At the beginning of last year, when the United States launched a trade war against China, I was immersed in writing “The Origin of Money”. As a researcher in the history of money, I was very confused about the motives of the US move, just like witnessing a powerful robotic hand. Unplugged the plug that charges itself, and then declares that it is going to perform a “human impossible” task.
International relations and trade are areas that I am not familiar with, and even my favorite history of money is full of controversy and unknown. Therefore, over the past year, I have always observed and disputed Sino-US trade disputes and negotiations. The state of thinking, rarely commented. Recently, as the United States further increased the scope of tariffs on China’s exports, I suddenly felt that I understood something.
First of all, from the perspective of currency history, the most powerful weapon of the United States is the US dollar. The most precious wealth of the United States is the international status of the US dollar. This is the first time that human beings have completely established a world-wide pass after they have left the gold standard. Banknote system. With the US dollar, you can buy almost all the goods in the world (payment convenience), holding the US dollar can prevent domestic inflation (preservation savings), and holding the US dollar can be hedged by various financial instruments in the US capital market. The risk position (risk management) of almost any asset, holding the US dollar allows the American people to concentrate on their work, rest assured to consume, and retired with peace of mind (stable expectations). The US dollar is already the “world currency” of today. The international status of the US dollar is the most worthy value system that the US government is trying to defend.
Second, the US trade deficit looks very big. After the publicity of the US politicians and the media, it sounds even more scary. However, if you look at the US trade deficit from the perspective of currency history, you will laugh: this is no longer the gold standard era. The trade deficit will not lead to the loss of gold reserves, nor will it bring about a reduction in the base currency. It will not bring about the collapse of the monetary system and the economic recession. As a superpower with the “world currency” coinage, the United States has the privilege of imposing a “coinage tax” on people all over the world. It must also bear the trade deficit (from the perspective of currency history, the trade deficit is actually the US A channel for global currency delivery).
Let me first talk about the fact that the United States imposes a coinage tax on the people of the world. The concept of the coinage tax in the era of the banknotes is different from the coinage tax in the gold standard era. Here is actually an image metaphor. Imagine an ordinary person in a developing country, he Xin After working hard for a lifetime, he has accumulated a pension. In order to prevent the risk of depreciation of his own currency, he would rather save it in dollars. For the United States, it is nothing more than printing a stack of colorful papers. With this stack of paper money, ordinary people in a developing country can work hard for a lifetime. After retirement, they will continue to slap their own peace and happiness – this is An invisible coinage tax. Is there any more valuable privilege in this world? I am afraid there is no more.
The trade deficit is the channel and means for the United States to put money into the world! The United States has used the trade deficit to export dollars to other countries around the world. After the central banks of other countries buy the dollars sold by the exporters of the country from the open market, they can be included in the foreign exchange reserves, and then they can successfully put in the local currency. The base currency is gone.
Imagine that if the current situation is as expected by some people in the US government and the United States maintains a trade surplus with the world, then the US dollar will definitely return to the United States. The central banks of the world have less and less US dollar reserves, and the US dollar circulating in the international market. In the end, the Fed was forced to shrink its watch in order to maintain price stability, and the US dollar issued in the past was written off at both ends of the balance sheet. Will the US economy be better? What is the international status of the dollar? Can the United States also impose a “coinage tax” on people all over the world?
Therefore, “bearing the trade deficit” and “having the world currency” are two sides of the same coin and cannot be separated at all. Now, the problem is simplified: Is the United States willing to give up the world currency status of the dollar? Is the trade deficit important or the world currency important? Are these two important? For those who have a little knowledge of the background of currency history, I know what the United States wants.
Some experts believe that the purpose of the US trade war against China is to reverse the trade deficit with China. Some scholars believe that the United States will launch a long-term trade war with China in order to completely relocate the manufacturing industry chain firmly rooted in China to the United States. Go; these views have some remarkable points, but in the perspective of currency history, it is worthy of scrutiny.
The return of manufacturing to the United States seems to have reversed the trade deficit, but we have already said that the trade deficit is a must for the dollar hegemony. Instead of reducing the trade deficit, it is better to defend the dollar hegemony and let the world’s resources, capital, talents, technology and asset prices rotate according to the US dollar baton, which makes more sense for the United States.
What is currency? Money is not wealth and assets. The currency in the era of banknotes is a colorful piece of paper. Its core is a set of values, a system, a rule, and an order. For the owner of the cinema, maintaining the order of the cinema can attract people to watch the movie (please imagine the ticket as a tax on the coin), which is much more important than watching a movie in my own position! What should the United States want to move back the manufacturing industry chain? It certainly wants the value chain of the dollar system!
Having said so much about the United States, I am thinking about our own domestic situation? Is the goal we are pursuing to continue to maintain a trade surplus with the United States? of course not! “Winning the trade war with the United States in order to continue to maintain the surplus” and “by negotiation to create a more favorable external environment for the reform and opening up for a period of time”, these two goals are light and heavy? The answer is clear at a glance. The continuous accumulation of trade surplus means that the People’s Bank of China means that it needs to continue to buy the US dollar to put in the renminbi, so that our local currency distribution channels and methods rely heavily on the trade surplus. This is why our economic transformation and upgrading has been said many years later. One of the reasons for the lack of obvious results. Establishing a complete, independent, dollar-independent currency issuance system is an important mission of a national central bank. This is also the core content of the China Monetary Sovereignty Report, which our institute has recently written.
If in the course of a trade war, the primary goal of the United States is not to eliminate the trade deficit, and China’s primary goal is not to maintain a trade surplus, then how can this trade war continue? The situation of the Fed must be dilemma, because once the 25% tariff is imposed on China, it means that the actual purchasing power of the dollar will fall. In the past, American consumers spent $40 to buy a pair of good running shoes, but now they have to spend an extra $10. Doesn’t this weaken the purchasing power of dollar holders? Doesn’t this reduce the attractiveness of the dollar accordingly? Does anyone really think that the United States can reduce the US fiscal deficit by adding 25% of the tariffs on 500 billion Chinese goods? This view is stupid.
When the purchasing power of the dollar declines and the dollar becomes “hairy,” people will sell dollars-priced assets, which is even more deadly for the United States. The biggest hope of the United States is that the people of all countries are safe to hold the dollar-denominated assets and not sell them to the market. Further, if China and the United States successfully reach an agreement, the purchasing power of the US dollar will increase, and the overseas market of American companies will expand, thus pushing up the US stock market. This is in line with the fundamental interests of the “world currency” minting countries.
Having said that, my conclusion is very clear. I believe that the trade war itself is not in the fundamental interests of China and the United States, and winning the trade war is not the primary goal pursued by China and the United States. Our leaders have long said that we have a thousand reasons to do a good job in Sino-US relations, and there is absolutely no reason to ruin Sino-US relations. The thousand reasons are not the duplication of cooperation between the two countries in a certain field (such as trade), but the discovery of cooperation opportunities and potential in a thousand different new areas. Therefore, I believe that it is possible for the two countries to reach a comprehensive cooperation agreement in a wider area including trade in the near future. After all, China and the United States and the two sides benefit, the cooperation between the two countries is a gospel for the people of the world.At the beginning of last year, when the United States launched a trade war against China, I was immersed in writing "The Origin of Money". As a researcher in the history of money, I was very confused about the motives of the US move, just like witnessing a powerful robotic hand. Unplugged the plug that charges itself, and then declares that it is going to perform a "human impossible" task. International relations and trade are areas that I am not familiar with, and even my favorite history of money is full of controversy and unknown. Therefore, over the past year, I have always observed and disputed Sino-US trade disputes and negotiations. The state of thinking, rarely commented. Recently, as the United States further increased the scope of tariffs on China’s exports, I suddenly felt that I understood something. First of all, from the perspective of currency history, the most powerful weapon of the United States is the US dollar. The most precious wealth of the United States is...