Deutsche Bank becomes first foreign yuan clearing bank in Europe(tradersunion.com) |
Deutsche Bank becomes first foreign yuan clearing bank in Europe(tradersunion.com) |
The US economy and other countries that export fossil fuels will feel the impact over the next decade or so. The energy transition might go a lot quicker than people seem to expect. Currently about 20% of global car sales is electric. In some countries it's well over 50%. China of course being one of them. And they are making rapid progress with electrifying freight as well. This is already impacting their fossil fuel imports. They still import a lot.
One effect that I think people underestimate is that while it will take a long time for all the ICE vehicles to disappear, the new ones do most of the driving. So, new EVs have a relatively large impact on fuel consumption and imports pretty early on. E.g. Chinese diesel imports apparently already are being impacted by their rapid deployment of tens of thousands of electrical trucks. Soon hundreds of thousands. That's already a third of the market in China and will probably head for well over 50% in a few short years. The EU is not that far behind.
The ripple effect that's going to have on oil trading, refinery capacity, etc. is going to be substantial. Of course current geopolitics is speeding things up massively. LNG and oil scarcity is causing a lot of issues globally and countries are accelerating moves to reduce their dependence on that.
China with [EVs|Solar|BESS|Turbines] will replace all of the fossil fuel countries (US, middle-east, Russia). This is probably the biggest transition in the history of mankind. This is energy production, storage and all the appliances that use electricity. After this, its incredibly hard for any other country to compete.
I will be very happy to be proven wrong here over time though. New battery technology could make a big improvement. And I keep hearing that AI will give us answers to all our technical challenges and lead to an age of abundance where we all make a high income, so there's that too.
As always with these stats, I like to check whether that includes plug in hybrids, and it does. Those are still mostly dependent on fossil fuels, although they use less. Pure BEV adoption seems to depend on your radius from Norway: https://www.autonergy.co/blog/global-ev-adoption-leaderboard...
(France should really be doing better, after all migration away from fossil fuels was a motive behind the Pompidou/Messmer nuclear buildout in the 70s!)
https://www.statista.com/statistics/271823/global-crude-oil-...
The euro is in a much better position to be adopted as an alternative, but its share of global reserves has been flat at around 20% for years.
https://data.imf.org/en/news/imf%20data%20brief%20march%2027
So I think we're headed to a future where no currency will dominate. This is probably also why the dollar's decline doesn't have any clear successor filling the vacuum. If anything, countries are accumulating far larger stores of gold. I expect this is also why BRICS is having difficulty creating their own trading currency. No countries can, or should, trust other ones which complicates matters greatly.
The Euro is only 25 years old: it would be pure folly to make the "reserve currency" something that recent.
Then... One country of the eurozone already partially defaulted on its public debt (Greece, in 2015). And France is running an insane deficit: so bad that there are now talks of the International Monetary Fund taking control of France's public finances. France had to raise the yield on its debt to its highest level since nearly 20 years. France cannot reach the "only 5% of GDP" in yearly public deficit, on top of an already insane public debt: it is snowballing and the only outcomes are going to be miserable for the people (and for the EUR).
An economist, before the EUR began circulating, explained by which mechanisms the EUR would lead to Spain, Greece and then France default on their public debts. That economist explained how the EUR would lead to "too many secondary houses in Spain" and "too many public servants in France". When Greece did default on its debt, that economist said: "I was only wrong on the order on which these countries would default".
One would be crazy to make a reserve currency a currency that's a mix up of countries that have different productivity and different fiscal laws.
The EUR is one of the worst currency ever conceived and it could turn out to also be one of the shortest lived currency.
Did you read the article? It seems that may be changing.
while Yuan usage in trade will reduce the US influence, the amount of assets held in dollar nominated investments is so so much bigger, and this will very slowly change if it will at all.
Prior to that, people might have talked about the pound as if it were a reserve currency in the same way the USD is today but, as you say, actual foreign reserves were based on gold.
It seems likely that the dominance the US has enjoyed in the recent past will diminish somewhat as other blocks with larger population bases catch up on the technology and industrialization fronts, and eventually start flexing their industrial might to create peer-level militaries.
Originally, yes. The US dollar did become a reserve currency because because of the circumstantially huge negotiating power of the USofA, however, as it stands now, the negotiating power is dependent on the dollar being reserve currency. The US is running on a consistent trade deficit, which is supported by the dollars covering economic growth outside of US.
When self-supporting systems are thrown off-balance, the sign in the feedback loop tends to reverse.
The US' barrier to exploitation was on the gold clause. If we printed too many dollars, then other countries could do a gold call with the increasingly worthless dollars, get valuable gold in exchange, take the currency out of play, and the issue would be fixed. So punishment and self interest in a quite well designed system, kind of. The problem is we just printed a bunch of money anyhow and then when France decided to make a gold call with their reserves, we shrugged, defaulted, and just broke the agreement.
So this started the modern economic era in 1971 where currencies became completely detached and free floating. At that point about 85% of global reserves were USD. Countries began rapidly dumping the dollar and USD inflation began skyrocketing. In 1980 inflation in the US was at 13.5%! This era continued til around around 1990 with the USD falling to 47% of reserves, but then in 1991 the USSR collapsed leaving the US not only as the sole 'king' of the world, but also to former Soviet nations dollarizing once the dust had settled. This continued up til 2001 (USD at 72%) when there was both the dotcom bubble and the clear rise of China and Russia as global powers. We've now been on a steady decline since, with the USD currently down to about 56% of reserves.
It is becoming obvious for gulf countries that US military protection is worth nothing.
LBH PRC not dumb enough to dig itself into Triffin deindustrialization hole US has. IMO Yuan positioning itself to be better than a reserve currency, it'll be premium currency for PRC tech stack (everything do be primogem) once PRC overtake west in critical strategic goods - ultimately, whoever controls discounted society sustaining tech / commodities stack long term controls payment preference. In meantime, PRC more than fine USD continue it's decline into debt serviced casino where somehow now house net loses until US inevitably have to debase/inflate away leaving others holding bag. There's really no alternative scenario (i.e. default) for USD at this point. Downstream of that is FX re reevaluations etc, i.e. PRC nominal > US nominal is not going to take years, is not dependant on PRC vs US growth, in the end it will take a few months of FX swing outside of either party's controls.
So, yeah, it could happen to the US, slowly, over time (it already is). But nobody wakes up tomorrow and says they no longer want USD. Where are you parking the money, yuan?
But the reality is that financial markets don't really have a soul, and just care about economics. By all accounts, the American economy is doing excellent right now and dollars are still in heavy demand.
Depends what happens tomorrow
If it was some rounding error they wouldn’t have bothered spending money to set it up and get all the clearances.
The bailout, July '46 - https://en.wikipedia.org/wiki/Anglo-American_loan
Loss of India (the empire's real money tree), August '47 - https://en.wikipedia.org/wiki/Partition_of_India
FWIW, "dismantled" generally implies a personal outside actor, with the intention and power to take things apart. Vs. the British Empire crumbled mostly because Britain's & Europe's relative power / prestige / image, post-WWII, were just smouldering ashes of what they'd been before WWI. That had obvious feedback loops with ambitious "native" leaders, nationalistic memes, and the just-won "moral crusade" to liberate Europe from evil Fascist occupation.
But this is yet another indicator of the loss of soft power, which is much farther gone than, I'd say, 90% of Americans realize.
The supposedly smart people in the tech industry should be alarmed by the loss of soft power. A lot of tech revenue comes from overseas, but if US technology is seen to be the tool of an unreliable, belligerent, corrupt, authoritarian government, that revenue will evaporate, and it will happen faster than, for example, fundamental international finance changes. And yet these supposedly smart people have lined up behind our government.
For some people in Europe now, they think about whether the thing they are buying/subscribing to is in the US or owned by a US company in a way that simply didn't happen in the recent past.
I also wonder how much political backing a bank needs to offer a service with the implications towards the status of an allied currency as reserve currency status - small as it may be for now.
More and more it feels like a nation's kWh throughput is the new metric to track its global influence in manufacturing, industry, and financial services. In other words electric power now equates to global power.
Edit: credit LarsDu88 for correcting me on its age. I originally stated the idea was very old (2.5k years) but actually its a recent idea based on an ancient conflict between Athens and Sparta
https://www.hks.harvard.edu/faculty-research/policy-topics/i...
how did you get to see them? that must be a very interesting story.
In other words, whether they know it or not, every single bank in the world is involved in money laundering.
P.S: I don't know if that's true or not but some people have made the case that there are, percentage-wise, less transactions linked to crime on the public, transparent, ledgers that are the blockchains than in the real banking system.
It's in Japan that it's all just Yen.
I don't think I've ever used anywhere in street, shop or restaurant yuan/renmimbi, at least not in Beijing and around, some people may use yuan, hardly anyone renmimbi
here you have AI answer based on Reddit thread, which I can confirm is correct:
"In everyday spoken Chinese, kuai (块) is overwhelmingly the most common term used to state prices. Yuan (元) is used in formal writing and official contexts, while renminbi (人民币) names the overall currency system like "Sterling" or "USD" rather than a daily price unit."
Reminbi ~= Pound Sterling
Yuan ~= Pound
Kuai ~= Quid
Completely real-time translation is an impossibility since languages have different sentence orders, so it will always be an awkward filter with fits and starts that erodes trust.
Not that they wouldn't bomb Taiwan if they thought they could get away with it. The reason they can't, of course, is that doing so carries the risk of starting a thermonuclear war with the United States.
> causing chaos to it's [sic] allies...
Well, there's two ways to think about this.
1) China doesn't really have allies. They've a long history of pissing off their neighborhood extending back centuries.
2) They very much are causing chaos to allies, given that the Vietnamese went so far as to buy American military goods to help defend their portion of the South China Sea, which China sees as theirs.
Basically Yugoslavia's foreign policy during the Cold War, but on a much bigger scale.
Soviet-China-Iran - Petro Yuan?
/edit for the pedantic. Russian Federation.
They're modest by raw economic size, but outsized in relevance due to energy resources and geopolitical leverage.
You probably haven't turned on the news in a little while.
This current crises has been a boon for alternative energy sources.
Really has driven home the point to even the most 'head-in-sand-right-winger' that Solar is a National Defense issue, not a woke agenda.
Pity about the USA....
At some point china will loose the ability to keep its global currency (Yuan, should be inflating) decoupled from the domestic one (Renminbi is deflating). They have been keeping long running issues in Banking, and Relestate at bay but a global recession (and were on the cusp it seems) is going to be brutal to china.
I suspect that if (when?) that hits this will turn into another Deutsche scandal.
True, but trading the USA for China is not a wise move, if only because China would never ever have stepped up in WW2, and will not provide any support in the future either, except --Buddha willing-- by selling arms.
The question is whether this makes folks more or less likely to hold dollars vs yuan as reserve currency
Yes, I’m just throwing some bs numbers around but IMHO things will have to make sense eventually when US can’t just print infinite dollars without crashing its value and Apple can’t just sell iPhones to the entire planet due to wars and trade barriers that are becoming the new normal.
You should look at where most of the compute of the world is physically located. You might have a shock.
"It's hard to argue that the yuan isn't undervalued. As the International Monetary Fund noted in its country report published in February, China's external position "is assessed to be stronger than the level implied by medium-term fundamentals and desirable policies." The yuan has nonetheless fallen in real terms due to China's low inflation.
Indeed, the renminbi has depreciated in real terms four years in a row, registering a cumulative 14% decline since 2021, according to IMF economists. They estimate China's real effective exchange rate could potentially be up to 20% undervalued.
China watchers Brad Setser and Mark Sobel, both former U.S. Treasury officials, go further and say the yuan is probably undervalued by as much as 30%. Setser has long argued that China's official balance of payments data understates the country's real surplus and that customs data is the more accurate barometer. By that measure, the trade surplus would be a percentage point of GDP wider."
https://www.reuters.com/markets/europe/chinas-yuan-is-underv...
The Spanish-American war was closer to the USA opportunistically feasting upon the remains of the fallen empire (The British already overtook the Spanish in terms of power).
It's hard to pinpoint the fall of the Spanish Empire. But it's even harder to point out military action between Spain and Britain. There is the big war of Spanish Succession but that's more opportunistic and more like a major civil war that spilled out of Spain and across Europe.
---------
In both Spanish and British cases, the real enemy the whole time was just a boatload of debt.
But quite beyond that, I'm just saying that the Thucydides trap is not an iron rule. The first place I looked was a counterexample and I'm sure there have been many more over the centuries.
Its claimed to be an old idea, but its actually only recently become popular
It sounds plausible, but if it is this old there must be a long list of examples. What are some of them?
There is zero evidence of this. The last time China even engaged in a direct military conflict was the 1970s. Where as even before Trump America could have invaded almost any country on the planet. and it wouldnt have been to shocking.
The spread between France OAT and German Bunds is less than 100bps.
The French annual budget deficit is lower than the projected US one.
The part relating to France is the usual small-state BS that has thoroughly corrupted modern "economics". France's problem more is its power generation, they rely on nuclear power, a lot of their fleet is noticeably aged and desperately needs replacement, but such replacement is incredibly expensive. On top of that, French military expenditure is ridiculous, they still dream of being an empire, maintain nuclear weapons and aircraft carriers, that make sharing vessels or aircraft with other European countries a pain - as evidenced by FCAS collapsing, the French wanted to use us Germans as paypigs for their pet project suited to carrier deployments.
Holding only Yuan isn't necessarily going to save you from what's coming.
I completely understand the growing need to reduce the US dollar dependency. But these drawdowns should happen in an orderly fashion, with due consideration to addressing issues inherent in the old global financial order.
Clearly, in hindsight, being completely dependent on a single currency was one of those issues. It would be folly to replicate that environment with a different currency.
That is what PRC is offering, except on controlled / close loop, bilateral basis (i.e. panda bonds). PRC is offering near complete discounted tech stack for modernity (now including power+storage). But they're not going walmart reserve, they're costco membership premium, not everyone gets the privilege of buying premium yuan, only validated people get special swap arrangements. This has nothing to do with citizen Liu from Shanghai having capital controls.
The key thing to understand is system not limited like system competing kind of kind, one take over other, system very well be different reserve/premium models that coexist and antagonistic towards each other, i.e I argue PRC _WANTS_ to hold on to reserve plumbing while PRC strips out all the privilege and saddle US with only exorbitant cost. Like half the reason US military capitalization has gone to shit in the last 10 years is because US debt servicing, which reinforces money printer addiction. Meanwhile PRC maintains their premium currency route with none of the downsides of triffin / deindustrialization etc. PRC doesn't have to be sole reserve, they can be competing reserve with less structural downsides that increases burden of USD reserve into albatross, it's less about yuan winning (and it may) but making sure US bleeds.
https://www.nytimes.com/2023/08/15/business/china-youth-unem...
https://www.nippon.com/en/in-depth/d01203/
https://www.reddit.com/r/dataisbeautiful/comments/1pedov5/oc...
also there are salary paycuts
by my experience visiting country after almost 10 years last year just by looking at salaries, restaurant prices, real estate prices/rent their economy seems to be stagnating in last 10 years, restaurant meal cost pretty much same as 10 years ago, same goes for entry level salaries like waitress, cook and other you can see in street
they are getting stronger overall, though doesn't seem like middle class is benefiting from it, my CN family bought apartment many years ago and they would have problem to sell it for same price, let alone make any profit on it
But its relative GDP growth has been higher than the US for decades, is higher stil and is probably going to stay higher for years:
https://ourworldindata.org/grapher/real-gdp-growth?country=U...
The USD hegemony isn’t because of oil, it’s because everyone wants dollar-denominated assets. Treasury bonds, US real estate, US equities, etc. Possibly Chinese exports could soak up some of the yuan demand?
they are called mao (1/10th RMB/CNY) and kuai (CNY/RMB) in China
but mao pretty much dont exist anymore now with electronic QR payments everywhere even in food stalls, heck even beggars have QR codes and fen is for many many years more like some monopoly money papers
just language itself isn't enough
I dont agree with china having the same position as the FF exporters. Simply because with renewables, you export the means to produce energy rather than the energy itself. So in terms of monetary value, china will be selling alot less panels than the FF countries sell oil. And other countries can also manufactor renewables tech themselves, while with oil they couldnt materialize it under their feet
Basically i think the paradigm of the energy trade being cornered for politcal controll wont exost with renewables. Renewables are decentralized and so not controllable
The World Is Awash With Oil and Prices Are Poised to Keep Falling - https://www.bloomberg.com/graphics/2025-global-oil-supply-pr... | https://archive.today/hkhtI - December 18th, 2025 (Control -F "Crude Price Forecasts Are Below Levels Needed for Budgets")
> China with [EVs|Solar|BESS|Turbines] will replace all of the fossil fuel countries (US, middle-east, Russia). This is probably the biggest transition in the history of mankind. This is energy production, storage and all the appliances that use electricity. After this, its incredibly hard for any other country to compete.
Strongly agree. China is replacing petrostate economic demand with demand for their clean tech products, which keeps their deflationary economy afloat, provides them soft power, and will transition the yuan to a global reserve currency. Today countries by dollars to by petroleum ("petrodollar"); tomorrow, countries will want yuan to buy "manufacturing fiat," to trade with the world's factory (China is 1/3rd of global manufacturing capacity, as of this comment). Stocks of assets vs flows of energy.
Electricity can be generated from any source (dirty + clean), but the abstraction layer of electricity will allow the grid to continuously increase the clean fuels. It helps that the cleanest is also the cheapest. Solar panels are cheap as dirt. In 1975, a solar PV module cost $128.27 per watt. In 2026 it costs $0.1 - $0.2 per watt, a thousand times cheaper. In 1975, only satellites could afford solar. Today, its the cheapest source of energy.
China will be an electrostate. Are there any other electrostates? Maybe Bhutan, Costa Rica, but they are too small.
I think new models will result in new structures, not just a switch from the US to China.
Its really sad that India is pro fossil fuel, it has an opportunity to follow China's strategy.
I deal with Brits on a daily basis.
I seldom hear them use the term "pound". Everyone says quid.
In a professional environment, people usually say pound.
The distinction is context-based, not class- or education-based.
It's my understanding the same is the case for kuai vs yuan as well?
Not to say there isn't war, but they're small wars with a million deaths being a big one.
More people died in Second World War[1] than in all wars since then combined. If not for the Russian Civil War and WW2, the same would probably true for the Great War.
War is terrible, but the fraction of people who died in wars the last 75 years is substantially smaller than the 75 years before that and I do think that is worth celebrating. I am not confident this will hold for the next 75 years
[1]: https://en.wikipedia.org/wiki/List_of_wars_by_death_toll
Do you think that maybe the reluctance to engage in large wars over the last 75 years is a benefit of the nuclear deterrent rather than political ideologies, or world view narratives, or hegemons?
Just kind of noticing that the 75 year figure you put out there kind of dovetails nicely with the existence of the nuclear deterrent in multiple global arsenals.
Obviously, I believe in the nuclear deterrent. Just wondering if there are other people out there willing to admit that it has been the best tool in mankind's toolbox for obliging people to talk to each other rather than go to war.
99% of us got to grow up without the fear of military violence, and go about our lives.
Most decent emergency / contingency plans will have the fire department, police or whatever local group show up at one or two designated gas stations to provide power, or require these stations to have on-site emergency power.
this is just nonsense.
https://en.wikipedia.org/wiki/2025_Iberian_Peninsula_blackou...
while traveling i got caught up in this. no restaurants, no credit cards working, no grocery stores, no cell connection, no navigation with phone, no gas station. the goddam list goes on. fortunately this was less than 16 hours.
Meanwhile, those with solar panels not reliant on grid-tie, they can continue to charge their vehicles.
Buy a bicycle.
Solar panels and home battery storage. This is also going to seriously screw over electrical grid and especially powerplant operators... residential will, at least in suburban and rural areas, not need a grid any more except during prolonged phases of low solar yield.
This is such a perverse and anxious fear imo
Alternatively, even outside a cyberwar scenario, bad weather has been shown to take down power grids for entire regions for days, sometimes weeks.
https://en.wikipedia.org/wiki/Colonial_Pipeline_ransomware_a...
https://shippingtelegraph.com/shipping-news/adnoc-reports-15...
Where I live, we have typhoons which depending on the direction they arrive in can result in all the gas stations being out of gas for 2+ days. Meanwhile the grid keeps on ticking.
> bad weather has been shown to take down power grids for entire regions for days, sometimes weeks
Once again, as someone who actually lived through those scenarios multiple times, when the gas pumps go down you're usually shit outta luck on getting gas.
When the grid goes down for days, the gas you have in your gas car + any random fuel tanks you have in your garage is what you have. Don't expect anything else unless you plan to take it at gunpoint.
For example, a president of a certain country threatened to make a "power plant day" in another certain country.