Local Currencies To Replace Dollar For 5 Countries' Dealings 519
An anonymous reader writes "Brazil, Russia, India, China and South Africa — the BRICS group of fastest growing economies — signed an agreement to use their own currencies instead of the predominant US dollar in issuing credit or grants to each other. The world does need a new financial architecture, but the BRICS by themselves are unlikely to be able to drive that change."
Re:Bad News for USD (Score:3, Informative)
People trade in dollars because it is so liquid in terms of finance options. As one example, if you are Korean, you can send a shipment of parts to Peru in exchange for dollars. Then, since you don't have to pay your suppliers for a month, you can buy treasuries or something for a month, then at the end, sell them. You've thus made a few percentage in the interim. It isn't always so easy to find something to invest in other currencies, thus the dollar has a competitive advantage. This is why the BRICS are unable to move away easily from the dollar.
Re:i don't understand what you are trying to say (Score:5, Informative)
the american economy suffered a burst bubble from an overheated real estate market in 2008. it might be a long painful recovery
but if it gets your political inclinations excited to derive deeper portents, have at it
people trade in the currency that is seen most stable RELATIVELY. some background: as the 2008 crisis began, people began to flee the dollar. then, as the crisis began to ripple across the rest of the world, some places wound up weaker than the usa, and people began to return the dollar. why? not because the dollar was stable, but because the dollar was RELATIVELY stable compared to the problems in many other places, like europe
currently, the yuan is probably the most stable currency, but china has plenty of exposure to potential problems that could blow up worse than the usa. then the dollar might again be the most RELATIVELY stable currency, or not, or some other currency. i don't know. neither do you
Re:Bad News for USD (Score:5, Informative)
You take tungsten, slightly less dense than gold, and a lot cheaper, mix it with a small amount of a more dense but more expensive metal to get up to the right density, then mix and plate it with about 50% gold. Very difficult to detect if you do it right, and costs a little over half the price of real gold.
Re:Bad News for USD (Score:5, Informative)
Yeah because the US dollar is not undergoing any inflation at all. Oh wait no, the US simply measures inflation differently by first taking out the prices that are going up (like say energy and transport), then massaging the numbers with subjective bullshit algorithms like hedonics, and then printing a number that has absolutely no contact with reality anymore and calling it inflation.
Tell me why I should buy a 10 year note at 3.4% per year in a currency that is shedding value like never before on foreign exchange markets and whose government is denying inflation while at the same time conducting policy that is leading to a very real risk of hyperinflation? No thanks. I can get 8% interest on the Costa Rican colon and surprisingly thanks to the devaluing US dollar, the exchange rate is also working in my favor giving me a net of about 10% per year in US dollars. Now when a currency from a 2 bit 3rd world banana republic is more solid than the US dollar, you know that you guys are in trouble.
Re:Bad News for USD (Score:5, Informative)
USD is currently experiencing a 10% inflation. Since the bulk of inflationary pressures caused by the US Gov spending was expected to kick in throughout 2011, it's only expected to get worse.
I have no idea where you're getting that number, or that suggested cause, but neither of them are even remotely correct. My guess is the rantings of some TV personality, but you and other readers need to know that it's pure nonsense.
The 12-month price change index (one of the more common measures of inflation) is close to 2.7% [usinflatio...ulator.com], slightly higher than normal but not really out of whack given the huge sums of money destroyed when the real estate market crashed. As far as government spending, in the last year the federal government went from spending about $3.6 trillion in 2010 to spending about $3.7 trillion in 2011 (both of those figures include Social Security and Medicare, which are not part of the general fund). That's an increase that's actually slightly less than inflation.
The first chart also has a clear answer on what is inflating, although it doesn't add up close to the suspiciously round 10% you cited: Gas prices are much higher in the US than they were a year ago. The most likely reason for this appears to be oil speculators buying up futures in anticipation of the Libya War causing supplies to drop. An increase in the price of crude would also cause a price increase in industrially-produced food, which we're also seeing. But that's different from having $1 today worth only $0.91 next year.
you've been duped, it is 10% (Score:4, Informative)
Re:Bad News for USD (Score:4, Informative)