It takes a catastrophe for a new order to be in place. Years back, it was the aftermath of World War II. Post the war, dollar, backed by relatively stronger position of US in those days, was unanimously chosen as international reserve standard. The power thus passed on to Anglo American nations and was manifested through international bodies like IMF, the World Bank and the Security Council of United Nations. However, if current trends are anything to go by, it seems that the Western dominance in financial and global politics is close to an inflection point.
In this decade, the balance of power has visibly shifted in favour of countries like Brazil, Russia, India, China and South Africa, better known as 'BRICS'. Together, the BRICS represent 43% of the global population and 18%of the global GDP. And here is the icing on the cake. The group currently attracts around 53% of the global financial capital. However, every opportunity comes with its own set of challenges. And the challenge with these emerging powers is lack of independence in global policies and dominance of institutions like World Bank and IMF that are being used by the Western nations to serve their own interests at the expense of the rest of the World.
Hence, these countries are considering putting their foot down and establishing a bank that focuses on the development of BRIC. It is needless to say that the independence will come with self funding of the bank. However, such a transition will not be easy and will take at least 5-10 years to challenge Western Institutions. But once that stage is reached, it will be a bipolar world. At one side of this will be currrency of the emerging nations led by China that will have the support of savings and strong economy. And the other side will have depreciated paper currency of debt ridden Western nations (U.S Treasury alone has incurred debts of around US$ 15.4 trillion and plans to increase by at least US$ 1 trillion per annum ), the shaky economic fundamentals of which have marred savings and investments . The highly debt ridden Western Countries are managing on the life support of money printing machines. Once that is withdrawn, these will be marked by severe recession in contrast to BRICS that have strong prospects of industrial growth, sensible economic policies, decent savings and investments and huge reserves (currently worth US$ 4 trillion) to support their currencies.
It is easy to see when it comes to taking sides; BRICS will be a preferred option to the rest of the world that must be desperate for a new international reserve currency that is linked to gold. It may take some more time, but finally the hegemony of Anglo American nations in global politics and economic scenario seems to be drawing to an end. We hope that with its end, we will witness an era that is free from the domination of paper currency and the one that rests on solid economic fundamentals.