CHINA-RUSSIA COALITION TAKE DRASTIC STEPS TO COLLAPSE DOLLAR
The deliberate collapse of the American dollar and thus our military might, likely has taken drastic steps forward with the creation of a new financial institution and agreement between Brazil, Russia, India, China and South Africa (BRICS) determined to see the dollar cease being the world's currency. It is the fact that the dollar IS and has been the world's currency since the end of WWII that allows the U.S. to rack up enormous debt without feeling the full consequences of those decisions. It appears this is about to change. - W.E.
The reign of the United States dollar as the only reserve currency in the world may be coming to an end.Over the last five years, the U.S.-centric balance of economic and military power has been destabilized with the crumbling of the social welfare states of the European Union and the rise of the state-sponsored capitalist BRICS: Brazil, Russia, India, China and South Africa.
After 70 years of the dollar’s supremacy, the BRICS at their summit in Durban, South Africa, have reached an agreement to establish a joint financial institution that would serve the same functions as the American-dominated International Monetary Fund and World Bank. With America hurting and Europe terminally burdened by debt and loss of economic competitiveness, the BRICS appear to be seizing the opportunity to attack the dollar’s preeminence.
As World War II was moving to its end in 1944, the U.S. and 43 allies reached an agreement at the Bretton Woods Conference to organize the International Bank for Reconstruction and Development to finance the rebuilding of Europe. The conference led to the establishment of the General Agreement on Tariffs and Trade, the International Monetary Fund, and later the World Bank.
These organizations were intended to promote international trade, finance, and the globalization of securities transactions. The agreement allowed the United States to bind countries into a capitalist bloc alliance during the Cold War. The key to these arrangements were the U.S. dollar as the world’s reserve currency and U.S. military as the world’s policeman.
Sparked by IMF and World Bank financings in U.S. dollars, the Bretton Woods agreement led to an era of unprecedented economic growth in Third World developing countries. The U.S., Japan, Germany, UK, and France, with 10% of the world’s population, still dominate the IMF with 37.37% voting control. With one third of the world’s population, BRICS control just 11.37% of IMF voting rights.
But the historic downside of Third World progress was often high inflation, compounded with debt-financed social welfare spending. Over-leveraged developing nations’ economies tended to suffer high inflation, which destroyed the value of their currency. With their borrowings denominated in U.S. dollars, the relative costs of paying interest in U.S. dollars skyrocketed. As BRICS regularly got into financial trouble, the IMF prescribed spending cuts and higher taxes as the cost for bail-out financing.
Former Brazilian President Luis Ignacio Silva protested that the U.S.-dominated IMF was at war with the Third World: “It is a war by the United States against the Latin American continent and the Third World. It is a war over the foreign debt, one which has as its main weapon interest, a weapon more deadly than the atom bomb, more shattering than a laser beam.”
But over the last five years, the United States and its developed nation allies are the countries suffering from protracted debt and deficit spending crises. Instead of taking their own prescribed “medicine” of spending cuts and tax increases in a financial crisis, Europe and the U.S. dramatically increased deficit spending. The current economic system and financial institutions were built around the U.S. when it was the only industrial power with the resources to stabilize a crisis. The United States is currently in no financial position to micromanage global affairs.
For the BRICS, this current period of financial weakness provides a strategic opportunity to escape the economic and military dominance of the United States. By pooling their resources to form independent financial institutions, they expect to have enough resources to finance higher levels of investment in member countries and stabilize any new foreign balance-of-payments crises.
China just concluded a large-scale military weapons purchase agreement with Russia for highly advanced submarines, fighter aircraft, S-400 long-range surface-to-air missiles, jet engines, large transport aircraft, and aerial refueling tankers. Combining Russia’s highly competitive military technology with China’s sophisticated manufacturing expertise creates a significant military supply competitor to the United States. If other BRICS make similar arrangements for military equipment, America’s future weapons dominance may be in question.
The United States benefited enormously from having the world’s dominant reserve currency since World War II. By dominating the International Monetary Fund and World Bank by controlling the largest bloc of votes, the developing world has been beholden to American interests. But with the BRICS uniting their regional strengths into an international financial and potentially military alliance, the era of the all-mighty U.S. dollar may be coming to an end.