BRICS credit: Local currencies to replace dollar

[Master Shake]

SANYA: Brazil, Russia, India, China and South Africa - the BRICS group of fastest growing economies - Thursday signed an agreement to use their own currencies instead of the predominant US dollar in issuing credit or grants to each other.

The agreement, the first-of-its-kind, was signed at the 3rd BRICS summit here attended by Indian Prime Minister Manmohan Singh, China's Hu Jintao, Brazil's Dilma Rousseff, Russia's Dmitry Medvedev and South Africa's Jacob Zuma.

http://articles.economictimes.indiat...cal-currencies

[don]

Re: BRICS credit: Local currencies to replace dollar

First Thought: Coming Soon- A Brand New No-Fly Zone

[c1ue]

Re: BRICS credit: Local currencies to replace dollar

This is a nice public image move, but irrelevant until said nations can grow their economies enough to offset the size of the US economy.

[Master Shake]

Re: BRICS credit: Local currencies to replace dollar

What does their growing their economies have to do with the abandonment of the dollar as a medium of exchange? That, by itself, the effect is negligible because the amounts are so small? A journey of a thousand miles begins with a small step, and all that.

[Adeptus]

Re: BRICS credit: Local currencies to replace dollar

The US dollar reserve status is all about a confidence game. This news sounds to me like some influential countries just lost their confidence in the US dollar and made it official. This leads to the question of : Who's next?
T-minus (insert single digit here) years before US is no longer the reserve currency?
Tick tock tick tock.

[GRG55]

Re: BRICS credit: Local currencies to replace dollar

First Thought: Coming Soon- A Brand New No-Fly Zone

Two questions come immediately to mind:

1. Do they go to the UN to bless the "no fly" geography, or just roll it in under that creative Libya approval - "Regime change if necessary, but not necessarily regime change"...

2. Wouldn't they have to have five zones? One for each letter in BRICS?

[jk]

Re: BRICS credit: Local currencies to replace dollar

This is a nice public image move, but irrelevant until said nations can grow their economies enough to offset the size of the US economy.

it's another step as they all try to tip-toe away from the dollar. meanwhile the cme will start trading oil and distillate futures priced in euros. another step.

[c1ue]

Re: BRICS credit: Local currencies to replace dollar

What does their growing their economies have to do with the abandonment of the dollar as a medium of exchange? That, by itself, the effect is negligible because the amounts are so small? A journey of a thousand miles begins with a small step, and all that.

Size of economy matters; the US' economy was so large compared to any other individual economy, as well as a big chunk of world GDP, that the US dollar would be in a dominant position even disregarding any other issues like reserve currency status, petro-dollar, IMF/World Bank loans, etc.

In order to minimize this impact - other economies (and their currencies) must grow.

This graph is a good visual way to understand what I'm referring to:



Given the US' share of world GDP in 1950 - is it any wonder that the US dollar was world reserve currency?

Now note the US' share is shrinking - not GDP per se but US percentage of world GDP.

More importantly Europe is now unified under the Euro which is different than 1950.

In turn the BRIC world share is still not that large but is growing.