Hello, my fellow Off-Grid investors. Today, we're going to discuss the recent BRICS meeting that took place in South Africa.
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Now, let’s get into!
What are the BRICS?
The BRICS nations—Brazil, Russia, India, China, and South Africa—are rich in natural resources, encompassing minerals, oil, and precious metals.
However, historically, they've had limited access to credit and significant cash reserves.
They grew weary of their financial limitations and constant dependence on wealthier Western countries like the US, EU, and Japan.
Before the formation of BRICS, these countries experienced economic growth, but it was modest. They seemed to hit an economic ceiling, often referred to as the "middle-income trap."
To illustrate, consider that in 2023, the average worker in China earns about $13k a year, while their counterpart in the US earns approximately $50k.
China's middle class began its significant expansion in the early 2000s. Yet, the country's income per citizen remains relatively low.
Such economic dynamics can incite civil unrest and potentially prompt shifts in leadership. To address these challenges, BRICS leaders chose to collaborate.
By joining forces, they aimed to enhance their economies, support one another, and reduce their dependence on the affluent Western nations.
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How did it come into being?
In 2001, Jim O'Neill, an analyst at Goldman Sachs, observed rapid growth in several countries. He identified Brazil, Russia, India, and China as the ones showing remarkable potential and aptly coined the term "BRIC" to describe them.
Seeing the potential benefits of collaboration and drawn by the idea of having a united front similar to the G7—a group of wealthy countries—these nations embraced the BRIC label. They envisioned becoming a prominent consortium in the global south.
Their significance became especially evident during the 2008 Global Financial Crisis. As world economies grappled with the fallout, there was mounting skepticism regarding the US's handling of the situation.
In response to the changing global dynamics, the leaders of the BRIC countries convened in 2009. By 2011, South Africa expressed interest in joining the group. Consequently, the acronym expanded to "BRICS" to represent Brazil, Russia, India, China, and South Africa.
BRICS Currency
Fast forward to today, and there's been significant buzz about the potential creation of a BRICS currency, one that might challenge the US dollar's dominance.
Interestingly, Brazil introduced this idea not long ago. However, during their recent annual meeting in South Africa, the plan was temporarily shelved.
Nevertheless, let's delve into this concept. I'll address several misconceptions surrounding this development.
Relying on YouTube influencers who prioritize sensational headlines without a deep understanding of monetary policy, geopolitics, or macroeconomics can inadvertently misguide you.
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BRICS Currency Breakdown
The idea behind the new currency (which won't be for individual citizens' use) is primarily to provide countries with funds to initiate large-scale development projects and expand their industries.
Basically, a shared currency would enable them to generate more income in the long run.
Some people believed that this new currency might be backed by gold. However, tying money to gold can significantly limit what a government can do.
Moreover, gold's value is largely determined by the dollar and the buying and selling activity at the London commodities exchange.
In essence, the BRICS currency will be created at some point to encourage those countries to do deals in each other's currencies, which will help each country bring in more investment.
Look at it as an added layer of insurance to one country if the other country they are traded with defaults.
This is the same concept as the SDR (special drawing rights) via the IMF which is used by the G7 and top-tier institutions and corporations.
Lastly, if they can create and manage a shared currency, they will use it to get the United States and other powerful UN nations to give them a seat at the global decision making table.
They do not want to create their own separate system and block people out; this is a myth and holds no weight in reality.
The goal of creating a global alternative to the dollar is to give more nations a piece of the wealth pie. This could help maintain equilibrium in the vast world of finance.
As a Off-Grid investor it is your job to figure out how to profit from it all.
My Money Moves are….
Based on the coming new addition of countries joining the BRICS group, I am looking 10 years down the line.
My objective is to create midterm and long term income for myself in these nations.
First, I will go on the hunt for more ancillary startups to invest in pre-seed rounds.
Second, I will look for credit lending opportunities to loan money to businesses in that space and increase my credibility in that market.
And last, as I build my brand and reputation in these markets, I will create a fund to give other investors the opportunity to invest alongside me.
These types of goals cannot be created via public market investing.
My goal is to help you expand your investment portfolio beyond stocks, options, and crypto.
Those 3 asset types are cool but to truly play the wealth game you need more diversity in your asset classes.
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Until next time…
J.D. Smith- Author, Investor, Advisor