Game Changer - The New BRICS Development Bank

[Magda Hassan]

from Golem XIV

There was recent announcement that the BRICS have agreed to launch a new Development bank with a $100 billion currency pool to aid countries with liquidity shortfalls. The major backer of the bank is China contributing $41 billion.

The bank will I have no doubt clear and settle certainly in Yuan and perhaps in Roubles. It will have good working relationships with Hong Kong.

Of more interest to me is that it will be headquartered in Shanghai.

It seems very clear that the Chinese and their economic allies in India and Russia as well as all the countries who are fellow travellers and variously disgruntled with Washington's high handedness are aiming at increasingly by-passing the dollar. The raft of bilateral agreements to settle in Yuan or Roubles that have been signed between China, Russia, Australia, Iran, various South American countries and the EU all serve notice that the days of the dollar's pre-eminence are now numbered.

Of course the reserve status of the dollar is important for how much debt the US can carry. But even if the Yuan and the euro begin to account for a far larger proportion of international settlement this does not eradicate the dollar's importance nor its status. obviously the euro is aiming at being used to settle gas contracts and possibly some oil contracts. If America continues to piss off Iraq's new dictators then they could well decide to settle their contracts in euros or roubles or Yuan.

But I think there are two further important step to watch for. One is to do with banks, the other with courts.

The other half of the power the dollar gives America is that settlement of contracts in dollars means every nation has large dollar accounts which it uses to settle accounts and pay debts. These accounts are held in the small number of global Custodial banks. I think, from memory there are about 4 majors and they are all American: Citi, JPMorgan Chase, Bank of NY Mellon, State Street. These banks house trillions and are one of the choke points used by international lawyers.

When Washington wants to enforce its will on a nation or when American vulture funds want to sue a crippled debtor the Custodial banks are the choke point they use. When Elliott Associates wanted to sue Argentina they did so by taking the Custodial banks that held Argentina's money, to court and got those banks to freeze Argentina's accounts. So the first thi(Iran-contra scandal)(1987)ng I am waiting for is for the emergence of a non-American, Asian or at least Asian based bank to become a major Custodial bank.

The second thing I am looking out for is for that bank to be based NOT in NY. The bank cannot be based in NY because if it was then it would be subject to American law and specifically it would come under the jurisdiction of Wall Street's ( and therefore Washington's) court, which is the Southern District Court of Manhattan. Where you will find the lovely and completely independent Judge Griesa.

Griesa is Wall Street's hanging judge. And his last judgement against Argentina and in favour of the Vultures was upheld by the US supreme court. That decision meant that Argentina will now be crippled with copy-cat appeals for payment from bond holders who had previously agreed to accept a lower settlement. More than that the judgement deals a huge blow to sovereignty in general setting a powerful precedent against any idea of sovereigns having the ability to protect themselves in bankruptcy. A protection that the private companies, including vulture funds themselves DO ENJOY. The ruling rules in favour of one strand of international law the strand which greatly favours private capital and ignores the other older strand such as the Calvo doctrine) which gives pre-eminence to sovereign not private rights.

America is the home of vulture funds and houses the court that rules in their favour. Those courts ruling over those banks is a major part of the projection of American power abroad. Set up a non-american bank to house those funds, and put it in a non American jurisdiction where American courts and Washington's political power is not served and America will have been dealt an entirely peaceful but crippling blow.

So the choice of Shanghai for eth new bank is interesting. There is little attraction in avoiding American political power if you saddle yourself with another equally aggressive power such as China. So what is needed is a place beyond Washington's reach but also not tied to closely to either China or Russia. Who would want a custodial bank subject to courts in Moscow or Beijing? Shanghai is a good place. It is less tied to Chinese banking interests than Hong Kong but still protected from America the way that Singapore, for example, might not be.

If you want to cripple American ability to enforce its will on other nations setting up a major Custodial bank outside of Manhattan would be a very good step. The steps taken so far increasingly by-passing the dollar when settling international accounts in favour of euros or Yuan followed by setting up a lending facility for nations in trouble that is not in dollars, avoids dollar accounts in American banks and is not controlled by the IMF are all the necessary steps which lead up to breaking the stranglehold of American custodial banks and the court which rules them.

I shall be watching.

from Golem XIV

There was recent announcement that the BRICS have agreed to launch a new Development bank with a $100 billion currency pool to aid countries with liquidity shortfalls. The major backer of the bank is China contributing $41 billion...

...If you want to cripple American ability to enforce its will on other nations setting up a major Custodial bank outside of Manhattan would be a very good step. The steps taken so far increasingly by-passing the dollar when settling international accounts in favour of euros or Yuan followed by setting up a lending facility for nations in trouble that is not in dollars, avoids dollar accounts in American banks and is not controlled by the IMF are all the necessary steps which lead up to breaking the stranglehold of American custodial banks and the court which rules them.

I shall be watching.

Spot on & great find!

Yes, great article.

I thought Iran already was trading in other currencies than US$s?