Among all the threats against the value of the U.S. dollar, one of the most-formidable comes from the emerging markets.
The BRICS in particular are actively working to reduce the importance of the U.S. dollar in international trade. And in today’s video, we’ll cover three ways they’re doing just that … including one major offensive they’re launching early next year that could alter the international-finance landscape as we know it!
Hi, this is Rudy Martin for Uncommon Wisdom Daily.
You may not be hearing much about the currency war, but I’m here to tell you that it’s still going on, especially in the emerging markets.
The Brazilian finance minister first raised the subject of a currency war two years ago, when the U.S. Federal Reserve instituted its first round of quantitative easing. The program flooded the markets with newly printed dollars, boosting asset prices.
Many other countries were concerned that the move would also devalue the dollar, helping the U.S. inflate its way out of debt and giving its exporters an advantage in the international markets.
That hasn’t happened yet, but emerging-market nations such as China, India and Brazil are still fighting the currency war — trying to reduce the importance of the dollar in international trade.
The first tactic they’re using in this war is the currency swap.
At a summit of the BRIC nations — Brazil, Russia, India and China — earlier this year, they agreed to trade in Chinese yuan, rather than U.S. dollars. Since then, Brazil and Argentina have begun selling their oil for yuan. And last month, HSBC India implemented the first yuan-denominated cross-border trade transaction.
In addition to these currency swaps, emerging markets are also creating their own institutions.
China and Russia recently committed $1 billion each to a new joint investment fund. And BRICS countries, including South Africa, are now in discussions about establishing a joint development bank to fund new infrastructure projects.
Finally, emerging markets are making aggressive moves into the United States itself.
Three state-owned Chinese banks recently purchased U.S. financial institutions — the first time that’s ever been allowed. Now, investors will be able to open yuan-denominated accounts at some U.S. bank branches.
Clearly, the emerging markets are still fighting the currency war. And I believe they’ll launch their next big offensive at the BRICS summit in South Africa this coming March.
That’s when the joint development bank is likely to come online, giving borrowers a new alternative to the World Bank and other international-finance institutions.
For investors like me and you, it’s just another reason why the emerging markets will offer the best opportunities for profit over the coming decades.
I’m Rudy Martin for Uncommon Wisdom Daily. Thanks for watching.