Dollar BRICbats

IBD Editorials ^ | June 17, 2009 | INVESTORS BUSINESS DAILY

[Kaslin]

Globalism: Four emerging economies met in Russia Tuesday to seek an alternative to the dollar. It's futile. But it shows how Washington's spending binge harms the world's prospects.

---

The Bush administration took a lot of flack for its supposed "unilateralism" in global affairs. But there's a new breed of go-it-alone "unilateralism" in the unrestrained U.S. fiscal spending that's causing trading partners to worry about the value of their dollar assets.

It's hitting Brazil, Russia, India and China in the pocketbook as they fret about the value of their $2.8 trillion in dollar holdings, about 42% of the world's total.

So it's no surprise that the four big emerging economies, dubbed the BRIC nations in 2001 by Goldman Sachs, met in Yekaterinburg, Russia, this week to try to find a way to defend their interests. At the summit's conclusion, Russian leader Dmitry Medvedev spoke of wanting a new global reserve currency that is "diversified, stable and predictable," because the dollar isn't fitting that bill right now.

The four tried to find ways to reduce their reliance on dollars. They fear that it's headed for a big devaluation.

They agreed to trade more freely with each other and to move dollar reserves into International Monetary Fund bonds. And China made a symbolic gesture Wednesday of selling some Treasury assets, which is where it parks most of the dollars it earns from trading with us.

[Mountain Troll]

Why bother? Any currency not tied to a physical commodity is subject to manipulation by the issuing authority. Print it red or blue or green, funny money is funny money.

[expatpat]

How did Brazil get to have such surpluses?