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> In fifteen to twenty years, China will have a much bigger economy, more advanced technology and more capable armed forces. It will also remain America’s most

> In fifteen to twenty years, China will have a much bigger economy, more advanced technology and more capable armed forces. It will also remain America’s most formidable rival, and will be able to constrain the exercise of American power globally. There's plenty said about the ascension of China, but not much said about the simultaneous decline of America, particularly the loss of the dollar as the world's reserve currency. I think an argument could be made that China doesn't have to do anything to surpass the United States in the coming decades.

rsj_hn 5y ago
The reason people aren't talking about the decline of the dollar is because the dollar is only strengthening in its reserve currency role, which is something that requires a basic awareness of how international trade works to understand. Sadly, there are many who lack this understanding and view the role of the dollar as a type of popularity contest or measuring of a nation's economic "strength", which is not the case at all. Rather, the international adoption of a a reserve currency is determined by the nation's * tradition of property rights and rule of law (will your money be more likely to be seized by the host nation if it is parked in nation A or nation B) * openness of the economy to absorb foreign capital inflows -- are you able to buy as many dollars as you want whenever you want? * openness of the economy to allow foreign capital outflows -- can you withdraw your money whenever you want? * Overall size of the nation's capital (e.g. debt) markets -- are there deep, liquid capital markets that can absorb large investments with little friction and at a high speed. How developed are the debt markets in that country? * Are the debt markets relatively free of domestic regulation? Obviously no nation receives perfect marks in all categories, but the US is at the top of this list overall, and no nation is even trying to unseat the US in these categories. Not at all. Note that the strength of the dollar has nothing to do with whether our economy is growing or shrinking, or whether we are producing more or less, have high or low unemployment. What matters is rule of law and openness to letting foreigners purchase US assets. Basically it is the exact opposite of China's economic policy. In fact one can say that China's strategic priorities are to not do well on any of these scores. Therefore only absolute fools believe that China can ever be a global reserve currency, when its own strategic agenda is to be the opposite of a reserve currency issuer. China wants to be a reserve currency accumulator! It wants to buy reserve currencies of others, not sell its own. If the RMB ever became a reserve currency, it would be a massive defeat for all of its top economic priorities, as it would be required to run massive trade deficits, accept unlimited amounts of foreign ownership of its domestic capital markets, adopt a hands off policy for regulating capital flows, adopt an independent judiciary, and drop most of its currency controls. It would need to hand over control of large segments of its economy to foreigners. Now how likely is China to agree to do that? It would be a total defeat of their existing priorities and political leadership.
- tejohnso 5y ago
  People aren't talking about it? How about the Congressional Research Service? https://crsreports.congress.gov/product/pdf/IF/IF11885 https://crsreports.congress.gov/product/pdf/IF/IF11885 Or from China, calls for a new reserve curency: https://www.rt.com/news/stocks-economy-usa-asia/ https://www.rt.com/news/stocks-economy-usa-asia/ https://abcnews.go.com/Business/story?id=7168919&page=1 https://abcnews.go.com/Business/story?id=7168919&page=1 Or independent reporting referring to historic government debt, massive trade deficit, decline in central bank dollar reserves, and a quote from the Bank of England Gov. Mark Carney: “Ultimately, we will have reserve currencies other than the U.S. dollar,” https://www.truthdig.com/articles/goodbye-to-the-dollar/ https://www.truthdig.com/articles/goodbye-to-the-dollar/

rsj_hn 5y ago

The reason people aren't talking about the decline of the dollar is because the dollar is only strengthening in its reserve currency role, which is something that requires a basic awareness of how international trade works to understand. Sadly, there are many who lack this understanding and view the role of the dollar as a type of popularity contest or measuring of a nation's economic "strength", which is not the case at all. Rather, the international adoption of a a reserve currency is determined by the nation's * tradition of property rights and rule of law (will your money be more likely to be seized by the host nation if it is parked in nation A or nation B) * openness of the economy to absorb foreign capital inflows -- are you able to buy as many dollars as you want whenever you want? * openness of the economy to allow foreign capital outflows -- can you withdraw your money whenever you want? * Overall size of the nation's capital (e.g. debt) markets -- are there deep, liquid capital markets that can absorb large investments with little friction and at a high speed. How developed are the debt markets in that country? * Are the debt markets relatively free of domestic regulation? Obviously no nation receives perfect marks in all categories, but the US is at the top of this list overall, and no nation is even trying to unseat the US in these categories. Not at all. Note that the strength of the dollar has nothing to do with whether our economy is growing or shrinking, or whether we are producing more or less, have high or low unemployment. What matters is rule of law and openness to letting foreigners purchase US assets. Basically it is the exact opposite of China's economic policy. In fact one can say that China's strategic priorities are to not do well on any of these scores. Therefore only absolute fools believe that China can ever be a global reserve currency, when its own strategic agenda is to be the opposite of a reserve currency issuer. China wants to be a reserve currency accumulator! It wants to buy reserve currencies of others, not sell its own. If the RMB ever became a reserve currency, it would be a massive defeat for all of its top economic priorities, as it would be required to run massive trade deficits, accept unlimited amounts of foreign ownership of its domestic capital markets, adopt a hands off policy for regulating capital flows, adopt an independent judiciary, and drop most of its currency controls. It would need to hand over control of large segments of its economy to foreigners. Now how likely is China to agree to do that? It would be a total defeat of their existing priorities and political leadership.

tejohnso 5y ago
People aren't talking about it? How about the Congressional Research Service? https://crsreports.congress.gov/product/pdf/IF/IF11885 https://crsreports.congress.gov/product/pdf/IF/IF11885 Or from China, calls for a new reserve curency: https://www.rt.com/news/stocks-economy-usa-asia/ https://www.rt.com/news/stocks-economy-usa-asia/ https://abcnews.go.com/Business/story?id=7168919&page=1 https://abcnews.go.com/Business/story?id=7168919&page=1 Or independent reporting referring to historic government debt, massive trade deficit, decline in central bank dollar reserves, and a quote from the Bank of England Gov. Mark Carney: “Ultimately, we will have reserve currencies other than the U.S. dollar,” https://www.truthdig.com/articles/goodbye-to-the-dollar/ https://www.truthdig.com/articles/goodbye-to-the-dollar/