We all know there is serious dysfunction in the world right now. We’ve got lingering legacy issues like COVID but we’ve also got declared and undeclared wars going on around us.
You know the declared ones.
We’ve got shooting wars like in the Ukraine.
We’ve got the culture wars where the alphabet mafia, the woke whiners and the poisonous progressives are attacking almost everything.
And then we’ve got the trade and economic wars like the one China has all but declared on Australia.
But it’s the battle between China and the United States that I want to discuss tonight. The quest for economic supremacy took a very interesting turn this week and it went largely unnoticed by most of the media.
Before I get to that though I have to tell you my position on where the economic world is at.
Trigger warning though because you probably won’t like it.
China is on track to be the worlds leading economy and the financial centre of the world within the next decade or so.
Now I know that is contrary to the views of many noted economists. Just this week the Lowy Institute released a paper suggesting China will be strong but not dominate.
My view is predicated on the fact I think the Western World is destroying itself.
All the selfish and indulgent garbage we have to put up with from virtue signalling movements, low productivity, excessive rules and regulations, the welfare state and so many crusading losers is destroying our competitive advantage.
In short, the woke left and their adherents are eating us from the inside.
On top of that, the USA is printing money like crazy, has out of control deficits and the highest inflation rate in 40 years.
One of the features that has made the US so strong is the fact that its currency is essentially the global reserve currency.
Most international contracts use it as their basis of their accounting and commodities are priced in USD.
China has long coveted a slice of this international trade for its own Yuan but has only captured around 3% versus the USD 35%. I think that is set to change.
Here’s why.
Last week when the US led the charge to freeze Russian access to the US dominated international banking system it would have sent shivers through every dollar owning nation.
If they can do it to one, they can do it to more.
Some Russian banks have already been using the alternative Chinese bank clearing system and more could be set to join, including issuing credit cards under the Chinese UnionPay system.
Earlier this week Saudi Arabia saying they would now consider denominating some of their oil contracts in Yuan.
These are small but significant developments.
I’m not sure why anyone would trust the Chinese State more than the US government but a Chinese oriented block with massive oil producers ( Russia and Saudi), potentially India and others who sense the decline of the US could be a game changer.
Capital flows to places where it is treated best. It often has no loyalty aside from wanting to minimise risk of loss.
The Chinese understand the weakness attached to the US move to isolate Russia from the banking system and have moved swiftly to exploit it to their own advantage.
Cory Bernardi is the author of seven books and has been a member of the Australian rowing team, a publican, an investment portfolio manager and spent nearly 14 years as an Australian Senator.
