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The heads of the BRIC nations—Brazil, Russia, India, and China—are having a pajama party in New Delhi, India.
Lots of good food, nasty gossip about the West, and a bit of a pity party are all on the agenda…
It turns out that they are very unhappy with the way the world is being run…
Which is to say, they are unhappy with the USA, the dollar, the IMF, the World Bank, ad infinitum.
After all, as I’ve said before in The Gorrie Details, the US has been creating dollars like they’re going out of style—which they very well may be—by devaluing the greenback, which makes US goods more affordable…
And BRIC countries’ goods more expensive and threatens their economies with recession and inflation.
And it is our fault; no doubt about it.
As Brazilian president Dilma Rousseff said at the BRIC Head summit…
“This crisis started in the developed world…by adopting aggressive expansionist policies such as low interest rates and quantitative easing policies that have triggered a 'monetary tsunami', led to a currency war, and have introduced new and perverse forms of protectionism in the world.”
So, yeah, it’s not a nice thing to do, and is enough to make anyone more than a little warm, but especially the BRIC Heads.
And that’s why the BRIC Heads have had their annual picnic for the past 3 years…
They want to find ways how they can change the way the world has worked for the past 65 years…
To have more control over their destiny and less reliance on the US dollar.
And they are on their way, more or less.
For instance, they want to reduce their need for the US and its financial power and exports to the West in general.
One idea is to get more control over the IMF, which has always been run by an American.
But alas, the four BRIC Heads couldn’t even agree on who they should nominate for the open post…
So Obama chose another Brick Head named Jim Yong Kim, president of Dartmouth College with experience in the World Health Organization’s HIV/Aids program…
A perfect pick to run a bank, don’t you think?
But still, with 40% of the world’s people and 1/5th of the global economy, the BRIC Heads surely can throw their weight around...
And they do.
But mostly, they throw their weight around at…each other.
What the BRIC Heads Want
What do the BRIC Heads want?
Oh, lots of neat stuff.
They want to improve trade between themselves...
And expand their domestic markets.
They want to create their own development bank to counter the US-made World Bank…
And some common security agreements…
But all these are easier said than done.
What India and Brazil are finding is that economic relationships are most stable and reliable when they are with nations with similar political views and cultures…
China, the Biggest BRIC Head
And that’s why suspicion of China is a common thread among the other BRIC Heads.
India and China spar with each other over borders, trade imbalances, and deep political differences.
To India, China is an over-militarized communist dictatorship bent on intimidating its neighbors today and ruling the world tomorrow.
India, on the other hand, has a much higher pool of educated, English-speaking people, has historically good relations with the West, is the world’s largest democracy, and, quite frankly, offers the world a superior and far more satisfying cuisine.
Russia, founder and former CEO of Failed Communism, Inc. for most of the 20th century, is now wearing the macho jacket of authoritarian oligarchy, but still views China with a high level of distrust for the same reasons that India does…
Border disputes, military fears, and other garden variety beefs between the old commie cousins go back fifty years and longer.
Brazil, however, is a little different.
They can afford to be less put off by China because they’re an ocean away…
But also because Chinese direct investment in Brazil was $17 billion last year, up 600% from the prior year…
That’s a lot of bread, it’s true; but culturally, China can’t dance the samba.
There is a high level of resentment in Brazil against the Chinese culture that comes with billions of Chinese yuan…
Brazil has very labor-friendly laws, such as guaranteed 1-month annual bonuses, stipends for meals and transportation, and independent unions with collective bargaining power that are keen to protect labor’s interests.
China has no interest in those things. They’ve climbed to the top of the world on the backs of what can best be described as slave labor, with no unions, no vacations, 14 hour back-breaking workdays, a 6 or 7 day work week, and dog-pound living conditions for “throw-away” workers with no rights.
And guess what?
Brazilians now chafe at the work demands of Chinese firms in Brazil. It’s a cultural clash that is not going to go away…
And who came blame the Brazilians?
Or the Indians?
Or even the Russians?
Generally speaking, the Chinese are a buzz kill to the world...
Think about it; do you know anyone who goes to Beijing for Carnivale? I don’t.
Even the Beijing Olympics were a snooze.
And that is why the BRIC Heads are having such a tough time…
China treats the other BRIC Heads the same way that China accuses the US of treating them….
Talk about the wok calling the kettle black.
BRIC Heads or Tails?
But what if the BRIC Heads do get their act together?
Things would change, of course.
The US and Europe would cease to be the biggest trading partners of China.
A BRIC development bank would likely be funded by China.
The US dollar would lose more value than it has already.
Interest rates in the US would have to rise, sending the US into crisis…
US tariffs on Chinese goods would follow.
Clearly, India and China would compete to dominate the new BRIC trading zone.
Russia would get jealous of China and India and turn the gas off on Western Europe because that’s all it could do…
So, if the BRIC Zone was a “success,” as it were, it would only lead to more global instability than we have now.
But is all of this likely?
In a BRIC Zone, would China really open up its domestic market to India, Brazil or even Russia?
No, it wouldn’t.
Would China try to have its way with the other BRIC Zone members?
Would China use the BRIC Zone to challenge the West in every way possible, to the detriment of the other BRIC Heads?
What is also likely is that a BRIC Zone would fail, due to all of the reasons listed above.
The irony is that whether if failed or succeeded, a BRIC Zone would likely lead to greater instability in the world than there is today.
But that doesn’t mean they won’t try…
Because, as everyone knows—except, perhaps, the current Administration--that you can only print so much money, export only so much inflation, keep interest rates low for only so long, and carry only so much debt before the whole financial system goes up like a brick sh—well, you know…
You don’t have to be hit in the head with a brick to see that.
And those are…The Gorrie Details.