IMF Bond Sales Could Lift Dollar: No there is other side to this

The recent BRIC countries summit in Russia have pledge to buy IMF bonds and sell their Dollar to buy these asset. I agree that in short term, dollar values will rise as the extra dollar in circulation will be removed from the market and will be locked up in "Hotel California" as you mentioned.

But are they going to trade in Dollar come sometime? Definitely that is the billion dollar question and that is the reason why they are raising their pitch so high. According to the various sources published around the world and west world in particular, they assume that these countries will keep on trading with dollar.

This is the fundamental question to be asked. The most important question for coming years. So what does BRIC countries plan to do? Definitely, they are looking at longterm goal where their reliance on dollar is going to wane in time. Come 10 year from now, you will see that these countries and may be other countries such as Mexico, Indonesia, malaysia (MIM) would join BRIC countries in their effort to move away from centric dollar.

As a result of these effort, they may launch a supernational currency or they may tradde with their local curriencies which can be pegged against each other for trade.

So what we are going to see is that in future, there will be few buyer for dollar as a result, the dollar will start declining.

Why they are fed up with Dollar? This is the most simple question. The Federal Reserve (US) is keep printing dollar so that they can support US economy without any exit plan to with draw extra dollar pumped in the market.

Twit This!