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Don’t miss our next trade idea. Get on the Bear Traps Report Today, click hereBRICS+ Three-Day Summit at Kazan
A core thesis of our new book — “When Markets Speak“ is found in the hubris in Washington around the USD. A) sanctions abuse over 15+ years by the GOP and Democrats, and B) property confiscation (Russia) are the catalysts. What are the long-term side effects? Global public debt tripled since the mid-1970s to reach 92 percent of GDP (or just above $91 trillion) by end-2022. In recent years, as interest rates surged, global central banks are now collecting MUCH HIGHER coupons and interest. We believe – as stated in “When Markets Speak“ – that a significant part of this excess cash flow, central banks are putting / will place that overflow interest in gold and other hard assets — away from USD.
Planet Earth and the USD
In private transactions, per the IMF, although the United States only makes up a quarter of global GDP and just over 16 percent of world exports and imports, the U.S. dollar continues to be represented at a disproportionately higher rate in financial transactions. Approximately half of all cross-border loans, international debt securities, and trade invoices are denominated in U.S. dollars, while roughly 40 percent of SWIFT messages and 60 percent of global foreign exchange reserves are in dollars. Per the NY Fed, the percentage of foreign currency debt denominated in U.S. dollars has remained around 70 percent since 2010.
The Summit
Putin opened his remarks at the largest foreign policy event ever hosted by Russia by formally acknowledging the Kazan declaration which covers the following topics. 1) Ukraine should be resolved through diplomacy; 2) concerned about Gaza, the West Bank and Lebanon, Israel’s military offensive, the loss of civilian lives; 3) objects to sanctions; 4) expresses a need to reform the international financial system; 5) establishes a grain exchange and trading platform called the BRICS Grain Exchange which will eventually cover all agricultural produce; 6) seeks to develop the BRICS Interbank Cooperation Mechanism (ICM) which will focus on financing of local currencies and other financial practices; 7) affirms support for the IMF; 8) affirms support for the G20; 8) affirms the need to protect species of large cats.
Review of Putin’s Speech:
He stressed that business activity is shifting towards emerging markets. He pointed to the debt loads of developed countries and protectionism as destabilizing geopolitically and fragmentation of international trade which in turn causes inflation. He believes BRICS countries are more fiscally responsible. He believes the purchasing power of the BRICS is greater than that of the G7 and will grow. As a result, he believes BRICS should enhance coordination in technology, resources, trade, logistics finance, insurance and capital investment. A key focus is the sustainability of supply chains. He claims that fighting global warming is a means to suppress BRICS+ economically. He is for establishing a BRICS arbitration center to resolve internal disputes. He stressed that the establishment of a BRICS grain exchange will protect BRICS countries from external interference. He wants a full-fledged commodity exchange. He pushed for further cooperation in mineral exploration. According to him, the minerals market is hampered by trade barriers, which wants to see dropped within BRICS. He wants to see better transport connections between BRICS countries. Another significant goal of his is to cooperate on Artificial Intelligence.
Our Read:
This was Putin’s laundry list of everything he could think of that he wants. We didn’t know he liked big cats so much! In any case, there was a sense of “Together, we are bigger than Russia’s enemies” which, intriguingly, implies Russia cannot go it alone.
Review of Xi’s Speech:
After bemoaning the situation in Ukraine and Gaza, Xi shifted to greater cooperation in Artificial Intelligence among BRICS members. He pointed out China’s role in providing minerals for technologies that reduce carbon emissions. He believes legal governance for what he termed “the Global South” needs to be reformed. He wants further financial and economic coordination and towards that end lauded the New BRICS Development Bank. Overall, his remarks were much less specific than Putin’s.
Our read:
The only thing Xi wants is a financial system not dominated by the West, plus all the minerals he can lay his hands on, and he wants it in a legally binding way to China’s advantage.
Don’t miss our next trade idea. Get on the Bear Traps Report Today, click hereReview of Sissi’s Speech:
He stressed Egypt’s desire for a multipolar world so that the developing world can be placed on a path of sustainable growth. He expressed pride that the first meeting of the New Development Bank was held in Egypt this past June.
Our read:
Basically, he will agree to anything if the other BRICS countries give Egypt more money.
Review of da Silva’s Speech:
He video-conferenced his speech from Brazil, saying that BRICS represent 36% of global GDP, and within BRICS territories is 76% of the manganese, graphite, and rare earths of the planet. He too stressed the importance of creating a financial system to reduce costs between BRICS members. He celebrated that the New Development bank is now 10 years old and is considering $100 billion worth of projects. He pointed out that he does not want to replace domestic money, however. Brazil will have the Presidency of BRICS for the year going forward.
Our read:
He wants the benefits of expanded BRICS powers without risk to Brazil’s sovereignty.
Review of Modi’s Speech:
BRICS accounts for 40% of the global population and 30% of the global economy. He is happy that the New Development Bank has current projects worth $35 billion. He wants the bank expanded. He wants more infrastructure projects. He is in favor of greater financial consolidation among BRICS members. Towards that end, he thinks the Unified Payment Interface developed by India and used between India and the UAE is working well and should be expanded throughout BRICS members.
Our read:
He wants more infrastructure in India and wants money for the projects to flow freely.
Review of Pezeshkian’s Speech:
The representative from Iran complained about the one-sidedness of Western hegemony and that the expansion of BRICS into BRICS+ is part of that solution. He wants the US dollar’s dominance to be reduced. He favors a BRICS currency basket. He believes the New Development Bank and the Reserve Fund should address the problems of payment imbalances and favors an integrated electronic platform to enhance trade between BRICS+ members.
Our read:
Iran’s membership in BRICS+ is a defensive move viz a viz the West.
Overall impression:
BRICS+ wants to reduce the influence the United States has on global trade and finance. The BRICS currency system is being avidly pursued, and Putin was actually given a BRICS currency bill at the summit, over which he beamed. We think that on the surface, the talk was about finance, currency and trade, but that under the surface it was about Russia, China, and Iran thinking militarily and the rest of the members thinking about how to make more money. As such the latter group seemed just a touch more cautious than the former. It is telling, too, that Xi said the least. He would like to hide his cards, but the reality is he wants China to dominate the world militarily and economically. Furthermore, the “Global South” is really about Africa and its mineral deposits. Finally, and not surprisingly, for all the talk of unity, each country seems to care about itself and its agendas most of all. We think that multipolarity will continue, but we doubt the US will become a non-entity. We maintain our view that after a meaningful decay (continued loss of market share), the US Dollar will still remain the dominant currency in world trade and finance and that a pruning back of that dominance to some small degree will actually give the Treasury and the Fed greater flexibility. The dollar will not be replaced. It will be given more room to maneuver.
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