from a dollar-dominated system to a multi-currency one

Ex-IMF Chief: Emerging Markets to Dominate World; Dollar to Lose Power - Yahoo! News

 

As much as 80% of the world's economic growth in the next 40 years will come from emerging market countries, ex-managing director of the International Monetary Fund (IMF), Michel Camdessus predicted this week in Buenos Aires.

"By 2050 we can expect that close to 80% of the global economic growth will be a result of emerging countries," Camdessus, a French economist and managing director of the IMF from 1987-2000, said at the Annual Meeting for the Christian Association of Company Directors.

Xinhua news agency covered the conference last week, quoting Camdessus on a story that ran on the wire June 23. Camdessus said that emerging markets "are narrowing the gap with developed nations by developing their middle-class and improving their life quality."

Dollar Losing its Lure

He also said international economists believe that in the next few years the dollar will cease to dominate the global monetary system, which will help promote a multi-currency system. The monetary and finance system will in the future "be renewed so that emerging countries are recognized, changing from a dollar-dominated system to a multi-currency one."

Many economists and anti-dollar investors have been bearish on the dollar over the last five years, at least, with some commodities bulls being dollar bears as far back as the early 2000s. Some have even called for a return to the gold standard, meaning each dollar would have to be backed by an ounce of gold. Such a policy would cause the price of precious metals to skyrocket.

The dollar is the world's trading currency. All commodities are priced in dollars. Many nations, including Brazil and Argentina, have considered pricing commodities in their local currency, whereas Buenos Aires buyers would not have to pay for Brazilian commodities like oil in dollars. They could be in Brazilian reals, or pesos. However, the underlying value of the product is still dollar-based, and their currency's would have to be converted to the market rate even if they were trading in their local currency.

The IMF estimates that total GDP of the emerging market nations, led by China and India, will surpass that of developed economies in 2014.

According to Ernst & Young, the emerging markets already attract almost 50% of foreign direct investment (FDI) global inflows and account for 25% of FDI outflows. By 2020, the BRICs are expected to account for nearly 50% of all global GDP growth.

Securing a strong base in these countries will be critical for investors seeking growth beyond the US, Europe and Japan.