For a very long time there has been discussion of the US dollar being displaced as the world trading currency. Sometimes the Chinese yuan is speculated as the successor.
To me, there has to be some point when another currency takes over, just
as the pound stirling was displaced. And often I'm motivated to think
that the yuan is just around the corner.
But is it?
I think there are good reasons to think of the yuan as a world trading currency, but one huge negative: their economy is far too hidden. Their official stats are remarkably untrustworthy. This is not to say that any nation is honest with stats that seem damaging, but the Chinese take it
to another level. I think a case in point is, during COVID, of all the nations reporting infections with varying degrees of accuracy and
honesty, but China reported numbers were devoid of any possible meaning.
They were essentially zilch.
Why was that?
I think it was simply a manifestation of strong cultural tendency to
hide any embarrassing fact. It is the "save face" case in the extreme.
Given this known tendency, do you think that international investors
would be comfortable about any reports originating from the Chinese government on, for example, employment numbers? On domestic consumption.
On immigration? On government spending? On domestic debt?
No nation will be entirely honest with their reporting, but with the US
and the west, the general tendencies are well known. And there's always
the rogue private foundations who can supply some version of the same
data, as a sort of comparison. And yet I know of no such alternative
sources of data from China. We simply have to take the government's word
for it, and I doubt that any capitalist investors would find this satisfactory.
So, back to the successor to the dollar as trading currency. If not the
yuan, then what?
...and carry this forward a bit. If you can come up with no plausible successor, then the US's deficient spending and national debt, while significant and undesirable, are not enough to make investors want to
change from the dollar, to the ??? .
On 3/3/24 2:00 PM, TT wrote:
Sawfish kirjoitti 3.3.2024 klo 23.18:
For a very long time there has been discussion of the US dollar being
displaced as the world trading currency. Sometimes the Chinese yuan
is speculated as the successor.
To me, there has to be some point when another currency takes over,
just as the pound stirling was displaced. And often I'm motivated to
think that the yuan is just around the corner.
But is it?
I think there are good reasons to think of the yuan as a world
trading currency, but one huge negative: their economy is far too
hidden. Their official stats are remarkably untrustworthy. This is
not to say that any nation is honest with stats that seem damaging,
but the Chinese take it to another level. I think a case in point is,
during COVID, of all the nations reporting infections with varying
degrees of accuracy and honesty, but China reported numbers were
devoid of any possible meaning. They were essentially zilch.
Why was that?
I think it was simply a manifestation of strong cultural tendency to
hide any embarrassing fact. It is the "save face" case in the extreme.
Given this known tendency, do you think that international investors
would be comfortable about any reports originating from the Chinese
government on, for example, employment numbers? On domestic
consumption. On immigration? On government spending? On domestic debt?
No nation will be entirely honest with their reporting, but with the
US and the west, the general tendencies are well known. And there's
always the rogue private foundations who can supply some version of
the same data, as a sort of comparison. And yet I know of no such
alternative sources of data from China. We simply have to take the
government's word for it, and I doubt that any capitalist investors
would find this satisfactory.
So, back to the successor to the dollar as trading currency. If not
the yuan, then what?
...and carry this forward a bit. If you can come up with no plausible
successor, then the US's deficient spending and national debt, while
significant and undesirable, are not enough to make investors want to
change from the dollar, to the ??? .
I can't think of anything else than Chinese yuan.
Bricks, (China's) world trade, possible change of petrodollar to...
Yes, China's figures are suspect. Someone said that they seem to even
out ups n downs... but that the average would be somewhat correct.
That seems to me plausible. There are of course many opinions about it.
US trade wars... and using dollar & swift system as extension of
foreign policy doesn't help the dollar's status in long term, as Putin
pointed out.
https://www.thenationalnews.com/business/economy/2024/02/09/russia-sanctions-tucker-carlson-putin-interview
And what about gold then... you see one can't take it away with
political sanctions... so seems like a better "reserve currency"...
Yes about gold.
It's really interesting to think about why the west shifted to fiat currencies. There's of course the obvious observation that having a
non-gold (or silver) backed currency puts less pressure to maintain gold reserves at a necessary level, but there are odd practical aspects, too,
as the population grows, and vastly outstrips the gold supply of the
entire earth.
It basically means that if US currency was legally backed by gold, and a person could walk into a bank with $10K and come out with say 360 oz
gold ($28 per oz, roughly), as the number people grew, it would
necessarily mean that the amount of gold per dollar would either become smaller and smaller, so that where 100 year before and there were 100M
people each with 10K, $10k might be 360 oz gold, but when there are 400M
each with 10K would be 90 oz.
That would represent inflation simply to create enough currency for 400M people to use. That would mean the dollar floats against the gold
supply--is not fixed.
But if the dollar is tied directly to a stated fixed amount of gold like
$28 per oz, there will become less and less dollars per person out
there, deflating the currency.
So to control deflation as population grows and the need for a currency
grows with it, the paper banknotes will need to become more numerous regardless of the gold supply, which is essentially fixed.
If the currency was based on a more available metal, like copper, you
could probably increase the copper supply so that the stated value of
the banknote and the copper backing was constant, but if the copper is
too plentiful, any foreign power who had access to new copper supplies
and a grudge against your country could essentially wreck the value of
the currency by dumping large amounts of newly mined copper on the world market.
Fiat currency gets rid of all this but it relies on trust in the issuing body, the government. It is fairly easy to adjust the value of the
currency, too, but expanding/contracting credit--or imaginary money.
Fiat currency is damned close to imaginary money, in many ways.
The whole system is very scary to me.
On 3/3/24 4:57 PM, jdeluise wrote:
TT <TT@dprk.kp> writes:
Next JD is gonna tell us that we'd feel much better with all out moneyYeah, sounds like a pain in the ass to store and protect though.
on crypto. No thanks, I'd rather have gold if I'd completely lose my
faith in banking system.
Yes.
Gold is *magic* though. The more you are around it the more you grow to
like it in an irrational way. It is a sort of sensuous metal. It doesn't
seem to stay cold for long, and it has an odd sort of tactile, or
"touch" to it.
I don't have much experience of it, but seeing/touching 10 maple leafs
all at one time really made me understand what is called "gold lust". I
think if you ever got your hands on 100 maple leafs for 20 minutes,
you'd be fucked up forever.
But you are right: it is as impractical as hell.
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