We are seeing increasing premiums in certain BRIC countries, but these are mild compared to what lies ahead. It is extremely important to the stability of the current dollar based system that FX interventions continue, both directly (through the primary dealer's FX traders) and indirectly (through central banker interventions into key macroeconomic influences) despite any falling out of the faint of heart.
Yes, volatility presents the best opportunity for greater capital accumulation among the HFT benefactors, but this is under great scrutiny lately, because the risk of systemic crash (i.e. volatility beyond control) is too great now. The final splintering of the BRICs from the old system is a likely end result of the next Lehman style derivatives failure.
As Bario has stated recently, the CBs are reaching their limits on maintaining stability:
... as deregulation and globalization took hold, the financial sector becomes increasingly separated from the real economy ...Yes, globalization on the whole has made its play, and by exacerbating the exorbitant privilege already in effect, is beginning to unwind and force the dynamic of regionalism and the shift to a competing system which does not take its orders from the old. As dollar strength (inflation) continues in the BRIC markets, they will develop away from the old, and stability will be regained.
The actual "sanctions" or intentional cordoning off of the old system in Iran and Russia are much more symbolic than severe in nature.
What will come of this will be more severe not by design of the US, but by the design of the quarantined nations. When the volatility becomes too great in the FX markets to contain, and the collapse comes, they will by then be able to insulate themselves from the next great derivatives failure, citing the old systems quarantine as counter party "claim protection".
Where will the gold markets be by this time? The western markets will be pricing gold downward as the BRIC markets will be pricing gold upward, but in competing terms. In the old system things will be working one way, in the new, another. They will not agree, and so confusion will prevail, but it will be clear that the new markets are robust, trade is being settled, energy and gold are flowing and growth is taking place. In the old, growth is stagnating, paper is flowing and trade settlement (the key) will be a topic of great consternation because trade between old system and new system participants, through declining all the while, still has balances to settle.
Will the BIS remain the ultimate judge of international settlement? It too may have a BRIC counterpart, either forming or formed, to help moderate that process.
These are not crystal ball predictions upon which to bet the family holdings, but more a set of deductions which are derived by the affirmations of current events. No one can predict our increasingly uncertain future, we can only draw clues from the aggregate knowledge that we acquire, and filter out the propaganda which does not fit the larger picture.
This the Roacheforques have always quitely done over many generations of wealth accumulation, and it has served them well. It was never the embarrassment of that unsavory liaison that caused the board to cast me out, but rather my love of the little people, which grew through that romantic association.
For the Roacheforques would NEVER have revealed the pathway for the little people to be on "equal footing" with their kind. The family's vast gold vaultings are worth SO much more per ounce than the few bars I gave to her. The value per ounce for Roacheforque tons in real economic impact when this event unfolds is many, many times the value per ounce of the paltry holdings of any commoner.
But when the fire of change has spread its destruction upon the paper holdings of the empires of debt, she will be well looked after by it, and the Roacheforque who denied his heritage will simply disappear with her into the night, a tragedy not even Shakespeare could have dreamt of in this world of ours where the truth, so much stranger than any fiction contrived, will one day be known.
Prologue: Only a few hours after finsihing this piece, I read this fine offering by Catherine Austin Fitts. She must at least be credited with considering the question at hand:
What would happen if the BRIC nations were to create their own Internet, their own currencies, their own energy sources and their own financial markets and to simply disengage from the Anglo-American alliance and the Western economies?The entire article is quite fine, and I heartily recommend it. But I think this question deserves more consideration. I feel it is inevitable that they will. And I think with the advantage of a certain lens, she would see that as well.