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.
What I’m about to write could be controversial for the time we’re living in now. As we all know president Trump’s tariffs on China are the means to push China to negotiate a fairer trade — at least this is how the president promotes to the public. So far China isn’t willing to be a pushover and so they decide to retaliate pound for pound. This means whoever blinks first would lose a lot more in the long run, but in the end, both the United States and China would lose in short-term — well, at least this is how the news programs promote this.
I’m thinking that could tariff be a blessing in disguise for China? How come? China has been known as the factory for the world since they opened up their market and joined the World Trade Organization. This means China can ramp up production of almost anything! As Trump’s tariffs hit China, companies that want to avoid tariffs from the United States and still want to export to the United States would move their operations out of China. Nonetheless, there are Chinese and foreign companies in China that produce the same stuff but have yet to export their products to the United States would find the vacuum suddenly is a lot more pleasant to navigate and do business.
The Chinese government could also be more lenient toward companies that decide to keep their operation within China, thus allowing these companies to prosper while China’s internal consumer market ought to grow bigger in time. Remember Google? Google left the Chinese market a long time ago but now Google has shown signs that it wants to grab a chunk of the Chinese’s huge consumer market. Unfortunately, Google isn’t making much progress in this front and allowing similar Chinese homegrown companies to grow unchallenged within China.
Since Chinese companies that are going to stay in China could ramp up their production unchallenged as the trade war between the United States and China heats up, these companies ought to grow bigger in a more empty but lucrative Chinese consumer market. Perhaps some European companies may want to open up their operations in China to give the Chinese companies some competitions. Anyway, I think Chinese companies could grow unchallenged in their home market and mass produce even cheaper products to saturate the world market even more. In the end, I think trade war could only harm a weaker foe who got no means to fight back and could not ramp up production. In the case of China, I think trade war could be a blessing in disguise for the reasons I surmised thus far.
I’m just wondering! Lately, the headlines are screaming that China is devaluing the Yuan to help cushion the blow of Trump’s tariff on China’s exports to the United States. Although this is a legitimate concern that the headlines raise, I’m wondering if there is another hidden motive for the Yuan to slide.
Could it be that the Chinese government is letting the Yuan slides so the treasury bonds that the Chinese own which Americans are in debt to China could stay valuable? This way China can begin to sell the treasury bonds while the treasury bonds are still valuable. Once China unloads enough of the treasury bonds onto the market, whatever value China receives from such transaction could then be converted to other favorable assets, investments, and currencies.
Of course, China could always convert the selling of treasury bonds into Yuan and then raise the Yuan’s buying power back up to stave inflation — but then it could begin a deflation. How? Well, if too many Yuans that are chasing the same thing could raise the price of whatever, but when the buying power of Yuans get push up the Chinese government then could lend out these Yuans to other countries and International projects such as Belt and Road Initiative projects to stave inflation. A more powerful Yuan could also allow the Chinese to get more bang for the buck whenever they use the Yuans to acquire whatever. Thus they also have to be careful about the deflation.
I’m no economist and so I could be wrong on what I’m suggesting. Nonetheless, I would love to hear other people’s opinions on the suggestion that I’m suggesting. Am I wrong? Am I even close?