Did any of you have the chance to watch the series “Empires of Silver” yet? I have been watching the first few episodes on my recent Singapore Airlines flights. Overall I thought the tv-series/documentary was pretty well done, with very pertinent content considering the trade ‘wars’ that are currently being waged.
What caught my attention about the show:
- Sponsored by Eastern entities. Why would they?
- Made for Western audiences. Again, why?
- Discusses trade imbalances during last days of the Qing dynasty, a global silver shortage (due to imbalanced trade flows to China) and how the west used opium to try and balance the deficit.
- Touches on what happened when China decided to stop the importation of opium.
- Makes mention of China’s deep ties with global economies back then, and influence on the west by having deep personal/business relations between chinese businessmen and prominent figures from the west.
- Goes in detail about how much the Chinese actually align with a hard currency as a culture (which happened to be silver back then)
What I found interesting were the number of analogs to the present day we find ourselves in:
- Global shortage in trade currency (It was silver back then, USD today), albeit for different reasons compared to the present day.
- Western powers balancing trade by forcing non productive exports upon surplus countries (US treasuries today, opium back then).
- Surplus countries stopping importation of useless goods (Opium then, US treasuries now) and the subsequent instability that follows.Luke Gromen from Forest For The Trees has been calling this well for ages.Foreigners are saying No to US monetary opium
- Guess what? China is hoarding hard international trade currency again. This time it is Gold. See below:
I wonder how the recent launch of Shanghai gold futures by the CME group plays into all of this. Gold futures denominated in yuan, traded on the shores of the US of A! Internationalisation of the yuan has been repeatedly called for by figures on both sides of the aisle. Looks like it might finally be accelerating.
This time, maybe, when China starts to become THE centre of global trade as they were before, they might be able to sidestep their previous problems.
China will have stronger networks with foreigners via the belt and road initiative (OBOR). They will probably have the ability to build trade surpluses without gumming up world trade (Gold in China stays in China by law, while foreigners can swap CNH (offshore yuan) for Gold offshore or for other Chinese goods and services). Also, China will navigate the coming period with caution rather than hubris.
So what is the next move that global players might be moving towards?
I know that not everyone is a big fan of Mr Keynes, but maybe his ‘Bancor’ idea from 1940 might have caught the imagination of a few powerful figures? See PBOC comments from 2009 and other interesting developments:
- “Since the outbreak of the financial crisis in 2008 Keynes’s proposal has been revived: In a speech delivered in March 2009 entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People’s Bank of China called Keynes’s bancor approach “farsighted” and proposed the adoption of International Monetary Fund (IMF) special drawing rights (SDRs) as a global reserve currency as a response to the financial crisis of 2007–2010. He argued that a national currency was unsuitable as a global reserve currency because of the Triffin dilemma—the difficulty faced by reserve currency issuers in trying to simultaneously achieve their domestic monetary policy goals and meet other countries’ demand for reserve currency. A similar analysis can be found in the Report of the United Nation’s “Experts on reforms of the international monetary and financial system” as well as in the IMF’s study published on 13 April 2010.” – Wikipedia on Bancor
- U.S. Weighs Currency Pact With China as Part of Partial Deal – Bloomberg article from Oct 2019
- PBOC’s Yi Gang joins trade talks in US? When was the last time the Fed’s Jay Powell went to China for trade talks? 😉
In any case, this TV series is another sign that they are not going into this new phase without having thought it all through. They might not pull it off, but it all seems at least calculated.
They wouldn’t want to be like a bull in a china shop would they?