BRICS get serious

Brazil, Russia, India, China and South Africa – the so called BRICS alliance have talked for some time about setting up a de-Americanised alternative to the global monetary system for themselves and other emerging nations.  At their annual meeting this week they took their first definitive step by announcing the establishment of their own version of the IMF and World Bank, with an initial size of $100b.  They, with others, are clearly tired of the US centric IMF.  Indeed tellingly Putin was quoted as saying it is “a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies.”  

Further in a clear warning on the USD’s continued dominance as the reserve currency they also stated “The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures”. To put BRICS into perspective for you, their combined GDP of $16t is about the same as the US’s and population of 3b nearly 10 times the US’s 318m.  Context for gold?  Well for a start it is another step closer to the fall of the USD, but it is also a precautionary step to try and shield themselves from the fallout out of the looming US debt crisis, which is a telling indictment on the global economic situation. Oh, and China, Russia and India bought nearly all the gold produced last year….