Dollar-driven new model: the three worlds

“Current account balance to GDP ratio should be controlled within 4%,” the United States as a consumer representative in the G20 meeting just concluded before throwing this standard, the main pressure to adjust imbalances in the production of the country generally. Producing or experiencing a painful currency appreciation, such as Japan; or abandoned in order to stabilize exchange rates and the independence of domestic monetary policy, such as China.

To meet this dollar-driven model, producers began looking for a new strategy equilibrium exchange rate: Germany in European integration as a platform to establish the euro, the trade balance with the region as a whole cover its trade surplus, with the dilution of their appreciation of the currency union pressure ; the Japanese yen is so low interest rates a major international financial markets, borrowing money to cover depreciation of the yen carry trade led to hedge its current account surplus lead to upward pressure.

However, Japan, Germany, desperately maneuvers such efforts have collapsed after the crisis: Greece’s debt crisis has revealed that both the euro zone producer and consumer characteristics of the internal contradictions of an economy; Europe Massive low interest rate environment in Japan The carry trade is lifted, the appreciation of the yen once again into the channel. Under the dollar standard destined to the U.S. currency war can not be losers, but this war may eventually be no winner.

Resources in the country of export and production of the country tied together, both constrained by the consumer, but also tied to the dollar-driven value chain. Every dollar expansion of supply are a direct result of rising international prices of commodities, which increases the cost of producing countries to reduce their reserves and causing imported inflation. Subsequent depreciation of the dollar comes more direct producer and resources to reduce the real purchasing power of national reserves. Expansion of a world made up of three world bear the ultimate cost: The most passive are resources in the country, the most painful is the producer, and consumer rights by virtue of international coinage, always in the top of the food chain.

Host China’s rise and the RMB

In the new century, the completion of primitive accumulation in East Asia, China leads the rising again, which together with the resource-exporting countries, intensification of the contradictions inherent in the dollar-based. Countries in Asia and the oil lost 75% of the ultimate holders of the global assets of non-gold reserves, these funds back to the core countries, mainly for the purchase of financial assets in Europe and America. Producing and resources in the country’s food chain in the global economy for the greed of consumer financing, U.S. dollar-based international monetary system are also being caught in a paradox: the growth in reserve assets in the U.S. external deficit requires, and the return of these funds requires the United States fiscal deficit, balance of payments deficit this decision the U.S. norm.

In the 21st century, global payments imbalances caused by liquidity out of control in the amplification of financial innovation under the final collapse of the subprime mortgage crisis has become one of the main. Greenspan’s interest rate increase to for the fuse, the core of the avalanche of international accumulation of liquidity, the real economy was back to bite them, the crisis quickly open to infection.

We can not overestimate the rise of China, but had to focus on the future internationalization of the RMB, because in our system, the renminbi currency production host country’s representative is to stabilize the international monetary system, the only balanced and fair positive solution. RMB internationalization of Asia, the foundation is to create a new tributary system is similar to the path, the China-ASEAN Free Trade Area is the test site, while Hong Kong is its outpost.

Since the producer pays the bill under the dollar standard is inevitable, then China will focus on the interests of being in this exchange: China’s share of IMF demands Asia reveals a breakthrough out of the RMB. Since China does not have thrown the international monetary system, the ability of the table, then at this table have gained a place for himself is undoubtedly the best choice.

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