Dedollarization: An Inverse Loot Crate
Survival instinct or extinct?
“... because everyone has quite correctly pointed out that the Renminbi will never replace the dollar. The Ruble won't do it. Nothing will work. Gold won't work. None of them will work. But that doesn't mean you can't blow everything up.” -Michael Every
The only people who think dedollarization will provide prosperity outside the dollar zone are people who don't pay attention to the financial markets. Michael Every has the right idea, that global growth will stop because of currency zones forming. People younger than 40 don't understand that the only reason their generation could afford to be influencers was because the collapse of the USSR was like smashing a loot crate. All that cheap energy to trade. All those corrupt dollars to bank. All those doctorates farming potatoes to feed themselves. The US economy grew faster than its productive capacity could absorb. We needed more cheap stuff and couldn't produce it all. That's why China industrialized. They made all our cheap plastic crap. China industrialized off trillions of dollars of stolen intellectual property. That was fine when former Soviet scientists and engineers were subsidizing technological growth in the West, but as that demographic wave has ended, the West needed new cheap inputs. European tech talent came to America. India's brightest came to America. America printed all this magic money and its banks kept commodities cheap and all because we beat the big baddie and took his loot.
Because America Runs On Geniuses And Burns Normies for Fuel.
The Eurozone tried dedollarization before it was even called dedollarization. Started off great. In 2007/2008 it even looked like the dollar was done. But Europe just used the Euro to stimulate internal consumption. The ECB was used to drop helicopter money to stimulate growth. Once all the poor zones (E. Europe and PIGS) reached equilibrium, growth halted, which is why Ukraine was such an important part of their game plan. The EU feeds on countries with its monetary union. It converts all profits earned into propping up its currency zone, where its members collectively decline under the malaise of socialism. That's how they allocated their loot. America preferred free trade. Of the two, guess which currency zone is in trouble? Hint, it's not the dollar. (https://tradingeconomics.com/euro-area/currency)(https://tradingeconomics.com/united-states/currency) The dollar is stronger than it was pre-covid. The Euro is weaker.
China wants to dedollarize because the dollar zone is a bully. No doubt, but it's a more benign bully than the one that preceded it: mercantilism. These screwballs want to talk about the glories of some Moscow-Beijing axis without first considering what happened last time. Oh, it's different this time? Because China has more industrial output? Does industry exist in a vacuum or does it need careful stewardship so the outputs are worth more than the inputs? Anyone who has worked for a living knows the answer (necessarily excluding most government employees). China is in a dollar trap: it has more dollars going out than coming in, and it wants to make a new financial system so that it can default and become the new financial center of the world. Do they even listen to how they sound? This is sheer delusion as I already covered.
If magic money theory was all it took, Zimbabwe would be rich with all the currency they printed. Oh, but they're corrupt? China isn't? Go on, say it. “But China is different. It's filled with Chinese.” Are you being racist? Bad economic systems are bad, no matter which race or ethnicity is using it. After the Cultural Revolution China was just as poor per capita as Chad. When China started using free market mechanisms, scarcity went away. Imagine that! Chad just nationalized its oil industry (https://apnews.com/article/exxon-mobil-chad-oil-f41c34396fdff247ca947019f9eb3f62) because it presumably will get expertise from Chinese and Russian oil engineers. Oh, what's that? Russia already exports oil? And China consumes only 16% of world oil? And what is Chad going to do with that cool currency zone that is in every way worse than the dollar? Buy guns from Russia and cheap crap from China? Why do they want the guns? For some 'ethnic cleansing?' And what trade network are they going to use to trade with China? Not the dollar zone, right? So they can get the Evergrande and Sri Lanka treatment too? When dumb people agree to do business together, just sit back and laugh. Russia is exporting the Resource Curse back to the non-sovereign world (otherwise known as the Developing World; Third World if you're a boomer) so that it can sell arms and extraction goods and services (and stay up higher on the supply chain). This strategy makes sense for Russia and it has worked in the past: export arms, destabilize the buyers, import resources. But China is totally blinded by its desire to break out of the dollar zone. Russia is glad to let China be a desperate factory owner constantly trying to fill up plant capacity, because Russia knows that wars impede trade of everything but arms and their precursors. Russia's industrial economy is negatively correlated with China's. China is like a camp follower; wherever the Russian army goes, the Chinese camp will be there to sell provisions to the survivors. China might want Russia's resources, but it has been attempting to diversify ever since Belt And Road was announced ten years ago... lending at a loss. China needs those resources and can't project its power. A Chinese military saying is that they have short arms and short legs. They can't reach out to hit very far and they can't move fast either. China has always preferred diplomacy and being the central place to trade. It's why Zheng He was not out to trade, but rather to 'awe' the barbarians. (https://en.wikipedia.org/wiki/Zheng_He) China doesn't just want to be the world's workshop. China seeks to deindustrialize the rest of the world. By destroying value-enterprises and converting them into commodity-enterprises, the Chinese political economy basically institutionalizes intellectual property theft. For both the Russians and the Chinese, this is the old Cold War playbook. It failed.
If China's strategy is successful in deindustrializing the rest of the world, then Chad, Saudi Arabia, and all the other commodity exporting fools will be selling to a single market. They willingly put the mercantilism noose around their necks, because they think their sovereignty will gain them more glories than the free trade zone they'll lose. Alas, that's the sort of stupidity that keeps these countries poor, but it sounds appealing so we can see why there is poor-world buy-in. But does China's dedollarization strategy actually pose a deindustrialization threat to the US? Because that's what we're talking about when we talk about dedollarization. Well, US factory construction is expanding, even if manufacturing has taken a recessionary dip. (https://www.manufacturingdive.com/news/manufacturing-construction-projects-2023-intel-enel-abbott-samsung-siemens/639995/)(https://www.pwc.com/us/en/industries/industrial-products/library/industrial-manufacturing-deals-outlook.html) Re-shoring supply chains is just replacing China, since it is China that has benefited the most from globalization. Import substitution will mean guaranteed profits for American producers, while legacy loans to Chinese borrowers will keep money flowing to the US from China. What's going to happen to all those downstream components that we used to buy from China? Even screw factories are coming back to the US. (https://www.ibisworld.com/united-states/market-research-reports/screw-nut-bolt-manufacturing-industry/) Good luck serving that dollar debt China. Do dedollarists really think that Africa can even replace California's consumption of Chinese goods? The financial data does NOT agree with this thesis. The dollar is stronger now than it was pre-Covid. All that really means is that a bunch of currencies just collapsed and it's only through dollar zone trade and fiction that keeps them going. Where is Pepe Escobar's (https://en.wikipedia.org/wiki/Pepe_Escobar) life savings? Is it all in Brazilian Real which depreciated by almost 33% in 2020 before stabilizing at 25% weaker? I BET YOU IT'S NOT! And if it is, then maybe he's just salty he didn't keep his cash in dollars. Yuan? Rubles? He's got crypto. He's got gold. I wouldn't be surprised if he's even got some hated dollars. My point is that his conviction can't last him a whole earnings/billings cycle and even if it can, he's a corrupt mouthpiece of intelligence organizations, so I'm pretty sure he's well compensated and can afford to espouse a position that would otherwise hurt him. Do you think he thinks of his net worth in Rubles? I don't. I think, like most people in the world, he thinks about his net worth from a Dollar peg. Even if it's Euros, the Euro is just a type of dollar peg. The Euro doesn't make monetary policy, it reacts to American monetary policy. I can just hear the Germans now: 'we have the second cheapest borrowing costs of a major economy after Japan.' Are German borrowing costs really cheaper than the dollar zone if the Euro has slid against the dollar 10% over 5 years? The answer is 'no.' And it does not matter how much Germany exports if it has to subsidize France and PIGS (Portugal, Italy, Greece, Spain) in order to prop up its export market. See, the Germans used the Euro-zone to eat the currencies of weaker economies too. When this same Germanic logic is applied against them and the US dollar zone starts eating their currency, oh, now it's 'that's not fair.' But when it was Germany imposing austerity on Greece, that was fair? The profligate lose their sovereignty to the canny traders. By lacking a strategic outlook, Europe let itself be squeezed by Russia, the US, and China. Russia with security and commodities, China with trade and manufacturing, and the US with trade, security, commodities, and manufacturing. Well Trump did try to warn them that low military spending on NATO would come back to bite them.
Dedollarization really just threatens Europe and its poor-world colonies. Does Chad's elite really think they're going to be able to sell oil to China, but spend dollars in America? Are they that stupid? Or do they believe this 'Dubai is as good as Europe' crap? Or do they think they have Europe in the bag with that demographic invasion? Do they really think that Europe is going to let itself be overrun by passport Europeans when it comes time to transfer the security services over? This is the folly of ignoring history. Europe's future is fascist. Fascism is where socialist liberalism goes to die. Socialist-liberalism follows its delusions to crisis. Either they go extinct or they recover survival instinct. Europe wants to blame the US for its decline, but really, Europe is in decline because it is not competitive compared to East Asia and America. Dedollarization will accelerate the process of European fascism spreading. Of course one could say the US & EU countries are fascist already, but this is an academic way of looking at it. I'm talking about old fashioned, 'purify the fatherland' type fascism. America might be Brave New World, but Europe has a Kampf from hell in front of it. Is fascism just tribalism gone industrial? I think so. Last time Europe deindustrialized (1920s), Fascism was the response. Dedollarization has blowback. Only Europe has been unable to turn its scientific and engineering talent into new growth industries. And Europe won't let itself be starved of resources, so it will conquer what it must have or die trying. It will not allow itself to have no industry, and it cannot compete with America and East Asia, so it will have to resort to violence to get what it needs. After all, what it's doing right now isn't working.
China's dedollarization will remove commodities from the global free-trade world. Those who fall for its trap will be caught in mercantile relationships with China. These mercantile colonies will see zero net growth. The least competitive free-traders will lose. Does China think Europe is a loot box to break? This is what happens when you live in a communist dictatorship: you get bad intel and then make stupid choices. Europe will kill to keep its standard of living. They have before, they will again. Everyone not on board with that agenda will flee to America. Europeans are not going to buy Chinese crap at the expense of their own legacy industries. The Chinese didn't even consider the racism factor in their great dedollarization plan.
What is an inverse loot crate? It is a return to the old historical patterns of history. Of 'Blood and Iron.' That is dedollarization. I do not think a citadel of artificial intelligence protected by a fleet of drones can stop an angry mob determined to starve it of resources while also trying to smash it to bits. And this citadel is both a notion and a metaphor that you can just swap out one hegemon for another and that the empire will keep running like before. Never mind that the plan is stupid and will backfire: does China really believe everyone else is just so passive and stupid and will allow it to swindle its way to the top, so it can impose its bullshit ersatz goods economy on the rest of the world? I don't think so. This citadel of free trade is conjoined to certain values that China does not share and Chinese growth can only go on so long as they're allowed to trade with the dollar zone. The dollar zone is a lifestyle. To dedollarize is merely to revert back to the pre-dollar world of suzerains. You think America bombing the Middle East is bad? We just wanted the oil and are inattentive, greedy assholes. Qin Shi Huang literally brought entire captive nations to his palace to be decapitated en masse in front of him. Don't tell me China is going to be so much more benign or that it has lost its taste for massacring dissenters. That line of reasoning is full of shit (Great Leap Forward, Cultural Revolution, etc). Everybody knows it. That's why people don't move to China. They desperately try to flee it. And they think they're going to be the capitol of global trade? Yeah right.
I like the "inverse loot crate" meme, like Schroedinger's cat in Pandora's box.
Where does wealth come from? How does it get service-with-a-smile?
Marx didn't study much physics, mostly law, so he didn't realize that wealth comes from energy, which drives transformative processes, like growing vegetables, ginning cotton and smelting aluminum.
https://surplusenergyeconomics.wordpress.com/
My Grandmother Day grew up in China during the Boxer Rebellion times, and considered the early death from stomach cancer of Sun Yat-sen to be one of the tragedies of the 20th century.
Neither of his lieutenants, Chiang or Mao had the big picture, so they fought the Japanese, yes, then each other, and failed to advance China at all.
China did not get back on track until Deng Xiaopeng, who did not have neurosyphilis, was intelligent, not an egoist, was well educated, marched the long march, and somehow survived Chairman Mao.
Chinese study Chinese history, world-history, same thing, thousands of years of it. China is the center of world civilization, the "middle kingdom", so they just need to get it back to that normal state of affairs after the recent bad patch. Chinese rulers take a long view.
Deng Xiaopeng had to figure how to get China to the front of the industrialized world by about 2015 or so, based on his reading of The Limits To Growth, which estimated that global industrial economy would probably peak out somewhere around then. https://www.clubofrome.org/publication/the-limits-to-growth/
Xi Jinpeng is pretty smart, but he is somewhat narcissistic, and is politically smart, but still has a 50 year plan where China is #1. Right now he needs to let #3 beat the declining #1, which is just good game-theory. That's going to be the focus, but Xi does not have as reliable of a capitalist-with-Chinese-characteristics captains-of-industry on the current long march as would be really reliable. Germans or Japanese would be better, but that's not what he's got and he's just dealig with it.
What I see as the conundrum is how to step down any economy from growth, when net-energy-after-extraction is in terminal-decline, as it seems to be since the second half of 2019. TPTB have arranged "Going-Direct" through the miracle of COVID-emergency-measures, giving the banks and Blackrock lots of financial capital, while all the retail people were locked down and locked out, so there was not retail inflation ... until later, but the banks were saved ... Growth stopped, at least in the physical economy, after being lame for decades, and peaking around the time of the 2019 repo-crisis, when the big banks couldn't trust each other overnight.
I think The Limits To Growth is playing out, just as the non-financial systems analysis computer model graphed it in 1972.
The "BAU" graph is the famous "business-as-usual" graph from 1972 https://www.resilience.org/stories/2021-08-16/revisiting-the-limits-to-growth/
Global economy is not even though. Global industrial output has been in decline since 2020, but Russian industrial output, and even prosperity-per-capita are still growing. US prosperity per capita peaked around 2001, and in the UK it peaked around 2005. I'm not sure about India. Dr Tim Morgan at Surplus Energy Economics may not have had reliable enough data for India. I suspect it's close to China and Russia.
The game is to grow if your economy still can, and to cut risks and losses going forward. The US needs to re-industrialize at a lower consumption baseline, which is do-able. It will be a massive restructuring, hopefully more orderly than Russia and China had. We shall see.
Next step is massive global defauts, and the battle of currencies.
Rumor is that Christine Lagarde got phone pranked, thinking she was talking to V. Zelensky, and said the CBDC rollout was going to be 10/23/23 ... Who knows?
Here is more analysis of LaGarde's speech and hints at CBDC this year... critckets from the MSM.
https://www.zerohedge.com/markets/it-wasnt-mistake-or-slip-lagarde-hints-raising-central-bank-inflation-target