The BRICs Ride to the Rescue!

The BRIC nations take charge at the G20 Summit
(you might wanna take time to learn their names)

President Obama made lackluster comments about the eurozone debt crisis in his closing news conference yesterday at the G20 summit in Los Cabos, Mexico. There wasn’t a single gram of meat in it.

What went largely unreported is that the BRIC nations galloped into town like cowboys on stallions to help save the eurozone. They came ready for action while everyone else just stood around pointing fingers at each other.

The BRICs held their own pre-summit mini-conference where they stressed substance over talk.

There is a paradigm shift happening. A power shuffle is moving inexorably forward toward a new world economic order.

The 3rd world is becoming the leader and the developed nations are becoming the followers.

Who are the BRICs?

The BRICs don’t get much attention in the United States, but they do everywhere else. The BRICs are an alliance of six developing nations that grows stronger by the year.

Those nations are: Brazil, Russia, India, China and now South Africa.

These guys are no lightweights. Together they have a combine GDP of just under $14 trillion. That compares favorably to $16 trillion or so for the United States and whatever is left of the European Union’s GDP.

Since 1980 the BRICs share of world GDP has risen to about 24% while the original G7’s share has dropped precipitously to 40%. The two are moving in opposite directions.

The BRICs make the stuff the rest of the world buys. Their economies have suffered the least from a downer world economy.

Whats the plan, Stan?

The BRICs rode into town with two main objectives:

  • Recapitalize the IMF to the tune of $189 billion or so more
  • Setup currency swaps to help grease the wheels of eurozone businesses

In other words, led by the BRICs, emerging economies outside Europe are putting their money where their mouths are. Nobody else did squat.

The International Monetary Fund (IMF) cannot further help revive eurozone productivity through job creating investments unless it gets recapitalized.

The BRICs unilaterally took it upon themselves to do just that. They have a dog in the fight and want to take decisive action before their economies are dragged down much further by events in Europe.

Conclusions

President Obama could have at least offered discounted dollar swaps through The Fed at the G20. Its a small token and typical of what The Fed does for other nations to support its full employment mandate from the Congress.

It doesn’t cost the U.S. a red cent. In fact, it makes money for The Fed. But he didn’t even do that.

A lack of positive action by the U.S. President and infighting over austerity vs. stimulus within Europe shows the developed nations are in gridlock.

It might not be enough, but the BRICs are about the only nations with the kahunas to do anything.

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Jun 20, 2012, in Business, culture, economics, eurozone, Global Economy, Life, news, Opinion, Politics, Thoughts. Bookmark the permalink. 3 Comments.

  1. I disagree with your primise, AZ. The BRICs are exactlu who should be capitalizing the IMF. In my opinion, they are late to the party. Also, the Fed does currency swaps regularly.

    • You are correct… the BRICs have benefited most by the IMF and should help recapitalize it.

      Also, the BRICs are huge beneficiaries of eurozone excesses and can and should help rectify the eurozone’s folly.

      Imho, The Fed needs to do more.

  2. Obama did nothing because he is a weak president. The main stream media like to say he is great, like an FDR, riding into town when there is a depression. But his policies have at best kept the patient, the US economy, breathing, but it still cannot stand on its two legs. BRICS are going leave us in the dust. During the 21st Century, America finds itself electing very mediocre talent to the top job, just like 1836-1856 and 1868 to 1904. As long as this nation continues to think that people like Donald Trump should be President, we are in decline.

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