China Defending Itself Against Dollar Drop
I opted for a less sensational title—”drop” instead of something like “collapse” or “death”—because I’m not an economist. I am convinced that the America, despite enormous self inflicted harm, retains massive advantages in economic terms. Also, bear in mind regarding the first picture below, that China—in my understanding—has been systematically accumulating gold probably from as far back as 1985 or so. It’s just that getting information hasn’t always been easy. China’s gold policies are somewhat complex, but some things become too big to hide. It’s not as if China is the only country buying gold in ever larger amounts, but as the world’s largest economy it becomes noticeable.
It’s almost as if China’s economic and monetary managers have been more farsighted than ours. This is the big challenge facing Trump, even though it got next to no mention during the campaign—at least not in the mainstream. Trump’s floated idea of sanctioning countries that diversify from the dollar is obviously nonsensical. The long and the short is that the US never really could afford a global empire, and now the monetary chickens (excessive debt) are coming home to roost. Exporting inflation hid the reality from Americans, but that’s going to end. Cutting and running from the war on Russia—hopefully under cover of some sort of deal—is a very good idea in this context. Continuing our Middle East war is a very bad idea.
1/ With China beefing up its gold reserves and largely opting out of the market for foreign holdings of US Treasuries - which is already causing liquidity problems - it’s useful to get a sense of what the Chinese are saying about this internally.
·2/ Here we turn to the latest issue of the China Institute of Contemporary International Relations’ journal. CICIR is an important government-affiliated think tank that has been around since 1965. So borderline official doctrine coming from this shop.
3/ In the Contents section we see not one, but two articles on the US dollar. ‘The Exorbitant Privilege of US Treasuries and China’s Choice in the New Era’ and ‘Impact of Financial Sanctions on the Dollar’s International Status’.
4/ The first article concludes that the dollar will be around for a while longer. But it also concludes that now is a good time to pull away from it and recycle Chinese holdings into a diversified basket of global assets.
5/ The second article is more dramatic still. It says the most likely outcome of changes in international financial relations after the Russian asset freeze is that the dollar “loses its throne”.
6/ This analysis may be right or wrong. Personally I think it’s right and first made the call a month after the asset freeze. But…
7/ …right or wrong this analysis has effects because China is the largest holder of international foreign exchange reserves in the world and the second largest holder of US Treasuries. Analysis that impacts China’s balance sheet makes its own reality.
8/ The United States is only starting to come to terms with this. Trump’s policy of forcing countries to use dollars is a non-starter. Currencies don’t work that way.
9/ What is needed is a new global monetary architecture for a multipolar world. Luckily I’ve published such a proposal with @hiia_budapest
. Link below!
I came across some comments to this thread:
Warwick Powell | 鲍韶山 @baoshaoshan
If you dig further into the Chinese official and non-official discussions there have been explicit calls for a new global non-national clearing currency since at least 2009. This set the stage for what has been unfolding - conceptually & practically - ever since.
Yes, but it does look like they’re pulling the trigger now. I laid out the political economy case for China to sign on to bancor and I’ve passed the proposal onto the Americans. Might be worth showing it to the Chinese? Budapest Woods 2026?
The answer is that the US is desperately trying to hold onto the world of the 1990s. The problem is that the US neocons are making a bad situation worse by doing this like freezing Russian assets, while running a huge deficit. I am pessimistic that Trump understands the isuses.
Does Trump get it? Hard to say. Is MAGA just a slogan that he figures will resonate with the American public? Possibly. It does have a 1990ish triumphalist ring to it—”mission accomplished,” and all that jazz. America can be great (MAG), but not in that 1990ish sense, and not without rethinking our place in the world.
Baron of the Taiga @baronitaigas
Don't know who needs to hear this, but neocons were neolibs. They were only called neocons because the Republican Party proved to be a better vehicle for their policies than the Democrat Party. There was never anything even vaguely conservative about them.
Speaking of Neocons/Neolibs here’s another slogan that fits their agenda: MTWSFOD—Make The World Safe For Our Democracy. This is the German version:
German vice chancellor and economy minister Habeck pressed charges and called in a house-bust against a pensioner who called him stupid on X! -> Habeck wants to become the next chancellor! The German government in its true face, they can’t take a X post.
Details on the police bust: “Last Tuesday, according to the prosecutor's office, a judicial house search of the suspect had been ordered. The investigation is ongoing. Proceedings have been opened against the accused. The 64-year-old is now being investigated on suspicion of insulting a person of political life under paragraphs 185 and 188 of the Criminal Code. If a conviction is made, the man faces a prison sentence of up to three years or a fine.”
No reason to get sanctimonious about this. We in the Anglosphere have our own thought police measures. In America we have a Constitution that makes things more difficult, but we all know that getting justice for political persecution takes a long time. J6, anyone? Or our joke election system? Or maybe this:
Gaetz was a highly effective member of Congress. Then all that changed with the publication of an anonymously sourced report accusing him of possibly being a child sex trafficker.
Interestingly, pretty moderate legal guy Jonathan Turley weighs in, sort of, on Gaetz. Cautiously, but the fact that he does seems telling—because you know that he has looked at the “facts”. He knows the entire Ruling Class was gunning for Gaetz, just as they were for Trump:
Jonathan Turley @JonathanTurley
...The President-elect has a legitimate grievance with the Justice Department and a mistrust in the ability of that department to reform itself. Gaetz nomination strips away the surge protectors and pads to deliver a shock to the system...
Is it news that the Ruling Class doesn’t like highly effective members of Congress? Or that the Ruling Class wants laws against “misinformation”? Maybe denigrating King Dollar will be on that list at some point.
There’s a UK version, too:
UK's Telegraph Journalist Gets "Hate Incident" Visit From Police Over Year-Old Tweet
Authored by Steve Watson via Modernity.news,
A journalist with the London Telegraph has been visited unannounced at her home by police in the UK who told her they are investigating a “non-crime hate incident” over a tweet she posted a year ago.
And Down Under they’re trying to pass a law that makes the government the sole arbiter of truth.
In an exclusive interview, Sen. Rand Paul (R-KY) told New York Post reporters he will take over the upper chamber's Homeland Security Committee in January after serving two years as the panel's top Republican. He explained that he would uncover the truth about Covid's origins.
Elon Musks and Rfk’s close relationship with Trump is exciting on the censorship issue.
The U.S. terrified other countries with the sanctions against Russia and seizing their foreign reserves. The U.S. has shown it can’t be trusted. New administration and old promises are gone (Libya Khadafi snafu is an example - thanks Hillary!).
Trump is trying to close the barn door after the horse has bolted.
China does not want to immediately destroy the US dollar, since that would be a huge blow to Chinas economy, but slowly transition away from it for non US transactions. Setting up the infrastructure takes time, and the needed agreements. This is all part of China trying to minimize the ability of western entities to control parts of Chinas economy. The setting up of the hold exchange in Shanghai is part of that effort. Lots of Western institutions, world bank, for paying of rent, setting of prices, and controlling policies through control of infrastructure, money lending, and financialization. China is setting up alternative infrastructures. Brics is a tool to achieve this, and is growing.