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Do you think GDP is the critical factor for determining a global reserve currency? IMO, respect for property ownership rights, legal/judicial recourse, ubiqui

by tcbawo 4y ago

Do you think GDP is the critical factor for determining a global reserve currency? IMO, respect for property ownership rights, legal/judicial recourse, ubiquity of US banks, and political stability are large contributing factors that few other countries can compete with. China has a pretty checkered past regarding ownership rights for citizens who are critical of its leadership.

deleted 4y ago
[deleted]
988747 4y ago
Property rights and such are secondary. The primary issue is: who has the power? Right now the answer to that question is "US", but since China is catching up on GDP, and, unlike US, actually manufactures things. If China decides that they want payments for all the goods that they export to be in RMB then there's nothing the rest of the world can do about it, except stop all the imports from China (which would take decades, because they have to learn to manufacture all those goods themselves). Once most of your imports come from China instead of the US it does make sense to use Chinese currency as the reserve currency, since you are going to need a lot of RMB to pay for your imports anyway.
- matthewdgreen 4y ago
  Saudi Arabia (to pick a major oil exporter) imports about 20% of its goods from China. But it also imports vastly more from regional partners and the US and Europe, not to mention that it depends on the US to secure all of its oil exports to China across thousands of miles of vulnerable ocean routes.
- ethbr0 4y ago
  China can't tank imports until they finish pivoting to their own internal, consumptive middle class. And probably not even then. The plan the international community hoped for is actually somewhat working, the timeline for China's giant population to metabolize it was just wrong. Large Chinese middle class = power = political risk to disrupting the economy = incentive not to rock the international trade boat's status quo. The CCP is already seeing with the anger over zero-COVID that {middle class life} >> {good of the Party} for most of the population. Unfortunately, China probably also learned from the USSR that the entire charade only collapses when you blink and refrain from using the military to crush civilian dissent. Which doesn't bode well for Chinese citizens...
  - FpUser 4y ago
    >"Unfortunately, China probably also learned from the USSR that the entire charade only collapses when you blink and refrain from using the military to crush civilian dissent." Baloney. USSR did not crush because of "civilian dissent". All the changes were driven from the top.
    - ethbr0 4y ago
      The Berlin Wall fell because the East German authorities and the USSR declined to shoot civilians. And the fact that order wasn't given was mostly due to bureaucratic ineptitude and delay, rather than intent. https://en.m.wikipedia.org/wiki/Fall_of_the_Berlin_Wall#Crowding_of_the_border https://en.m.wikipedia.org/wiki/Fall_of_the_Berlin_Wall#Crow... It could have easily been Hungary 1956, Czechoslovakia 1968, Georgia 1989 instead. Progress trends towards freedom, but it can walk over a lot of corpses on its way there. :(
      - FpUser 4y ago
        Berlin Wall did not cause the collapse of the USSR, it was one of the results of generally declining empire and change of it policies that again came from the top. Gorby and Reagan had decided to be "friends"
ben_w 4y ago
I suspect it's a prerequisite, though perhaps not the only one. I also suspect that political stability is more likely to favour China than the USA over the next few decades — it is very human for success to be followed by the assumption of indefatigability and that to be followed by fighting over who leads the nation, rather than continuing to focus on what actually made a nation dominant and how to keep it that way. The UK lost its literal empire that way; the Soviet Union took 50 years to go from agrarian to space, but by the end they had become at least as out of touch with their own people as the last Tsar had been; I think the US may lose its metaphorical empire similarly to the UK's actual empire, though the group deciding to call itself "The Tea Party" at least implies the possibility of it failing, with analogy to the USSR, in the same way it was formed.
- tcbawo 4y ago
  The US may have backslid a bit, but it still leads the world in property ownership rights and fairness of the legal system. When a foreign corporation takes a domestic corporation to court, which jurisdiction will they get the fairest shake? What happens to billionaires when they speak critically of the Chinese government? Despite claims to the contrary, freedom of speech and rights of the property ownership are still vigilantly protected in the US.
  - ben_w 4y ago
    Certainly; this is a hypothetical about a future where both China improves and the USA continues downhill. But even then, don't image a static world, imagine the difference (on the world stage, not in absolute terms) between the UK in 1922 and 1950, and assume the USA might fall proportionally as far by 2050. Or the growth of the Soviet Union in the same period, and apply that to China by 2050.
- KptMarchewa 4y ago
  >the Soviet Union took 50 years to go from agrarian to space That's a naive view of russia. Up to this day, one of the main tasks of russian army - as previously soviet - is potato harvest.

by tcbawo 4y ago

deleted 4y ago

[deleted]

988747 4y ago

Property rights and such are secondary. The primary issue is: who has the power? Right now the answer to that question is "US", but since China is catching up on GDP, and, unlike US, actually manufactures things. If China decides that they want payments for all the goods that they export to be in RMB then there's nothing the rest of the world can do about it, except stop all the imports from China (which would take decades, because they have to learn to manufacture all those goods themselves). Once most of your imports come from China instead of the US it does make sense to use Chinese currency as the reserve currency, since you are going to need a lot of RMB to pay for your imports anyway.

matthewdgreen 4y ago
Saudi Arabia (to pick a major oil exporter) imports about 20% of its goods from China. But it also imports vastly more from regional partners and the US and Europe, not to mention that it depends on the US to secure all of its oil exports to China across thousands of miles of vulnerable ocean routes.
ethbr0 4y ago
China can't tank imports until they finish pivoting to their own internal, consumptive middle class. And probably not even then. The plan the international community hoped for is actually somewhat working, the timeline for China's giant population to metabolize it was just wrong. Large Chinese middle class = power = political risk to disrupting the economy = incentive not to rock the international trade boat's status quo. The CCP is already seeing with the anger over zero-COVID that {middle class life} >> {good of the Party} for most of the population. Unfortunately, China probably also learned from the USSR that the entire charade only collapses when you blink and refrain from using the military to crush civilian dissent. Which doesn't bode well for Chinese citizens...
- FpUser 4y ago
  >"Unfortunately, China probably also learned from the USSR that the entire charade only collapses when you blink and refrain from using the military to crush civilian dissent." Baloney. USSR did not crush because of "civilian dissent". All the changes were driven from the top.
  - ethbr0 4y ago
    The Berlin Wall fell because the East German authorities and the USSR declined to shoot civilians. And the fact that order wasn't given was mostly due to bureaucratic ineptitude and delay, rather than intent. https://en.m.wikipedia.org/wiki/Fall_of_the_Berlin_Wall#Crowding_of_the_border https://en.m.wikipedia.org/wiki/Fall_of_the_Berlin_Wall#Crow... It could have easily been Hungary 1956, Czechoslovakia 1968, Georgia 1989 instead. Progress trends towards freedom, but it can walk over a lot of corpses on its way there. :(
    - FpUser 4y ago
      Berlin Wall did not cause the collapse of the USSR, it was one of the results of generally declining empire and change of it policies that again came from the top. Gorby and Reagan had decided to be "friends"

ben_w 4y ago

I suspect it's a prerequisite, though perhaps not the only one. I also suspect that political stability is more likely to favour China than the USA over the next few decades — it is very human for success to be followed by the assumption of indefatigability and that to be followed by fighting over who leads the nation, rather than continuing to focus on what actually made a nation dominant and how to keep it that way. The UK lost its literal empire that way; the Soviet Union took 50 years to go from agrarian to space, but by the end they had become at least as out of touch with their own people as the last Tsar had been; I think the US may lose its metaphorical empire similarly to the UK's actual empire, though the group deciding to call itself "The Tea Party" at least implies the possibility of it failing, with analogy to the USSR, in the same way it was formed.

tcbawo 4y ago
The US may have backslid a bit, but it still leads the world in property ownership rights and fairness of the legal system. When a foreign corporation takes a domestic corporation to court, which jurisdiction will they get the fairest shake? What happens to billionaires when they speak critically of the Chinese government? Despite claims to the contrary, freedom of speech and rights of the property ownership are still vigilantly protected in the US.
- ben_w 4y ago
  Certainly; this is a hypothetical about a future where both China improves and the USA continues downhill. But even then, don't image a static world, imagine the difference (on the world stage, not in absolute terms) between the UK in 1922 and 1950, and assume the USA might fall proportionally as far by 2050. Or the growth of the Soviet Union in the same period, and apply that to China by 2050.
KptMarchewa 4y ago
>the Soviet Union took 50 years to go from agrarian to space That's a naive view of russia. Up to this day, one of the main tasks of russian army - as previously soviet - is potato harvest.