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Economics

美元的脆弱霸权

Mar 30, 2021 Kenneth Rogoff

发自剑桥—强大的美元依然在全球市场上占据着统治地位，但它的主导能力或许比看起来要脆弱得多，因为意料之内的中国汇率制度变化可能会触发一场国际货币秩序的重大转变。

出于多种原因，中国当局可能会在某一天停止将人民币与一篮子货币挂钩并转向允许汇率更加自由浮动（尤其是兑美元汇率）的现代通胀目标制。一旦出现这种状况，亚洲大部分地区很可能都会追随中国。到那时候目前作为全球约2/3GDP锚定货币的美元可能会失去近一半权重。

鉴于美国在很大程度上依赖美元的特殊地位——或者法国前财政部长瓦莱里·吉斯卡·德斯塔因（Valéry Giscard d'Estaing）所谓的美国“过高特权”——来为自身大规模公共和私人借贷融资，这种转变的影响可能是巨大的。同时由于美国一直在积极利用赤字融资来对抗新冠病毒的经济破坏，因此其债务可持续性也可能遭到质疑。

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Kenneth Rogoff

Writing for PS since 2002
245 Commentaries

Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He is co-author of This Time is Different: Eight Centuries of Financial Folly (Princeton University Press, 2011) and author of The Curse of Cash (Princeton University Press, 2016).

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Stephane B Apr 29, 2021

Interesting view, the Yuan will sooner or later reflect the clout of the Chinese nation, and the extra terrotoriality of the US justice is certainly motivating other nations to spport more diversity. Yet, the notion of trust, fiat, is fundamental when it comes to money matters. China and its strong regime and opacity is not there yet when it comes to reassuring investors for the really large amounts required. Will they ever be one day ? Can't be totally ruled either...
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j. von Hettlingen Apr 5, 2021

Kenneth Rogoff says the “mighty US dollar continues to reign supreme in global markets.” But its 50-year dominance “may well be more fragile than it appears, because expected future changes in China’s exchange-rate regime are likely to trigger a significant shift in the international monetary order.” Due to Trump’s mishandling of the pandemic and his “trade war policies to check China’s trade dominance” the dollar had weakened on his watch.
China’s speedy economic recovery from the pandemic has bolstered its resolve to end the dollar hegemony that enables Washington to wield vast power and borrow at ultra-low costs. Beijing also wants to attract more foreign capital to accelerate its economic development. The uptick in appetite for Chinese assets seems suggest that international investors are feeling comfortable with the renminbi for trade and even considering it as a reserve currency.
According to the author “Beijing will probably someday stop pegging the renminbi to a basket of currencies,” after IMF added it to its Special Drawing Rights (SDR) basket in 2016. “The long-standing argument for a more flexible Chinese currency is that China is simply too big to let its economy dance to the US Federal Reserve’s tune.” Beijing’s is eager to undermine the greenback’s traditional role as both global growth engine and haven of first choice for investors during crisis.
China’s GDP (measured at international prices) “surpassed that of the US back in 2014 and is still growing far faster than the US and Europe, making the case for greater exchange-rate flexibility increasingly compelling.” This may enable Beijing to “shift to a modern inflation-targeting regime under which they allow the exchange rate to fluctuate much more freely, especially against the dollar.” Such a move could deal a “painful blow” to the dollar’s supreme status.
This would prompt “most of Asia to follow China,” and the dollar, “currently the anchor currency for roughly two-thirds of world GDP, could lose nearly half its weight.” It may well be an ironic end to Trump’s pursuit of a weaker dollar. Despite frequently accusing China of manipulating its currency to support its exports at the expense of the US, and starting a full-blown trade war to force its hand, Covid-19 finished his job. China is reaping the rewards, and is set to outperform the US by 2028.
According to the author, “Chinese policymakers face many obstacles in trying to break away from the current renminbi peg. But, in characteristic style, they have slowly been laying the groundwork on many fronts. China has been gradually allowing foreign institutional investors to buy renminbi bonds.” Besides, the People’s Bank of China (PBOC) had been among the frontrunner in developing a Central Bank Digital Currency (CBDC).
Initially for “domestic use”, China’s digital currency will ultimately “facilitate the renminbi’s international use, especially in countries that gravitate toward China’s eventual currency bloc. This will give the Chinese government a window into digital renminbi users’ transactions, just as the current system gives the US a great deal of similar information.” A digital currency will also enable China to bring a large population without a bank account into the mainstream economy.
The author asks whether “other Asian countries indeed follow China.” The US “will certainly push hard to keep as many economies as possible orbiting around the dollar, but it will be an uphill battle. Just as the US eclipsed Britain at the end of the nineteenth century as the world’s largest trading country, China long ago surpassed America by the same measure.” India and Japan may prefer going “their own way.” But if China “makes the renminbi more flexible”, they will likely…give it a thought.
According to the author there are “striking parallels between Asia’s close alignment with the dollar today and the situation in Europe in the 1960s and early 1970s. But that era ended with high inflation and the collapse of the post-war Bretton Woods system of fixed exchange rates. Most of Europe then recognized that intra-European trade was more important than trade with the US. This led to the emergence of a Deutsche Mark bloc that decades later morphed into the single currency, the euro.”
The renminbi is still not a freely convertible currency. A free flow could push it to strengthen further and faster, which would trigger government intervention, as China had historically advocated for a weaker currency to promote exports. The renminbi will not become “the global currency overnight. Transitions from one dominant currency to another can take a long time. During the two decades between World Wars I and II… the new entrant, the dollar, had roughly the same weight… as the British pound, which had been the dominant global currency”…after the Napoleonic Wars in the early 1800s.
The dollar’s demise as the world’s reserve currency may still be remote, but the author asks whether the three world currencies – the euro, the renminbi, and the dollar – could share the “spotlight.” He fears that “neither markets nor policymakers seem remotely prepared for such a transition. US government borrowing rates would almost certainly be affected, though the really big impact might fall on corporate borrowers, especially small and medium-size firms.”
The other question is whether Beijing is willing to relinquish control over anything. In 2015 China unexpectedly devalued the currency, triggering the renminbi’s biggest one-day loss in 20 years. So far, China’s central bank has only moved to slow, rather than halt, the renminbi’s advance by making it cheaper for traders to bet against the currency and by relaxing capital curbs to allow more outflows. Any intervention would slow not only the renminbi’s advance, but also its challenge to the dollar.
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David Lentz Apr 2, 2021

China faces enormous problems with pollution and climate change. If temperature go asymptotic as some expect how will they feed their population? Plus much of the soil is toxic now. America faces similar issues. I showed a stream to my daughter there were no minnows in it. This stream is a rare clear water stream in America. But no minnows. When I was a boy they would have been there. I cannot explain to my daughter how lifeless our ecosystem has become.
Now in China they say poverty is reduced. But lifespans are falling due to air pollution. So higher GDP but so what?
China knows that the reserve currency is a dead end game and won’t go there. They have more existential issues
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B Wilds Apr 2, 2021

China's strength must be questioned by people without an agenda if we truly wish to understand the world. It seems Americans tend to supersize anything they can conjure up as a challenge to their supremacy.

This is evident in the number of confidence crushing-articles being published with titles such as "The US Keeps Losing In Every Simulated War-Game Against China." The article below argues China is not as strong as many people think. Far to much of the Chinese economy is based on selling goods to American consumers.

https://brucewilds.blogspot.com/2021/03/chinas-strength-should-be-evaluated.html
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David Punabantu Mar 30, 2021

Fear that changes in the Chinese Renminbi pegging to the US dollar could well undermine the value of the US dollar. This in a monistic view which does not reflect the reality on the ground within national money markets. Instead the notion of one fixed value for the US dollar even if it loses half its value still implies one fixed value. This fixed value is clearly seen in the International Monetary Fund (IMF) fixed cross rates.For example the IMF fixed cross rates on the 28th of May 2021 gave the exchange rate between the two trans-Atlantic nations as US$1 equal to £1.2284. When looking at the Euro the value of the US dollar and Sterling pound in Euro respectively is €0.91027 and €1.11826 giving a IMF fixed cross rate of 1.2284 which mimics the exchange rate of the two trans-Atlantic nations of the UK and USA.
The South African Rand shows a similar picture being ZAR17.4053 per US dollar, and ZAR21.3813 per British Sterling pound giving a cross rate when the two figures are divided of 1.2284. Similarly the North Korea Won with KPW165.848 per Sterling pound against KPW135 per US dollar gives a cross rate of 1.2284. South Korea gives a similar picture. KRW1,517.51 per Sterling pound against KRW1,235.32 per US dollar when divided together gives a cross rate of 1.2284. The Japanese Yen shows the same picture with JYP132.25 per Sterling pound and JYP107.65 per US dollar when divided together gives 1.2284. The Canadian dollar also shows the same image being CAD1.69181 per Sterling pound and CAD1.37721 per US dollar that gives a cross rate of 1.2284. The Indian Rupee at INR92.4590 per Sterling pound and INR75.2657 when divided gives 1.2284 which is the exchange rate between the US and UK.
Even the Chinese Renminbi at CNY8.9449 per Sterling pound against CNY7.15910 per US dollars gives a cross rate of 1.2284. Zambia with ZMK22.1715 per Sterling pound against ZMK17.925 per US dollar gives the same picture.
The question that arises from this is does North Korea have exactly in its money markets the same US dollar and Sterling liquidity to equal the cross rates as determined by the IMF? Does Zambia, Canada, Japan, South Korea, China, India to name a few countries have everyday day in and day out the same liquidity of Sterling pounds and US dollars in their money markets to justify the value given to the IMF fixed cross rates.
To create value free floating cross rates are needed whose value is actually based on existing currency liquidities within each country's money as a function of trade.
Such a condition existed as recounted by the IMF managing director Mr. M. Gutt at Harvard University on the 13th February 1948, when he presented a paper entitled The Practical Problem of Exchange Rates.
Then as Tew records, the official direct Sterling-US dollar rate ruling in Britain and the United States is one Sterling pound to US$4, but the Lira-Sterling and Lira-US dollar direct rates are such that the Sterling pound-US dollar cross-rate in Italy is one Sterling pound to US$2.6. (Tew Brain (1967) p.79)
Americans found it cheaper to purchase goods from the UK via Italy until the IMF stepped in and imposed the IMF fixed cross-rate system in favour of the UK and not Italy nor the US.
What this means it that the notion of a fixed value for the US dollar is an ancient relic of past economic systems that need to overhauled to a free floating cross rate system.
The picture that emerges, for example, may see Zambia having trade surplus with Japan . This creates an exchange rate of ¥1,000 per K1 as Japan uses her Yen to purchase Kwachas, Zambia ’s national currency.
To this, Japan uses the purchased Kwachas to buy copper, against which Zambia accumulates Yen in its market as the Fund “[assists] in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hampers the growth of world trade.” ((Articles of Agreement: Article I (iv) (2011))
Although the exchange rate in Zambia for the US dollar, based on Zambia' s market liquidity may be K8 per US dollar, in Japan it may well be ¥200 per US dollar as Japan trades more with United States of America than Zambia .
If a citizen in Zambia wanted to import an iphone X from the United States of America pegged at US$500, it would be cheaper to buy the iphone X via Japan , but this would in turn affect market liquidities in both the Zambia and Japan money markets and hence exchange rates as exchange arbitrage operations occur.
As the iphone X is valued at US$500 in Zambia in Kwacha terms based on its K8 per US dollar rate it would cost K4,000, but through Japan the cost of the iphone X would be ¥100,000 at ¥200 per US dollar, being through Zambia ’s Kwacha/Yen exchange rate at ¥1,000 per K1 be worth K100, which is equal in US dollars based on Zambia's US dollar/Kwacha exchange rate at US$12.50.
At US$12.50 for an iphone X, the United States of America would be on an equal footing to deal with another country called China with its cheap exports unless China’s cross-rates are lower in the countries China/ United States of America /Zambia exchange rate configurations.
It would then be a question of quality and finding the best value in currency arbitrage operations. The United States of America would still get its US$500 irrespective of the value step up or step down and the problem of external disequilibrium is addressed provided each country settled its exports in its national currencies.
This is the underlyinging axiom to Adam Smith's Supply and Demand Doctrine.
Adam Smith's Supply and Demand Doctrine is based on British goods being bought by the British Sterling pounds whose supply and demand of both sets a price. If a German wanted British goods they would first have to use their D-marks to buy the British Sterling pounds and use these pounds to buy British goods. This is the process China has followed. Although Chinese firms quote in US dollars the final payment settlement for Chinese firms is in Chinese Renminbi because their foreign currency regulations.
It is here that the works of the former editor of the Financial Times Mr Geoffrey Crowther wrote in his book "An Out Line of Money" in that "if a purchaser is someone who wants D-marks in order to pay for German exports, the fact that he can get his D-marks cheap is equivalent to a reduction in the price of exports; it will stimulate sales in exactly the same way as an ordinary depreciation of the exchange rate" (Crowther (1951) p.260).
US economic policy as epitomised by the International Monetary Fund (IMF) has been "an ordinary exchange depreciation" to stimulate US dollar inflows. The Chinese economic policy has been a "reduction in the price of exports" as epitomised by cheap Chinese products exported globally.
This is Chinese Yuan Renminbi buying Chinese goods much like German D-marks buying German goods. However because of the US dollar's "exorbitant privilege" and developing nations directly selling their goods into US dollars while side stepping their national currencies has distorted the value of the US dollar whose value should vary between markets and within markets based on trade and currency availability within markets. Sadly current economic policy only sees one value of the US dollar imposed on trade which does not reflect the true position of markets and existing values.

Crowther Geoffrey. An Outline of Money. 2nd ed. New York: Thomas Nelson & Sons Ltd, 1951.

North-South: A Programme for Survival. The Report of the Independent Commission on International Development Issues under Chairmanship of Willy Brandt. London : Pan Books Ltd.. 1980

Tew Brian. International Monetary Co-operation 1945-67. 9th ed. London:
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