BRICS New Development Bank to Open July 7th

China announced on July 1st that the Standing Committee of the National People’s Congress officially ratified the agreement signed in Brazil last year to launch the New Development Bank for the BRICS nations. The bank’s Board of Governors are scheduled to have their first meeting in Moscow on Tuesday and Greece is expected to be a hot topic of discussion as that country’s referendum for remaining a part of the Eurozone occurs just two days prior.
Some analysts have suggested that Greece could get assistance from BRICS and the NDB if the troika will not agree to their demands. China and Russia have already publicly stated that they are willing to offer financial aid. This would give one more avenue for Russia to supply Europe’s gas. As we covered previously, the conflicts in Ukraine and Syria are likely actually proxy wars between U.S. and Russian gas companies competing to be Europe’s main energy supplier.
The BRICS nations (Brazil, Russia, India, China, and South Africa) announced plans for the New Development Bank last summer. The institution is meant to rival the IMF and BIS banks and act as an alternative for developing countries. The NDB will have an initial capital of 100 billion dollars to be used for assisting developing countries to finance things such as infrastructure, utilities, and other projects. It will also allow developing countries to escape many of the restrictions that are typically imposed by the International Monetary Fund. When the IMF loans to developing countries, it often stipulates that the country privatize its utilities and open up its economy to western interests and trade.
Combined, the BRICS countries make up more than 50% of the global population, so this alliance will be extremely powerful, not just economically, but also militarily. China and Russia signed a currency trade agreement last September and China’s ambassador to Russia made statements earlier this week that the two countries have already begun to work toward better military cooperation.
Victoria Panova, Advisor on BRICS Strategic Planning at the BRICS Research Institute said, “If cooperation between our countries is effective at all levels, this union will allow every participant to increase its influence on the global stage.”
Some have suggested that the NDB will be for BRICS what the Bretton Woods agreement was for the West.
Even with this BRICS partnership, China seems to be hedging its bets for whatever is next. The country launched its own Asian Infrastructure Investment Bank earlier this year and recruited countries from around the world to invest. The AIIB will function much the same way that the NDB and IMF do, providing financing for developing countries, but they are not intended to conflict with each other. Chinese Foreign Ministry spokesperson Hua Chunying said that “The two banks will complement and reinforce each other and jointly contribute to infrastructure building of the developing countries and play their different role in this regard.”
The country has also developed its own SWIFT payment alternative, CIPS or China’s International Payment System to better facilitate trade using the yuan.
While a currency revolution has not been officially announced yet, some analysts have posited that there actually could be plans to back the yuan with gold. China has dramatically increased its gold purchases in recent years and no one knows just how much gold the country has managed to accumulate. Backing the yuan with gold would not only further strengthen its value and increase demand for the currency abroad, some believe that it could threaten the dollar and other fiat currencies.
Earlier this year, China declared the yuan the New World Currency and the country has been making strong moves to internationalize it even further. The UK government issued its first yuan denominated bonds for currency reserves at the end of last year and it is likely that the yuan will be included in the IMF’s Special Drawing Rights reserve currency this October.
Chinese banks have also begun to join the ICE Benchmark gold fix process and the Shanghai Gold Exchange started testing its own benchmark process recently, expected to be launched later this year. Both will give the country much greater influence over the pricing of gold in the future. If China has accumulated enough gold to back the yuan, even partially, it will be crucial for the country to have better control over the pricing. Depending on how much gold China actually has, the new SGE benchmark may even make the ICE benchmark obsolete.
All of these moves are part of a larger effort to reduce the dollar’s influence globally and will certainly impact future demand for U.S. currency. The best way for you to protect yourself against the devaluation of the dollar is by diversifying your assets with precious metals such as gold and silver. If you have an IRA or 401k, Fortress Gold Group can help you convert it into a Gold IRA so that you can own gold and silver as part of your retirement account. Call us today at (800) 777-6177 to find out how.

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