in Europe:

“I think the work on ruble-yuan swap line will finalized in the nearest future and the way for ruble-yuan settlement will be open. Moreover, we are not the only ones with such initiatives. We know about the statements made by Mr. Noyer, chairman of the Bank of France. As a retaliation for what Americans have done to BNP Paribas, he opined that the trade with China must be done in yuan or euro.”

If the current trend continues, soon the dollar will be abandoned by most of the significant global economies and it will be kicked out of the global trade finance. Washington's bullying will make even former American allies choose the anti-dollar alliance instead of the existing dollar-based monetary system. The point of no return for the dollar may be much closer than it is generally thought. In fact, the greenback may have already past its point of no return on its way to irrelevance.

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groundedkiwi's picture

its like insurance we pay our taxes and think we are covered. Govt is no different than an insurance compamy or the banks. TBTF and TBTJ.

grekko's picture

Why are so many asleep?  Because, in my terminology, "Operation Dreamland" was put into effect by TPTB a long time ago through the MSM and Edward Bernays.  ZH'ers are mostly immune to this deep sleep as well as Constitutionalists, Libertarians, and all those that Ron Paul awakened while running for Pres.  I think 10-12% of the people are awake, maybe a few percent more who are unwilling to admit it so as not to be judged tin-foil hat wearing crazies.  That still leaves an 85% sleep rate.  That is the bad news.  The good news is that in 1776, only about 10% of the people wanted to rebel against England, and look what happened there.  So, there is a hope, small that it may be.

tumblemore's picture

"Why are so few people wide and awake in this world?"

 

The first thing the banking mafia did was buy the media.

 


TK69's picture

The blame is the population who want their government benefits which cannot be paid.  They want others to pay their bills so the bankers inflate and the government taxes all in order to pay for those government programs.  There is no free lunch as inflation only means that the poor must pay.  ANd btw, Canada too has a housing (financial) criuses.  They too are on the same page as the rest of the world.  They too are going bankrupt.

joego1's picture

No doubt this is all in motion but like a huge ship it will take some time for it to turn, years, maybe decades.

Dublinmick's picture

what ever transpires will be from outside. Americans have no idea what is going on. 4 hundred pounders leave stores every day with Aspartame coke. We are finished, Molech won

Yen Cross's picture

 I  just shorted CABLE Biotchez!

TheObsoleteMan's picture

First, let me say I am as fed up {no pun intended} as the next person with US aggression techniques. The world  reserve currency status enables the crooks and gangsters to bring their plans into fruition. But listen here all of you cheerleaders for the demise of the US$: What is your wages, salaries, pensions, IRAs, and other investments denominated in? Your home and property? Even if you are "stacking" AU & AG, a minimum of 75% of your wealth is in US dollars. No way getting around it. Let that sink in a bit. Are you ready to watch 75%+ of your life's efforts take a 40%+ haircut? I long for a better America {which frankly, I can't imagine under the present circumstances}, but I dread what is coming. The austerity that has hit the PIGS nations will make the coming US austerity look like a cake walk. I don't look forward to it.

Lin S's picture

Oh, wow... so scary.  

Please give me a minute while I try my best to give a fuck.

TheObsoleteMan's picture

Mom's basement must be safe and warm......

Lin S's picture

You're the bitch who knows...

smacker's picture

I think the inevitable US domestic inflaton that follows a gradual demise of the USD as global reserve currency is fairly well undestood by ZH-ers, if not by the wider population.

Personally, I do not see this demise as happening overnight. When reality finally faces TPTB & IMF, it will be co-operatively managed to happen over a longish period. BRICS and others will buy that to avoid a major collapse in global markets.

lakecity55's picture

At least one BRIC is suffering inflation....seems there is plenty to go around

shinobi-7's picture

The slow part of the process you are describing is already happening. When 100,000 people lose their jobs, it is just 0.1% lower income for the country but usually over 50% for the people concerned. The faster part which will be sudden will imply a 30 to 50% income and asset prices drop for all of us. (Certainly more in Japan than in Canada although it is very hard to predict.) This will not be a process but a sudden loss of confidence in the market. This is why the Central banks of the world are all in offering guaranties for both assets and their shadows. This will work until it doesn't. A disruption of the gas flow in Ukraine or Oil in the Gulf could precipitate a crisis. Less well known but as likely, so would a disruption of rare earth availability in China or of the global chain. The world economy is flexible against one type of disruption but not against the cummulated effects of several although this is exactly what we are facing right now. All these monetary discussions are but foreplay and preparations for "after". For what I see in the US, Japan and China, we are already entering a new recession. As in 2008, the market will only realize it around the end of the Summer... and will become "unstable" in the fall.

andrewp111's picture

The timetable can be accelerated by deliberate action of political actors like Russia and China. Also, it is clear that the Caliphate will take over all the oil in the Middle East and become a universal Islamic Empire. Whan that happens, the petrodollar will be dead. Oil will go to $300-500/barrel.

smacker's picture

Yes it can be accelerated, but is a global economic slide what BRICS really want?? I doubt it. They have their own economies to think about.

It's in their best interests to "manage" the USD decline to make the transition as steady as possible and avoid unwanted consequences. These could be made worse by USG action in a fit of pique or last-ditch-stand as it were. And the IMF will get involved.

The unknowns are in the Middle East who are well accustomed to chaos and won't be put off by creating more of it.

Ghordius's picture

agree on your doubt. note that the IMF's members want to increase the shareholdership, and the only one that is against it is the US Congress. a pity there is little serious reporting on this

smacker's picture

IIRC the US currently has 16% voting power on the IMF based upon contributions. If the USG handed out more voting power to other countries, it would have to reduce its own. That means it would lose overall control.

That is why the BRICS are setting up their own parallel "IMF".

We are seeing major global institutions like the IMF, WB & UN - set up by the US & UK after WWII to further their own interests and influence - being diluted and sidelined by developing countries who've "had enough".

Can't say I'm sorry about that because they've all become far too powerful, abusive of power and of course are completely unaccountable to any citizen anywhere.

daveO's picture

The long term management comes into play here. Notice that Russia and the USA are both sending arms to Baghdad. 

AgentScruffy's picture

Agreed. According to someone high up in the finance world, dollar collapse will happen but forecasting when is not nearly as easy as most make it out to be. This person's assessment: within 20 years, and the bull market isn't anywhere near over. At absolute minimum a few years out, but more likely the absolute minimum is several years out (5-7). More time to prepare, but take nothing for granted. Do what you can and learn a new trade/career by boosting your education online. Work to make yourself "anti-fragile" (as NNTaleb would say) or at least resilient.

lakecity55's picture

Yes, be careful what you wish for.......

I recently flew over Cape Canaveral....abandoned.....

The day I flew into India Mr Modi watched an Indian Rocket loft 5 separate satellites into space successfully.

Be careful what you wish for...........

groundedkiwi's picture

indian food, sublime, american food sub prime. We are what we eat.

lakecity55's picture

It is funny, the subway here sells better food than the US subway, hahaha. More choices, too. Actually traveling around to do my job has made me discover almost ANY country's food is better. I stay in places the chef gets the food maybe 1 day from the farm for a lot of his supplies.

It must be Karma. The US is a sinking ship, but the rest of the world is floating higher. There is inflation everywhere, though.

Wahooo's picture

A teetering empire is a dangerous one. The slow slide is already underway and there is no stopping it. So yeah, while I don't look forward to it, I do acknowledge it.

tumblemore's picture

The banking mafia have been working to replace the white population for 60 years so if the choice is slow genocide or economic collapse i'll take collapse.

daveO's picture

It's actually beneficial to the whites. They aren't as dependent on Uncle Sugar. The blacks will riot, like they always do. The only difference this time is they won't get bigger handouts. They will get shot at by the National Guard, like 1967's Detroit (Gov. George Romney, Mitt's dad).

daveO's picture

It was a done deal when Clinton gave China MFN status. It's  nearly taken 15 years to get here. Prepare for Mexico 1980's.

Lanka's picture

The sinking of the US$ has hastened recently, ever since JPM got cute and tried to prohibit Russia from using SWIFT to pay some embassy expenses.

daveO's picture

I wonder if Dimon's cancer doctor is a Russian?

Yen Cross's picture

 I'm going to short gbp/aud in the next 8-12 hours biotchez.

Lin S's picture

There are only two possible outcomes:

A. The USD's reserve currency status is finally put to an end, and the world becomes a safer place.

B. The USD's reserve currency status continues, and American psychopaths usher in nuclear armageddon.

Wahooo's picture

Notice the outcome of either scenario is destruction of the dollar.

andrewp111's picture

C. The USD's reserve currency status is finally put to an end, and the world becomes a more dangerous place. The USA simply grabs the assets and resources it wants with raw military force, instead of buying them with a currency it prints. Ultimately, this leads to World War III.

Ancient Landmark's picture

USA can't grab anything. Raw military force has no Commander in Chief and the USD has no value. WWIII has a different face.

pupdog1's picture

Elvira and Vlad are out to get the Kenyan.

You just can't make this shit up.

 

NuYawkFrankie's picture

re The BRICs Are Morphing Into An Anti-Dollar Alliance...

all thanks to the ZIO-Punks running the USSA

onmail's picture

It is time to dump the Dollar

It is blood money

It is not money, rather  hegemoney

It is the devil's instrument which robs your soul

Be free from Dollar and attain salvation

Dollar domination like the East India Company

Using Dollar & Internet America has cast its net on the entire globe and sucking up its very soul leaving the whole world in ruins.

Using Dollar means accepting slavery of America 

Dollar is the Dead Mans Chest and America is the chief of pi;rates and western world is its companions - parrots & p00dles 

Where ever dollar goes , death goes there 

shinobi-7's picture

Still quite difficult to see how to reconcile Russian and Chinese interests. The Chinese need a cheaper Yuan to keep their economy humming, the Russian higher prices for commodities to square their budget. Guaranteed cheap gas and oil prices denominated in Yuan? But if the dollar crashes and with it the world economy, it is likely that the dollar denominated price of almost everything will be cheaper in 2016 than whatever was fixed in 2014 in Yuan. To make such a deal work the Russian must accept a rather high NPV loss and the Chinese a high future value risk. Unless they believe that the dollar market will close for whatever reason in which case it doesn't matter. If it is the later then we are indeed entering a new age but why on earth are the markets not pricing in such a huge risk?

Uncle Remus's picture

.

The Chinese need a cheaper Yuan to keep their economy humming

I'd say the Chinese need to keep the Yuan in balance during it's transition to a more reserve currency status as well as the transition away from the US as the "default" consumer market.

andrewp111's picture

They have sound geopolitical reasons not to use the dollar except for trade with the US. They can use Euros, Pounds, and their own currencies for everything else. And the dollar is going to crash anyway, once the Caliphate wins control of the whole Middle East and controls all the oil. At that point, they can insist that the US dollar not be used in trade at all.

daveO's picture

So, BHO's banking puppet masters are short treasuries?

Global Observer's picture

If the US$ crashes, nothing sold on the international markets will be priced in US$. Prices in US$ will be just as relevant as the prices in Argentine Peso or the Zimbabwe $. Of course, before the US$ can crash, there has to be another reference currency to price things on the international market in. It may be a currency issued by the BRICS bank to be established for that purpose or a virtual currency like the IMF SDR.

It is not a risk markets can price in. It is going to be Black Swan event and there is no way to price the risk of Black Swans in.

nidaar's picture

If they are going to back it by gold, then gold denominated value will matter, when dollar becomes trash

22winmag's picture

CTRL-P Print Federal Reserve Notes

CTRL-L Launch nukes when CTRL-P fails

CTRL-R Global revaluation and gold backed Treasury Notes

 

I'll take CTRL-R over a 5,000 degree day thank you.

Mcat's picture

One key point missing. If they abandon the dollar and establish a new trading currency. They do not have large enough financial markets to invest the currency of trade. They will need exchangeability and ease. Enter Cryptocurrencies like Bitcoin backed by real assets. 

shinobi-7's picture

Very good point. The depth of the market is indeed key. Now if all you have left is a central bank buying all the notes issued by the tresury as it is almost the case in Japan now, where exactly is the "Large Enough Financial Market"?

usathoughts's picture

Mcat,

 

China is doing exactly that. Now own and/or control 20 percent of U.S. wealth. Also buying most of Africa's minining industries.