The question then becomes, will a new fiat replaced it? Or has the world reached a point of distrust that the next global medium of exchange will be based on something that sovereigns have less manipulation over? A more historic, universally accepted medium of exchange that nations already have stored for such an event: gold?
Thus I will continue to chronicle major developments in "geopoliticaleconomics," developments impacted by global trade, economics, and geopolitics. A multidisclipinary approach is important, in my view. Merely looking at sterile monetary theory in a "vacuum" misses a lot of other extremely important factors. And so:
US Congress moves to punish China on currency
The US Congress moved Friday to open the way for retaliation against China over its currency, warning that it has lost patience with quiet efforts to press Beijing to let its yuan appreciate.Now, anyone that understands the mechanics of lawmaking in the US knows that although this is an important first step, it is far from becoming policy. Sometimes it is merely a dog's bark, with no bite. But sure enough, it looks like China is more than willing to play this game of chicken (pun intended):
One day after President Barack Obama pressed Chinese Premier Wen Jiabao on currency in a meeting in New York, Obama's allies in Congress approved a measure that accuses Beijing of killing US manufacturing jobs with its yuan.
The House Ways and Means Committee, which writes tax laws, voted to expand the powers of the Commerce Department to allow it to impose tariffs when another nation is found to be manipulating its currency's value...
China to Levy Anti-Dumping Duty on U.S. Poultry, Ministry of Commerce Says
China will impose an anti-dumping duty as high as 105.4 percent on U.S. broiler chicken products, effective tomorrow, the Ministry of Commerce said today.Now this is not barking... it's real, and this law is effective as of... now. A little perspective, from the article:
China found that the U.S. industry dumped such products on the Chinese market, hurting domestic production, the ministry said. The tax rate will be 50.3 percent to 53.4 percent for those U.S. producers who cooperated with the investigation and 105.4 percent for those who didn’t, it said.
“The final ruling is that the there is a causal relationship between the U.S. dumping of broiler products and the losses suffered by the Chinese industry,” the ministry said in Beijing.
China consumed almost 800,000 metric tons of U.S. chicken products in 2008, valued at $722 million, according to the USA Poultry & Egg Export Council.This is not anything to sneeze at. This is where we are going, where we are heading... the current architecture of global trade and finance broke in the Autumn of 2008. What is holding it up right now is massive, never before seen in history, monetary printing done as a lame attempt at holding up the massive global imbalances of deficits and surpluses created by a fictitous and easily manipulated monetary system.
But trade wars not only impact where products go, if they are sold at all, but also by association, trade wars impact global monetary flows. Monetary flows of debt, investments, and commercial exchange. Interrupt these flows, or radically change them, and the system starts to crack again.