Author: Rong ping source: official account: Rong Ping (ID: rongping898) has been authorized to reprint
Vigorously promoting the internationalization of the renminbi, defeating the US dollar system, and freeing all countries in the world from the exploitation of the US currency hegemony is one of the most desirable things for the Chinese people with world sentiments. However, although China has been making efforts, it has always been silent and especially conservative about the real replacement of the US dollar by the RMB as the absolute universal currency in the world.
At the recent symposium on the 25th anniversary of the Asian financial crisis held by the China Development Research Foundation, Dai Xianglong, former governor of the people’s Bank of China, said that the current economic strength of the United States can hardly support the original status of the US dollar.
What does this mean?
To put it simply, economic strength is the bottom building of the US dollar system. With the large-scale recession of the US economy and the inability to restore its influence on the world to its previous level, the US dollar hegemony is also disintegrating, and the global monetary system is about to enter the era of Warring States.
The international monetary map cannot be fragmented like international politics, because the fragmentation of politics can also be reorganized in the change of power of major powers. This process will be quite long and the losses will be acceptable.
The fragmentation of the currency map will cause the global economy to regress in an instant, which no one can afford, let alone be immune from. Therefore, the most important financial task for all countries is to find a solution that can replace the US dollar.
The solution proposed by President Dai is to strengthen China EU economic and trade cooperation, promote the stability of the euro, adhere to market driven and enterprise independent choice, and steadily and prudently promote the internationalization of the RMB. To put it bluntly, if the euro is to take the lead, the RMB needs to develop in a wretched way, which is also the official attitude of the central bank.
On September 18 last year, the central bank pointed out in this year’s RMB internationalization report that the next step would be to steadily and prudently promote the internationalization of RMB and improve infrastructure. The so-called stability and prudence mean stability and prudence at a small scale and caution at a large scale. Some people are not very satisfied with this conservative style. At present, in a world of great struggle, wealth and honor need to seek in danger, and it is impossible to achieve great things with fear of hands and feet.
But in fact, the idea of steadily and prudently promoting the internationalization of the renminbi has made great progress compared with earlier times.
In May 2019, the central bank published an article saying that the RMB does not have the ability to challenge the mainstream world’s international currencies in the short term. The article gives two reasons: one is that the US dollar has been deeply involved in the market for many years, and multinational enterprises and other countries will not easily switch tracks; The other is that the process of RMB internationalization is a process of challenging the core interests of the United States. If we want to challenge successfully, we must continue to develop our own economic and military strength.
Judging from this past history, although our attitude towards the internationalization of RMB is still stable and prudent, it would be quite radical if we could take the initiative to propose the solution of de dollarization.
To steadily and prudently promote the internationalization of the RMB and not to be a substitute for the US dollar is not to be afraid of attracting the firepower of the United States. After all, some of the things we are doing are not less than digging the corner of US dollar hegemony.
For example, shortly after the economic and trade war began, the Shanghai International Energy Trading Center launched futures contracts denominated in RMB. Another example is the deep development of digital currency and RMB cross-border settlement system, and the differentiation of the dominant power of swift controlled by the United States from the transaction channel.
The new circulation mechanism established by relying on currency digitalization will be a nightmare of swift
Therefore, China is not worried about the retaliation of the United States. Anyway, Sino US relations have long been worse than they can be. What’s wrong with offending a little more?
The real reason for China’s unwillingness to replace the US dollar is that there is a problem that has never been solved. If this problem cannot be solved, it will probably follow in the footsteps of the United States by forcing the establishment of a RMB settlement system.
This problem is the Triffin currency problem that has plagued the US dollar for many years!
In 1960, the American economist Robert After studying the Bretton Woods system in detail, Triffin found that the US dollar, as a hegemonic currency, has fatal defects in its circulation mode.
That is, the US dollar is both the currency of the United States and the currency of the world. In order to develop international trade that maintains economic growth, countries will try every possible way to obtain US dollars as a settlement and reserve currency, which will lead to the continuous outflow of US dollars overseas and the perpetuation of the US trade deficit. However, the premise for the international common currency to be accepted by all countries is that the value of the US dollar must be strong, which in turn requires that the United States must be a trade surplus country.
The above two points are obviously contradictory, so the monetary circles call them Triffin paradox.
Before the 1940s, due to the limitation of trading currencies, the circulation of international trade was delayed because everyone did not trust each other’s currencies and only accepted hard currencies such as gold, but the output of gold was limited. Without gold, some countries would rather not do business.
After the end of the Second World War, the United States was a bit impatient in the face of such a situation. A large amount of capacity they had accumulated during the war was urgently needed to be digested by the international market. They did not want to experience another great depression caused by overcapacity in the late 1920s.
Therefore, the United States decided to carry out a package of reforms in international trade, including the general agreement on Tariffs and trade (GATT), the predecessor of the World Trade Organization (WTO), which promoted the grouping and regularization of trade among countries, and the Bretton Woods system, which unified the international trade settlement currency: the United States dollar is linked to gold, the currencies of other countries are linked to the United States dollar, and the fixed exchange rate is implemented. International trade is settled in United States dollars.
In the early days, it was of positive significance for the United States dollar to dominate the world, and it was particularly big. After the war, the world economy has experienced reconstruction and Reindustrialization, the third scientific and technological revolution, industrial transfer and other activities, all of which are attributed to the convenience brought to international trade by the US dollar settlement mechanism.
To take the simplest example, the reconstruction of country a requires the import of 1 million tons of steel, but the gold in its foreign exchange reserves is only enough to import 200000 tons. If there is no US dollars, the gap of 800000 tons can not be bought. In this way, the economic development of country a will be hindered and the life of the people will not be so good.
With the rapid expansion of international trade facilitated by the US dollar settlement mechanism, countries participating in international trade have an increasing demand for us dollars.
For this reason, these countries coincidentally focus their commodity exports on the US market,
Because the United States is the largest reservoir of dollars, as long as their products can beat their counterparts in the United States, they can constantly get dollars from the pockets of American consumers!
At that time, the United States was known as the most powerful industrial country in the history of mankind. In addition, the cost of import tariffs was still there. It was definitely not possible to fight hard.
Therefore, the emerging industrial countries led by Japan and Germany began to play the dumping routine. The government subsidized the goods exported to the United States, so that they could win over the products made in the United States at low prices and earn enough foreign exchange in dollars. Don’t be afraid of losing money. The United States is only the largest overseas consumer market, and it is not the only consumer market. As long as there is a large amount of US dollars and foreign exchange in hand, and the domestic foreign trade base is expanded, the money lost in the United States will be recovered from the third-party market and the future United States sooner or later.
Of course, the United States also knows that they are engaged in dumping. This is all a matter of face, and one can check it one by one. However, it is like the feeling of taking drugs. The short-term pleasure is really beyond our control.
On the one hand, the more goods from other countries are dumped in the US market, the greater the overseas circulation.
The greater the circulation of US dollars overseas, the deeper the dependence of international trade on US dollars. Feedback to the US dollar system means that hegemony is more stable! On the other hand, dumping enables American consumers to buy more products with less money, which is conducive to depressing American inflation!
In the middle of the Reagan era, the inflation rate in the United States dropped from 13% to 3%. Some people attributed his reform achievements to neoliberalism, which advocated market fundamentalism, but it was actually related to many factors.
First, in the late 1970s and early 1980s, the achievements of the third scientific and technological revolution began to be industrialized. Thanks to the emergence of a large number of high-value-added industries, the income of American consumers increased significantly, and their actual purchasing power doubled.
Second, the change of industries has pushed the United States to transfer a number of backward manufacturing industries. As we all know, industrial transfer is also a kind of international trade. Since it is an international trade, it must be a settlement currency, which to a certain extent dilutes the surplus US dollars in the United States.
Third, the industrial gradient of Japan and Europe has been improved in this round of transfer. In the past, only the United States could produce industrial products such as semiconductors, high-end cars and television sets. Japan and Europe can also produce them, and because of dumping, they sell cheaper than the United States, which further depresses the inflation rate of the United States.
Reagan is known as the leader of the Renaissance of the United States. In fact, the Renaissance of the United States has long been foreshadowed in the Roosevelt Era
However, drug abuse is always drug abuse, and after a short pleasure, it is a great pain and difficult to cure!
Under the fierce attack of Japan, Europe and later China and South Korea, American industry collapsed in a large area in the next 50 years. In 1950, the added value of American industry accounted for 45% of the world, which was only about 12% last year. The resulting series of negative effects left indelible damage to American hegemony and social and political ecology.
First, there is a permanent and irreversible trade deficit: the lack of middle and low-end manufacturing industries makes the United States need to spend hundreds of billions of dollars every year to import consumer daily products and industrial intermediates from all over the world. The once largest trade surplus country in the world has now become the largest trade deficit country in the world!
The long-term trade deficit of other countries will consume us dollars and foreign exchange. Once US dollars and foreign exchange are exhausted, the plate of international trade will become smaller, which will trigger an economic crisis.
However, the United States is the issuer of US dollars. If the government has no money, it can print as many as it wants. The disadvantage is that if the money is printed too much, the US dollar will be seriously devalued. In order to prevent the decline of wealth denominated in US dollars and the evaporation of foreign exchange, other countries will try their best to stop losses. As a result, the confidence of all countries in the US dollar will be shaken and the hegemony of the US dollar will collapse!
The reason for the disintegration of the Bretton Woods system lies in the fact that more and more dollars are printed. Countries fear the depreciation of the dollar and go to the Federal Reserve to exchange their dollars for hard currency gold. As a result, the gold reserves of the United States are not enough to pay for the dollars removed from the outflow. For the first time, the dollar hegemony collapsed!
Although the second US dollar hegemony solved the problem of lack of sufficient anchors for exchange by linking with oil and other major raw materials, it did not solve the problem of US dollar depreciation. This also makes the influence of the US dollar as an international settlement currency and the hegemony of a hegemonic currency volatilize at a visible speed with the decline of the US economic strength, the abuse of sanctions against the US dollar and the deterioration of relations with raw material suppliers.
At the beginning of 2021, the EU drafted a document saying that it was quite frustrated by the hegemony of the United States and the dollar in the international financial system
Secondly, it intensifies social contradictions and political contradictions: the position of high-end manufacturing in the United States in the world economy is still unshakable, but the high-end manufacturing industry can provide few jobs, and the high added value income generated by it can only flow among a few people.
Therefore, if a country wants to maintain a basic income balance, it should retain the only medium and low-end manufacturing industry that can provide a large number of jobs while ensuring a certain income. After the loss of this part of the industry in the United States, the middle and lower classes lost the most stable and important source of income, so that the gap between the rich and the poor continued to soar in the three decades of its deindustrialization.
Economic problems are the root of all social problems. Poor income and poor quality of life will inevitably lead to multiple social contradictions. The answer to today’s social contradictions in the United States is here!
White people complain that black people and Asian people who can bear hardships have taken away their economic cake, so they advocate white supremacy, while black people have launched a stronger reaction under strong racial discrimination. On the other hand, the Democratic Party and the Republican Party, in accordance with their own interests, choose sides to stand in line between these two major social contradictions. You scold them, I fight them, and they tear down each other’s towers.
Ultimately, the internal contradictions of the United States have developed into irreconcilable and out of control in the spiral escalation of Party confrontation and social confrontation! The chief culprit of all this is, at best, the lack of greed of the Anglo Saxons and the defect of the national character of the snake swallowing the elephant; At a minimum, it is only because the currency paradox in the Triffin problem was not handled in time!
The ancients said that if a husband uses copper as a mirror, he can straighten his clothes; Taking the past as a mirror, we can know the rise and fall; By taking people as mirrors, we can see the gains and losses.
The United States is not far from the front.
Although the Chinese are not a nation that is hard to make delicious food, this does not mean that the RMB can not be internationalized and can not replace the status of the US dollar. On the contrary, RMB must be internationalized and replace the US dollar as the new global settlement currency.
People always say that the greater the ability, the greater the responsibility, and this is also true of international politics.
Our goal is to revive the glory of Han and Tang Dynasties and lead the world again. Since we want to lead the world, we should assume the responsibility of being a leader.
Specifically, this responsibility is to provide all countries in the world with a set of public goods needed for development, including relative military security, political order and economic system. In this set of public goods, the international settlement currency is the most important thing. Without it, the world will sooner or later fall back to the era of fragmented economy. This is not in China’s interests, and it will also break the expectations of other countries.
It should be noted that the true knight errant is not to help himself, but to help others!