That's exactly what I'm talking about. For Chinese politicians, this commercial orientation was very important in turning China into a powerful country, with a large world export market reserve and huge international reserves, but at what cost?
This cost was to the detriment of the entire Chinese society, which could have increased its standard of living even further if it had not followed this mercantilist logic.
In the 80s, I remember very well when the US imported Japanese cars while the US exported the "dollar". In other words, the Americans received automobiles while the Japanese received the dollar. Everyone talked about how disadvantageous this was for the USA, the same type of trade balance argument that there must always be infinite surpluses to accumulate huge international reserves, etc.
A country is competitive because of its ability to export many goods to other countries. However, to do this, there is a trade-off: this country inevitably has to accept promissory notes from foreigners. When a country exports goods, what it receives in return are mere electronic digits recorded in foreign currency -- currently, the dollar. As the dollar is not legal currency in the overwhelming majority of nations around the world, what an exporting country receives, in reality, is a debt bond from the American government. The digital dollars that this country receives as a result of its exports are reinvested in the USA, in the acquisition of American government bonds. In the Central Bank's balance sheet, this acquisition of government securities is recorded as "international reserves".
What actually happens is the following: individuals working in the export business are willing to accept promissory notes, or other types of assets based on electronic digits, in exchange for physical goods. The exporter receives electronic money -- in this case, US dollars -- into his bank account. For him, these dollars have value. If he hadn't, he wouldn't have exported the goods. He can exchange these dollars for his domestic currency (in this case, he sells dollars to his bank, which will credit his current account with national currency) or he can keep these dollars abroad, deposited in a foreign bank. Perhaps he prefers to buy stocks or other foreign assets that are sold in dollars. The point is that this exporter is willing to accept promissory notes -- in this case, digital promises -- in exchange for their real goods. This is the only principle behind exporting.
The USA is the classic example of a country that imports many more goods than it exports. However, the USA is also considered an economic power. Why? Because foreigners are always willing to invest in the country. The problem is that the favorite investment is buying bonds issued by the US Treasury. Although some foreign investors buy these bonds, the overwhelming majority of them are foreign central banks. Foreign central banks buy US government bonds because their respective governments want to keep their national currencies depreciated against the dollar in order to increase exports to the US. In other words, the Chinese government is the real source of that nation's export power, as it is the one who manipulates the foreign exchange market to favor its export industries.
Using state power to subsidize a small percentage of the domestic population (exporters, whose lobby is powerful in any nation in the world) while harming the overwhelming majority of the population (consumers, who have no lobby in any nation in the world) world) is the current norm in every major economy across the globe. And the rhetoric used is also the same: benefiting a few to the detriment of everyone else is something that is done in the name of strengthening the nation.
The argument, as with all government promises, is completely fallacious. China does even worse, devaluing the currency to encourage exports, inhibiting any tariffs or market decline.
What strengthens a country's population is having a predictable currency. This makes investment predictions easier. People's concerns about currency value fluctuations are reduced. But it is impossible to obtain a predictable currency in international terms, as the governments of other countries are continually manipulating their currencies, almost always by expanding the money supply. In other words, all foreign central banks inflate. Therefore, a domestic currency whose supply is constant will continually appreciate in relation to foreign currencies. This means your purchasing power will continually increase. There will be no stable exchange rates between countries.
Given that there are a much larger number of people focused on the domestic market than on exports, a stable currency policy would benefit those people who are more productive, more economically efficient and who better meet the demands of the population. These would be able to obtain a continuous flow of domestic currency. Your cost of living would drop year after year, consistently, because foreign central banks are inflating their respective currencies. The value of those currencies relative to this country's stable currency would continually fall.
Therefore, a stable currency would bring a great benefit to those consumers who live under this standard. And these consumers form the overwhelming majority of consumers in a country. Only a relatively small percentage of a nation's entrepreneurs and workers are in the export sector of the economy. That is why the devaluation of the national currency is a subsidy only for a minority of businesspeople and workers. The vast majority of this nation's residents are harmed. It is forced to pay more for imported goods because of its Central Bank's policy of inflating the money supply in order to keep the national currency devalued compared to other currencies.
By depreciating their own currency, monetary planners are harming the interests of the vast majority of this nation's citizens. The subsidy only benefits a minority. The fact that there are a huge number of people in the majority allows their wealth to be plundered through inflation of the money supply, allowing the export sector to earn above-market revenues when exporting their goods. A minority cannot subsidize a majority. It always has to be the other way around.
Therefore, an economy with a stable currency will benefit the vast majority of its citizens, who will be able to purchase at continually lower prices. This economic truth irritates defenders of mercantilism. They say such a policy is evil. They are convinced that having a Central Bank continually depreciating the currency as a way of subsidizing the export sector is something extremely beneficial for a nation, and that the reduced quantity of goods and services that will be available to domestic consumers (both as a result of smaller imports and the fact that more domestic products are being exported) is something of no importance.
Unfortunately, there are so few people who understand economic logic that this subsidy coercively extracted from a majority to a minority is not seen as a program to transfer wealth from the poorest (common consumers) to the richest (export sector). Whenever a country's government adopts mercantilism -- something that occurs approximately 100% of the time -- it does so knowing that practically no one understands that that policy harms the vast majority of citizens and benefits only a minority who are in the sector. exporter of the economy. What's more, he does so knowing that he will have the resolute support of the media and the uninformed, who believe that a "subsidized export sector strengthens the country's economy."
The world is now adopting competitive monetary depreciation policies. If one country depreciates its currency, the other wants to depreciate it more. "Everything for exporters!" This will severely harm the vast majority of citizens of all nations. It is no coincidence that the standard of living in all major countries has been falling steadily in recent years. They will not be able to enjoy the benefit of having a strong domestic currency, something that would allow them to import more foreign goods. They would be able to purchase whatever goods and services they wanted, at continually declining prices. But since they don't understand economics, they accept (and even applaud) their government's mercantilist policies. They accept that their currency will be depreciated and their standard of living will be reduced. They accept being robbed for the good life of exporters. They like to see their goods being sent to foreigners for nothing (only the exporters keep the promissory notes).
It's unfortunate that most people don't understand economics. For exporters, however, who benefit from this assault on the population's purchasing power, this economic ignorance of their compatriots is a gift. Given that it is impossible to gain something for nothing, what happens is that a small group of exporters gain a lot and, in return, the rest of the masses are left with increasing prices for almost all goods and services in the economy. And he still claps.
