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The problem is that there is nothing to replace the US dollar/Euro -- e.g. the western capital markets, because other nations (excluding Japan) do not want to o

by rsj_hn 4y ago

The problem is that there is nothing to replace the US dollar/Euro -- e.g. the western capital markets, because other nations (excluding Japan) do not want to open their capital markets to foreign investment. So if this was just a matter of switching from one reserve currency to another, then globalization would be fine. But this is a situation in which the world is realizing that the dollar/euro system is no longer fit for use, and there is nothing to replace it, which is why nations are realizing that they can no longer run these massive trade surpluses full stop. That's how you get to the end of globalization. > see last week in KSA Yes, let's look at this deal, because the KSA deal is a perfect example of the end of globalization. It's basically barter -- Saudi will send China oil and China will send Saudi Huawei gear and build factories there. People are focusing on the fact that the oil will be denominated in CNY and assume this means a massive increase in Saudi CNY holdings -- but China doesn't want other nations to start buying up CNY assets, and it has capital controls in place to prevent that. So the CNY is not replacing the dollar as a reserve currency -- that would be China's worst nightmare. Instead, we are switching to bilateral, managed, balanced trade in which each side gets something tangible under their own control and there is no residual large cross border financial flow to finance the deal. Now let's assume this is how trade will be done in the future. You want to import natural gas from me? Fine, build me a chip fab. Or a port. This is a very different world than saying "You want to import natural gas from me? Fine, I'll buy lots of your bonds and keep my money in your financial system. Do you see the difference?

pphysch 4y ago
Yes, I see your point. There are simply different definitions of "globalization" going on here. I believe there is a meaningful distinction between "USD-d(en)ominated global finance" and economic globalization. The latter isn't going anywhere.
- rsj_hn 4y ago
  The reason why "globalization" is associated to these cross-cutting financial investments is that it creates dependencies. A sells lots of oil to B, and in exchange it gets an account in B's financial system with lots of B-currency bonds. In that case, A depends on B to not seize the bonds. This dependency reduces the sovereignty of each nation - power flows from the nation-state to the global consensus - to the world's largest importer, whose currency is the world's largest reserve currency. Moreover international investors -- international capital, so to speak, have enormous power over individual nation states. This is globalization - the reduction of the autonomy of the individual nation state, subordinate to the rules laid down by the world's largest importer, and it's associated international investment community. On the other hand, if A just sells oil to B, and B builds a port for A, then B cannot seize A's port. The transaction is finished. There is no room for any international investment banker to make a lot of money on this. There is no possibility for B to threaten to seize A's holdings if they don't do what A wants. There is still some dependence just from the trade, but not nearly as much interdependence as having much of your bank reserves under the control of another nation. In that environment, nations become stronger and the world's largest importer becomes weaker -- much weaker. It goes from being the banker to the world to being the most dependent nation, which is a huge fall in terms of power.

by rsj_hn 4y ago

pphysch 4y ago

Yes, I see your point. There are simply different definitions of "globalization" going on here. I believe there is a meaningful distinction between "USD-d(en)ominated global finance" and economic globalization. The latter isn't going anywhere.

rsj_hn 4y ago
The reason why "globalization" is associated to these cross-cutting financial investments is that it creates dependencies. A sells lots of oil to B, and in exchange it gets an account in B's financial system with lots of B-currency bonds. In that case, A depends on B to not seize the bonds. This dependency reduces the sovereignty of each nation - power flows from the nation-state to the global consensus - to the world's largest importer, whose currency is the world's largest reserve currency. Moreover international investors -- international capital, so to speak, have enormous power over individual nation states. This is globalization - the reduction of the autonomy of the individual nation state, subordinate to the rules laid down by the world's largest importer, and it's associated international investment community. On the other hand, if A just sells oil to B, and B builds a port for A, then B cannot seize A's port. The transaction is finished. There is no room for any international investment banker to make a lot of money on this. There is no possibility for B to threaten to seize A's holdings if they don't do what A wants. There is still some dependence just from the trade, but not nearly as much interdependence as having much of your bank reserves under the control of another nation. In that environment, nations become stronger and the world's largest importer becomes weaker -- much weaker. It goes from being the banker to the world to being the most dependent nation, which is a huge fall in terms of power.