The Inventor of Fiat Money Finally Joins the Global Fiat Money Cartel. The Chinese currency (Yuan) has finally joined the elite club of national currencies in the IMF’s Special Drawing Rights (SDR) currency basket. Those of us who follow Chinese economic news have known about the IMF’s decision to include the Yuan in the SDR since 2015, but the actual implementation has just occurred. This is one of the biggest events in the world of economics and finance since the birth of the Euro in 1999.
China’s Path from Great Power to “Sick Man of Asia” to Global Superpower. China invented paper currency during the Tang Dynasty (7th Century) so this IMF event has been unfolding for nearly 1,400 years. While Europe was flopping around in the Dark and Middle Ages on its agonizing path to the Renaissance and Enlightenment, China was a regional superpower with the most sophisticated technology and the most advanced economy in the world. Then the Industrial Revolution endowed Britain with the crude military and logistical power to choke China with Britain’s Indian-plantation-grown opium. This enabled Britain to dominate China economically and politically between the 18th and 20th Centuries. Then Japan joined the rape China party in the early 20th Century, resulting in the Rape of Nanking Massacre in 1937 just before WWII, among other less-famous atrocities against the Chinese.
Rise of China (Again). From the perspective of Chinese culture, the rise of China as a global power was inevitable. From a purely economic perspective, China’s massive population makes their rise virtually inevitable. All they needed was to throw off the shackles of oppressive Western imperialism to resume their historically confident position on the global stage.
China Uses the Greed and Hubris of the West Against the West. It has been amusing to watch the self-immolating greed of Western corporations. Over the past 30 years, multinational corporations have fantasized about exploiting the Chinese market with little or no understanding of the reality that they themselves were being exploited. Chinese leaders have been far more sophisticated, disciplined, and patient than most corporate executives could imagine. Crippled and blinded by their own greed, American corporations, in particular, failed to use their lobbying power in Washington to hold China’s leaders accountable to their WTO obligations when China was still malleable and amenable to the influence of Western economic policies. Now it’s too late.
The Power of Enlightened Authoritarianism. China’s power comes from much more than its GDP, cheap widgets, or 1.4 billion people; it comes from the long-term vision of their cultural leaders, which happen to run their government. Their methods are not democratic, which is antithetical to my personal philosophy and the democratic ideals of most people in the West. However, when we step back and look at the incredibly challenging circumstances that China has had to deal with in the past and the challenges they face in the present and future, I don’t think a democratic China could achieve nearly as much economic and political power as it has today.
Those Who Think China Will Collapse Don’t Really Understand China’s True Source of Power. Imagine China with the kind of “democracy” that we have in the United States today. It’s inconceivable that any democratic nation with 1.4 billion people mired in American-style democracy could sufficiently unite themselves to achieve anything close to what China has achieved. Growing up in a quasi-democratic nation, I could never be entirely happy living under an authoritarian regime, but I admire the Chinese leaders and the Chinese people for understanding how to maximize their strengths against powerful and oppressive external forces.
China’s Past is Prelude to Its Future. Drawing from the lessons of Sun Tzu, Confucius, the epic stories of the Three Kingdoms, and hundreds of years of Western colonial oppression, China has masterfully out-maneuvered feckless and short-sighted Western politicians and corporate executives over the past 30 years. The induction of the Yuan into the IMF’s SDR currency basket is a reflection of China’s exceptionally strong cultural resilience and exceptionally strong (ruthless), far-sighted leadership.
Is This World Big Enough for Two Global Hegemons? Probably not. China’s rapid rise will result in increasing tension, conflict, and war in the coming years. When war comes, there will be plenty of blame to throw around. I just hope the American people have access to enough accurate information to hold their political leaders accountable because U.S. foreign policy over the past two generations has been criminally incompetent and short-sighted.
We live in interesting times.