BRICS Collaboration and Currency Markets
BRICS Collaboration and Currency Markets
As the developed world goes up in flames and is chocking on tremendous debt burdens from Washington to Brussels BRICS, which stands for Brazil, Russia, India, China and South Africa, collaborates further and creates a $100 Billion fund in order to combat currency crisis in the future. They did not reach an agreement on creating a development bank.
According to Russian Finance Minister Anton Siluanov made the following funding proposal public at a meeting in Durban, South Africa as far as contributions are concerned:
- Brazil: $18 Billion
- Russia: $18 Billion
- India: $18 Billion
- China: $41 Billion
- South Africa: $5 Billion
Total: $100 Billion
BRICS have a total of $4.4 Trillion in currency reserves and 43% of the global population, but not the appropriate financial influence which is why BRICS does and will further work together in order to create the tools necessary to counter those of the developed world. All five countries have felt the negative impacts of mistakes made by the U.S. Federal Reserve, the Bank of Japan and the European Central Bank.
The $100 Billion fund will allow BRICS to combat financial maneuvers taken by the developed world which are the cause of negative economic impacts around the world, strengthen financial stability, cover short-term liquidity squeezes and provide mutual support among each other. Brazilian Finance Minister Guido Mantega stated back in October that the fund will be modeled on the Chiang Mai Initiative.
While broader consensus was reached on another financial weapon, the creation of a BRICS development bank which is heavily opposed by the World Bank as well as International Monetary Fund for obvious reasons, a detailed plan was not provided. India proposed the idea over a year ago and Brazil as well as Russia said they could contribute $10 Billion each to the bank. The BRICS development bank may be modeled on the Chinese Development Bank.
The first BRIC summit was hosted four years ago and three years ago they invited South Africa to join their ranks and created BRICS. They will work much closer together on all possible fronts in order to counter the mistakes made by the developed world, namely by the U.S., in order to shield their economies as well as their citizens from the negative fall-out.
The creation of the $100 Billion fund is another powerful step in the right correction in order to limit the negative impacts on currency pairs due to the poor decisions made by the U.S., Japan and the EU. It will allow BRICS to increase their influence and counter the moves made which may bring more stability to forex markets or at least limit the impacts or duration of it. We see heavy moves in the USD and Japanese Yen due to direct market manipulation by the U.S. Fed and Bank of Japan which distorts the natural path of chart patterns in currency markets and this fund is the first step in order to combat terrible decisions made by a few.