Tuesday, June 16, 2009

First summit for emerging giants Russia, China Brazil and India

The world's newest economic grouping is to hold its first summit in the Russian city of Yekaterinburg on Tuesday.

Bric is named after its four member states - emerging giants Brazil, Russia, India and China.
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4 comments:

  1. Maracatú des CaraïbesJune 16, 2009 at 2:23 PM

    Granted that this is likely a long term proposition:
     
    BEIJING, June 16 -- The leaders of Brazil, Russia, India and China are gathering in the Russian city of Yekaterinburg today, during which they are expected to discuss ways to reduce their reliance on the US dollar.      On the summit agenda is a long list of issues ranging from the financial crisis to climate change, but if the four nations reach any agreement regarding the US dollar's role in their foreign exchange reserves and cross-border trade, that could lead to an eventual reshuffle of the international financial order.

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  2. Maracatú des CaraïbesJune 16, 2009 at 2:42 PM

    There are many reasons to doubt the dollars resilience in the long term.  Let's look back at history a bit with the help of renown economist Barry Eichengreen, shall we? :)
     
    The conventional wisdom that one currency dominates reserve holdings worldwide thus derives mainly from the second half of the 20th century alone, when the greenback accounted for as much as 85 percent of global foreign exchange reserves. (...) In part, the post-World War II dominance of the dollar reflected the exceptional dominance by the United States of global trade and payments in a period when Europe and Japan had not yet fully recovered from the war and modern economic growth had yet to spread to what we now refer to as emerging markets. In addition it reflected the fact that the governments of other potential reserve centers actively discouraged international use of their currencies. (...)
    These and other considerations led the countries whose currencies were potential alternatives to the dollar to maintain significant capital controls well into the post-World War II period, in some cases until the end of the 1980s. Controls limited the liquidity of their securities markets.27 Thus, it was not simply the unusually large size of the U.S. in the world economy or the admirable liquidity of U.S. financial markets but the maintenance of controls by other potential reserve centers that explains why the dollar was so dominant in reserves for so long after World War II.

     

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  3. Maracatú des CaraïbesJune 16, 2009 at 2:47 PM

    You can read the entire thing on your own (recommended).  I'll just jump to the conclusion:
     
    ...several currencies can share reserve currency status, as they not infrequently have. Changes in financial technologies and market structures, which weaken network effects, make it even more likely that this will be true in the future than the past. At the same time, mistaken policies can quickly knock a currency out of contention. Time will tell whether this fate befalls the dollar.
     
    ...And by the way, this was dated May, 2005.

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  4. anandJune 16, 2009 at 6:21 PM

    wow Mara, nice posts.
     
    I think the Chinese Yuan, Indian Rupee, Singapore dollar, Indonesian Rupiah will become more widely used currencies in the future.
     
    Many countries are concerned that the federal reserved has doubled the number of dollars in the money supply (monetary base) since September 10, 2008. They are concerned that this might lead to higher inflation. I think they are right to be concerned.
     
    Many Americans seem eager to pursue policies that will lead to higher inflation.
     

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