Will China Force The World To Trade In Yuan?

Dr. Mahathir Mohamad thinks that the richer the Chinese get, they will not accept the domination of the Dollar.  He thinks that China may force the world to trade in Yuan.  This is certainly a scary thing for the United States!

If China could force the world to trade in Yuan, people like me who are living in the United States would have to face many scary outcomes of a much weaker Dollar.  Just imagine if the world decides to drop the U.S. Dollar as the reserve currency, the United States then has to worry about the balance of trade even more than ever before.

A country in some ways is not that different than a normal household.  Besides getting loans, what you make is what you have got to spend.  Nonetheless, a normal household got bills to pay, and so what you make is what you have got to save somehow.  Without enough saving, you don’t have enough money to spend.  Living beyond one’s means will get one into huge debts.

Dr. Mahathir Mohamad hints that if China forces the world to abandon Dollar for Yuan, the United States won’t have enough gold and whatever to pay back debts and could declare bankruptcy overnight.  I’m an American and so I don’t want to see something like this to occur, but we’re not Chinese and so we can’t really know what the Chinese would do when they get even richer.

Check out the video right after the break to see Dr. Mahathir Mohamad — current Malaysia’s prime minister — speaks on how the Chinese may drop the Dollar in the near future and force the world to trade in Yuan.

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Feeling Like A Broken Record, But I Admit Cryptocurrencies Are Really Broken! I Don’t Trust Bitcoin!

Why I trust the bank and not Bitcoin or any other cryptocurrency?  Simple!  Origin’s traceable trail!  What do I mean by this?  The time you deposit your money into the bank either through electronic means such as mobile or you could deposit your money in person, a third party, in this case, the bank is there to take the responsibility of safekeeping your money.  Sure, the bank could have a system hiccup where your bank account would show up with a wrong value, but the bank has the responsibility to generate other traceable trails of your money such as paper statement, online bank statement and so forth.  Bitcoin or any other cryptocurrency is a different matter because there is no third party that is responsible for your money!  When something goes wrong with your electronic wallet such as corruptive memory on your device would destroy everything you store!  Cryptocurrency exchanges could be the third party to be responsible for your crypto coins, but these are new institutions that you could not trust and they got hacked too often!

In China, people are going cashless by using their mobile phone as the main medium to pay for things.  Still, their digital currency in their electronic wallet is tied to a medium of cash and a whole lot of other mediums such as check and so forth that could eventually generate into very noticeable trails of origin.  With such noticeable trails of origin, the owner of the money could always demand some sort of compensation when everything goes wrong such as the value of money is suddenly being misreported somehow.  These people, although in cashless society (almost), would be able to morph their medium of payment effortlessly — cash to check to digital numbers on their mobile to whatnot — with some sort of confidence that some sort of traceable trails of origin would back their transaction up clearly.

Although cryptocurrency’s blockchain is very rigid and vivid in showing transaction trails, the sender and receiver of the crypto-coins could hide behind the transaction which in the end could hurt their claim of the transaction.  What’s worse is that they could face a perfect storm when their device got corrupted or hacked and their wallet somehow was rendered broken — they won’t be able to open their wallet to show that they got the traceable trail of origin to back up their transactional claim so they could receive any compensation from whatever party that they’d dealt with.  As of now though, even if they’re proving that they’re the owner of a crypto wallet that sent out the crypto-coins, they mostly like are going to face anger and confusion as once the crypto-coins leave their wallet — these crypto-coins are gone forever and nobody would be able to compensate for the lost crypto-coins.

I think until the cryptocurrency tech could address the worries and weaknesses of the transactions that are being made by the blockchain and the frontend technology such as the cryptocurrency tech (e.g., Bitcoin, Litecoin, Namecoin) itself, nobody could fully feel comfortable of using such tech as a replacement for traditional forms of currencies.  I hate the feeling of being a broken record, but let’s be clear cryptocurrencies are facing real hurdles such as hackable, not widely acceptable, not being supported by the governments, relying too much on an electronic wallet as the trail of origin, facing corruptable electronic memory (i.e., RAM/hard-drive), no mean of compensation once crypto-coins got loose from the crypto-wallet, too much saturation as too many cryptocurrencies are in the existence, and so forth.

One more thing!  If someone stole the medium that you store your crypto-coins on such as your smartphone, you will never get these crypto-coins back!  Traditional forms of money such as the digital numbers that represent the dollar amount you got in your smartphone app would still be yours if your smartphone got stolen!  After all, the app on your smartphone is probably connected to your bank account and the app could once again be re-download and reconnected to your bank account. Perhaps, you’re using an app such as Starbucks app which requires you to preload the number of dollars before you could use it to pay for coffee — even a stolen mobile phone won’t be a problem since you could always re-download Starbucks app and reconnect to Starbucks’ server which got the proper dollar amount in your Starbucks account as before!  Crypto-wallet?  I don’t think so!

Weaker Dollar, Stronger Yuan May Hurt The United States And Help China In The Long Run!

I’m no expert in economic matters, but I just want to use my own personal logic to make sense of a few things that are currently happening.  People are seeing that the Dollar is weakening as we speak, and the Yuan is growing stronger as we speak.  Some people say weaker Dollar is a good thing because export will become more profitable.  Furthermore, when export becomes profitable, it also drives up the manufacturing sector at home.  That’s the theory for some people, but I feel that it’s way more complicated than this.

Since the United States isn’t a world manufacture hub — China is holding this title — the United States’ exports won’t matter as much unless the United States becomes the world manufacture hub.  Sure, with weaker Dollar, the United States’ exports will become more competitive than before.  The question is, will a little gain in competitiveness in exports spur the manufacturing sector at home?  Meanwhile, weaker Dollar will make the United States’ imports a lot more expensive.

I think the United States currently imports a lot more than exports.  The United States’ import is at $2.25 trillion and the export is at $1.45 trillion for the year of 2016, according to Wikipedia.  If the United States’ exports continue to slack even with the weak Dollar and the imports continue to grow, the United States could face an even stronger trade deficit.  For an example, manufacturer companies in the United States may have to import more expensive materials from the outside to manufacture products at home for selling across the world and at home.  This may not make the products at home cheaper for homegrown consumers.  Furthermore, this will increase the trade deficit in manufacturing sector if not enough products within the United States get to export to balance out the import costs.

Weak Dollar will increase less buying power for the Americans who go abroad for vacation, business, and so forth.  Weak Dollar can make purchases of products from foreign companies through online websites or offline imports more expensive for the American consumers.  For an example, I could be buying a music plugin from an online website which belongs to a French company, and with a weak Dollar, I could be paying more for this software.

I guess good things and bad things do exist even when the Dollar is weak or strong.  Nonetheless, the most interesting question is can the United States fare better when the Dollar is weaker or stronger.  In my opinion, weaker Dollar can help spur export a bit, but if the United States’ exports don’t carry the whole United States’ overall, long-term economy, then the weaker Dollar will be a very bad thing!

What about China?  If the United States enters a trade war against China, China can increase import tariff costs for the products from the United States.  This could hurt the United States’ export market because weaker Dollar would be neutralized by this move from China.  Furthermore, China can also buy up weak Dollar on the cheap to make Yuan stronger if this would serve China’s agenda.  Of course, stronger Yuan for China could make China’s exports look expensive.  Still, from what I’ve heard, China is trying to spur demands at home to create a bigger home consumer market so China won’t be relying on too much from the export market.  If this is the case, then cheap Dollar would be beneficial for China in a big way!

Stronger Yuan would allow Chinese who are going abroad to get more bang for the buck.  Meanwhile, Chinese imports would become cheaper, and so China won’t have to spend so much money to import stuff.  As China’s export market isn’t doing so bad and the imports get cheaper, stronger Yuan allows China to continue to reform her consumption market.  Foreign companies would love to enter China’s bigger homegrown consumption market because China has 1.4 billion headcounts and growing.  As China becomes an ever more important factor for foreign companies due to the size of Chinese population and market, China can begin to dictate tastes, styles, fashions, and so forth worldwide.  Chinese culture will become ever more influential if Chinese market becomes the most important market in the world.

With a weaker Dollar and stronger Yuan, entering a trade war against China might be very bad for the United States!  China can sanction the United States’ companies, entities, and so much more to crash the United States economy.  Of course, a trade war would be bad for China too, because the United States’ imports from China do matter to China a lot.  Nonetheless, as China doesn’t rely on the export market so much, a trade war between the United States and China won’t deter Chinese economic reform plan.  After all, China wants to grow the homegrown consumption market!  While growing a homegrown consumption market to rely less on the export market, China relies on the cheaper import market to balance out the reduction of Chinese exports.  Weaker Dollar and stronger Yuan will allow China to transit from the export market to a service market, also to move to a higher value-added export market — all in all – making this transition in a smoother fashion.

In conclusion, I think China can make the best out of either weaker or stronger Dollar, and the United States — as long as the country stays less competitive — won’t be able to have the upper hand if a trade war occurs between China and the United States.  Meanwhile, China can use stronger Yuan to buy cheap debts from United States’ weak Dollar to prop up China Yuan’s strength.  This, in turn, will actually help China transits from a manufacturing to a service economy.  As the low value-added market goes away in China, China has to accelerate the reform of the manufacturing sector at home so Chinese future export market will be more about high value-added products.  Anyhow, if the United States isn’t going to be able to use the opportunity of a weaker Dollar to reform her economy somehow to make the United States’ economy more competitive against rivals such as China, in the long run other rivals will use the weaker Dollar as the opportunity to make their own economies a lot stronger.

Can the United States’ high inflationary and low interest rate policies help China to grow even more?

Can the United States’ high inflationary and low interest rate policies help China to grow even more?  As we know how the United States is trying to keep the inflation rate high and interest rate low to promote consumption spending and bring in more revenues for government agencies.  United States is doing this while also cutting back some spendings in general, because the United States needs to deal with both huge foreign and internal debts and the interest of the foreign debts.  As United States prints more money to keep inflation rate high, this affects China’s inflation rate big time.

Why?  China’s Yuan is still pegging to the Dollar, and so China’s inflation rate is probably shooting up really high when the inflation rate in the United States skyrockets.  As China’s middle class is growing in astounding number, China’s middle class is sure to have a lot of cash to spend.  Although Chinese tradition is to save more and spend less — Chinese had been poor for a long while since the downfall of China’s ancient kingdom and during Mao’s time — with more money Chinese people are sure to be able to afford better modern accommodations.  As in the United States, high inflation may encourage Chinese to spend more since they may fear that prices are keep climbing for the accommodations (e.g., household items, cars, furnitures, electronic items, smartphones, etc…) that they need.

In the time that the Chinese are having a lot of money, they are sure going to spend for whatever that they must have and need. With the high inflation rate in China to boost the domestic Chinese consumers to spend even more, Chinese internal market may heat up even more and growth in consumption may as well skyrocket.  This in turn will boost firms and companies from abroad to bet even bigger on the Chinese market as Chinese market is set to grow a lot higher in term of consumption lead.

Unlike the United States in term of forgoing home manufacturing capacity, China may boost consumption even without letting go home manufacturing capacity.  Why?  Out of 1.4 billion of people or so, if I’m not wrong on this China’s middle class is roughly around 300-400 million of people or so, and so around 1 billion more Chinese are still working their way toward becoming the new middle class citizens.  With so many more Chinese that aren’t yet achieved the middle class status, they’re sure working hard in the home manufacturing based entities/market in hope of making a better living.  This is why China may not yet be able to forgo the home manufacturing capacity for cheap labor is still possible in China’s poorer areas.

Meanwhile, China may try to boost their service sector to grow even more to compete with foreign service industries.  On the top of all of that, China doesn’t need to print so much money as the United States to boost inflation rate, because the United States’ inflation rate alone is already pushing China’s inflation rate up. I think China’s market will grow even more as the United States prints more money to boost the inflation rate at home. The question is if the United States decides to tapering, what will happen to the markets and economic growths in China and the United States?

Can The Euro Replace The Dollar As The Next Reserve Currency?

After finishing my reading of Chapter 5 for “Death of Money: The Coming Collapse of the International Monetary System,” it seemed at this point of the book the author viewed Euro as a potential challenger to the dollar as the reserve currency.  The author James Rickards surmised that the Eurozone could regain strength and vitality as long Germany and other Eurozone member countries could go ahead and reform several internal problems.

Although I don’t remember all of the internal problems James Rickards described that needed to be reformed for Eurozone, I think he’d mentioned about labor mobility and several others.  Nonetheless, James Rickards imagined that if Eurozone could move the unemployed workforces from Eurozone member countries to employment resource scarce countries such as Germany, then the unemployment problem for the Eurozone could be alleviated.  In effect of this, the revitalized workforces that were moved could once again contribute growth in terms of consumption and investment and so on in general.

I have to wonder though, would Germany and other employment resource scarce countries, assuming jobs are abundant and requiring to be filled, want a flood of migrants from Eurozone member countries to disrupt the local employment flow?  Nonetheless, it seemed that China had successfully implemented something like this by allowing migrants from rural area to migrate into the cities, consequently expanding the cities’ size, reach, productivity, and so on. As Chinese migrants are readily earned city’s incomes, they can then export some of their earnings back to the rural areas for whatever.  Perhaps, some of the migrants will have enough money to go back home and open up businesses of whatever, and this in turn slowly urbanizes the rural areas.  As China’s urban cities got crowded, overused, overpopulated, and so the labor demand for such cities cannot grow more — wages for such cities might be higher as workers expect cities’ wages and not of rural areas’ wages — the flood of migrants will slow down.  Nonetheless, China’s coastal cities can relocate factories and other essential industrial capacities into the inner China where rural areas are common, and in this process China finds cheaper labor and urbanizes the inner rural cities.

James Rickards imagined Eurozone member countries could do something as China’s labor mobility but without the factor of urbanization.  After all, many Eurozone member countries may not need urbanization at all if I’m not wrong on this.  I think Eurozone member countries can definitely improve the labor mobility to improve the Eurozone as a whole, but internal political strifes among Eurozone member countries may prevent this to be done without danger.

Imagine Germany’s political force may not want to see the German workforce order to be disturbed too much, because once the workforce order got disturbed it could be a lot harder for such a workforce order to be reversed back to its normal flow.  To make my point, let’s assumes that Germany is experiencing growth in general and demanding bigger labor workforce, migrant workers from Greece and elsewhere within Eurozone can migrate to Germany to fill up the labor demand.  The problem is when Germany begins to experience economic downturn, the huge number of migrants will not be viewed favorable to the local population.  At this point the migrants will stop migrating to Germany, and the migrants that are already in Germany will go elsewhere within Eurozone to find jobs.  If everything works out the way the supply and demand force is meant to behave for the labor demand in Eurozone, things will not be so bad.  Nonetheless, will Germany in an economic downturn easily find it to be easy to accept migrant inflow when the economy picks up again?  The bigger question is what if the whole Eurozone experiences economic downturn, where the migrants who work in Germany migrate to within the Eurozone?  Perhaps, the migrants may have to go beyond the Eurozone for jobs, but it’s not easy for the migrants to migrate beyond the Eurozone for jobs for obvious reasons (i.e., documentation issues, immigration issues, etc…).

It’s hard for me to imagine Eurozone as a whole uses a single dominant language for facilitating economic conditions.  French will forever speak French, German will forever speak German and so forth for the whole Eurozone.  I assume this will be the same for writing too for the Eurozone member countries.  My point is that every time migrants from Eurozone relocate themselves elsewhere within Eurozone, they may have to learn new language (e.g., writing, speaking) in order for them to be effective at their new jobs.  This won’t be easy if the economies within the Eurozone change too frequently (e.g., economic downturn, economic upturn).

I think we can pretend that many economic models and facts and equations can point out the problems and provide solutions for an economy, but we fail to realize that what matters most is the irrational behavior of humans.  We humans don’t behave rational all the time, because we are not the robots.  Robots follow the rules of the algorithms without theirs own rationalization.  Us humans tend to do things on our own as if we know best, thus when we become irrational we don’t think that we are irrational.  As a collective whole humans can be very irrational, and this shows why our history is full of wars and tragedies.  Our economies behave the way we are, and so when we are not so rational, our economies become irrational.  With this notion, I don’t think few simple suggestions such as labor mobility and so forth can be implemented with certainty.  Even with labor mobility and so forth could be realized, the global economy as a whole has too many moving parts, and these moving parts can be counter productive to the positive trends that occur within the Eurozone.  For an example, United States will not want to see the Euro rises for obvious reason (i.e., dollar’s reserve currency status must be upheld).  China too wants its currency to become a reserve currency in the near future.  With the two biggest economies in the world, United States and China, with very powerful military mights to back their agendas, it’s easy to imagine there are so many more moving parts within the global economy as a whole.

I think the author is too optimistic about the whole Eurozone as a whole.  I do think the author does have many good points on why the Euro won’t collapse and Eurozone won’t be breaking apart, because he explained well why United States and China do not want to see the collapse of Euro and Eurozone.  James Rickards mentioned that the United States had been wanting to keep inflation high in the United States and interest rate low for revitalizing exports and easy debt payments.  By printing more dollars, the United States can push inflation up.  By printing more dollars, the United States also keeps the Euro strong.  Besides United States exports deflation to Eurozone member countries, China too wants the Euro to stay strong for many reasons.  One noticeable reason which James Rickards mentioned is that China wants to diversify its foreign investments.  Instead of only investing in United States treasury bonds (i.e., dollar holding), China wants to convert some of its Dollar holding to Euro holding and other Eurozone investments.  This way, China does not have to put all of its eggs in one basket.  After all, how can one be sure that the dollar will be alright for indefinitely?

Entering Russia and so the picture of global economy becomes even more complex.  Russia does not want the dollar to be the only reserve currency, and Russia isn’t having a good relation with the United States since forever.  Especially since Syria, Libya, and Ukraine crises/conflicts, United States-Russia relationship has gotten worse than ever before.  In fact, many people think this relation is making a full circle (i.e., getting worse to the freezing point of the cold war).  Russia is an energy export country, and so Russia’s energy geopolitical maneuver has great impact on the world.  As United States boosts its own energy export sector, it’s in conflict with Russia in the energy export market.  Meanwhile Eurozone member countries are depending on Russia for energy supplies such as natural gas.  This is a big security issue for Eurozone member countries, because Russia can blackmail Eurozone member countries into submission by raising prices or producing less energy resources.  Can the United States help Eurozone member countries to rely less on Russia’s energy resources?

Anyhow, Russia with its own geopolitical agenda can make the whole global economy a lot more complex.  It’s already happened as Russia and China signed the $400 billion natural gas deal.  With this deal Russia will not have to worry about too relying on Eurozone member countries for natural gas export.  As Ukraine conflict continues, United States and Eurozone member countries continue to sanction Russia.  Returning the favor, Russia cuts more ties with the United States and Eurozone member countries.  With these economic sanctions between them (e.g., Russia vs United States and Eurozone member countries), the outlook for the global economy might be dampened by a lot.  Meanwhile Japan, Philippines, and Viet Nam are in territorial disputes against China.  China might play hardball and sanction these countries.  If the tension between these countries against China are not dying down, the global economy as a whole might get even worse.  Simply put, there are way too many uncertainties and moving parts for the author, James Rickards, to be certain that Eurozone will be able to reform without issues.  Without reforming appropriately, the Eurozone will not be able to perform.  If things got really bad, the Eurozone might even see the collapse of the Euro.  This is why China isn’t exactly put all of its eggs into the Eurozone.  Although China is cutting back on the buying of the United States’ treasury bonds, China isn’t exactly cashing out all of United States’ treasury bonds.  It means that China is still hedging between the United States’ dollar and the Eurozone’s Euro.

In summary, I think the author is too bullish on the Euro even though the Eurozone isn’t exactly doing too well at the moment.  If the Eurozone fails to reform as how James Rickards had advised in “Death of Money: The Coming Collapse of the International Monetary System” book, the Euro may suffer great setback.  Furthermore, Ukraine conflict might add more energy, economic, and political issues for Eurozone to be dealt with.  If the United States sees the Euro as the potential rival for the dollar’s currency reserve status, the United States might not want to see the Euro rise.  China might not want to see the Euro rise also, because this might dampen the potential for the Yuan to become the sole reserve currency.  Nonetheless, what if the Euro rise will happen anyway and China will insist the Yuan to become another reserve currency?  This will be very problematic for the United States for obvious reasons.  One noticeable reason would be the world will use the dollar even less as the reserve currency, and this will make it harder for the United States to print more dollar to pay off debts.  In a nutshell, the global economy is a mess and a battlefield, and James Rickards might be very wrong for being too bullish on the Euro.

Can Financial War Foretell That A Physical War Is Near?

After I had done finished the reading of Chapter 2 for “The Death of Money: The Coming Collapse of the International Monetary System” By James Rickards, I’m convinced that financial war could precede the physical war.  In fact, I think financial war might be one of the early telltale signs that may point out that the physical war is near.  After all, financial war is designed to be first strike of first strike, because it helps the attackers to damage the enemy’s economy, consequently weakening the enemy’s ability to conduct physical war in the long term basis.  Nonetheless, it doesn’t mean that a physical war is definitely going to happen when a financial war has happened.  It’s just that I think financial war is definitely preceding a physical war, because financial war can be used to weaken an enemy’s economy.

In the digital age we’re living in, financial war can cause havoc beyond imagination, because trillions of dollar could be vanishing in digital wipe.  Perhaps, the digital wipes could come in waves such as stock market collapse, bank runs, bond market collapse, and so forth.  Systemic collapse such as the financial crisis in 2007 was experienced waves of paper wealth loss, and the same thing can be happening again either by targeted attack by designed or by another unseen consequential event which happens naturally by the design of nature (such as systemic risk).

By digital wipe I meant that our money (more like the world money) can vanish in the digital world even though paper wealth loss might be the eventual explanation.  After all, money nowadays can be zeros and ones in the digital world.  Stock market is trading in the digital age with digital technology.  The book suggested that successful cyber-attacks could amplify the financial war in general.  In fact, cyber-attack method is one of the methods a state can employ to launch a financial war.  Nonetheless, cyber-attack method isn’t the only mean for financial war, because financial war in general is a lot more complex.  Such as sanction and other means can be employed too!

Anyhow, once the financial war attack begins, I bet the chain of big events will eventually follow.  Until the point of an enemy’s economy can no longer be weakened by the means of financial war, then the physical war might follow unless one of the war participants decides to make peace and prevent the physical war.  Of course, physical war between major powers such as China, Russia and United States cannot be breaking out easily, because these are nuclear power states.  Besides financial mutual destruction capability, these states can probably annihilate each other with radioactive capability such as nuclear bombs/missiles and so forth.  They might deliver these nuclear weapons at hypersonic speed which is up to 10 times the speed of sound, consequently making it very hard for a defense apparatus to shoot down such nuclear weapons before these devastated radioactive weapons reach the intended targets.

As the book suggested, perhaps physical war might not happen as one side might back down from further conflict as the financial war might be devastating enough to dictate the winner in the conflict.  The book suggested further that major forces such as China and Russia are preparing for such possibilities by accruing gold.  The book detailed that at the height of financial war between United States and Iran, Iran was partly successfully circumvented the United States dollar sanction by accepting gold as payment for the oil export.  Until when the United States told its allies to stop trading goods with Iran using gold, it was then that Iran had to import and export goods using its allies local currencies such as Yuan, Ruble, and Rupee.

In these two early chapters, the book already suggested that United States unintentionally pushed Iran to stop using the dollar as the reserve currency.  This might suggest that other countries are looking at Iran and fearing that one day they maybe in the Iran situation, thus they might have to face U.S. dollar sanction, consequently putting their economy at risks of collapsing.  These other states may already have been diverting and diversifying their dollars into something more tangible such as gold and so forth.  In China and Russia case, these two countries are now ramping up their natural gas deals and whatever else to partly diversifying their dollar reserve holding.  So too hoarding gold is among the plans of their diversifying activity in case the dollar is in trouble.  The United States government was shutdown not too long ago, because of the debt limit ceiling bickering between the political parties — this had further added the anxiety for the states that are currently holding dollar as their reserve currency for oil trading and so forth.

Even if a physical war breaks out, the book suggested that the winner of the physical war in the end might still regain the financial war lost.  After all, the winner can dictate the terms in the end right?  Nonetheless, in my opinion nobody knows how the next great war will turn out to be since we’re living in the nuclear age.  The nuclear fallout is beyond my imagination.  Sure, I have seen movies’ depictions of the nuclear fallout, but how close to the reality the movies’ nuclear fallout depiction is remaining to be seen.  Nobody knows the future I would say!  If God forbid that the nuclear fallout might occur and be so devastated, the victor of a physical war might not be able to regain the financial war lost, because the situation got so bad that dictating terms at such time might not be even feasible or sensible for all involved parties/states.

Perhaps, the nuclear age is so scary that major powers such as United States, China, and Russia, if sensible enough, may dare only to engage in financial war — leaving physical war to be carried out by the Hollywood movies.  If this is a possible scenario, I must say that financial war is even more important than otherwise.  After all, the victor in financial war will be able to dictate terms that are favorable for a victor’s state in today globalized world in the aftermath.  Perhaps, financial war will be able to be used as a targeted weapon which isn’t involving too many states at the same time, because it’s not as destructive as a physical great war such as World War II.  Because World War III may go nuclear!

As the case of United States sanctioned Iran from the dollar payment system, it was clear that United States could orchestrate a targeted financial war against a single state.  Sure, the United States did involve its allies to stop trading dollar for Iran goods; these so called allies had their own interests to be contented with, consequently forcing them to not carry out their financial war against Iran at 100% effort.  Moreover, Iran got the oil that could be bought at cheaper price during the height of the  United States’ Iran sanctions, and the so called allies had allowed Iran to export oil for gold and so forth.  With accruing gold, Iran could then trade the gold with its allies such as China, Russia, and India for other goods and services.  Even when the United States had involved allies such as Germany and so forth to stop Iran from exporting oil for dollar and gold eventually, Iran survived the sanction and the allies were humming fine.  This demonstrated that the financial war could destroy the targeted enemy’s economy without ending humanity.

Knowing financial war can destroy an enemy’s economy without ending humanity, nuclear war might only be the last desperate attempt for a state to defend itself.  This might encourage states to use financial war more frequently to push the boundary of bargaining at world stage.  Nonetheless, since we are living in the digital age and globalized world, financial war can be very consequential.  In the United States case, if an enemy is successfully bringing down the economy of the United States through financial war, it may not destroy the United States in short term.  In the longer term though, a successful financial war against the United States can be devastated for the overall health of the United States economy.  Furthermore, if the United States gets weaker financially, United States won’t be able to maintain her military might and so forth.

Certainly, it’s in the United States’ best interests to not let a financial war attack to bring down the United States economy, because in the longer term the United States may not be able to grow normally again.  Certainly, it’s the case for other countries besides United States to make sure their economy won’t be disturbed by financial war.  After all, I think a financial war can be devastated enough to disrupt even the everyday peoples’ lives.  I think financial war should not be taken lightly and be waged so carefree.  Countries of the world should care more for the health of global finance, because we’re living in a globalized world.  A break in the chain might do more harm in the long run, because things are moving faster in a much more complex globalized and closely finance linked world.

Source:  http://www.washingtontimes.com/news/2014/jan/13/hypersonic-arms-race-china-tests-high-speed-missil/?page=all