Back in September, China made the first of many new moves to provide the global economy an alternative to the petro-dollar when they began to sell and purchase oil in currencies other than the U.S. dollar. This move, allowing nations to bypass the SWIFT central banking and currency system, was the first real blow to dollar hegemony, and a first move towards establishing a new global reserve currency.
On Nov. 27, China, along with other BRIC nations, injected their next move against the reserve currency when they formed a new development bank comprised of $240 billion in newly pooled funds. This bank, which will allow for loans to be made in foreign reserves, and for purposes such as sovereign bailouts, is a direct threat to the decades old IMF, and another step in changing global domination by the West of the international banking system.
The BRICS (Brazil, Russia, India, China and South Africa) bloc has begun planning its own development bank and a new bailout fund which would be created by pooling together an estimated $240 billion in foreign exchange reserves, according to diplomatic sources. To get a sense of how significant the proposed fund would be, the fund would be larger than the combined Gross Domestic Product (GDP) of about 150 countries, according to Russia and India Report.
Many believe the BRICS countries are interested in creating these institutions because they are increasingly dissatisfied by Western dominated institutions like the World Bank and the International Monetary Fund (IMF). For example, although the European debt crisis has allowed BRICS countries to push for more influence at the IMF, they currently only hold about a combined 11% of the Fund’s voting shares. – The Diplomat
This new development bank also comes on the heels of China recasting their gold reserves in preparation of a new gold backed currency, and in their formulation of a centralized oil wholesaling operation meant to bypass the U.S. dollar.
For well over a year, the IMF, ECB, and Western central banks have been unable to stop the massive economic and financial declines of member nations such as Greece, Spain, and Italy, while at the same time being unable to halt the 10-25% unemployment rates that lingers in most of these countries. Even with tens of trillions of dollars provided to private financial institutions, and national central banks since the 2008 credit crisis, the instability of these financial and monetary systems have created multiple fiscal cliffs remaining to be addressed by several sovereign nations.
The BRIC nations of Brazil, Russia, India, and China not only represent the future of developing economies, but also the future of stable monetary systems. Adding South Africa to the mix as well, these nations, as opposed to the United States, Europe, and old world Western economies, have been buying foreign debt, experiencing net imports, and have been purchasing gold and other assets while the West sells their assets to prop up their failing currencies.
It is said that nations like China and Russia play chess, while those in the West play checkers in the realms of politics and economic policy. In this, China and Russia are much more patient in their strategic moves, and are willing to sacrifice in the short term to accomplish their desired longer term goals. And like their moves made in September to provide an alternative to the 40 year domination of the petro-dollar, this newly formed development bank is the next step in offering the world a way to borrow money and capital, without leveraging their countries to the draconian demands of the IMF, and the forced austerity measures being introduced by central banks such as the ECB.