How will the confrontation in Ukraine affect the global balance? Specifically, how might it shift the balance between the US and China. The immediate diagnosis seemed not to favor the US. Largely unnoticed, into the escalating tension in Ukraine, on Friday February 11 the Biden administration
This is brilliant: 'The mishandling of the “China shock” to the US economy in the late 1990s and early 2000s, has left a legacy that is too toxic in political terms. The failure to cushion the impact on key constituencies and the success of political entrepreneurs in turning it into a cause celebrate, now robs the US of trading off domestic and foreign policy objectives”.
So does the Fed's generous hegemony of the dollar-based global system. It is running out of trade-offs between domestic and foreign policies. As Keynes warned it would at Bretton Woods. The US dollar's exorbitant privilege becoming merely orbital.
China, being the smartest guy in the room, has no intention of repeating this mistake. In 2009, after the GFC, Zhou Xiaochuan, Governor of the PBOC, said, "The world needs an international reserve currency that is disconnected from individual nations and able to remain stable in the long run, removing the inherent deficiencies caused by using credit-based national currencies.”
Zhou proposed Special Drawing Rights, SDRs, and C. Fred Bergsten, Robert Mundell, and Joseph Stieglitz agreed, “The creation of a global currency would restore a needed coherence to the international monetary system, give the IMF a function that would help it to promote stability and be a catalyst for international harmony".
Beijing began valuing its yuan against a currency basket in 2012 and the IMF made its first SDR loan in 2014. The World Bank issued the first SDR bonds in 2016, Standard Chartered Bank issued the first commercial SDR notes in 2017, and the world’s central banks began stating their currency reserves in SDRs in 2019.
China’s authoritarianism and the corruption and lawlessness that generates will make it very difficult for the renminbi to compete with the Dollar, Euro and Yen. The Dollar is powerful not just because the US economy is big; it’s also powerful because people trust the US political system more than they trust other political systems.
How very curious: " The problem is that the Asian economies don’t buy the alignment of interests between the US and Asia-Pacific middle class conjured up by the White House document. But they are intensely interested in China. They have no interest in any substantial trade deal with the US that excludes China. "
What does Macro-Economics have to say about that? The usual David Ricardo? The Ricardian bargain "used to be" the Asian economies would looove to export their stuff using lower labor costs, to the high-labor-cost US/Western economy for hard international currency. It appears there's a lot going on besides straight trade issues: intellectual property, use of tax havens for gains (also tied to I.P.), transfer of tech, instant sanctionability (Huawei/ZTE, Swift bans), Trumpian denigratory racism, etc etc. Not just earnings. How curious.
“Asian economies … are intensely interested in China. They have no interest in any substantial trade deal with the US that excludes China.” What about CPTPP?
The point about China wanting to de-dollarise, but also keep their capital account restricted cannot be emphasized enough. Rana Foroohar does an excellent job
This is brilliant: 'The mishandling of the “China shock” to the US economy in the late 1990s and early 2000s, has left a legacy that is too toxic in political terms. The failure to cushion the impact on key constituencies and the success of political entrepreneurs in turning it into a cause celebrate, now robs the US of trading off domestic and foreign policy objectives”.
So does the Fed's generous hegemony of the dollar-based global system. It is running out of trade-offs between domestic and foreign policies. As Keynes warned it would at Bretton Woods. The US dollar's exorbitant privilege becoming merely orbital.
China, being the smartest guy in the room, has no intention of repeating this mistake. In 2009, after the GFC, Zhou Xiaochuan, Governor of the PBOC, said, "The world needs an international reserve currency that is disconnected from individual nations and able to remain stable in the long run, removing the inherent deficiencies caused by using credit-based national currencies.”
Zhou proposed Special Drawing Rights, SDRs, and C. Fred Bergsten, Robert Mundell, and Joseph Stieglitz agreed, “The creation of a global currency would restore a needed coherence to the international monetary system, give the IMF a function that would help it to promote stability and be a catalyst for international harmony".
Beijing began valuing its yuan against a currency basket in 2012 and the IMF made its first SDR loan in 2014. The World Bank issued the first SDR bonds in 2016, Standard Chartered Bank issued the first commercial SDR notes in 2017, and the world’s central banks began stating their currency reserves in SDRs in 2019.
China’s authoritarianism and the corruption and lawlessness that generates will make it very difficult for the renminbi to compete with the Dollar, Euro and Yen. The Dollar is powerful not just because the US economy is big; it’s also powerful because people trust the US political system more than they trust other political systems.
How very curious: " The problem is that the Asian economies don’t buy the alignment of interests between the US and Asia-Pacific middle class conjured up by the White House document. But they are intensely interested in China. They have no interest in any substantial trade deal with the US that excludes China. "
What does Macro-Economics have to say about that? The usual David Ricardo? The Ricardian bargain "used to be" the Asian economies would looove to export their stuff using lower labor costs, to the high-labor-cost US/Western economy for hard international currency. It appears there's a lot going on besides straight trade issues: intellectual property, use of tax havens for gains (also tied to I.P.), transfer of tech, instant sanctionability (Huawei/ZTE, Swift bans), Trumpian denigratory racism, etc etc. Not just earnings. How curious.
“Asian economies … are intensely interested in China. They have no interest in any substantial trade deal with the US that excludes China.” What about CPTPP?
The point about China wanting to de-dollarise, but also keep their capital account restricted cannot be emphasized enough. Rana Foroohar does an excellent job
It’s looking like woke picked two hills to die on: COVID and Ukraine.