Once again, awesome essay, thank you so much for sharing this accessible yet reality-grounded explanation.
Two comments on this topic:
-For one, I find myself craving more honesty in the Western media landscape (I can't speak for the rest of the world as I don't live there) about the current state of global economic affairs. Most people around me had heard about Trump's tarrifs, but none had heard about the very powerful Chinese response leveraging rare-earth metal export controls. So in their minds, the outcome of the Xi-Trump meeting just comes out as a "weird" turn of events without big implications. It's just "Trump doing Trump", saying one thing one day, then doing the opposite the next day. That conclusion, although not wrong per se, misses out on the main event that just happened: for the first time (I think but I may be wrong), US bossy dominance got effectively challenged on the economic plane! This is HUGE NEWS! But I don't hear enough Western media outlets commenting it that way (maybe I didn't search well enough). Denial of the truth will only harm us and delay our much needed bounce back.
-Secondly: indeed, it doesn't seem sensical to cut off China from the US dollar system. Yet at the same time, when I look at what's going on in Ukraine, and the way European governments assess the situation and what can be done, I realize that the West has left sensical waters years ago. So who knows? Was it sensical to cutt off Russia from SWIFT given Europe's heavy reliance on its energy supply? Of course not. Yet they did it. Is it sensical to continue sending billions of euros to what was the most corrupt country in Europe before the war at the expense of whatever's left of EU countries' economic growth and welfare? Or course not. Yet it's still happening. Is it sensical to escalate global nuclear tensions and officialize nuclear testing when your country is on the brink of civil war and your government officials are hiding in military bunkers? Probably not. Yet it's happening.
In today's world, at least in the global West, it's not because a policy makes zero sense that it won't be implemented. Sometimes I wonder if the Western elite isn't launching itself in some kind of suicide mission, what we French people call a "baroud d'honneur" in which you'd rather sacrifice your life than accept defeat. Problem is: we the people aren't up for that kind of sacrifice !!
If insanity continues and China does get cut off from the US dollar, yes, it might bleed a little, but it will bounce back. If Russia did it, China definitely can. And yes, it will certainly speed up the already lively dedollarization process -which, indeed, isn't a bad thing at all.
«craving more honesty in the Western media landscape»
Harold MacMillan, a retired english prime minister, wrote in 1963: “It is wonderful not to read the newspapers — except a rapid glance through The Times. It makes such a difference. One feels better, mentally and morally, not to be absorbing unconsciously, all that steady stream of falsehood, innuendo, poison which makes up the Press today, apart from purely informative sections.”
Thomas Jefferson, an early USA president, wrote in 1814: “I deplore with you the putrid state into which our newspapers have passed, and the malignity, the vulgarity, & mendacious spirit of those who write for them: and I inclose you a recent sample, the production of a New-England judge, as a proof of the abyss of degradation into which we are fallen. these ordures are rapidly depraving the public taste, and lessening it’s relish for sound food. as vehicles of information, and a curb on our functionaries they have rendered themselves useless by forfeiting all title to belief.”
Much of the media in "the west" have been and are under the ownership of oligarchs and the influence of the security services, and have been particularly overt propaganda organs since the organizations representing working class interests and their media wings have been largely suppressed. More independent web media are gaining audiences and so there have been big efforts to ensure that popular web media too operate within the "guardrails" defined by the oligarchs and the security services.
«The Economist pointed out that the US wants 3 impossible things at the same time: high growth, low inflation and reducing trade deficit.»
That is how Economists in "the west" are trained to think or at least to speak and it is entirely unrealistic, because "high growth, low inflation and reducing trade deficit" are mere generic abstractions and the big question even if one wastes time thinking in those terms is "for whom?". Because politics and policy is not about generic abstractions but about the material interests of the lobbies that have power. Looking at things more realistically:
* Since Reagan and Clinton the goals of the FIRE and tech lobbies in power in the USA have been high property and stock profits for themselves, to be achieved with a very expansive credit policy and globalist expansion as in mass offshoring of jobs and mass immigration of workers (also called "human quantitative easing"). Asset incomes have experienced high growth and asset prices high inflation, wages have experienced significant deflation, and the trade deficit did not matter.
* The lobbies for which Trump is the front-man reckon that an excess of offshoring and immigration and this has overextended and diluted the strength of the USA empire and have decided that instead the USA needs a significant period of consolidation and in particular to strengthen the core country, the USA itself, also shortening supply lines.
* Part of this means re-motivating the USA working class about the USA empire as part of the process to bring more USA productive capacity under the direct territorial control of the USA government. Some USA lobbies have been badly burned by discovering that the PRC is not a weak and compliant vassal run by loyal "comprador" elites (like Europe inevitably is and Russia was), but by patient and calculating "Hide your strength, bide your time" political elites (even if many in the PRC economic elites have "comprador" interests).
* So the new aims of the USA government are not "high growth, low inflation and reducing trade deficit" but high onshore investment, rising onshore wages, while maintaining high stock prices (all aided by military keynesianism); inflation is an issue but not a big issue if wages rise as a result of high onshore investment.
The overall policy is going back to the economic conditions of the first "cold war" with the USA as the most powerful core economy of the "first world", a much smaller "second world" in which the PRC and RF are contained, and a "third world" that matters a lot less and while it talks as if it were independent in practice it is leaning towards the USA.
The "cold war" period economic conditions were not as favorable to the USA FIRE and tech lobbies as those of the following "globalisation" period but the USA economy without offshoring to and immigration from to East Asia and South Asia was still doing pretty well and conditions were much better for for other lobbies, so the new policies are likely to be viable.
For the current USA government the priority is thus to isolate the PRC into the "second world" as quickly as possible before the rise of its economy draws more countries into its sphere of influence. Destabilizing the international trade system and creating fear, uncertainty, doubt about "globalisation" are part of that policy, not a sign of confusion.
«That is how Economists in "the west" are trained to think or at least to speak and it is entirely unrealistic»
One of the more amusing aspect of out current times is that "capitalist" propaganda doctrines have been eagerly received and adopted in the PRC and the RF by Economists and many politicians while in "the west" the capitalist elites (both oligarchs and their top intellectual advisors) remain committed to much more realistic marxist analysis, principally the notion that increasing profits depend on higher exploitation of workers (but also dialectic and materialistic approaches to history and current affairs). After all Marx was inspired by Bernard de Mandeville and early and quite realistic right-wing political economist.
If the USA uses the ultimate "weapon", it won't be aimed at China. It's use will be blamed on China, but it's use will be to finish off the transfer of wealth upward. This will finish off Entrepreneur class, those who are only worth multi-millions to single billions, destroying their physical base so that all the wealth can be sucked up by the financial oligarchy ala Bain Capital.
Once again, awesome essay, thank you so much for sharing this accessible yet reality-grounded explanation.
Two comments on this topic:
-For one, I find myself craving more honesty in the Western media landscape (I can't speak for the rest of the world as I don't live there) about the current state of global economic affairs. Most people around me had heard about Trump's tarrifs, but none had heard about the very powerful Chinese response leveraging rare-earth metal export controls. So in their minds, the outcome of the Xi-Trump meeting just comes out as a "weird" turn of events without big implications. It's just "Trump doing Trump", saying one thing one day, then doing the opposite the next day. That conclusion, although not wrong per se, misses out on the main event that just happened: for the first time (I think but I may be wrong), US bossy dominance got effectively challenged on the economic plane! This is HUGE NEWS! But I don't hear enough Western media outlets commenting it that way (maybe I didn't search well enough). Denial of the truth will only harm us and delay our much needed bounce back.
-Secondly: indeed, it doesn't seem sensical to cut off China from the US dollar system. Yet at the same time, when I look at what's going on in Ukraine, and the way European governments assess the situation and what can be done, I realize that the West has left sensical waters years ago. So who knows? Was it sensical to cutt off Russia from SWIFT given Europe's heavy reliance on its energy supply? Of course not. Yet they did it. Is it sensical to continue sending billions of euros to what was the most corrupt country in Europe before the war at the expense of whatever's left of EU countries' economic growth and welfare? Or course not. Yet it's still happening. Is it sensical to escalate global nuclear tensions and officialize nuclear testing when your country is on the brink of civil war and your government officials are hiding in military bunkers? Probably not. Yet it's happening.
In today's world, at least in the global West, it's not because a policy makes zero sense that it won't be implemented. Sometimes I wonder if the Western elite isn't launching itself in some kind of suicide mission, what we French people call a "baroud d'honneur" in which you'd rather sacrifice your life than accept defeat. Problem is: we the people aren't up for that kind of sacrifice !!
If insanity continues and China does get cut off from the US dollar, yes, it might bleed a little, but it will bounce back. If Russia did it, China definitely can. And yes, it will certainly speed up the already lively dedollarization process -which, indeed, isn't a bad thing at all.
«craving more honesty in the Western media landscape»
Harold MacMillan, a retired english prime minister, wrote in 1963: “It is wonderful not to read the newspapers — except a rapid glance through The Times. It makes such a difference. One feels better, mentally and morally, not to be absorbing unconsciously, all that steady stream of falsehood, innuendo, poison which makes up the Press today, apart from purely informative sections.”
Thomas Jefferson, an early USA president, wrote in 1814: “I deplore with you the putrid state into which our newspapers have passed, and the malignity, the vulgarity, & mendacious spirit of those who write for them: and I inclose you a recent sample, the production of a New-England judge, as a proof of the abyss of degradation into which we are fallen. these ordures are rapidly depraving the public taste, and lessening it’s relish for sound food. as vehicles of information, and a curb on our functionaries they have rendered themselves useless by forfeiting all title to belief.”
Much of the media in "the west" have been and are under the ownership of oligarchs and the influence of the security services, and have been particularly overt propaganda organs since the organizations representing working class interests and their media wings have been largely suppressed. More independent web media are gaining audiences and so there have been big efforts to ensure that popular web media too operate within the "guardrails" defined by the oligarchs and the security services.
«The Economist pointed out that the US wants 3 impossible things at the same time: high growth, low inflation and reducing trade deficit.»
That is how Economists in "the west" are trained to think or at least to speak and it is entirely unrealistic, because "high growth, low inflation and reducing trade deficit" are mere generic abstractions and the big question even if one wastes time thinking in those terms is "for whom?". Because politics and policy is not about generic abstractions but about the material interests of the lobbies that have power. Looking at things more realistically:
* Since Reagan and Clinton the goals of the FIRE and tech lobbies in power in the USA have been high property and stock profits for themselves, to be achieved with a very expansive credit policy and globalist expansion as in mass offshoring of jobs and mass immigration of workers (also called "human quantitative easing"). Asset incomes have experienced high growth and asset prices high inflation, wages have experienced significant deflation, and the trade deficit did not matter.
* The lobbies for which Trump is the front-man reckon that an excess of offshoring and immigration and this has overextended and diluted the strength of the USA empire and have decided that instead the USA needs a significant period of consolidation and in particular to strengthen the core country, the USA itself, also shortening supply lines.
* Part of this means re-motivating the USA working class about the USA empire as part of the process to bring more USA productive capacity under the direct territorial control of the USA government. Some USA lobbies have been badly burned by discovering that the PRC is not a weak and compliant vassal run by loyal "comprador" elites (like Europe inevitably is and Russia was), but by patient and calculating "Hide your strength, bide your time" political elites (even if many in the PRC economic elites have "comprador" interests).
* So the new aims of the USA government are not "high growth, low inflation and reducing trade deficit" but high onshore investment, rising onshore wages, while maintaining high stock prices (all aided by military keynesianism); inflation is an issue but not a big issue if wages rise as a result of high onshore investment.
The overall policy is going back to the economic conditions of the first "cold war" with the USA as the most powerful core economy of the "first world", a much smaller "second world" in which the PRC and RF are contained, and a "third world" that matters a lot less and while it talks as if it were independent in practice it is leaning towards the USA.
The "cold war" period economic conditions were not as favorable to the USA FIRE and tech lobbies as those of the following "globalisation" period but the USA economy without offshoring to and immigration from to East Asia and South Asia was still doing pretty well and conditions were much better for for other lobbies, so the new policies are likely to be viable.
For the current USA government the priority is thus to isolate the PRC into the "second world" as quickly as possible before the rise of its economy draws more countries into its sphere of influence. Destabilizing the international trade system and creating fear, uncertainty, doubt about "globalisation" are part of that policy, not a sign of confusion.
«That is how Economists in "the west" are trained to think or at least to speak and it is entirely unrealistic»
One of the more amusing aspect of out current times is that "capitalist" propaganda doctrines have been eagerly received and adopted in the PRC and the RF by Economists and many politicians while in "the west" the capitalist elites (both oligarchs and their top intellectual advisors) remain committed to much more realistic marxist analysis, principally the notion that increasing profits depend on higher exploitation of workers (but also dialectic and materialistic approaches to history and current affairs). After all Marx was inspired by Bernard de Mandeville and early and quite realistic right-wing political economist.
If the USA uses the ultimate "weapon", it won't be aimed at China. It's use will be blamed on China, but it's use will be to finish off the transfer of wealth upward. This will finish off Entrepreneur class, those who are only worth multi-millions to single billions, destroying their physical base so that all the wealth can be sucked up by the financial oligarchy ala Bain Capital.