changing power equations..!

The recent G8+G5 summit in Italy has raised doubts regarding the relevance of G8 as a body to look after the technoeconomic interests of the world. Most of the countries of G8 are marked by stagnant economies,rising deficts and ageing populations. On the other hand we have contries like India,China,Russia,Brazil etc which are still growing at a brisk pace even in this financial turmoil. These countries have young populations who can power economic growth for atleast next few decades. China and India represent close to one third of the world's population and they have huge untapped domestic markets which are being eagerly sought by western companies.

The world has realised that it cannnot fight the major problems confronting humanity without the help of these new emerging countries , be it climate change or restoring world's financial health.

India and China are no longer seen as regional powers as they have started flexing their muscles in international arenas as in the case of voting rights at IMF or Doha trade deal. It calls for the reform of major international institutions like UN security council,IMF, etc to realise the legitimate aspirations of these emerging economies. We find that it is a transition phase which will lead to a multipolar world in the next few decades.

decline of dollar.!

The days of hegemony of dollar seems to be numbered. The currency has lost its value against the major currencies of the world in the recent past. We appear to be heading to an era in which an international reserve currency would replace the dollar. Some major economies of the world like China ,Russia have already expressed there reservations against dollar and its prolonged mismanagement by the US authorities.

The US seems to be enjoying its leisure on borrowed money as most of foreign exchange surpluses of countries like india and china have been parked in the US treasury bonds at interest rates of 2-3%. These funds then in turn help the US to manage its trade deficit and thus providing resources to the government for funding its wars and in some way fuelling the private consumption story.

But the recent quantitative easing in the US have cast doubts about the credibility of dollar resulting in the loss of the investor's faith. The US seems to have found a way to get rid of its foreign debt by debasing the real value of dollar which has made countries like china quite jittery. Such events have contributed to the viewpoint that time has come to evolve a global currency which can replace dollar in due course of time.