Brics countries plan multi polar agenda

At the recent BRICS annual summit in New Delhi, the BRICS signed an accord to promote intra-BRICS currency convertibility to enhance bilateral trade and investment. Stevens said: “Predictably, the announcement has been seized upon swiftly by fearmongers suggesting that the BRICS bloc is ‘plotting the demise of the USD’.” But he added that reserve currency status is a by-product and direct convertibility of the five Rs (the rand, real, renminbi, rouble and rupee) will grow related financial products, liquidity and depth, thereby boosting the attractiveness of these currencies. Stevens added: “The global financial system certainly does need to change: making up a fifth of the world’s output, the US dollar makes up 63% of allocated global FX reserves. And now that the dollar has become a yen-like carry trade funder, its outlook is challenged, adding impetus to central banks’ desires to diversify.” Stevens said that China and Russia have reduced their holdings of US treasuries by 11% and 5% respectively since last June and Brazil and India are slowing the pace of their purchases. But this is mainly because they remember the way that the global demand shock in the fourth quarter of 2008 was worsened by the shortage of US dollar liquidity and the credit crunch. “The problem is that 85% of the average turnover in the global foreign exchange market has a US dollar counterparty. The share is odd. The BRICS are just $1.3 trillion smaller than the US (and will overtake the US in 2013)”, Stevens said.