It will be interesting to see how much of Thucydides Trap plays out in currency and trade as opposed to military conflict. I am hopeful that economic and financial warfare absorbs the brunt of the power struggle.
Deutsche banks slogan should be "If you need to do something shady call Deutsche".
At some point china will loose the ability to keep its global currency (Yuan, should be inflating) decoupled from the domestic one (Renminbi is deflating). They have been keeping long running issues in Banking, and Relestate at bay but a global recession (and were on the cusp it seems) is going to be brutal to china.
I suspect that if (when?) that hits this will turn into another Deutsche scandal.
The US wields incredible negotiating power and hegemony because the dollar is the world’s reserve currency. Like the British pound and the Dutch guilder before it, if that loses reserve currency status it will be harder to borrow on favorable terms, which would affect the entire US economy. This is a big step in that perhaps starting to happen over the next few decades.
One advantage America has, and will remain having as an advantage as long as its broken: it borrows a lot of dollars. So if China wants to save a few billion dollars, it is super easy to do it by just bidding for US treasuries, rather than trying to convert it to yuan and somehow putting it in its own economy where it won't cause overheating.
America is essentially just a debtor of last resort, that is the superpower of the dollar.
I wonder if it has anything to do with the currency apparently being backed by an immense reserve of oil (proven to the world by this year's geopolitical events), then coal, and then a massive amount of renewable solar, hydro, wind kWh's and infrastructure to deliver it to homes and shops.
More and more it feels like a nation's kWh throughput is the new metric to track its global influence in manufacturing, industry, and financial services. In other words electric power now equates to global power.
It's very easy to avoid American products (there aren't many here in Europe you can't easily avoid) but it's kinda impossible to do the same with china.
Except software/web, avoiding US tech is kinda complicated too.
Would this also mean we can get a EuroDollar systems for the Yuan? As in, Deutsche Bank can create loans denominated in Yuan without Chinese central bank control?
Ah, yes, the best way to react to increased authoritarianism in the US is to checks notes begin doing more business with a country that is the final word in authoritarianism.
I have this pet theory that is fueled with ignorance but kind of make sense to me: The correct value of the USD would be adjusted to match the tech company valuations sans AI(Apple can be a good guide IMHO) when they serve 350M people instead of 8B people as AI makes software obsolete and the geopolitics and the US government behavior dismantles any network or lock in effects.
Currencies are basically commodities whose value is based on supply and demand.
Demand comes from other countries wanting to buy your currency (or things they need to pay for with your currency). For example, much global oil is priced in dollars, so if you want to buy oil you need to buy dollars. If you think the US dollar is a good place to park your foreign reserves, then you are buying dollars. Thinks the US stock or bond market, or real estate, etc, looks like an attractive investment, then you need to buy dollars.
If a country wants to boost the value of it's currency then they increase interest rates to make it more attractive to foreign investors, or reduce the supply by selling bonds (taking dollars out of the market).
So ... it's complicated. Supply and demand, but tons of factors that go into those.
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[ 1.3 ms ] story [ 26.7 ms ] threadSoviet-China-Iran - Petro Yuan?
/edit for the pedantic. Russian Federation.
At some point china will loose the ability to keep its global currency (Yuan, should be inflating) decoupled from the domestic one (Renminbi is deflating). They have been keeping long running issues in Banking, and Relestate at bay but a global recession (and were on the cusp it seems) is going to be brutal to china.
I suspect that if (when?) that hits this will turn into another Deutsche scandal.
America is essentially just a debtor of last resort, that is the superpower of the dollar.
Pity about the USA....
More and more it feels like a nation's kWh throughput is the new metric to track its global influence in manufacturing, industry, and financial services. In other words electric power now equates to global power.
Except software/web, avoiding US tech is kinda complicated too.
Demand comes from other countries wanting to buy your currency (or things they need to pay for with your currency). For example, much global oil is priced in dollars, so if you want to buy oil you need to buy dollars. If you think the US dollar is a good place to park your foreign reserves, then you are buying dollars. Thinks the US stock or bond market, or real estate, etc, looks like an attractive investment, then you need to buy dollars.
If a country wants to boost the value of it's currency then they increase interest rates to make it more attractive to foreign investors, or reduce the supply by selling bonds (taking dollars out of the market).
So ... it's complicated. Supply and demand, but tons of factors that go into those.