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Page added on July 15, 2014
BRICS Announce $100 Billion Reserve To Bypass Fed, Developed World Central Banks
As we suggested last night, the anti-dollar alliance among the BRICS has successfully created a so-called “mini-IMF” since the BRICS are clearly furious with the IMF as it stands currently: this is what the world’s developing nations just said on this topic “We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness.”
As Putin explains, this is part of “a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies.” Initial capital for the BRICS Bank will be $50 Billion – paid in equal share among the 5 members (with a contingent reserve up to $100 Billion) and will see India as the first President. The BRICS Bank will be based in Shanghai and chaired by Russia. Simply put, as Sovereign Man’s Simon Black warns, “when you see this happen, you’ll know it’s game over for the dollar…. I give it 2-3 years.”
- BRICS MINISTERS SIGN DEVELOPMENT BANK AGREEMENT
- INITIAL SUBSCRIBED CAPITAL OF BRICS BANK IS $50 BLN: STATEMENT
A quick take on existing monetary policy.
- MONETARY POLICY MUST BE CAREFULLY CALIBRATED: BRICS STATEMENT
The punchline, however, is that using bilateral swaps, the BRICS are effectively disintermediating themselves from a Fed and other “developed world” central-bank dominated world and will provide their own funding.
We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements…. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.
Incidentally, the role of the dollar in such a world is, well, nil.
For those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.
Key excerpts from the Full statement:
We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness. The IMF reform process is based on high-level commitments, which already strengthened the Fund’s resources and must also lead to the modernization of its governance structure so as to better reflect the increasing weight of EMDCs in the world economy. The Fund must remain a quota-based institution. We call on the membership of the IMF to find ways to implement the 14th General Review of Quotas without further delay. We reiterate our call on the IMF to develop options to move ahead with its reform process, with a view to ensuring increased voice and representation of EMDCs, in case the 2010 reforms are not entered into force by the end of the year. We also call on the membership of the IMF to reach a final agreement on a new quota formula together with the 15th General Review of Quotas so as not to further jeopardize the postponed deadline of January 2015.
BRICS, as well as other EMDCs, continue to face significant financing constraints to address infrastructure gaps and sustainable development needs. With this in mind, we are pleased to announce the signing of the Agreement establishing the New Development Bank (NDB), with the purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies. We appreciate the work undertaken by our Finance Ministers. Based on sound banking principles, the NDB will strengthen the cooperation among our countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to our collective commitments for achieving the goal of strong, sustainable and balanced growth.
The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters. We direct our Finance Ministers to work out the modalities for its operationalization.
We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements. We appreciate the work undertaken by our Finance Ministers and Central Bank Governors. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.
Goodbye visions of an SDR-world currency. As for the USD…
21 Comments on "BRICS Announce $100 Billion Reserve To Bypass Fed, Developed World Central Banks"
Makati1 on Tue, 15th Jul 2014 9:06 pm
And the beat goes on…
Western sanctions will be useless soon as there will be alternates to the US money system that will facilitate trade and non-dollar money flows. This is being forced by the actions of the US against Russia and France lately. Most of the 3rd world has felt the whip of the IMF and now the West is experiencing it.
The only reason that makes any sense of US actions recently, is that the US wants to have the whole world in turmoil until a war breaks out in one of their hot spots, allowing Marshal Law/Police State Dictatorship to take over the Us openly, before it crashes. What did he say above? Two to three years? Sounds about right.
Davy on Tue, 15th Jul 2014 9:21 pm
Mak, what is a 100BIl in the grand scheme of things. I see it as nothing more than a pimple on the West’s ass. Come on Brics at least put some kudos behind it. Pretty lame report of the opening of what you Mak, say is a game changer.
Northwest Resident on Tue, 15th Jul 2014 9:24 pm
One hundred billion dollars is chump change in today’s economy. They should be ashamed for even putting up that paltry sum and exposing how thoroughly broke they all are. A few trillion, okay, now we’re talking. Heck, America can print a hundred billion new dollars with one mouse click — and they do, frequently.
redpill on Tue, 15th Jul 2014 11:42 pm
Ah, can always tell it’s a Ohedge piece just by the tone of the intro.
News by wankers for wankers.
Makati1 on Wed, 16th Jul 2014 12:18 am
None of the BRICS are ‘broke’. The West is bankrupt and will never recover. The Chinese are sitting on a trillion plus Charmin dollars that they want to get rid of. This is one way to do it.
That paltry sum is the way to avoid the WB & IMF and illegal sanctions by the West. THAT is the goal. That and to turn trade into other than USD all over the world. Seems it is moving forward rather rapidly.
External debt:
US: $17,400,000,000,000. 106+% of GDP.
China: $3,000,000,000,000. 37% of GDP.
Russia: $640,000,000,000. 23% of GDP.
India: $376,000,000,000. 20% of GDP.
S.Africa: $138,000,000,000. 23% of GDP.
Brazil: $428,000,000,000. 15% of GDP.
http://en.wikipedia.org/wiki/List_of_countries_by_external_debt
Northwest Resident on Wed, 16th Jul 2014 12:49 am
Makati1 — I seriously doubt that the China debt includes all the shadow banking debt in their economy. Much, and speculation is perhaps most of Chinese debt is obscured or hidden by the shadow banking sector.
China is a total wreck, Makati1. You can keep playing the role of “Chinese Baghdad Bob” if you want, but your singing the praises of China on this forum sounds out of key and squeaky, like a really bad singer belting it as if he thinks he’s got a great voice but in fact he sucks. Why do you feel a need to sing China’s praises? I don’t get it.
clueless on Wed, 16th Jul 2014 1:40 am
He who has the gold makes the rule. Period. US has no gold and bankrupt ,hence the dumping of the useless $. China is emerging, has gold, and with exceptional GDP. Now do the math. China is the new USA. Accept the fact.
Arthur on Wed, 16th Jul 2014 2:07 am
Fail to see why a new fund of 100 billion *dollar* can be seen as an attack against the dollar. A real attack would be to eliminate the dollar from business transactions. That seems to be increasingly happening.
Arthur on Wed, 16th Jul 2014 2:21 am
Makati, China has 4T$ excess liquidity, not 1T$. and China knows it will only see a fraction of that value back. Hence their reluctance to add more $ to that pile.
From a financial point of view, the west is indeed the most instable and western BAU is likely to contract first and that moment will come when China and Russia will initiate a global process of rejecting the dollar, simply because the US has misused its own currency as an ATM.
Makati1 on Wed, 16th Jul 2014 5:45 am
Northwest, the Us is more then $17T in debt. The actual total is past $60T and climbing. Cities are going bankrupt. Retirement plans are bleeding income due to the Zero interest system and are likely to be ‘nationalized’ in the next few years as the US needs those trillions. States are cutting back and letting asphalt roads go back to gravel. Tax income is falling all over the place. You have to remember, China does not have all of these social safety nets to worry about. They are telling their people to buy gold and are making it easy to do so. They know where there is real value. It is not in paper money with only faith as a backup.
China may be having problems, but they are still one of the fastest growing countries in the world. They are using their hoard of USDs to buy up resources and build infrastructure all over the world. You should try to source info from sources outside the MSM Iron Curtain. Try:www.wantchinatimes.com/news-subclass-cnt.aspx?id=20140615000083&cid=1101
or: http://voiceofrussia.com/
or: http://journal-neo.org/
or: http://www.arabnews.com/news/501001
or: http://thebricspost.com/
or: http://www.themoscowtimes.com/
You don’t get a well rounded meal by only eating the desert. Nor do you get a well rounded view of the world from one spot.
Makati1 on Wed, 16th Jul 2014 5:49 am
Artur, your insistence that Russia is going to be part of Europe eventually is likely to come to be, but, I think Russia wants to be the chairman of the committee, not a just a member. It all depends on the next few years and the dismantling of the dollar as the world’s reserve currency.
Davy on Wed, 16th Jul 2014 6:13 am
Mak, China has significant shadow debt read this and weep.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10611931/The-15-trillion-shadow-over-Chinese-banks.html
“Chu has warned since 2009 about a rapid expansion in lending that has seen something close to $15 trillion (£9.1 trillion) of credit created, fuelling a property and infrastructure boom that has no equal in history.”
Mak, another excellent article explains how China has grossly overstated its GDP for years by extending and pretending the massive and increasing bad debt that never gets realized. The day of reckoning for China is near. At some point the debt will have to be realized and it can’t just be socialized. It has to go somewhere unless that is if they want to continue with unsustainable debt creation which is increasingly not possible.
http://www.zerohedge.com/news/2014-07-14/michael-pettis-warns-china-bulls-bad-debt-cannot-simply-be-socialized
Feemer on Wed, 16th Jul 2014 7:34 am
Russia will not be apart of Europe for a very long time. I mostly agree with Mikati, this brics bank seriously challenges the IMF and world bank, which always side with the west. Now I certainly have bias, living in the west, but I don’t want to see China become the new US. The US has flaws, many flaws, but it still has better environmental regulations, and science programs than China. The West’s debt and lack of resources will allow China and Russia and Brazil to outpace us very soon.
Feemer on Wed, 16th Jul 2014 7:37 am
There’s still the chance that China will collapse on itself but that probably won’t happen for a while if Russia and China become closer and closer allies. Europe and the US could lessen China’s power by trading less with them and instead produce their own (useless) goods on their own soil, creating jobs here and keeping the money in our own countries, but corporations would see huge profit losses and wouldn’t allow our government to do that.
Makati1 on Wed, 16th Jul 2014 8:07 am
Feemer, you are correct. Corporations run the West now and nothing that cuts profits will be allowed. There is no national patriotism in corporations, only profit canters. The West is consuming less and less and the rest of the world is picking up the slack.
Arthur on Wed, 16th Jul 2014 8:10 am
Makati says: “Artur, your insistence that Russia is going to be part of Europe eventually is likely to come to be, but, I think Russia wants to be the chairman of the committee, not a just a member.”
Haha, if your ask modern French neo-Gaullists about the future roles within a European-Russian alliance, you will get the answer:
France does the politics
Germany the economy
Russia the military
lol
Don’t know about that, but here is the real reason why Russia wants such an alliance most of all:
http://www.nytimes.com/roomfordebate/2014/07/03/where-do-borders-need-to-be-redrawn/why-china-will-reclaim-siberia
The idea of a European-Russian was first promoted by French general de Gaulle, during the war, nota bene, when de Gaulle was in permanent conflict with Churchill and especially with Roosevelt, who considered de Gaulle a nuisance. De Gaulle early recognized the true intentions of Roosevelt (complete colonisation of Europe, together with Stalin) and alread in 1943 was contemplating an alliance with the (post-Soviet) Russians and ‘the Fritzen’ after the war. Read as an eyeopener “Allies at war: Churchill v Roosevelt v de Gaulle” (amazon.com, kindle). At some point Roosevelt and Churchill contemplated killing de Gaulle, because of his attempts to keep France independent (from the Anglos). The Americans even tried to prevent the French from organizing local authority at municipal level as they wanted to completely colonize France as well, like Germany, but de Gaulle prevented that. In the view of Roosevelt the world was going to be administered by the US, USSR (and Britain as junior partner). WW2 was nothing short of a brutal pre-planned war by the US and USSR to conquer the world. The only party pooper turned out to be Stalin, the closet-anti-semite, who refused to go along with American views concerning world government and the cold war started. If America friend Leon Trotsky would have won the stand-off with Stalin, we would have had world government of the banksters today. But Trotsky got ice-picked by Stalin’s agents and that was the beginning of the end of the US-SU alliance as soon as the war was over. Now the USSR is dead and the NWO-USA will be forced to step down soon from it’s current preeminent position and the geopolitical cards are going to be dealt from scratch: China, balanced by EU-Russia + European majority parts of the US. La Raza will take over (or back rather) the American South-West and bring it back to Mexico, restoring the situation of beginning 19th century.
penury on Wed, 16th Jul 2014 9:10 am
I know that all of you are aware of this but, it bears repeating, It is not a 100 billion dollar fund-it is 100 billion dollar equivalent fund.The importance of the fund is that it will allow nations to trade internationally without the use of dollars. Sanctions against banks will no longer be possible if they do not trade in dollars. The U.S. will no longer be able to control all trade worldwide by denying the use of dollars each time we have a hissy fit with one country or another. If countries are no longer bound to the dollar they may make decisions which anger the empire without banking sanctions crippling their economy. Mighty oaks from tiny acorns do grow.
louis wu on Wed, 16th Jul 2014 12:25 pm
This is interesting in an academic way but does anybody really think that the global economy can keep going much longer period let alone without the US?
noobtube on Wed, 16th Jul 2014 2:32 pm
Saddam tried Euros. US assassinated him.
Qadaffi tried a gold-back currency. US assassinated him.
Now, Russia, China, India, Brazil, and South Africa are creating an alternative trading bank.
I wonder if the US will assassinate their leaders.
Davy on Wed, 16th Jul 2014 4:39 pm
Pen, I doubt a mighty oak. I am happy for the Brics. We need a diversified global financial system. I will lead to more resilience. I also hope the loons in DC have less financial sanction options. Financial sanctions have got out of control yet highly effective in some cases. What needs to be realized here is the global system can not decouple from the US economy to any significance without bringing on a collapse. It can’t be done and shouldn’t be attempted if all parties care about stability. In some ways this will be a plus for the West let the problem children go to the Bric bank that will mean less deadbeats to have to deal with. This will also make the whole fiancé field more competitive and hopefully less corrupt.
Feemer on Wed, 16th Jul 2014 8:51 pm
Davy, you make many good points! hopefully the problem children will go to the brics bank, but I think russia will use it to borrow lots of money when we are sanctioning them. Russia will also use it to get its grubby hands into other countries. Russia just signed a nuclear energy deal with Argentina. Putin is smart and is making not only wise investments but friends who will be become powerful. Brazil and China and russia will all become very powerful from their natural resources