Chinese Mercantilism?
Posted by Ivo Cerckel on April 25th, 2009
the liquidity argument of the dollar regime
The Chinese want the world to know that they are increasing their gold reserve in order that the product (the “fruit”) of their wealth be consolidated with a view to further fructifying.
US of A dollar versus gold
US of A dollar versus China et alt.
Who’s the real Mercantilist? China or Geithner?
Who’s the real Keynesian? China or Geithner?
Gordon Brown?
The dollar-regime is promoting itself with the argument that the liquidity of the regime would be in sharp contrast with the non-liquidity of mercantile gold.
The regime is arguing that one can get rid of dollars and dollar derivatives “ad nutum” (instantaneously), whereas, says the regime, one would not be able to find a buyer for gold when one wants to sell it.
This has always been the argument of the advocates of a dollar standard instead of a (mercantile) gold standard (hoarding).
Yes,
the Mercantilist theory, which formed the foundation of economic thought from about 1500 to 1800, says that countries should export more than they import and, if successful, would receive the value of their trade surpluses in the form of GOLD [capitalisation mine] from the country or countries that ran deficits.
(John D. Daniels and Lee H. Radebaugh, “International Business”, Addison Wesley, 1995, 7th ed., p. 168)
Ir is true that
the main concern of the Mercantilists was with the so-called balance of trade and the alleged need of governments to secure an excess of exports over imports, as the means of increasing the quantity of money in a country that lacked its own gold and silver mines.
(George Reisman, “Capitalism – A Treatise on Economics”, Ottawa, Illinois: Jameson Books, 1998, 3rd ed., p. 6)
It is also true that
the concern of the Mercantilists with increasing the quantity of money led them to anticipate the essential fallacy of Lord KEYNES [capitalisation mine] in the last century, namely, that it is necessary for government to intervene in the economic system for the purpose of stimulating “demand” and “employment”.
(Reisman, loc. cit.)
But,
in order to keep this dollar liquidity alive, the dollar regime must continuously proceed to further devaluation.
And, adds Dr Reisman on p. 527,
Mercantilism bears a close similarity to the ideas of KEYNES and his followers in its concern with finding a source of economic “STIMULUS” and its fears that in the absence of such stimulus, the economic system must languish in employment and poverty. Its views on the ability of a larger quantity of money to reduce interest rates are also indistinguishable from those of KEYNES. [all capitalisations mine]
Now,
WHO’S THE REAL MERCANTILIST?
China or Geithner?
WHO’S THE REAL KEYNESIAN?
China or Geithner?
Gordon Brown?
Yes,
further devaluation is completely opposed to Mercantilism.
Indeed,
in Mercantilism, the wealth one has acquired is being consolidated in or through constant purchasing power.
Contrast
this to the dollar barrel in which more and more holes are appearing.
To the extent
that more dollars are being poured into the barrel,
to that extent
more holes are appearing in the barrel.
To the extent
that more dollars are being poured into the barrel,
to that extent
the échappatoires, the escape holes, must be larger to allow for the liquidity of the regime.
It is absurd to keep mercantile gold away from this.
If the dollar regime were to decide to keep mercantile gold away from the barrel, the dollar and its regime would self-destruct.
Who will indeed be prepared to keep dollars cerckeling around if their loss of purchasing power accelerates with the cerckeling around?
Gold advocates want the product (the “fruit”) of their wealth to be consolidated with a view to further fructifying, not with a view to further cerckeling around.
This is what the Mercantile Chinese want the world to know about their increasing gold reserve.
Gold exists INSIDE the liquid and continuously devaluating fiat system
THEREFORE
this wealth consolidator will always remain tradable.
Since the dollar regime has outrageously mismanaged the dollar liquidity, the regime has no other option but to accept the mercantile-gold competitor.
If FreeGold were to be further postponed,
the liquid dollar-regime will only be further marginalised.
At the end of the day, the regime will then fall into disuse.
Tomorrow, it will no longer possible to compromise between the dollar and gold.
Overthrowing the dollar regime will no longer even be necessary.
Ivo Cerckel
ivocerckel@siquijor.ws
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April 26th, 2009 at 11:31
[...] Chinese Mercantilism? [...]
April 26th, 2009 at 17:00
Friday’s announcement came too late for this South-Korean writer
A new world order with the Beijing Consensus
By Kang Seonjou
2009.04.27
http://www.koreaherald.co.kr/NEWKHSITE/data/html_dir/2009/04/27/200904270016.asp
SNIPS
To some, the Washington Consensus was synonymous with a dogmatic commitment to market fundamentalism. It was such discontent that gave rise to the Beijing Consensus, which presents a new model for development with three pillars:
market reforms without democratization and a larger role for the state to guide the reforms; equality and harmony in the process of development;
and independence and self-reliance to prevent powerful international actors from unduly influencing developmental decisions.
+
Recently the Chinese government launched efforts to upgrade the Beijing Consensus from an alternative development model to a new economic order by adding currency arrangements to it. The Chinese government calls for a new international reserve currency delinked from a particular country to replace the U.S. dollar as the anchor currency. This demand is legitimate, according to China, on the grounds that a supranational reserve currency will remain stable in the long run and hence enhance stability in the world economy.
China hopes to expand the use of the IMF’s Special Drawing Rights with the Chinese yuan eventually added, which currently are monetary units valued against a composite of the U.S. dollar, the Japanese yen, the British pound and the Euro. However, realizing that it will take a long time before a new reserve currency emerges, for the time being China aims to increase the use of the yuan in global trade and has signed bilateral currency swap agreements with six different countries.
+
The point is that it will not be helpful to view a future international economic order in terms of the Beijing Consensus vs. the Washington Consensus. There are pressing issues in the contemporary world economy that require cooperation among the key players, and it will be really a big challenge for the liberal economic order to draw a wide support. Thus, it is time to embrace the Beijing Consensus into a more productive discourse.