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1st sustainable Global Bank funded by BRAZIL, RUSSIA, INDIA, CHINA, SOUTH AFRICA (BRICS) Challenges the Exorbitant Privilege of the US Dollar

 
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1st sustainable Global Bank funded by BRAZIL, RUSSIA, INDIA, CHINA, SOUTH AFRICA (BRICS) Challenges the Exorbitant Privilege of the US Dollar
BRICS Bank Challenges the Exorbitant Privilege of the US Dollar

Tue, 08/05/2014 - 11:04
by Horace G. Campbell

Over 65 percent of the world’s nations keep their foreign exchange reserves in the US dollar, the dominant world currency. The creation of the BRICS Bank and other financial interventions will likely weaken the dollar’s dominance and contribute to the creation a new international economic order.

BRICS Bank Challenges the Exorbitant Privilege of the US Dollar

by Horace G. Campbell
This article previously appeared in Pambazuka News.

“This summit represented a major step in breaking the Exorbitant Privilege of the US dollar as a the dominant international currency.”

At the end of the Sixth BRICS Summit in Fortaleza, Brazil on July 16, 2014, the leaders of the BRICS countries announced the “Fortaleza Action Plan.” This plan is in the context of the Fortaleza Declaration, where the leaders reinforced their position that BRICS would be an international force in challenging the neo-liberal policies of the Washington Consensus. Touching on areas of major destabilization in the world – from Syria to Sudan and from Ukraine to Iraq – the leaders spelt out the need for new paths to peace and for strengthening the United Nations to resolve the outstanding questions of war and insecurity. The most daring aspect of the Fortaleza Declaration was the announcement of a new financial architecture to intervene in relation to the international tensions that have arisen since the Federal Reserve Bank of the United States announced the monetary policy of Quantitative Easing This policy allows a central bank, like the Federal Reserve System, to purchase government or other securities from the market with the goal of lowering interest rates and increasing the available money supply. The BRICS summit announced two new pillars in a new financial architecture that is to be anchored with the headquarters of the New Development Bank in Shanghai, China.

The Fortaleza Action Plan and the outcomes of this summit represented a major step in breaking the Exorbitant Privilege of the US dollar as a the dominant international currency. Along with the formal establishment of the New Development Bank (NDB), the leaders announced the launch of a Contingency Reserve Arrangement (CRA), which in 2013 was approved to receive a $100 billion fund to combat currency crises. The first president of the Bank will be from India, the inaugural Chairman of the Board of directors will come from Brazil and the inaugural chairman of the Board of Governors will be Russian. It was stressed in the Fortaleza proclamations that the BRICS Bank would be organized on the basis of equality unlike the current IMF and World Bank where the leader of the IMF is always a European and the head of the World Bank is always a U.S citizen. The proposal for the BRICS bank had been announced at the BRICS summit in New Delhi in 2012 and at the summit in Durban in 2013 the plan for the CRA was also outlined. The long term goal of the CRA will be to provide emergency cash to BRICS countries faced with short term credit crisis or balance of payments problems. Ultimately, in the context of the present currency wars, the CRA will replace the International Monetary Fund (IMF) as the provider of resources for BRICS members and other poor societies when there is balance of payment difficulties.

“The bank is emerging at a moment when the entire international financial system continues to be in a state of instability because of the recklessness of the predatory speculators of Wall Street.”

When the announcement was made of the bank to be capitalized with the US$ 50 billion and the CRA with US$100b, it was also announced that the leaders of BRICS were also considering the establishment of a BRICS Exchange Alliance to challenge the opaque derivatives market of the Wall Street oligarchs and an energy alliance to challenge the speculative activities of the Intercontinental Exchange (ICE). These four institutions (a) the New Development Bank (b) the Contingency Reserve Arrangement (c) The BRICS exchange alliance and (d) the BRICS Energy Alliance – when fully operational will engender a tremendous change in the direction of creating a New International Economic Order. For as we will outline, the NDB and the CRA will not simply be like other regional development banks such as the European Investment Bank or the Corporación Andina de Fomento (CAF), also known as the “Development Bank of Latin America.” The bank is emerging at a moment when the entire international financial system continues to be in a state of instability because of the recklessness of the predatory speculators of Wall Street. In the midst of this recklessness, the ruling class of the United States is stoking warfare to deflect working peoples from the crisis of global capital.

Read more here:
[link to www.blackagendareport.com]

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