Well, I find the idea of a single BRICs currency to be preposterous. A single currency issued and administered by a single Central Bank for Brazil, Russia, India and China? Replacing the real, ruble, rupee and renminbi all at once?
"C'mon man!"
I can think of 500 reasons that will never happen!
Originally Posted by lustylad
You forgot Saudi Arabia, from WYID's post.
You know more about money and the Fed than the rest of us put together, TC excepted. But I'll argue, why not. Like Jews at Masada or Texans at the Alamo, I'll lose. But maybe I'll learn something in the process.
I'm going to kick out India, as I see about "0" chance of them going into a currency union with China.
The USA and Europe have confiscated Russia's foreign reserves to the extent they could, and are debating spending them on the reconstruction of Ukraine. So the Russians are likely to see hundreds of billions in dollar and Euro financial assets go up in smoke. Some Russian financial institutions have been banned from SWIFT, and the USA and Europe have otherwise made it difficult for the Russians to transact in the dollar and the Euro.
China sees the writing on the wall, and is moving money out of dollars, perhaps with a view towards invading Taiwan some day. Or perhaps just because they rightly believe that would make them less subject to U.S. and European pressure.
China and Russia have set up a mechanism to trade between themselves without using dollars.
Prince Mohammed bin Salman, effectively the leader of Saudi Arabia, figures the Biden administration would like to see him in jail for the Khashoggi killing and other crimes against humanity. Now, with the help of China, the Saudi's are negotiating peace with Iran, while leaving the USA and Israel out in the cold. Furthermore, the Saudi's recently announced they would like to start trading in additional currencies, besides the dollar. Like Russia and China, they likely see the risks associated with the dollar and the Euro if they get crossways with the USA and Europe.
So, there's lots of political motivation, especially on the part of Russia and China, to come up with an alternative currency to the dollar and Euro.
There's a lot of trade between the countries, a lot more than between some EU member countries.
The Chinese have invested tons in Brazil, and are by far their biggest customer. Annual Brazilian exports to China are $90 billion, compared to $38 billion for the USA. While we're on Brazil, I'll note the current president is a Socialist. While he appears benign, who knows. At one time Chavez, Ortega and Morales probably appeared benign as well, and they all became good buddies with Russia. Admittedly, I'm stretching a bit including Brazil in this currency union.
The Saudi's and the Russians sell lots of oil to China. And Russia, Brazil and Saudi Arabia all import more from China than from any other country.
All the countries have long coastlines (ok, maybe a little problematic for European Russia) so can trade cheaply among themselves.
Finally, China in terms of purchasing power is the largest economy in the world, and probably set to become largest in nominal terms sometime in the future. China, Russia and Saudi Arabia perennially run current account surpluses and have large foreign reserves. And Brazil, well, maybe forget about Brazil for a minute. Collectively, this group of countries would be a force to be reckoned with, economically.
So, my question for you. If Europe could do it, why couldn't China, Russia, Saudi Arabia and Brazil?
Admittedly from the Chinese perspective it would probably make more sense to loosen exchange controls on the Renminbi and try to make it an alternative to the dollar. And any country entering into a currency union with Russia might be concerned about getting shut out of trading outside of the union.
