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Pay attention to BRICS Clear [1]

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Date: 2025-01-26

From VOA (dated 23rd October, 2024… lost in the final days of the Kamala vs Trump race)

WASHINGTON — Gathered Wednesday at a summit in the Russian city of Kazan, the members of BRICS adopted a joint declaration calling for the creation of an independent payment system based on their national currencies, a move in response to what they regard as illegal sanctions that are damaging the global economy. BRICS member countries, which account for about 35% of the global economy, issued the Kazan Declaration, which calls for the "elimination" of "unilateral economic sanctions and secondary sanctions that are contrary to international law."

China and India (the C & I of the BRICS) don't like using the word de-dolarization, but that is effectively what all this is about. From the same article

"The BRICS have finally found a unifying mission: circumventing American financial dominance."

Currently, the US dollar dominates currency trading (about 90% market share) and international trade (about 58% market share). The new BRICS Clear currency would enable trade between BRICS countries, and also between BRICS and BRICS-partner countries. As per various estimates, the dollar share of international trade would fall from the current 58% to about 30%.

There will be several consequences (the list below is not my own; but they make sense to me).

It will be harder for the US to finance internal debt. Interest rates will rise. Mortage costs will go up for US households.

It will be harder for the US to impose sanctions on countries like Iran and Russia (indeed, this is why the Russians have been pushing for this move for quite some time). The era of hegemonic US foreign policy will end.

Exports from the G7 nations will fall about 5%. Not a big deal overall, but could be de-stabilizing for some.

All of this is supposed to happen within 5 years of the formation of this new BRICS Clear system… potentially by 2030. Most of this could coincide with Trump II. And so, Trump had this to say:

The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy

At least he is smart enough to recognize what may be happening. But not smart enough to recognize that these threats won't have any impact on the inevitable. Or maybe he is smart enough to recognize that. To understand why, look at the cover chart.

A ROM summary of that chart is as follows:

BRICS countries already account for about 33% of global GDP, and that share rises by 1% every 2 years (i.e. 34% in 2026, 35% in 2028 etc).

By contrast, the G7 countries account for 29% of global GDP, and that share decreases by 1% every 2 years.

De-dolarization is inevitable under the circumstances. What Trump may be asking for is for the BRICS countries to delay the inevitable until 2028, so that the resultant disruption within the G7 countries would happen under a future US President.

The Chinese may yet oblige him on this (BRICS Clear cannot happen without Chinese consent). The Chinese are not interested in any direct confrontation with the USA at this point in time… they know that time is on their side… so they may give Trump what he wants.

But they will extract concessions in return!!

Over Taiwan perhaps. Or lifting sanctions on Iran/Russia. Or something just as meaningful to China.

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