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April 6 2023

A new world order? BRICS nations offer alternative to West

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Predictions about the BRICS countries as the fastest growing economies haven’t quite panned out. Instead, the alliance is now offering a diplomatic forum and development financing, outside of the Western mainstream.

The acronym began as a somewhat optimistic term to describe what were the world’s fastest-growing economies at the time. But now the BRICS nations — Brazil, Russia, India, China, South Africa — are setting themselves up as an alternative to existing international financial and political forums.

“The founding myth of the emerging economies has faded,” confirmed Günther Maihold, deputy director of the German Institute for International and Security Affairs, or SWP. “The BRICS countries are experiencing their geopolitical moment.”

Brazil, Russia, India, China and South Africa are trying to position themselves as representatives of the Global South, providing “an alternative model to the G7.”

The G7 is an “informal forum” of heads of state of the world’s most advanced economies, founded in 1975. Germany, France, the United Kingdom, Italy, Japan, Canada and the US are members, as is the EU.

The acronym BRIC, which initially stood for Brazil, Russia, India and China, was coined by Jim O’Neill in 2001 when he was chief economist of the multinational investment bank, Goldman Sachs. At the time, the four countries had sustained rates of high economic growth and the BRIC label stood for economic optimism about the future of those nations. Opponents of the label said the countries were too diverse to be grouped together like this and that it was really just a Goldman Sachs marketing ploy.

But what may have started as a marketing ploy to encourage investors has grown into a platform for intergovernmental cooperation similar to the G7. In 2009, the four nations met for their first summit in Russia’s Yekaterinburg. In 2010, South Africa was invited to join the group, adding the “S” to BRICS.

Challenging the World Bank model

In 2014, with $50 billion (around €46 billion) in seed money, the BRICS nations launched the New Development Bank as an alternative to the World Bank and the International Monetary Fund. In addition, they created a liquidity mechanism called the Contingent Reserve Arrangement to support members struggling with payments.

These offers were not only attractive to the BRICS nations themselves, but also to many other developing and emerging economies that had had painful experiences with the IMF’s structural adjustment programs and austerity measures. This is why many countries said they might be interested in joining the BRICS group.

The BRICS bank is open to new members. In 2021, Egypt, the United Arab Emirates, Uruguay and Bangladesh took up shares. However, these were much lower than the respective $10 billion investments made by the bank’s founding members.

Set to expand

South African Foreign Minister Naledi Pandor has said worldwide interest in the BRICS group was “huge.” In early March, she told television interviewers that she had 12 letters from interested countries on her desk.

“Saudi Arabia is one,” she said. “United Arab Emirates, Egypt, Algeria, and Argentina,” as well as Mexico and Nigeria.

“Once we’ve shaped the criteria [for lending], we will then make the decision,” she said, noting that the topic would be placed on the agenda for the upcoming August summit in South Africa.

The most recent economic developments in BRICS member states have little to do with the initial myths upon which the group was founded. Of the five members, only China has achieved sustained and extensive growth since then.

As China’s gross domestic product grew from $6 trillion in 2010 to nearly $18 trillion in 2021, the economies in Brazil, South Africa and Russia stagnated. India’s GDP grew from $1.7 trillion to $3.1 trillion, but was outpaced by China’s growth.

No sanctions against Russia

Since the start of the Russian war in Ukraine, the BRICS countries have only distanced themselves further from the so-called West. Neither India, Brazil, South Africa or China are taking part in sanctions against Russia. This has become increasingly clear with near-historic levels of trade between India and Russia, or in Brazil’s dependence on Russian fertilizer.

“Diplomatically, the war in Ukraine appears to have drawn a stark dividing line between an eastern-backed Russia and the West,” political scientist Matthew Bishop from the University of Sheffield wrote for the Economics Observatory late last year. “Consequently, some European and US policymakers worry that the BRICS may become less an economic club of rising powers seeking to influence global growth and development, and more a political one defined by their authoritarian nationalism.”

Astrid Prange

https://www.dw.com/en/a-new-world-order-brics-nations-offer-alternative-to-west/a-65124269

November 30 2018

Your money in Crisis!

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A fast-spreading currency crisis could cause major economies to collapse and wipe out the value of dollar-denominated accounts across the country. Here’s what’s going on right now. Three large national economies: Argentina, Turkey, and Venezuela, are currently collapsing because of their own respective currency crises.

Think about this: Every citizen of Argentina experienced the equivalent of a 45% pay cut in 2018 because of that nation’s currency crisis. That’s because the Argentine Peso has lost 45% of its value in 2018, CNBC is reporting. Consequently, Argentine families can now buy only half the essentials (including food) that they could earlier in January. But not just that, Argentines have lost 45% of their savings and investments as well. Nevertheless, it is not quite over for Argentina’s economy. In fact, it’s likely to get much worse since the country’s inflation rate is 25.4%.

Currency Crisis Threatens Your Savings

The currency crisis is now spreading to other nations, Bloomberg writer Satyajit Das reveals. Das thinks currency crises will quickly erupt in India, Indonesia, Brazil, and South Africa next. High national debts and unsustainable consumer debt will cause those nations’ currencies to collapse. Average people and retail investors will get caught in the middle as purchasing power disappears but debt remains.

The currency crisis is already shrinking U.S. retirement accounts. The U.S. stock markets had debt related setbacks on August 29 because of the Argentine and Turkish crises, Reuters claims. Notably, the S&P 500 was down by 7.3% from 2017 on Thursday. Meanwhile, Marketwatch expects the NASDAQ to fall by 1.9% this week.

The Currency Crisis Will Come To America

A more intensified currency crisis is also likely to reach America in the near future. Existing currency issues in other nations put pressure on America’s economy by lowering demand for our goods. There is compelling evidence that the United States is very vulnerable to a currency crisis. For example, economists project that the federal deficit will rise to $833 billion in 2018. The deficit was already at $665 billion in 2017. Economists blame similar deficits for the currency crises in Argentina and Turkey.

The bad news is that America’s consumer credit bubble is growing dramatically. Particularly, the amount of auto and student loans nationwide increased by $10.4 billion in June alone. Some see the student debt trend line as catastrophic since 44 million Americans owe an estimated $1.5 trillion in student loan debts.

The truth is that the world is experiencing the beginnings of an enormous currency crisis that has the potential to devastate America’s economy. Thinking Americans should prepare for the coming currency crisis by reducing debt and diversifying their dollar-denominated accounts. Gold and other precious metals can be important hedges in a currency crisis.

November 27 2018

How Much is Left?

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With gold having been in use since the dawn of history and new mining still occurring, it may seem strange to think of a day when there is no more gold to be extracted from the ground. Nevertheless, like any other limited natural resource, there is a finite supply of gold in the world.

At some point, the world’s supply of new gold will run out. The only question is how far away that day is.

Here are some interesting facts about the global gold supply and when we may run out.

Current Major Sources of Gold

To understand exactly how much gold is in the world and when we may run out, a good first step is to look at current sources and production of gold.

The largest single source of gold in history has been the Witwatersrand Basin of South Africa. This geologic formation is believed to be the result of an ancient meteorite and has produced over 1.5 billion troy ounces of gold since it was discovered in 1886. Witwatersrand accounts for roughly 50 percent of the gold ever mined. The formation, however, has seen declining production since the 1970s. Recently, the total gold output of South Africa, almost all of which comes from Witwatersrand, has dropped below 170 tons per year.

Other major sources of gold include the extremely deep Mponeng mine in China, the Super Pit and Newmont Boddington mines in Australia, Indonesia’s Grasberg Mine, and the mines along the Carlin Unconformity in Nevada, USA. Canada, Russia, and Peru are also major producers of gold.

Between all of the gold sources in the world, current estimates suggest that roughly 2,500 to 3,000 tons of new gold is mined each year. At present, experts believe that the total amount of above ground gold in the world stands at just over 190,000 tons.

Are There Still Untapped Sources of Gold?

Over the past two decades, new gold discoveries have slowed down considerably. Throughout the second half of the 20th century, discoveries of new veins with estimated deposits of 10 million troy ounces or more were quite common.

Though new gold veins are still being found, discoveries of large deposits are becoming increasingly rare. As a result, most gold production today is coming from older mines that have already been exploited for decades. In part, this is due to decreasing investment in discovery on the part of mining companies, though a larger factor is the fact that there may not be many large, undiscovered veins left in the world.

It’s also important to remember that the total amount of gold in the Earth’s crust and the total amount that can be feasibly mined are not the same. There are almost certainly massive gold deposits deep beneath the surface of the Earth that are too far down to be detected, let alone extracted.

Similarly, there are some known gold deposits in Antarctica that may never be economical to mine due to the continent’s extreme weather conditions and the challenges presented by thick ice layers.

There is also a considerable amount of gold that cannot be collected profitably scattered throughout the world’s oceans. Much of these underwater deposits are contained within the ocean floor and floating as tiny particles in the seawater itself.

Modeling the Decline of Gold Production

Because no absolute estimate of how much gold is left to be mined in the world exists, it’s impossible to know exactly how long current reserves will last. There are, however, some ways to estimate the timeline along which gold production could decline.

One primary concept in this effort is known as “peak gold.” Peak gold is defined as the point at which global gold production reaches its highest historical point. There are debates as to when peak gold will actually occur, but most estimates place it within the next decade. Some people think we have already surpassed this point. After peak gold is reached, the global output of gold will gradually decline until all deposits that are economical to exploit have been extracted.

Although the years immediately following peak gold likely won’t see a dramatic decrease in production, the depletion of major mine sites could cause output to drop drastically within a few decades. At present extraction rates, some analysts believe that South Africa, which is one of the largest gold producers in the world, could run out of accessible gold within 40 years.

How Long Before Gold Runs Out and What Happens Then?

Based on known reserves, estimates suggest that gold mining could reach the point of being economically unsustainable by 2050, though new vein discoveries will likely push that date back somewhat. New technologies may also make it possible to extract some known reserves that aren’t currently economical to access, but it is unlikely that large-scale gold mining will continue past 2075 without either huge mining technology advances or the discovery of currently unknown massive gold deposits.

One factor gold has going for it, compared to other non-renewable resources like oil, is that can be recycled. In other words, “running out of gold” isn’t really an adequate description of what happens when gold mines stop producing. Rather, the gold industry will transition from mining to recycling, allowing the global gold supply to be recirculated.

Thanks to the large amount of gold used in electronics that are widely viewed as disposable, efforts to recycle gold extracted from electronic waste are already well under way. Recycling will have to become considerably more efficient to meet the needs of the global gold market, as a huge amount of gold still ends up in landfills each year.

One aspect of the depletion of gold mines that is very difficult to predict is how it will affect the spot price of gold. If demand continues to rise while available supply stagnates, basic economic theory of supply and demand would suggest that prices will rise substantially in the future.

Fortunately, gold hasn’t run out yet and is widely considered a wise investment option for any investor. Buy gold today at Provident Metals while you still can.