But then again, these countries have a large stake in the dollar, so the punches they throw have to be calculated and followed with counters and ambiguity.
It’s also important to remember that we’re talking about a group of countries that could sink back into economic anonymity just as quickly as they emerged.
Take a look at Russia for example …
When the housing market began to fall in the U.S. and the financial system began to crack, the mantra of decoupling was making the rounds. Experts thought that emerging super-growth economies could operate independently of the U.S. and the world economy would keep on plugging away.
That was quickly and clearly proven wrong. And there was no country hit harder than Russia …
First there was the collapse in global demand for oil and other commodities, followed by the collapse in prices. This sent Russia’s economy, heavily dependent on oil and gas exports, into a tailspin. The country’s stock market tumbled. In fact, after climbing 6600 percent between 1998 and 2008, Russian stocks fell 80 percent in just eight months last year — one of the steepest and deepest stock market declines in the world!
And as money was fleeing the Russian stock market, it was fleeing their currency, too. The ruble came under attack losing 58 percent of its value. The freefall stopped only after the Russian central bank stepped in to defend the ruble’s value by burning through more than 1/3 of its currency reserves buying rubles and selling more than $200 billion worth of dollars. The outlook for Russia was looking very bleak.
And it wasn’t just Russia that was exposed … it was the entire BRIC contingent! From peak to trough Chinese stocks lost 73 percent, Indian stocks lost 64 percent and Brazilian stocks lost 60 percent.
What a Difference
Three Months Make …
With the total collapse of the global financial system seemingly averted, the global risk appetite has now improved. And the perception of recovery is breathing life back into commodities, global asset values and emerging market investments.
This week the BRIC countries gathered. And on the premise of diversifying their exposure to the dollar, they proposed buying each other’s local–currency denominated bonds.
So instead of buying U.S.
