Moon of Alabama Brecht quote
August 24, 2019

U.S. Decoupling From China Forces Others To Decouple From U.S.

The U.S. is decoupling itself from China. The effects of that process hurt all global economies. To avoid damage other countries have no choice but to decouple themselves from the U.S.

Today's Washington Post front page leads with a highly misleading headline:

The headline above the article is also wrong:

Trump retaliates in trade war by escalating tariffs on Chinese imports and demanding companies cut ties with China

It was China, not Trump, which retaliated. Trump reacted to that with a tweet-storm and by intensifying the trade war he started. The piece under the misleading headline even says that:

President Trump demanded U.S. companies stop doing business with China and announced he would raise the rate of tariffs on Beijing Friday, capping one of the most extraordinary days in the long-running U.S.-China trade war.
The day began with Beijing’s announcement that it would impose new tariffs on $75 billion in goods, including reinstated levies on auto products, starting this fall. It came to a close Friday afternoon with Trump tweeting that he would raise the rate of existing and planned tariffs on China by 5 percentage points.

Beijing’s tariff retaliation was delivered with strategic timing, hours before an important address by Powell, and as Trump prepared to depart for the G-7 meeting in Biarritz.

After Trump's move the stock markets had a sad. Trade wars are, at least in the short term, bad for commerce. The U.S. and the global economy are still teetering along, but will soon be in recession.

The Trump administration is fine with that. (As is Dilbert creator Scott Adams (vid).)

U.S. grand strategy is to prevent other powers from becoming equals to itself or to even surpass it. China, with a population four times larger than the U.S., is the country ready to do just that. It has already built itself into an economic powerhouse and it is also steadily increasing its military might.

China is thus a U.S. 'enemy' even though Trump avoided, until yesterday, to use that term.

Over the last 20+ years the U.S. has imported more and more goods from China and elsewhere and has diminished its own manufacturing capabilities. It is difficult to wage war against another country when one depends on that country's production capacities. The U.S. must first decouple itself from China before it can launch the real war. Trump's trade war with China is intended to achieve that. As Peter Lee wrote when the trade negotiations with China failed:

The decoupling strategy of the US China hawks is proceeding as planned. And economic pain is a feature, not a bug.
Failure of trade negotiations was pretty much baked in, thanks to [Trump's trade negotiator] Lightizer's maximalist demands.

And that was fine with the China hawks.

Because their ultimate goal was to decouple the US & PRC economies, weaken the PRC, and make it more vulnerable to domestic destabilization and global rollback.

If decoupling shaved a few points off global GDP, hurt American businesses, or pushed the world into recession, well that's the price o' freedom.

Or at least the cost of IndoPACOM being able to win the d*ck measuring contest in East Asia, which is what this is really all about.

Trump does not want a new trade deal with China. He wants to decouple the U.S. economy from the future enemy. Trade wars tend to hurt all involved economies. While the decoupling process is ongoing the U.S. will likely suffer a recession.

Trump is afraid that a downturn in the U.S. could lower his re-election chances. That is why he wants to use the Federal Reserve Bank to douse the economy with more money without regard for the long term consequences. That is the reason why the first part of his tweet storm yesterday was directed at Fed chief Jay Powell:

In his order for U.S. companies to withdraw from China, some close to the administration saw the president embracing the calls for an economic decoupling made by the hawks inside his administration.

The evidence of the shift may have been most apparent in a 14-word tweet in which Trump appeared to call Xi an “enemy.”

“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” he said in a Tweet posted after Powell gave a speech in Jackson Hole that contained implicit criticism of Trump’s trade policies and their impact on the U.S. and global economies.

Jay Powell does not want to lower the Fed interest rate. He does not want to increase bond buying, i.e. quantitative easing. Interest rates are already too low and to further decrease them has its own danger. The last time the Fed ran a too-low interest rate policy it caused the 2008 crash and a global depression.

Expect Trump to fire Powell should he not be willing to follow his command. The U.S. will push up its markets no matter what.

From Powell's perspective there is an additional danger in lowering U.S. interest rates. When the U.S. runs insane economic and monetary policies U.S. allies will also want decouple themselves - not from China but from the U.S. The 2008 experience demonstrated that the U.S. dollar as the global reserve and main trade currency is dangerous for all who use it. Currently any hiccup in the U.S. economy leads to large scale recessions elsewhere.

That is why even long term U.S. ally Britain warns of such danger and is looking for a way out:

Bank of England Governor Mark Carney took aim at the U.S. dollar's "destabilising" role in the world economy on Friday and said central banks might need to join together to create their own replacement reserve currency.

The dollar's dominance of the global financial system increased the risks of a liquidity trap of ultra-low interest rates and weak growth, Carney told central bankers from around the world gathered in Jackson Hole, Wyoming, in the United States.
Carney warned that very low equilibrium interest rates had in the past coincided with wars, financial crises and abrupt changes in the banking system.
China's yuan represented the most likely candidate to become a reserve currency to match the dollar, but it still had a long way to go before it was ready.

The best solution would be a diversified multi-polar financial system, something that could be provided by technology, Carney said.

Carney speaks of a "new Synthetic Hegemonic Currency (SHC)" which, in a purely electronic form, could be created by a contract between the central banks of most or all countries. It would replace the dollar as the main trade currency and lower the risk for other economies to get infected by U.S. sicknesses (and manipulations).

Carney did not elaborate further but it is an interesting concept. The devil will be, as always, in the details. Will one be able to pay one's taxes in that currency? How will the value of each sovereign currency in relation to SHC be determined?

That the U.S. dollar is used as a global reserve currency under the Bretton Woods system is, in the words of the former French Minister of Finance Valéry Giscard d'Estaing, an "exorbitant privilege". If it wants to keep that privilege it will have to go back to sane economic and monetary policies. Otherwise the global economy will have no choice but to decouple from it.

Posted by b on August 24, 2019 at 19:22 UTC | Permalink

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Excellent article!...thank you!

Posted by: jerichocheyenne | Aug 24 2019 19:50 utc | 1

"The 2008 experience demonstrated that the U.S. dollar as the global reserve and main trade currency is dangerous for all who use it. Currently any hickup in the U.S. economy leads to large scale recessions elsewhere."

It has also become a primary tool for the US to assert extraterritorial jurisdiction over the world to enforce extreme uses of sanctions, as in blowing up the Iran deal. Already the EU has explored ways to get around that to work with Iran.

The over use of sanctions, and abuse of the US financial position in order to govern others, reinforces the desire to deal with fears that dependence on the dollar risks vulnerability to economic depression due to US irresponsibility.

The US is creating a perfect storm for the dollar, with is exactly what it would take to make others undertake the expense and difficulty of replacing it as the world reserve currency and presumed standard of exchange.

No one currency is quite as good now, but one could be improved, or a basket approach could be used. In the ancient world, they used such a nominal currency as a standard by which to value real currencies. We could again.

Posted by: Mark Thomason | Aug 24 2019 19:54 utc | 2

When do we get started?

Posted by: nwwoods | Aug 24 2019 20:00 utc | 3

Why would others want to de-couple from US? What difference it would make to UK or other EU vassals to serve FED/petro-dollar or to serve CCP/petro-yuan? Can one really get rid of one without just getting a new master?

Posted by: Contributor | Aug 24 2019 20:02 utc | 4

Trump does not want a new trade deal with China. He wants to decouple the U.S. economy from the future enemy.

If true that would be a commendable thing.

National self-sufficiency is a worthy goal for any country. It is not always feasible -- small countries are not likely to have all the resources required to be self-sufficient, so their best bet may be to encourage trade.

But the U.S. is not a small country. We have most of the resources we need. Why should we choose to be economically dependent on China? Such dependency makes us vulnerable.

As for the reserve currency, that is a great benefit to Wall Street, but not to Main Street. The Australian dollar is not a reserve currency but that does not seem to bother Australia. The British pound lost its reserve currency status after WWII yet the British sky did not fall, to the contrary, they built a nice welfare state with a better quality of life than they have now under Thather-nomics.

Being a reserve currency has disadvantages as well as advantages. It makes your products less competitive globally, so you end up with a trade deficit, your manufacturing is gutted, and you have to run a large budget deficit to compensate for the demand leakage.

Loss of reserve currency status would mean I'd have to pay more for imported oil, but we need to stop burning oil, anyway.

I'm not seeing any long term downside to the working man. Yes, in the short term there will be pain while we make the transition. So what? America's revolutionary war caused short term economic pain, but in the long run it worked out.

Agree that lowering interest rates and blowing another private debt bubble is the wrong answer. In general, laissez faire capitalism is not the answer, and we need more government intervention in the economy. A 5 year industrial plan, have Uncle Sam build factories, like we did in WWII, except instead of building weapons let's build solar panels. Hire the unemployed to build those factories. And so forth.

Posted by: Dan Lynch | Aug 24 2019 20:07 utc | 5

”Synthetic Hegemonic Currency (SHC)”

Very Orwellian newspeak, that phraseology.

Posted by: barrisj | Aug 24 2019 20:09 utc | 6

Much of this article is projecting, b.

For instance, how does one differentiate America "not wanting to have others surpass it economically" and from the natural mission of a sovereign state to do the best for its people? You can't. All nations want to win. And from my view, China has been playing ufairly with their lack of ethical means of production including treatment of workers and environmental protection, not to mention its poor court system and lack of patent infringement protections. And its defenders always point to America's failures in this regard without mentioning China's egregious violations.

American elites have been overlooking these longterm odds of success because up until very recently, they have still been garnering obscene wealth. Well, now, as you say, in time China has levereged its position and wants an even bigger slice of the pie. Good for them.

But in all these attacks upon the steps that America has taken under Trump to seek more favorable terms for its own economy, I see very little conciliatory notions that America must do SOMETHING! What are these "sane monetary policies" that you shoehorn into the last paragraph of your piece, for instance? In the groovy, China love-fest that has become this forum, I have yet to see any suggestions that would allow a soft-landing for the US and bring about multi-polarity. On the contrary, it is all, "The King is dead, Long Live the King."

I suppose because of this it is very natural for people like me who want to see saner American policies for its people result to saying, "Fuck.Everything.And.Run."

I will say it again: I see no other beneficial alternative for the US.

Posted by: NemesisCalling | Aug 24 2019 20:10 utc | 7

NC @ 7 - Extremely well-stated. Teh only disagreement I have is that China itself doesn't wish to destroy Amerikkka at all. It would be insane for them to destroy their largest client.

It is Trump on the destructive path here with no gain in sight. It i Amerikkkans who must do something to fix Amerikkka, but the Amerikkkan elites are not riding on a wave of nationalist fervor to fix Amerikkka for the working classes. Not Trump either. He is riding the wave for his personal profit and for all his wealthy buddies.

Trump is the texbook definition of rentier. And he is an heir to boot. This makes him somewhat different in prespective from the standard corporate elites but only by degree.

And don't kid yourself for a second just because he used nativist resentment of the hurting classes for his own benefit that he gives a fuck about them...or you.

Posted by: donkeytale | Aug 24 2019 20:28 utc | 8

The USD is way overvalued because of GRC, it needs a 70% devaluation for the US to become competitive.Such a devaluation would make the US a poor second largest economy in world rankings.
It is an adjustment that will happen very quickly now the Gulf monarchies are switching sides to eurasia,they're already selling oil for yuan and other currencys, a secret hidden in plain sight.
Carney is panicking because the western bankers have lost control.

Posted by: Winston2 | Aug 24 2019 20:34 utc | 9

It´s not only yuan which would become world reserve...

While Amazonia burns under Bolsonaro fascist government ( patronized from the US Trump administration...)to the benefit of great landowners and great mining industries...China reforests

Posted by: Sasha | Aug 24 2019 20:42 utc | 10

Trump does not want a new trade deal with China. He wants to decouple the U.S. economy from the future enemy.

That may well be what is going on here. Something between total insanity and managed insanity. The next president will unravel all of this in a year or so of effort. That is what is so damaging. No business can plan on what is next. No policy is long term.

This is pure Trumpian logic unhinged. Hit them twice as hard as they hit you. I would not dare to guess who is winding him up and pointing him in this direction. Trump has had one of his busiest weeks yet.

I see Elisabeth Warren's crowd sizes are getting very large. I will feel better when no one shows up to a Trump rally. China has time to wait this out and the ability to raise some chaos on their own to help undermine Trump.

Posted by: dltravers | Aug 24 2019 20:45 utc | 11

NemesisCalling @7, donkeytale @8

Sorry guys, it was the realization that the Empire had driven Russia into China's arms that sparked the 'get tough' attitude on China.

The Empire HAD TO isolate China but their horrendous treatment of Russia provided an opportunity for China to escape the coming 'smack down' by joining with Russia to challenge Western global domination.

As usual, it is us 'little people that will suffer for the mistakes of our elites. And elite propaganda means that most will suffer in silence, not realizing what really happened.

It should be clear by now that elite adventurism is a choice that is not subject to democratic controls. The sheeple will sleepwalk into WWIII.

Silver lining? Maybe a multi-lateral world saves us from the the more terrible dystopia of a unilateral world.

Posted by: Jackrabbit | Aug 24 2019 20:46 utc | 12

I just had a thought. The USSA has been doing it all wrong for all these decades. There are at least two responses the USSA could have applied to the obviously impending debacle of simply allowing the Chinese to thoroughly undermine its industrial system. The most obvious response would have been tariffs, which could be perceived as an aggressive policy, but certainly not as the outright aggression of sanctions.

Or probably even much better, a 'negative sales tax' on USSA manufactured products, which could in no way be perceived as aggressive at all. Note that there is (I presume) a vast difference between simply subsidizing companies (since subsidies coud then flow directly into the pockets of the companies' capitalists) and providing the companies' customers with a 'negative tax' on USSA produced products (basically an instant rebate). This could effectively provide price parity for the goods produced for the two countries, and could maintain the viability of the USSA manufacturing system.

But... no, we didn't do anything like that. Our Harvard trained economics geniuses hatched the 'far superior' strategy of 'quantitative easing'. They simply eased all the money out of the system and into the absurdly deep pockets of the oligarchs, supposedly in order to 'save the system'. What a masterful strategy! So the options are all used up, and theres no sane way forward. Great job.

So here's my plan. First, of course, we 'take care of' the lawyers. Well... no. First we we bulldoze Harvard. Then we institute the mother of all class action lawsuits, the 99% as plaintiffs and the 1% as defendants, and we clean them out (they will surely run off to China, but good riddance). We will be left with all their fake money, but at least we can try to start over.

Posted by: blues | Aug 24 2019 20:46 utc | 13

@Posted by: Sasha | August 24, 2019 at 20:42

From the article linked above...Just another model of political technology,....and of civilization....

Titled 'Green is gold: the strategy and actions to China´s ecological civilization', the plan that was analyzed during the UNEA assembly explains, in its beginning, its starting point and destination: “Enjoying a beautiful house, a blue sky, a green land and clean water is the dream of any Chinese citizen and, therefore, the center of the Chinese dream (...) To achieve this vision, the government has decided to highlight the concept of eco-civilization and incorporate it into every aspect of the economy, politics, culture and social development of the country."

Definitely, a different political technology from that of Bannon...

Dianxi Xiaoge's YouTube channel is contemporary political technology at its finest. Recommended viewing for all future world leaders.

Posted by: Sasha | Aug 24 2019 20:51 utc | 14

Can one really get rid of one without just getting a new master?
Why not? Progress is not inevitable but it is possible.
The US ruling class cannot grow out of its desire to extend its rule to the rest of the planet. But humanity is not as malleable as the American people-with their dreams of sharing in the dividends when America (Great Again) (aka its ruling class) orders the rest of the world around and exploits everyone the way that it exploits the working people in the United States. Somehow the profits of Empire never quite trickle down to the people who do the work and man the armies.
Elsewhere, however the dream of ruling the planet either never occurred or was grown out of. And people would be very happy to live good lives and make the earth a better place for future generations.

Posted by: bevin | Aug 24 2019 20:58 utc | 15

Spot on in the first part of article about the inevitable new Cold War between China and America and the serious fallout from the breakup of close economic ties. But not so good on the second half wherein America central bankers are acting "insane"
while the rest of the developed world looks on in horror. Are you forgetting most of the interest rates in Europe are now negative?
Are you not aware that the Bank of Japan basically owns 70% of the Japanese stock market in the from of ETFs? America is way behind the curve when it comes to complete surrender to "market forces." Trump wants Powell to play catchup now that it's game on with China. While Europe and Japan are failing economically at least America is at war with the second biggest power on the planet, making drastic moves justified in the face of a national emergency.

China is a bigger threat to America than Russia ever was because their economic model has been so successful compared to the U.S. This is made more so because we no longer have a government per se, only competing economic forces, while the Chinese have a government that runs everything. If they lose this war, they still have a system. If we lose this war, we lose everything.

Posted by: RenoDino | Aug 24 2019 20:59 utc | 16

I imagine now that John Maynard Keynes'ghost, if it were observing our current global political and economic affairs, would be having a laugh. It was Keynes who suggested the notion of International trade using a common trading currency created purely for International trade purposes, in a system in which nations would not be allowed to build up continuous balance-of-payments surpluses or deficits over several years, but would be required to spend their surpluses on countries forced to go into deficit because of other countries' desires for annual surpluses, leading to trade policies or currency manipulations to achieve such a dubious goal.

The EU would be looking very different as a result, without a southern zone of debtor nations with unstable economies and high unemployment, and a northern zone of smug nations with full employment whose social welfare programs depend on an army of unemployed southerner immigrants willing to work for peanuts.

Posted by: Jen | Aug 24 2019 21:04 utc | 17

@7, NemesisCalling:

Oh there are many other beneficial alternatives for the US. For one, the US is best advised to pull its head out of the sand and assess the present global reality objectively. You ain't numero Uno no mo'! You don't manufacture efficiently, your workers are too fat to put in a day's hard work, your lawyers' and Propaganda pros' rantings don't result in money in people's pocket to put food on tables, your national leaders have no idea nor vision as to how to shape up or where you should be headed. These are some of the realities. Now if you can change all that over night, by all means decouple from them chinamen and land on your soft behind. But if you can't do it over night, perhaps you'd better bite your tongue, roll up your sleeves, and work slowly to build up strength before cutting the umbilical? Now that's only ONE of many alternatives; others such as swinging your big sticks, annexing Venezuela for its oil, freezing them chinamen currency reserves sitting in your Fed for your own use, etc. etc., I suspect have entered your considerations but best kept unspoken.

I am quite moved that you pitied upon them poor chinamen workers being mistreated, and bother to gather evidences of Chinese unethical means of production that have caused all these environmental problems. What an egregious nation! We should decouple from them by all means, now that American elites are finally awaken. But do they know where to start? From what noise that has been coming out of the beltway (including that from the blonde headed superhero), I wouldn't suggest that you put YOUR money where THEIR mouths are.

Posted by: Oriental Voice | Aug 24 2019 21:05 utc | 18

When an American claims China has been behaving unfairly, what they really mean is that the Chinese played America's rigged game and ended up outsmarting the dealer.

Posted by: AntiUSA | Aug 24 2019 21:07 utc | 19

Why would others want to de-couple from US? What difference it would make to UK or other EU vassals to serve FED/petro-dollar or to serve CCP/petro-yuan? Can one really get rid of one without just getting a new master?

Posted by: Contributor | Aug 24 2019 20:02 utc | 4

The US$ is overvalued because there is, as it is the global reserve currency, a higher demand for it than otherwise justifiable. In consequence U.S. companies buy up companies in UK and Europe with an overvalued dollar. When the Fed lowers the price for US$ loans it increases that effect. The Fed also creates bubbles, see the mortgage crisis, and the currently overvalued stock markets, that have effects on foreign countries.

Said differently: The U.S. abuses is 'exorbitant privilege'. The hope is that China would be less inclined to do so.

The real solution though is a different system with some global exchange medium that can not be manipulated by one country or a block of selfish countries.

Posted by: b | Aug 24 2019 21:10 utc | 20

The blow against Chinese fentanyl is spot on. Why should Americans consume Chinese fentanyl when they could use domestic meth, aiding industry that was thriving until recently:

"Northern Kentucky Drug Strike Force says the price of meth decreased in 2016, meaning more is available, and it’s of a higher quality. In 2017, lab submissions for drugs showed about 39% was meth. A year later it was 43%." Sadly, in 2019 imported fentanyl seems to be taking over.

Another issue is that rather than consuming imported unhealthy opioids, American could grow and process their own organic poppies etc.

Posted by: Piotr Berman | Aug 24 2019 21:19 utc | 21

The sheeple will sleepwalk into WWIII.

Indeed...just when arriving from the beach...they were broadcasting a foreign documentary about Uyghurs and the opression they suffer and have suffered through the centuires from China in Spanish public TV 2nd channel...

No wonder that Sánchez, the one who would prefer making a deal with the far-right than with the real left, is one of those invited to the G7 Summit....

Pedro Sánchez arrives at the General Secretariat of the PSOE boosted by the right of the party against Eduardo Madina, remains in limbo when the barons take him out of the direction of the PSOE, becomes anti-system in the race towards the General Secretariat, retakes the speech of the left in the general elections and returns again to the right from the acting government.(...) When the PP meets VOX and Ciudadanos, it does not make ideological concessions because they are substantially the same. But when the PSOE joins Unidas Podemos, it has to recover its socialist ideology and confront the economic power of Spain. And Pedro Sánchez doesn't want to. It is not that the right are united and the left are disunited. It is that the PSOE wants to occupy the entire electoral space of the left, wants to have all the possible government of the left - although they do not give it the votes - and is not willing to make leftist policies that confront it with financial capitalism, with the monarchy or with the European Union in its neoliberal drift.

Posted by: Sasha | Aug 24 2019 21:28 utc | 22

@ Oriental Voice 18

Good one, mate! As if I give a shit about being numero uno. I am in the fight of my life, passing through our dark night, where I am just trying to figure out what it means to be an American.

Laugh all you want buddy, but it won't dissuade me from my duty to ascertain this and share it with my countrymen.

After all, I can't concern myself with coming up with a new smart phone that will sell like gangbusters while also being able to tell if I really really meant to help that old lady across the street or if I was just doing it for my own benefit and social score.

As for the Chinese. I am decrying their egregious violations not for their sake, but for ours. Fuck them if they can't stand up for theyselves!

@ AntiUSA 19

Yes, that is exactly what I mean. Good for them, too!


Here is an interesting article entitled "The Dialectic of Globalization," that raises several important questions pertaining to the phenomenon of globalism from the end of colonialism to the height of "transnationalism" with the end of the cold war.

I can just about agree with its conclusions and provide my own opinion as to the end of the "dialectic of globalism," that Trump seems to have, whether wittingly or not, ushered into its next phase.

International neoliberalism needs vast amounts of regulating, but I do not believe that Supranational governing agencies will be able to do this fairly and in the light of day. The only other option then is to reassert state-controlled notions of legality which is what vast proportions of the west seems to be clamoring for as can be seen with the Trump-phenomenon.

Posted by: NemesisCalling | Aug 24 2019 21:36 utc | 23

@ Contributor 4

Why would others decouple from the US?

What foreign manufacturer of any product would rely on US components unless they were absolutely necessary? Doing so allows the US on any whim to shut down their production line via sanctions. OFAC compliance is probably a nightmare as well. Secondary sanctions can get to a similar result, but are another hurdle to implement.

Look at Huawei replacing US chips and maybe the Android OS (the latter by compulsion), and Russia removing US components from a new airliner (bad example because it has crashed twice). There is a large contract for an oil project in Iraq currently in the bidding process and there have been muddled reports as to whether Exxon might be entirely shut out.

Anybody who thinks that the US is not paying a price for Trump's sanctions actions is delusional. But the Saudis and Israel still love us.

Posted by: Schmoe | Aug 24 2019 21:38 utc | 24

@13, blues:

I like your idea of 'negative tax' :)

Any step that reduces the government coffer is a step in the right direction.

Posted by: Oriental Voice | Aug 24 2019 21:38 utc | 25

But the problem with the world economy is not only the supremacy mania of the usa, B. Global production capacity and global purchasing power are less and less in line. The deeper reason for this lies in the nature of capitalism. There is an irreconcilable contradiction, an aporia, between an economic system that, in order to function halfway smoothly, must always grow, eternally 'rationalize' - in practice replacing human labor with capital - and the development of purchasing power. This leads to long cycles completed by final crises. Only the conquest of new markets or the destruction of as many values as possible can restart the system. Hardly possible in today's situation. Virtually all existing markets are internalised and wars between strong national capitalisms can no longer be won in the true sense of the word due to today's uber-weapons. They also destroy the nominal winner. Moreover, today the greatest contradiction of all has become an obvious problem - the one between eternal growth and a finite world.

Posted by: Pnyx | Aug 24 2019 21:41 utc | 26

I'll make one comment in two parts.


There's no need to take sides here.

In the capitalist world, any given country needs two conditions in order to be the world's superpower: industrial superpower and financial superpower. Think of it as the world of boxing: you have to have two belts in order to be considered the undisputed world champion.

In 1945, when Western Europe was on its knees, the USSR had just lost an estimate of 35% of its GDP and China was just restarting its civil war after a century of devastation, only the USA had its economy intact. That meant the USA was, in 1945, both the industrial and financial superpower. The only thing that stopped it from being the world's superpower was the fact that the USSR managed to block access to a good portion of the globe, and the fact that China would be closed for the capitalists for more than 30 years.

In 1972, China was opened. In 1974-5 there was the oil crisis, which would, in hindsight, strip the USA from its industrial superpower status. But the problem, before that, wasn't the USSR, but two small countries that lost the war: Germany and Japan.

The (re)rise of Germany and Japan is a telltale about the nature of capitalism, and why unipolar worlds are, in the long term, impossible in capitalism under a Nation-State configuration. Let's talk about it.

In 1948, the Marshall Plan was passed and executed. With it, Western Europe was revived. But why did it work? Simple answer: the plan paid Western Europe in USD. Since the USA was the only industrial superpower in the capitalist world at the time, that meant the ravaged Western European countries could, with American currency, buy excess American industrial capacity to rebuild themselves.

Japan didn't receive funds from the Marshall Plan, instead, it received the Dodge Plan, which was reverse Marshall Plan, and possibly the first documental evidence of what we would call today "austerity". It was a monumental failure: there was a series of strikes in 1948-9, and the plan was quickly withdrawn. Japan's redemption would only come one year later, with the Korean War. With the Korean War, American bases were installed on Japanese soil, and, with it, more than USD 1 billion (which was a fortune at the time, more than what, e.g. Germany, received through the Marshall Plan) was injected in Japan. The country was saved by an accident of History.

So, how did the USA exerted absolute power over the capitalist half of the world? We can visualize it clearly here: the other countries had to buy from the USA in order to rebuild and reindustrialize. For that, they needed USD. That, on its part, reinforced its financial sector and the US's Treasury bonds (sovereign debt). In exchange, the USA could simply dictate the other countries' foreign policies (see the Suez fisco for a very illustrative case).

But it is not possible for a country to be the industrial and financial superpower forever in the capitalist system: as the other countries reindustrialize, the amount of value on them also increases. That makes their trade accounts turn positive (i.e. "black"). If one's trade account is positive, then that means another country (or countries) must be negative. As other countries begun to be awash with Dollars, they begun to be able to buy things with them not only from the USA, but also from each other. The Dollar weakened, but American exports didn't become necessarily cheaper: the USD was now the standard world currency.

Since the Dollar didn't weaken from the trade point of view, the USA begun to bleed out in this front: German and Japanese cheap industrialized goods begun to dominate. Then, as industrial competition begun to saturate, commodities also begun to get more expensive. The oil crisis of 1974-5 just wasn't worse for the USA because it hurt Germany, Japan and, specially, the USSR more.

By the end of the 1970s, the American economy had clearly reached a point of exhaustion. After an agonizing double-dip crisis in 1980-2, the Plaza Accord of 1985 finally bring German and Japanese ascension dreams to an end -- but it also buried the American ambition to continue to be both the industrial and financial superpowers. The USA was now only the financial superpower.

But even then, how did the USA manage to keep its proeminence? Well, one important factor was that, albeit Germany and Japan were industrially strong, they were small: there comes a point where scale is decisive. But another very important factor was China: after 1972, the US industrial elite begun to outsource its manufacturing infrastructure to China, in order to enjoy its huge population. Since China was a Third World country, it imposed no immediate threat to the USA.

The post-1972 world then had a sole superpower (in the capitalist world) that actually was a binary system: USA with the financial, China with the industrial titles.

After the fall of the USSR (1991), the Eastern European markets were open and its assets sacked. This gave the USA little bit more time, roughly correspondent to the Bill Clinton governments (1993-2000). But it was only that: borrowed time.

[End of part 1].

Posted by: vk | Aug 24 2019 21:41 utc | 27

b #20

Very well said.

US interests are buying up “blue chip” companies all around using, essentially, Monopoly money. And then the slash and burn techniques used to devastate the great US corporations of yore are focused on the new acquisitions.

Posted by: Cortes | Aug 24 2019 21:50 utc | 28

Future policy also seems prefigued by that decoupling from arms treaties with Russia that has gradually unfolded. This manuevering stands a chance of touching off an outrageous and bloody end. Obama's bringing along of the tactical "baby nukes" with adjustable settings, and his "pivot to Asia" are in retrospect to be regarded as preparing the ground. The corporate Democratic Party and its mouthpieces are carrying the demonization of Russia to a continual, dizzying extreme, at the same time

The economic decoupling from China has to backfire since it's not a rational or prudent course of action; and the cast of characters such as Bolton and Pompeo will not be able to think their way out of this train wreck they have set in motion.

Posted by: Copeland | Aug 24 2019 21:54 utc | 29

Why not? Progress is not inevitable but it is possible.
The US ruling class cannot grow out of its desire to extend its rule to the rest of the planet.
Bevin @15

My question implied two potential ”masters”, China or US. Each have ”ruling class”. History shows that ”ruling class” generated by communist system is far more dangerous master than what US system could be. Progress and Communism really do not belong to same sentence if we check back in time and misery it created. There is no doubt that China has even stronger urge to ruling the rest of the planet than even the US. Just check back in history. Or ask Chinese.

Posted by: Contributor | Aug 24 2019 22:02 utc | 30

Carney warned that very low equilibrium interest rates had in the past coincided with wars, financial crises and abrupt changes in the banking system.

Which came first, the chicken or the egg? Bankers organize all wars and set the conditions for scooping up everything in the aftermath.

This is a funny statement coming from a Banker, current head of BOE and formerly a partner at Goldman Sachs.

Posted by: C I eh? | Aug 24 2019 22:03 utc | 31


This part is dedicated to why the capitalist world behaves like it does since the post-war.

Contrary to other mercantile systems (e.g. Late Bronze Age, Antiquity), capitalism has a novelty: the capitals' account (the "financial part").

That happens because capitalism is the first system capable of putting production under unconditional command of commerce. To put it another way, people work (i.e. produce) in order to sell, not to consume the produce themselves. The "world (free) market" therefore determines what is produced, under what conditions, and by how much.

How does it happen? By reducing human labor to the form of abstract labor (i.e. labor in general, as a substance). This "substance" is value. With value, you can transform any labor in a quantitative form. This quantitative form is time. But you can't exchange time, and, even then, time oscillates: some workers are faster than others, or work under more ideal circumstances. The solution to this is money: money is a historically determined commodity which is "elected" as a universal means of exchange. It is stripped from its original use ("retired") and is ascended to the post of being useful only as money. Money is, thus, the universal commodity, the commodity whose use is serving as being the one capable of being exchanged for any other commodity.

By reading this quick explanation, you must be asking? Where are the Nation-states in this story? Well, the fact is, capitalism doesn't need Nation-states to exist. Not only that, but, in the long term, Nation-states are prejudicial to capitalism. It's goal is what Marx called the "world market"; to that, Nation-states are an obstacle.

Why then do Nation-states exist? Simple: because that was the concrete political reform the bourgeoisie found to topple feudalism. That, and the technological limitations of the time (which exist until our times). They had to swallow reality and try to build the "world market" through Nation-states. Call it "really existing capitalism" for ironic purposes, if you want.

The USA is a Nation-state that issues the USD, which is the universal fiat currency of the post Bretton Woods era. But the USA is still a capitalist Nation-state in a capitalist-dominated world. That means its tendency is still to form the world market, not to be a self-sustaining fief.

So, it is the Nation-state that is responsible to -- in the context of the world market -- produce the most valuable commodity in capitalism: money.

If you produce money, you don't have, from the capitalist point of view, the need to produce anything else: money transforms into any other kind of commodity (fetichism of the commodity, alienation of labor). Americans can simply print money in order to import whatever they need to survive. It's up to the rest of the world to sustain its value, since they need USDs to make international trade. That's why the USA is the only country in the world that doesn't suffer from inflation when it prints money; instead, the crisis breaks at the weakest link of the trade chain (usually, a Third World country).

But the price is deindustrialization: as the USA imports increase, it becomes cheaper to produce anywhere else (as in "another country"). And even that can only go insofar as the rest of the world doesn't break (i.e. until the Third World can sustain it).

The 2008 crisis was impressive not because it was a financial one, but because it had its epicenter at the USA (as in opposition of at another random Third World country, as was the case of 1997). 2008 was a structural, not a cyclical, crisis.

The system itself broke. 2008 only didn't collapse the USA because the Fed acted quickly and essentially ransacked the American people in order to keep the big banks et al afloat. There was some allocation to Third World countries (such as Greece), but the overall effect was limited. The capitalist part of the globe is now effectivelly a zombie economy: the First World countries can't rise the interest rates because that would bankrupt their precious big corporations; but they also can't lower then anymore because they are already essentially in negative territory.

This left us with China. Why didn't China go down in 2008? The answer is equally simple: because it is not capitalist. Needless to say, Cuba and North Korea were also left unscathed by the 2008 meltdown.

[End of part 2].

Posted by: vk | Aug 24 2019 22:10 utc | 32

“If decoupling shaved a few points off global GDP, hurt American businesses, or pushed the world into recession, well that's the price o' freedom.”

I believe that there is a US deep state, but are the ones with the most power business interests or those with more of an interest in changing world order. Corporations have invested a lot in gutting our manufacturing and sending it overseas primarily to China. I suppose they will not be happy to lose money, so will push back. Trump has to worry about an election, and would another president also follow Trumps China decoupling?

Also - “The U.S. Military's Greatest Weakness? China 'Builds' a Huge Chunk of It”

“Ninety percent of the world's printed circuit boards are manufactured in Asia, and more than half in China.”

Posted by: Stever | Aug 24 2019 22:16 utc | 33


Carney speaks of a "new Synthetic Hegemonic Currency (SHC)" which, in a purely electronic form, could be created by a contract between the central banks of most or all countries.

In every instance where an old fiat has been replaced by a new, from tally sticks to gold or from gold to paper, bankers have enriched themselves by retaining exclusive possession of the the new currency for a period while debtors and debts remain in the old. This makes it impossible for debts to be paid since the old currency plus anything denominated in the old is suddenly worthless. By this ruse the bankers are planning to buy up the world.

What bankers want is digital currency since reaching into pocket for cash is difficult while disappearing all your wealth with just a few key strokes is easy to do.

That is what the takedown of the USA and it's dollar is all about. It is about unipolarity of the ultimate kind with everyone placed on an electronic teet which is used NOT to save the environment but manage your behaviour in every imaginable respect.

Electronic currency equals technofascism, and that's what bankers want. Marxism is the cover story they use to hide their plan to own and control everything. Just try and oppose them after it is installed and see what happens to the balance of your account.

Posted by: C I eh? | Aug 24 2019 22:22 utc | 34

”The EU would be looking very different as a result, without a southern zone of debtor nations with unstable economies and high unemployment, and a northern zone of smug nations with full employment whose social welfare programs depend on an army of unemployed southerner immigrants willing to work for peanuts.”

Jen @17:

I wonder which nations your definition of ”northern zone of smug nations” means?

There would be no facts supporting your statement, if your description covers Nordic countries. All Nordic countries except Norway are raising heavy debt every year to cover the costs of wellfare system being strained by immigrants. There is certainly no ”southeners working for peanuts”, if at all. Before EU forced to open borders and economic migration the wellfare states in Nordic countries were all running balanced budgets (except when baill outs for failed banks required to raise national debt). The whole point of Nordic wellfare system was for decades to first plan the national income and then decide whats available for social wellfare to be shared from that income. You see, the Nordic system was based on everyone contributing to the system by very high income tax. If there was ”southeners working for peanuts” that would mean their tax contribution would be lower too and wellfare system would eventually fall down - as it is currently doing.

Posted by: Contributor | Aug 24 2019 22:23 utc | 35

Both plans (Carney's and Trump's) won't work in my opinion.

The problem is that capitalism doesn't operate based on national interests, but on profits: if the prospective profit rate is not high enough, the capitalists won't invest.

The USA can't decouple from China without abdicating its world superpower status. The most it could do is to induce industry to get out of China and go to other countries not called USA -- but then, it would just transfer the problem to another place (from China to a constellation of countries), not solve it. The USA will continue to deindustrialize as its hyperconsumer population becomes ever more expensive relative to the other countries' labor power. The only solution would be for it to abdicate the USD as universal currency -- but that would defeat the purpose of continue to be the sole superpower.

Even if the USA manages to transform China into a wasteland and all the other countries fully industrialized, that would mean it would become an anachronistic, Ancient Régime-like, aristocracy; it would be a matter of time before this confederation of industrialized countries to topple the USA. In other words: even in its most successful scenario, the USA would be killing China only to create an even bigger China 150 years from now. That can happen, but is very unlikely.

Carney's plan also won't work, because that wouldn't solve the crisis of profitability capitalism is suffering from now: you would've been just replacing the USD with another hyperimperialistic fiat currency.

It's funny how symmetrical both plans are: Trump wants to destroy China in order to create an even bigger (borderless) China; Carney wants to destroy the USA only to create an even bigger (borderless) USA. In the first case, it would be a confederation of hyperindustrialized countries; in the second case, it would be an hyper-elite of true "masters of the universe" governing over a scify-worthy dystopia.

Posted by: vk | Aug 24 2019 22:25 utc | 36

thanks b... this is an ongoing issue that needs to be examined closely.. the many links and comments from michael hudson over the past few years are another sign of the extreme importance of this topic you raise here....

very few folks understand the opaque nature of central banks, the federal reserve and etc. is much like a ponzi scheme at present where the house - us$ - usually always wins.. however the lesser players have been switching out of the us$ and wanting to change the balance and free ride the us$ has gotten, especially since it was uncoupled from gold... the jig isn't completely up, but odds are leaning towards favouring an alternative, especially given the canuck mark carneys comments...i tend to agree with someone else up thread who said 'the bankers' are starting to freak out.. they know this bubble and game is unsustainable.. they just don't want to be at the helm of the titanic when it happens...

i also agree with the commentator who thinks present day capitalism is a problem... maybe we can figure out a way to get beyond this capitalism-communism duo and create a system that is a balance of the two...

@5 dan lynch.. the us$ as reserve currency is a huge advantage to the usa - wall st banking system... it is interesting you downplay that as much as you do.. having oil denominated in us$ is only a small part of it...

@18 Oriental Voice.. good post.. thanks!

Posted by: james | Aug 24 2019 22:27 utc | 37

The most likely explanation for the rise of Trump is that petit billionaires from the United States understand that mega trillionaire Euro-Rothschilds, who already own perhaps 40% of everything according to one Swiss study, are attempting to seize the rest by cutting off the legs of people like Sheldon Adelson and his Intelligence backers, whose wealth and power depends on the existence and use of US dollars.

Posted by: C I eh? | Aug 24 2019 22:34 utc | 38

Western Oligarchs initially were unified with their program to keep prices stable, lower labor costs, cut taxes and deregulate. Credit Cards and low cost consumer goods at Walmart kept working families pacified as their jobs were outsourced. Greed got the better of the Elite. Joe Biden’s regime change crew took aim at Ukraine and ultimately Russia, once again, to seize the resources. This restarting the Cold War and forced Russia and China to ally. The world is at war. It just has not gone nuclear yet. A Multipolar World is a now a given. The question is human survival.

American farmers and consumers are in so far in debt that bankruptcy or dying owing an average of $61,000 is the only way out. Manufacturing cannot be moved without costs. The Trade Wars and Brexit will splinter the USA and the UK. Somebody thinks they will make money out of the chaos. This is a very dangerous bet. With rising prices, food and medicine shortages, and oligarchs at each other’s throat, another Civil War is most likely.

Posted by: VietnamVet | Aug 24 2019 22:35 utc | 39

@ Posted by: Contributor | Aug 24 2019 22:02 utc | 30

I disagree with you. The USSR became a superpower in just 29 years -- and that because the imperial powers of the time tried to destroy it twice (Civil War 1917-1921; WWII, 1941-1945). Before that, it was a third rate, decadent, imperial power (for sure the weakest of the "big four", by far the poorest and most backwards). No other country has achieved that (the USA took 130 years to surpass the UK in industrial power, and 45 years more to become a world superpower).

China became a superpower (as is recognized by the USA since 2017) in 68 years (40 years, if you want to falsify History and claim Mao's years should be thrown to the thrash can).

Cuba, because of its size, can never aspire to be a superpower, but it's the best place to live in Latin America, on average (HDI consider per capita income, so Cuba, which is socialist, appears to be worst than it is).

So, I don't see why you associate communism as the antithesis of "progress" -- evidence clearly disproves you.

Posted by: vk | Aug 24 2019 22:38 utc | 40

After the Global Financial Crisis Zhou Xiaochuan, Governor of the Bank of China announced, “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.” 

He proposed Special Drawing Rights, SDRs, that derive their value from a basket of world currencies. Nobelists C. Fred Bergsten, Robert Mundell and Joseph Stieglitz, were supportive, “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.” 

To demonstrate the scheme’s stability China began valuing its own currency, the RMB, against a basket of dollars, euros, yen and pounds sterling and, almost immediately complaints about RMB valuation ceased. The IMF made its first SDR loan in 2014, the World Bank issued the first SDR bond in 2016, Standard Chartered Bank issued the first commercial SDR notes in 2017 and the world’s central banks began stating reserves in SDRs in 2019. 

While few noticed the advent of SDRs, the creation of the Asian Infrastructure Investment Bank, AIIB, in 2015 was a sensation. Former US Treasury Secretary Larry Summers called it, “The moment the United States lost its role as the underwriter of the global economic system. I can think of no event since Bretton Woods⁠ comparable to the combination of China’s effort to establish a major new institution–and the failure of the US to persuade dozens of its traditional allies, starting with Britain–to stay out of it.” 

The AIIB's one hundred member countries account for eighty percent of the world's total population and two-thirds of global GDP. It guarantees a trillion dollars annually in long term, low interest loans for regional infrastructure, poverty reduction, growth and climate change mitigation and allows Eurasia’s four billion savers to mobilize local savings that previously had few safe or creative outlets.

Posted by: Godfree Roberts | Aug 24 2019 22:43 utc | 41

How does one fire the Federal Reserve Chairman? No President has ever attempted to remove a Federal Reserve Board member let alone the chairman. And what would change? The other board members have been unanimously voting for Powell's policies.

Posted by: bam | Aug 24 2019 22:44 utc | 42

@b #20

The real solution though is a different system with some global exchange medium that can not be manipulated by one country or a block of selfish countries.

Please describe what future system cannot be manipulated by a social class, since nations are 'things' and are controlled by specific people already.

Posted by: C I eh? | Aug 24 2019 22:46 utc | 43

@41 bam... the usa signed over their control over the us$ a long time ago... trump optics are circus stuff for the masses...

Posted by: james | Aug 24 2019 22:46 utc | 44

Said differently: The U.S. abuses is 'exorbitant privilege'. The hope is that China would be less inclined to do so.

The real solution though is a different system with some global exchange medium that can not be manipulated by one country or a block of selfish countries.

b @20

I agree that US abuses, but that is what hegemoney always does. Power corrupts and has always done so. If there ever was a hegemony less inclined to do so, the history certainly shows not to expect that from China or Communists. Hence, I would not wish to desire outcome in which China gets close to hegemony.

I agree that a different system would be the solution. Currently, such option does not yet exist? Or at least function? For that reason, it would seem safe to say that other countries have no reason to de-couple from the least bad master of all bad ones available.

Posted by: Contributor | Aug 24 2019 22:49 utc | 45

Reading some comments here makes it very obvious why Trump is American and why Carney isn't.

Trump's plan (the "decoupling" plan) creates the illusion the American people has a way out of this mess without giving up its (financial) superpower status.

Carney's plan (the "synthetic currency" plan) creates the illusion the First-World-minus-the-USA peoples have a way out of this mess without having to give up their anti-communist, Atlanticist, social-democratic way of life.

Just because something worked out before doesn't mean it will work out again; just because something happened before doesn't mean it will happen again.

Posted by: vk | Aug 24 2019 22:49 utc | 46

In a nutshell,you cannot hold GRC and have those jobs back.
These trade disputes are not about trade per se, they're about the breakdown in trade dollar
recycling, ie vendor financing that allowed the US to live way above its means.
Uncle Scams credit card is having limits put on it, UST auctions have been failing for years, covered
by $22trn in missing money.The jig is up.

Posted by: Winston2 | Aug 24 2019 23:01 utc | 47

vk with your comments about the USD as reserve currency (Triffin Paradox) and for pointig out global capitalist exploitation is unrelated to nationalism....exactly correct and right on. I make this same point once in awhile. Lol. But not nearly as well explained as you do here.

This is the non-sequitor behind the Brexit fallacy as well, that rejecting the EU for a nationalist trade and economic policy will somehow make Britain Great again. Pure nonsense and not a coincidence that Mercer/Bannon created this policy like Trump's policies with outright lies through a complicit media/political campaign.

The sad fact of the matter is Britain can't even feed itself. So, Brexiteers, welcome to a steady diet of overpriced sovereignty on a bun after the October 31st crash out.

And yes of course Keynes was correct about the need for a neutral global reserve currency for trade rather than a national currency serving as world reserve currency. As james and b suggest has great utility for the wealthiest Amerikkkans, while NC correctly views the strong dollar as the reason for the hollowing of the Amerikkkan blue collar worker.

And bet your bottom dollar (pun intended) China has no desire for the yuan to become the world reserve currency. That is the entire point of their global currency strategy: to maintain the yuan subordinate to the USD.

Posted by: donkeytale | Aug 24 2019 23:03 utc | 48

China's One Bridge One Road (OBOR) is a transport (rail, road, sea, & air), communication (including satellite), & energy distribution network/grid for the entire world (excluding the Americas). It is effectively an entire alternative economic system.

The US can only maintain its pre-eminent position by destroying OBOR, but it's probably far too late. Time is not on the side of the US. The US and the western system have already lost. Most westerners are unaware of OBOR, or have only the vaguest notions of what OBOR really is or it's extent; like all declining empires/civilisations, we don't understand what's happening.

Posted by: ADKC | Aug 24 2019 23:08 utc | 49

Perhaps it has already been stated in this thread, but once the US dollar was decoupled from gold in 1971, it gave the Fed and the banksters the ability to create an infinite number of digital and paper dollars. The US used this power to build 1000 military bases around the world and use its sanctions to freeze dollars to anyone who challenged its policies and power.

The call to replace the fiat dollar with some other form of bankster digital fiat should be a non-starter. Only commodity-based currencies, which have intrinsic value and cannot be created out of thin air, are the only viable form money for a world which could be free of endless war paid for by endless debt and economic slavery.

Posted by: Perimetr | Aug 24 2019 23:11 utc | 50

It is astonishing to see how British Imperialism, from before Hobbes wrote Leviathan to the present day, has fooled everyone by teaching us to focus on the particulars and our physical senses instead of taking in the bigger picture and registering the totality and spirit of what is occurring.

You cannot see the forrest standing six inches infront of a tree. So it is with all the would be Marxist theoreticians who quote Hudson all day but almost never take in the bigger picture he is attempting to relay.

It probably started with the bankers of Delphi, who Michael Hudson describes as the Davos of it's day, who sponsered the rise of Macedonia and had it's prince Alexander the Great, edumucated by their agent Aristotle, first to conquer Greece and then to destroy Persia and setup the first hegemonic globalist order to attempt conquest of the known world.

Ironically it was the bankers who also organized the invasion of Greece by Xerxes and his heir, to unite the quarrelsome Greeks into a nation state, when that concept was in vogue.

The bankers of Venice repeated the trick by sponsering the Turks of Anatolia and Central Asia to destroy first Byzantium, then centuries later to invade the Hapsburg Empire and weaken their predominantly German enemies.

Literally nothing has changed.

Posted by: C I eh? | Aug 24 2019 23:14 utc | 51

On May 23, on MOA, I made the following comment:

This is the beginning of dividing the world into two spheres. A Multi-Polar sphere, led by China and Russia, and a U.S. led sphere.
In the current world order, the U.S. has lost its place of leadership. Militarily it has been surpassed by Russia and economically it has been surpassed by China.
In terms of the economy, China's GDP (PPP basis) is some 20% larger than the U.S. In terms of what counts, producing useful products, the difference is much larger than that. In fact the U.S. hasn't produced the value of products that it consumes for more than 30 years, and is currently running a trade deficit of more than 2% of GDP. The accumulated foreign debt, resulting from these on-going trade deficits is a major strategic threat.
Not only has the U.S. lost its position of leadership, its perspectives are rapidly deteriorating. 30+ years of Globalization has destroyed its industrial base, and without an industrial base it cannot compete either economically or militarily.
To stop the on-going loss of its leadership position, the U.S. must redevelop its industrial base. But it cannot do so in world of open borders in which it has to compete with China. Thus, the U.S. is seeking to create its own sphere, accompanied by its loyal vassals, where it can redevelop its industrial base and ultimately recover its industrial strength and leadership, isolated from its competitors.
This, in my opinion, is the strategic intent of Trump's economic and trade policies. He is not looking to achieve a trade deal with China, but rather to shut down trade between China (and the Multi-Polar sphere in general), and a U.S. led economic sphere, which consists of the U.S. and its vassal states. He is also looking to limit or harm the Multi-Polar sphere in every way, short of all out war, in order to ensure the loyalty of as many vassals as possible.
Posted by: dh-mtl | May 23, 2019 1:15:10 PM | 39

It seems to me that this comment is quite pertinent to this thread.

Regarding the US dollar as a reserve currency: This reserve currency status and the resulting overpricing of the U.S. dollar has been a windfall to the global elites, but has been devastating to the United States itself, being a major factor in the destruction of the U.S. as an industrial economy.

In addition, the fact that the U.S. dollar has a dual purpose, as the currency of the U.S. and as the reserve currency of the world, has resulted in considerable financial instability. When the U.S. adjusts its monetary policy based on domestic needs, resulting wild swings in the exchange rate send shock waves around the world.

A world reserve currency is used as a reference for other currencies and must be stable. A domestic currency must be able to adjust based on the monetary policy required for the domestic economy. These two separate functions are incompatible.

Over the past five decades the U.S. dollar has been anything but stable. In this sense Mark Carney's analysis is spot on.

I believe that the Chinese, Russians, etc. recognize this situation and have long been looking for an alternative to the U.S. dollar as a world reserve currency. The recent weaponization of the dollar for geo-political purposes has only made the situation more urgent.

I believe that what is required is a world reserve currency that is separate from any domestic currency, similar to what Carney is calling for. However, my bet is that this world reserve currency will take the form of a crypto-currency backed by gold. Only with the backing of gold will the currency have the transparency required to be a world reference currency, acceptable to all.

Posted by: dh-mtl | Aug 24 2019 23:18 utc | 52

Carney's plan just creates a stronger coupling to the Empire by transforming a system that uses the dollar as reserve currency into a system that uses what might be termed the 'e-dollar' for everything.

The proposal likely leads to a revived TPP because global currency requires "harmonization" of regulatory regimes.

Most importantly: European poodles will be on an even shorter lease. (No gas from Russia!)

Western globalist elites have already de-coupled from nation-states. The e-dollar makes would force everyone to catch-up.

An exorbitant privilege" is likely to continue in one form or another. They will not give up the ability to use currency as a tax without real pressure (which is currently nonexistent).

Bonus: "the Russians hacked our currency!" is the perfect way for the in-group to crush resistance by stealing from their critics.

Posted by: Jackrabbit | Aug 24 2019 23:21 utc | 53

ADKC - careful here. Don't over subscribe Chinese elitist propaganda for the truth just because their government says so. The BRI to date isn't a proven winner, far from it, except for the Chinese who insist on imperialistic control over these ventures both for their companies and imported Chinese workers. Proof of benefits to the foreign countries has yet to be determined.

In fact, there is evidence that at least in some respects BRI looks to be an empty boondoggle like the empty skyscrapers in the Chinese urban skyline.

China is sending empty freight trains to Europe through one of its key Belt and Road Initiative (BRI) projects: the China-Europe Railway Express. The bizarre phenomenon caught the attention of Depth Paper (等深线), a Chinese online news platform. In a rare move by a Chinese media outlet in today’s media environment, Depth Paper probed critically into one of the BRI’s most visible “connectivity” projects, uncovering the perverse incentives that are luring China’s local governments and companies to create huge “bubbles” of ostensibly flourishing rail routes that run tens of thousands of kilometers across the vast landmass of Eurasia.

The revelation partly confirms what some observers have suspected all along: that China’s central government lacks the ability to keep BRI strategically tight and coordinated. Sub-national stakeholders, as they do in other policy areas, have the incentives to bend the initiative to their own narrowly defined interests and in the process undermine the overarching strategy, if such a strategy indeed exists at all. The curious case uncovers some important dynamics playing out among Belt and Road’s diverse stakeholders.

Yes, Barflies, there are also downsides to central government planning even in the Zen Master Paradiso, which of course is 100% free of corruption and perverse incentives:

The elevation of the freight service in political importance created powerful incentives for players to “rig the game”. Depth Paper reveals two groups of schemers in the game:

Provincial and local governments: As the number of freight trips to and from Europe become a measurable indicator, local governments, particularly those sitting at key railway hubs, saw a clear opportunity to boost their visibility under the BRI (and probably to the leadership). At their disposal were subsidies to lower the cost of freight services and make them competitive with cargo ships.

The Ministry of Finance provides a guiding subsidy ceiling of 0.8USD/container/kilometer. But ambitious local governments circumvent it by inventing all kinds of additional rewards to lure businesses to their train terminals, sometimes even compensating for the extra mileage of truck transportation to bring containers from thousands of kilometers away. According to a chart collated by Sino Trade and Finance, many municipal government offer around 3000USD per container for a one-way Europe bound trip and a whole train could receive a total of 123,000USD worth of subsidies per trip. These local governments also use tax rebate and land use subsidies to sweeten the deal for freight service companies.

International railway service companies: Competition with each other and pressure from local governments eager for BRI visibility has incentivized the companies who actually run the numerous rail routes to Europe to increase the number of train trips. Every month these companies have to book planned trips from the railway regulators and get what is called a “route slip” that permits them to run those trains. The ratio of actual trips to the applied number is called “realization rate” that regulators use to monitor rail capacity utilization.

The interplay of these incentives drives both groups to boost indicators that make them look good in this game, creating scenes that are outright bizarre. The government of Xi’an is one of the most active players starting from 2018. The city, 1000 kilometers to the west of Beijing and the former capital of Tang Dynasty more than a millennium ago, considers itself the “starting point of the ancient Silk Road” and strives to restore its glory in the Belt and Road era. With full support from its provincial bosses, it is the most generous with subsidies, dwarfing other provinces by a wide margin. “Subsidized per container transportation price from Xi’an is constantly below RMB 8500, while it costs over 20000 RMB from Shandong,” a trade agent told Depth Paper.

The subsidies are of the scale that they bend the gravity of trade. In the most extreme cases, traders in the far west Xinjiang Autonomous Region, which already borders Central Asia and is itself a Belt and Road rail hub, would move their cargo thousands of kilometers to the east to capitalize on the Xi’an government’s free handouts before transporting west across the Eurasian continent. Similarly, traders in coastal Shandong provinces would truck their goods all the way to Xi’an and load them onto trains, as it is cheaper even after taking into account the 5000 RMB per container transportation cost by truck (for which the Xi’an government also partially remunerates). The result is that Europe-bound freight train trips from Xi’an grew by a whopping 536.6% in just one year from 2017 to 2018.

The railway service companies, on the other hand, blow up their trip numbers even when they have very little to ship. Before Xi’an arrived on the scene in 2018, the competition between Chongqing and Chengdu, two nearby cities, was so fierce that the two cities would refuse to merge cargo loads back from Germany despite neither being able to fill a whole train themselves. When the pressure (and reward) to be the top railway service company facilitating “Belt and Road” trips to Europe becomes huge, the companies simply start loading empty containers to their trains. They must ensure that each train meets the regulator’s 40-container minimum before it leaves the station, but there is no obligation and no ability (for lack of demand) to fill those containers.

In the most extreme case, one train carried 40 empty containers and just one full container all the way to Europe. This makes the China Railway Express’s impressive growth number highly dubious, and most certainly a “bubble”. Even with all their tricks, companies can barely fulfill their promise to regulators: they have overbooked railway resources. In Q2 of 2019, Chongqing’s “realization rate” dipped to as low as 64% for some routes.

Posted by: donkeytale | Aug 24 2019 23:29 utc | 54

The ghost cities of China.

China will unquestionably need even more infrastructure if it's to accommodate all the additional migrants McKinsey anticipates. But just because China needs things that haven't yet been built, that doesn't mean that everything that gets built is truly needed. Even the casual observer driving around China can see that something is wrong. You can see it in the industrial parks that are empty except for a small handful of factories, and in the government buildings that are so large it seems impossible that they will ever fill in with civil servants, and in the airports that only sporadically host an arriving plane, and in the glut of exhibition centres and museums that every town seems compelled to build.

Urbanisation – the construction of new housing and infrastructure – has been the driving force behind the Chinese economy for close to two decades. It has created demand for massive volumes of steel, cement, and glass; for the ships that bring iron ore from overseas; for the power plants and coal mines needed by the steel mills; and for the machinery that is needed on construction sites.

But this constant and nonstop building has become an addiction for local governments. it's a way of stimulating the local economy and maintaining growth, all loosely justified by the needs of migrants. The World Bank calls urbanisation an "enabling parallel [process] in rapid growth"; in other words, urbanisation can support growth, but it can't drive it. China has put the cart before the horse, and the result is waste on an epic scale. Tieling's story is one of how ambition and a lack of restraint by local governments, masquerading as planning for the future, have laid the foundation for financial problems that have been replicated throughout China – and how the promise of further migration isn't going to fix them.

Posted by: donkeytale | Aug 24 2019 23:47 utc | 55

@11 dltravers

I see Elisabeth Warren's crowd sizes are getting very large. I will feel better when no one shows up to a Trump rally.

I sympathize, but Elizabeth Warren is terrible on foreign policy. When the IDF was slaughtering civilians in Gaza in 2014 she pushed to release a few hundred million dollars to "help" Israel "defend" itself. The MSM loves Warren. She is a neoliberal capitalist, liberal interventionist and splits Sanders' vote.

Posted by: Daniel | Aug 24 2019 23:52 utc | 56

I see many many people have bought into anti-China propaganda. So the MSM lies about Israel and Russia and Syria and WMD and Iran but when it comes to China it tells the truth. Gotcha.

Posted by: Daniel | Aug 24 2019 23:57 utc | 57

In my opinion, what we will see in the near future is a move toward banishing currencies. Australia is already making significant moves in that direction. With negative interest rates coming soon to a central bank near you, the existence of currencies is a direct threat to the ability of central banks to lower rates to subzero levels since consumers will merely hoard cash to avoid losing capital.

Posted by: Sally Snyder | Aug 24 2019 23:58 utc | 58

donkeytale @53

That's because you (and the article you rely on) only see OBOR as a rail network transporting goods.

Everything the US/west ever did was gung-ho and figure out the problems as they arise. When the US/West started counting the cost, working out the value, balancing the costs and the benefits, they stopped doing anything worthwhile.

It doesn't matter if OBOR is inefficient or doesn't ever make money, it will still achieve it's objectives.

I would have thought that you would have recognised OBOR as true globalisation rather than the exploitative, financialised, virtual version that the US/West is offering.

Posted by: ADKC | Aug 25 2019 0:04 utc | 59

@ Posted by: donkeytale | Aug 24 2019 23:29 utc | 53

But it is not us, alleged "pro-China propagandists" who are "buying into Chinese elite propaganda". It is its main enemy -- the USA -- that is stating China is a superpower (the term "great power" is used + subliminar message of the document).

As a famous philosopher once said: the best way to know yourself is to know your enemy.

And, by knowing its enemy and by assessing the evidence on the field available to us, it leaves us to believe that the Chinese socialist system has been -- with all its virtues and flaws -- a monumental success: so far, it's the only Third World country to ascend to superpower status; it's also the first really big country (1.4 billion people) to have found a way to material prosperity (mutatis mutandis) to the totality of its population (which breaks with the post-war Western European social-democrat myth that states only small countries can be prosperous).

And we have corruption here in the (capitalist) Third World too. Corruption is not an invention of socialism. If I could, I would choose the Chinese system for my country in a heartbeat.

Posted by: vk | Aug 25 2019 0:05 utc | 60

First : Good articles from B always get responded by astroturfers / paid trolls in the first few comments , that mean B’s MoA already in priority watch list of TPTB drones

Second : Rather surprised by people that got surprised of the decoupling plan , as it been the goal all along and any china watcher knew this right from the start. Trump is not the instigator of this , he acted like moron on twitter but the machination for the decoupling have been ongoing even during obama years (TPP anyone ?) The whole trump trade deal promise with china are not about trade deals , it is a list of demand from US to make china bow to US or face decoupling. China of course refused and here we are today. US overplayed their hands as china better prepared for the decoupling.

Third : HK violent protests are in fact designed to make china over react and send in security forces into HK , the debacle then will be used as US and push EU allies to support decoupling with china. But the awaited china HK crackdown never happened and the western plan go ahead anyway with the choreographed western leader’s comments on china action toward HK even when theres no action.

To the trolls like Nemesis Calling and his sock puppet accounts , it would be wiser if you notice the people coming to MoA are not random ignorant citizen of USA or EU. Such blatant pro US narrarive from you instantly got recognized and laughed at.

Posted by: milomilo | Aug 25 2019 0:16 utc | 61

SHC idea is BS. I don’t want to even think about all the hidden tricks the City is planning to build into it. There’s no need to because there’s no need for SHC itself.

It used to be hard to maintain accounts in multiple currencies, as well as settle such accounts when trading internationally, so the trade (and, therefore, insurance, short-term credit, and trade reserves) inevitably coalesced around a few main currencies. With the computation capabilities available today, there’s nothing preventing banks and companies from having accounts in dozens of currencies. There’s nothing preventing all kinds of currency pairs (thousands, even tens of thousands of combinations) to be traded automatically by market-making algorithms, thus providing the necessary liquidity.

This is what the non-Empire countries should be working towards: a decentralized system of currency exchanges and settling systems built upon a common standard for maximum interoperability. No blockchain currencies are necessary: simple correspondent accounts at the central banks will do. The trick is to adopt a common tech standard and simplify legal procedures, so that a bank can easily open accounts in the currencies of dozens of countries and easily exchange these currencies on a currency exchange of its choosing.

Posted by: S | Aug 25 2019 0:22 utc | 62

Here's the famous memorandum where Trump admits China is (by exclusion) at least an "developed" economy:

Trump Targets China Over WTO ‘Developing Nation’ Crackdown

Trump singled out China in a memo to U.S. Trade Representative Robert Lighthizer, saying that “the United States has never accepted China’s claim to developing-country status, and virtually every current economic indicator belies China’s claim.” In response, China said that it’s still a developing nation and needs flexibility and policy room, according to state broadcaster CCTV.

Posted by: vk | Aug 25 2019 0:43 utc | 63

@60 milo

Excuse me? Exactly who the fuck are you and what are you referring to wrt my trolling?

Please be specific, because just as you are clairvoyant in your identifying trolls through the veil, I can sniff out people who don't know what the hell they are talking about and opt to insult the contributions of others when they themselves fail to understand what they are reading.

Seriously? TTP? How is its failure detrimental to China or related to American-Chinese decoupling? Get a clue, Jr.


I desire this decoupling that b is writing about. If it is self-defeating for us Americans, why should you care? Why should anyone care? Let us be lemmings if we want to be.

Posted by: NemesisCalling | Aug 25 2019 0:46 utc | 64

What about the “Asian pivot”? Is this part of what started under Obambam?

Posted by: yippies | Aug 25 2019 0:50 utc | 65

donkeytale @54

That's because you look at the empty cities from a western (particularly Hayek economics) perspective. There are at least the following factors that you have ignored:

1. That the US/West requested China to support the world economy post 2008 by spending.

2. That the West has wasted far greater resources with quantitative easing & non-performing investments.

3. That China adopted a Keynesian approach to keep their economy moving.

4. That the cities were all planned anyway and build was just brought forward to support the world and Chinese economy.

5. That most of these cities are still not complete and not ready yet for mass residence.

I can see the argument that these cities might turn out to be a waste but so was the western approach to the 2008 crash and what we are left with is continuing austerity, huge amounts of money that has been wasted by pouring it straight into the pockets of the ultra rich, and another pending crash. What China is left with is money that went to the workers, an economy that continued to develop and assets (cities) that may well be very useful in the future.

Posted by: ADKC | Aug 25 2019 0:53 utc | 66

I know USA is messed up but don't let that blind u to the corruption of the ccp. Obor is a disaster. The money has been all spent and nothing got build. The poor of those countries now are in massive debt. In China smuggling of milk powder is a big black market cuz if u buy Chinese brand it will be half sawdust . Would u put your life savings in yaun?

Posted by: Bob burger | Aug 25 2019 1:02 utc | 67

Crypto currencies as a technology is simply a means of secure, fast, cheap, unfettered by boundaries exchange.
But it does nothing to enhance the management of the currency. In general that relies on the wisdom, transparency and good faith of the management structure. Of which there are several - there are choices.
What Carney and all CB's want is an opaque monopoly as they largely now have. So they can control, manipulate and steal.
Everything they touch turns to crap.
They are needing alternative because they have soiled the bed they have.

Posted by: jared | Aug 25 2019 1:05 utc | 68

ZH has an article posted on what it means for an American capitalist based in HK to 'de-couple' from China. Does it mean move manufacturing from China to the US? No, it means moving your factory to another south asian source of cheap labor (Thailand in this case) and making sure the product meets the 'made in Thailand' threshold of 35% manufactured there. The article also notes that Reuters has been following this story for a year or more. Interesting.

Posted by: the pessimist | Aug 25 2019 1:09 utc | 69

About China's "ghost cities":

Expert warns of excessive urban expansion

According to this article, the problem is poor planning. Better planning, no more ghost cities. The article is from 2015.

But the true importance of this article is that it is heavily implied China is a socialist economy which, ultimately, relies on central planning to function.

The article mentions a report from 2013, which states 12 ghost cities were found. Not desirable, but far from catastrophic. It also mentions those ghost cities are mainly fruit of the local governments' initiatives, not the central government's.

Now, this other article is also very interesting. Its from 2014:

Resiliency central to East Asian growth story

It states that:

Many people are profoundly pessimistic about the Chinese economy's growth prospects, owing to the emergence of massive debt, excessive investment, overcapacity and so-called ghost cities since the 2008 global financial crisis. But these problems are not new. They have, in various forms, affected China's economy since 1978, and were evident in East Asia's other high-performing economies during their periods of rapid growth.

This is an important clue. It indicates that, albeit China was obviously affected by 2008 crisis, it was affected in a different way than the capitalist countries. It had an overcapacity problem. Hence the BRI: export this excess capacity to countries deficient in infrastructure. Plus, technological innovation: hence 5G etc.

Posted by: vk | Aug 25 2019 1:12 utc | 70

@ Posted by: the pessimist | Aug 25 2019 1:09 utc | 68

It doesn't matter because that won't change the factories' profit rates. What makes capitalism prosper is high profit rates, not the country where it is made. And, now, profit rates are very low: in fact, financialisation is a symptom of low profit rates in the "real" economy. Capitalists move to very creative financial products not because they love them, but because they need them.

They do that because profit rates will secularly fall in the capitalist system. The more it develops, the less it will profit relatively to its own size in the long term; that's Marx's greatest discovery.

You can move all the factory of China and turn China into a wasteland: that won't save capitalism, that won't bring the 1960s back to the American people.

I even doubt "decoupling" will actually happen -- let alone that it will work if it does. This movement of factories of cheap products moving outside China to India, Vietnam et al is actually very old, and the CCP is already prepared for it.

The same is valid for Carney's "SHC" plan: you can strip the USA of its "exorbitant privilege" and transform it into a decadent hunger games dystopia if you want -- that also won't save capitalism. You're just exchanging one group of "masters of the universe" with another.

Both plans (Trump's and Carney's) are different sides of the same coin: they won't solve capitalism's problems, but just dislocate them in time and space. And the reason is, ultimately, only one: capitalism is a historically specific system, and cannot last forever. It will disappear someday. The only thing we can control is how will it disappear, and thus on which direction we, as a species, will fall (upwards or downwards).

Posted by: vk | Aug 25 2019 1:24 utc | 71

The era of de-globalization has begun. This is a good thing for everyone except the Davos crowd.

The Deplorables who have no financial assets don’t care about the stock market. If there is real de-coupling and the end of long supply chains based on labor arbitrage then manufacturing will relocate close to end markets.

Posted by: ab initio | Aug 25 2019 1:33 utc | 72

ab initio @71: The era of de-globalization has begun.

Why do you think so?

IMO the general sense of comments before yours is that a de-coupling from China is/will be accompanied by a strengthening of globalization that excludes China.

Posted by: Jackrabbit | Aug 25 2019 1:43 utc | 73

>> empty cities

Are we talking empty-ing cities like Detroit, Camden, Youngstown?

Or were a few extra buildings built in China and not used? In a country of 1.4 billion, if you build even 1% extra that goes unused then housing for 10 million people stands unused. In other words, some people make a mountain out of a rounding error.

Posted by: oglalla | Aug 25 2019 1:47 utc | 74

vk@70 My resaon for posting the link was to call bs on those imagining that the trade war will result directly in the rebuilding of US manufacturing base. The people making the policy decisions care squat about the fate of the common folk. They are not "patriots", just capitalists.

Posted by: the pessimist | Aug 25 2019 1:56 utc | 75

@ b who wrote
Jay Powell does not want to lower the Fed interest rate. He does not want to increase bond buying, i.e. quantitative easing.

Quantitative easing, also known as large-scale asset purchases, is an expansionary monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets in order to stimulate the economy and increase liquidity.

It is not just bonds but "other financial instruments" that are the bigger part of the issue. In the case of the US, in 2008 the Fed/Treasury sopped up a couple trillion of that other financial instrument type

From a Forbes late 2015 article
QE1, was initiated in November 2008. The Fed proposed to buy ~$100 billion of agency debt and ~$500 billion of mortgage-backed securities. The first round was further extended in March 2009, where the Fed used another $850 billion to purchase mortgage-backed securities and debt. Furthermore, the Fed also channeled another $300 billion into longer-dated treasuries. In November 2010, the Fed announced yet another bond buying program. This involved buying $600 billion worth of longer-dated treasuries by mid 2011. This was called QE2. In September 2011, the Fed initiated a new maturity extension program, also called Operation Twist, with the aim of increasing the average maturity of the bank’s treasury portfolio. Hence, the Fed purchased $400 billion worth of treasuries with maturities between 72 and 360 months, and sold off an equal amount of treasuries that had maturities in the 3-36 month range. In September 2012, the Fed announced QE3, where the central bank would spend close to $40 billion per month in mortgage-backed securities.
Another example is Japan who along with buying up a bunch of their internal debt is currently the largest holder of US Treasuries (over 1 trillion)....again "other financial instruments from Japan's POV"

The current (08/21/2019) Fed balance sheet shows $2,085,859 for US Securities and $1,504,938 of mortgage back securities

The noise to signal ratio on this thread is skewed to the noise side....I wonder why?

Posted by: psychohistorian | Aug 25 2019 2:04 utc | 76

Look at Huawei replacing US chips and maybe the Android OS (the latter by compulsion), and Russia removing US components from a new airliner (bad example because it has crashed twice). There is a large contract for an oil project in Iraq currently in the bidding process and there have been muddled reports as to whether Exxon might be entirely shut out.

Anybody who thinks that the US is not paying a price for Trump's sanctions actions is delusional. But the Saudis and Israel still love us. by: Schmoe | @ 24


oil giants and johnny come lately corporations have caused most of the problems around the globe .. trying to destroy all competition at whatever the costs.. The world would be much better off, and USA occupied America would be better off, if the USA would take away all of the monopolies, patents, copyrights and retract all of the governmental goods and services privatized and break up every corporation over 1000 people. without any kind of monopoly power.. the world turns on competition. not monopoly power. The problem is economic Zionism takes no prisoners, allows no competition and destroys all that might some day become competitive. and if the world is left to competition one nation will be up will the next will be down.. its competition. we need

Posted by: snake | Aug 25 2019 2:06 utc | 77

ADKC @65

Just to add to the list of counter arguments to China's empty cities being wasteful:

6. China has a foreseen need/plan to move some 250 million people from rural to urban environments (you have to build those cities in advance).

7. That the cities (whilst built by local municipalities) are directed by a central plan and are strategically located (they are not built on a whim, by corrupt local politicians, in inappropriate locations).

8. Empty cities are a phenomenon throughout the region (i.e. not just China).

I reiterate my point that the belief that these cities are ghosts, wasteful and will never be put to good use is just western complacency.

Posted by: ADKC | Aug 25 2019 2:07 utc | 78

@ b who wrote
How will the value of each sovereign currency in relation to SHC be determined?
SHC = Synthetic Hegemonic Currency (SHC)

Please note the term Synthetic which I define in this context as FIAT/faith based DEBT specie that has no intrinsic value so anything connected to it will be only a measure of DEBT and have no value either

The current Reserve Currency lost its intrinsic value in 1971 when the US went off the "gold standard"

Until and unless Reserve Currency specie is created that has some sort of intrinsic value it will only continue to represent DEBT

Posted by: psychohistorian | Aug 25 2019 2:12 utc | 79

b @20

As long as we have fiat currency with no asset backing it then relative values are driven by supply/demand, psychology and speculation. Dollar has waxed and waned relative to other fully convertible currencies for decades when it has been the reserve currency. So that is not a good explanation for current strength.

Why is it strong now? Relative yield spreads is one reason - Treasuries yield more than bunds, gilts and JGB. Another is relative economic strength - US economic growth higher than EU area, UK and Japan. Then there is the demand for USD in emerging markets. Fourth, US financial markets have had better relative performance compared to other developed markets.

Yuan of course is not a convertible currency and Chinese government controls it’s relative value and they have started devaluing for a number of reasons one of course being to dent the effects of the tariffs.

Remember fx trading is the biggest market. Over $1 trillion gets traded every day. Financial Analysts always try to give seemingly rational explanation for moves in currency pairs but in such liquid markets psychology and sentiment meaning emotions play a huge role. And those emotions can change quickly.

BTW, there’s no easy way to change the offshore Eurodollar role in trade finance. It will take decades for similar acceptance for anything else.

Posted by: ab initio | Aug 25 2019 2:24 utc | 80

Currently the free market determines exchange rates.
Sovereign nations regulate their currencies by regulating supply.
Dollar is strong because economy is relatively strong and nation is relatively solvent and financially well managed.
Hard is that is to believe for a nation which has spent 20 trillion more than it has taken in.
The problem Carney has is race to bottom everyone is insolvent.
Time for reset. Hold on to your hat and loved ones.

Posted by: jared | Aug 25 2019 2:27 utc | 81

@71 ab initio, @72 jackrabbit

Let's say that ab is right and Trump is indeed ushering in the next phase of the "dialectic of globalization." Well, by golly, that would place the Orange-one in a unique class of people that Hegel referred to as "world-historical figures."

Socrates, Napoleon, etc. He who is single-handedly bucking the trend and bringing about the future when the spirit is calling for just such a one.

That is not to say that what Trump is proposing will arrive unscathed in the form he imagines, but that world spirit will see to it, that antithesis is counterpoised to meet his thesis.

My opinion is this: Trump is calling for reasserting America as the global superpower that it perhaps thought it once was. In doing so, he is addressing the need to challenge the technological ascendency of China and thus shining a light onto what China truly is and that this avatar embodies something fundmentally imcompatible with the west.

Here's the rub: America as superpower is done. Finished. Good. Trump can't prevent the pain that is to come when the globalist paradigm shrinks from the weight of its greed and dismissiveness of world spirit and from the need for individual freedom from the plight and organizing of vicious technocrats.

So this of course leads us to the decoupling. Away from the east. Away from the Orient. Not with the tail between our legs. But reinvorgated by world spirit showing itself to us in its truthfulness and freedom. Not slaves to the financial games of the globalist rentier class.

Would this qualify Trump as world historical figure, according to Hegel? Perhaps. Can a man dream? Yes.

Posted by: NemesisCalling | Aug 25 2019 2:31 utc | 82

@ b who wrote
The real solution though is a different system with some global exchange medium that can not be manipulated by one country or a block of selfish countries.
While I agree with the sentiment the underlying assertion that manipulation is happening by a country is flat out wrong. The current "global exchange medium" is controlled by a supra-national private cult of people/financial entities, NOT countries.

The US Fed consists of 12 privately owned regional banks
The City of London Corporation is privately owned and has the BOE by the balls...
Many of the Central Banks of the world nations are privately owned.
The IMF, World Bank and BIS are privately owned/operated

America is being thrown under the bus by the private finance elite to attempt to save their position of control so any non-public finance entity is the problem and any Synthetic Hegemonic Currency (SHC) put forward by private banking is against all sovereign nations interests.

We are in WWIII because China will not give up its public banking system to the private finance cult of the West

Posted by: psychohistorian | Aug 25 2019 2:33 utc | 83

@77 AKDC

I appreciate your take on China. The various sources I cite periodically have spelled this all out in great detail - Jeff Brown certainly and Godfree Roberts probably with lots of data. Those cities do get filled. China is the most experienced civilization in the world's history when it comes to very large and very enduring projects. She may have some "rounding errors" - as oglalla @73 so nicely put it - but she won't make many irrecoverable errors in this project.

As you clearly know, the OBOR is a world-changing system that is creating the multi polar world as much as or more than any other factor in the world. These are early days of course, and those who say the Belt and Road venture has failed should be aware that it's still in the planning stage - it hasn't even launched yet and already its impact on realpolitik globally is of immense significance. Every nation free to think privately about its future wants to be part of OBOR. It's a network that will increase the wealth of all its nodes exponentially as it grows.

And finally, China's money expansion created through state-owned and directed banks went into building infrastructure and creating new wealth, as you point out. As Dr. Richard Werner has explained to us, when you inflate the money supply without creating new goods, more money chases the same stuff, and you have price increases as a result. But when you create new things with that new money, this inflationary symptom doesn't appear. China isn't in a debt trap.

I know you know all this, and it was my pleasure to join in and help write it out for the record.

Posted by: Grieved | Aug 25 2019 2:34 utc | 84


Ah yes, our good ole' USA who always whines about unfairness unless every deck is rigged to its favor.


US infrastructure is so abysmal compared to China's that moving manufacturing back to the states is a complete non starter just on that alone.

Posted by: JW | Aug 25 2019 2:45 utc | 85

@71 jackrabbit

The re-negotiated NAFTA provides insight. The most important element ignored by much of the media was content rule. Rising content threshold to avail tariff free status. So to ship into any of the three countries tariff free the product must meet the high content threshold. Meaning they have to be manufactured there. You can’t just ship a car from Mexico made with Chinese parts tariff free, the parts too have to be made in either Mexico, Canada or US.

Posted by: ab initio | Aug 25 2019 2:50 utc | 86

On China housing -- China has been building homes for a million people–the entire housing stock of San Francisco, every month since 1950.. . .China vs.USA, Below Median Income Home Ownership: China 95%, USA 49% - with many homeless people living on

Posted by: Don Bacon | Aug 25 2019 2:53 utc | 87

@70 vk

You've been writing up a storm today. I think I read just about all of it, and it was great enjoyment. I've copied your 2-part piece for a further time to re-read it. I can't make any other comment except thank you for offering everything you have.

Posted by: Grieved | Aug 25 2019 2:58 utc | 88

One thing I don't understand in all this talk of a replacement reserve currency for the world is why there is no mention of the IMF's Special Drawing Rights (SDR) currency. This is a basket of currencies fashioned to act as a global reserve currency at some, currently unknown, point in the future. Both the USD and Yuan are in the basket - China doesn't want to be the reserve currency, but she wants adequate voting rights over the SDR, and this is a continuing negotiation, to downgrade the US's legacy majority vote.

And although I haven't studied Carney's proposal well, I get the point that while the US is at most 15% of global GDP, more than half of all trades are closed in USD. So he's looking for ways to close some of those trades in alternative currencies. Russia and China and I think Iran are helping this by trading directly in each other's currencies, but I suspect that such things for most companies would be very unwieldy with today's global supply chains.

The fact is that, still today, the US Dollar is a damn useful currency to trade in. Are the sanctions worth it? Obviously, increasingly not. But I can't imagine trying to go outside of it without a very strong platform to switch to.

Posted by: Grieved | Aug 25 2019 3:00 utc | 89

I love the anti-China hysteria, it's quite the paradox, given our greedy captains of industry, dismantled our manufacturing base, and sent it to China.

The crocodile tears, I find quite amusing....

Posted by: ben | Aug 25 2019 3:04 utc | 90

@88 grieved... the imf is a step up that weighs heavily towards usa favouritism... so because oil is denominated in us$, how do you think this skews the data you cite?? the usa is ground zero for the derivative industry - financial trades accounts for much of the gdp.. those are the trades you are talking about.. like i said earlier up thread - it is one big ponzi scheme, like the wizard of oz with some scared little guy behind the smoke machine... at some point the facade has to come down... the economic soothsayers are full of crap...

Posted by: james | Aug 25 2019 3:12 utc | 91

I will add to the historical runthrough that was posted by: C I eh? | Aug 24 2019 23:14 utc | 50, that the methadology he describes was originated with empire building given a 'moral' impetus by the philosophical teachings of Aristotle. That is, with respect for that philosopher's acuity, what one might call the neoliberal attitude towards conquest and man as an aggressive animal.

I hold that there is a huge difference between Plato and his student Aristotle, much as there is between Socrates and his student Alcibiades in the Dialogues of Plato. And I also hold that that strain of pure philosophy as described by Plato,( in which virtue is NOT the ability to rhetorically bamboozle and force 'lesser' mortals into slavery,) was incorporated into the Christian Greek-oriented Eastern branch, while Aristotelian logic became the foundation of Western Christianity and Papal hegemony.

It's not all clear cut, and on each side there were lapses into the virtues or failings of the other historically speaking, but my reason for making this distinction is that there is a positive historical path that IS ethical. We saw it in the US with Martin Luther King, with some, many, ethically minded politicians. Not all have been Kochlike empirically focussed, though many have. It's easy to break stuff, it has been pointed out; much harder to fix it.

Many on this forum are looking for solutions to problems of Aristotelian logic. But the solutions are not there. The solutions are in dialogue, in diplomacy, in human to human confrontations. They are subtle, like the Greek language - fluid but symphonic in nature. Starting and returning eventually to home. I would not say Aristotle is musical, but Plato is. And they are as different as chalk and cheese. Is there another Platonist out there? I think Putin is one. I know his faith is in many regards Platonic. Chi might be as well; it is hard to know. The Chinese are very enigmatic. Maybe having Taoist tendencies is enough. We need more, much more of that kind of creative thinking!

The door was never slammed on the US. That is my thought on the problem of decoupling. It is not in the interests of the rest of the world to isolate this huge segment of it, any more than it would be in anyone's interest to start a nuclear war which can proliferate around the world in the space of the wind's progress. It is just not going to happen. Aristotelian logic says get those bases, more, more. Threaten, be powerful! Platonic dialogue says have a conversation, win by receding like the tide. . .

It's subtle. Relentless. Like water. On a mindblowingly beautiful planet.

Bend, like grass. They, the new powerful, bend. Why oh why can't we?

Posted by: juliania | Aug 25 2019 3:46 utc | 92

Nemesis @81:

Let's say that ab is right ...

He isn't. Decoupling from China is not the anti-globalization he supposes it to be.

... and Trump is indeed ushering in the next phase of the "dialectic of globalization."

'Small hands' Trump is incapable of ushering anything of any consequence to a successful conclusion.

Can a man dream? Yes.

Some would call your dreams hopium nonsense and Trumpian propaganda.

Obamabots claimed that Obama played 11-dimensional chess too. Anyone privy to the Deep State's game plan would look smart.

Posted by: Jackrabbit | Aug 25 2019 4:05 utc | 93

@60, milomilo:

I agree with you the HK violent protests were designed to prompt China to over react and send in troupes. The resulting carnage might result in providing an adequate narrative for G7 to join the USA in concerted move to decouple China. That's my take away in watching the incremental escalations in both the severity and absurdity of the violence. How else to explain protesters wantonly targeting the tourist industry as the one to bear the blunt? Even 17, 18 years are old enough to know their Mom and Dads' jobs, and thus their own livelihood, depend on this economy and left to their own they would likely have chosen some other means to press their points, if not for having to obey or get paid by their instigators?

China thus far has not followed their antagonists' script and refused as yet to ramp the confrontation up another notch. But the time will come! The time will come that mass psychology in HK, and subsequently vast other parts of the world, would change into one that demands stern actions be taken by China to stem the carnage and restore minimal order for the sake of livelihood of 7.5 million people. That's when the broom will be lowered, and vassals of the USA would have an excuse of not joining the decoupling if they don't want to.

I also agree with you that TPP was a China-decoupling Plan conceived under Obama. But I am not so sure the idea of China-decoupling dated back before Obama. If it did, the deep state would have ample time prior to now to start the building up of alternative supply chains and other logistics. It is apparent at this point that the deep state is caught off-guarded by China's intransigence and at loss of what to do next. It seems that in their zeal to contain China, they instead are accelerating their own decline. The ironies of real life!

Posted by: Oriental Voice | Aug 25 2019 4:09 utc | 94

A few comments above state that the strong USD is the, or a prime, cause of US manufacturing being hollowed out. Even if the USD is overvalued relative to other currencies by ~ 30%,the wage difference is so high, and healthcare costs for US workers so high, that a 30% weakening of the USD would not close the gap for many products. Some products, if not labor that labor intensive or bulky or difficult to ship, could become economical for US manufacturing, but I suspect Mexico would be a more likely production center for those. There is also a massive loss of manufacturing expertise in the US.

Posted by: Schmoe | Aug 25 2019 4:18 utc | 95

ab initio @85:

The re-negotiated NAFTA provides insight... You can’t just ship a car from Mexico made with Chinese parts tariff free ...

Well, to the extent that the new NAFTA is an anti-China measure, it doesn't provide much insight.

As discussed above, American and other Western countries are likely to move their manufacturing to other Asian countries. And a universal, crypto-based currency could mean that all West-dependent countries are tightly bound. This adds up to a strengthened globalism - except that China is no longer part of the club (aka "decoupled").

Posted by: Jackrabbit | Aug 25 2019 4:19 utc | 96

The Trump administration is fine with that. (As is Dilbert creator Scott Adams (vid).)

Wow! Right-wing Loonies R Us?
Adams' video exemplifies what it means to be AmeriKKKan.
Whenever something goes pear-shaped in AmeriKKKa, the first thing the Right-wingers do is look for someone else to blame.

So according to Scott Adams it's China's fault that Greedy AmeriKKKans have been exporting the jobs of their friends, neighbors and relatives to countries with cheap labour for 50+ years; same as all the other Christian Colonial countries in the Neo-Liberal West?

Sorry, Scott, I'm not buying it.
However, had you said that we're heading into a preliminary pre-recession recession, I'd be inclined to agree.

Posted by: Hoarsewhisperer | Aug 25 2019 4:32 utc | 97

@92 jackrabbit

Goodness gracious, j.r.

I conceded that Trump is leading us to calamity and you tell me I'm taking the hopium.

The silver lining is of course that the sooner we are ushered into this next phase, the better. I was merely positing that Trump could be the figure to usher us into this and its ramifications could be immense. And with the emergence of spirit, we often don't know whether we are looking at a harbinger of death or renewal.

And I am inclined to agree with b that many nations in the west will remain hitched to Chinese-made wagons. So I don't follow your logic that this decoupling will in any way strengthen the globalist thread which twines itself in the west.

Posted by: NemesisCalling | Aug 25 2019 4:46 utc | 98

"new Synthetic Hegemonic Currency (SHC)"

Am I to assume this is a rehash of John Maynard Keynes' concept of the make-believe "Bancor" that would play piggy-in-the-middle in all international financial transactions?

If it is then no real surprise that a British banker is still wistfully talking about what might have been. Interesting though that the only other nation that thinks that a synthetic currency is a good idea is.... China.

Money does make for some strange bedfellows, doesn't it?

Posted by: Yeah, Right | Aug 25 2019 5:32 utc | 99

Let's say that ab is right and Trump is indeed ushering in the next phase of the "dialectic of globalization." Well, by golly, that would place the Orange-one in a unique class of people that Hegel referred to as "world-historical figures."

Trump is a meat puppet. You can make light of his Orangeness but that is precisely why he was chosen by the financiers and mafiosos as front man for so many of their scams.

I think it began when the CIA needed someone to front for their money laundering and casino operations in Atlantic City.

Fronting, do you know what that means? It means someone is fronting for people who wish to remain anonymous.

What a hilarious concept, don't you agree? I mean who on earth would think up an idea like that, letting some stupid schmuck take the rap for your crimes.

The CIA is a legacy project of the UK-Rothchild and British financial elite. Another commenter covered it above. Intelligence agencies representing elites create and manage the public image of Lifetime Actors, such as anyone you know, including his Orange Highness, who was made in the image of an Idiot Savant so as to allow his backers to get away with the largest and most lucrative scam in human history.

Posted by: C I eh? | Aug 25 2019 5:55 utc | 100

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