Summary:  A crisis strips away our pretenses, the no longer true beliefs to which we clutch out of fear — from our unwillingness to face the future.   Today we have a fine example as Europe begs for loans from China and the other emerging nations.  The new world order emerges before our eyes.

America loves our status as a superpower.  Europe and Japan relish their status as great powers.  We are all broke.  America has borrowed trillions from the emerging nations, but retains the delusion of hegemony.  Now Europe faces its test, and turns to the new great powers for aid.  Not Japan.  Not America.

“BRICS in Talks to Buy Euro Bonds to Help Ease Crisis “, CNBC, 13 September 2011 — Opening:

The BRICS major emerging markets are in initial talks about increasing their holdings of euro-denominated bonds in an effort to help ease the euro zone debt crisis, a Brazil government official told Reuters on Tuesday. The talks are still in a “preliminary stage,” said the source, who asked not to be identified because the negotiations were ongoing. The BRICS countries are Brazil, Russia, India, China and South Africa.

With almost 3 trillion euros in reserves, the BRICs have the ability to rescue the European Monetary Union (i.e., BRICs means China plus the others; China’s reserves are almost 3x the other’s combined total).  Doing so would rebuild the global financial system, creating at last a system to replace the long-dead Bretton Woods framework.  But what would the BRIC nations get from this deal?

What do they want?  Probably leadership, or at least a voice commensurate with their growing power.  The BRICs have 14% of the votes in the IMF.  Increasing that would be a logical step, one that’s inevitable eventually.  That’s probably the least they will ask for.  As Europe’s crisis seems almost certain to deepen in the next few months, we (or at least western governments) will soon see their demands.

My guess:  the price might be hidden (much like the deal settling the Cuban Missile Crisis), but it will be high.  Perhaps very high.  The BRICs have no need to hurry, as Europe’s need for loans will only grow — unless (until) its leaders abandon for now the unification project.

Putting the above in perspective

The BRICs are a disparate group.  Very different internal conditions, few common interests, no signs of acting together.

China remains a poor nation, despite its rapid growth.  For example, despite China’s high levels of investment (too high say critics) it’s per capita capital stock is aprox 1/8 that of the US (at PPP, per GaveKal), aprox 1/5 that of Japan (where Japan was circa 1970).

The growing in the BRICs –esp China — lies in the future.  The shift of power has just started.  America’s political dysfunctionality accelerates that process (as our rich increasingly work to further concentrate power and wealth rather build America).

For more information

For all posts about this, see the FM Reference Page End of the post-WWII geopolitical regime.

About China:

1. Power shifts from West to East: the end of the post-WWII regime in the news, 20 December 2007
2. China becomes a super-power (geopolitical analysis need not be war-mongering), 9 July 2008
3. China – the mysterious other pole of the world economy, 22 July 2009
4. Another big step for China on its road to becoming a great power, 27 July 2009
5. Update about China: a new center of the world, 13 December 2009
6. How China builds its commercial empire, 12 July 2010
7. A look at the future (it’s already here, but it’s not in the USA), 29 September 2010
8. Why China will again rise to the top, and their most important advantage over America, 11 November 2010
9. Will China become a superpower?, 9 September 2011

About Europe:

1. The periphery of Europe – a flashpoint to the global economy, 8 February 2010
2. A great speech by the PM of Greece. How soon until an American President says similar words?, 3 March 2010
3. About the Euro crisis: the experts are wrong; the German people are right., 7 May 2010
4. Former Central Bank Head Karl Otto Pöhl says bailout plan is all about ‘rescuing banks and rich Greeks’, 20 May 2010

This post originally appeared at Fabius Maximus and is reproduced here with permission.