Tag Archives: Politics

China: Yuan Will Be a Reserve Currency, Come What May

EDIT: Indeed, it has been made a reserve currency, or at least it looks like announcements have already been made to pave the way.

The IMF is considering adding the Yuan to the group of reserve currencies. That would put it alongside the U.S. Dollar, the Japanese Yen, the English Pound, and the Euro in terms of “officially perceived” stash-your-value-here viability. As far as actual criteria for inclusion go, the Canadian Dollar, Australian Dollar, and very likely the Russian Ruble are probably actually closer to being genuine reserve currency material than the Chinese Yuan.

But… politics.

China is much closer to a total financial collapse and internal civil disruption* than recovery and stability in its current form. Long-term, of course, China will still be right where it is and the people there will still be Chinese (but there will eventually be far fewer of them, at least for a few generations). A Chinese collapse right now would be a major disaster for everyone. The commodity markets are depressed more than they have been for several decades (in relative terms, actually, I’m not sure that we actually have a post-WWII precedent for what is happening), energy is cheap, credit is massively overleveraged, and yet people aren’t buying enough stuff to keep the wheels spinning.

What does that have to do with the Yuan becoming a reserve currency? It does three things:

  • Gives China access to an external aggregate value device to prop up the yuan if necessary (links their economy to everyone else’s by failure, similar to the way subsidies can do this within a national economy). This effect is actually more a hoped-for psychological effect on the market than a tangible superpower China is being granted by the rays of a yellow sun.
  • Makes the Yuan a necessary holding for anyone trying to carry a balanced basket of reserve currencies (temporarily spikes demand for the Yuan).
  • Promotes an impression of stability in the Yuan (well-founded or not).

Why would the West agree to this? (And I say “the West” because, let’s face it, Washington and London are pretty much the ones who will be deciding.) Because if China were to fail right now it would be a severe annoyance for the U.S. and a complete disaster for Europe and Russia. Nobody really knows what the fallout of that would be, but it wouldn’t be pretty.

The Yuan will be made a reserve currency, whether it makes sense or not, and whether it actually fits in the reserve currency club by the standards and rules the IMF itself has laid out. These are scary times and nobody has any good levers to pull to “fix the economy” so national governments and central banks are pulling at straws because there is simply nothing left to try. All the control rods have been yanked out and tossed already, or shoved in and locked tightly; all the red buttons have been mashed; all the hyperbolic rhetorical devices have been so over-used at this point that the only thing that might actually influence market participants is a frank exposition about the truth rather than more “we’ll do whatever it takes!” and other gung-ho, “it’ll work this time” and “this is the lastest of the last rounds of QE, and this time it will really be the most effectivest of effective measures… I promise!” blather.

[* China is due for two painful corrections which will likely occur together, as they are linked. The first is a political correction; China’s geography does not lend itself to a central command economy. The second is a property-claims correction; when basic goods cannot be had at any price it means the entire system is so out of whack due to government interventions that only a hard reset can fix things. This will likely take the form of a civil war, but who knows. It could be gradual decline toward state failure followed by a logical and non-violent nation-wide roundtable discussion, or even a bloodless revolution coupled with a voluntary capitulation of material holdings by the power elites. But seriously, this has never happened in history and there is no reason to expect China’s inevitable transitions to occur independently of one another, or for either to be non-violent.]

Politics, Media, Synthetic Experiences

I mentioned earlier that this would be good news for the Democrats and the media types who have staked their careers on a failure in Iraq, and in fact, they are playing it up. Weirdly there’s not a lot of space to expand this story to sound worse than it is because its a fairly unambiguous event and it happened too close to Syria to be completely blamed on a “failing policy in Iraq” or on Bush himself.

The bombing news will likely fade away soon since it involves Kurds and ethnic cleansing, and people do not like to talk about that right now, as it might indicate that we’re doing the right thing by being there. This leaves the anti-Warrists with a choice between two unpleasant alternatives in media focus: they can focus on the bombing event which looks bad on first look, but upon deeper inspection reveals some serious and strong motives for actually being in Iraq as opposed to abandoning it to mass slaughter; or they can focus on the troop reduction plan Petraeus is working on now.

Which type of media event an anti-Warrist will focus on reveals which type of anti-Warrist he is. There are those who genuinely do not accept war as a policy (which in practice every society accepts war, or they soon cease to exist and are quickly stricken from the record of human history), and there are those who wish to be seen as original and free thinkers who are bravely rebellious antiestablishmentarians.

The vast majority of anti-Warrists are of the latter category. It will be easier for them to focus on the bomb news but not deeply explore the issues that go with it than to focus on the troop reduction plan. This type of political thinker will recognize that without a war to stand resolutely against they will be out of a job and require a new thing to stand resolutely against in order to maintain their perceived relevance. The focus on the scary aspects of the bombing and ignorance of the underlying issues it raises that are potentially pro-War is made easier by the contemporary media consumer’s lack of interest in complete stories. Very few make it to the end of a serious in-depth piece even on TV today. There are so many other things to do now that are more entertaining than understanding the real world. WoW, pr0nz, drinking, pr0nz, football, pr0nz… man, the day just fills up with synthetic experiences so fast.

The political media today is usually little more than entertainment anyway — just another synthetic experience. My words here are written just for me, read for the reader and in any event have no impact on what happens in Iraq or anywhere else. It is completely plausible for me to enrage a reader and start an online posting war back and forth over issues that are completely removed from us in space and time but we both simply feel very strongly about. Our realities are defined by our perceptions, and with that in mind, I restate that the news media is largely about entertainment value and not the faithful relay of current human events.

The Surge and Politics

It seems that the much vaunted Surge is working in Iraq. I’ve been pretty slow to say anything of the sort, as I was not sure how to rate the “success” I keep hearing in the media. Weren’t the media types almost uniformly calling Iraq a huge waste of life, waste of time, America’s Vietnam, etc. for the longest time?

And now it seems that good news in Iraq is going to be very bad news to Left-wing Democrats who have based their entire last 7 years of political life on talking smack about the Iraq war, how bad it is and how everything bad, ever, is George Bush’s fault… (in honesty, the last 7 links were satire sites, here’s the opposite view… in a very schoolboyish, whiny tone…)

The biggest problem in Iraq is the absolute lack of leadership there. None of the Iraqis wants to make a decision, no matter what level of government they work in (or out of). The cultural concept of a “leader” in the Middle East (outside of Israel and maybe Jordan) is about defining someone whom the people serve, whereas the West views a leader as someone who serves the people. Very different views.

Some Iraqis seem to get it though, and it looks like there is finally some pressure building within their own socio-political structure to actually do something. Apparently the “civil war” in Iraq is more of an Al Qaeda ready-made media spin than a reality, and the calm permitted by the Surge is something at least a few Iraqi leaders want to take advantage of before its over. This is a golden opportunity for them to work together and actually settle their society a little, or at least unify against the looming Iranian threat (an Iran which has pretty scary plans for everyone in the region…). That said, the idea that the dusty bits of Iraq and the muddy bits of Iraq will suddenly see each other as part of a whole more than they see each other as proxy threats from Iran or Saudi is slim.

This new focus on civil leaders getting things done is probably thanks to the US Army’s new direction. While the media was busy characterizing the Surge as a combat technique, the real focus was always on providing enough troops not to beat up the enemy, but rather to have enough folks to leave behind in town once the ass-kicking was over with. The US Army has not lost any field engagements so far. This is often overlooked. The US Army focused on working with the Air Force and locals (generally lead by US Special Forces) to whip ass at an unprecedented rate. The enemy doesn’t stand a chance on the actual battlefield. If they did, they would have tried to invade the US a long time ago. That’s why the resort to terrorism, because they are not very difficult opponents in an open fight — it is interesting that enough of them are misguided to actually try fighting in the open, but that’s another subject.

The whole point of the Surge is to address local issues that make or break local societies. Fixing electric problems, getting shipments of food running like they are supposed to again, water services, sanitation, etc. All the things the Americans are spending so much money on trying to fix. We have plenty of troops to whip everyone’s ass in Iraq. America could, if it wished to, easily kill every single person in Iraq. But that’s never been the point, regardless what the hate-blinded over at The Guardian may think. The Surge gives us enough people to beat the terrorists out, keep them out for a time, and still have enough people to prod the local and national Iraqi leaders to actually do their jobs. Its sort of like having SF advisers for the political side of the nation, not just the military.

A note here on defining “terrorists” and how control works in Iraq: When we’re talking about Iraq today we’re not talking about 9/11 type terrorists (though some of these guys would love to volunteer for Wave 2), we’re talking about local, petty terrorists who act like unhinged mafia types. The game in Iraq is about local control and motivating local resources to make a drive at national control. Since no region is powerful enough to assert authority over the other two, Iraq is fundamentally unstable — so the next alternative is to look outside for assistance for your side. If you’re in the dusty bits that means Saudi, if you’re closer to the muddy bits then that means Iran, and if you’re a Kurd that means anybody else because you know you’re probably fucked if you can’t get an international energy deal going or convince the Russians to love you. So the “Surge” is providing some local stability but its not the thing that is really calming the violence — its the political interplay that the local stability is fostering so that the various factions can reassess their alignment with the US.

Support for the Iraq Campaign

Watch out, everyone… “Republican support for the war is slipping” says this article. This means, of course, that two senators have decided that having the war move to America instead of stay in Iraq is a good idea.

Whenever I run farther than a half-marathon I start telling myself that walking sounds a lot better than running. It sounds like a great idea at the time, until I realize how crap I will feel at the end when I’m last place… so I keep running and step it up a notch to silence the rebellious dissent within my mind.

Stopping the war in Iraq for the reasons listed is preposterous at best and dangerous at worst, and with terrorists, I always assume the worst. They propose that the solution is to turn things over to the Iraqi Army and “its neighbors” and they will keep the bad guys busy so we can live peacefully in our sector of the world. Which neighbors are we talking about? Surely not Syria or Iran, I would hope. Not Saudi, a kingdom run by detached, elitist “royal” families who support us up front because they desperately need us to buy their dinosaur grease but who must pander to their bronze-age inhabitants who still (fervently) believe in a flat-world religion and wire money in support of our enemies. Jordan maybe? Jordan has enough problems of its own keeping bad guys from operating inside its own space, and has internal moral qualms about even doing that much to stop terrorism. Turkey? Maybe, sorta… depending on how their ongoing politico-social evolution turns out. But trust them to be the honest broker in the Kurdish situation? I think not… and on the flip side, trust the Kurds with anything Turkish? If the region were capable of maintaining its equilibrium then it would have found it long ago and we wouldn’t be in this mess in the first place.

This is a region of people whose basic logical assumption by which every other aspect of reality is postulated is that America is the embodiment of evil and all things not Muslim must be conquered, murdered or subjugated (and taxed under Islamic law) for there to be peace on Earth. This attitude extends to the various competing sects of Islam as well, so if the whole world were subjugated already, there would be plenty of fighting left to go around as every sect must fundamentally define the other sects as “false believers” who must be killed (subjugation for false believers is not allowable by the Koran or the Hadiths, let’s remember, for they are worse than non-believers by their own account). So once every sect but yours is dead and the whole world conquered and murdered or subjugated, then we can have peace… provided that no groups splintered from yours somewhere along the way and granted that nobody within your group accidentally draws any attention to concrete contradictions within your cult’s magic book (like provably false things, like the shape of the Earth or nature of the stars, for example).

The above situation does not describe a peace that I can accept. These are also not allies that make acceptable promises for this reason. I have had nice Muslim LBG’s working for me plenty of times, but I and they both know that in a few years things could turn ugly between us because just as I was using them to do a job, they are using me to survive because at the moment I was the biggest dog on the block.

Dog-eat-dog, that’s the way it goes. Let’s remain the biggest.