Timing is the tricky part. Despite the fragility of the system, its resilience is notoriously underestimated. Granted—for all the wrong reasons. The US dollar is still the reserve currency, backed by a military power. It could persist longer than many expect. Great article, by the way.
They have engineered a well secured and enclosed Dollarized machine. However, if you steel encase the system the only way out is by exiting the dollar system completely, which is the endgame and the reason for the geopolitical conflict we see. A mass exodus out has already started and there is nothing the bankers or DT can do to stop it, and trying to prevent it will only make it worse. Danger close.
You're not wrong about the financial system but you're not really getting to the heart of the problem and therefore not providing true understanding of the root causes and how to solve them, namely, the right of the monopolistic state to counterfeit money.
The financial system per se it not able to do anything without there being the Big Brother waiting in the wings to save them from all their bad decisions by injecting 'liquidity' into the system.
As George Gammon points out, it's actually the fractional reserve banking that does the majority of the quantitative expansion of the money supply, which redistributes the resources toward the borrowers and leads to the misallocation of resources in speculative investments.
If the liquidity created out of thin air went into actual productive capacity it might not be a problem, but it's precisely the nature of a market pumped up with liquidity and socialized risk that it goes into speculative bubbles like the real estate bubble, or the dot com bubble.
So you have stagflation: a rising stock market pumped through inflation, and a stagnant unproductive economy.
Once you see that, you will see that the US and China are in pretty much the same situation, but of course we have to rely on the CCP data that masks a collapsing real estate and banking sector, rising unemployment and a stagnant economy.
The root course in the end is the Keynesian mixed economy statism.
I actually have a much longer essay coming on Argentina addressing many of your points and the Libertarian failure to understand what is happening there and in the global economy.
That said, the problem with the Austrian School and Anarcho-Capitalism in general is its reliance upon Rational Choice Theory (see Daniel Khaneman's work for more) and its limited view of what economies really are, namely peculiar human systems or aggregations of epigentic Hive Minds (see the Bell Curve-Murray or Hive Mind-Garret Jones for more). Hence, there are many different economic models that create wealth, some are more laissez-faire (West), others less so (everyone else). None are "free market" and America's ascension to economic power came largely between 1865-1890 and 1920-1950, much of which far more closely resembles China's model today becuase it was driven largely by concentrated capital in the hands of private industrial monopolies like Carnegie, Rockefeller, and Vanderbilt. (The Chinese version is called Township-Village-Enterprises (TVEs) as in China.)
While Fractional Reserve Banking and its offshoots (liquidity via Fed Printing or bank lending) have become existential threats, they are inputs not outputs. This is what Monetarists get wrong as well. Market forces digest QE, bank lending, fiscal stimulus etc. in different and unpredictable ways. Lowering interest rates for example does not necessarily cause banks to lend, QE does not necessarily lead to inflation ("velocity of money"), federal spending can be productive (much as it was in mid-20th century America, the Asian Tigers and now China). This is why inflation, while present, has not structurally surged until recently, and it has primarily for reasons beyond the Fed or the banking system (supply chain disruptions and fiscal spending - see Lyn Alden for more on different types of inflation).
The US and China are in radically different positions, which illustrates the bankruptcy of Austrian thinking. China has built a global network of trade partners and supply chains rooted in Chinese advanced manufacturing, rapidly developing technology, infrastructure, and decentralized banking largely through TVEs at the provincial level less so through the SOEs (see Louis-Vincent Gave work for more). Such a colossal project has been built on the backs of mercantilist economics (less so free markets) and erected the best engineering human capital in the world, largely because of the self-contained industrial complexes they have built. (For more on that read "Capital and Collusion" or "The Key to the Asian Miracle" by Hilton Root) In other words, China is far less financialized, its wealth is real, reproducible and increasing in innovation.
By contrast, the US has been hollowed out, its industrial capacity and thereby its ability to innovate has been crippled by financialization, which really started in the 70's and 80's partially because of abandoning the Gold standard but equally because of industrial offshoring in the 80's (Globalization). If you read the work of Robert Gordon (Limits of US Growth) he shows a slow down in US growth that is decades old largely because of the lackluster effects of Industrial Revolution 3 (Information Age) relative to earlier breakthroughs during IR-1 and IR-2. What made America great was industrial capacity scaled through global supply chains and operated by a top tier white-well educated middle class. (as China is doing today) Today, we have the appearance of innovation in Silicon Valley but if you look at the details it is errant (A good paper that goes into detail about this called "Towards an Untrepreneurial Economy." )
Remember, these variables are just part of the overall story as well. Immigration, political anachronism in America (USG institutions are not just corrupt they are also old and inefficient) has devastated America's productive capacity as well as Europe's, a mistake the Chinese are keen on avoiding. There are many problems in China but the overall story is in tact and I saw that first hand when I was in Asia. Japan for example is under severe threat by China's EV expansion in South Asia, forcing major Japanese (and German) auto companies into a tough spot.
I also highly recommend a speech by Jeffrey Gundlach (one of the top minds in finance) at the last Grant's Conference, perhaps the best speech on this subject I have seen. Pay keen attention when he describes the decoupling of asset holders (Capital) from the means of production.
A reset is coming and it will bring a revolution in economic theory as well.
Well, we can debate our differences in various forums.
Academic Agent/Neema Parvini is just as incorrigible.
But just as ground setting, perhaps you can tell me your rebuttal of my anti-political science argument that I wrote on X in a response to AA but I tagged you bc it's also directed at you:
The question is, if political science is not a real science then what is the basis for your statements?
"Libertarian failure" to understand ... praxeology is an explanatory-theoretical framework which says that if you expand the money supply this will lead to price inflation.
If it 'explains' this then it provides a way to 'understand' it.
In what sense could this be a 'failure to understand'.
As far as I can tell, as a political scientist (ie., a mere empiricist historian) you have no explanatory-theoretical framework to work off.
So, my praxeological framework predicts that China's economy (being a mixed 'managed' economy with a central bank) is likely failing, and there's ample evidence that this is happening.
What is your framework, over and above mere empirical/factual statements like
"China has built a global network of trade partners and supply chains rooted in Chinese advanced manufacturing, rapidly developing technology, infrastructure, and ..."
Yes, they are totally reliant on IP transfer (which is now gonna be hard for them) and International trade, and are cheap labour force to construct warehousing cities many of which are actually ghost cities, ie., they're a malinvestment.
So does that necessarily help the Chinese population slaving away in the factories for a pittance?
This kind of handwaving without an explanatory theory really won't get us anywhere.
If China were dependent on Western IP they never would have shifted from OEM factories for Western firms to building their own industries and brands, which they have. Innovation comes from the factory floor not the design phase. To learn more read the resources I referenced above. It is well documented.
Westerners went through exactly the same excruciating industrial process during the Western modernization project (see work of Charles Dickens), which is why Socialist movements surged from mid-19th to early 20th centuries.
Eventually, standards of living improved and social conditions eased. The same will happen in China in large part because of the social contract I mentioned in my video. However, Chinese society will never mirror ours because they are culturally-racially distinct and do not share Western values, as most of the world does not. (A good book on that subject is "The Geography of Thought" - Richard Nesbett)
George Box “All models are wrong, some are useful.”
Read the material I recommended and try to set aside the theoretical models, some of which have merit but most of which are either anachronistic, incomplete, or have been hijacked by the Frankfurt School as you probably know.
"If China were dependent on Western IP they never would have shifted from OEM factories for Western firms to building their own industries and brands, which they have. Innovation comes from the factory floor not the design phase. To learn more read the resources I referenced above. It is well documented."
You don't know that. If you do, and it's well-documented, then sending me to do my own research is not really adequate. My simple rebuttal is this: aggregates. As I pointed out in my video: you can't manage innovation a priori. I'll go for a priori to your a posteriori aggregates.
I'm working on a video/article to deal with the relativism inherent in both, your and AA's style of argumentation and how both of you are really on the left.
Not sure i understand how your points relate to Chinese industrial economy or economics in general.
RE: evidence. BYD.
BYD is probably the best EV company in the world at this point, and it is a domestic industrial Chinese company. To build a successful EV company requires an entire industrial suite: world class factories, top engineers, robust assembly lines, energy inputs, sales distribution etc. There are a host of Chinese companies across the manufacturing space that have achieved similar results.
Did you read my original article? TLDR: Everything changed in 2017. You had to live in China to understand how far everything changed.
It's an astroturf country and a Potemkin village.
The Soviets beat the Nazi's by building thousands of tanks. And?
All the EV and renewables stuff that China is selling is subsidized by the West's 'green agenda', which is dead in the water, as well as the Chinese state.
No one's buying it and no one's gonna buy any more EV's, including the Chinese.
Timing is the tricky part. Despite the fragility of the system, its resilience is notoriously underestimated. Granted—for all the wrong reasons. The US dollar is still the reserve currency, backed by a military power. It could persist longer than many expect. Great article, by the way.
Yes - there is good work on that subject done by a SubStacker named Conks. See his essay called: "The Silent Monetary Revolution"
(https://www.conks.plumbing/p/the-silent-monetary-revolution)
They have engineered a well secured and enclosed Dollarized machine. However, if you steel encase the system the only way out is by exiting the dollar system completely, which is the endgame and the reason for the geopolitical conflict we see. A mass exodus out has already started and there is nothing the bankers or DT can do to stop it, and trying to prevent it will only make it worse. Danger close.
Agree, efforts are certainly underway for an alternative as the dollar gets closer to its expiration date. I'll check out the article, thank you.
You're not wrong about the financial system but you're not really getting to the heart of the problem and therefore not providing true understanding of the root causes and how to solve them, namely, the right of the monopolistic state to counterfeit money.
The financial system per se it not able to do anything without there being the Big Brother waiting in the wings to save them from all their bad decisions by injecting 'liquidity' into the system.
As George Gammon points out, it's actually the fractional reserve banking that does the majority of the quantitative expansion of the money supply, which redistributes the resources toward the borrowers and leads to the misallocation of resources in speculative investments.
If the liquidity created out of thin air went into actual productive capacity it might not be a problem, but it's precisely the nature of a market pumped up with liquidity and socialized risk that it goes into speculative bubbles like the real estate bubble, or the dot com bubble.
So you have stagflation: a rising stock market pumped through inflation, and a stagnant unproductive economy.
Once you see that, you will see that the US and China are in pretty much the same situation, but of course we have to rely on the CCP data that masks a collapsing real estate and banking sector, rising unemployment and a stagnant economy.
The root course in the end is the Keynesian mixed economy statism.
Thanks for the note Tom.
I actually have a much longer essay coming on Argentina addressing many of your points and the Libertarian failure to understand what is happening there and in the global economy.
That said, the problem with the Austrian School and Anarcho-Capitalism in general is its reliance upon Rational Choice Theory (see Daniel Khaneman's work for more) and its limited view of what economies really are, namely peculiar human systems or aggregations of epigentic Hive Minds (see the Bell Curve-Murray or Hive Mind-Garret Jones for more). Hence, there are many different economic models that create wealth, some are more laissez-faire (West), others less so (everyone else). None are "free market" and America's ascension to economic power came largely between 1865-1890 and 1920-1950, much of which far more closely resembles China's model today becuase it was driven largely by concentrated capital in the hands of private industrial monopolies like Carnegie, Rockefeller, and Vanderbilt. (The Chinese version is called Township-Village-Enterprises (TVEs) as in China.)
While Fractional Reserve Banking and its offshoots (liquidity via Fed Printing or bank lending) have become existential threats, they are inputs not outputs. This is what Monetarists get wrong as well. Market forces digest QE, bank lending, fiscal stimulus etc. in different and unpredictable ways. Lowering interest rates for example does not necessarily cause banks to lend, QE does not necessarily lead to inflation ("velocity of money"), federal spending can be productive (much as it was in mid-20th century America, the Asian Tigers and now China). This is why inflation, while present, has not structurally surged until recently, and it has primarily for reasons beyond the Fed or the banking system (supply chain disruptions and fiscal spending - see Lyn Alden for more on different types of inflation).
The US and China are in radically different positions, which illustrates the bankruptcy of Austrian thinking. China has built a global network of trade partners and supply chains rooted in Chinese advanced manufacturing, rapidly developing technology, infrastructure, and decentralized banking largely through TVEs at the provincial level less so through the SOEs (see Louis-Vincent Gave work for more). Such a colossal project has been built on the backs of mercantilist economics (less so free markets) and erected the best engineering human capital in the world, largely because of the self-contained industrial complexes they have built. (For more on that read "Capital and Collusion" or "The Key to the Asian Miracle" by Hilton Root) In other words, China is far less financialized, its wealth is real, reproducible and increasing in innovation.
By contrast, the US has been hollowed out, its industrial capacity and thereby its ability to innovate has been crippled by financialization, which really started in the 70's and 80's partially because of abandoning the Gold standard but equally because of industrial offshoring in the 80's (Globalization). If you read the work of Robert Gordon (Limits of US Growth) he shows a slow down in US growth that is decades old largely because of the lackluster effects of Industrial Revolution 3 (Information Age) relative to earlier breakthroughs during IR-1 and IR-2. What made America great was industrial capacity scaled through global supply chains and operated by a top tier white-well educated middle class. (as China is doing today) Today, we have the appearance of innovation in Silicon Valley but if you look at the details it is errant (A good paper that goes into detail about this called "Towards an Untrepreneurial Economy." )
Remember, these variables are just part of the overall story as well. Immigration, political anachronism in America (USG institutions are not just corrupt they are also old and inefficient) has devastated America's productive capacity as well as Europe's, a mistake the Chinese are keen on avoiding. There are many problems in China but the overall story is in tact and I saw that first hand when I was in Asia. Japan for example is under severe threat by China's EV expansion in South Asia, forcing major Japanese (and German) auto companies into a tough spot.
I also highly recommend a speech by Jeffrey Gundlach (one of the top minds in finance) at the last Grant's Conference, perhaps the best speech on this subject I have seen. Pay keen attention when he describes the decoupling of asset holders (Capital) from the means of production.
A reset is coming and it will bring a revolution in economic theory as well.
Argentina essay will be released in Feb.
Best,
Cameron
Well, we can debate our differences in various forums.
Academic Agent/Neema Parvini is just as incorrigible.
But just as ground setting, perhaps you can tell me your rebuttal of my anti-political science argument that I wrote on X in a response to AA but I tagged you bc it's also directed at you:
https://x.com/TabaczynskiTom/status/1881508523080921475
The question is, if political science is not a real science then what is the basis for your statements?
"Libertarian failure" to understand ... praxeology is an explanatory-theoretical framework which says that if you expand the money supply this will lead to price inflation.
If it 'explains' this then it provides a way to 'understand' it.
In what sense could this be a 'failure to understand'.
As far as I can tell, as a political scientist (ie., a mere empiricist historian) you have no explanatory-theoretical framework to work off.
So, my praxeological framework predicts that China's economy (being a mixed 'managed' economy with a central bank) is likely failing, and there's ample evidence that this is happening.
What is your framework, over and above mere empirical/factual statements like
"China has built a global network of trade partners and supply chains rooted in Chinese advanced manufacturing, rapidly developing technology, infrastructure, and ..."
Yes, they are totally reliant on IP transfer (which is now gonna be hard for them) and International trade, and are cheap labour force to construct warehousing cities many of which are actually ghost cities, ie., they're a malinvestment.
So does that necessarily help the Chinese population slaving away in the factories for a pittance?
This kind of handwaving without an explanatory theory really won't get us anywhere.
Correct me if I'm wrong.
If China were dependent on Western IP they never would have shifted from OEM factories for Western firms to building their own industries and brands, which they have. Innovation comes from the factory floor not the design phase. To learn more read the resources I referenced above. It is well documented.
Westerners went through exactly the same excruciating industrial process during the Western modernization project (see work of Charles Dickens), which is why Socialist movements surged from mid-19th to early 20th centuries.
Eventually, standards of living improved and social conditions eased. The same will happen in China in large part because of the social contract I mentioned in my video. However, Chinese society will never mirror ours because they are culturally-racially distinct and do not share Western values, as most of the world does not. (A good book on that subject is "The Geography of Thought" - Richard Nesbett)
George Box “All models are wrong, some are useful.”
Read the material I recommended and try to set aside the theoretical models, some of which have merit but most of which are either anachronistic, incomplete, or have been hijacked by the Frankfurt School as you probably know.
Thanks for the note.
"If China were dependent on Western IP they never would have shifted from OEM factories for Western firms to building their own industries and brands, which they have. Innovation comes from the factory floor not the design phase. To learn more read the resources I referenced above. It is well documented."
You don't know that. If you do, and it's well-documented, then sending me to do my own research is not really adequate. My simple rebuttal is this: aggregates. As I pointed out in my video: you can't manage innovation a priori. I'll go for a priori to your a posteriori aggregates.
I'm working on a video/article to deal with the relativism inherent in both, your and AA's style of argumentation and how both of you are really on the left.
Not sure i understand how your points relate to Chinese industrial economy or economics in general.
RE: evidence. BYD.
BYD is probably the best EV company in the world at this point, and it is a domestic industrial Chinese company. To build a successful EV company requires an entire industrial suite: world class factories, top engineers, robust assembly lines, energy inputs, sales distribution etc. There are a host of Chinese companies across the manufacturing space that have achieved similar results.
(Motley Fool's Ratings: https://www.fool.com/research/largest-ev-companies/)
Wish you the best.
I give a more full reply in the lates podcast video: https://www.youtube.com/watch?v=sWMgJdCmbAA
Article should be up on Substack tomorrow, but I discuss the key points in the video.
Did you read my original article? TLDR: Everything changed in 2017. You had to live in China to understand how far everything changed.
It's an astroturf country and a Potemkin village.
The Soviets beat the Nazi's by building thousands of tanks. And?
All the EV and renewables stuff that China is selling is subsidized by the West's 'green agenda', which is dead in the water, as well as the Chinese state.
No one's buying it and no one's gonna buy any more EV's, including the Chinese.