Original Article Titled: “China Is Taking Steps Toward Global Economic Dominance”
In simple terms, the world economy is changing rapidly. China has taken innocuous yet noticeable steps globally with it’s currency the Yuan. If the global market becomes ever more unstable or dilapidated then they will do whatever they can to fill any gap to their advantage. This has happened commonly at the expense and detriment of both European and American economies. For now, the US and Europe still claim great sway over global trade, banking and currency. However China is silently encroaching upon all of these claims.
Below are a few ways this has been done…
~Manipulation of Currency~
Currency manipulation occurs when countries sell their own currencies in the foreign exchange markets, usually against dollars, to keep their exchange rates weak and the dollar strong.
What this does is increase that nations(China’s) international competitiveness. Subsequently the negative effects of this can be seen namely in the form of the millions of jobs lost in the US among the sectors of the US economy closely tied to exports. Specifically within the industries of manufacturing and energy, though other factors such as State and Federal regulations have an large effect as well.
Many nations have taken part in such self serving currency manipulation with China being the biggest offender due to the size of their economy. Every day more examples of this back the premise that China will use whatever means possible to attempt to dominate global trade, operating without constraints even if it means risking global economic stability.
~The Chinese Yuan has became a World Reserve Currency~
At the start of October the Yuan was officially adopted by the International Monetary Fund or IMF as a reserve currency. It is still behind the dollar and Euro and pound however recent developments may change that in years to come.
“It’s an irreversible path towards opening up, integrating into the global economy and playing the economic game by the rules,” -IMF Managing Director Christine Lagarde
Since 1999 there have been four reserve currencies: the US dollar, the Euro, the British pound, and the Japanese Yen. This development is a sign that the Chinese Yuan is gaining strength and that their economy may be on the brink of an evolution. Entire ghost cities have even been built in possible prep of the ultimate attempt at central planning. In history there have been various primary reserve currencies. Currently across earth it is the dollar. However after nearly 90 years of holding that status could it be at the start of its decline?
~Euro In Possible Decline~
The European Union has seen a period of instability as of late. As member nations need to be bailed out their currency will suffer. This could strengthen both the dollar and other currencies in both the short and long run. Brexit once it goes into full legal swing could shake up the world markets further.
British Pound In Decline?
In the United Kingdom around the time of Brexit the pound hit a 31 year low back in June. After which some predicted a recovery. Instead, in recent weeks there were further major overnight drops. In fact it at one time dropped a full 8% in value in only eight minutes from $1.26 to $1.1491. A massive plunge in a market where a single cent change has a reverberating ripple effect across economies. Ian Johnson, a foreign exchange strategist at the financial analysis firm 4Cast commented the following on the event.
“I’ve been trading the pound since 1978 through every crisis it has seen, and I’ve not seen anything like this.”
The threat of a flash crash has been shown to clearly exist. In this case it mostly bounced back within the day. Some blamed a rogue algorithm and others a rogue trade. Either way it proves that stability in these times of fiscal turbulence is an illusion at best.
Can America Remain The World Superpower?
The 21st century will belong to either the U.S. or China. Since 1871 The United States was the world’s greatest economy. Now…well you can observe the graph above for your answer.
If the US does not change it’s current course it will not remain the worlds one true superpower and strongest economy. Over the past decade while trillions was spent in the middle east and other failed investments, China moved ahead without much distraction from the U.S.. As a result it became the second largest economy on earth and now has surpassed the US on paper in GDP based on PPP. However the numbers are not as bad as they first appear. The US is still the far ahead in terms of per capita GDP, which reflects living standards and the quality of life for a nation’s people.
When it comes Russia since the aftermath of the collapse of the USSR it has now regained its footing under the leadership of Putin and is now the eighth or so largest economy on earth. These two nations are working actively together against both the economic and foreign interests of the United States worldwide. Slow and steady does not win the race therefore we must pick up the pace. The US must stand up for itself while it still can and take quick decisive actions for the interest of this nations economic future.
~After The Election~
Even as Trump gained electoral votes the world markets began to react rapidly. The American dollar rose in value and the Mexican Peso dramatically dropped. Certain stocks went up and down as people found their industries more or less valued by the new administration.
A Forbes writer went as far as to proclaim that now the US would soon again dominate the world economy due to a new strong foreign policy and other factors that have arisen. Under an economy that will not be left to the fate of the invisible hand but rather Trumps hand, a hand which attempts to bring back corporations and threatens tariffs if they do not.
How the world will respond to Trump’s policies is still developing. For starters China took immediate moves within their banking system. Then also preemptively increased tariffs on ethanol, possibly shutting US companies entirely out of their markets within those industries. Germany has continued the repatriation of their gold reserves by the hundreds of billions.
In short, the world seems to prepping itself for the economic consequences of a United States that will no longer tolerate as much ‘free’ trade flowing in and out of its borders. This could well be the start of a economic cold war with a full blown trade war on the heated horizon.
It’s a game of chicken with economies on the line.