![]() And thus depend on the Western economies to import their glut of goods and savings for growth. Or - put it another way - these current account surpluses show us that BRICS have low domestic demand. Meaning, they aren’t consuming what they produce, thus needing to export the rest abroad. These current account surpluses also indicate that BRICS (and Germany and Japan) have extremely unbalanced economies. Seems "good" for BRICS, right? Well, not so fast. For perspective, the International Monetary Fund (IMF) recently noted the evolution of global current accounts as a percentage of world GDP after the Russia-Ukraine war began.Īnd as you can see, not only do they balance, but have actually widened since 2020. run large current account deficits to match these. And currently, almost all BRICS are running huge current account surpluses (with India quickly moving towards one). Meaning, a surplus somewhere is a deficit elsewhere (and vice versa). But I don’t look at things so black and white. And that a deficit (importing more goods and savings than it exports) is "bad". In economics, it’s generally taught that a country running a current account surplus (aka exporting more goods and savings than it imports) is a "good" thing. Almost All of BRICS Run Current Account Surpluses, Thus Depending On Western (Mostly U.S.) Deficits So, let’s take a closer look at all this. But these are important topics that no one ever seems to discuss regarding a BRICS currency. Keep in mind, this is a complex macroeconomic topic (although grossly underrated). But it would require a significant amount of pain that these countries don’t want to endure. Now, it’s not impossible for a BRICS currency to happen. And three anemic commodity producers in Russia, Brazil, and South Africa. A golden goose that’s never laid an egg (but has potential) in India. Let’s be clear - BRICS is simply an eroding growth engine in China. And would depend on the Chinese economy and the yuan as the backbone for a currency bloc. Have extremely high domestic savings rates. Such as, they all essentially run current account surpluses. Headlines like “ Argentina Ditching Dollar” and “ Saudi Arabia Moving Towards Yuan” and “ Brazil Declares War On Dollar ” have spread like fire.īecause there are massive imbalances within the BRICS. Over the last month, I’ve seen a wave of hysteria regarding "de-dollarization" and the formation of a BRICS currency.
0 Comments
Leave a Reply. |