Brics Countries Replacing The Dollar With Local Currencies

thanks for the article! its going to be an interesting year thats for sure.

So approximately 20 per cent of the global economy has agreed to manage credit between banks in their own local currencies. All this does is enable them to prop up their banks using low priced credit from other low priced banks in other third world countries instead of having to buy more high priced G7 currency.

Note that no one accepted the local currencies for actual goods... just paper.

In the meantime, the G7 countries allow their banks to extend credit credit to each other in their local currencies .. mainly the US dollar, the Euro, the Pound, Yen and the Canadian dollar. So that's 60 per cent of the global economy and those currencies are accepted for actual trade goods.

OK, so deposits to my bank in Brazil might be used to back credit in South Africa that can be repaid in SA local currency.. why does that not make me feel warm and fuzzy? Further, these are not predictable economies, not even China. As rough a ride as the G7 has had, they are still more predictable than socialist nations that can turn private property into state property at the drop of a pin with no recompense.

This is just maneuvering, paper maneuvers to get low priced credit from each other by the third world with no other way to support their credit crunch and not slow their massively growing population driven economies. Talk about a bubble, they took a page right from Europe's playbook.

It is quite possible that what we are seeing in this is similar to the ripples that precede a tsunami. This event in and of itself may not be especially consequential but it does indicate that more of the same will follow. If so, then it is likely that subsequent events could be of increasing magnitude.



And why wouldn't they? Even Bill Gross is not buying US T bonds any more. Gross knows a LOT more about bonds and the bond markets than I ever will, so if he thinks that these things are not good investments, it is likely that he is correct.



No, we are much more sophisticated than that here. Instead, what we do is cut our interest rates to near zero and hold them there so long that the US dollar is rammed into the dirt. This just steals the buying power of the hard earned money that our citizens have managed to save for their retirement without physically grabbing it from them. That's SO much better, right? Uh, right?



Absolutely right, Silverhawk... as if it needed any additional pushing in that direction, huh?

Always possible and, occasionally, quite likely.



Perhaps this is a semantics issue. To me, MONEY is the currency of the country where I live. WEALTH is property of various kinds. I know from your post that you do not confuse this issue but to me all too many people do confuse money with wealth and they are not the same at all. Money is not wealth but it is a symbol of wealth.



Sometimes money can be converted into things and sometimes it cannot. Much of my wealth is in my IRA, which has rules associated with it as to what I can and cannot buy with it.



A lot of people got rich by buying those little paper coupons called stock certificates. These paper products represent the shares of public companies. I can buy IBM shares, for example, and participate in its growth and earnings as a company but I cannot buy the IBM company. It's worth more than I have!



I don't think that I was even remotely suggesting this. The fact is, though, a lot of people supplement their retirement incomes via instruments that do not pay particularly well but that are reasonably secure from sudden and drastic price declines. These "pennies", as you call them, are important to them. They can make the difference between being comfortable and being hungry. No, they will not make them rich but that is not really their purpose. Their primary purpose is security plus whatever additional money they can chip in to help pay the bills.



I have no argument with your position. It is closer to my own than you might think. It's great that you can work to supplement your income when you choose and your ability to work productively is your true wealth. Older folks often do not have that ability or desire. They still need some extra income from time to time, though, and investments that pay interest have been one method of doing that. Is it the best way? Perhaps not but it is indeed their primary method of choice.

As to the world reserve currencies... this is needed to facilitate world trade and I have no problem with it. My problem tends to be with fiat currencies that are completely un-backed by anything of value. Supposedly, the productivity of a nation now backs its currency. That would be fine but only if the money supply is carefully rationed such that the amount of currency in the system actually does represent the true productivity of that nation, increasing and decreasing as needed to maintain the correct balance. For the US, this used to be the case and the dollar had solid buying power. These days? Not so much. WAY too many dollars have been printed and productivity has declined, so the value of the dollar has shrunk considerably. Since every measuring system needs to have a standard and gold and silver have served in that capacity before, we can look at monetary and financial matters in terms of gold and silver if we choose to do so. Seen in that light, gold and silver are maintaining their value quite nicely but the dollar and some other currencies are falling like dropped rocks. This is why we have such expensive commodities these days. It simply takes more of these cheap fiat currencies to buy less and less REAL goods.



Is it? Or is it much more likely that we just have a slightly differing view of the world?

Any time, friend. In the SHTF scenario, helping hands are always welcome!

I agree with your comments on the retirement plans. They do have an excessive number of rules and whatnot but a lot of this is defensive on their part to prevent people from abusing the system... and they will, of course, if allowed to do so.

I once had a 401k plan, which is probably THE best retirement idea ever... and it was completely unintentional on the part of the US government. It just sort of unfolded this way because a very creative gentleman named Ted Benna interpreted IRS rules in a way that no one else ever had before... and the IRS agreed with him! In any case, my 401k was the reason I was able to retire at age 55. Without it, I would have been working until my pension kicked in at age 65. The juicy part is that not only did my 401k allow me to retire early, it also pays about 50% better than the old pension plan would have. Not at all bad, crummy rules and all!