Blackstone
Brigadier
OK PanAsian, we beat this one to death. Thanks for the civil discussion and debate, we'll just have to agree to disagree.
South China Sea Strategies for other nations (Not China)
- Thread starter PanAsian
- Start date
Thank you as well, agree to disagree, peace out on this one.
@Blackstone
You state
This is factually incorrect.
In 1945, the US accounted for 50% of global economic output
In 1960, this dropped to 40%
In 2002, it was 32%
By 2013, this had dropped to 22%
The long-term trend is that the US will account for a smaller proportion of the economy, as most of the world's population is much poorer and can be expected to grow faster than the US. And remember that both China and India can be expected to grow a larger economy than the USA in the coming years. So the US is declining relative to the rest of the world, which is growing faster and therefore amassing more power and influence.
See the WSJ article and the IMF report below, which looks at the past and also to future economic growth.
You state
This is factually incorrect.
In 1945, the US accounted for 50% of global economic output
In 1960, this dropped to 40%
In 2002, it was 32%
By 2013, this had dropped to 22%
The long-term trend is that the US will account for a smaller proportion of the economy, as most of the world's population is much poorer and can be expected to grow faster than the US. And remember that both China and India can be expected to grow a larger economy than the USA in the coming years. So the US is declining relative to the rest of the world, which is growing faster and therefore amassing more power and influence.
See the WSJ article and the IMF report below, which looks at the past and also to future economic growth.
SamuraiBlue
Captain
I won't be in such a haste to make such conclusion if you actually know how the world economy actually works, especially in the Finance sector concerning currency trade.
You see after what is now known as the Nixon Shock in which the US dollar went full Fiat money, the dollar sky rocketed due to the fact that oil can only be purchased through US Dollar so the currency exchange is based on US dollar.
What this means is if PRC wants to purchase oil from OPEC they would first need to exchange RMB to US dollar to make the transaction.
This means there is a constant flow of US dollar into various nation's currency including OPEC nation's currencies in which the US Federal reserve banks are able to tap into.
This is the reason why US was so hell bent against Iran which declared that they will create their own Oil Bourse which accepts not only US Dollars but also various other currencies for transaction in which Russia followed.
The only way for the US to be dethroned from top economy of the world is move away from the carbon economy which is very difficult to whine away from at the moment.
@SamuraiBlue
Blackstone didn't realise or was in denial about how the USA is in relative decline.
But let's take your point on US dollar hegemony, because yes,
1. most international trade is currently denominated in dollars
2. and therefore has to be transacted through the US banking system and US laws
3. and the most common reserve currency is the US dollar
But I think you need to look what at developments there have been with regards to the relative decline in the importance of the dollar.
1. The studies now show that Asian currencies are more closely correlated with the RMB than the USD, because of the centrality of the Chinese economy within Asia. So logically it makes more sense for Asian currencies to peg themselves to the RMB and denominate trade in the RMB rather than the USD. This would better smooth out the impact of currency fluctuations and instability.
2. We also see a steady long-term loosening of control of the RMB and the removal of capital controls, which will promote its use abroad.
3. The recent phase 1 launch of the 'China International Payments System' will provide an alternative to Swift which is dominated by US/European banks. Later phases will expand the scope of a clearing network for international transactions, which would favour the RMB.
4. China Unionpay has now grown to become the world's largest card payment network. In places like Korea, unionpay-based transactions are dominant over Visa/Mastercard, and would presumably favour the RMB over the USD. Remember that China as a trade/investment/tourism partner is more important to Korea than the combination of Japan+USA.
5. China only recently became the world's largest oil importer, but it will probably take another 10 years before it grows to becomes a larger oil consumer than the USA. At that point, it would obviously be logical for Asia and the Middle East to price oil in RMB instead of USD.
6. "the main benefit of using the renminbi is that for large importers (often retailers) it is cheaper – it removes the foreign exchange margin from the contract and often Chinese companies will offer a discount of 1-2 per cent if buyers pay in renminbi."
...
He adds: “Many times you are able to negotiate larger discounts with your suppliers if you are paying in Rmb” because paying in foreign currency creates procedural bottlenecks and delays.
7. And as the Chinese economy continues to grow much faster than the US economy, we can expect RMB usage to increase significantly, and possibly replace the USD. After all, China is already the world's largest trading nation, outbound tourist provider and spender, largest net foreign investor, largest in terms of actual economic output etc etc.
Various articles below
Blackstone didn't realise or was in denial about how the USA is in relative decline.
But let's take your point on US dollar hegemony, because yes,
1. most international trade is currently denominated in dollars
2. and therefore has to be transacted through the US banking system and US laws
3. and the most common reserve currency is the US dollar
But I think you need to look what at developments there have been with regards to the relative decline in the importance of the dollar.
1. The studies now show that Asian currencies are more closely correlated with the RMB than the USD, because of the centrality of the Chinese economy within Asia. So logically it makes more sense for Asian currencies to peg themselves to the RMB and denominate trade in the RMB rather than the USD. This would better smooth out the impact of currency fluctuations and instability.
2. We also see a steady long-term loosening of control of the RMB and the removal of capital controls, which will promote its use abroad.
3. The recent phase 1 launch of the 'China International Payments System' will provide an alternative to Swift which is dominated by US/European banks. Later phases will expand the scope of a clearing network for international transactions, which would favour the RMB.
4. China Unionpay has now grown to become the world's largest card payment network. In places like Korea, unionpay-based transactions are dominant over Visa/Mastercard, and would presumably favour the RMB over the USD. Remember that China as a trade/investment/tourism partner is more important to Korea than the combination of Japan+USA.
5. China only recently became the world's largest oil importer, but it will probably take another 10 years before it grows to becomes a larger oil consumer than the USA. At that point, it would obviously be logical for Asia and the Middle East to price oil in RMB instead of USD.
6. "the main benefit of using the renminbi is that for large importers (often retailers) it is cheaper – it removes the foreign exchange margin from the contract and often Chinese companies will offer a discount of 1-2 per cent if buyers pay in renminbi."
...
He adds: “Many times you are able to negotiate larger discounts with your suppliers if you are paying in Rmb” because paying in foreign currency creates procedural bottlenecks and delays.
7. And as the Chinese economy continues to grow much faster than the US economy, we can expect RMB usage to increase significantly, and possibly replace the USD. After all, China is already the world's largest trading nation, outbound tourist provider and spender, largest net foreign investor, largest in terms of actual economic output etc etc.
Various articles below
Blackstone
Brigadier
I've stated many times US is in relative decline vis-a-vis reemerging great powers like China.
@Blackstone
The correct statement is that the US is at its zenith and is in relative decline vis-a-vis the rest of the world, but especially China.
Did you not read the WSJ article which shows how the US economy in the past 50 years makes up an ever smaller proportion of the global economy?
And how the IMF expect the US to continue growing significantly slower than the average for the rest of the world?
The correct statement is that the US is at its zenith and is in relative decline vis-a-vis the rest of the world, but especially China.
Did you not read the WSJ article which shows how the US economy in the past 50 years makes up an ever smaller proportion of the global economy?
And how the IMF expect the US to continue growing significantly slower than the average for the rest of the world?
Blackstone
Brigadier
US is still ascending relative most of the world, because it's growth is faster than most countries. China is a an exception; ergo the phrase relative decline to China. Those are the facts.
No it isn't. You're making up this fact.
US growth is projected at 2.6% for both 2016 and 2017.
Overall World growth is projected at 3.4% for 2016 and 3.6% for 2017
If I take the IMF data below and do a rough calculation, the rest of the world (excluding China and the USA) is projected to grow by at least 2.88% in 2016 and we can see the 2017 projection will be a significantly higher number.
Hence the US is in a sustained relative decline with regard to the rest of the world even if China is excluded from the comparison.
This should not be a controversial point as the USA is already very wealthy, but the vast majority in the rest of the world is a lot poorer, so they can sustain a much higher growth rate.
IMF report with the numbers below