The biggest news last week was that the BRICS bank has been formed and being funded. Some may argue that the downing of the Malaysian airline flight was bigger but I don’t think so. From a money and banking standpoint, the formation of the BRICS bank is the BIGGEST news since either 1971 or 1973 when the U.S. defaulted off of the gold standard or when the Saudis stepped up to the plate for the petrodollar.
The formation of the BRICS bank is in direct competition with both the IMF and The World Bank. Both of these are “U.S.” controlled banks and the currency that they lend to “help” or “save” countries with are dollars. During our lifetimes these two banks have been the lender of last resort for troubled banks, banking systems and sovereign countries. Often the loans led to alleviating liquidity problems in the short term but then created bigger problems for borrowers in the long term.
Stepping back to look at what has happened and “why” the BRICS decided to form this bank is an important exercise. This will allow and facilitate trade between nations without using dollars. This is important because of the recent “fine” paid by French bank PNB Paribas and the looming fines for both Commerzbank and DeutscheBank of Germany. They transacted business for customers which broke U.S. sanction “rules” regarding Iran and Sudan. These fines as I understand it were levied because the money transfers were in dollars. Anyone even simple minded would understand that to avoid any future “fines,” you just don’t use dollars. It is this simple and foreigners will now use fewer dollars because they don’t have to use them and it is “safer” for them from a “risk” standpoint.
The BRICS bank has been a long time coming and certainly not done in secret. This news has been widely known by foreigners in real time. It has been a different story for Americans. Mainstream U.S. press has barely even whispered the news yet it is the most important event for at least a generation. To put it in perspective, this is the nullification of Bretton Woods outright.
I think that it’s important to understand that the action of forming a non-dollar competitive bank could only have been done if “everyone” went along with it. We have seen in the past what has happened when a country spoke of no longer using the dollar. Their “ruler” was displaced and the country as in the case with Iraq was bombed back into the Stone Age. This is now a simple case of all the schoolyard kids lining up against the bully and “saying” (not asking) “what are you going to do about it?”
I have been very boisterous in my opinion that Saudi Arabia would be the final straw that breaks the back of the dollar. They have had top level talks with both Russia and China with very little comment or “statement” after the meetings. What was said? What was decided? My guess is that Saudi Arabia was “told” what was going to happen. This is no different than a marriage that breaks up or even when “Mafioso” migrate from a weakening family to one that is strong and getting stronger. Saudi Arabia will move to the East.
If you recall the movie “Rollover” from 1981 you will remember the scene where Kris Kristofferson talks about the Arab’s selling Treasuries and dollars. Any announcement by the Saudis that they will accept currencies other than dollars will make “Rollover” come true …exponentially! I say “exponentially” because the system is now 35 years into the futures and at least $1 quadrillion more bloated with debt and derivatives. The system will implode and “wealth,” paper wealth will evaporate overnight. As is said in the movie, “$2,000 gold will be cheap by tomorrow morning,” gold at the time if you remember was $400-$500.
Please understand the “what and why” of the BRICS bank. The Chinese, Russians and the rest of the world know that the petrodollar system is on its last legs. The case can even be made that the rest of the world has “carried” the U.S. for a few rounds so that they could get their ducks in a row ahead of time. The BRICS bank has been put into place because there has to be “something” to “start over with.” Prior to this bank being formed, were the Western banking system to implode the rest of the world had no alternative. When I say “alternative” I am talking about no other clearing system and no place to “hide” so to speak.
It is clear to me that the BRICS bank formation and the massive accumulation of gold over the last several years has gone hand in hand. “The rest of the world” has known for some time that the dollar, the U.S. and the entire Western financial system was on shaky ground and had finite lives. A plan to distance them from the inevitable was formed and has been carried out. All that now remains in my opinion is for Saudi Arabia to defect from the U.S. and knock the last remaining leg out from under the dollar.
My opinion as you already know is that within two weeks of a Saudi announcement, our world will change. The purchasing power of the dollar will crash; this in turn will mean that more dollars will be needed to pay for foreign imported goods. This will affect you directly when you “shop”… for anything. The inflation which we have been exporting for all these years will wash back onto our shores. The “baton” of world reserve currency issuance is being passed right before our eyes. Actually I should reword this; the baton is being TAKEN from us because we have so badly abused the privilege.