US Fed: US export controls to China wiped out $130B(newyorkfed.org) |
US Fed: US export controls to China wiped out $130B(newyorkfed.org) |
I have no real horse in the race about export controls with China or elsewhere, but some notes: timelines matter here — rebuilding industrial capacity is .. not fast. Especially in the US today, much more safety-conscious, labor-rights oriented, etc, than when much of our on-shore industry got build in WW2 era.
To my mind, especially with US political cycles providing a fair amount of policy whiplash, it’s too early to see what total impact these rules have had — let’s check in on these numbers in 20 years. If export controls continued unabated over that period, I imagine we’ll have seen a fair amount of on-shoring of former supply chains.
That's been the trend across the past several administrations.
do note that the financial world is much more pessimistic and doom-gloom than the current geopolitical wars with USD/JPY carry trade unwinding, US treasury debts being dumped and USD loosing sheen slowly in global trades.
It is plausible that China is the economy in the global drivers seat now. If they are, then attempts to limit their economy will probably bounce off - unless violence is used, the laws of economics favour those who work hard, invest and are honest about what is affordable. The evidence suggests China does those things better than the US (although it is probably fairly knife-edge, both countries have out-of-control levels of government intervention in markets but at some point China will probably do something stupidly authoritarian).
This report is interesting in light of that frame.
Ultimately speaking the US dollar’s reserve status rests on the US economy’s productive capacity. Chinese dollar denominated exports are what’s propping up the dollar. Their accumulation of treasuries is merely a necessary consequence of the necessary accounting operations to dollar denominate those exports.
https://www.zerohedge.com/geopolitical/start-de-dollarizatio...
Between how specialized a lot of the tech is and a lot of things only being worth doing if it is cheap, was this surprising?
Why would their be onshoring?
why not gold? surely, you can see that china is continuously buying more and more gold reserves.
At some point, china would also be able to convince the global south to start trading in the chinese yuan.
I’m not operationally involved with gold markets so take this with a grain of salt, but I wonder if there is enough gold being traded for the market to supply the better part of $1 trillion to a central bank hoard. Markets are adaptable things so I’m not saying it’s impossible, but it sure could get extremely interesting. Enough so that I might have to learn a bit about it and see if I can’t nibble some crumbs that fall off the table.
> At some point, china would also be able to convince the global south to start trading in the chinese yuan.
Agreed. But are the Chinese willing to start running the gargantuan RMB denominated current account deficit that would be required to supply adequate RMB for foreign currency users? Probably not. Instead they will probably try to get foreigners to fund purchases of Chinese exports with Chinese originated RMB denominated debt. It’s going to make the World Bank and IMF look like Santa Claus. I foresee African countries being strip mined for resources just to pay the interest. And, in the end, I don’t see the Indians or other regional economies faring much better.
It really is a shame the US powers that be are running the dollar system into the ground, because while it’s certainly quite imperfect and even exploitative, it’s positively benign to have foreign reserves provided by the issuer’s debt rather than the receiver’s debt.
It’s a pipe dream to convince people to trade in a currency controlled by an authoritarian and corrupt government.
The global south can yap all they wish, but they still prefer to trade in dollars and euros, the currencies of countries with rule of law.
laws which they don't themselves control. For all intents and purposes, the US is as "authoritarian" as the chinese in this aspect. This is even demonstrated, albeit rightly so, by the russian financial sanctions, and currency freezes/seizures.
If you're part of the global south, but is rich enough to have foreign reserves, you will start to think about how to diversify.
No it isn’t. The reserves were frozen under due process and can be returned under specific conditions, i.e., Russia withdrawing troops from Ukraine. That’s what the rule of law is, unlike China that can seize your Yuan anytime, and there’s no due process to get it back.
> If you're part of the global south, but is rich enough to have foreign reserves, you will start to think about how to diversify.
They’ll still overwhelmingly stick to the dollar, not a currency that operates on the whims of a dictator.