Peak Oil News and Message Boards

I would assume they are dumping them because the are concerned the US will turn against them as you did Russia, and kick China out of SWIFT. If this happens the treasuries will be be so many worthless promises. There is also this.

The biggest impact of six new member states joining BRICS will be on the share of global oil production that will increase to 40% from the current 18%, which is expected to be the potential game changer for payment system and price discovery

The share of BRICS (Brazil, Russia, India, China, South Africa) in global GDP will rise to 30% starting January 2024 when Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates join the organization

https://tass.com/economy/1669459

When you stop trading in $US you don't need $US

One day American currency will go like Venezuela's did, and on that day you will be glad you have a lot of your savings in Gold and silver. There are countless stories on the web about countries from Syria to Argentina that have seen their banks and currencies flounder and collapse. What makes the US different? Not much anymore...

Newfie wrote:Do you know why they are doing that?

I have suspicions of course, but no way or really knowing why. My hunch is that they are done with artificially reducing the value of their currency and are wanting to let it float eventually so it can be a good candidate for purchasing oil and grain/fertilizer. If it gets seen as as stable store of value that isn't being printed like crazy it'll have some fundamental advantages over the dollar.

It could also be more in line with Lucky's take that they are concerned about the inevitable use of sanctions by the US to steal value and not allow China to turn the treasuries into real assets. I think such a concern is valid.

Thanks. I feel I never have a sufficient grasp of these monetary machinations so I very seldom comment on them.

From what I have read they have grossly inflated their money supply. Seems like they may be in a bind of their own making.

Newfie wrote:
From what I have read they have grossly inflated their money supply. Seems like they may be in a bind of their own making.

Well we have all done that! The US more that any nation. Inflation is poorly understood, it is in essence, inflation of the money supply and this mostly happens through the creation of Loans. When a loan is created, as when the US creates a hundreds of billions in treasuries and sells them around the world, that is money, an increase, or inflation of the amount of money in the system.

A lot was never spent, thankfully. It just sat in vaults as reserves. Because if it was spent it would flood the market and push up prices, consumer price inflation. Just like what happens at a house auction where the person with the most money to throw around gets the house because they outbid the other potential buyers. Now if China floods the market with it's US treasuries they will go out and buy stuff, or go home to the US and have to settled for cash, which buys stuff. That creates the secondary effect called consumer price inflation.

Newfie wrote:From what I have read they have grossly inflated their money supply. Seems like they may be in a bind of their own making.

Actually... if they are experiencing measurable deflation, they need to increase their money supply even more, not less. Deflation is a real killer of production; with an ideal inflation rate being about 3%.

Could be they are trying to perform a balancing act to sell USD treasuries to force the value of the Yuan up while increasing money supply to counteract deflation, which puts downward pressure on the value of the Yuan. Won't be able to tell success or failure on that kind of score for a couple years at least. Even harder to measure short term since many benchmarks (USD/Euro) are/have experiencing(ed) significant inflation recently.

Looking at the 5yr chart renminbi/usd its remarkably stable with yuan being near a recent low of 7.3 with an avg around 6.8 or so. (eyeball math)

ruble vs yuan is also interesting in that its not matching the pattern, ruble 5 yrs ago was about 10, now its about 13 on a mostly flat chart; very modest shift in value considering. Considering China may be seeing Russia as a much more reliable source of fuel and food these days, there may be more than just the usd exchange rate on their minds.

AgentR11 wrote:Deflation is a real killer of production; with an ideal inflation rate being about 3%.

True, but only in a fiat debt based modern economy. If the Chinese transition to something different then monetary deflation is acceptable, it can actually cause growth.

Buoyed by the rise of industrial mechanization after the war, the prices of goods dropped starting in 1815 and continued to drop until 1860. Even though prices were dropping, output grew consistently during this time and continued to grow at the same time that prices were dropping until approximately 1860, at the start of the Civil War in America.

During the period between 1873 and 1879, prices dropped by nearly 3% every year, yet real national product growth was around 7% during the same time period. However, despite this economic growth and the rise of real wages, historians have called this period "The Long Depression" because of the presence of deflation.

https://www.investopedia.com/ask/answer ... istory.asp

The job of modern economists is to sing the praises of debt backed money even as it destroys living standards and economies. They are whores basically, they work for the rentier classes and the banking houses that create the endless money. Basically for people who live off manipulating money, not working for it like the rest of us.

The problems begin when the central government prints paper money "Debt" to pay for wars etc. Whic is exactly what the governments did during the civil war. If left alone under an honest money system a nation will experience deflation as the natural consequence of innovation etc. A fully gold backed money, if introduced by the BRICSIS... would stabilize prices and could lead to deflation.

Imagine saving money for retirement and seeing it go up in value every year. That would be something! Under our modern system we pay money to faceless men in pension funds and they promise to give it back with interest in the decades ahead. Which is all good and well, as long as the real economy continues to grow and the vehicles they use, like Enron, don't collapse and take our money with it.

https://www.encyclopedia.com/social-sci ... ss-rentier

Not picking sides, just posting à graph. Nothing more recent is jumping put at me. Ergo I am assuming it is not good for China.

Interesting that the M2 divergence is so large, but the exchange rate between the two is so stable.

I don't think its possible to know whether that chart is good or not just yet. Proof will be in the future as to whether they can grow the supply large enough to support international settlement without disrupting their domestic economy. There's 1.4 billion folks over there that'd all like to be middle class; and a government in charge that is interested in making that happen.

Agent,

I thought it was interesting more recent data was not available. I did a pretty lame search so perhaps it is out there. From what I hear I can only assume the trend has not gotten better.

Emerging news about Xi and dissent from the leadership.

https://www.wionews.com/world/am-i-to-b ... 632860/amp

Well, it is a communist country, they aren't necessarily the most forthcoming with respect to data. Still, I'm not convinced one way or another as to whether that is a good trend or a bad trend, or maybe just a good trend that is happening to quickly to keep everything stable.

As to dissent, good luck. Xi is the king of the Tiger Hunt. Uninterested in purging the little guys, he likes big game, and has successfully imprisoned or executed more than a few prey. I'd suspect that of those speaking publicly, they have permission from above to do so, and about what they may complain. Those that don't, I suspect will be somehow absent in a year or so.

A radial increase in money supply is not necessarily bad. It depends where the money is going. In the US it goes into corporations to fund wars, to the social security fund to feed people and allow them to take drugs etc. None of this money really builds the economy, just sucks from it in aggregate.

Where is the Chinese money going? Is it going into productive assets? Their pointless residential building boom is over, is it going into buying and stockpiling natural resources? Into mines and factories offshore to bring wealth back home? These are the questions that define whether it's problematic or not.

Agent and Lucky,

The analyst I follow, as you know, to is Zeihan.

His take is that had the money gone into infrastructure projects it may have been a good bargain. He says much money went into wasteful projects that did nothing to help China long term.

Zeihan has been saying the Chinese can not build advanced chips. But today I see a release that an internally produced cell phone has some locally produced advanced chips. I don’t think this has been confirmed but is something to watch.

As to Xi’s position Zeihan has to date bot said anything to indicate Di is in danger. The cited news article is the first hint of any decent I have heard. And it is pretty mild. Still Xi has been doing some odd things on the foreign affairs front, it bears watching.

A personal pondering is if China will do anything with Russian territory. The current situation is a golden opportunity for China to expand borders. Hard to see anyone coming to Putin’s aid should China decide to annex portions. Things to consider.

Chips... well the phone they produced is confirmed to have a 7nm process chip produced by SMIC. Huawei Mate 60. It sold out. Had very high demand. Apparently it can make both regular 5G calls and satellite calls. Question I have is why did they not make enough to meet demand? Low efficiency of the process? Limited production capacity? But if so, using it for a dumb cell phone seems like a serious waste of something that is strategically relevant. Could also be those strategically relevant uses are taking top priority and they had to get special permission to run an ego batch to give the US the middle finger in a public way.

Hard to say. My understanding also is that they built upon some Dutch lithography stuff to advance its capabilities. Not that they built their own machine tools for the purpose. OTOH, there is a flight of Chinese scientists leaving the US and returning home over fears of being treated as a spy regardless of whether the individual actually was. It won't be that long before they make their own goodies on their own tools.

I guess folks can figure out why Russia isn't running out of the low end chips required for missile tech. lol.

As to Russian territory??? Have you looked at the land in question north of the Amur? Its mostly useless, no gain in doing something like that, and you lose an easy captive trade partner. Maybe twenty years ago that sort of thing might have made a Russian think twice, but these days, to little, to late. China isn't interested, and is proving they aren't interested day after day after day. They simply want to trade chips and trinkets for oil and grain. No muss, no fuss, no SWIFT.

Chinese Taipei, as it is known on the mainland, has all the chip manufacturing they need. Why expand if they are going to take it back soon.

Taiwan’s semiconductor sector accounted for US$115 billion, around 20 percent of the global semiconductor industry. In sectors such as foundry operations, Taiwanese companies account for 50 percent of the world market, with Taiwan Semiconductor Manufacturing Company (TSMC) the biggest player in the foundry market.

https://en.wikipedia.org/wiki/Semicondu ... _in_Taiwan

I think its been made pretty clear that the US would destroy TSMC facilities in the event of a fight to take back Taiwan.

What the US makes pretty clear and what happens in the real world are rarely the same. The Taiwan government is all Pro US now, but in the event of an overwhelming attack I doubt they would be willing to conduct a scorched earth policy. They saw what happened in Hong Kong, they know life goes on. In the end the island of Taiwan belongs to the Chinese people, whether you believe that implies those living on it or those on the mainland. The US has no stake there other than their meddling geopolitics and the desire to Exploit it. They can fuckoff.

Ugh, PO is in one of its "moods." When it gets like this almost impossible to write anything here. The screen freezes. So typing into a note which I will copy over. This happens in another forum also so not a PO unique experience.

There are a lot of good thoughts here that cover a range of possibilities. Any of them may occur, or something entirely different.

IMHOBmost likely is Russia will become so degraded as to become a Chinese vessel state. It may split into a Euro PO Ean Russia and a Eastern Russia. But more possibilities exist.

I believe the chance of a Taiwan conflict is low. China has little to gain and much to loose, especially with a degraded Russia next door. That itself is a lot to deal with.

Right now we have a situation with 2 strongman dictatorships with countries arcing past their prime into troubled waters. Putin is demonstrating that extreme militarism is not a sure thing. China does not have the border issue Russia does, except with Russia. Recent China postures are pointing towards Xi looking more inward, becoming more isolated.

Shortly, within 10 to 15 years, both countries will likely have new leadership with new ideas, as will we. So it is a perpetually changing game board.

China can be a trouble maker for sure. But they are vulnerable to maintaining sea lanes of traffic and there are various choke points where they can be cut off. Europe has far more to worry about than the USA. If I understand correctly Europe has more trade connections, both ways.

Former Australian PM talks to Chinese PM about Ancient Greek Wars
........................
The trap for China and America

Thucydides was a general in ancient Athens who wrote a history of the Peloponnesian War in the fifth century BC.

At the beginning of his history, he writes a long list of causes of the war — changing alliances, affairs, insults — but then he points to an overarching cause.

"The real cause I consider to be the one which was formally most kept out of sight," Thucydides wrote.
"The growth of the power of Athens, and the alarm which this inspired in Sparta, made war inevitable."
...............................

Mr Turnbull says Mr Xi's interest in the Peloponnesian War goes deeper.

"He was, interestingly, familiar with another part of Thucydides' history, which I think in many respects, is more relevant.

"That is what's called the Melian dialogue."

This relates to a scene halfway through the Peloponnesian War, where Athens invaded the island of Melos, which had until that point been neutral in the war.

"The Athenians say, 'You've got to join us,'" Mr Turnbull explained.

"The Melians say, 'Oh, give us a break, we're independent, we're neutral. You know, we love you all. We don't want to pick sides,'" he paraphrased.

After some discussions, the Athenians issue an ultimatum.

"The Athenians say, 'Cut the crap, justice, you should know, is found only between equals in power. As to the rest, the strong do as they will and the weak suffer as they must,'" Mr Turnbull said.

Essentially, whoever is more powerful gets their way. But Mr Turnbull says this isn't how the modern world should be run.

"What we're trying to achieve with the rule of law in the world and in our region is to ensure that nobody is able to say, 'The strong do as they will and the weak suffer as they must.'"



https://en.wikipedia.org/wiki/Thucydides_Trap

https://www.abc.net.au/news/2021-07-06/ ... /100267570

Current Australian PM just visited to coincide with the 50 year Anniversary of when Australia was the first Western country to recognise China

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Latest Polling

Asked about “the current tensions between the US and China”, two-thirds (66%) of voters say Australia should stay “as neutral as possible”, just over a quarter (27%) think we should “actively support the US” and just 6% say we should actively support China.

Maybe Xi's interest in Greek history explaines his leadership style.
Much more suited to a technological stable situation than to one where it is moving rapidly.