xiaohongshu [none/use name]

  • 1 Post
  • 319 Comments
Joined 4 months ago
Cake day: August 1st, 2024
  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    5·
    4 hours ago

    China will not do many of those things, because that would be giving up control of the economy to financial markets. But that’s the rub, isn’t it? China can’t establish itself as the world’s reserve currency, not least because its financial institutions are not ‘advanced’ enough. The USA is a decrepit shell that has spent 40 years hollowing itself out to be the best financial market possible. The current proposal seems to be using both of these facts to China’ advantage.

    This is simply not true. Post-war America exported dollars to rebuild Europe through Marshall Plan. China can do the same with the Global South countries, but with yuan.

    It does mean that China will have to slowly give up its net exporter status as the cost of labor/wages increase, i.e. the living standards of its people increase and makes their export less competitive (which is GOOD)

    And that China will have to share its productive capacity with the Global South to allow for a more equal development (which is GOOD)

    And giving up its huge trade surplus means China would not be punished as bad with a Bancor-like financial arrangement and in turn makes them more amenable to get on board with this new system (which is GOOD)

    And the end result of this is prying away the Global South dependence on the dollar will also bring about economic sovereignty to those countries colonized by Western imperialism (which is GOOD).

    However, China has to give up its huge export capacity - that’s the price it has to pay to increase the living standards of its own people and those of the world’s.

    America’s decline through de-industrialization is more of a consequence of Bretton Woods being chosen over Keynes’s Bancor (which allowed the US to go unpunished with its huge trade deficits and forcing austerity on the rest of the world, and hence the rise of the rentier class that makes huge financial claims over the colonized Global South countries), and the rise of Chicago school of neoclassical economics that took over the mainstream economics departments (to be fair, Keynesianism itself doesn’t help and it was doomed to fail anyway, but the Chicago school is far more pernicious than the Keynesians for sure).

    If China can remain ideologically committed to Marxism (and not imported Western neoliberal nonsense), it doesn’t have to suffer from the same fate of hyper-financialization as the US.

  • xiaohongshu [none/use name]@hexbear.nettodoomer@hexbear.net•Every post about de-dollarization makes me want to [REDACTED]English
    4·
    5 hours ago

    it’s funny because the reason I wrote that was more that I was afraid of people getting scammed into buying gold/crypto/whatever grift that is being peddled right now. I was more concerned about people losing money because of how easy one can fall prey to internet narrative, than whether China or US is gonna win the financial war (well, it is of grave concern, of course, but strangely not the immediate reason for me trying debunk misinformation)

    Have you seen the bitcoin price? It’s approaching 100k now. A lot of people are going to lose their money over that.

  • xiaohongshu [none/use name]@hexbear.nettodoomer@hexbear.net•Every post about de-dollarization makes me want to [REDACTED]English
    9·
    6 hours ago

    Ok disregard, i was just joking.

    Here’s what’s gonna happen: Trump is going to screw up the political system so bad that socialists will finally have a chance of grabbing power (by sheer accident), which allows revolutionary defeatism to take root in America. The capitalists are finally expropriated, and America reestablished diplomacy with China. China learned that liberals cannot be trusted and finally purged them. Russia saw the wind of history is changing and decided that their right wing nationalism would not fare well in this new multipolar order, and looked into their past to seek lessons from the Soviet Union.

    This brings prosperity to the Global Majority, and all of this because a nerd missed his shot on Donald Trump by an inch. Some said the God of Wind had decided the fate of humanity that day.

  • xiaohongshu [none/use name]@hexbear.nettodoomer@hexbear.net•Every post about de-dollarization makes me want to [REDACTED]English
    17·
    6 hours ago

    I mean this is the problem with liberals. Do you know how brutal it was during Stalin’s purge to finally get rid of them? And even then they started to seep back into the Soviet bureaucracy as soon as Stalin died.

    The same libs who screwed up the Shanghai lockdown so bad because they wanted to emulate “Western style lockdown” that finally let Omicron spread across the entire country and forced the central leadership to abandon the entire Zero Covid plan, are now trying to convince (and might very well have done so) the central government to open up China’s capital market for foreign investors to come in because “tariffs are so scary”. These are the people who went to study in Western universities, got indoctrinated by neoliberal ideology, and now think China cannot live without US dollars lol.

    Never trust the libs. This is the lesson here.

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    12·
    10 hours ago

    You are correct that those were not China’s intentions.

    It should be noted that the US literally printed $2 trillion during Covid as stimulus as if nothing happened.

    There has been a lot of narrative about how the Covid stimulus was causing the inflation, but this is a right wing propaganda aimed to disparage government spending on social programs. As Michael Hudson and others had pointed out, it was a supply-side inflation caused by energy price inflation (due to sanctions against Russia), supply chain disruption (caused by Covid lockdowns the exacerbated by the Russia-Ukraine war) and monopolists price gouging. Consumer-side inflation can happen only when the economy has full employment and people have so much money to spend that they drive the prices up.

    So, no, it doesn’t matter whether China issues a $2 billion or $200 billion bonds. In fact, the US is already on its course to reverse the flow of dollar after sucking in so much international capital from the past two years of 5% rate hike. It’s time to flood the world with dollars again if they want the countries to regain the dependence of those countries again.

    What the world needs is to use the opportunity to de-dollarize while the dollars fled their countries, not entrenching further into the system where one side controls the tap that can pump out countless bottles of water while the rest trades the water bottles among themselves.

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    11·
    11 hours ago

    IORB is a relatively recent tool (since 2008 because the Fed bought so much of the treasury securities since the financial crisis) but for a long time since the US abandoned the Bretton Woods, the interest rate was set mostly by the Federal Reserve selling treasuries in the interbank market.

    What this means is that US treasuries are even more useless these days (in terms of having an actual function on the banking operations). At this point, the US government selling treasuries is a choice (they enrich the rich people, let’s put it bluntly).

    As a general note, there are plenty of instruments that the government and the central bank use to manipulate the flow of currencies, but getting into each one of those only adds confusion to the lay audience wanting to understand how the system works on a fundamental level (which remains unchanged in its principles).

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    42·
    16 hours ago

    (continued pt.3)

    What is the intent behind China issuing dollar-denominated bond in Saudi Arabia? Can it really help Belt and Road countries pay back their dollar debt?

    expand

    The answer is so ridiculously simple that I don’t even know why there are so many mental gymnastics involved: the Saudis don’t want to buy the bonds in yuan, they want to pay in dollars (because they have a shit ton of those), and so China obliged because they want to build a closer business relationship with Saudi Arabia who supplies them with oil.

    Of course, any investor can buy those bonds, but the sentiment remains the same: the Middle East is not going to be yuanized for sure.

    The goal of Saudi Arabia is to dollarize the BRICS countries (in this case, the Middle East), not to help them de-dollarize. There is simply no incentive for Saudi Arabia to do so, and China also benefits from a dollarized world since they have committed to a net exporter status for the longer term, and so they would prefer others not to save in yuan (rather, they want people to use yuan to import stuff from China, not as a saving instrument like the dollar).

    —-

    I hope this very long post has been educational to those who are interested in learning. There are so many misinformation around the internet these days, and it is easy to fall into their narratives (especially since I am seeing more “multipolar grifters” taking advantage of the anti-imperialist sentiment to promote gold and crypto by scaring people into thinking that their dollar savings will be worthless because the US dollar is going to collapse anytime soon).

    Learning about how the system works from a materialist and Marxist perspective can at least shield us from these propaganda that only serve to strengthen right wing neoliberal ideology, and the unfortunate fact that many on the left has subscribed to and continue to believe in such nonsense that only harms our cause.

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    44·
    16 hours ago

    (continued)

    What is the role of US treasuries post-1971?

    expand

    However, after 1971 the US has abandoned the Bretton Woods (Michael Hudson calls this the superimperialism phase) and the dollar is now a fiat currency with a floating exchange rate. It is no longer pegged to anything, and there is nothing to defend. As such, the government cannot go default from overspending.

    So, then, what is the role of US treasury post-1971 where the US dollar is now a fiat currency?

    While technically the US government no longer need to issue bonds (debts) to “finance its spending” (more accurately, now that we have learned, to take money out of circulation), the US treasury as an institutional mechanism is still useful when serving as a drain for interbank reserves (to maintain the interest rate set by the federal government) and for the excess dollars spent overseas (Hudson’s superimperialism). In other words, the US treasury is simply serving as a drain or a “sponge” to soak up all the surplus dollars/reserves.

    We will now look into each of these roles, because it is very important to get this into your head that the US treasury does NOT finance US government spending.

    First, let’s look at how the US treasury helps maintain the target interest rate set by the central bank aka Federal Reserve in the US.

    Have you ever taken a check to a bank and deposit it into your account? How does this “transfer of money” work, especially if the payer has an account from a different bank? Does the payer bank ships its money to the recipient bank?

    The answer is no, they simply run up and down the numbers in their reserve accounts held at the central bank (Federal Reserve in the US). All commercial banks have special reserve accounts at the central bank and this is a very important part of the banking system to ensure that millions and millions of transactions taking place every day can be rapidly validated and cleared. Without such a system in place, there is no way for the government to monitor and validate billions of dollars worth of transactions that occur every single minute across the entire world, and without which some banks will very quickly run out of money when large transactions take place! Imagine what chaos that would be.

    Every commercial bank is required by law to maintain a minimum (and positive) daily reserve (although technically they are only checked over the weeks or through averages over time, not every single day). This means that at the end of every day, some banks will have a surplus (more) of the minimum required reserve in their account (maybe because more checks transferred more money to their banks) and some banks will have a deficit (less) of the minimum reserve required (maybe because a lot of withdrawals took place in their banks).

    In any case, the banks that do not meet the minimum reserve requirement will have to fill up that reserve account, and banks that have a surplus of reserve will be looking to lend them out (because every single excess dollar is dead money and banks really do not want to carry any dead money that does not bring any profit!)

    Of course, because the central bank (Federal Reserve) will never run out of money, the commercial banks running low on reserves can always borrow from the central bank to fill them up. However, to discourage such persistent behavior of commercial banks keep running out of reserves, the central bank typically charges a penalty rate every time a commercial bank asks to draw from this discount lending (this is known as the “discount window” in technical terms).

    As such, commercial banks would typically avoid borrowing directly from the central bank, and instead borrow from the interbank market that occurs within the central bank (the Fed fund market). This is where the banks with surplus reserves will be looking to lend out their extra reserves to the banks that need them. However, because of competition, and every bank really really does not want to hold even a single extra dollar above their minimum requirement for reserve balance because it doesn’t bring any profit, this competition to lend out their reserves will very quickly drive the interest rate down to 0%, and this is a problem for the central bank whose mission is to target a particular interest rate.

    Let’s say the central bank (Federal Reserve) wants to target a 2% interest rate, and they want to prevent the interest rate being driven down to 0% in the Fed fund market, so here the Federal Reserve can sell government-backed securities (US treasuries) at a specific rate (say 2%) to set the minimum price of borrowing, and thus stopping the competition from driving the market interest rate down to 0%. Commercial banks with surplus reserves will now prefer to lend to the government (2% interest) than to compete in the interbank market which is being driven down to 0%. Thus, simply by selling US treasuries at a certain price, the Federal Reserve can maintain its interest rate target and ensures that no bank will lend below 2% among each other.

    In other words, the US treasuries act as a drain that soaks up the excess reserves that are flowing in the Fed fund market while allowing it to target a particular interest rate.

    Now, there is another role for the US treasuries that Michael Hudson described in Super-imperialism, which is to act as a vehicle/drain to soak up excess dollars that the US empire has spent overseas. Because the US federal regulations prohibit foreign governments and entities from purchasing critical assets, most net exporter economies who sold their goods and services will end up with surplus dollars (after spending their trade revenues to import whatever they need in dollars). Where else could all these dollars go? Nowhere except US treasuries because that’s where you can at least earn some interests.

    This is also the reason why China has largely stopped buying US treasuries since 2013 and started to lend out their dollar revenues in the Belt and Road Initiative, because they have realized that they were simply accumulating junk papers after selling actual goods and services made using Chinese labor and resources to America. At least with BRI, you are gaining some diplomacy benefits by helping the developing countries build their infrastructures.

    But the fundamental problem remains the same: this simply kicks the can down the road and the BRI countries now have to earn dollars to pay back their Chinese creditors. And this is part of the reason why all these talks about China accumulating more dollars make no sense at all.

    To conclude, the US treasuries (government debt) do NOT finance US government spending, and it doesn’t matter even if nobody buys US treasuries since it only functions as a drain for the surplus dollars.

    The misconceptions about it persist because many people are still thinking in gold standard/Bretton Woods terms. This works neatly into the neoliberal narrative that the US has run into too much deficits and that austerity is needed to make sure that “our country will not be owned by China and our children won’t have to pay back the debt we are accumulating.”

    The US government (or any government with monetary sovereignty) is thus not constrained by such spending rules. The power of fiat currency backed by the state has been discovered many times (e.g. greenbacks during the US Civil War, Beihai currency issued by the CPC Beihai Bank in Shandong during the war against Japanese and KMT invented by the legendary Marxist economist Xue Muqiao), but the first known case of this usage in peacetime was Stalin’s war communism, 40 years before the US independently discovered it!

    —-

    What can a $100 billion dollar-denominated bond issued by China do?

    expand

    We now answer the question based on the wild extrapolation that somehow, this $2 billion dollar-denominated bond, if being scaled up to $100 billion dollar, will somehow wreck the US financial system.

    Let’s have some perspective: the $780 billion US treasuries currently owned by China comprise about 2.7% of the total treasuries, or ~9% of all treasuries held by foreign owners, amidst a gigantic $27 trillion US treasury.

    Even if China sells off its entire reserve, it would barely make a dent to the US treasury market, let alone a $100 billion bond. This is pure scaremongering tactics used especially by the Republicans to make the American people fear about a foreign threat coming to take away their life savings.

    What China can do, however, is to strategically use those dollar reserves to pay back Africa’s $700 billion dollar debt, and quickly flush the region with yuan (the institutions need to be well prepared in advance, of course), and that would be a real challenge to the US hegemony in the region and tip the balance of US monetary imperialism by allowing African nations to escape the US debt trap.

    However, if China had wanted to do that, they can simply do it directly. All the fantastical imagination about how China issues more dollar bonds (which effective dollarizes the world) and accumulate more dollar surplus (which would require someone or some countries to sell more shit to America in order to earn the dollars to buy the China-issued bonds) so that China can somehow use those money to help the BRI countries pay back their dollar debt (which are mostly owed to private creditors including many Chinese creditors) is quite preposterous if you think about it.

    Remember that the US can pump out dollars like opening a tap, while China and the rest of the world have to earn those dollars with real labor and resources. You are already at a huge disadvantage if you try to play the dollar game. China cannot control the dollar in the same way that the US cannot control the yuan. Monetary sovereignty confers the currency-issuing government with a lot of power to perform their tasks.

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    77·
    14 hours ago

    Educational post: here we will debunk the myth of China’s dollar-denominated bonds in Saudi Arabia for those who are interested in learning about how the system actually works, and those who need a little help with connecting the dots.

    A few months ago, some multipolar bloggers were jumping up and down about Saudi Arabia “ending its 50-year petrodollar contract” and how that is going to “end dollar hegemony” (I already wrote a whole post debunking that). Today we see the same people saying that China issuing dollar-denominated bonds in Saudi Arabia is actually genius and how that’s going to “end dollar hegemony”. So which one is it?

    The answer is neither, and far simpler than you think. But to even be able to answer this question, we need to learn a bit about the fundamentals of the financial system, and especially to debunk the many misconceptions about the role of US treasury.

    Don’t worry, I have deliberately stripped all technical jargons from this post, so anyone will be able to understand even if you know nothing about banking and finance. This post is meant to be educational - I firmly believe that learning about how the economy and the financial system operate can shield us from falling for right wing propaganda, and that is my goal of spending many hours writing this post here.

    First, let’s lay out the main misconceptions that have been perpetuated on social media about the China’s dollar bond in Saudi Arabia, and what questions do we need to answer:

    1. The misconception that the US government is financed by its treasury bonds (China is issuing dollar bonds at nearly the same rates, so investors will buy China bonds instead of US treasury bonds, so the US government can no longer finance its spending)
      • Question: What is the role of US treasuries?
    2. A wild extrapolation that a $2 billion bond issuance somehow serves as a prelude to China issuing a $100 billion dollar bond which will then subvert the entire US treasury market.
      • Question: What can a $100 billion dollar bond do if China issues that?
    3. The mental gymnastics involved to craft a narrative about why China issuing its bond in dollar in Saudi Arabia is actually good and that somehow is going to help the BRI countries pay back their dollar debt.
      • Questions: What is the intent behind China issuing dollar-denominated bond in Saudi Arabia? Can it really help Belt and Road countries pay back their dollar debt?

    Let’s go through this point by point.

    What is the role of US treasuries?

    expand

    Many people will tell you that a government needs to borrow (treasury issuing bonds/securities) to finance its spending. Here, we see the same narrative that if everyone stops buying US treasuries, the US government would not be able to finance its imperialism.

    This is no different than the popular neoliberal myth perpetuated by both the Republicans and the Democrats that “we have to cut our spending and bring our deficits down because we have borrowed trillions of dollars from China!”

    What they really mean is that “we have to cut funding to this and that public utilities and services so all the wealth can be concentrated to the top 0.1%”. In other words, myths like this allow the ruling class to institute austerity on the working people, otherwise “your children and grandchildren will become debt slaves to China who owns our country and they have to work so much harder to pay back our debt to China!”

    Let’s dispel this myth once and for all by learning about where did this myth even comes from.

    Do government have to borrow to finance its spending?

    You see, a long time ago when governments peg their currencies to gold (or under Bretton Woods from 1944-1971, to US dollar which is in turn pegged to gold), they run on a fixed exchange rate. This means that the government promises that its currency can be exchanged for gold (or dollar) at a certain price. If the government cannot keep that promise, they will have to default, or depreciate the value of their currency (exchange rate goes down, imports become more expensive).

    A main attraction of pegging your currency to a stable metal like gold, or another stable currency like the dollar, is that it helps boost the confidence and usage of your currency. This was especially true for post-war European countries after their economies had been wrecked by WWII, and those governments desperately needed their citizens to use their currencies again (that were worth very little because the productive capacities had been destroyed) instead of foreign currencies. And so during the Bretton Woods conference, they decided that their governments would peg their currencies to the dollar, and the dollar itself to gold, with the hopes that this will help stabilize the currency exchange rate and hence the development of their economies.

    However, there is a huge problem when you run on a fixed exchange rate - you need to have a reserve of the metal/foreign currency in order to defend this exchange rate, and this quickly becomes a problem when it comes to fiscal operations (government spending):

    Let’s say you are a government with $100 billion worth of gold reserve, and have issued $100 billion of your currency to circulate the economy. Now, you want to spend $10 billion to build new hospitals for the country, to improve the healthcare standards for the people. Of course, you can just print $10 billion and credit the bank accounts of contractors, raw material suppliers and manufacturers and let them get to work, but you will now have $110 billion circulating the economy with only $100 billion worth of gold reserve, and this is a problem because you do not have enough reserve to defend the fixed exchange rate you have set.

    You have several options here:

    One, you can increase gold supply

    • search and dig for more gold
    • purchase gold by exporting your goods and services made using your labor and resources to countries that have a lot of gold
    • steal the gold by colonizing or invading other countries who have them

    Two, you will have to somehow take $10 billion currency away from the economy.

    There are two common ways to do this - first, increase the taxes so you can subtract $10 billion from the economy, which brings monetary base down to $90 billion, and this frees up the space for you to issue a new $10 billion currencies to build the new hospitals.

    This is where the popular misconception that taxes finance government budget come from. But as you can see, the taxes really only serve the purpose of taking money out of the circulation so new money can be added to finance new projects. Those taxed money are instead destroyed in the central bank, contrary to the popular myth that they are being used to finance government spending.

    Governments that can issue their own money don’t need your taxes - why would they do that if they can already print them? The purpose of taxation is to drive the value of your currency (you are forced to earn the currency because you have to pay taxes with them), and to re-distribute wealth within the society (rich people accumulating too much wealth? Tax them away so they don’t grow too powerful, not because the government needs to be financed by billionaires - of course this does not apply in governments that have been captured by the wealthy elites, but the concept of the power of the State still applies)

    The second way is to issue government securities/bonds (in the US, this is known as the US treasury bills/notes/bonds). Instead of taking away your money which many people hate, here the government says: ”hey what if you give me some of your money and I’ll keep them safe for you and in a few years’ time when they mature, I’ll pay you back with interests?”

    As you can see, the function of a government bond is the same as taxes - taking money out of circulation, except that instead of the money getting destroyed through taxation, your money is being safekept in a special government savings account (the government’s version of certificate of deposit) and you are not allowed to use them until the bond matures. Then you get your money back with interests.

    Because the government is technically “borrowing” from you, this is known as government debt, and you are the creditor lending money to the government. This is where the popular misconception that government debt finances government spending comes from. But really, they just want to take some money out of the circulation so they can defend their exchange rate during new budget spending.

    And finally, if the government cannot fulfill its promise of exchanging their currency at the price they have set with reference to gold/dollar, they will have to default, or depreciate the value of their currency.

    The above was how they roll during the fixed exchange rate era, and where all these misconceptions about US treasuries comes from.

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    2·
    2 days ago

    Look, I still remember a few months ago some of these internet accounts were jumping up and down about Saudi Arabia “ending its 50-year contract of petrodollar” and how it’s going to “end dollar hegemony” and I had to write a post debunking it.

    I have no interest in winning any arguments here, and would prefer not to engage if I can, but I feel obliged when there is a need to debunk myths that perpetuate neoclassical views of economics.

    I hope this site will continue to engage with global geopolitical affairs as Marxists and materialists, not subscribing to some fantasy that many “anti-imperialist” social media accounts are promoting which obviously have to do with them promoting gold and crypto to gullible audience. It’s easy to fall prey into these internet narratives and I hope I am at least saving some people from falling into these holes whenever I debunk these stuff.

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    2·
    2 days ago

    his talking points

    Who is “he” here? Please try not to misgender on this site, thank you. (and I will note that this is not the first time you have done this and have this called out before)

    Besides, for everything I have written, I laid out the exact mechanisms on why it would/wouldn’t work, what are the alternatives and explained how they would work.

    I literally said that Russia cancelling $21 billion of Africa’s debt in August 2022, which China immediately followed by waiving interest on their loans to 17 African countries were the correct moves towards de-dollarization. If China had continued to do that, de-dollarization would be on the table, especially with the interest rate hike sucking out all the dollars in the Global South and many countries were close to default.

    I also warned that they have to do this fast because once the short term US treasuries matured in late 2023, the US is going to flood the Global South with dollars again, and the window of opportunity would start to close. This is exactly what happened, and the irony is that China is now proactively helping the US doing exactly that by dollarizing the world.

    Once again, we should update our views based on actual, real world events, not clinging to some fantasy that has no basis. I was optimistic, until the actual events that transpired proved me wrong. I have to update my view based on the new evidence. We are materialists here (at least I hope we all are) so try not to subscribe to the neoclassical view of economics.

  • xiaohongshu [none/use name]@hexbear.nettonews@hexbear.net•Bulletins and News Discussion from November 18th to November 24th, 2024 - Could It Soon Be Azover? - COTW: UkraineEnglish
    6·
    2 days ago

    Of course we can only guess, but let’s look at the trend and make some educated guesses.

    Back in 2018 when Trump attempted his foray into a trade war with China, the Chinese Marxist/MMT economist Jia Genliang already warned of an impending shift in the US strategy (reissued article in February 2024, in Chinese):

    笔者在2018年就指出，美国战略家将利用中国对美贸易顺差这种“核心关切”的错误认识，以不继续增加关税作为诱饵，诱使中国金融无底线开放。美国正在从通过贸易逆差输出美元为主的战略转变为通过贸易逆差和金融直接投资输出美元并重的战略，并有可能在未来转变为以后者为主，这是美国对华经济战略的重大变革，这就必然要求中国对美国实施金融开放。——2018年9月5日

    I have pointed out back in 2018, that the American strategists will take the “core concerns” of Chinese trade surplus as an excuse, through the threat of increasing tariffs as baits, to entice China into opening up its financial sector in an unrestrained fashion. America is currently transitioning from its “exporting US dollar through trade deficit” strategy into a new strategy of “exporting US dollar through both trade deficit and financial direct investment with equal measures”, with the possibility of the latter becoming the dominant form of US dollar export in the future. This marks a fundamental shift in the US economic strategy against China, which demands that China implements financial opening up to the US. — September 5th, 2018.

    美国谈判代表背后的战略家清楚他们的目的是“明修栈道暗度陈仓”，将关税作为幌子，通过跨国公司彻底控制中国经济，通过中国的对美金融开放，彻底摧毁中国的金融体系。——2019年12月18日

    The strategists behind the American delegates clearly understood that their goal is to create a diversion (Chinese proverb: “repairing the plank road by day and secretly crossing the river at night”), using tariffs as “cover”, to allow multinational corporations to control the Chinese economy, to allow China to open up financially to the US, and to completely destroy the Chinese financial institutions. — December 18th, 2019

    The whole article is well worth a read (I am told that machine translation works quite well but I never tried it myself), and while Trump wasn’t able to do much back then, the Biden administration had resumed and doubled down on imposing tariffs against China, which, when complemented by the high interest rates since 2022, led the Chinese libs to fall hook, line and sinker for their deception.

    Looking back, these words appear prescient. The tariffs are just covers, the real meat is to enter the Chinese capital market. As much as I don’t want this to happen, recent events have me concerned.

    Immediately following the interest rate cut in September, China announced its monetary easing policies to entice foreign investments. Chinese stock market even jumped for a short period then. This was then followed by various policy changes to make it easier for foreign direct investments to come into China by removing previous restrictions to ease the concerns of foreign investors.

    More concerning is what the CSRC president, Wu Qing, announced on Monday (article from Global Times):

    China’s top securities regulator said on Monday that the authority is launching a new round of reform and opening-up of the capital market, as more measures will be rolled out to create a better environment for global investors to participate in the Chinese market.

    …

    China has realized notable achievements in boosting the high-quality opening-up of the capital market in recent years, represented by the establishment of more convenient investment channels, the continuous lowering of thresholds for foreign investors, and the growing scale of listed mainland firms overseas, said Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences.

    Wang told the Global Times on Monday that the achievements have elevated the international competitiveness of the country’s capital market while injecting vitality into China’s economic development.

    Chinese authorities have been ramping up efforts to attract foreign investment. Earlier this month, the Ministry of Commerce and five other departments released revised regulations for foreign investment in listed companies, making it much easier for overseas investors to invest in Chinese listed firms.

    The trend is clear. China is now committed to its export sector and financial opening up, apparently believing that this will be their path towards saving the dampened domestic consumption amidst property market crisis and local government debt crisis (which can be traced back to the 2009 GFC and I’ve written this elsewhere so I won’t be elaborating for now). In this interpretation, the dollarization of the world economy will be good for China, a strong US economy is good for China. Other countries might get squeezed in the process, and de-dollarization won’t be on the table any time soon, but China will register growth in the short-medium term.

    What remains to be seen is the long term consequence - was Jia’s prediction that the US finance capital will exploit the opportunity to infiltrate the Chinese financial market correct? What will China do in response to this? What will happen to the Global South exporter countries who will now become ever more dependent on a dollarized economy? What will happen to these countries when the US runs into a 2009 GFC style recession and consumption slumps? These are the key questions that need to be thought out further.