Especially appreciate how you frame hypothecation and shadow asset recycling as the real mechanism hollowing out dollar hegemony — not dramatic liquidation but quiet reengineering.
Feels like we’re witnessing a slow migration from nominal claims to real use-value flows — without the fireworks most people expect.
Don't understand much of the detail, being a biological scientist, my grasp of macro-economics is more basic than an average 2 yr old, but my understanding is that the hyper-financialisation of USD based global economy over recent decades has finally reached its long-predicted inflexion point.
Tim Morgan's surplus Energy Economics model, explains that there are 2 linked economies... The "real" economy of material tangible goods & services, and the financial economy of "mouse-click money" .. when these 2 economies diverge too much and the real-world value link between them is broken, the financial asset economy has to break and re-value down to the level of the "real" economy which in turn, is based on fundamental core energy. As the planet depletes in FF energy stores, it makes real economic sense to invest in multiple alternatives and innovate. Also makes sense that the majority of US graduates go into MBA's for Wall Street, or Law, but the majority of Chinese graduates go into STEM jobs.
Because in the end, you can't eat money, it doesn't even burn well enough to keep you warm in winter. I also deeply appreciate China's method seems to be moving slow and steady, rather than break it suddenly.
And, the Trump Dream Team's behaviour seems more of a Hail Mary pass, and we all know how they usually play out.
A wide ranging review of the utility of China’s continued holding of USD. The myriad ways of exploiting this dollar position are intriguing. As an example (possibly mentioned in your piece, I read quickly) is commiting to smaller countries awash in USD/IMF/IBRD debt or financial commitments (eg debt covenants) — in exchange for partnered natural resource development rights. Another is the possibility of a new stablecoin (there’s already been discussion about a role for HK here), Tether-like, with beta testing before launching publicly (like CIPS).
In any case, the dangers of a net long position in USD — of course being studied by China — with the recent “triple witching hour”(fall in USD against the euro, SwFr, and RMB — not to speak of gold — during the same period, something that hasn’t happened before) sounding a major alarm. It’s the classic asset-liability match/mismatch that lending institutions face, with the frisson of the possible collapsing USD turning “spicy” into “extra spicy”. Or a kind of musical chairs (aka Trip to Jerusalem) with the last unhedged player kicked to the floor.
Thank you Professor Powell. A tour de force Professor. I came back a second time. The point, make sure I understood what I understood; strengthen my understanding. Tremendous experience. This work is monumental. A perfect bow on a magnificent box of chocolate. Again, thank you. The time, effort to produce this… my thesaurus failed me. Best wishes. Cary on!
Great essay.
Especially appreciate how you frame hypothecation and shadow asset recycling as the real mechanism hollowing out dollar hegemony — not dramatic liquidation but quiet reengineering.
Feels like we’re witnessing a slow migration from nominal claims to real use-value flows — without the fireworks most people expect.
Don't understand much of the detail, being a biological scientist, my grasp of macro-economics is more basic than an average 2 yr old, but my understanding is that the hyper-financialisation of USD based global economy over recent decades has finally reached its long-predicted inflexion point.
Tim Morgan's surplus Energy Economics model, explains that there are 2 linked economies... The "real" economy of material tangible goods & services, and the financial economy of "mouse-click money" .. when these 2 economies diverge too much and the real-world value link between them is broken, the financial asset economy has to break and re-value down to the level of the "real" economy which in turn, is based on fundamental core energy. As the planet depletes in FF energy stores, it makes real economic sense to invest in multiple alternatives and innovate. Also makes sense that the majority of US graduates go into MBA's for Wall Street, or Law, but the majority of Chinese graduates go into STEM jobs.
Because in the end, you can't eat money, it doesn't even burn well enough to keep you warm in winter. I also deeply appreciate China's method seems to be moving slow and steady, rather than break it suddenly.
And, the Trump Dream Team's behaviour seems more of a Hail Mary pass, and we all know how they usually play out.
A wide ranging review of the utility of China’s continued holding of USD. The myriad ways of exploiting this dollar position are intriguing. As an example (possibly mentioned in your piece, I read quickly) is commiting to smaller countries awash in USD/IMF/IBRD debt or financial commitments (eg debt covenants) — in exchange for partnered natural resource development rights. Another is the possibility of a new stablecoin (there’s already been discussion about a role for HK here), Tether-like, with beta testing before launching publicly (like CIPS).
In any case, the dangers of a net long position in USD — of course being studied by China — with the recent “triple witching hour”(fall in USD against the euro, SwFr, and RMB — not to speak of gold — during the same period, something that hasn’t happened before) sounding a major alarm. It’s the classic asset-liability match/mismatch that lending institutions face, with the frisson of the possible collapsing USD turning “spicy” into “extra spicy”. Or a kind of musical chairs (aka Trip to Jerusalem) with the last unhedged player kicked to the floor.
Thank you Professor Powell. A tour de force Professor. I came back a second time. The point, make sure I understood what I understood; strengthen my understanding. Tremendous experience. This work is monumental. A perfect bow on a magnificent box of chocolate. Again, thank you. The time, effort to produce this… my thesaurus failed me. Best wishes. Cary on!