This one is about BRICS; not the South African entertainer but the five nations that became friends just because the first letters of their names formed a cool acronym. The surprise coalition was formed inadvertently in 2001 when an economist in a major bank in the US published a paper that highlighted the size and potential of the four largest emerging economies of that time being Brazil, Russia, India and last but certainly not least, China. How South Africa snuck its way into this club of trillion dollar economies that are friendly purely on the basis of economic clout when it is not even half a trillion dollar economy was baffling back in 2010 when they annexed the ’S’ to BRIC. I remain baffled. SA is not even the largest economy in Africa. But I guess BRICS sounds a whole lot better than BRICN. My working theory is that the invitation for SA to join the BRIC bloc was drafted by China shortly after Tshabalala’s opening goal at the 2010 World Cup.
Back in 2001, the growth prospects of the individual BRIC nations were considered high. It was really easy to make that call as these were the fastest growing economies on the planet. The experts predicted that though BRIC prospects were undeniably high, the probability that they would be realised or even sustained after having been realised were low in juxtaposition with the economies of the Group of 7 (G7). If BRICS is a coalition of the foremost developing economies and their slow friend, South Africa, G7 is the veteran counterpart. The G7 is an informal syndicate of the advanced economies UK, US, Canada, Japan, Italy, France and Germany that meet annually to decide the fate of the world. I’m giving them too much credit there. There are no criteria for membership into G7, so the IMF Head, European Union as well as central bank governors also form part of the club that was once only a clique of finance ministers.
Following the coining of the acronym, the BRIC nations took the hint and started holding informal meetings from around 2006. By 2009, they were hosting each other more formally on a rotational basis. The BRIC summits quickly rose to prominence on the economic calendar. 2009 was perfect timing to set up something that could counterbalance the influence of the G7 after the spectacular collapse of the house of cards that was the US mortgaged-backed securities market forerunning the Global Financial Crisis (GFC). GFC brought down a few good banks. I use the term “good” very loosely. It also highlighted the gross incompetence of first world regulators who were doubly embarrassed on account of the rotten housing market as well as Bernie Madoff’s Ponzi scheme, the largest such scheme in history.
The housing market collapsed because financial institutions lent indiscriminately. People who could not afford a modest home suddenly qualified for mortgages on mansions. After lending to someone who has to stretch themselves thinly to put together the periodic instalment to repay you, they soon run out of ideas and default. Another way to say this is, if you lend to someone who cannot pay you back then you are a magician because you’ve just figured out how to make your money disappear. Congratulations! That was the crux of the housing market crash. What made it so pervasive was that the money that had been given to people who would never pay it back was pooled together and repackaged as new assets and sold to unwitting investors. Investors bought into these assets in the trillions ignoring the risk profile of the people who had the actual obligations to pay back. There’s more. These packaged rotten assets were endorsed by credit rating agencies who opined definitively that they were investment grade financial instruments. Investors overly relied on these ratings to their detriment in the end. The regulators missed all of this for years and found out about the crisis on the news just like you and I.
While all of that was going on, Bernie Madoff’s scheme was unraveling alongside. Regulators were also nowhere to be seen on this one. Bernie had been taking clients’ money just to leave it in a bank while feigning trading activity on clients statements. He generated statements to clients retrospectively at month end where he would enter would be favourable positions after having read where the market had gone. To his clients, it looked like he was perfectly timing the market. He bought all the stocks that would go up a day or so early and exited losers with the same precise timing. How is this possible? I’ll tell you. It’s not. Hindsight is 20/20! His track record was a perfect 45 degrees line that was always rising. He never lost money. That should be suspicious to anyone who has sat a finance exam but somehow he got away with it for years. By the end, Bernie had created over 60 billion dollars in monopoly money.
The shameful debacle in the West prompted the largest emerging economies in the world to ponder over how to determine their own futures, relying less and less on the Western leadership that had egg on its face. 30 years ago, the G7 accounted for nearly 70% of global GDP. It has fallen gradually over the years and today sits at around the 40% mark in nominal terms. The BRICS on the other hand account for about 30% or near 40% of global output depending on who you ask. It’s quite remarkable because this has been achieved organically. There exists no formal trade agreement between the BRICS. It’s purely vibes for now. But the vibes have unlocked real value. The countries established the BRICS Bank back in 2015 which has committed more than 30 billion dollars to projects in the BRICS countries. They also created a contingency fund of 100 billion dollars to be accessed in times of turmoil by any of the member states. The BRICS have been discussing the prospects of creating a common currency that will rival the US dollar in international trade. They do take their time though, it must be said, but that is not dissimilar to everything else that involves governments. It seems to me that the potential highlighted in 2001 has been realised. Others may disagree but take a look at the list of countries that have expressed interest in joining the BRICS. The voice to counter first world influence seems to hold much sway. It is more than just the hype.
What I’m Reading
I was reading Ernest Hemingway’s The Old Man and the Sea. It was okay. I only took interest in the book after I learned about the author’s life. The book is about an old man who goes into the sea to fish. Honestly that’s the plot. It was short, what can I say? The old man is called Santiago. The same name chosen by Paul Coelho for his protagonist in the highly acclaimed The Alchemist. A book that I found to be awful. I know it sold more than 100 million copies but it sucks. My sister read it too and agrees with me so that’s all the assurance I need. It’s me and her against the 100 million of you. It does make me wonder about the stuff that we collectively regard as great. Is it always really great or are we acquiescing to an authority that has pronounced it so? Are we too scared to point out that the Emperor is not wearing any clothes?
But Ernest’s actual life is a potential box office classic. Firstly, four suicides in his family during his lifetime and one more after he himself had taken his own life which adds up to six suicides in four generations. On a human level, that is heartbreaking. I wish it wasn’t so. But as a plot, it’s quite interesting right? You ask yourself. Which members of the family? When? Why? The more sadistic of us will even ask how?
Hemingway was called the most important author since Shakespeare by the New York Times but I wanna meet the man who authored Ernest’s life. Hemingway was in both world wars. He was an ambulance driver in the first world war and sustained a fair share of bullet wounds during that time. He was involved in a drunken car accident that saw him thrown out the car’s windshield when he returned home after the war. A few months later he was flying off a motor cycle and is supposed to have suffered a brain injury - by the end of his life he had suffered six brain injuries. He then went on to survive a plane crash in Nairobi. Miraculously, nobody in his party was severely injured and so they boarded a second plane that also crashed. That is two plane crashes only hours apart! He smashed his head against the grounded plane’s metal doors to escape the burning rubble. He did this so many times that spinal fluid leaked from his ears. He womanised… so they say. He got through four marriages. The only thing approaching ordinary about him was that he enjoyed fishing and hunting big game.
Ernie was brought up in a household with five siblings. His dad was a stern ‘disciplinarian’ which is the word they used back then to describe abusive parents. He beat up the children at will. The father’s mood swung from hot to cold and back to hot again without a moment’s notice. He probably had mental health issues. He even told his son to his face that his work was “filth”. That's much harsher than my verdict. Coming from a father, that is crippling. Little surprise then that the young Hemingway would mock assassinate his father by aligning his head to the crosshairs of a gun. In the end he never had to pull the trigger, Ernest’s dad took his own life in his 50s. Ernest was 29.
The unceasing alcoholism that he would struggle with for the rest of his life snowballed after the death of his father. As for his mother, she would dress him up as girl during the childhood years and attempt to pass him for the twin sister to his elder sister. Weird obsession but the mother insisted. Ernest hated her. To the point that he would come to blame her for his father shooting himself. Out of his five siblings, three committed suicide before he resigned himself to the same fate. A gripping tragedy but a tragedy nonetheless.
Till next Sunday👋🏾.
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