Comments by "yop yop" (@yopyop3241) on "Zeihan on Geopolitics"
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On the Japan/China demographic point raised at the end: both countries have large numbers of 50-somethings. However, the Japanese are skewed towards the lower 50s while the Chinese are skewed to the upper 50s. Much more important, however is the types of work that these groups of Japanese and Chinese have spent their lives on.
The Japanese have been doing work similar to those age groups in the rest of the advanced world. They’re highly educated with lots of white collar desk jockeys and service job workers, some high skilled machinists/technicians, and relatively few blue collar manual laborers.
In contrast, the 50-something-year-old Chinese are the kids who weren’t in school because the teachers were being re-educated during the Cultural Revolution. Very poorly educated. They have spent their entire working life doing repetitive, often back-breaking manual labor.
As a result, on average, the Japanese are capable of many more years of work. They’re a few years younger, but more importantly, they’re desk workers instead of construction laborers or assembly line worker bees, and that makes it much more likely that they will be able to continue working into their 70s rather than being forced by physical breakdown to retire at around 60.
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@JonySmith-bb4gx Population decline in other countries is a big issue. But China’s population decline is going to be faster than anyone else’s. You simply don’t get a faster decline in the birth rate than you get when an authoritarian government imposes a draconian One Child Policy.
In addition, China has huge bubbles in real estate and finance. Those bubbles are intertwined with their demographic crisis. So China is going to face a triple crash— demographic, real estate, and finance. Other countries are only facing one crash, maybe two.
USA had two financial crises… and had the sense to deal with them before the demographic challenge of the Baby Boomers retiring needed to be dealt with. China lacked that sense.
China did not have a One Child Policy between 1963 and 1970. The One Child Policy was imposed in 1980. (The “Later, Longer, Fewer” policies, sometimes referred to as China’s “Two Child Policy,” were in place from 1970-1980.)
Yes, other countries experienced birth rate decline. But not as bad as China. Those other countries’ declines are another problem for China, btw. That’s a longish explanation though.
China is nowhere close to self sufficient. Are you kidding me? China requires massive imports of food, energy, fertilizers, metal ores, etc., etc. Almost everything.
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Not for China.
In the global robotics sector, almost half of the value-added comes from Japan, Germany is in second place with around 10%, then there is a glut of countries at around 2% that includes the US, the Netherlands, Italy, Korea, Taiwan, Canada, France, and the UK. China is below 1%. Factor in population size, and you can see how inadequate China’s position in robotics is. Robotics might be enough for Japan and maybe some wealthy micro nations like Singapore, but it won’t be anywhere close to enough for China.
AI isn’t there yet. Training current AIs is extremely labor intensive. Unless we have a huge unexpected breakthrough, AI isn’t going to save anyone. It will help a bit around the margins, but it isn’t a game changer.
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Only a small fraction of the value-added that is embodied in the stuff loaded onto a ship from China to the US is from China. The Chinese have nearly cornered the market on final assembly, but that’s the easiest thing there is to replace. Just reroute the complex, high value-added intermediate manufactured components that were made in Japan, Korea, Taiwan, Thailand, Malaysia, Germany, etc. to some alternative final assembly location. In many cases, it only takes a matter of a few minutes to train up a new worker for that new final assembly factory.
It takes time to work out the logistics, but companies have long known about China’s upcoming (in progress) demographic implosion, so they already have plans in motion to relocate the final assembly operations that have been China’s forte.
It’ll be fine. Definitely less disruptive than the covid supply chain snafus, where we got completely blindsided. It won’t be entirely painless, but if you were able to survive the covid toilet paper apocalypse, this will be a comparative walk in the park.
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The US is self sufficient in food and energy. Throw in Canada’s potash which has to go through the US to get to the wider world, and the US is self sufficient in fertilizers and pesticides, too. It would take a lot to collapse the USA to the extent we are talking about here.
In contrast, China is completely dependent on sources of food, energy, fertilizers, and pesticides that are at least an ocean away, and China has turned almost every country with any ability to affect transport along the way into an enemy.
The nice thing is that China likely screwed themselves with their real estate, finance, and demographic bubbles. They would have almost certainly been screwed anyway, but this way no one has to feel guilty about offing them.
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You have to be capable of playing it forward. Much of the world is facing a retirement crisis. What does that mean at different scales and going forward in time? At the country scale, a retirement crisis equates to an inability to meet its own needs. Fewer workers trying to provide for basically the same number of people. The only country that has gone through a retirement crisis so far has been Japan. The result of Japan’s retirement crisis is that Japan’s exports fell while their imports of many products rose. But that result obviously isn’t possible when it’s the entire world as a whole that will be going through this transition. So if we don’t have the outlets that Japan did what are the consequences to that happening on a global scale? And how do you expect things to play out over time?
There simply isn’t going to be enough to go around. There are going to be some major losers. Collapse level losers.
China is at the head of the list. China is utterly dependent on imports of food, energy, fertilizers, and pesticides. Worse, those inputs come from at least an ocean away. China happens to have the world’s longest maritime trade lifelines. In a world that doesn’t have enough to go around, are the desperate countries along the way going to just sit there and die passively as lumbering, defenseless modern commercial vessels carrying civilization sustaining stuff stroll along their shores? Or are they going to act like cornered savage beasts and lunge at even the smallest chance of survival?
The only country that has the combination of military might and the global network of hundreds of military bases necessary to possibly cowe the savage beasts into even partial, temporary submission is the US. And the US now sees China as enemy #1. Instead of protecting China’s trade, the US is likely to tell the savage beasts, “Look, I understand you’re getting desperate. So if you have to go after someone’s trade shipments, you might prefer to go after China’s. Just sayin’.”
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@hejohn9227 Zeihan’s prediction is for a globe-spanning collapse. China will only be one part of the collapse, but it will be the worst part. Which is entirely appropriate since China is more responsible for the coming horror than anyone else. China is going to find itself with many countries in various stages of collapse between it and the overseas resources and markets that China is utterly dependent upon. In their desperation, those failed and near-failed states are going to ensure that no one suffers more deprivation than China. China happens to have the world’s longest and most at-risk maritime trade lifelines.
In contrast, the US is self sufficient in food and energy. Add in Canada’s potash which has to go via the Mississippi to reach the wider world, and the US is basically self sufficient in fertilizer as well. Access to just about everything is far more secure for the US than for China. China is nowhere close, and the result is likely to be the death by starvation or starvation-driven violence of the majority of the Chinese population.
Countries like Japan, Taiwan, and Korea would be just as screwed as China, but for one key difference. They are all close US allies, and so they will be granted access to the US’s globe spanning network of military bases. That will allow them to use their navies to convoy the trade that they need safely past the collapse zones. The PLA lacks the overseas military bases needed to make that strategy feasible for China. It also helps tremendously that Japan, Taiwan, and Kore all have excellent relations with key countries like India and Indonesia along the way.
China chose the wrong path, and the Chinese people are going to pay a terrible price for that shortsightedness.
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@KayyHong Zeihan is right that (1) the global system has become incredibly brittle and (2) if the global system breaks, no one will suffer more than than China.
Some facts to consider:
Iran’s population has gone up by more than 5x since the end of WW2. Saudi Arabia’s population has gone up by more than 10x. The rest of the region is similar. Oil wealth is impressive, but it’s basically all they have, and it doesn’t go up exponentially. The protests in Iran earlier this year? Inevitable and just the start of the regional instability that is to come.
What do you think will happen in the Middle East if oil prices fall and/or wheat prices rise? A war between Russia and Ukraine could cause wheat prices to rise sharply. A slowdown in China from bubbles in real estate, finance, and demography popping could cause oil prices to fall sharply.
And both the Saudis and the Iranians have increased the reach of their militaries. Have you seen how hard it has been for both the Ukrainians and the Russians to defend against drone attacks? How far are their oil facilities from the other’s territory? 150 miles? Less?
What happens to China if the amount of oil coming out of the Gulf falls off drastically? Will, say, India allow China’s market power to take everything? Or will India use military force to ensure that its own needs are met first?
The US has the combination of military power and overseas military bases to compel India to stop, but will the American people support Americans fighting and dying to preserve China’s ability to import oil?
If the US doesn’t act, can China subdue India before the Chinese strategic petroleum reserve runs out? China’s reserves have been estimated to be about three weeks worth.
And what if it’s not just India, what if every country along the route is desperate to take whatever they can get? Can China beat down a dozen counties to secure its access to oil? In just a handful of weeks before its oil reserve runs out?
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@stavroshadjiyiannis6283 Pipelines for metal ores, fertilizers, coal, grain, cooking oil, etc., etc.? Good luck with that. Lol: pipelines for livestock!
It also needs to be pointed out that the current pipelines to China are only capable of supplying a tiny fraction of China’s oil needs. Further, Russian natural gas pipelines to China have so far proven to be quite unreliable. Water keeps finding its way into the system which freezes and causes problems that require shutting the flow down to fix. If Russia can’t even keep natural gas flowing, what are the odds that they’ll be able to manage the far more difficult task of keeping oil pipelines running?
Also, we’re talking about an armed conflict, right? Pipelines make for juicy targets, and their length makes them very, very difficult to defend.
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Zeihan is predicting that China collapses and takes the whole world down with it. That will hurt everyone, but it will absolutely devastate China. Especially over the long term.
No one is more dependent on the American led order than China, because no one has longer, more at-risk logistical lifelines than China. If the American led order falls, China falls. In contrast, America is not dependent on the order, because it is self sufficient in the most critical resources (energy, food, fertilizer, most metal ores), has the world’s only growing consumer market of size, and has the combination of military power and 800+ overseas military bases to secure access to whatever else it might possibly need.
If/when the American led order falls, America falls but will quickly get back up.
If/when the American led order falls, China falls and likely will never get back up again. The PRC is likely to lose three quarters of its population over the coming decade or so. How much of that will be from famine vs famine-driven violence vs famine-driven secession remains to be determined.
The saddest part of this is how incredibly unnecessary it is. The American led order has always been brittle, but it has remained strong for decades because the countries that prospered under it have strengthened it. As countries like Japan and Germany recovered from WW2, they joined the order and helped support it. Later, as countries like Korea and Poland developed and prospered, they joined the order and made it stronger. Sadly, that pattern has not held up with China.
The order is American led. The US started it, and America’s global network of 800+ overseas military bases is one of the fundamental keys to sustaining it. As countries developed under the order, they also became trusting enough and trustworthy enough to integrate with the American military and trusting enough and trustworthy enough to operate out of the global network of American bases. As the world developed and got stronger, the structure that supports the global order got stronger.
Until China. The order has benefited China more than anyone else. (How much Persian Gulf oil did China import before Deng opened China up vs how much does China import now?) But none of the core countries of the order trusts China at all. China’s reputation among the peoples of the advanced democracies is at the bottom of the barrel. China certainly doesn’t look like it is going to integrate its military with those of the main order countries anytime soon. PLA access to the American base network? Lol.
It didn’t have to be this way. As recently as 2017, the populaces of the majority of the advanced democracies had a favorable opinion of China. As recently as the mid-2010s, the US was trying to learn to integrate with the PLA to combat piracy. In 2015, the US sponsored China to acquire its first overseas military base to further that anti-piracy military integration and cooperation. China chose to take the world down this path by building militarized artificial islands, by “wolf warrior” diplomacy, by its brutal crackdown on Hong Kong, by its inability to cooperate on covid. If China can’t even be trusted to cooperate in fighting against a deadly, mindless pathogen, how can China be trusted on anything?
China is at fault for wrecking the system, and the result is going to be tragic. For the Chinese most of all.
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@pmnichols10 Russia is an empire. Resources derived from the periphery of an empire have to go to the core region/population center before they go anywhere else. It’s about control. Empires don’t trust their peripheries. Forcing all flows of money, resources, everything to go through the core is a key way they maintain control.
So, yes, huge pipelines would be a hole in the analysis, but just be aware of the fact that you’re talking about building giant pipelines from the Moscow/St. Petersburg area to Beijing. All the way across the full extent of Siberia. Compared to oil tankers, the cost of such pipelines would be absolutely prohibitive.
(BTW, China is the same way. For example, it would make a ton of economic and environmental sense to build giant solar arrays in Tibet and run the electricity over/through the Himalayas to the teeming hordes of northern India. The transmission distance is short, and electricity doesn’t care about mountains. But the center of the Chinese empire would see that as a potential economic centerpiece for an independent Tibet, so Beijing will never allow such a project to happen.
In contrast, there are no such concerns involved in any prospective projects involving American outlying territories such as Hawaii, Alaska, or Guam. And of course, America’s allies are their own sovereign countries, so of course they are free of any such considerations, too. Proves that the US is not imperialist while Russia and China are.)
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@icet6665 Value-added to the global robotics industry by country in 2019 (before the pandemic scrambled things): Japan, almost 50%; Germany, 10%; multiple countries (USA, Korea, Taiwan, Netherlands, Italy, Canada, etc.), 2%; China, less than 1%. I doubt that buying robots from Japan and Germany is going to solve China’s problems.
Youth unemployment in China is an ominous sign. That shows that employers are afraid that the resources needed to train up a new, young worker will not be recouped.
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@joem0088 Again, this would be done via a maritime militia. Same as how China pretends that it’s not the PLA harassing other countries’ fishermen, those are the actions of independent Chinese fishermen. Plausible deniability. Similar to how the Iranians are using Hamas and the Houthis to avoid most of the negative repercussions of those actions. And just like we’re seeing with the Houthi attacks, when dealing with international maritime trade, it doesn’t take much to be incredibly disruptive and inflict tremendous economic damage.
It’s ironic that it is Iran and China that have chosen to uncork the genie and start off the use of these tactics, because in the end, Iran and China are two of the countries that can and will be undone with these tactics. When these tactics are used to fracture the single global market, Iran will be screwed by only being able to sell its oil at dirt cheap prices while China will be screwed by being unable to buy oil at any price.
Iran and China don’t have any other options— they have to trade through waters that India can easily control. In contrast, the Europeans can get their oil from Africa and the Americas. Manufacturing will shift to India-friendly countries or to India itself.
The Houthis will be squelched. Whether that is done by the US or not remains to be seen, but it will happen. In contrast, who is going to squelch India once they start using these underhanded Chinese/Iranian tactics?
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He predicts decades of warfare in the Middle East. The ultimate outcome is going to depend on what Turkey and India choose to do, which is still up in the air. But in all cases, the Middle East as a whole is going to suffer very badly. With the US backing away from protecting freedom of navigation, many fewer buyers are going to be able to reach all the way to the Middle East. With so many fewer buyers, it will be a buyer’s market. If you can reach the Middle East, you’ll be able to buy oil for barely enough to cover the production cost. The countries of the Middle East are going to find themselves with way more people than they can feed.
At the same time as oil is dirt cheap in the Middle East, the countries at the far end of the line, countries like Germany and China, are going to find that they can’t buy oil even at $1000 per barrel.
The split in price between dirt cheap at the source vs crazy expensive at distance is the way things have been for most of human history. For example, in centuries past, porcelain that was common enough to be used by ordinary merchants in China was beyond the reach of anyone except kings and queens in Europe. We are going to revert to that normal. But instead of the fracture of markets being constrained to luxuries like porcelain teacups for sovereigns, it is going to be in everything, including the resources that allow a country to sustain an industrialized system.
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National-debt-to-GDP figures look good for China, but that’s just a number on a spreadsheet. What matters is what that number represents. For most countries, it’s the national government that is mostly responsible for key services like education, healthcare, the retirement safety net, and infrastructure. That’s the stuff that matters, and so the national government’s ability to provide that stuff in light of its debt situation is what matters.
In the US, that’s actually incorrect. In the US, state and local governments are responsible for a lot of that stuff. But we’re still OK just using the US’s national debt numbers and ignoring state and local government debt because the US’s state and local governments are highly constrained by law against carrying significant debt. So mathematical precision demands that we consider the US’s state and local government debts, but since those values are constrained to be nearly zero, we can get away with just using the US national debt figure.
In China, the situation is totally different. In China, the provincial and local governments are responsible for almost all of the stuff that matters. In addition, to pay for that stuff, the provincial and local governments have tallied up huge amounts of debt. So to understand China’s situation with respect to the stuff that matters (education, healthcare, retirement, infrastructure, etc.), we can’t just focus on China’s national debt, because that’s not the number that matters.
The 350% number that Peter gives is a reasonable estimate, but the reality is that no one really knows. The Chinese provincial and local governments have purposely used very opaque borrowing methods to disguise how much debt they have built up (and how much the government officials have pocketed themselves).
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@JonySmith-bb4gx China’s demographic data is publicly available. The first babies conceived after the Great Chinese Famine (1958-1962) just turned 60 over the last several months. The post Great Chinese Famine Baby Boom generation was almost all born between 1963 and 1970. Famine ended in 1962, and it takes most of a year to pop out a baby. Thus the start of the Baby Boom in 1963– first Chinese Boomers turned 60 over the last year (1963 + 60 = 2023). The Chinese Baby Boom ended when Mao started to bring in the “Later, Longer, Fewer” policies in 1970, so the youngest Chinese Boomers turn 60 in 2030 (1970 + 60 = 2030).
Experience from all corners of the globe, even in countries with retirement ages above 60, even in countries with no retirement system at all, has found that people who have spent their working lives as manual laborers tend to retire between 58 and 61. China’s Boomers have almost all spent their working lives as manual laborers. So by 2030, the Chinese Boomers will almost all be retired.
China is in the very most nascent part of their retirement crisis. The pressure is going to get much, much, much worse over the coming few years.
Collapse by 2030.
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Xi has reportedly purged between 2 and 2.5 million people, starting with almost everyone of any significance from the two main CCP power blocks since Mao’s death but also extending to anyone with any influence from any walk of life. And keep in mind that Xi was a small fish compromise candidate, chosen because each of the two main factions thought they could take control of him and use him as their puppet. Xi only has a relative handful of his own people.
In the US, when a new President is elected, they bring their most trusted people with them, but that’s probably only a few dozen people at most. A President is responsible for appointing ~4,000 people, over 1,000 of whom are important enough to require Senate approval. Where does a new President turn to find the appointees that they need? Obviously, they look to the top people in the country, especially the ones who have worked their way up in their own political party.
Now do you see the problem?Xi has purged the top 2-2.5 million people. There’s evidence that Team Xi is struggling to run the country. It’s just too big for Xi and his small band of trusted, experienced people. But what comes next is likely to be far worse. There’s a huge leadership/experience/competence/influence vacuum behind Xi, and Xi appears to be too paranoid to allow anyone to grow to fill that vacuum.
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Currently, the US is paying a negative real interest rate on its debt. Hard to imagine that triggering any sort of collapse. That negative rate means that US government debt is currently a source of strength, not weakness for the US.
And of course, US debt is in US dollars, so the US always has the backstop option to just print more dollars to pay off its debts. That wouldn’t be completely painless, the US would experience some inflation via the impact on exchange rates, but as the least trade-involved country in the world relative to GDP, the US’s pain would only be a small fraction as bad as most people probably imagine. Much of the pain would be dumped onto countries that hold US dollars and rely on exporting to the US for a major part of their economic well being.
It should also be pointed out that the US system is believed to be reliably transparent. There are no rumblings about under appreciated risks like there were in the lead up to the 2008 financial crisis and like there currently are with China’s local government financing vehicles.
All in all, the US’s debt position seems stable. It could definitely be better, and the observed pathetic return on the tax cuts over the last thirty years says that it should be better, but short of a complete black swan event, there doesn’t appear to be any risk of a US debt driven collapse.
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This isn’t a “make a trip to see the real China” thing. This is a “take a step back and look at the global perspective “ thing.
The global system has become incredibly brittle, and China’s exposure to the possible failure of that system is extreme. China’s bubbles in real estate, finance, and demographics are a major part of the brittleness. So is US debt and discord. So are the wars in Ukraine and Israel. So is aging in Europe, Japan, Korea, Thailand, etc. So is the population growth in Middle East countries in the last 70+ years (Iran’s population has increased by more than 5x; Saudi Arabia’s by more than 10x).
There is little strength in reserve anywhere to hold the global system together anymore. If China and Russia had joined the global order and integrated to the point that Russian and Chinese military forces were welcome to run operations out of US military bases, the system might still be sustainable. But that obviously didn’t happen, so the system is going to break sooner or later. And when it does, the resulting avalanche is going to come crashing down on China harder than anyone else.
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lol. No, actually you wouldn’t. In a nutshell, his thoughts on the border are, “Trump is an idiot.”
The wall makes it harder to get five feet into the US. Instead of just stepping across, now you have to spend a couple of minutes using a rope or a ladder. But on the other hand, the roads that were built to bring in the materials to build the wall make it much, much easier to get into the rest of the US. Instead of spending days trudging across uninhabited desert to get to a road, now the road is right there, so you can meet up with a criminal with a car right away. Couple of minutes climbing a rope or a ladder vs days of trudging across open desert.
Trump and his enablers in Congress did more to fling open the doors at the border than anyone else ever. But, hey, it made for a good photo op, and that’s all that matters, right?
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The USA and the rest of the advanced democracies are the real reason for the end of China’s Century of Humiliation. In a world that has unlocked the techs that allow industrialization, it is China’s natural condition to be prey. China happens to have the world’s worst access to the resources necessary to support an industrialized economy. No other country has to go further afield than China to acquire oil, food, and fertilizer. Luckily for China, the US and the rest of the advanced democracies decided to create the rules based international order. That order is why the industrialized countries stopped preying on China. That order is why freedom of navigation exists which is why China is able to access the resources needed to become industrialized.
Which is why it is so incredibly, incredibly stupid for China to side against the advanced democracies and work to undermine the rules based international order. Industrialization is not going to go away. If the rules based international order falls, and we return to a multipolar world like the world has had from “ancient times” up to WW2, China will fall back, deindustrialize, return to being prey, and enter a new Century of Humiliation.
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Do you realize that a couple of years ago when China was feuding with Australia (over the Aussies having the temerity to suggest an unhindered investigation into the origins of covid), China decided to buy a load of coal from Kazakhstan? Shared border, completed BRI links. Kazakhstan’s biggest city of Almaty runs on coal, has a robust system to bring in coal from the rest of the country, and is less than 200 miles along the BRI rail line to the border with China. So of course China’s load of coal originated in Almaty and arrived by BRI, right? Nope. Cheaper to grab coal located at the other end of Kazakhstan, and put it on a ship. River to the Caspian Sea. River to canal to river through Russia to Sea of Azov, Kerch Strait, and the Black Sea. Turkish Straits to Aegean Sea to Mediterranean to Suez, Red Sea, Indian Ocean, Malacca, South China Sea, Taiwan Strait, and eventually to its destination in a Northern Chinese port.
Ships are waaaaaay more efficient/cheaper for transporting commodities than any other option.
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@DianeMerriam Makes sense to leave out China, because they impose capital controls that prevent their companies from operating subsidiaries outside of China. Prevents capital flight, but also prevents them from taking advantage of this sort of potential opportunity. Russia and North Korea aren't worth mentioning, because neither has a significant position/expertise in this area. If you're worried, you can impose specific sanctions keeping China/Russia/whoever out.
Isn't F-35 manufacturing spread across more than half a dozen countries? Having an American subsidiary of a Japanese company manufacturing ships inside the continental USA is a significantly smaller national security weakness, imo.
And again, we aren't talking about what the situation is at this moment. We are talking about the future. In the future, the USA is projected to have advantages in both energy and labor costs due to demographics, shale energy, renewable energy, and likely carbon taxes.
In any case, I think it is far more likely that the geopolitical trends will make the Jones Act obsolete long before the US Congress will get off its giant collective derriere and fix this.
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@DianeMerriam My point was to discuss the fact that the world is in the process of transitioning to a new normal. For the last several decades, we have lived in a world that featured tons of cheap East Asian labor, easy access to energy and mineral resources from Russia, the US as the world's biggest energy importer, and no concern for the carbon content associated with producing anything. We are in the process of transitioning to a very different set of conditions, and the result is going to be a new normal that is going to be correspondingly different.
That new normal may include a return of shipbuilding to American shores. Cheap American energy has already spurred a bit of turnaround in American steel production capability. In the US from 2009 to 2017, the number of big, "integrated" steel plants (the ones that can turn iron ore into pig iron and virgin steel) fell from 13 to 9. But from 2017 to 2021, with shale oil and gas reaching maturity and driving down American energy costs to the lowest in the world, that number has rebounded somewhat from 9 to 11. And if American steel production is already becoming more and more competitive, it seems likely that American shipbuilding will also become more competitive.
Who else is there to pick up the mantle? There is little doubt that the East Asians are going to have to give it up. Between their baked-in-the-cake plummeting demographic profiles over the next few years, and their dependence on Chinese coal-dependent steel production, there is little doubt that they won't be able to keep the shipbuilding industry in East Asia. Shipbuilding is going to move, the question is, where is it going to go? My bet is that it will come here to the US.
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Zeihan has been saying that China would collapse by 2030. He has always referenced the Chinese retirement crisis as the backstop for the death of China. The oldest Chinese Boomers just started to reach retirement age (60 years old) within the last few months. By 2030, the Chinese Boomers will basically all be retired.
The overwhelming majority of China’s Boomers were born between 1963 and 1970. They had an absolutely epic baby boom when they came out of the Great Chinese Famine (1958-1962). That baby boom was capped off by the introduction of the “Longer, Later, Fewer” policies starting in 1970 which limited families to two children, a mark that most families had already reached during the unrestricted baby boom years. From there, by the time those Chinese Boomers were old enough to have kids, the One Child Policy was in place.
Net result is that from 2023-2030, China faces an absolute tidal wave of retirements, and because of the One Child Policy, there won’t be enough workers to do much of anything except “996” (Chinese work culture = 9am to 9pm, six days per week) changing adult diapers.
There’s no way out, either. The first generation born under One Child are in their upper thirties now. Even if they wanted to pump out a couple hundred million babies over the next couple of years before the retirement crisis shifts into high gear, they probably wouldn’t be able to. So the earliest that China will be able to even hypothetically try to start addressing this population problem is with the second One Child generation who are all still minors. Zeihan’s prediction is that the retirement tidal wave driven collapse will preclude any such potential progress. So now we’re out to what? The 2070s or 2080s before they could even potentially start to rebuild the Chinese working age population?
China is screwed.
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That’s what he is arguing. Globe-spanning collapse. Weaknesses and instabilities everywhere— in China, in the US, in Europe, in the Middle East, everywhere. Like a landscape of tinder-dry vegetation, fire/collapse is going to sweep through and lay much of the land bare.
The US will come through singed but largely intact. Self sufficient in energy, food, and fertilizer gives resilience against the incoming wave of fire/collapse. So does the combination of the world’s strongest military and 800+ overseas military bases.
In contrast, as the country with the world’s worst access to energy, food, and fertilizer— no one has longer and more at-risk critical logistical lifelines than China— China is going to be entirely consumed by the fire/collapse and likely will never rise again. Zeihan is predicting that more than half of the Chinese alive today will be consumed by the fire/collapse and that there is a strong possibility that we will be witness to the end of the Chinese Empire, similar to how the Roman Empire fell to be replaced by the array of countries and ethnicities that we know today.
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That fits with Zeihan’s hypothesis. The entire world, including the US, is becoming more and more brittle. No one, including the US, has the strength in reserve needed to hold the global system together in the face of a serious crack.
The global demographic crisis that is worst in China but which applies to almost all of the world’s significant economies is certain to create such a crack. As a result, Zeihan predicts that the entire global system is going to come crashing down at some point in the next few years.
Everyone is going to fall. Everyone is going to take damage. But the countries that will fall the furthest, take the most damage, and stay down the longest are the countries that have the longest and most at-risk logistical lifelines to acquire energy, fertilizer, food, and other critical inputs to support an industrialized economy. China has the globe’s worst position and so will fall the hardest.
In contrast, the US is self sufficient in energy, fertilizer, etc. and has the combination of military power and a global network of hundreds of overseas military bases to allow it to acquire what it needs. The US won’t fall anywhere near as far or anywhere near as hard. And in the aftermath of the crash, while most of the world is still racked by famine and war, the US will have the opportunity for explosive growth thanks to the crash cutting down the competition.
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@leezhieng No, China’s problems are far worse. For starters, you simply don’t get a drop in the birth rate bigger than with an authoritarian government imposing a draconian One Child Policy. China has just started to see the effect. The oldest of the post-Great Chinese Famine birth cohort started turning 60 over the last several months. The “4” from China’s “4-2-1” demographic structure have just started to retire; they will almost all be retired by 2030.
In addition, Japan was able to increase the workforce participation rate to offset some of the decline in the working age population. At Japan’s peak, it was the norm for women to become stay-at-home housewives/mothers upon getting married. As the labor supply became constricted, Japan was able to compensate by bringing women back into the workforce. Shinzo Abe said that increasing the women’s workforce participation rate was the greatest success of his tenure as Prime Minister. China doesn’t have that buffer available, because Chinese women already work. Japan’s peak was stunted by removing women from the workforce, but Japan’s fall has been cushioned by bringing women back into the workforce.
In addition, Japan is much, much better at automation than China is. In the global robotics sector, almost half of the value-added is contributed by Japan. China is less than 1%. (Germany is #2 at 10%. Then there is a slew of countries at 2% that includes the US, Canada, the advanced European countries, Korea, and Taiwan.) A major benefit of automation is that the dearth of human workers allows remote factories to be viable, even halfway around the globe. The biggest and most profitable Toyota factories these days aren’t in Japan. They’re in Kentucky and Texas. But that’s a strategy that China can’t capitalize on, because China fears having those sorts of overseas assets seized. Japan is way ahead in automation, and their friendly relations with the countries of the big consumer markets in the advanced world allow them to profit from automation in a way that China cannot.
On that note, Japan’s friendly relations with the countries of the advanced world ensures that they are at no risk of being cut off from advanced microprocessors or other tech. China’s situation is obviously far worse for tech access.
Japan’s real estate bubble popped in 1992. Their Boomers didn’t retire until the 2010s. Japan had the luxury of facing those challenges one at a time. China has set itself up to face both at the same time.
Where Japan has stalled out, China is going to regress. Hard. Chinese collapse is the most likely outcome.
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@gliu1431 Nope, China undoubtedly has far more debt than the US. Sum up the national government debt, local government debt, and local government financing vehicle debt for both countries, and China’s total is definitely far higher. In addition, China’s banking sector has more debt. China’s household debt even recently surpassed America’s which is totally astounding. Then you have to consider the implied debt of Chinese expectations that the CCP will not allow real estate prices to fall.
The only comparison where China comes out ahead is if you limit the comparison to national government debt. But that’s a pointless comparison. The value of the national government debt isn’t what matters. Just a number on a spreadsheet. What actually matters is the country’s ability to provide critical government services. Things like education, infrastructure, police protection, security from invasion, etc.
For most countries, it’s the national government that provides all of those government services, so it makes sense to look at the national government debt.
For the US, that’s not quite right, because in the US many core government services are provided at the state and local government level. For the US, you should account for state and local government debt. In practice, we usually don’t bother, though, because US state and local governments are forbidden by law to carry much debt. Those terms are small compared to the national debt, so it doesn’t affect the bottom line to ignore the state and local government debts. As a result in practice, we usually just look at national government debt when evaluating the US.
In China, as in the US, many government services are provided by local governments. But unlike in the US, China’s local governments have racked up huge amounts of debt. To assess China’s ability to provide critical government services, you have to account for those debts. How huge are they? No one knows. Local government financing vehicles were designed from the start to be non-transparent. But that lack of transparency should terrify the Chinese public. Graft and corruption have the ugly tendency of being far worse than you expect even when you try to take into account that they are probably far worse than you expect.
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@icet6665 The PRC is going to collapse within the next seven years. And it’s entirely self inflicted. China’s housing market, debt, and demographic problems lie entirely at the feet of the CCP. With autocratic governance, a collapse was inevitable, but this? This is going to be heartbreakingly awful.
BTW, Zeihan is 50 years old, if I remember correctly. He’s younger than the “4” in China’s “4-2-1” demographic structure. If you honestly think he’s at major risk of Alzheimer’s, maybe it’s because Alzheimer’s has been running rampant through the Chinese Boomer cadre? Did you just let the curtain slip? Has China been covering up another huge epidemic? This time, instead of covid, it’s Alzheimer’s? Actually, this would explain a lot…. And medical science still hasn’t nailed down the cause of Alzheimer’s…. China has had incredible levels of air and water pollution…. Then there’s the incredibly sketchy Chinese food supply….
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Zeihan has always put China’s expiration date at 2030. Could be earlier if they shoot themselves in the face, but 2030 is a hard deadline. 2030 is based on their retirement crisis and has been locked in since back in 1970 when the last of the Chinese Boomers were born without constraint by CCP family planning restrictions.
Japan has had a lot of advantages that China lacks.
First, Japan’s birth rate didn’t collapse as fast. With natural progression, you simply don’t get a collapse in the birth rate as sudden as the instantaneous imposition of draconian authoritarian family planning restrictions.
Second, Japan has been able to partially offset its decline in working age population by increasing the workforce participation rate. At Japan’s peak, it was normal for women to leave the workforce upon getting married. In the last couple of decades, Japan has made major strides in getting more work out of its female half of the population. Japan’s peak was stunted by its women not working, but the underutilized spare capacity has helped to greatly cushion Japan’s fall. China doesn’t have that spare capacity, because Chinese women already work.
Third, when Japan was thriving, Japanese workers received big pension payouts upon retirement. In essence, instead of taking the full salary that they were entitled to, Japanese workers kept part of their money with their employers which then got returned to them as their pension at retirement. It’s easy to see how worker savings that are left in the hands of, say, Toyota can be turned into automated systems that can allow Toyota to survive with a retirement crisis driven decline in the size of the workforce. In contrast, Chinese workers savings are mostly tied up in the form of real estate. There is no good way to turn condos into industrial robots.
Fourth, Japan is waaay ahead of China in robotics. Almost 50% of the value-added in the global robotics industry comes from Japan. China provides less than 1%. (Germany is #2 at 10%, then there’s a bunch of countries that includes the US, Korea, Taiwan, the Netherlands, Italy, etc. at around 2%.)
Fifth, Japan’s decades of stagnation came during a period of global peace, low inflation, and low capital costs. Japan was never cut off from tech or sanctioned. China is facing the opposite.
There is no chance for China to do as well as Japan has.
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Zeihan has always put China’s “dead by” date at 2030. It’s based on the Chinese retirement crisis. By 2030, almost all of the “4s” from China’s “4-2-1” demographic structure will be retired.
With each Chinese Boomer that retires, the risk ratchets up that China’s bubbles in real estate and finance will go into full meltdown.
From there, China’s economy is so big that China’s meltdown is almost certain to drag the global system down with it. Part of the certainty there is because resilience of the global system has also been eroded by the weaknesses in the advanced democracies.
When the global system breaks, everyone will suffer, but no one will suffer worse or for longer than the Chinese, because China happens to have the longest and most at-risk logistical lifelines on the planet. When the global system breaks, China will be the poorest, least industrialized country on the planet. A country of subsistence farmers. Powered by human toil, fertilized with human feces.
Since the carrying capacity of China’s land under subsistence agriculture is probably only about half of the current population, that means massive famine and likely civilizational collapse. And this sort of population reset never settles easily at the new carrying capacity. A reset like this almost always overshoots….
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Compare the situation in China vs in the US. The US government is far more robust.
When a US President is elected, he appoints ~1,500 people at the top of the government. He’ll undoubtedly only have a dozen or two of his own close trusted, experienced people, so where do the rest of those ~1,500 appointees come from? The answer is that each of the two big political parties has a stable of ~10,000 reasonably competent, experienced people that a newly elected President will draw from.
Those numbers— 1,500 and 10,000– provide continuity and robustness.
Compare that with the current situation in China. Xi was a compromise candidate, not part of either of the two main CCP factions, and since taking power, Xi has apparently all but completely gutted the two former main factions.
That leaves China with just Xi and his one or two dozen people. There are no longer any stables of 10,000 competent, experienced people to draw on to staff the top 1,500 positions. There’s strong evidence that Team Xi is incapable of governing fully effectively.
And the next leadership groups are likely to be even worse. At best, you’ll get continuity but with a likely lesser man at the top. What are the odds that one of Xi’s longtime followers is as good or better at leading than Xi? At worst, you get a prolonged period of internecine conflict, possibly exploding into complete chaos.
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China has inflated giant, intertwined bubbles in demographics, real estate, and finance. China’s position is incredibly precarious.
In addition, global stability, especially the global energy market, has also become incredibly precarious. Another giant house of cards. China is a giant house of cards in the middle of a globe-spanning house of cards.
Worse, those houses of cards have a “doomed by” date. That date is 2030. By 2030, the “4” from China’s “4-2-1” demographic structure will almost all be retired. China’s retirement crisis is certain to bring the giant, interwoven houses of cards tumbling down.
As the country with the longest, most threatened supply lifelines in the world, China is destined to suffer more than any other country in the coming desperate scramble to acquire the resources needed to survive.
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@karatsurba4791 Spoken like someone from a country with no real friends or allies.
The US military has been in Japan and Germany because the Japanese and Germans have wanted the US military in Japan and Germany. All the Japanese and Germans ever needed to do to eject the US military is ask. Look what happened when the Philippines asked the US to leave. They packed up and left.
Anyway, the Japanese, German, and American populaces know that their countries are friends and allies, and theirs are the only opinions that matter.
That sort of real friendship is the greatness of democracy. When accompanied by all of the necessary institutions like freedom of speech, freedom of the press, an independent judiciary, etc., democracy is the most transparent form of government ever devised and implemented at scale. That transparency, allowing anyone, even outsiders, to see the underlying workings, allows trust to grow. In turn, that trust allows real friendship to blossom. It is no coincidence that the world’s mutually demilitarized borders have all been between healthy democracies.
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Have you read the UN Charter? The good nations of the world are supposed to come together to protect human rights and fight against countries and groups that threaten global peace and order. Most US interventions are the system working properly. Chinese non-contribution and piggybacking on the benefits of global order is just another example of China leeching off of others.
This kind of Chinese parasitism is a big part of why the US has begun to view the global order as a failed experiment and is pulling back from the parts of the world that don’t factor into US interests. For example, the US doesn’t trade much through the Red Sea. Those waters matter much more to China, Europe, and India. Against the Houthis, the US is stepping back, and security for those waters is being turned over to Europe and India. Control of those waters is being turned over to Europe and India.
That’s just the start of a long term trend. The Indian Ocean overall is going to be turned over to India. The Western Pacific is going to be handed off to Japan.
Since WW2, the US has ensured free access to all of the world’s oceans. Free from pirates, free from transit fees. For everyone. Going forward, we’ll see how the new owners of the Indian Ocean and Western Pacific choose to play it. Maybe they’ll continue to offer free access to everyone. Or maybe the new owners will charge big transit fees and play favorites: charging a pittance to friends and allies, charging exorbitant fees that basically completely block unfriendlies. We’ll see how it goes.
Hmm. India and Japan. I wonder, which countries do India and Japan view with suspicion?
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@amunt3r China’s automotive industry is likely another bubble. The Chinese government pumps tons of debt-derived capital into the industry, and those companies use that money to pump out vehicles. But the thing is that the profit margin on each sale is currently razor thin, maybe even negative. At some point, those companies need to transition to making real profits. Otherwise, when the capital dries up, those companies will collapse along with the rest of China’s giant house of cards.
Automation isn’t a one-off. You need a constant cash flow to retool your robots with every new product or tweak to an existing product line. With, say, Toyota, that cost is covered from the earnings from the sale of each unit. Currently, Chinese manufacturers cover that cost using debt-derived government support. That’s not sustainable. It’s another bubble. When the cash flow stops, that’s just another bubble that will pop.
And there is no doubt that the bubbles are going to pop. China’s retirement crisis, the retirement of the “4” in China’s “4-2-1” population structure, puts a cap on how long the bubbles can possibly survive. That cap is 2030. By 2030, the majority of China’s “4” generation will have retired.
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Biden’s big legislative accomplishments are all very “America First.” Lots of requirements and incentives to prioritize Made-in-the-USA and made-within-NAFTA components and equipment.
In addition, the Biden Trade Office has greatly increased its enforcement activities. Tons of positions that were left empty through the Trump Administration have been filled. That’s lots of trade lawyers hired and bringing cases against companies/countries that have been getting away with failing to live up to the requirements of trade deals.
Trump talked big, but his execution sucked.
In particular, Trump’s trade war was a predictable disaster. We knew for certain that his moves would trigger automatic WTO penalties. For f’s sake, US trade lawyers authored the majority of those provisions. Giant “L” for the USA. But, hey, it was good for Trump politically since most voters never look beneath the surface, and that’s all that matters, right?
Trump’s only significant legislative accomplishment, the Tax Cut and Jobs Act, was also a disaster as measured by an “America First” yardstick. The most important provision in TCJA was the slashing of the capital gains tax for stocks. But about 40% of US stocks are owned by foreigners, so the TCJA was a giant boon to wealthy foreigners. Run up the US deficit and the national debt to put money into foreigners’ pockets? Anyone who believes in “America First” should be horrified.
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What people fail to recognize is that China is not facing a bunch of big problems. China is facing a single gigantic, multifaceted problem.
People talk about China’s debt, housing market, and retirement problems like they’re separate things. They’re not. They’re all tightly intertwined with each other.
For example, 70% of China’s wealth is tied up in residential real estate. What is the #1 reason that people save money for? To pay for retirement. So when their Boomers retire over the next few years, it is a certainty that they will try to sell off some of their real estate to pay for things like food and medical care. That massive surge in selling due to the massive surge in retirements will be a massive surge in downward pressure on real estate prices. But the Chinese people are completely convinced that the CCP will never allow real estate prices to fall. The CCP has fed into that perception, so there is an implicit, unwritten guarantee there that will trigger massive political blowback if it is broken. Preventing real estate prices from falling would be an absolutely gargantuan task. We would be talking about pumping something like $50 trillion into the sector. That’s “trillion” with a “t.” The only way they could scrape up that kind of cash is via massive amounts of debt.
Their problems with debt, real estate, and retirements are all intimately intertwined. They have combined into an absolutely massive problem that is far worse than the sum of its parts. The timer on this bomb is set by their demographics, the retirement timeline of their Boomers. That timer was locked in back when the last of their Boomers was born more than five decades ago. That timer hits zero by 2030.
China is dead man walking.
Oh, and then there’s the whole “global freedom of navigation is unraveling” thing. That will ensure that they will never have a chance to rise again.
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Yes, that is what he is predicting. Wide scale collapse that spans the globe. China’s problems with demographics, debt, and asset bubbles are especially bad, but they are nowhere close to unique. Those problems are going to collapse the global system that we know and set off a global scramble for resources. China happens to have the world’s longest, most precarious supply lifelines, so China is going to come out worse than anyone else in that scramble.
Zeihan is predicting that China’s especially bad bubbles in demographics, real estate, and finance mean that China will fall especially hard in the beginning. The result will be the destruction of the current global system and the triggering of a feeding frenzy that will strip any remaining flesh from China’s bones for the foreseeable future.
In contrast, some countries are going to come through the upcoming globe-spanning collapse relatively unscathed. At the top of the list of such countries is the US. The US doesn’t have enormous bubbles and is self sufficient in food and energy. Further, the combination of the US military with the US’s 800+ military bases ensures that the US won’t face any truly crippling shortages even during the coming scramble. The US will have to deal with a few years of very high inflation in specific manufactured products from fubared supply chains as large swathes of the world collapse, but Americans will never suffer from a serious lack of any basic necessities.
Zeihan is predicting that billions around the world are going to die awful deaths of famine and war with a disproportionate number of those deaths being concentrated in China. The US is not going to come out of this totally unscathed, but compared to the effects of mass famine or civil war, deaths from supply chain problems in specific medicines or electronic devices will be almost inconsequential.
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US debt-to-GDP ratio has improved by 10% over the last 12 months, and the US is currently paying a NEGATIVE real interest rate on its debt. Foreigners are paying the US for the privilege of lending money to the US government.
US factory construction has doubled over the last 12 months and is now at rates not seen since WW2.
Imports from China are down by 20% over the last 12 months. The US now trades with each of the EU, Mexico, Canada, and ASEAN more than it trades with China.
In an industrialized world, China’s natural state is what we saw during the so-called Century of Humiliation. US power and the US creation of the rules based international order gifted China with a reprieve, but China’s abuse of that order has convinced the US to stop giving China undeserved gifts. Back to Centuries of Humiliation for China.
China happens to have basically the world’s worst access to the resources that a country needs to be industrialized. The US created order gifted China with the same access as everyone else. That is ending. Being cut off from advanced microchips is just the start. Before long, China will be cut off from SWIFT and global finance. Eventually, China will be cut off from freedom of navigation. For Centuries. Of Humiliation. Except there’s nothing to be humiliated about. That’s just the way the universe is. China is going to return to its natural state as an economic backwater, the country that mothers all around the globe tell their small children, “Eat your vegetables. There are starving kids in China who would love to have them.”
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@Jokstaify The value of the USD is largely about the value of the goods and services that the US produces. Many of the products on the market were designed by Americans. If you want products with that design, you have to pay for that design service with USD. The manufacturing process for making those products was probably developed by hyper skilled American engineers. If you want that high end manufacturing, you have to pay in USD. US agriculture is incredibly productive. If you want US corn or soybeans or whatever, you have to pay in USD. And on and on.
In addition, the US is the most reliable currency out there. China and Japan have strict currency controls, and they have both routinely manipulated the value of their currency. The Euro turned to mud during the 2008 financial crisis because every Eurozone country had some control which meant that there was no coherent control. After that you’re in to countries like India, Brazil, Mexico, Indonesia, Russia, Turkey, etc. that have been guilty of badly mismanaging their currencies in the recent past, so no one trusts their currencies to be a reliable store of value. For currencies that are seen as reliable, you’re down to countries like Canada, Australia, and the UK. Those countries reliably move in lockstep with the US on sanctions, and they don’t have the volume of the USD, so they come with proportionally greater volatility.
The Chinese think that it’s unfair that the US can threaten to cut them off from Swift. Americans think it’s unfair that China can manipulate its currency to give Chinese workers a cost advantage over American workers. What most people fail to recognize is that these are two sides of the same coin.
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