Yves here. Please welcome Andrew Korybko to Naked Capitalism. He regularly posts on his own Substack and has graciously agreed to let us reproduce his work from time to time.
Please note that the tone of this post is a bit out of character for Korybko, in that he is clearly chuffed and is taking a mini-victory lap. Specifically, events are playing out in line with his assessment of the BRICS bank and Global South economic leaders’ approach to the de-dollarization project, namely that they will be very careful and deliberate. That means way way slower than most enthusiasts for the multipolarity project would like to believe.
I can understand his frustration with commentators who generally have sound geopolitical views but gone ga-ga over the prospects for establishing new payment and investment arrangements. We’ve focused on the governance and infrastructure/institutional requirements, which are substantial and generally ignored and pretty much guarantee that progress will be measured. Korybko has focused on another set of impediments, that the countries who wants to slip the dollar leash are still considerably entwined with the First World and thus need to move deliberately.
If you are still skeptical of Korybko’s and our take, check back in after the big BRICS meeting on August 22 to 24. New reserve currency fans have for the most part been predicting the launch of major concrete measures. Let’s see what actually happens.
By Andrew Korybko, a Moscow-based American political analyst who specializes in the global systemic transition to multipolarity in the New Cold War. He has a PhD from MGIMO, which is under the umbrella of the Russian Foreign Ministry. Originally published at his website
Those who aren’t irredeemably brainwashed and sincerely aspire to understand the global systemic transition to multipolarity as it objectively exists instead of indulging in wishful thinking about it should use this unpleasant development as the opportunity to finally awaken.
The Alt-Media Community (AMC) has hyped their audience up since the start of the NATO-Russian proxy war seventeen months ago into thinking that BRICS is supposedly on the brink of dealing a deathblow to the dollar. Top influencers deliberately exaggerated the group’s role in advancing financial multipolarity processes in order to generate clout, push their ideological agenda, and/or solicit donations from their well-intended but naive followers.
The reality is that BRICS only envisages gradually reforming the global financial system through a series of carefully coordinated moves whose effects will take a lot of time to materialize, not radically changing everything by de facto declaring war on the Western-centric financial order with all that entails. After all, apart from Russia nowadays, all of its members are in relationships of complex interdependence with the same lopsided system that they intend to reform.
It therefore follows that none of those other four ever planned to cross their Western partners’ financial red lines like the AMC’s top influencers falsely claimed and thus risk catalyzing the mutually disastrous consequences of a so-called “decoupling”. Their economies could crash, Color Revolution threats might then soar, and the resultant international instability could complicate their respective grand strategies. Anyone who expected otherwise was misled as the latest development on Wednesday proved.
Newly appointed President of the New Development Bank (NDB, which is popular known as the BRICS Bank) Dilma Rousseff confirmed in a statement published on her official Twitter account that “The NDB reiterated that it is not planning new projects in Russia and operates in compliance with applicable restrictions on international financial and capital markets. Any speculations on such a matter are unfounded.”
Rousseff used to lead Brazil prior to her ouster in August 2016 as part of the US’ rolling regime change campaign there at the time. Her appointment as President of the BRICS Bank by newly re-elected and now three-time President Lula da Silva was spun by the AMC’s top influencers as allegedly proving its supposedly secret plans to de facto declare war on the Western-centric financial order. Their audience fell for this lie due to their sympathy for her and their false belief that Lula is against the US.
They could never have imagined that she of all people would be the one to officially inform the world that the BRICS Bank is complying with Western sanctions against Russia and then rubbish all related speculation about her group’s intentions as “unfounded”. In one fell swoop, it became undeniable that “BRICS Isn’t What Many Of Its Supporters Assumed”, thus shattering the AMC’s worldview and discrediting those of its top influencers who deliberately exaggerated its role in the emerging order.
There’ll of course be some shameless charlatans who’ll predictably claim that Rousseff is just playing “5D chess” in order to “psyche out the West” or whatever exactly as they always allege whenever “politically inconvenient” facts expose their lies, but this is an insult to their audience’s intelligence to allege. Nevertheless, these sorts of conspiracy theories have regrettably become common in recent years after top influencers realized that many people desperately want to believe them for whatever reason.
Those who aren’t irredeemably brainwashed and sincerely aspire to understand the global systemic transition to multipolarity as it objectively exists instead of indulging in wishful thinking about it should use this unpleasant development as the opportunity to finally awaken. They’ve had the wool pulled over their eyes by the AMC’s top influencers for far too long, which got their hopes unrealistically high and thus inevitably set them up for the deep disappointment that they’re probably experiencing right now.
The seven steps suggested here half a decade ago will help them deprogram their minds after all the false narratives that they were duped by “trusted” sources into believing. Together with that, they’d do well to see if those aforesaid sources publicly account for why they got it so wrong about BRICS. Those who do deserve credit for taking responsibility and trying to improve their work, while those who ignore the latest development or double down on “5D chess” conspiracy theories should no longer be trusted.
As was explained in this analysis here about the recent arrest of Igor Girkin, “5D chess” and “doom & gloom” (“D&G”) conspiracy theories are equally inaccurate depictions of reality that members of the AMC should always be on the lookout for. Rousseff’s confirmation that the BRICS Bank is complying with the Western sanctions about Russia shatters the first false perception about its role in advancing financial multipolarity processes but it also shouldn’t be exploited to extend credence to the second.
This “politically inconvenient” development doesn’t mean that BRICS isn’t important or sold out to the West like “D&G” conspiracy theorists might predictably claim. Rather, it simply confirms what was earlier shared in this analysis regarding that group’s goal of only gradually reforming the global financial system through a series of carefully coordinated moves whose effects will take a lot of time to materialize. Progress is already being made even though the pace isn’t to the liking of many in the AMC.
The shock being felt by those well-intended but naive folks who fell for “5D chess” conspiracy theories about BRICS shouldn’t lead to them becoming so despondent that they “defect” to “D&G” ones, but should instead inspire them to seek the truth about the global systemic transition as it objectively exists. To that end, they should follow the seven steps that were previously suggested in parallel with diversifying their sources of information and always being careful not to fall for conspiracy theories.
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It may not be so much a case of the BRICS planning a Great Escape from the western financial system as being forced out by it. At the moment about a third of the countries in the world are under one form of sanctions or another and that number is only increasing. The west has given proof that if you have your gold in one of their countries, that they will have no compunction about stealing it or slow-walking returning it by years. That your property, investments and currency reserves can be seized overnight if you get in their bad books and this includes countries like Switzerland who had a two century long doctrine of neutrality – until now. The loans that you can get from the west are predatory and are designed to cripple your main economy and remain subservient to western governments. In short, how are the countries of the Global South supposed to defends against these systems? They may still be at the planning stage but there must be awareness that this system is quite capable of throwing up another 2008 financial crisis that would be worse by an order of magnitude – with those countries left to hang out to dry. And if it all falls to pieces, they had better have something, anything ready to take its place.
Great comment, I agree 100%. Since almost the beginning of the conflict when it became clear that this wasn’t a mere flash in the pan and instead was igniting a great global conflagration, I have been in the “This will lead to the long-term decline of the West and we’ll likely have to wait years if not decades before we can really sit back and say ‘The American Empire has fallen!'” So the announcement is of no surprise to me. If China’s playing it (mostly) safe to not run afoul of US sanctions on Russia too badly, then so will BRICS by extension.
Nonetheless, I think it’s extremely wise to not take victory laps and start smugly advising people on why they’re wrong (see: https://www.youtube.com/watch?v=RpkQEq75y18 by The Onion) and why you’re so clever and correct until you’ve actually, well, won. Prior to February 24th 2022, I would have confidently and smugly said that any hopes of the US dollar being dethroned in anybody heres’ lifetimes are absurd because of these Five Laws of Economics™, and we must find another way of breaking US hegemony – and now I’m not so sure. It’s still entirely possible that the US will light a fire under the collective bottoms of the Multipolarists (it would still be too much to call many of them, like Brazil and Saudi Arabia, anti-Western). In the very much not too distant future, regardless of how carefully BRICS plays it and how gingerly they move about. the US might decide to take another bold step like with attempting to seize Russia’s central bank reserves and try it with China over some incident in Taiwan, or go to war with Iran, or something like that, and it could force BRICS into a rubber-hits-the-road moment where it’s either respond drastically or just give up the entire project and let America rule the world until the biosphere collapses and the fossil fuel executives launch their rockets to Alpha Centauri.
I guess I’m just in the “let’s wait and see what happens” crowd more than I’m in the doom and gloom crowd, the 5D chess crowd, or even Korybko’s crowd.
I also wonder how the generational aspect plays into this. Right now we have 80 year old + “leaders” who can’t walk up stairs, finish a speech or think hoarding ice cream is how to survive a pandemic. These people need to go, and possibly the gen xer’s (of which I am one) behind them for meaningful new thinking to emerge. Until then, Russia and China have to be extremely cautious in taking on a geriatric generation so mired in neoliberalist capitalism and neocon foreign policy that nuclear war may seem like a viable option to them if all else fails.
One also needs to wonder how much time we actually have. Climate change projections for 2050 or 2100 are a tool to delay action. At the rate we are going we could reach an inflection point in the next 1-5 years.
As a fellow Gen Xer, I wouldn’t put too much faith in our generation of political “leaders.” After all, we came of age in the so-called “neoliberal golden age” of the 90’s and I suspect most of Biden’s administration (the Clintonites) are also Gen X. The new house minority leader, Jeffries, is a total neoliberal. Yes, he’s part of the CPC, but joining the CPC, is trivially easy. My cats could join the CPC if they wanted to.
This could be because they already have one foot in the grave themselves. Pretty sure they don’t give two craps’ about the younger generations. Probably cognitive decline which completely eliminates what little empathy they already had. As my dear boomer mother once told me, we don’t get better as we get older, we get worse.
As a New Yorker and public school teacher, I’ve observed Jeffries from the start of his political career, where he started out running against Roger Green (who was a legitimate progressive during some very dry years) for State Assembly and then carrying water for the hedge fund parasites who were seeking to privatize the public schools. He’s a front for some very nasty people.
Trust me, he’s awful, and no improvement over Boomer geriatrics. If anything, he’s worse, given the Idpol screening and misdirection he’ll be provided with.
Yes, the tempo of the transition to multipolarity will vary. Many countries trying to navigate this transition will have to respond to many different pressures by necessity. Applying a purity test to their respective decisions or questioning their commitment to the transition is not only useless, but also silly. The fundamentals that initiated the transition will ultimately prevail, but each country’s path will be different. India for example recently announced that it wasn’t interested in being part of a BRICS currency. Maybe it’s true, or maybe they just realize that their position requires ambiguity, lest they incur the wrath of the GAE. Globalization and Hegemonic rule created a web of interdependencies that need to be unraveled and reworked for a new system. This will take time, and leaders will have to tread carefully to avoid disaster.
MMT quite clearly shows that any nation with a sovereign currency does not need foreign loans.
There are limits to how much a nation might be able to finance internal advancement, but nations are free in general to chart their own course.
Thanks for that salutary reminder, Odysseus. You’re absolutely right of course.
The only problem is to get enough people to understand what MMT is telling us!
Thank you for posting Korybko here at NC. As this article shows, he provides a useful antidote to both the “5D Chess” cheerleaders and the “Doom & Gloomers” (his terms) who really function as “sixth columnists.” This polarization within the alt-media community is getting so bad, and so predictable, that I am starting to ignore some of the commentators that I have been following since this conflict began. In this vein, I highly recommend his article on the Strelkov arrest as well which he links to above, also here:
https://korybko.substack.com/p/analyzing-the-arrest-of-doom-and
Just as democracy the is proverbial “least bad” form of government compared to everything else, the USD is the least bad reserve currency compared to everything else.
The USD is still going to reign supreme—-but it does have stage 1.5 cancer.
This is what helps the US Dollar reign supreme: 26-week Treasury–5.5%. (0f course, it could be 0.0% [or less] if you run afoul of Mr. Biden.)
I agree with Korybko’s assessment. Building this non-USD system is going to take time and careful planning, especially as all 5 of the original BRICS (even RU to some extent) are still operating within the USD system. The task at hand reminds me a bit of Isaac Asimov’s Foundation Trilogy, in which the goal was to create (without attracting attention from TPTB) the basis for a new empire while the old empire was collapsing around it. Not easy to do, and a great set of novels. Nevertheless, I think the USA’s constant weaponization of its effective control of the international financial system is forcing the BRICS to take action. The freezing/theft of RU’s central bank reserves was a game-changer that has focused minds as never before. So yes, it will happen. But not tomorrow, and not in late August either.
The funny thing is that everybody–even China and Russia–was happy with the post-Bretton Woods system that was essentially centered on the USD. Everything was just dandy until the idiots inside the Beltway decided to weaponize it. Seizing RU’s central bank reserves will go down in history as one of the all-time great own goals, a classic short-term gain for long-term loss.
And this surprises people, how?
I used to think maybe the reserve currency status was likely to change in the near future. I was surprised by this revelation and the revelation of the technology challenges and legal issue along with many other obstacles make it impossible. As an American, this is actually a relief even though I think in the long run it would benefit the world to have a more stable reserve currency. In my opinion, based on the facts I do not think we are running a big enough deficit and should increase spending to overhaul the entire infrastructure and offer massive incentives for all companies to relocate to the US. Since no one can get away from dollar then in the long-run Russia is done and just a matter of time for their end and same goes for China. I have been humbled and will be much more careful to believe in anything related to the US being in decline. Thank you so much for all the valuable information and great discussions.
i initially gleaned/hoped that it would happen quickly…but Yves convinced me otherwise.
that still leaves the possibility that Brics could have their hands forced…by whatever the Western PTB can cook up…and hafta pull the trigger sooner than they wanted.
I know i would endeavor to have such a contingency plan in place.
but i’m too ignorant to know all that well how currency works at that high level….so i defer to Yves.
all that said, that pax americana in somewhere on the slope of terminal decline…making our elite cohort freak out embarrassingly…i have no doubt.
many other indicators besides the relative strength of the dollar.
that same goes for humanity, in general…given resource depletion, essentially Shi6tting our nest…and cultural and institutional(and Ontological!) Inertia.
it will just take longer.
‘As an American, this is actually a relief …”…lol.
as doomers at Latoc used to say:” more time to get yer preps in”
use it wisely.
build villages in the hinterland, upwind of strategic targets.
I’m sorry but the author is misrepresenting the issue when he says in his substack article that South Africa was “shown who’s boss” when yielding to western pressure to arrest Putin were he to step foot in Johannesburg for the Brics summit. This is simply not true, our official opposition party, the Democratic Alliance, which twerks for the west at every opportunity and has made it its stated mission to keep SA under the yoke of neo-colonial oppression, went to court to compel the state under our laws to arrest Putin if he showed up here, and the order was granted by the Gauteng High Court on the 17th of July. “Western pressure” wasn’t what forced the government’s hand here, it the exploitation of a legal pathway by the DA that made it possible.
At least in so far as this particular issue on Putin’s arrest is concerned, the author pursues it with frothy fervour and falls prey to the same giddiness he decries in the alt-media influencers he criticizes.
so long ago now, i cant remember…but arent Kissinger, Bush2, Rumsfeld, etc essentially in the same boat?
i remember that being a breathy topic in lefty spaces, pre trump.
a spanish judge signing warrants, etc…too much has happened since, and i mustve needed the headroom.
The author (and he is not alone here) misuses or does not understand the term ‘conspiracy theory.’
A conspiracy is an agreement by two or more persons to commit a crime. De-dollarization isn’t a crime – at least, not yet.
Sorry, usage changes over time. For instance, “sophisticated” once meant trashy or superficial. Korybko makes a well-accepted use of “conspiracy theory”.
Tom Lehrer:
Those of us who are familiar with Keynes know about his Bancor. His ruminations about its mechanics and implementation must be somewhere in the literature. He typically never talked out his (ahem). Could be illuminating.
My understanding is that BRICS are gradually developing an ‘accounting system’ for trades within the group based on gold which very closely mirrors the Keynes suggestion pre Bretton Woods.
There is no attempt to create an alternative ‘reserve currency’ , they may never need to be.
This is a slow burner but given the countries applying to join BRICS , it will be quite profound when it comes into operation.
The general tone of this article is more akin to the school playground than anything else.
Thanks for all the BRICS banking coverage. It is bringing much needed clarity, by showing the magnitude of the tasks at hand – were there to be any desire to upend what is essentially still the Bretton-Woods system in place.
And perhaps that’s a great place to start: should there be a plan to upend it all … in the longer term?
What is the nature of these complex relationships, and should they be allowed to persist?
Well, I guess if any nation is OK with having their USD/Euro holdings frozen, or even put under someone else’s control (see Venezuela’s Juan Guaido) then fine … so why even bother with gradual reform?
Question asked, question answered:
Well, as I have been saying for years now, banks have largely replaced banks as the chosen weapons of mass destruction … that is, of course unless you’re part of the jungle, not the garden … in which case, bombs away!
I can accept that at this juncture, there is no grand plan afoot. What I cannot see is ten years down the road, with potentially widening “sanctions diplomacy” and proxy war(s) escalation, the someone, somewhere (in the BRICS sphere) won’t say, ” … it’s time to accelerate to end game”. (Thx Obama!)
While it seems logical that a rationale, carefully thought out de-dollarization plans will take decades, rationality and strategery is in short supply in the Western leadership, acting against its own economic interests, as Michael Hudson notes.
A single accident in the S China Sea (or the Black Sea) and all those careful plans will be out the window with US security interests torpedoing the global economy in a fit of exceptionalist irrationality.
Its easy to imagine President Trump refusing to ship LNG to a freezing Europe (with massive deaths) next winter (or President Nuland this winter), driving into power a wave of far far right Euro gov’ts that attempt to send the Yanks home and a new Operation Gladio (probably without telling President Trump). Open resistance to the assassinations by some European countries then leads the US to freeze and seize all European assets, and . . .
A few decades ago, this would have been inconceivable.
The end of an empire, particularly one as militaristic, delusional, and repeatedly self-immolating as the US, seems unlikely to evolve sensibly. I recommend the End of Civilizations podcast to see how Empires over the millennia have self imploded and how, it often goes very slowly until it goes fast. History doesnt repeat, but it does rhyme.
“The reality is that BRICS only envisages gradually reforming the global financial system through a series of carefully coordinated moves whose effects will take a lot of time to materialize, not radically changing everything by de facto declaring war on the Western-centric financial order with all that entails…”
The global PMC is real and “Americanized.”
The actual budgets and spending priorities that come from any financial order or institution will have more importance than any type of currency.
Budgets will show you how people are.
I would like to push back against the argument in a few of his posts/articles Korybko has linked to in this one, that Lula is aligned with the “liberal globalists” because he supports LGBTetc rights. It seems to me there are quite a good many anti-globalist-agenda people who are also pro-LGBT rights and this whole area of discussion has been seriously poisoned by TPTB toxic idpol posturing. Which is to say that support for LGBT rights isn’t the same thing as the idpol discourse, and it’s one of the many negative consequences of that discourse that many people with more conservative values have been led to believe that anyone who supports LGBT rights is also a liberal globalist.
I see that Korybko also considers a number of Lula’s actions in arriving at his suspicions of Lula, but I think Lula has so far demonstrated a record of actions justifying at best ambiguous/tentative conclusions about his alignments. He seems to me to be deeply committed to South-South cooperation.
So in any case, I don’t disagree with the main argument/analysis here, but I do have some misgivings about Korybko’s broader analysis of Brazil/Lula and just felt the need to leave this in a comment.
What is happening now is not really de-dollarization, but balkanization of world trade flows. With globalization everybody can sell to everybody, but in the balkanized world (Western Hemi, Eastern Hemi minus Europe, Europe) there will be a lot more trade within each “balkan” than between “balkans”.
A fascinating side note is that this re-arrangement of trade flows will require investment, and that investment will require dollars.