Publication in Russian on the Zen blog
https://dzen.ru/a/Zp5B-tZQ5lzDpLos
What determines the strength of a fiat currency? Quantity Theory of Money, ISLM Curve, New Consensus, Austrian School, Swedish School, Monetarism, Chicago Boys, etc. In this post, we will look at whether the Chinese Yuan will dethrone the US Dollar, Euro, Pound Sterling, Swiss Franc, and Canadian Dollar. Let's take a look.
Let's talk about the Chinese yuan, the Chinese currency, how strong it is and whether it will be able to overthrow and replace the dollar. And what does this mean for the geopolitical consequences in Russia and Ukraine, in the world. And I can give you the answer right now in the words of Adam Smith: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own interest. We appeal, not to humanity, but to their selfishness; and never speak to them of our wants, but only of their advantage." Which means that selfishness and self-interest are the main motivators for production and trade. And there is nothing we can do about it: over a million years of human evolution, it is firmly ingrained in us.
The Chinese economy is a controlled economy, where people are treated like cattle. The economy of the US, Europe and other free democracies is, to all intents and purposes, like a chess grandmaster who is 12 moves ahead of the average man. A free economy is capitalism, enlightened self-interest and self-interest. Adam Smith was a moral philosopher, and this conscious ethical selfishness will always win out over a controlled economy.
I'm not going to talk about monetary theory, I'm not going to talk about monitorism until I'm blue in the face, until your eyes glaze over or until you fall asleep, but I will just mention the respected economists like Knut Wicksell, Ludwig von Mises, Milton Friedman, Anna Schwartz, and I will just say that economics is always about currency. If you have a strong economy, you have a strong currency, people want to accept it, they trust it in the fiat world that we live in, because we are no longer on the gold standard of 1914 and the Bretton Woods system that we had in the 1970s. In the fiat world that we live in, the fundamental factor is the strength of the economy. It's like stock prices, you can look at the technicals until your head spins, but as long as the company keeps making money and earning money, everything will be fine. As for China, it's a controlled economy, it's collapsing, it's got real problems with real estate, it's got real problems with leverage, and no one person, no control center, no matter how smart, can run an economy better than you and me, according to Adam Smith, where selfishness and self-interest are the main motivators of production and trade. I'll give you an analogy where a capitalist economy is like a freeway where you're driving, you can stop and go to the beach, sunbathe, surf. Then you can go this way, or you can go that way and go to the store you want. A controlled economy is when you're on a bus, everyone's on this bus for three and a half hours, non-stop, no bathroom, packed bus. This is the controlled economy in China, where everyone works in a factory, child labor is used, where terrible things happen to the environment, you can just order some plastic or metal thing from China, do a test and look at the content of lead, candium and other substances in your product from China. In civilized countries, the economy is capitalism, which satisfies the needs of conscious-thinking people. And if something does not work, it closes and something else begins. In a controlled economy, everything is very simple - everyone goes to the factory. The Chinese economy will never be able to win or come close to a free market democratic economy, it is simply impossible. Milton Friedman gave the example of a pencil, the essence of which is the complexity of the economy. The market is so complex when it takes a million or a hundred thousand people to make a pencil. In our brains, in these supercomputers, is the collective unconscious of all human beings, and no artificial intelligence can replicate a million years of evolution, and that is why the Chinese currency is a fake, it will never become an international currency, it will go the way of North Korea, Cuba, Venezuela. It will go the way of the Russian ruble. These controlled economies cannot defeat a free democracy based on a free market and human creativity and the human spirit. The free market is centuries superior to any controlled economy. It is in the human being to not be treated like human cattle. So it is a losing game and a losing currency. It is controlled by the government and it will always be defeated because China's domestic economy is collapsing and becoming more vulnerable. And the more you control the people, the more they slip through your fingers. Everything about the Chinese yuan, which can displace the dollar, the euro, the pound, the franc, is just propaganda, it is disinformation, it is what you need to say and repeat. I and you do not care if the dollar is dethroned, I and you do not care that China does not use the British pound, the Swiss franc or the Canadian dollar as a medium of exchange, but right now the whole world uses these currencies, and China with its economy will go into obscurity, because rivals and friendly competitors will want to do business not with China, but with me or with you, based on social values and on the principles of a free market economy. So China has already lost. Maybe there are some arguments in favor of China, but just as the ruble is not money, so China in this regard should not be taken seriously.
Many people are uncomfortable with the Marxist term "capitalism" used in publications. You can simply replace it with another term: "free enterprise".
The only key to a prosperous economy is the ability to express yourself. Either through creativity or education. Suppress freedom of expression and the economy will die. Invention is the key to economic growth.
China has power and should be respected. However, China's economy will decline in the next 10-15 years. The Chinese can force Russia to accept the yuan, which will force the Russians to buy from China, unless North Korea, India, Iran, Turkey or the Central Asian states accept yuan as payment for goods. Do Cuba or Venezuela have anything to sell to Russia? I don't think so.
Людвиг фон Мизес - австрийский экономист, философ, преподаватель университета и писатель.
Милтон Фридман - американский экономист, статистик, преподаватель университета, эссеист, создатель теории монетаризма, нобелевский лауреат.
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Publication in Russian on the Zen blog
https://dzen.ru/a/Zp5B-tZQ5lzDpLos
