The tectonic plates of our global financial system shifted when Brazil, Russia, India and China - known by their acronym Bric - held their first standalone meeting in the Russian city of Yekaterinburg on June 16. Did the Bric meeting echo the Bandung conference of non-aligned developing nations in 1965? Unlike Bandung, Bric was not about broad political vision in a post-colonial era but, rather, coping with a global financial crisis in the post-Washington Consensus era.
Bric represents the emergence of a new consensus, often between unrelated nations drawn into an alliance to address specific issues or crises. In this case, it was the search for pragmatic alternatives to the US dollar as the only global reserve currency.
It began when China's central banker Zhou Xiaochuan called on the International Monetary Fund to expand the basket of special drawing rights (SDRs) earlier this year. He was soon echoed by Russian President Dmitry Medvedev's chief economic aide, Arkady Dvorkovich. And, in the run-up to the summit, Mr Medvedev said: 'The existing set of reserve currencies, including the US dollar, have failed to perform their functions.' Mr Dvorkovich called on the basket of SDRs to include commodity currencies such as the yuan, rouble, Australian and Canadian dollars, plus gold.
On the second day of the summit, the US dollar fell sharply, indicating that the Bric nations had found the magic power of making the dollar ride a roller coaster with only a few words.
The important point is that this summit of Bric leaders was not just about talk, but action. They proposed investing their reserves in each other's currencies, settling bilateral trade in domestic currencies and striking currency-swap agreements. It was even suggested to include the five central Asian states of Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan within the framework of using the yuan as a settlement currency, which some point to as an attempt to create a miniature European-Union type of arrangement in Central Asia.
While it may still be premature to adopt a global currency, as suggested by some economists such as Joseph Stiglitz, the idea does seem to have some momentum. 'The Bric countries can lead the world towards global monetary stability by supporting the researching and planning for the next global currency to replace the US dollar,' said Morrison Bonpasse, president of the Single Global Currency Association, a US think tank. Mr Bonpasse believes that 'when such a single global currency supports a number of countries with 40-50 per cent of the world's GDP, the 'tipping point' will have been reached, and other countries will join quickly'.
