Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 40 original podcasts with new episodes released every day.
BRICS+
I’ve been a member since 2011 and this is my first post. I’ve been a federal worker until this month (retired after 33 years) and I take the Hatch Act seriously. Unfortunately, it’s become cleat the senior levels of the deep state do not have this concern.
I want to take advantage of my familiarity with this community to both raise awareness of, and possibly dispel, my growing anxiety about what I think are significant geopolitical issues.
Background:
In 2009 Brazil, Russia, India, China and South Africa formed an economic alliance to invest in developing nations as an alternative to the Western-dominated World Bank and IMF. In December, Saudi Arabia, UAE, Egypt, Ethiopia, Iran and Argentina were invited to join.
https://www.forbes.com/sites/tilakdoshi/2023/08/29/brics6-vs-g-7-the-quest-for-multipolarity/
The stated goal of the BRICS+ is to supplant the dollar and the euro as the dominant world’s reserve currency. The only reason I can think of why the Saudis, Egyptians, and Emirates would join the Iranians in such a relationship comes down to China. What might China have to do with this? Simple self-interest on behalf of the Gulf states. China consumes much of the Middle East’s petroleum. In the event that China does something to warrant international sanctions, the Gulf states would need an alternative to the dollar to continue to trade with China.
Analysis:
Recently, Germany, after pulling back on its promise to send aid to Ukraine, directed the interest on frozen Russian assets to Ukraine instead. This spurred the Saudis to warn the Germans that such a move would be a red line, and that Saudi Arabia would dump all sovereign debt.
As I write this, the US is currently upside down on debt to GDP, with OMB projecting to add another $11 trillion to our debt through deficit spending over the next 9 years. These are big numbers, so let me provide some context. Today the single most expensive item of discretionary spending is maintenance on our debt, which amounts to ~$1 trillion; the second most expensive item is the roughly $800 billion we spend on the entire DoD (yes, the Army, Navy, Marines, and Air force as well as the entire Intelligence community.) In other words, each year we are spending more on debt maintenance than on national security. Remember that OMB projects this to get worse as deficit spending continues. OMB’s projection of debt/GDP by 2027 is 120%. The last time the US was in this situation was 1947—after fighting WWII.
Opinion:
The BRICS+ have a common thread beyond self-interest. They are all autocracies of one form or another. Russia and China have consistently expressed revanchist goals. With Western deterrence at an all-time low and with the mitigation of our best soft power weapon—sanctions—what we may be seeing is a realignment in the world’s geopolitical order between democracies and autocracies. If so, we need to consider the current strife not as independent wars but as separate but related battles in what may become a global war.
Today, the BRICS+ are more than a financial consortium. There are cultural, technological, and military elements to their cooperation.
I’m hopeful that I am wrong about my analysis and conclusions. In any case, we may want to think about our debt and deficit in terms of national defense as well as how they impact the economy.
Published in Finance
Great first post. Welcome.
Question: Does a potential collapse of the Chinese economy invite more military adventurism globally or the diminution of it? Taiwan seems confident in repelling a Chinese assault on the island in the short term, the Philippines not so much. Does a financially weak China begin to drain the resources that Russia and Iran rely upon?
Thank you for posting. After 13 years, you’re due!
Interesting post; it will take me a bit to fully digest it.
Mark Steyn postulated back in 2006 that Putin’s Russia might prefer to take down as many others as they can with them, as their demographic death-spiral continues. China could easily figure the same.
Thank you for the thoughtful and thorough comment; I hope it’s the first of many.
Your reluctance to participate is understandable. I used to worry about social media affecting my Top Secret clearance; fortunately that went away with my last Navy contractor gig. Ricochet is probably the safest place in social media to express an opinion.
my off the cuff answer is that autocracies do “pain” better than democracies. I think if Taiwan is attacked we will quickly find out how our Pacific fleet strategy will abide.
In this case, we need to think about not one adversary but all of our potential adversaries not necessarily coordinating but acting in their self interest. O course with Russia threatening to send ASCM (Anti Ship Cruise Missiles) to Yemen that ups the ante. Honestly I think there is a significant threat to the western order. With ASCM’s in Yemen the USN will either have to weather the storm or pull back out of range and let the Iranian backed Houthis close off the Suez.
As far as China is concerned, I agree that their economy is on the rocks but Xi’s revanchist focus on Taiwan overcomes any rational action. China isn’t rational: where is Jack Ma? Or any off the other Chinese that prospered under Deng’s Market policies? For what it’s worth, the CCP navy is getting old. What I mean by that is that navies have an O&M tail (Operation and Maintenance) and the bill for the 400+ ship Chinese navy comes due in 2026.
Short answer is “Maybee”. Taiwan is likely hoping that South Korea and Japan has it’s back as well as the US Pacific fleet. I’ll ask a question back to you: How effective is US determent today with our current commander in chief and our fickle congress?
Thank you all for very thought provoking questions
Folks,
I don’t know about this new guy.
He seems to be very intelligent and to write serious commentary and raise important questions about subjects concerning which he is very well informed, all in a friendly and respectful manner.
The thing is, we have already allowed in several people of that sort. Dr. Bastiat comes to mind, and he’s not the only one.
Don’t we risk losing control if we keep letting in more?
Well, it depends. More information will be needed to identify who the current Commander-in-Chief is…it’s typically the same person who is President…but it’s also unclear who the current President is. As far as the US Pacific fleet…as long as the Chinese don’t launch their attack when the US Pacific fleet is engaged in painting LGBTQ+ rainbows on their fingernails and toenails…then there’s a chance…not a great chance…but a marginal chance that they could repel a Chinese action.
Since 2011 I’ve been a silent reader. I’m not sure what your referring too with respect to Dr. Bastiat. I can say that I will adhere to all off ricochette’s implicit and explicit guidelines and I will strive to be respectful to all. But I can assure you I think for myself, without an agenda. I’m earnestly looking for a conversation related to topics I find interesting.
Your comment @Mark Camp, seems to convey there is a selection reserved to a Clericy for what members gain approval. If that is so, I regret that I’ve been a Thatcher member since 2011 and will no longer post.
I’m pretty sure Mark is being his charming self with a little friendly sarcasm and is paying you a very well-deserved compliment. Keep posting, we’re all hungry for more!
Interesting first post. I have a few thoughts.
I can think of plenty of reasons why the Saudis, Egyptians, and Emirates would want to join BRICS. The obvious one is the risk that they could end up on the receiving end of US sanctions themselves.
The US set up the international system circa World War II. The so-called Atlantic Charter, in August 1941 and therefore shortly before US entry into the war, was aspirational. Among other things, it stated the agreement of the US and Britain as follows:
We don’t do this, of course. Contrary to our stated principles, we do not respect the forms of government of other countries, regularly overthrowing various regimes, and sanctioning others whose form of government we don’t like. We regularly deprive various countries of “access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity.”
Instead, we use trade as a weapon.
The Bretton-Woods system was established during the war, in 1944, essentially establishing the primacy of the dollar. This system broke down after the US left the gold standard, but other agreements and institutions has maintained the dollar as the world’s principal reserve currency. The SWIFT financial network facilitates international trade and banking now, as I understand it. The international banking system is quite complex, and I don’t begin to understand the details.
What I do understand is that we use it as a weapon.
It is not surprising that other countries would look for an alternative.
I don’t think that either part of this is true.
I’ve never heard of China expressing revanchist goals. China says that there is one China, and that Taiwan is part of that one China. Taiwan has always said the same thing. Since the 1970s, we have agreed. China wanting its rebel province back is not “revanchist.”
I don’t think that Russia has expressed revanchist goals, either. What do you mean? I’ve seen many false claims that President Putin expressed such goals, particularly in his July 2021 article. I think that those claiming this are either lying, or misinformed. I’ve read the article. You can read it here. Perhaps you’re thinking of something else.
The BRICS countries are not all autocracies, either. Current members include democracies — Brazil, India, and South Africa. I’ve seen that Malaysia and Thailand are both interested in joining, and are both democracies.
Sorry, Gordo!
My Comment was tongue-in-cheek…my way of saying, “Welcome to the Commenting community!” And “Based on the quality of your first Comment (and your contributions to the thread) it looks like we will be blessed by your more active role in the future.”
I am embarrassed, and I am thinking once more about abandoning my career as a permanently aspiring humorist.
Thanks for clearing that up. I too have a dry sense off humor but, nevertheless, had first post jitters. This is the only Blog I’ve ever posted too.
All good
My main thesis is that there is no conspiracy, rather the autocratic states are acting in their own self interest. With respect to both Russia and China I would call Putin’s designs on Eastern Europe, disguised as defense since the 2008 and 2014 invasions of Georgia and Ukraine respectively, as revanchist and geared towards rebuilding the Russian empire. Russian Media has also suggested that the sale of Alaska was unlawful. China covets Taiwan as part of it’s territory though it’s been autonomous for 70 years. Not to mention the “Middle Kingdom’s” designs through the belt and road initiative (of which it made great use of the BRICS funding).
I greatly appreciate the feedback, I’m hopeful I’m wrong.
Also the Democracies you identify (Brazil, India, and South Africa) …. Brazil has been a socialist country since Lula while South Africa is openly Marxist, and India is sliding more and more towards single party (BJP) rule.
Or, take out the launchers/the people operating the launchers.
Dead Houthis don’t launch anything.
One difference is, Taiwan says they hold the real Chinese authority, and “mainland” China is the rebel province.
There’s a good argument that they are correct. Not that it ultimately matters, of course.
Welcome, and thanks for the post.
I have a couple of questions.
First, if I read you right, your assertion is basically that authoritarian nations are aligning to become what is essentially an authoritarian bloc in opposition to the west, and this is the conclusion “[you] are hopeful [you] are wrong about….”
Is that approximately correct?
Secondly, why did you choose to discuss specific aspects of US debt to GDP ratios? Why did you contrast servicing the debt with military spending, and why did you omit so-called non-discretionary spending that actually far exceeds both debt servicing and military spending combined? How do those things relate to your thesis?
For fun, I am trying to say the following sentences with a straight face.
“Brazil is key.”
“Brazil makes this a slam-dunk.”
“Brazil is gonna bring us luck.”
Whatever – or whatever else – is inside the heads of diplomats, statesmen, and strategists, I don’t wanna know.
“Brazil: right next to Ethiopia. If you think about it. Really really hard.”
Hmmmm…….good thing we have a couple folks that will check spelling and grammar…..just sayin’…….:-)
Oh boy! You have to get used to the quirky humor here – maybe its hard to lighten up given your serious post, but Mark was joking with you…………but my serious comment to your post is we all share your concern, and mine is it’s a different planet since WWII – with AI churning up at full speed, things could get very out of control on the debt front, the war front and in so many other ways – this is new territory – and I am worried that the conventional wisdom (or lack of) of the past will not work in these confusing days – In other words, the power hungry probably have contingency plans and are way ahead (or even causing these problems) to bring about a new world order unlike anything we’ve ever seen –
Minor note:
When I read “debt to GDP ratio” I always mentally translate it to “debt to per annum GDP ratio”; likewise, I translate, say, “120 %” (which implies that it is a dimensionless metric) to “120% of one year”.
I don’t mention it to be pedantic. Both expressions may be intended as shorthand, and I am all in for writers using as few words as are needed to express an intended meaning to their readers clearly. You should never waste their time with unnecessary precision of language.
Rather I bring up this sidetrack to encourage critical reading and critical thinking. If a reader was unaware that the term “debt to GDP ratio” is perfectly nonsensical, then this is a convenient time to bring it to his attention, so he can learn what GDP means at the simplest possible level:
Regarding the fact that the correct name of the units for debt to GDP per annum is years:
Once more the meaning is what counts. Using scientifically correct units allows a reader to understand the significance of the number reaching 120%. It means it would take one and a fifth years to repay the debt, assuming that all resident producers of value (households, for-profit institutions, Non-profit Institutions Serving Households, and Government institutions) applied 100 % of that amount of value to repaying the National Debt.
In that hypothetical (which can never be even close to realistic, but is necessary for even beginning to understand the significance of the value reported) it is allowed that people could still have non-zero consumption of value. They could deplete inventories of capital and Final Consumption goods like stored food, and use non-depreciating capital and Final Consumption goods.
foRCInG uS tO uSE goVErNmENt moNEY mAKes ouR lIvEs betTEr
It was just a matter of time before debt service eclipsed the spending in any other category, discretionary or not. You can’t add trillions to expenditures annually and expect tax revenues to just magically rise equally to whatever insanity you fund this year.
Note that none of this touches the unfunded liabilities question (Social Security, Medicare, Medicaid), which is far larger and looming just as immediately close as that 2027 date in the OP, because of all the boomer retirements happening now and happening in the next 5-10-15 years.
I’ve long talked about and posted about this predictable disaster, but I am quite confident that 99% of people in Congress are going to vote for the next budget that continues to exacerbate the same problems, and ignore the liabilities piece, because it hurts their chances of re-election.
We need to change the incentives that create the problem, which is self-interested congressional leeches. I have ideas around this, largely consisting of buckets of hot tar and bags of feathers, and I’m seeking support to start making real-time changes in Congress, since they seem to be so happily destroying my future, and yours, while lecturing us to shut up and take it.
Our model became unsustainable decades ago, this is just the math catching up to us. It was only ever a matter of time.
Time for a reminder that someone pointed out, a bit ago, that the tar of “tar and feathers” was tree tar, not hot asphalt/petroleum.
How about voters who are leeches? That seems to be part of the problem.
How about a gold standard?
Government Is How We Steal From Each Other™