I can understand why the Western media didn’t consider it important enough to mention it in relation to the just-ended BRIC summit, but it’s nevertheless important enough for long term investors to take notice.
Yesterday, alongside the first annual BRIC summit of Brazil, Russia, India, and China, the Shanghai Cooperation Organization countries, which comprises Russia, China and four ex-Soviet Central Asian republics — Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan — held their own parallel summit in the same Russian Ural city of Yekaterinburg. They agreed on backing the Russian proposal on using their national currencies in mutual settlements, which should be currency swaps, and introducing in the foreseeable future their own common monetary union currency.
The Shanghai Cooperation Organization (SCO) countries agreed their common currency will be similar to the European currency unit and to the coming monetary union currency in 2013 of the Gulf Cooperation Council countries that include Bahrain, Kuwait, Qatar, and Saudi Arabia.
As could be expected, the SCO summit's participants said that the current structure of the world currency system, dominated by the U.S. dollar as the major global reserve currency, was far from ideal and the appearance of new reserve currencies was inevitable.
Russian President Dmitry Medvedev, also as expected, told the SCO summit that the Shanghai group member states should increase the share of their national currencies in mutual settlements to reduce dependence on the dollar and improve the health of the global financial system.
"The current set of reserve currencies and the main reserve currency — the U.S. dollar — have failed to function as they should," Medvedev said.
Ok, all this will take a lot of time and will have to overcome a lot of obstacles before coming into practical use.
In the meantime, we will have to do with what we have, and therefore, continue to use mostly, for still years to come, the U.S. dollar.
That said, it’s also a fact that the dollar dominance as the world’s prime reserve currency isn’t on the road to expansion. It’s obvious that the developing world is clearly preoccupied about the unprecedented rise of U.S. debt that is, of course, issued in U.S. dollars.
Well, honestly, I can’t blame them.
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