THE GEOPOLITICS OF FINANCE HEATS UP: RUSSIA AND CHINA LAUNCHING NEW ...January 17, 2015
If you've been following the the developing financial geopolitics of the BRICSA nations (Brazil, Russia, India, China, and South Africa), then this news will not come as any surprise. Indeed, so many of you sent me thgis article, it's safe to say that it's on many people's radar(and my thanks to all of you who did):
The article says it all: Russia and China are calling the credit ratings industry bluff, by pointing out that their ratings have been anything but objective, but more often in the service of larger financial and geopolitcal agendas:
"The new Universal Credit Rating Group (UCRG) is being set up to rival the existing agencies Moody's, S&P and Fitch, and its first rating will be issued this year.
"The setting up of UCRG is in its final stages, ready to challenge the ‘Big Three’ that currently dominate the industry, the Managing Director of RusRating Aleksandr Ovchinnikov told Sputnik News Agency on Tuesday.
"'In our opinion, the first ratings [will] appear … during the current year,' Ovchinnikov said, adding that accreditation with the local regulator is already underway.
"The new agency will be based in Hong Kong, and provide a check on the ‘Big Three’, which some analysts say don’t provide an accurate reading of economic situations.
"Many securities and bonds in the US that had triple-A ratings in 2008 and were considered ‘safe’, turned out to be a bubble, revealed by the subprime mortgage crisis."(Boldface emphasis added)
Now all this calls for some commentary, and, as one might imagine, some of our trademark "high octane speculation." In the first place, this is an obvious step for the two most powerful BRICSA nations to make, and one can expect that the ratings agency game might be expanded to the creation of more such agencies within the bloc, with other sponsors, Brazil and India for example. It's a clear sign that the BRICSA bloc intends to challenge the philosophical and financial assumptions beneath the western agencies. So one can watch for more detailed commentary coming from the BRICSA bloc - Russia and China in particular - as they address the underlying assumptions of the Western financial system and its ratings agencies in the coming year. Over the long haul, if such critiques and ratings from the Universal Credit Rating Group prove to be more accurate than those of Moody's, S&P, and Fitch, then this will be a clear geopolitical tool in the BRICSA arsenal to expose the hypocrisies within the western system.
But there is a wider context from which this development must be viewed, I think. Just recently I did an interview with former Assistant Secretary of Housing and Urban Development, Catherine Austin Fitts (which will be available on her website, Solari (Solari.com) as well as in the members' area on this website. One of the observations she made was very intriguing. We have all seen Russia's development of an independent system of domestic financial clearing, and I've been strongly suggesting over the past few years that another inevitable component of the BRICSA challenge to the western financial dominance would be the establishment of parallel systems to those of western finance, specifically, their own development bank - which we have seen recently launched - and ultimately a parallel system of international financial clearing (for which a development bank could conceivably serve double duty). As I (and she, in fact) have often remarked in this connection, the development of such a parallel system of international financial clearing will have to have redundant systems of space based communications, and by extension, the ability to protect them(a point which I hope to cover in tomorrow's blog).
In this context, Ms. Fitts suggested yet another interpretive possibility to the possible BRICSA development of such a parallel system of international financial clearing: redundancy, for if one wishes to usher in, or transition to, a new global financial system, and ultimately toward a global currency, then one must perforce have redundant systems of international financial clearing, rather than one based more or less exclusively on Western, and largely American, controlled space assets and clearing systems (such as SWIFT). I then observed that in addition to this, such redundancy would also be, from the military and security point of view, necessary, in addition to whatever redundancies are currently built into the western system.
The bottom line with all this high octane speculation is this: with the announcement of their own development bank last year, and this announcement of a new credit rating agency to begin this new year, the direction the BRICSA nations are headed is clear: they mean to be players at that international financial table, not as passive vassals, but as active and influential shapers of that new system, should it ever emerge. The multi-lateral currency swap arrangements already negotiated between various BRICSA nations and their affiliated nations are clear signs that the next step - the development of the first planks of a parallel system of international financial clearing - are very near. How they will inevitably integrate that with the western system remains to be seen. But one thing is clear: to do this, they will need to beef up their space-based capabilities...
...but that's tomorrow's story...
See you on the flip side...