Tuesday, June 16, 2009

A BRIC upside the head

Nothing gets your attention like a BRIC upside the head. In this case it's Brazil, Russia, India and China. These are the major non-European industrial powers anchored by the world's only superpower China. The rest of the countries of South America, Africa and Asia are more than willing to align with them as their trade continues to shift away from the US and Europe. At their summit in Russia this week they refused to allow the US to even observe the proceedings.

The major focus of the meeting was how they will proceed with the elimination of the US Dollar as the international reserve currency. In the past six months these countries have moved aggressively toward trade among themselves without the use of Dollars. Now that this has been set in motion there is almost no way to stop it. The only thing holding it back is China's reluctance to change, once they are fully committed either by choice or by cascading events, the avalanche will be unstoppable.

This will make the Dollar worthless for international trade and trigger either hyper-inflation or crushing deflation or alternating waves of both here at home. The assumption is that the standard of living of Americans would drop 20% overnight because that is the percentage of our economy that is made up by trade deficit. Its not likely that it would stop there since we not only consume imports but imports are completely integrated into every aspect of our economy. Everything from car parts to surgical supplies are imported and many things that are lynch pins of our economy are exclusively imported.

The turmoil that this could produce has no large scale precedent. With almost no Americans having any sense of ownership in our society the reaction will be a feeling of hopelessness and an every man for himself mentality. The crazies on the right have been priming themselves for this sort of apocalyptic collapse for forty years and will have no doubt who is to blame. Those that don't know who to blame will get a fair and balanced list on Fox News. Watch your back.


Anonymous said...

Ever heard of Japan? Japan's economy is the second-largest in the world (still), and much of China's exports can only be manufactured using Japanese industrial equipment and components. China's GDP is pathetically low compared to the US and Japan.

I'm growing weary of this tendency of Prairie2 to make China out to be something they are not. They have about 50 years to go before their level of development even approaches Japan's or the US's.

prairie2 said...

Are you kidding? Japan is not on our side. The people in charge still hold a grudge about that little war thing. School children in Japan are all learning Chinese. Japan is fully onboard with China. I make China out for what it is, look at the numbers. And you miss the point, China is overwhelming us because of the stupid US policies of the last 40 years not because they are some sort of supermen. The gains you think China will take 50 years to achieve they already have and we are on the edge of the cliff.