Watch fire burning across the river

Sinophobes in America are down in their spirit. How many times they have cheered when the Presidents of America barb, censure and taunt China for her conduct of financial affairs. Donald Trump went further snubbing China as currency manipulator that under normal circumstance would have elicited angry response. Except for statements disproving the tone and texture of this form of chastise China remained by and large in cooler realm. Why?

This is because China is too busy watching from the distance the internal fire that is consuming USA financially that slowly erodes her position as number one power financial muscle projected to the world outside. More than that her leading position in the geoeconomics is being eroded slowly but steadily. 

This is the gist of wisdom China has learnt from the ninth stratagem in Chinese folk lore on 36 stratagem” that says “Watch fire burning across the river”. This stratagem is a sum total of observing from a distance everything happening in the enemy camp.

Applied in both military and business warfare, this stratagem brings into limelight the noted Napoleonic concept of “not to interfere when enemy is making mistake.” According to the playbook, China would continue to encourage America printing whale of a lot currency notes the fiat money that is neither linked to gold nor linked to a promise by US that in the event of currency collapse it would recompense the holders of Greenback with any other value based instrument.

Humongous national debt of 26.7 Trillion US$ requires debt servicing that runs to more than half a Trillion annually. By end 2020 national debt was hovering around 99.3% of GDP.  Unless the spending spree is curtailed by 2030 the debt is expected to breach 100% of GDP, a scary scenario for the world’s solo superpower. 

The easy way out for servicing national debt is to print more and more fiat currency that could flood the market. At present the amount is estimated as 26.8 Trillion and is expected to reach the 30 Trillion mark very shortly as Biden Administration has heaped up colossal spending programs that are not financed by internal saving or external flow but merely by resorting to print more money.

Paradoxically, Biden administration fears popularising digital dollar officially other than entries between banks for settlement as this measure could be self-damaging. The idea that paper bill could be replaced by digital bill even if it is administered by Federal Reserve would fundamentally alter the trust people have on the greenback. Sleepless nights are left with Biden Administration over the looming project of digital Yuan.

China in the meantime is contended watching the fire burning in the US Treasury with delight! 

 

Cheers! 

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist