tl;dr: Musings on China’s level of threat to the US and the dollar.

Loyal blog reader Mark sent me a thoughtful response to the post How the Fed May Be Accidentally Ending the Dollar.

He writes:

“The death of the dollar is currently being paved in digital yuan.

The digital yuan will replace the dollar as the default currency in shipping because the transactions costs will be nothing compared to dollars.  

As that happens, the dollar will fall first slowly and then crash entirely.  We are heading towards a digital cliff caused by our own stupidity and arrogance.

China’s plan is brilliant!”

Accompanying the note, he sent an article about the e-yuan.

‘While China is making considerable progress, and hopes to use its nascent digital currency to help internationalize the yuan, several other nations are warming to the idea of relying less on hard cash.“

I’m far from a China expert, but like many people, I wonder what their game plan is.

As Sun Tzu writes,

“Successful war follows the path of Deception”

It seems to me that we are already at war with China, even if no physical shots are being fired.

One of the shots being fired is in the category of 17 rare earth minerals, 80% of which are controlled by China, which is holding the hammer of possible export restrictions above the heads of the US.

That move would essentially cripple the US economy.

Meanwhile, my former schoolmate, Dan Blumenthal of the American Enterprise Institute has written a book called The China Nightmare: The Grand Ambitions of a Decaying State  where he argues that our fear and concerns about China are really overblown; China is a paper tiger with which we should not be concerned long term because their internal support structures are too weak.

I honestly have no idea, but if I were China, I’d prefer to avoid a hot, shooting war with the US and seek to eat away at global dominance by pushing the e-yuan to as many places as possible.

Anyone who wants to export from China would have to use it, which would force all shipping companies hold it on their balance sheets, a move that would slowly propagate into other parts of the economy, gradually reducing demand for dollars.

People in the world of Bitcoin often say that this period is about the separation of “Money and State,” so it makes sense to me, in that vein, that the era of Big Money and Big States would climax in a war of Big Money.