GOLDBRICS

Yesterday (7/23), an article in the prestigious foreign policy journal The Diplomat began:

"Although the tragic incident of MH17 now attracts global attention, the real big news last week was the establishment of the BRICS development bank at the BRICS summit in Brazil."

Although the article displays the blatant bias of its author as a professional Chicom apologist (Dingding Chen is a professor of government at China’s University of Macau), there are many in the West and the US who agree – particularly among those who root for the collapse of the dollar.

Despite Mr. Chen’s hyperbole, the BRICS’ New Development Bank is worth paying attention to as a possible competitor to 1) the IMF & World Bank, 2) the SWIFT international banking transaction network, and 3) the US dollar as the world’s reserve currency.

The key word in the sentence above is "possible" – for when you examine each of the BRICS individually (Brazil, Russia, India, China, and South Africa) you begin to see what’s possible here is not very probable.  Competition for the SWIFT/IMF/US$ hegemonies is to be welcomed – but it is very unlikely it will be provided by this crowd.

Far more possible is the group will become known as the GOLDBRICS, given Webster’s definition of "goldbrick" as: a worthless brick that appears to be of gold; something that appears to be valuable but is actually worthless.

Let’s begin with their "R" – Russia.  The whole BRICS Bank thing died three days after it was born with the Putin Huilo becoming an international pariah via his mercenaries shooting down MH17.

If the Putin Huilo had any real brains, he would have immediately said the shootdown was a tragic mistake, ordered his mercs in Ukraine to abjectly apologize, quickly welcomed international inspection teams to the crash site, and gotten his drunken mercs the hell out of the way.  But no, he has to go full Soviet with denials, delays, and ludicrously conflicting disinformation that only Ron Paul could believe.

As a result, he’ll forever be a pariah.  The Euroweenies may not confront him straight up, but he’ll always be regarded as a Soviet thug deserving of no genuine respect.  Capital flight will continue, the Russian economy will continue to spiral down the toilet bowl of recession and depression, the ruble will continue to depreciate.

And there’s no way for the Russian economy to spiral back up because it’s run by folks with a Soviet win-lose anti-capitalist mentality. That the ruble could ever compete with the dollar is a joke.  Delete the "R" – so now we’re down to the BICS, like the company that makes cheap razors and pens.

Next, delete the "S" as South Africa is there just to make Africans happy.  Albeit that South Africa is the continent’s largest economy, its GDP at $350 billion is tiny (half of one percent of global GDP), and has been falling for the last three years.  The Rand has lost over one-third of its value against the dollar since 2011.  Goodbye.

Now for the "B."  Brazil is huge, no doubt.  Almost the same size of the US, 200 million people, world’s 7^th largest economy – under Lula da Silva (president 2003-2011), its economy finally took off with everyone predicting the end of its curse: that "Brazil is the country of tomorrow, and always will be."

Alas, it’s been downhill for Lula’s successor Dilma.  Brazil has a commodity-based economy and China stopped buying all of her soybeans.  Since 2011, the Real has dropped 30% against the dollar, while GDP has been falling until now it’s barely above water at under 1% with many analysts saying Brazil is in recession.  Prime interest is at 11% while inflation is getting close to 7% and rising.  Forbes expresses the general consensus that no one sees light at the end of Brazil’s tunnel.

Delete the "B" for the foreseeable future.  Brazil’s tomorrow is still a long ways off.

What about the "I"?  It’s all on the shoulders of Narendra Modi.  India’s Asian Tiger days ended a while ago – the Rupee is down almost 50% against the dollar since 2011.  The level of corruption and the maze of bureaucracy is beyond Byzantine – a blizzard of forms is required for approval to do anything, and a bribe is required for a bureaucrat’s stamp on every one.

Modi was able to sweep a lot of this away when he was governor of Gujarat, the reason it’s India’s best state economy.  His task is absolutely monumental, but if he can do for his whole country what he did for his state, India will be a tiger again.

That said, Modi was smiling and holding hands with his BRICS partners in Fortaleza, Brazil last week for strictly political and national security reasons – not for anything economic as he’s well aware of all the facts above.  Further, he has no intention of helping make the Chicom Yuan the world’s alternate currency to the dollar. 

No, Modi’s in the game to make it harder for Beijing to wage border wars with India and try to strangle her with its String of Pearls strategy in the Indian Ocean.  He’s in the game to prevent China from replacing the US as the world’s economic hegemon.

So now we come to what this BRICS charade is all about, the Big "C" – Chicom China.  The total BRICS GDP is $14.68 trillion – of which China’s share is $8.23 trillion or 56%.  US GDP by itself is a full trillion larger at $15.68 trillion.  Oh, but we’re in deep debt doo-doo.  The US economy is going to collapse, the dollar is doomed, China is THE FUTURE, blah, blah, blah.

We’ve heard this off-key tune before, the Soviet Union was going to overtake us in the 70s, Japan was going to overtake us in the 80s, now China will.  The news is that Chicom China is the most indebted nation on earth, not the US, as a debt-to-GDP ratio.

China’s debt is now 251% of its GDP.  What’s more, it’s the speed at which this debt is accelerating.  It’s risen over 100% in the last four years, and risen by 20% in the last six months.  US federal debt is 101% of GDP.  Sure, our government deficit spending is horrendous – but China’s is worse.  The Chicoms keep printing trillions of yuan to corrupt state-owned companies and local governments that just go into Red Princes’ pockets.

What’s even worse is that China is still a Third World country with a crony capitalist economy that dwarfs Zero’s cronyism.  All corporate governance is dictated by the Communist Party apparat. Not one single Chinese company ranks among the world’s Top 100 Global Brands.

Take a look at that list – how many American brands do you see?  And the yuan is going to replace the dollar??

For all its spectacular growth, China remains a "processing-and-assembly" economy, with little creativity or innovation.  It’s hard to find a single area – technology, medicine, business, education, etc. – where China is setting global standards.  Of the Top 200 Universities Worldwide, only 2 are Chinese.  76, by the way, are US and the ranking is done by Brits.

China ranks 101^st out of 187 countries in the UN Human Development Report.  Almost 200 million Chinese live on less than $1.25 a day.  Its environmental pollution is the worst in the world.  Basic human freedoms of course are ghastly, with the Communist Party unable to respond to criticism of its rule with anything except increased repression.

Which brings us to the main point of this exercise.  The only one of the BRICS with any sympathy for free market capitalism is Modi’s India – and that’s because of Modi himself.  India, like all the others is a dog’s breakfast of socialism, protectionism, corruption and crony capitalism on scales light-years beyond the US. 

I’m rooting for Modi to get India out of its mire – but the last thing the others will do, especially China and Russia, is give the world more economic freedom and non-crony capitalism.

I’d love to see an alternative to SWIFT.  I’d love to see FATCA get kicked in the face.  I’d love to see the IMF gone with the wind, and the Fed with it.  I’d love to see the world using real money, not debased paper.  But it’s not going to be some GOLDBRICS led by the Chicoms who will do it.

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