Dr.

Parasaran Rangarajan
July 24
th
, 2014




BRICS Capitalization On The Dollar





The new BRICS Development Bank has set off bells in the western world and
rumors are flying on the possible fall of the dollar as the major international currency.
U.S. dollar holdings in foreign banks have fallen over 20% in the past 10 years. However,
100% of the capital in the BRICS Development Bank is the dollar.

This is a very strategic move on behalf of the BRICS and it is not to improve the
value of the dollar in any means. It is well known that the American Dollar printed by the
Federal Reserve Bank is hedged on the stock market and the developing capitalist
economy and not on any solid ground such as gold or oil as some other countries
maintain. This is a positive and negative sign for the dollar as currency hedged on
resources is outdated as the need for currency greatly outweighs the amount of gold
available in todays world. One must also take into account the strategic advantage that
other nations hold over the U.S. dollar.

First, examining the U.S. economy; the main export are arms and innovation but
the U.S. is far from a commercial powerhouse in other sectors. Thus, it is responsible for
taking the burden of the worlds imports on hand and its main export is already sold by
Russia with equal or near equal strength and the innovation by the U.S. is provided
largely by an immigrant population which shares the innovation back with their country
of origin as the entire of the U.S. is a land of immigrants except for the Native Americans
and Western Latin American indigenous peoples which are conveniently erased from
western history books. The U.S. more so has been a convenient methods by foreign
lobbys to accomplish political goals through funding Congress and the willingness of the
U.S. to military intervene but this has been met with large failure as money does not buy
loyalty in relation to security. This is a reason why Russia has won the proxy wars with
the U.S. as of late in Syria, Ukraine, etc and even with Libya; it was Russia who gave the
final approval at the U.N. Security Council to authorize the new regime and the fall of
Col. Khadafi. The BRICS Development Bank proves this exactly as foreign exports of
Brazil, Russia, India, China, and South Africa to the U.S. returns in the dollar which has
been used to build an entire new bank to challenge the IMF as BRICS feels that their
growing status as a superpower alliance is not being paid heed by the western world
which drafted the original documents of the current international economy.

The simple way of putting it is; the U.S. dollar is purchased as a strategic tool to
keep global inflation down in our interconnected world. However, a scenario of
devastating impact on the dollar can unfold which has made currency traders a bit
questionable on the future of the dollar.

The U.S. has borrowed trillions of dollars from the Federal Reserve without much
export to back it which is why the military budget must be sustained. When the U.S.
military budget is not sustained, there is no justification for printing the dollar and
international markets look down upon the dollar. Although we live in an interconnected
world, many of todays nations have gained or are gaining self-reliance, especially in
Asia and Eurasia. The rise of the main exports of nations such as Saudi Arabian oil,
Indian and Chinese gold, and Russian arms, African agriculture can all play a role in
bringing the 70 year rule of the U.S. dollar down.

For example, if the main import products of the U.S. were given a 10% increase
by the exporter, the U.S. will face heavy inflation and will have no choice but to continue
buying the product to keep the dollar as the main currency in the world or face extinction
of the dollar. This in turn would make foreign economies rise as well.

This is not merely theory as it has been put to use by Middle Eastern nations such
as Saudi Arabia when the U.S. directly or indirectly gets involved in a conflict as Saudi
Arabia, UAE, and the other oil kingdoms choose to increase the oil barrel prices if it is
not beneficial to them. This was most recently seen with the opening of the U.N. Human
Rights Council Independent International Commission of Inquiry (IICOI) established to
investigate Israel of serious war crimes such as genocide and crimes against humanity as
oil prices were raised. The availability of oil certainly did not change in this short 17 day
time span of the Israeli war with Hamas to raise prices but investor confidence and the
will to sell certainly did. This is also reason why all European nations abstained from the
vote as the U.S. stood alone in the world to vote against the resolution taking the inflation
but this is just a minor example of what the future holds as far as economic strategies to
influence the international political decision making processes.


The BRICS Development Bank chose to start off by putting the dollar as the main
form of currency for this reason. In that it has ultimate control over the dollar by raising
the prices of exported goods to the U.S. In addition to the dollar falling on foreign banks
by over 20%, only 10% of the World Bank currency is in U.S. dollars so to the IMF or
World Bank, the dollar is of irrelevance in development projects and only useful as a
trading tool.

The BRICS Development Bank on the other hand sees the U.S. dollar as the main
currency to use in development of other nations and will continue to buy the dollar until it
is inflated to a point where the Federal Reserve cannot sustain the requirements for the
international development needs of the world today. More so, BRICS nations do not use
the dollar in trading between themselves but use their currency of origin as a global
economic alliance has now formed such as the European Union and Central Bank which
is a very good example of how the dollar was subsidized as the Euro is worth more due to
its gross worth backed by the development of the European Union, not the exports of its
products.

The rise of India and China will play a major role in any future development of
changing the international economic order as nations are confident to invest in these
nations due to the growth rates of over 6% annually. Just today, June 24
th
, 2014; the
World Bank President hesitantly welcomed the BRICS Development Bank stating that
hopefully it will not be a challenger to the IMF and also stated that the world needed
India while quickly investing nearly $18 billion USD into the BRICS Development Bank
to have some shares for leverage. However, as mentioned, BRICS is related to the
European Union as it is self-reliant economically as the development of nations provided
by foreign capital, whether it be the Dollar, Yen, Euro, etc will result in the rise of the
currency of the originating nation. Generic brands produced domestically have
contributed to the rise of being a commercial or industrial powerhouse. The current U.S.
GDP is $16.8 Trillion while China is at $16.2 Trillion and combined with the other
nations of BRICS, it outweighs the U.S. and its alliances as the European Union is not
dependent on the dollar in many cases.

There is also the possibility of the BRICS maintain an international stock market
such as the European Unions regional markets with much more potential for growth due
to the development of these two rising superpowers. Ultimately, if the investment is in
dollars, the dollar will be bought out by BRICS or handed out by the U.S. in investment
projects in attempts to keep the dollar relevant but one must realize that by doing so; a
return may be possible for the U.S. but it will not match the return that the receiving
country has gained.

While some critics have pointed out that the BRICS Development Bank is more
of a PR stunt and more talk than walk, there is an entire economic, political, and strategic
alliance that has been formed in the last month with no reliance on the dollar but only to
abuse the dollar. When the U.S. realizes this, BRICS will be a global contender on the
international economic market.