The first summit of heads of state of the BRIC countries — Brazil, Russia, India and China — ended with a declaration calling for a “multipolar world order”, diplomatic code for a rejection of America’s position as the sole global superpower.
The BRIC bloc brings together four of the world’s largest emerging economies, representing 40 per cent of the world’s population and 15 per cent of global GDP. The leaders set out plans to co-operate on policies for tackling the global economic crisis at the next G20 summit in the US in September.
The declaration also satisfied a key Kremlin demand by calling for a “more diversified international monetary system”. President Medvedev is seeking to break the dominance of the US dollar in financial markets as the world’s leading reserve currency.
UPDATE: The BRICs are said to be considering buying each other’s bonds and swapping currencies to lessen dependence on the U.S. dollar. Their leaders will discuss measures to promote regional currencies, including ‘possibly placing part of reserves in the financial instruments of partner countries’. With combined reserves of US$2.8 trillion, the BRICs are among the biggest holders of U.S. Treasuries (Bloomberg)
China, Shipping and the Great Commodity Carry Trade
China appears to be running Yuan printing presses to counter the US Dollar printing presses.
History has proven repeatedly that mass printing of fiat money always leads to currency debasement and hyperinflation.
China is on a big natural resources shopping spree around the world lately, in order to divest its huge foreign currency reserves.
Both events are occurring as people have noticed: Capital is escaping American soil; and China is on a global shopping spree of raw materials. But people who notice these two things explain it as simply market behavior driven by speculative forces.
The Chinese government has locked the exchange rate at a constant Y6.832 = US$1.00, for over a year now. WHY? Insightful investors such as Jim Rogers, Peter Schiff, Marc Faber all predicted a US dollar collapse and the appreciation of Chinese Yuan.
As the flood of US dollars flows in, China merely cranks up its own money printing press to print more RMB Yuan to exchange for the US dollars. It then uses some of the dollars to buy US Treasury bonds and prop up the value of the dollar, maintaining a constant USD/Yuan exchange rate. But China’s real goal is not to support the dollar in long term, but to buy time to allow it to divest the huge dollar assets it is holding, in exchange of physical assets: natural resources, raw commodities, foreign mining companies and other physical assets. It costs China nothing to print more Yuans to buy more US dollars and then use the dollars to buy up the whole world.
Thanks to currency speculators, we have lent our money printing machine to China. This opportunity allowed China to launch the greatest Commodity Carry Trade ((CCT)) in history! It is an absolutely ingenious move: US government has no choice but to keep printing more dollars; Speculators betting a dollar collapse flee the US market and bring the dollars to China; the drainage of market capital from the US market forces the US government to print even more dollars and drives more investors away from the US and into China; China then prints more of its own currency at virtually no cost, swap for the dollars, and then holding the dollars at hands, they go around the world to buy up everything, and go to the USA to buy up everything. At the end when China is done, they will let the US dollar collapse meanwhile, the Chinese Yuan, due to strong backing of all the physical assets China hoarded, will hold up its value.
Andrew Snyder on the Commodity Carry Trade