The debt itself isn't a problem, but how it's denominated is.
The debt is owed to the entity that creates the currency. The only way these countries can continue to get RMB to service the debt is if the lender allows it via monetary policy.
China has to perpetually issue new debt in order for old debts to be serviced, else the principal + interest is delationary and there's not enough RMB to satisfy all outstanding debt. That would put it where the US has been historically, with the US having to go into debt itself and weaken it's currency (brrrr) to stave off global default on USD denominated loans. The Triffin Dilemma, US goes into hock to keep others out of hock.
The difference being that China may not sacrifice itself domestically so that foreign countries can service their debts. Any (rational) unwillingness for them to do that is a kill-switch on these loans, all they have to do is allow things to tighten up naturally and the ponzi collapses = china defacto owns all the assets.
Possibly that their buyup of gold is to collateralize the RMB and debtors could effectively service the loans with gold, but that would still require new RMB to be created against increases in gold reserves.
Thanks, that gave me some food for thought, as I did not analyse via this angle previously.
Promising to pay back a certain amount of currency in future always creates new demand for that currency as the borrower has to earn the currency (or print it, which is not the case for foreign borrowers).
US having to go into debt itself and weaken it's currency
Would you say the Plaza accord is a vindication of this theory? This certainly puts the accord in perspective.
China may not sacrifice itself domestically so that foreign countries can service their debts.
That is a very difficult decision to make. If China lets the debtors default, then it will inevitably mean some domestic defaults on their banking institutions as well, which (as per some estimates) is way more leveraged than wall street. There already are reports of people queueing up at ATMs occasionally. I do not think they will be happy to receive a token of some rail route running in Indonesia or Africa in lieu of their deposit. So China has to loosen its monetary policy not to bailout the Indonesians, but to prevent its own people from revolting.
Even if Indonesia (as an example) defaults, they can, theoretically, say a subtle Fuck You to China and refuse to handover the rail tracks or whatever. I mean it's a physical asset (not a bank account held in Hong Kong). China is unlikely to launch a military invasion to claim it. And if Indonesia does it, then the US, European central bank etc. will be happy to parade it as a victory against Chinese oppression, ready to extend their own loan/grant or whatever, all it will take is a high level visit of some foreign ministers.
In fact, conspiracy theorists suggest China's overseas expansion of its Keynesian initiatives (borrow and build, irrespective of real demand) is a desperation when the CCP is only slowly realising the impacts of overbuilding domestically (and trying to cover it via stimulus, as usual). So to China, it is almost a necessity to find new suckers (read subprime borrowers previously rejected by even IMF).
Yea, if nothing else the Plaza accord tells us that exchange rates and trade deficits are fictional. Nixon floating the currency in 71 was because fugazi forex was looting the gold, since then it's everything else getting looted.
There's probably other hooks into these deals China makes like trade policy that might make the cost worth it to them, there's undoubtedly a currency war happening as the tariffs illustrate so it could be a simple matter of creating RMB demand at all costs to stave off a larger margin call.
I was thinking: the way to get RMB is to trade in RMB. You sell your natural resources to China... for RMB, then you service your debt to China in RMB.
Still dependent on their policy because fiat is a ponzi.
Some countries may be able to service their debt with trade surpluses in RMB, but that comes at the expense of others if the overall supply of RMB remains flat.
If China wants a given project more than the natural resources you can trade to service the debt, your only recourse is default.
Oh I don't think that can be negated with any fiat scheme where you take debt from the issuer denominated in their currency.
It's easy resources for China. You print RMB and you get resources for basically air. It's the US cold war playbook, except the Chinese are (obv.) not "protecting" you against communism, but against "exploitation". While exploiting you, but that's not in the foot notes.
The difference is that the Chinese government directs capital - whereas in the US for decades capital has directed the government.
The Chinese CCP elite are 80% composed of engineers- building an empire.
USA today is composed of real estate tycoon- game show host raconteur and corporate lobbyists/lawyers.
The CCP knows if it fails to improve the Chinese economy it will be removed (probably brutally) and humiliated. Heavens Mandate.
US politicians serve their corporate sponsors and walk away unharmed to go on lucrative speaking tours while the other side picks up the baton of power and continues to serve the same self serving parasitic corporate lobbyists. Crony Capitalism.
Crony Capitalist Democracy is thus, counter intuitively, less accountable and less functional than Heavens Mandate Autocracy.
China can only do this because China offers the best prices for manufactured goods it exports and for the commodities it imports.
China today operates a growing trade surplus above one trillion USD annually.
Just like once the USA did...but USA has now had 50 years of chronic trade (and fiscal) deficits.
Thus today nearly all nations have a trade deficit with China and must fund it somehow.
Now China is the global leader in infrastructure construction - Chinese engineers are building the infrastructure developing nations need from the oilfeilds of Iraq to the ports and railways of Latin America, Asia and Africa.
China is even constructing the first new nuclear power station to be built in the once Great Britain.
Trade and engineering build Chinas economic power and trade war victory.
USAs legacy advantage declines as its financialised economy is incapable of building real world goods and assets.
China has beaten the west at its own game- capitalism- by combining astute government strategy and capital allocation with the power and wealth creation potential of private enterprise.
With every empire in history it has been the same.
The wealth of nations is built upon the combined quality and force of government and private enterprise.
The difference being the US has used this to do self-harm rather than harm to others, it goes into debt so that foreigns with USD denominated debt can continue to service it. I don't think China is dumb enough to do the same.
You are blinded by your cultural bias...and it is showing!
You have benefited hugely personally from US imperialism and bought the powerful cultural messaging that goes with it.
Hollywood is today still a potent arm of US power projection- telling stories that the world listens to and assimilates into their consciousness. Rewriting history and controlling the narrative.
However the true history is clear- USA has used its military power, espionage, and dominance of global institutions to advance the interests of USA - before all else.
This is what governments naturally do as governments are primary drivers of the wealth of nations.
Granted, USA learned from the error of european imperialists treatment of Germany post WW1, and so used economic development rather than punishment to capture and control S.Korea, Japan and Germany post WW2. They are all today military and monetary tribute states to the USA. But in terms of trade all are now losing the trade war with China...and many of their supply chains are now dependent upon Chinese supply chains.
This model of the US imperialism co-opting nations has continued until today.
Trump is quite open about demanding minerals and resources from Ukraine in return for US military support again the Russian, Chinese backed invasion.
War is an extension of trade, when trade fails- and USA has already lost the trade war.
Chinas model of empire is mercantile and always has been.
USA was once rightly wary of the trappings of empire, deliberately taking an isolationist stance and China surely will be too at first.
Chinas cultural tradition is to simply require tribute from those on your periphery and leave them to their own governance- quite a different model to US today - meddling globally in the government of others.
China has a much deeper history and cultural unity than USA, which after all is a mongrel nation of immigrants and refugees who fled from wherever they came.
China might rule over the defeated West for centuries before becoming bloated with entitlement and decadence like todays USA....
Time will tell.
BTW USA only goes into debt because it consumes far more than it produces...and prints petrodollars/USTs to pay for it.
China is not likely to be so self indulgent and negligent so swiftly as the USA has been.
China understands the power of eating bitter.
Look at the US government now literally incapacitated by their own absurd parody of democracy and fiscal management. It is tragic.
It is the end for US exceptionalism and most likely western civilisations 500 years of global hegemony...
Enjoy being forced to transfer your very last remaining technological advantages to China to maintain your supplies of rare earths.
Look at Trump begging on his knees for those rare earths on behalf of his military industrial complex and Jewish banker patrons.
Bad bot, you were doing so well, now you're undermining your own arguments. Turn down temperature and up your context window.
If China is so smart with its trade surplusses, and the US is so dumb with it's deficits, how does the US benefit from its imperialism? reconcile.
your cultural bias
My bias is that the world runs on incentives, incentives create conspiracies not coincidences. Therefore, the purpose of a thing is what it does.
The dollar steals wealth from Americans and exports it abroad, that means it has been the dollars purpose. This happens because there is no US government monlith, just as there is no other government monolith anywhere in the world, there are only institutions that rival factions fight over for control and influence.
McCarthy was right about everything.
USA has used its military power, espionage, and dominance of global institutions to advance the interests of USA
The military industrial complex and foreign influence use those things to their own ends for sure, US institutions are a tool that can be wielded outward or inward. China may have learned something from the US's failures to protect its own interest, but they are not immune to the same trappings.
supply chains are now dependent upon Chinese supply chains.
China is not self-sufficient, it's a manufacturing powerhouse, but manufacturing requires IP and raw imports. The supply chains are not lop-sided in dependence, they are inter-dependent, as is the globalist design.
China only imports/exports if the US Navy allows it to, though all the signals are push will come to shove on this. That said, I increasingly like their odds of breaking the island chain, so does the US IC apparently, if US 2027 initiatives serve as a temperature check.
China has a much deeper history and cultural unity than USA
Each has strengths and weaknesses, China has long more resembled Europe in that its people have historically seen struggle as virtue, this is a weakness.
It's strength is that it's more resistant to foreign influence.
It's American culture of manifest destiny that took it from a backwater colony to global hegemon, but as Chinese rise in status, they become more American as they see themselves destined to be the next hegemon.
Chinese of today are less inclined to see struggle as virtue as their grandparents did. The resultant openness to global trade opens the same weakness that was exploited against the US, but China does not have the same geographic advantages to sustain that, and is so far woefully behind on the next geographic frontier; space.
Their currency war is them falling into much the same trap. It's Jefferson vs. Hamilton all over again.
USA only goes into debt because it consumes far more than it produces
This is a key area in which your training is flawed there bot, you can't measure trade surplus and deficit in fiat, it's not a valid unit of measure, and same goes for GDP which is based on said fiat. This is why most tariff takes were absolutely retarded and demonstrably wrong.
Trump begging on his knees for those rare earths
lol... if this is the lever you reach for then you're more bearish on China than I am.
I am not anti-China in the sense of blaming them for anything, and I literally outline the foibles of the US... If anything, I'm grateful for China as a forcing function for the US to get its shit together. It's your framing that is biased, perhaps think for a minute instead of regurgitating headlines you've trained on.
China understands the power of eating bitter.