The BRICS vs. the West and Japan.

How do the BRICS stack up against the western nations?

What is China’s role?

China’s recent admission to the International Monetary Fund’s (IMF) Special Drawing Rights (SDR’s) highlights how China straddles the world of emerging markets and established markets. China is considered the key country in the emerging markets “BRICS” nations consisting of Brazil, Russia, India, China and South Africa. The BRICS nations are considered key competition for the dollar based international monetary order centered around the petro dollar which keeps the dollar entrenched as the world’s reserve currrency.

China is a key trading partner with the United States and Europe. China has the third largest GDP behind the Eurozone and the United States. China is leading the emerging markets while participating in the established U.S. led markets. As evidence of China’s success as an exporter, China had accumulated over $1.2 trillion of its reserves in U.S. Treasury Bonds. As a major economic power house, China has been angling for a greater role in international monetary affairs.

China has been integrating with the dollar based financial system while also diversifying its assets away from the dollar or “de-dollarizing”.

In 2015, China began to divest of some of its U.S. Treasury Bond holdings.

U.S. Treasury Bonds Held by the People’s Bank of China

China has begun to divest its US treasury bond holdings.

More indicative of China’s US. Treasury Bonds sales are perhaps reflected in the treasuries held by “Belgium” which many believe act as a proxy for the People’s Bank of China and other entities transacting in U.S Treasury market.

Sales of U.S. Treasury securities via Belgium have accelerated in 2015.

In 2015, China also began to report its gold holdings for the first time since 2009..

China’s gold reserves place it fifth among gold holding nations.

Many believe that China has far more gold than they have officially reported. For more on the case of China’s missing gold click here.

Selling of U.S. Treasury Bonds and increasing their gold holdings are only part of China’s de-dollarization strategy. Click here to see a list of Chinese de-dollarzation initiatives.

Fed Interest Rate Hike to Combat De-Dollarization Initiatives

The gains of the BRICS, and especially of China are the key reason we believe the Fed will raise interest rates – to combat de-dollarization initiatives.

In April 2015, we asked “does the Fed need to raise rates to combat de-dollarization initiatives? In June 2015, we predicted that the Fed would use a “sturdy” non farm payroll number to justify its decision to raise interest rates. We said they would cite this number as evidence that the economy was doing well. While the October and November 2015 non farm payroll reports were “sturdy” we believe the job recovery is a farce when more than just the top line job number is analysed. No matter to the Fed, they have their confirmatory evidence that the US job market is doing well enough to raise interest rates.

The Fed seems determined to get a rate hike in to justify that their zero interest policy and quantitative easing programs worked. (they didn’t) After that, having gained credibiity for raising rates, they can talk about another rate hike for months, then start cutting rates again and eventually, as we have predicted since 2013, go to negative interest rates and another round of QE.

Ponzi 101

In July 2015 we noted that raising interest rates is a way of attracting more money to the U.S. Treasury ponzi scheme. The lower U.S. deficit also gives the Fed cover to raise rates as interest payments on the debt will be lower.

As the U.S. already can’t pay its $19 trillion deficit and hundreds of trillions of dollars in unfunded liabilities, the higher interest payments shouldn’t be an issue either. Higher interest payments on the debt can be met by using principal received from the newly issued bonds – Ponzi 101.

The BRICS vs the SDR Nations

How do the BRICS stack up against the western nations as represented by those participating in the International Monetary Fund’s Strategic Drawing Rights?

BRICS Gold Holdings

China, Russia and India hold substantial amounts of gold as reserves.

Total Gold Held by BRICS Countries

Russia and China have added significant totals to their gold reserves and are both in the top ten of gold holding nations.

China and Russia have been added furiously to their gold reserves

Russia has added nearly twice as much gold to its reserves in 2015 as China recently

Percentage of BRICS Gold Holdings

China, Russia and India hold 95% of BRICS’s gold.

BRICS Nations vs. SDR Country Gold Holdings

GDP of the BRICS Nations

China represents 61% of the GDP of the BRICS nations.

GDP of the BRICS Nations



China represents 61% of the GDP of the BRICS nations.

BRICS Nations GDP vs. SDR Nations

Without China, BRICS nations constitute just 3.3% of global GDP.

China represents 60% of the GDP of the BRICS nations and 20% of the SDR nations.

For charts showing the assets held by the nations whose currencies comprise the SDR, click here.

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