Elena Panina, Director of the RUSSTRAT Institute – Machine Translated and cleaned up from the Russian original.
MOSCOW, June 29, 2022, RUSSTRAT Institute.
BRICS expansion has been discussed for a long time. It is significant that the last summit on June 24 in the BRICS Plus format was attended by such countries as Algeria, Argentina, Cambodia, Egypt, Fiji, Ethiopia, Indonesia, Iran, Kazakhstan, Malaysia, Senegal, Thailand and Uzbekistan.
At the same time, the fact that the first applications for membership were submitted by Argentina and Iran, which did not take part in the BRICS Plus meeting, does not seem accidental.
Initially, the BRICS group was created as an association of the largest developing economies in the world. However, in the modern world, it is political decisions that determine the nature of the development of economic ties. It is quite logical that the first countries with a pronounced geopolitical sovereignty and having their own geopolitical scores with the collective West are preparing to join the expanded BRICS.
Iran is already almost two and a half thousand years old, since the time of Cyrus the Great is a powerful historical power, and its geopolitical significance cannot be overestimated. The geography itself determines the potential of its influence on the countries of the Arab world up to the coast of the Mediterranean Sea and the Persian Gulf, in the Transcaucasus, Central Asia, as well as on the Afpak region (Afghanistan and Pakistan). Since the 1979 Islamic Revolution, Iran’s state ideology has been anti-Western. Tehran is engaged in an intense struggle with the US-British coalition for influence in Iraq, and is helping Syria in the fight against terrorism.
From an economic point of view, Iran’s potential is also great. The Iranian economy is in the world’s top 20 in terms of purchasing power parity, the country is third in the world after Saudi Arabia and Venezuela in terms of proven oil resources, and has 16 percent of the world’s proven gas reserves.
Argentina, since the time of General Juan Domingo Peron, has also clearly felt its geopolitical role, being one of the regional leaders in Latin America. This role is recognized all over the world. Argentina, while not one of the world’s largest economies, is nevertheless a full member of the G20. Having survived the failed war with Great Britain over the Falkland Islands (Malvinas), as well as the collapse of liberal reforms according to the IMF recipes, the country has an obvious request to find an independent path of development. Today, Argentina is in a difficult economic situation, it has a huge external debt. However, the potential of Argentina as one of the global food exporters has significantly increased in recent years.
For various reasons, both Iran and Argentina are extremely interested in BRICS projects to create new international settlement systems that are alternative to the global hegemony of the dollar. Iran, which is under sanctions, life itself has forced to go to “de-dollarization”, the country practically does not use the US currency. For Argentina, the transition to a hypothetical new monetary and financial zone would mean an escape from the stranglehold of the IMF, from the pressure of American creditors, which today have an extremely destructive impact on the national economy.
In any case, against the background of aggressive pressure from the United States and its allies on potential new BRICS members, the desire of Iran and Argentina to join the community requires a certain amount of foreign policy courage. There is reason to assume that the process of their joining the BRICS will be successful, since both countries do not cause rejection even in India, which until recently was the main opponent of expansion. We can confidently predict that in the near future the process of adding new members to the BRICS will continue due to the entry of a number of Asian and African countries.
But even now, the BRICS expansion at the expense of Iran and Argentina is the final departure of the community from the idea of Goldman Sachs analyst Jim O’Neill, who coined this abbreviation twenty years ago, who decided to designate such a term as “emerging economies” that are “catching up” with the developed West.
We can say that BRICS is confidently turning into a “collective Non-West”, from a community of emerging markets it is finally transformed into a community of world powers with a pronounced geopolitical sovereignty.
Jerome Powell talking De-Globalization
Federal Reserve Chair Jerome Powell said he thinks it’s rather “likely” that the forces of de-globalization will mount, leading to a more fractionalized new normal characterized by higher inflationary pressures, lower productivity, and slower economic growth.
Powell made the remarks on June 29, during a panel discussion at the European Central Bank’s annual policy forum in Sintra, Portugal.
“We’ve lived through a period of disinflationary forces around the world—this is globalization, aging demographics, low productivity, technology enabling all of that,” Powell said, describing it as a world where inflation was generally “not a problem” in most advanced economies.
“Since the pandemic, we’ve been living in a world where the economy is being driven by very different forces, we know that,” he continued, noting that what remains unknown is whether things will go back to a prior disinflationary environment and, if so, to what extent.
“We suspect that it will be kind of a blend,” the Fed chief said.
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“In the meantime, we’ve had a series of supply shocks, we’ve had very high inflation across the world, certainly through all the advanced economies, and … we’re learning to deal with it,” he said, with his remarks coming as central banks around the world have, in general, been caught flat-footed by persistently high inflation and have rushed to tighten loose monetary settings to bring down soaring prices.
Powell said the Fed’s job of achieving price stability and maximum employment in this new normal with new forces at work has been a “very different exercise” than the U.S. central bank has undertaken over the past 25 years while suggesting that slower economic growth would be an inevitable tradeoff in fighting inflation.
“If what we see, for example, is a re-division of the world into competing geopolitical and economic camps, in a reversal of globalization, that certainly sounds like lower productivity and lower growth,” he said.
“That’s certainly a possible outcome and I think probably, to some extent, a likely outcome,” Powell said.
He added that the aim of the Fed’s rate-hiking cycle is to have economic growth “moderate,” calling it a “necessary adjustment” that aims to bring down demand in the U.S. economy and bring it more into alignment with supply.
“Right now, supply and demand are really out of balance in many parts of the U.S. economy, the labor market being a big example of that,” he said, with the unemployment rate currently at 3.6 percent and around two job vacancies for every job-seeker.
“We need to get them better in balance so inflation can come down,” he added, suggesting the Fed is prepared to tolerate some labor market pain as the price of cooling inflation.
‘No Guarantee’ of a Soft Landing
Powell said that he sees “pathways” for the Fed to achieve a so-called soft landing, where inflation drops but unemployment doesn’t move up significantly, though he added that “there’s no guarantee that we can do that.”
“We believe we can do that,” Powell said, but “it’s obviously something that’s going to be quite challenging.”
Powell’s remarks come on the heels of recent statements made by other Fed officials indicating that the central bank believes its current aggressive monetary tightening cycle is necessary to quell inflation and will lead to a slowdown in economic growth—but that a recession is not inevitable.
Cleveland Fed President Loretta Mester, a voting member of the interest rate-setting Federal Open Market Committee (FOMC), said in a Wednesday interview on CNBC that the Fed is “just at the beginning” of its rate-hiking endeavor and that it carries the risk of a recession.
‘Bumpy Ride’
Regardless of the possibility of an economic contraction, Mester insisted that the Fed needs to keep hiking rates “expeditiously” and that, in order to get a handle on inflation, she said the central bank might have to err on the side of tighter financial conditions.
“We’re on a path now to bring our interest rates up to a more normal level and then probably a little bit higher into restrictive territory,” she told CNBC.
What Mester described as a “bumpy ride” toward tighter financial conditions would likely drive up the unemployment rate from the current 3.6 percent to between 4 percent and 4.25 percent over the next two years, she predicted.
New York Fed President John Williams said in a separate interview on CNBC that he, too, sees a recessionary risk, though that is not his “base case.”
Williams predicted the U.S. economy would slow its pace of growth for the entire year to between 1 percent and 1.5 percent, calling it a “slowdown that we need to see in the economy to really reduce the inflationary pressures that we have and bring inflation down.”
The Fed hiked rates by 75 basis points at its last meeting, with Fed Funds futures contracts putting the odds of another 75 basis point hike at the next July policy meeting at 89.1 percent. That would bring the benchmark overnight deposit rate up to a target range of between 2.25 percent and 2.50 percent from the current 1.50 percent to 1.75 percent.
Mester said that the Fed would likely have to keep hiking rates to a terminal rate of between 3 percent and 3.5 percent.
Fed Dovish Pivot?
Nick Reece, VP of Macro Research and Investment Strategy at Merk Investments, told The Epoch Times in an emailed statement that market expectations for Fed rate hikes have shifted.
“The expected Fed rate hiking cycle peak has shifted higher and sooner over the past month: from an expected peak in mid-2023 at about 3.25 percent to the end of 2022 at 3.75 percent,” he said.
Reece added, however, that history shows that Fed hiking cycles don’t typically last as long or go as high as markets expect, and that, “in fact, the Fed dovish pivot may have already started.”
He pointed to the fact that 2-year Treasury yields spiked to 3.45 percent several weeks ago and have since fallen back to around 3 percent.
“The 2-year yield typically peaks at or before Fed rate hiking cycle peaks and above rate hiking cycle peaks,” he said, with his remarks coming as market watchers try to predict when the Fed might pivot away from tighter policy and adjust portfolio allocations to profit from the phase shift.
Long cut ‘n paste, no link whatsoever, and you’ve forgotten to take out the line:
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Epoch Times eh .. completely Falun Gong.
I’m into wisdom, knowledge & understanding. With that said, I love to share information and ideas between people seeking the same. I know the western ideas of a new world order utopia is not going to happen and Powell is showing us where we have failed humanity in part. Enjoy the poetry of the matter for now.
Powell should throw in the towel. One need only look at the value of the Ruble. We say they lose, what else are we wrong about. Ok simpler question what do we get right? Vaccines, missile defense systems, aircraft carriers?
A lot of people around here have probably read “The Creature of Jekyll Island”. Might explain why no one gets too enthusiastic about the Fed or any story that it might do something that doesn’t screw the average citizen.
If you are going to regale us with already overhyped nonsense, every channel same script, could you at least shorten it up a bit. It’s probably impossible to find a single honest quote in one of your pastes, but a whole boat load of lies, does not compensate.
Epoch time is pro Taiwan cia usaid financed.Fake news.
“It is quite logical that the first countries with a pronounced geopolitical sovereignty and having their own geopolitical scores with the collective West are preparing to join the expanded BRICS.”
Actually what option did we leave them? Become even more enslaved, or at least have a chance to run their own affairs in cooperation with peers.
The West is so far ahead of anyone else they can’t even fathom the rest of the world tiring of a prostitute role. Well how can a western person doubt the omnipotent media we now worship and obey as a God.
Argentina is interesting. Russia has already essentially said that any country joining the new currency and economy in the East is not obligated to service any of the old western debts, at least as far as the East is concerned.
That would take some courage from Argentina, to repudiate its debt load. Could Argentina on its own fend off the retaliation? One wonders if a military contingent from Russia in the country would be the means to keep the North American bully at bay.
No predictions from me, but there are some beguiling possibilities in this newly shaping architecture.
The world is becoming curiouser and curiouser. Everything indicates that the U.S. is heading fast to a Soviet-style implosion. I hope it is for the best. Nevertheless, we should keep in mind the Chinese saying: The most dangerous part of the dragon is its tail.
Thanks to the Saker for his wisdom.
The “Brics” are the necessary nucleus for a liberated and restored Classical World.