Reducing Dollar Dependence

Posted June 17, 2009 - 20:18 by isohelpline
Today world financial transactions are dominated by US dollar. This is not a good for a successful global currency system. Leaders from Brazil, Russia, India, and China (BRIC countries) are meeting in Russia to discuss this issue.

The are considering buying each others bonds and swapping currencies to lessen dependence on US dollars. Arkady Dvorkovich, top economic adviser to Russian president Dmitry Medvedev, to reporters "The leaders will be discuss measures measures to promote regional currencies, including "possibly placing part of reserve in the financial instruments of partner countries", during their meeting.

The BRIC Countries have combined reserves of USD 2.8 trillion which is among the biggest. Brazil. China and Russia have already announced plans to shift some foreign reserves into International Monetary Fund bonds, driving treasuries and the US dollar lower.

Mr. Stanislav Ponomarenko, an analyst at ING Groep NV in Moscow said "This is not something for the immediate future, but rather a direction of movement. I don't think a more than a few percent of reserves could be reinvested into BRIC bonds. What we are seeing is a continuation of discussions to find an alternative to the dollar, yet nobody is going fundamentally to alter anything yet.

Masha Lipman, a political analyst at the Carnegie Center in Moscow said “Tuesday's meetings show a very strong desire of developing countries to play a big role in the world finance especially given the growing insecurity related to the current crisis”.

Now post your views here regarding developing a new currency in BRIC countries on the lines of EURO. 

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