BRICS 2024 (goi-bilera) (6)

BRICS plans to transform the international monetary and financial system, and discussed policies at the 2024 summit in Kazan, Russia. Can it successfully challenge the dominance of the US dollar?

Political economist Radhika Desai is joined by Ben Norton and former central banker Kathleen Tyson, author of the book “Multicurrency Mercantilism”.

Topics 0:00 Highlight

1:24 Intro: 2024 BRICS summit in Kazan, Russia

7:33 Evaluating BRICS proposal to improve financial system

16:47 De-dollarizing trade vs capital markets

24:50 Can a global currency solve the Triffin dilemma?

29:10 Investment flows from poor to rich

30:44 Capital controls

37:16 Could Special Drawing Rights (SDRs) be a new global reserve currency?

42:17 Can a currency backed by a basket of commodities help settle trade imbalances?

48:38 Financial deregulation, Glass-Steagall, and China

53:21 HSBC splits between West and East

55:18 How can central banks de-dollarize reserves?

1:02:35 Controlling finance

1:09:01 What can China do with its huge surplus?

1:16:11 Outro

Transkripzioa:

Highlight

0:00

the bricks want local currency trade in their own currencies as the preferred

0:07

objective uh and to a great extent they’ve achieved that in uh important ways um 53% of China’s trade is now in

0:16

Yuan uh over 90% of trade between Russia and China is either in Yuan or

0:22

Ruble and other countries are making progress 80 countries determined in 2023

0:29

to move to local currency trade is a matter of policy so it’s not just bricks it’s also um I mean I I said this last

0:36

month in Singapore and I think it resonates that currency optionality is

0:42

now a matter of Economic and National Security that no country wants the the

0:49

constant threat of uh dollar sanctions hold over them over their

0:54

corporations over their uh future Prosperity so it uh

1:00

un the Southeast Asian States unanimously agreed to move to local currency trade they’re not in bricks

1:06

although some of them will be next year three of them will be um but you know they they made that decision in their

1:13

Collective self-interest so it’s part of a global movement towards currency optionality

1:19

that that really is underpinned by the need to get away from the constant threat of sanctions hello and welcome to the 35th

1:26

geopolitical economy hour the show that examines the fast changing political and

1:31

geopolitical economy of our time I’m radika Desa so the brick Summit

1:38

in Kazan is over a communic has been issued and as usual commentators are

1:44

dividing between those who overstate and those who dismiss what has been achieved

1:50

the West prefers understating the achievements pointing to important differences that undoubtedly exist among

1:57

brics countries they prefer to portray bricks as fractious directionless and

2:03

indeed vain glorious bricks boosters on the other hand are busy touting every

2:08

little statement of intent as an accomplished fact each marking a major

2:13

Milestone on the path away from Western domination rather than given to these

2:19

equal and opposite Temptations we tread a different path one that is closer in

2:24

spirit at least to the boosters but considerably less inebriated than they seem to be be there is absolutely no

2:32

doubt that the in that the inherited institutions of international economic governance which have long been

2:38

inadequate to the developmental purposes of the overwhelming majority of the countries of the world as we’ve seen

2:45

from decades indeed of organizing among third world countries against them which

2:50

once culminated in a demand for a new international economic order so we’ve seen that these

2:56

institutions are inadequate to the developmental needs of of the countries of the world and they are increasingly

3:02

opposed rejected and criticized by the world majority countries to use the

3:07

Russian nomenclature these countries find their interests not represented by these

3:13

outfits whether it is the IMF the World Bank the WTO and last but not the least

3:19

the vast paraphernalia of the basically privately owned institution that still

3:25

run the world’s money while these institutions are in many ways in crisis

3:30

the internal structure of power relations in practically all the brick countries are reigning in advance

3:37

towards Alternatives because their objective interests still seem to lie

3:43

with the dollar crocy the the the private institutions that run the world

3:49

dollar system though we recognize this we are we are clear about that we also

3:55

understand something else that puts clear blue water between ourselves and those who dismiss the bricks that’s

4:01

something is an understanding that both pull and push factors are leading the bricks and through them the world away

4:10

from the decaying productively enfeebled financialized and Innovation hobbled

4:15

West and towards China that is rising in all these respects and the other bricks

4:21

countries that have a chance to do the same if they learn like China to control

4:28

corporate power this is the recognition we bring to today today’s discussion so

4:33

who are we I’m joined today by our very own Ben Norton the host of the geopolitical economy Report website on

4:41

which the geopolitical economy hour show is regularly hosted welcome Ben it’s a

4:46

pleasure radica thanks for having me on your show and we also have with us a very special guest Kathleen Tyson

4:54

Kathleen Tyson is a expert on the international monetary and financial system she’s started her career at the

5:00

Federal Reserve Bank of New York where she was a Founder member of The Settle settlement system studies group she then

5:08

moved to London to supervise Global Securities Market um and international Central Securities depository Euro clear

5:16

and clear stream she’s the author of a very important book on the subject of the end of dollar dominance and it’s

5:22

called multicurrency mercantilism the new international monetary order and it came out just just

5:30

a year a year or so ago and and the book is about the transition away from the unipolar the unipolar Dollar World so

5:37

welcome Kathleen it’s a great privilege for us to have you on our show thank you radica so today we want to discuss a

5:45

very important and interesting document put out by the Russian government it has been put out by the bricks chairmanship

5:52

research which is presumably the research arm of Russia’s chairmans ship of the bricks in 2024 and it is entitled

6:00

Improvement of the international monetary and financial system as everybody knows the Russian

6:06

government has been in the forfront of countries that would like to see dollarization its enthusiasm has led to

6:13

a a critique of the dollar system in this report that is more profound than practically any seen in official

6:19

documents produced by various bricks governments on the other hand while many

6:25

of the solutions they this document proposes are very well considered others remain problematic precisely because

6:32

they tend as is the want of most governments to concede too much to markets and private power we will be

6:39

arguing that while uh while we support the thrust of the criticisms which point in a marketly progressive direction we

6:47

also realize that these governments as embodied historical actors are um as

6:53

since they embody the legacy of the 40 plus years of neoliberalism still some way from recognizing what really needs

7:00

to be done we make this argument confident in our understanding that the present direction of the West is not the

7:07

way to go while the bricks must aim at a productive Dynamic Innovative exclusive

7:13

and egalitarian economies that is not the direction in which bestern economies are going so let me put an end to this

7:20

very long introduction and ask Kathleen to perhaps start us off with some overall remarks about how she reads the

7:27

report and what she sees as it significance Kathleen please go ahead okay thank you I’m just to preface this

7:34

I have a foot in both worlds um I built most of the capital markets infrastructure that runs the current

7:41

Global Financial system I’m proud of that um and yet also I recognize the

7:47

challenges the instability um the critical vulnerabilities and the need for other

7:54

countries to rise without being constantly threatened with destabilization

8:00

so um I’m really Foo in both worlds right now uh trying to keep friends in

8:06

both worlds too um I did read and summarize the

8:12

report and the key takeaways I’ll just summarize for me and other people will

8:20

read other things into the report but uh the big one was no new currency all of

8:25

the delusional um hyperventilation about a brics currency it’s just that it’s

8:32

delusion the Johannesburg declaration last year was perfectly clear that the

8:37

bricks want local currency trade in their own currencies as the preferred

8:44

objective uh and to a great extent they’ve achieved that in uh important ways um 53% of China’s trade is now in

8:53

Yuan uh over 90% of trade between Russia and China is either in Yuan or Rubble

9:00

and other countries are making progress 80 countries determined in 2023 to move

9:06

to local currency trade is a matter of policy so it’s not just bricks it’s also

9:11

um I mean I I said this last month in Singapore and I think it resonates that currency optionality is now a matter of

9:20

Economic and National Security that no country wants the the

9:26

constant threat of uh dollar sanctions hold over them over their corporations

9:32

over their uh future Prosperity so it uh un the Southeast Asian States

9:39

unanimously agreed to move to local currency trade they’re not in bricks although some of them will be next year

9:46

three of them will be um but you know they they made that decision in their Collective

9:51

self-interest so it’s part of a global movement towards currency optionality that that really is underpinned by the

9:57

need to get away from the constant threat of sanctions um so that was big there

10:03

there’s no new currency um there’s it’s not a goldback currency it’s not a commodity basket currency uh it’s not a

10:09

crypto scam it’s just good old-fashioned dealing in domestic payment systems that

10:15

already exist so that’s the the big headline for me uh beneath that other

10:21

important things from the report uh the core principles of the new monetary and financial system should be security

10:30

Independence inclusion and sustainability um and I think you know I

10:36

don’t think anybody can object to any of those uh they have not agreed a new payment

10:43

system a new multi-currency payment system but they’re working on Parallel

10:49

developments um at uh alternatives to the Swift messaging platform and uh they

10:56

are working on domestic payments interoperability and there have been a few instances in the past year of linking bilaterally

11:04

linking uh domestic Payment Systems so that uh payments become easier cross

11:11

border Russia has proposed that bricks central banks create a supernational

11:18

infrastructure for a common settlement platform but it it is not

11:24

agreed what was finally agreed in the uh bricks Kazan declaration released on

11:32

Wednesday at paragraph 66 uh was that they want to um do

11:39

further work on crossb payments and they you know they they basically delegated

11:45

it back to the central bank Governors and the Ministers of Finance to do that further work and report next year so um

11:53

that you know again building Global infrastructure I can tell you from personal experience is not simple

12:00

it really isn’t and um I I can you know reading between the lines I can see

12:05

where they’re tripping up I can see where the challenges are um by the way

12:11

it’s not unique to them the bank for international settlements this week at the IMF World Bank meetings in

12:18

Washington tried to Railroad uh a multicurrency payment system run by them

12:24

on their on their members and the members said no we’re not having it

12:30

um so it’s it’s not you these challenges are complex and it’s and the Buy in is

12:36

very difficult to um to organically create because uh there’s always a

12:43

suspicion about new infrastructure so um ah this one I like woohoo Russia

12:52

proposes bricks clear now that is news it’s the first time we’ve seen bricks

12:57

clear and what it is is uh 300 million of Russia’s assets got frozen in 2022 in

13:04

euroclear and uh then the proceeds of those assets got stolen and given to

13:10

Ukraine um I I should say expropriated or securitized however you

13:16

want to frame it Russia has been denied a lot of assets and a lot of proceeds from those assets and uh and so what

13:24

they’re trying to do with brics clear is break the euroclear clear stream duopoly

13:29

that collectively Euro CLE and ClearStream hold about uh this is a ballpark figure but

13:35

it’s going to be close 50 trillion in Assets in custody in their

13:41

depositories and Bricks clear wants to get um a a Securities

13:46

depository that can hold brick Securities assets independent of the existing

13:53

duopoly um full disclosure I was uh in fact Deputy General Council and Deputy

13:59

Company Secretary of ClearStream a while back so I’m very I’m very familiar with

14:05

the governance challenges that they’re going to have and just to highlight one of them literally the first principle of

14:12

the principles for financial markets infrastructure is legal certainty which jurisdiction are they

14:19

going to put this new depository in it can’t really be Russia because of the 14,000 sanctions in operation and

14:27

because Executives have a bad of falling out of tall Windows there um and it

14:33

can’t really be China because India will object to more Chinese dominance of the

14:39

Global Financial infrastructure uh and it can’t be South

14:45

Africa Brazil or India because there will be a a lack of confidence in a

14:51

non-discriminatory commercial law so where are they going to put

14:57

it it’s you that’s just one principle out of a long list of principles that

15:04

have to be addressed to successfully build new infrastructure um but bricks clear is

15:11

news I’m I you know I’m I’m particularly interested in the challenge of it um

15:18

having a background in depositories uh and in clearing and settlement Securities Finance it would be a great

15:24

thing to have I’m just not sure where they’re going to put it and how they’re going to do it and I I suspect they’re

15:30

not either because they didn’t even use the phrase ICD in describing

15:36

it so um just the capacity development that’s involved in even detailing the

15:42

feasibility study agreed in the Declaration um is a big

15:47

challenge right um they’ve called for reducing reserves

15:53

in US dollar and moving to other alternative reserves uh they want an

15:59

urgent review the funding vulnerability of Emerging Markets um they want reform of the IMF

16:07

and the SDR as inconsistent with modern needs and uh they’re finding that some

16:13

of the things they have agreed on and tried to implement are now problematic and not serving uh their purpose in

16:19

particular the brics credit rating agency that was an excellent overview

16:24

Kathleen thank you I I do want to say by the way that it’s a real pleasure speaking with you about this I I feel like we’re all privileged because it’s

16:31

so rare to have you know someone from the inside a financial plumber if you will who helped to design these systems

16:37

and is also dedicated to trying to create a more Equitable framework

16:42

because we I mean you can understand better than all of us the problems that exist in these systems um I I want to

16:49

reference an excerpt from your book that actually you tweeted out after you read this report um this is from your very

16:56

interesting book multicurrency mercant ISM which everyone should go out should go by and read and in this book you

17:04

argue that the transition to multicurrency mercantilism will be gradual and you point out that in some

17:11

ways it’s kind of easy to dollarize global trade but dollariz the

17:18

financial system overall is much more complicated so you point out in your book that global trade in Goods in 202

17:26

2023 was approximately 46 trillion dollar approximately half in in US

17:32

dollars so dollariz 23 trillion is not

17:38

as ambitious as the other problems that that the other parts of the financial

17:43

system which you point out this is modest compared to Global Finance in bonds is over $37 trillion dollar in par

17:52

value it’s a lot more now well exactly yeah with uh so much debt growing in the

17:58

United States with you know 120% of GDP US federal debt and 6% of GDP deficits

18:04

per year but um you also point out that the entire market capitalization of equities around the world is 108

18:12

trillion so about five times all of good all of goods trade in one year um

18:17

derivatives just derivatives is 635 trillion in notional value and then

18:25

with in the Foreign Exchange Market it’s nearly two trillion sorry nearly 2,000

18:30

trillion it sounds like it sounds like a joke but in the Foreign Exchange Market alone every year there are

18:37

$1,900 trillion dollar of settlements I don’t even know what what foreign exchange trade is about because when

18:45

when uh when I engaged to build CLS Bank uh the total foreign exchange daily

18:54

transactions were about 830 billion and now every single

19:00

day uh CLS settles an average of 7.5

19:06

trillion in just 18 currencies it’s it’s enormous

19:13

numbers but and it’s it’s completely you know very you know when you think that all global trade annually non dooll is

19:21

23 trillion um it’s ridiculous that there’s that much foreign exchange sloshing around but there it is that’s

19:28

the the system I built and it works no I mean yeah it’s it’s an incredible

19:33

quantity that we’re talking about um so you point out that Capital markets will still be dominated by Dollar denominated

19:40

instruments however what I wanted to point out is that uh it’s true that

19:45

dollariz in global trade is much easier than dollariz in capital markets but it’s also I think more important right

19:51

because the vast majority of the financial flows that we’re talking about and things like derivatives they don’t

19:58

really impact most average people now if if all of those bets collapse and causes another financial crisis that will

20:04

impact people but I think at the end of the day China’s not really concerned and Russia is not concerned with

20:11

dollariz the global derivatives market and and dollariz you know other Bond

20:18

markets I mean what they’re concerned about ultimately is their own security being able to pay for their Imports in

20:24

their currency so China just wants to be able to buy oil and gas in Ren mby and not have to get access to Dollars and

20:31

they’re concerned about their own domestic treasury markets but I don’t think especially now that the People’s

20:36

Bank of China has been reducing its Holdings of US Treasury Securities for a decade now

20:42

uh you point out that it’s actually quite reasonable to ex to suspect that

20:48

countries can in in the medium term it’s not going to happen overnight they can dollarize what’s most important to them

20:56

and still the rest of the capital markets will be but I mean is that really a big issue

21:01

for for the bricks countries right there there was an announcement in the um

21:09

report um from both the Improvement to International Financial market system uh

21:16

and also uh in the brics Declaration that they are exploring

21:24

setting up hubs there was a difference between the two by the way in the um

21:30

international monetary and financial system report uh the Russians proposed setting

21:36

up Regional hubs for trading of oil gas gold and

21:42

grain but the bricks declaration released after that only suggest setting

21:50

up hubs for grain trade although although they said it could expand other Commodities but they’re starting with

21:56

the Grain Exchange they’re starting with UK um and most of them already have gold

22:01

exchanges in their countries Moscow has a gold exchange Shanghai has a gold exchange Dubai has a gold exchange so um

22:09

maybe they just don’t need more gold exchanges um because they already have them but uh um setting up grain

22:17

exchanges for uh trading grain in local currency would be a significant Force

22:24

for stabilizing grain prices to Emerging Markets where uh it’s often uh unstable

22:30

prices in agricultural Imports are a driver of [Music]

22:36

underdevelopment uh so that actually is a big big signal event um Russia itself

22:43

is 28% of global grain exports well no that’s wheat wheat

22:48

exports they also export a huge amount of other things uh soybeans and barley

22:54

and other grains um but uh yeah so Russia moving to create hubs for grain

23:02

trade in the global South that stabilize food prices for the global South would

23:08

actually be a huge win for sustainability and for Equitable development yeah Kathleen made you made

23:15

very interesting points and I I agree what I’m curious about is like I don’t think the bricks countries really care

23:20

about dollariz Capital markets necessarily they don’t care if the US Financial system has all of these

23:27

hundreds of trillions of doll of derivatives as long as it doesn’t destabilize their own Financial system

23:33

exactly and uh yeah you know one reason that that China continues to be a closed

23:40

economy uh and is very cautious about allowing Western financial institutions in uh although they have liberalized

23:48

significantly is because they do not want to be destabilized by the

23:53

vulnerabilities that persistently cause crisis in the West whether it’s dodgy

24:00

securitization underwriting or uh dodgy credit ratings or uh dodgy derivatives

24:07

um that uh that that can blow up Pension funds like we had here in the UK two

24:12

years ago uh it’s they they are very cautious about importing those kinds of

24:18

problems and rightly so I think um as a for you know as a former Market

24:24

supervisor I’m uncomfortable about the risks that we’re running

24:29

yeah so you know I just wanted to intervene here because I think that the point that you raised um Ben about uh

24:36

the difficulty of liberalizing capital markets and the ease with which trade can not liberal sorry the dollarize

24:42

capital markets versus the ease with which we it is possible uh to liberalize

24:47

uh tra uh to dollarize trade this is actually connected with a couple of the

24:52

points that um Kathleen picked out when she was enumerating like some of her main takeaways and I think they are very

24:59

deeply connected and I just want to highlight them because that’s kind of it also connects up this conversation to

25:05

the Legacy historical conversations that Michael and I have had on dollarization

25:10

in this show uh over over the past couple of years so the two points that I

25:16

want to to refer to is the Kathleen your first point that you are very glad that

25:21

they’re not proposing a new currency that uh that that this is you know not the way to go and that they are uh

25:28

propos opposing on working on existing National currencies and of course our argument Michael and I have always

25:34

argued and this is where we basically go with um K’s original argument that uh at

25:40

at Breton Woods when he went there with his original proposals regarding the international clearing Union and a

25:46

bankor is that if there were to be any single currency that will replace the

25:51

existing still multi-currency order because the dollar may be dominant but it is not the only one so anyway the

25:57

existing dollar dominance it will be a currency that is not an ordinary

26:03

currency that you and I can use to uh pay for a restaurant meal or buy a bar of chocolate it will be a currency for

26:10

use between International Banks and it will be used to settle uh imbalances between Banks to clear imbalances and

26:18

periodically and so on so so no new currency is a good thing but the reason

26:23

no new currency is a good thing is because the fundamental premise of the

26:28

dollar system has never been problematized except by people like myself in my geopolitical economy and

26:34

later in my writing with Michael a national currency has never been stably

26:40

and securely the currency of the rest of the world so that um you know Britain was only Sterling was only able to be a

26:48

world currency because it was not a national currency it was an imperial currency which was able to take

26:54

surpluses derived from the rest of the world and fling it as liquidity into the

26:59

international market in a on a grand scale for for for those times and for

27:04

those proportions that were involved the United States dollar was all having no

27:10

Capital to export in a completely different era when you could not afford the kind of

27:16

deindustrialization that Britain took upon itself to inflict upon itself and which the United States eventually did

27:22

inflict upon itself but nevertheless in the immediate post second world war period the us could not export capital

27:28

It could only essentially uh give you know incur deficits as a way of

27:35

providing liquidity and Robert triffin pointed out a long time ago folks this way is inherently contradictory the more

27:41

liquidity you provide the less attractive your dollar and that whole phase came to an end with the Europeans

27:47

simply saying you to the Americans you know you folks keep your valueless dollars you give us gold were’re were

27:54

were not agreeing to it but then what happened is after the US essentially to

28:01

took away the gold backing and refused to give any more uh dollar gold for dollars because they didn’t have any

28:06

money the US Financial system you know a lot of the boosters of the dollar pretended the trifin Dy went away it was

28:13

somehow connected with the gold and with the this move there is no trifin D no

28:19

there has always been a trifin dilem and the way in which the triffin Dilemma has been addressed is by countering the down

28:28

downward pressure on the dollar that the United States deficits will inevitably exert trade deficits current account

28:33

deficits fiscal deficits all these things the downward pressure this will this inevitably exerts has been

28:40

alleviated by Progressive by successive by the inflation of

28:46

successive Financial bubbles you had vast expansion of dollar denominated

28:52

Financial activity and this has nothing to do with trade which is why it is easy

28:58

to dollarize trade uh so that’s the first point I wanted to make and then you know I also wanted to say you know I

29:05

liked your summary because this is also deeply connected so just bear with me for a second I like your summary of the

29:11

main points but I did want to add one more uh thing to it and that is one of

29:17

the well at this point it’s relevant at this point to add one more thing to it and that is that they the report is very

29:25

aware that uh the um the

29:31

um that the existing dollar system is leading money to flow from what they

29:39

call the emerging markets and developing economies emdes to the advanced

29:44

countries and I just want to show you this one chart which I think is a good one so they show us this chart you know

29:50

contrary to what most people who worry about oh you know jobs being lost in First World countries in fact most

29:57

foreign investment uh and these are stocks not flows are actually from uh AE

30:05

to AE so that’s the big blue blue thing here and then these are small amount

30:10

goes from the advanced industrial countries to the emerging and developing economies but here’s the one these

30:16

people are worried about and and the small number even smaller amount goes from emerging and developing to other to

30:22

other emerging and developing but this is the one they are concerned about the most that about 10 and 133% most recent

30:29

figure is 133% is actually going from the uh emerging and developing economies

30:36

into the first world economies and this is the essentially the the the situation

30:43

that they are complaining about how do you create an International Financial and monetary system that avoids this and

30:48

my simple answer I want to put to you is that you can only and I want to you both to comment on it I I I think the only

30:55

way in which you can do it is some version of capital controls you can call

31:01

them something nice like capital account management or what have you but some way of essentially corralling the capital in

31:08

your country and obliging it to be invested and invested productively in your own country is the only way to

31:15

go okay well I’ll start on that one I’m not a big fan of capital controls but I would be a big fan of

31:25

localizing the sale of of uh uh natural

31:31

resources and agricultural output and you know the industrialized Plantation

31:36

style agricultural output into local currencies as a means of uh uh avoiding

31:44

the two-tier pricing of the current system where they virtually pay pennies in the local economy and offshore the

31:52

pricing to somewhere else where the price is much much higher uh before they

31:58

reexport and to me if they can localize the sale of their locally produced Goods

32:07

uh and resources then they have they they will actually capture much more uh fiscal

32:14

stability and it will be in their own currency so free from the instability of

32:20

offshore dollar pricing which by and large never comes back to the local

32:26

economy um I know in Nigeria a few years ago the Central Bank ordered two

32:32

container ships full of cocoa um to be impounded until the proceeds of the Coco

32:38

were paid locally because they knew if those ships left not a penny of the Coco would come

32:45

back to the country and they needed the Coco revenues to service their World

32:50

Bank debts that had funded the corporates

32:55

plantations so but wouldn’t it be that that supposing you localize it by which you mean that they should have for

33:01

example Russia should have the sale of oil and gas in its own in its own territory but more to the point in

33:07

Rubles and and so on but so long as there is no restriction on converting rubles into foreign money would it not

33:13

simply uh uh uh leak out uh of the Russian economy some of it has to leak out if

33:20

they’re going to buy the things they need well I don’t that’s not a Le the question is whether it’s realized in

33:26

country at all um you know they’re going to have to if you want to be an attractive venue for investment you have

33:32

to have some openness um I don’t think you know it

33:38

doesn’t there’s there’s there’s various um

33:43

different requirements in each country uh and I think there needs to be

33:48

recognition that not there’s no one- siiz fits-all solution yeah although China has done wouldn’t be suitable for

33:55

South Africa yeah no I mean again a fair point although I would say that you know

34:00

the amount of liberalization that you have to undertake in order to attract investment may be judged to be too great

34:07

if you consider the fact that actually foreign investment for most countries constitutes a relatively small portion

34:14

of the total grow for gross fixed Capital formation because these days uh the companies like Walmart are not

34:21

investing elsewhere they are basically asking other countries uh entrepreneurs

34:26

to invest and they are just creating Supply relationships with them so in that sense it’s Outsourcing rather than

34:33

FDI that is the dominant Paradigm of the so-called internationalization of production so I think that the kind of

34:39

uh you know given that about 80 to 90% of your investment in any country is

34:44

typically domestic anyway I mean is it a huge cost to pay and you know back in the day when most countries still had

34:51

Capital controls I mean if company if some company wants to invest in Chile’s corer or Russia’s gas they’re going to

34:58

have to come in no matter what because the copper and the gas can’t be moved around it’s there where it

35:03

is there’s still Capital controls in most countries be honest one reason why

35:10

African states don’t trade with each other is because of the horrific mess of

35:15

capital controls that most African states have so they trade with each other through the Euro or through the

35:21

dollar because they can’t trade with each other in their own currencies and that’s a factor of each of them having

35:28

horrendous Capital controls um the only I’ve ever had from a client was an

35:35

African client that defaulted because they couldn’t pay me because of the capital controls or at least that’s what they told me right so I mean you know

35:43

the capital controls are themselves a huge constraint on development I don’t think they’re the answer okay I I would

35:49

just say though of course that the reason for the lack of trade between a lot of you know lack of souths South

35:55

trade more generally and int African trade more generally is often more to do with the similarity of productive

36:02

structures you know if both of you are produced have co coco to export you’re not going to trade it with one another

36:08

so you need to create greater trade complementarities and this is going to be a longer process it’s not going to

36:13

happen tomorrow but yes I’m sure that they are not the greatest designers of capital controls and that this is a is

36:19

this is a problem independent problem as well but yeah sorry yeah well I there’s

36:26

so many problems to solve there how do you choose um bricks has has made clear

36:31

what their objectives and priorities are and uh and just looking at those they’re

36:37

taking a very sensible measured uh course of development you know I I think

36:43

the grain the grain hubs will be interesting to watch just because Russia is such a dominant producer of grains uh

36:51

and because you know the others are all big importers Well India is also a huge

36:56

exporter of grains actually when I when I think about it but unfortunately we’ll

37:01

see how that initiative goes and and then we’ll see if it expands uh because that could

37:09

rationalize and bring down inflation in in a lot of vulnerable

37:15

countries Kathleen you mentioned the issue of uh the fact that bricks in the

short to the medium term is not talking about trying to create a common currency or unit of account but you also

37:28

mentioned that in this report that was written by the Russian bricks chairmanship that they they called for

37:34

strengthening the sdrs the special drawing rights for people people who don’t know this is an international unit

37:40

of account that is overseen by the international monetary fund it’s essentially this kind of international

37:46

currency not not dissimilar to the idea that kan’s proposed of the bond Corp and the value of the SDR is based on a

37:53

basket of five currencies at different weighted values that change over the years which those currencies are the

37:59

dollar the Euro the Japanese Yen the British pound and the Chinese rimi and

38:04

what’s interesting is the report says that the SDR has all of these issues now for instance they can’t be used actually

38:11

in the market they they’re only a unit of account that’s that’s administered by the IMF to to it’s an alternative off

38:18

it’s an alternative Reserve exactly it’s not a currency it’s not a currency it can’t be spent it’s an alternative

38:25

official Reserve but what’s is in the report they they they call for the SDR

38:31

to for new infrastructure to be developed so the SDR could be actually

38:36

used in Market transactions which essentially it’s it’s a step toward creating some kind of uh unit of account

38:43

that could be used to settle trade imbalances that’s backed by a basket that’s the value of which is based on a

38:48

basket of currencies so I’m I’m wondering if you could talk about a little bit more about this this maybe

38:54

the strengths and weaknesses of this idea because ultimately we talked about dollarization of global trade and as you

39:01

point out in your book It’s relatively modest compared to some of the other challenges the other challenge is not

39:07

only dollariz trade but dollariz savings right dollariz reserves held by central

39:12

banks and this could be a reserve asset in fact the report also calls for

39:18

creating new financial instruments that are denominated in the currencies of bricks members including they call for

39:25

essentially strengthening Bond markets and instead of you know having euro dollar assets that are denominated in

39:32

dollar offshore dollars calling for selling these Assets denominated in the

39:38

currencies of bricks members which obviously it might be difficult to convince investors to to buy those if

39:43

there are exchange rate risks but the SDR seems like it could be a way to

39:48

solve that issue what do you I’m a Time skeptic on the SDR um and particularly after the last

39:56

re waiting because uh to me any basket is prone to uh manipulation by the

40:03

incumbents and that’s what we see with the SDR at first they just kept changing the

40:09

formula and now they’ve abandoned the formula altogether in 2015 when they

40:15

admitted uh Yuan as one of the currencies they established a formula

40:20

which was approved by the IMF board uh that weighted the sdrs

40:25

according to uh use in financial markets and exports two

40:32

factors now if they had applied that waiting in 2020 Sterling would have fallen out of

40:38

the SDR because Sterling has lost you know it’s lost its export Market our biggest

40:45

export Market was the EU it doesn’t take our stuff anymore and also in terms of

40:50

capital markets Sterling is insignificant now nobody needs Sterling for anything

40:55

anymore um it’s you know it has Legacy use in some Commonwealth transactions

41:01

but that’s it so instead of reweighting it using

41:07

the formula in 2020 they pled pandemic and delayed the waiting for two years

41:13

and then in dark of night with no no um Fanfare at all announced that

41:20

there’s a new waiting of the basket and here it is with no explanation of how they arrived at it and of course what you’re

41:28

also saying is that this it will never serve the purpose unless the IMF itself is reformed in a big

41:34

way well yes that and it’s interesting that you bring that up radica because I’ve just done a search on the actual

41:43

declaration and it doesn’t even mention SDR yeah so clearly that was one Russian

41:49

proposal that’s been kicked back um yes of course the IMF governance

41:55

is completely out of date and the SDR is completely not fit for purpose

42:01

anymore but um again it’s very difficult to address that as long as the IMF is

42:07

based in Washington and is a huge

42:13

redistributive mechanism for a lot of global wealth and you know that that

really that’s that’s a really interesting answer as well because the thing is that leads me to another question that I’ve been wanting to ask

42:25

you which is you know how you know you know the proverbial problem of uh the the kind of a clear the the use of

42:32

national currencies in international trade is that some countries end up with unusable stocks of the currency of

42:39

another country Russia Russia stockpiling Rupees is a typical example so how would you see that problem being

42:45

resolved I mean would it not require the creation of some kind of unit of account

42:50

which will then enable kind of a multiple clearing or something I mean I don’t know I just I shouldn’t say more

42:56

you let say yeah no no it’s a good question um and what I would say

43:02

is we’re returning to gold as a hegemonic asset and Banks central banks bought at

43:10

record rates in 2023 and they accelerated purchases in the first half

43:15

of 2024 so there is a money for inter Interstate settlements and it’s called

43:21

gold and it worked for 3,000 years we’ve had a 50-year Hiatus where we went to do

43:27

we’ve seen that didn’t work out very well we’re going back to gold now um but gold isn’t the only asset and what’s

43:35

interesting to watch is if if these grain uh hubs expand to oil to gas to uh

43:44

gold then you have alternative barter currencies that you can stockpile if you

43:49

have a currency that you don’t want to hold no you know this is very interesting because of course canes who

43:56

is known for calling gold barbarous Relic uh did however say that the prices

44:01

of his that the cost the the value of his banko would have to rely on the basket of at that time he enumerated

44:08

some 30 most highly traded Commodities and commodities are very important

44:14

because I mean gold of course has a certain special function to which you allude but more generally prices are

44:20

very affected by the prices of primary Commodities this is our this is our encounter with nature and our ENC

44:27

with nature is always more less predictable than our encounter with our fellow human beings in manufacturing and

44:34

that’s where that’s why there can be so much fluctuation in the prices of primary Commodities and that’s why he

44:39

said 30 of the most traded Commodities the weighted average of 30 of the most traded Commodities should form the basis

44:46

of the value of bankor and I think the and and of course which Commodities also

44:51

becomes interesting but the bricks countries can easily set up a working group that identifies an inclusive set

44:57

of Commodities whose prices affect everybody to some roughly equal extent and then say okay we will say that the

45:04

currency Reserve will or the currency unit of account which we will use to mutually clear will be based on this do

45:10

you think such a thing could happen no I don’t think that there would be Global agreement on that I don’t think because

45:17

of the differences in even within bricks what we’ve seen is the Russians recommended hubs for oil

45:25

gas gold and grain and the only one being implemented in the Declaration is for grains yeah but it also says that

45:32

they can expand to other Commodities they’re just starting with grains yeah now no that’s a fair point

45:38

Ben but um especially given the in unequal distribution of

45:44

resources and uh and the way that historically they’ve been exploited so

45:50

that the resources are taken out of the Emerging Markets out of the global South and out of the global east and the

45:56

profit go to London or New York or Chicago um that’s what that’s really the

46:02

nub of it uh where they by moving to local currency trade by creating their

46:08

own pricing nodes through these hubs for the things that are most concern to them

46:14

grains energy gold um they can equalize and make

46:20

accessible uh more Equitable exchange and stabilize inflation which would be a

46:26

huge win for them for Most states I mean China’s had near zero inflation for the

46:31

longest time and they haven’t had a single quarter of negative growth since

46:38

1986 China’s hacked stability um and and that’s really what

46:46

they’re trying to export is stability Al you I mean I can understand

46:52

that um you know K’s plan would have of course I think sh said about KES kan’s

46:58

advis is always British advise in British interests so uh he’s you know speaking for a country that has

47:05

historically relied on importing practically all its uh uh uh inputs its natural raw materials and so on so it

47:11

he’s concerned about stabilizing import prices for Britain in particular but a

47:17

grouping like the bricks which as you know Jim O’Neal originally coined the term to include what he called the two

47:24

natural resource in intensive um economies Brazil and Russia the two really big ones and the two really big

47:31

human resource intent uh Rich uh countries China and India and in a grouping so that you know you’re looking

47:38

at the interests of both the exporters and the importers and trying to come up with some kind of a balance between

47:44

those two uh so that you know give a decent price to exporters but at the same time stabilize and not you

47:52

know not create well not fleece the importers so

47:59

do you think that despite that it will be difficult to come to some sort of agreement and that gold will have to

48:04

remain the only fallback position the the risk of any basket is

48:14

that as soon as you give Bankers a target for manipulation they will manipulate

48:19

it you mean Central Bankers will manipulate it both Central bankers and Commercial bankers and mertile bankers

48:27

every kind of Banker they will make if you give them a target a single node

48:32

vulnerability they will Target that for destabilization because they make money out of

48:38

destabilization and and Al of course you could bring back some version of glass

48:44

Eagle which prevents the overwhelming majority of Banks and in this this would be in all countries not just in the

48:50

United States to prevent all the overwhelming majority of private Banks from doing this sort of thing well I I

48:56

think vulker called for that after the did great financial crisis yeah and he

49:02

called derivatives weapons of financial destruction yes uh and uh I would I’m

49:09

very sympathetic with that um in my early career I was on the team that

49:14

overturned glass deagle and I was on the team that liberalized

49:20

derivatives um and now with mature perspective I think both were misguided

49:28

well I mean um overturning glass Eagle really opened the floodgates to the 2008

49:33

housing and credit bubbles or the ones that bed in 2008 it would not 23 years

49:40

later no uh sorry it it was no just within less than a decade because it it

49:45

was repealed in 200 it repealed in 1999 and by 2008 we had already had the

49:52

bubble and it had already crashed yeah um I I think there’s slightly different issues but um

49:59

certainly by combining um structurally combining um mertile Banking and

50:07

financialized um uh over financialization um the entire real

50:12

economy then becomes vulnerable and this is what China avoids by by whenever it

50:19

sees too much excess financialization it curbs it in through the State Banks the

50:24

state-owned banks um and and then they keep reinforcing that the policy is that

50:29

we support the real economy and you know this is so widely misunderstood I mean the number of commentators who are going

50:36

around talking about China’s property bubble being the same as the American Property bubble which burst in 2008

50:43

sorry folks it’s not the same the people who are in trouble are not the banks the people who are in trouble are the

50:48

developers it’s not even and the government is doing everything possible to save the ordinary homeowner so if you

50:55

look at all of these things and the whole situation is completely different but it doesn’t prevent people who should

51:02

know so much about these things from saying this kind of thing it’s astonishing I think I think a lot of

51:07

Western countries would have would like to have the crisis 96% home

51:13

ownership yes 80% without a mortgage yes yeah well the thing in China people

51:19

rarely Buy on mortgage people buy with their savings you know because they save it’s a culture that values saving um and

51:28

also because CH I think that’ be a great crisis to have uh it’s not the way we do crisis

51:34

no no and and and the thing is that sorry just one one final point I wanted to make is simply that you know China

51:40

doesn’t have these problems precisely because it is the sort of system that has you know not exactly glass Eagle but

51:46

rules pretty similar to that which are aimed at keeping the uh Financial system

51:51

investing in the productive economy and not speculating in financial markets and which kind of brings us we should

51:57

probably be wrapping up in the next 5 minutes or so just a heads up to think of things you want to say in in in

52:03

closing but just you know it brings us back to our original point which is that we are living in a dollar system that is

52:11

reliant on the regular inflation and therefore inevitably of course the regular bursting of financial Bubbles

52:18

and this is why the world this is also why the world could not afford it and I must say that I I was impressed at that

52:26

this document uh was able to recognize is like like I say there’s one thing it

52:31

doesn’t recognize but otherwise I found nearly all the elements of a critique of

52:36

the present system which will lead to the construction of a better system to be here so just to quickly quote a short

52:43

thing it it enumerated the following things it enumerated frequent crises persistent trade and current account

52:49

imbalances elevated and Rising levels of public debt destabilizing volatility of

52:54

capital flows and exchange rates I mean that’s a pretty comprehensive list of problems and it is in addition it is

53:01

serving the interest of the advanced economies capital is Flowing from poor countries to rich countries this is not

53:07

what’s supposed to happen but this is what is required for the functioning of their system so boy I thought it was a

53:14

pretty darn good report but um please go ahead and have your say you know we’re

53:19

not closing yet but yeah um I just want to note that on Tuesday there was a big

53:25

story that broke that I think is a signal Hong Kong Shanghai banking

53:30

corporation HSBC announced that it was going to split into HSBC West and HSBC

53:40

East now it could be that behind that is um um some horrific debts in the Hong

53:47

Kong property Market that’s what I’ve heard from one person but it could also be that they want to free Hong Kong HSBC

53:56

East from the feds and um FR frankly stagnation and

54:03

HSBC West because HSBC West gets pretty much

54:08

zero growth economies the United States is growing at 2.6% but that’s only

54:14

because it’s also running a$ two and a half trillion dollar deficit 8% of GDP

54:19

but there’s zero growth in Europe there’s zero growth in the UK there’s zero growth in Japan there’s um although

54:25

I don’t know where Japan is between East and West um there’s zero growth in in North Korea or South Korea so um it

54:34

looks like what HSBC is trying to do is trying to have the

54:39

progrowth um uniting pacifying countries of the

54:45

east in one segment and the pro sanctions warmongering zerog growth

54:52

countries of the West in another segment and if that becomes something that many

55:00

financial and non-financial firms adopt either formally or informally as

55:05

structure for governance that will radically change the balance in the

55:10

world yeah Kathleen I’m very glad you mentioned that because actually that was on my list of questions you read my mind

55:15

there um so before we conclude just I would like to actually kind of go back briefly and talk about this problem it’s

55:23

a very difficult problem to solve and I think you’d be one of the best equipped people to try to solve it which is how

55:28

to dollarize savings right especially the reserves of bricks countries and if

55:33

you read the Russian proposal you can see that they propose several different ideas they actually even call for the

55:40

creation of what they call a bricks digital investment asset which is backed by the collateral is basically or the

55:48

the assets value is based on the assets that are contributed by the brics

55:54

countries and it would be overseen by the Development Bank um they also as I

55:59

mentioned they call for the creation of new investment uh opportunities through different

56:05

platforms the creation of new Financial assets but essentially as you as you

56:10

acknowledge what we’ve really seen is that central banks have just been buying up huge sums of gold the price of gold

56:16

is is rising very quickly easily to $3,000 probably and probably well beyond

56:21

there are a lot of investors who think it’ll grow keep going up many times um but what what’s interesting is Gold’s

56:27

getting a lot of attention silver is also going up a lot um probably because a lot of investors see they think the

56:34

gold price might be too high so instead they’re buying silver although silver does also have some more industrial

56:40

applications than gold um but what’s interesting is what’s gotten less attention is China has been importing

56:47

lots and lots of oil extra oil nor more that to to fill its strategic petroleum

56:52

reserves China has also been importing lots of metals different kinds of metals

56:57

that it can stockpile so do you think Commodities will become the new kind of Reserve assets and and also I mean this

57:05

idea of having starting with the bricks Grain Exchange could also be used to settle imbalances but I mean if we’re

57:11

talking about a country like China that has every year a trade surplus of more than $ 800 billion

57:18

dollar there there’s not enough grain in the world to make up for that or even many other Commodities so how do they

57:24

deal with this problem where you have such big trade deficits sorry trade surpluses even Russia still has a

57:31

constantly has a a current account Surplus so they don’t want to buy too many Commodities to stockpile them

57:37

because then the price would just go very high in all of these markets so how do you how do you solve this very

57:43

difficult issue of dollariz savings and reserves other than just gold I mean

57:48

maybe you could say gold will go to to $20,000 but other than that what other

57:54

options are there and and you said you don’t like the SD our option either so what what are the options well I’m I’m

57:59

definitely against some synthetic crypto thing um that’s all three of us we’re

58:05

all on the same page there um all right on stockpiling China announced two years

58:12

ago that it’s moving to a war footing that it it sees all the new missile bases that the United States has

58:19

negotiated in Australia uh the Philippines Japan Korea and and it sees

58:26

the missiles being installed so China’s stockpiling of everything and it is the world’s largest

58:33

stockpile of grains and now oil um is entirely rational because it can be

58:40

isolated for for the however long the duration of the war is and so metals

58:48

that they might need for manufacturing and stockpiles of oil and grains are are protecting them and providing stability

58:56

I mean one reason why uh China did not experience a spike in inflation in 2022

59:02

when everybody else did is because of their stock piles their their their inflation peaked at

59:09

3.2% because they had the world’s largest grain stockpile because they had an oil stockpile and yes they’ve tripled

59:17

the um uh strategic petroleum Reserve in China so that the United States under

59:22

Joe Biden has emptied the spr in the United States into

59:27

China’s because it basically got exported off to China uh nice

59:34

interesting policy but there it is so now the United States doesn’t have a strategic petroleum Reserve uh because

59:40

it was used to uh to influence uh the election and that’s kind of insane but

59:47

there it is uh but China’s behavior is completely rational uh and completely uh

59:53

Pro stability um and and Pro keeping inflation low keeping its people fed

59:58

keeping the lights on keeping the uh its Industries expanding and that’s how it should be

1:00:05

seen now that’s completely separate from looking at those things as some sort of monetary

1:00:12

Reserve um they’re they’re much more important from the monetary policy perspective of ensuring future low

1:00:20

inflation and future availability so um in terms of the rest

1:00:26

of the world um Russia doesn’t need to reserve anything because they make

1:00:31

everything they have every possible resource they could ever need uh

1:00:37

particularly in light of the the size of the Russian population they want a bigger population that’s their their

1:00:42

objective now that might be the hardest nut to crack yeah um every country is

1:00:49

different in both what it produces and what it needs and I think actually what would be interesting um and I’ve never

1:00:56

seen it proposed in any um Western media is to actually try and study and

1:01:04

formulate the methodology that China has used to achieve such outstanding

1:01:10

stability and make that a a direction of monetary policy I mean instead of monetary policy

1:01:17

all being all about the money make it about stability and about

1:01:24

looking at the fundamental nature of of what underpins the economy as

1:01:31

what’s necessary to underpin the currency I actually had this discussion on Wednesday with professor Charles goodart who was one of the founder

1:01:38

members of the the monetary policy committee at the bank of England and then the the Global Financial stability

1:01:43

board that what if money doesn’t just have one nature what if money has a different

1:01:50

nature in each economy that is the economy of issue

1:01:56

and that the the challenge of monetary policy should be to stabilize the value of the money in

1:02:04

terms of the real economy within each country of issue so

1:02:09

we tend to talk about monetary policy as if there’s one monetary policy uh thesis that suits every currency but I think

1:02:16

that’s nonsense I think I think that you really need to um fundamentally rethink what

1:02:24

monetary policy is about in terms of stability in light of China’s Decades of

1:02:31

success in having stable growth without a crisis but I think that there is a

1:02:37

two-word answer to that Kathleen that you may not like but here it is it’s called Financial repression that’s what

1:02:44

we used to call it in the past that is to say a regime in which capital like we earlier agreed capital is uh organized

1:02:51

that is the financial sector is organized in such a way as to direct capital toward productive investment

1:02:57

control external movements uh and so on and this kind of regime was divided uh

1:03:02

in the postc world war period which why one of the key reasons why we had a period of extremely high growth and

1:03:08

relatively high levels of investment even in Western countries uh that’s what China has that’s what the West has

1:03:13

abandoned since the 1970s and that’s why the West has such abysmal rates of growth and also and also I mean the

1:03:21

other point you make you know about money having a different nature of course money has many aspects it’s

1:03:27

supposed to function simultaneously as a unit of account as a store of value as a means of exchange as a means of payment

1:03:33

blah blah Etc so obviously different policies will prioritize one or the other thing I mean uh even in the United

1:03:40

States in the last in during the neoliberal era alone we’ve seen an era of high uh a tight monetary policy in

1:03:48

the 80s and ’90s and then extremely lose monetary policy as a rule not always

1:03:54

since about 2000 so we’ve had two quite different types of marage policy something people rarely

1:04:00

comment on actually but anyway there it is um it’s a very different thing so I completely agree with you on that point

1:04:07

you know that uh that that that that money is different things and which side

1:04:14

every government emphasizes will determine what kind of monetary policy it will pursue yeah

1:04:21

exactly yeah I think it’s a big challenge uh to

1:04:27

usually Central Bankers are brought to New York or brought to London and they’re they’re they’re they’re told

1:04:33

this is the only way that you you can run your Central Bank where I think what we need to see

1:04:39

is more diversity um I’ve always been uncomfortable with eosco and the bank

1:04:45

for international settlements making one- siiz fits-all rules and then enforcing those by um uh scrutinizing

1:04:54

whether they’re implemented in other markets one set of rules isn’t right for every market and uh and I think we need

1:05:02

we can with bricks and the way bricks is expanding hope at least at this point

1:05:08

it’s just hope that there’s more um appreciation for diversity for

1:05:15

experimentation for studying what works and replicating what works and I mean this is the way China

1:05:22

runs itself internally policies are set centrally but the 86% of spending is at Municipal

1:05:29

and provincial level where there’s an enormous amount of competition and experimentation to achieve results and

1:05:37

then the results are are which are monitored by the central government indeed all results are have standard

1:05:43

monitoring for performance and they study the outperformance they

1:05:48

methodically analyze and Report the outperformance methods and then share

1:05:54

that nationally I mean here in the UK we never bother with that we just allow everything to

1:06:00

fail around us without ever bothering to study why it’s failing or to try and correct it um which is a bit mading well

1:06:07

indeed I I I must say we should have you back for another show on all the things that are failing in the UK particularly

1:06:14

water uh maybe sometime you know the way I mean this is such a scandal um and of

1:06:20

course this is a that is sorry I’m 20 feet from the Tims River

1:06:25

here yes river is outside that window yes so this is something water quality

1:06:31

is something I’m passionate about because when I bought this house I could swim in the CHS and you can’t anymore no oh wow

1:06:40

because well I have not SW full of sewage now right yeah it’s an open sewer

1:06:46

it’s full of sewage I thought they didn’t permit it in the temps although they permit it in some of the smaller

1:06:52

Rivers but I’m interested to hear they also permit it in the temps but exactly

1:06:57

and this is a country that Prides itself on you know rewarding the winners well

1:07:03

this is just you know it doesn’t work that way you have to take care of everybody but anyway that’s for another

1:07:08

story maybe you know I’ll just make one final remark uh in closing and then invite you to both comment and then

1:07:15

perhaps Kathleen will will and Ben we will have set up another show discussing uh other scandals uh discussing these

1:07:23

scandals we were just discussing so so anyway to me I as I say I felt that maybe in summary what I just simply like

1:07:29

to say is that personally I do feel that uh some kind of capital controls no matter how you talk about them are

1:07:36

indeed necessary to create the kind of stable productive uh State financial

1:07:42

system that we’re talking about and this report to me comes close to I mean it

1:07:47

sort of seems like an uneven keil on the one hand it talks explicitly about directing Capital flows away from

1:07:54

flowing to First World countries where they complain it is Flowing unnecessarily and to the detriment of

1:08:00

third you know emerging markets and towards emerging market and towards productive investment but on the other

1:08:07

hand They Don’t Really discuss capital capital controls in any way so to me it seems that they are poison on knife edge

1:08:14

between the the need to recognize this but on the other hand of course the

1:08:20

pressures upon them not to name such a thing as capital control so how this enfor in the future will be most

1:08:27

interesting so that’s what I want to say in closing but please go ahead Ben and Kathleen whatever you want to

1:08:34

add yeah Kathleen if if um I I know I’ve mentioned this and I agreed with the

1:08:40

answer that you gave I agreed with everything you said about how each country’s economy is different we shouldn’t take this one one siiz

1:08:47

fits-all approach that is often taught in you know uh Finance classes and such

1:08:52

and Central Bankers are taught that they should all run their Central Bank the same way but just um really quickly to

1:08:58

get back to this question um so you mentioned that you know China has been buying up a lot of different Commodities

1:09:05

and trying to diver essentially find new forms of of TR trans of converting its

1:09:13

current account Surplus its big Trade Surplus into something that it can tangibly use for the economy I would add

1:09:19

that also it’s been using a lot of that Surplus to fund the bell and Road initiative right to turn that into

1:09:25

tangible infrastructure but absolutely but the point is is that if you if you

1:09:31

were in The People’s Bank of China right now and you saw what happened to the bank of Russia 300 billion US Dollars

1:09:37

and Euros worth of assets stolen by the west and you said okay we need to find

1:09:43

some kind of alternative obviously the pboc is selling treasuries and buying a lot of gold but I mean unless we really

1:09:51

do think that gold is going to go from a bit under $3,000 like it is now to like I don’t know 20,000 who knows how much

1:09:58

like it’s very possible the price could just multiply many times but like do you

1:10:04

think that there are other assets that could be held like is there a short-term

1:10:10

solution or does there need to be some kind of medium to long-term solution and

1:10:15

could that not be something like an some something like a bond core okay something that can’t be seized

1:10:22

by by the US and and Europe it’s a bit complicated and it’s a bit

1:10:28

uncertain because it wasn’t as obvious in this bricks Summit last year uh in

1:10:36

Johannesburg I was pretty much keeping a tally of all of the bilateral deals that were announced you know that Dubai ports

1:10:43

world was going to build the first Super container port in India India has that amazing long coastline but not a single

1:10:50

super container port for export so ports world is building that and then um uh

1:10:57

Saudi Arabia agreed to sell oil for a nuclear power plant that China would build in

1:11:02

Saudi and you know um uh um China’s uh electricity um company was going to fix

1:11:10

the Grid in South Africa which by the way they did South Africa hasn’t had a brown out or a blackout for six

1:11:16

months as of today’s date um so in escom was a complete mess

1:11:23

so it seems like that cooperation benefited South Africa almost immediately um so though I have not seen

1:11:31

those kinds of bilateral deals being announced this week but that doesn’t necessarily mean they’re not happening

1:11:38

and that is a critical use of surpluses Dubai recycled its Surplus into a new

1:11:45

container port in India that it co-owns um China recycles its Surplus

1:11:52

into nuclear power plants that it’s building all over the world now and as you say into Logistics infrastructure

1:12:00

Railways ports um hospitals universities um things that can grow domestic

1:12:06

economies that then become future clients of China’s exports um if it grows African

1:12:12

Prosperity that’s a huge game Cher in terms of new markets for Africa for Chinese

1:12:18

Goods um in terms of treasuries and why you know why would China not be dumping

1:12:24

Treasures they’re not dumping treasuries uh a year ago they had 800

1:12:30

85.4 billion in us treasuries and these are it’s official

1:12:36

and non-official holdings together um and right now it’s 7746 billion so they’re down 25 billion

1:12:45

oops that’s not dumping um they’re not dumping their treasuries uh you know

1:12:51

obviously if um right now now the United States military is hugely

1:12:59

concentrating in the Eastern Mediterranean for a war with

1:13:05

Iran uh and there have been huge UPS Spike this month in inbound um cargo

1:13:12

flights and in f35s and F f-16s and refueling tankers concentrating in the

1:13:20

region so we’re going to have to see how that plays out but as long as the United States is tied down in the Eastern

1:13:27

Mediterranean then it’s not going to have a war with China and so China will encourage the

1:13:34

United States to not attack China by holding on

1:13:40

to those treasuries and it’s a relatively low cost at 770 billion you know it’s a drop in the bucket to them

1:13:47

um United States trade with China is now less than 10% of China’s trade um so if

1:13:54

there was a war China could cut the US off and China would hardly feel it but

1:13:59

the US economy would implode um and we’re seeing the Israeli economy implode right now because uh you

1:14:08

just can’t do business with Israeli companies anymore um and a lot of people are are

1:14:14

quietly backing away and drisking from exposure so those are there’s a lot at

1:14:22

play at the moment it’s a very confusing world but what I I think is possible as

1:14:27

an alternative to large surpluses is co-investment and that does get a

1:14:32

mention in the Russian report um I think they called it Blended Finance or something um which by the way

1:14:40

is also Sharia compliant so important for the uh Muslim

1:14:45

countries in bricks because co-investment is completely okay um and again it it it’s it’s

1:14:53

long-term stab izing because if your partners in an Enterprise instead of just ripping it off um like asset

1:15:01

stripping or whatever um then you’re you’re You’re Building future prosperity and future

1:15:07

stability so I think the world’s changing very very quickly um parts of

1:15:12

it are very dangerous uh but there’s a lot to be hopeful about uh particularly in the

1:15:18

east in the Far East um and and in the global South because you know we’ve seen

1:15:25

the sahale States declare their independence from French imperialism kick out the military bases on their

1:15:30

soil nationalize resources and now they’re importing tractors they’re

1:15:37

importing fertilizer I um Bina Faso has imported a

1:15:42

thousand tractors that’s a GameChanger because food security is National

1:15:48

Security so um I started out with curron the optionality is National Security um

1:15:54

food Security Council too so there’s a lot of changes going on and a lot of them are very positive towards long-term

1:16:00

stability and long-term shared prosperity and uh I I think I want to

1:16:05

end there on a positive note and and hope that the rest just sorts itself out

1:16:12

I think that’s that’s a great note to end on at the end of the day what are you going to buy with the money if it’s

1:16:17

not food in the first place so absolutely food security is important I just wanted to add two quick things

1:16:22

number one you know this whole issue of invest M being used as a way of dealing with the problem of over accumulation of

1:16:30

currencies was also of course in K’s original plan for bankor because he said that this would be form of development

1:16:35

loans and so on that could go to other countries if there was an accumulation of reserves Beyond a certain point but

1:16:42

above all his plan was a plan for development which would lead he felt to

1:16:48

balance trade because the more balanced trade and investment relations are the less need there is to settle any

1:16:54

outstanding imp balances and the other very quick point is that you know this whole issue of China dumping dollars or

1:16:59

not dumping dollars as the case may be in this discussion most people forget that the overwhelming majority of US

1:17:06

debt is owned by us individuals and entities it is not owned outside the US

1:17:12

that accounts for almost 70% of the total and then the rest is divided between the various foreign holders of

1:17:19

which yes Japan is of course currently the largest but China was once the largest but gasoline thank you just so

1:17:25

very much I think that your expertise is so much appreciated on this show we really enjoyed it and we hope to have

1:17:31

you back to discuss a myriad other things which I’m sure you can shed lots of light on so thank you very much

1:17:37

thanks for joining me Ben and uh we look forward to the next geopolitical economy

1:17:43

hour in about 15 days uh please like it share it and discuss it of course thanks

1:17:50

very much and goodbye thank you

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BRICS Kazan Meeting DESTROYS Western Hegemony Once And For All | Dr. Michael Rossi

(https://www.youtube.com/watch?v=5ZVjVRrdqMk)

The 16th BRICS meeting that took place from October 22-24 in the Russian city of Kazan was a resounding success not only for the BRICS movement but Russia in particular. The participation of 35 states an the presence of the UN General Secretary as well as the extensive outcome document are testimony to the shift in global power balance. However, BRICS went out of its way to make it clear that it’s not trying to be an adversary to the West, it simply doesn’t care about Europe and the US anymore. “The Rest” is not so much working against “The West”, it simply is leaving it behind.

Dr. Michael Rossi is a lecturer at Rutgers University in New Jersey where he teaches political science and international relations. He is also the host of a YouTube channel “Michael Rossi Pol Sci” on which he keeps publishing very valuable primary sources in the form of uncommented speeches and press releases from Russia. Most recently, he has been working on publishing the documents and interviews coming out of the BRICS meeting in Kazan of last week.

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