The European Central Bank, the Bank of Japan, andâto a lesser extentâthe Peopleâs Bank of China made similar moves, though what matters most is what the Federal Reserve did because it is the creator of dollars, which are still the worldâs dominant money and credit. To be clear, Iâm not ideological and I donât choose sides ideologically. That means that if the US dollar were to lose its reserve status and significantly depreciate in value it would have a devastating effect on the finances of those countries holding those reserves as well as private-sector holders of dollar-debt assets. By producing money and giving it to debtors in need, central banks can prevent the debt crisis dynamic that I just explained. Naturally more investors turned in their promises to get the gold for the claims on the gold. There was no merit-based pay. Those who become richer naturally tend to work less hard, engage in more leisurely and less productive activities, and at the extreme, become decadent and unproductive. I know that the Chinese leadership knows how terrible a hot war would be and worries about unintentionally slipping into one the way World War I was unintentionally slipped into. They came from the G5 countries and are about as anachronistic as the G5 is. For example, as far as the power of its education system is concerned, while our index rises at a fairly brisk pace it fails to fully capture the relative improvements in China because this measure is made up of average levels of education as well as total levels of education. As we drop down, imperceptibly small thingsâTikTok, Huawei, Hong Kong sanctions, closing consulates, moving battleships, unprecedented monetary policies, political fights, social conflicts, and many othersâwill start to appear much larger, and we will find ourselves in a blizzard of them that comes at us every day. It continues to be reflected in the reduced willingness to cross party lines to compromise and reach agreements. This shift had big effects and implications. This whole 1971-91 cycle, which affected just about everyone in the world, was the result of the US going off the gold standard. You should assume that Bridgewater has a significant financial interest in one or more of the positions and/or securities or derivatives discussed. Those with dollar-debt liabilities and those with non-dollar assets would be the big winners. As for providing money, both venture capitalists and the government are providing virtually unlimited amounts to Chinese developers. While Iâm not sure thatâs exactly right, I think itâs by and large right. Over the next 5-10 years, in addition to there being the decouplings6 in other areas, we will be seeing which countries align themselves with each of these leading powers. The new government quickly repaired transportation and communications and nationalized the banking system, which it put under the new central bank, the Peopleâs Bank of China. China will probably advance its technologies and the quality of its decision making that is enabled by them faster than the US will. Also, for reasons previously explained, it is my opinion that capitalismâan incentive system that rewards people who are the most inventive and productive and that has capital markets that allocate resources in ways in which people are rewarded for good capital allocation decisions and penalized for bad onesâwill lead to a) more productivity over the long run (hence a bigger total pie), b) big wealth differences, and c) capital markets (especially debt markets) that become overextended and then break down and, when there is a capital market/economic breakdown at the same time, there are big wealth and values differences, which will lead to some form of revolution (i.e., there can be harmonious productive ones, though most have great conflict and are destructive before they are productive). Though the devaluation helped in the short term, over the next two decades, the pound would face recurring balance of payments strains. As we have seen, this ânegotiationâ was about testing each otherâs powers rather than looking to global laws and judges (like the World Trade Organization) to achieve fair resolution. So, at the time, gold was the money in the bank and the paper dollars were like checks in a checkbook that could be turned in for the real money. As you can see, while the United Statesâ relative strengths of education, competitiveness, trade, and production have declined significantly and steadily over the last 100 years (to now be around the 50-60th percentile versus other leading powers), its relative strength in innovation and technology, reserve currency status, financial center power, and military have remained at or near the top. The items that are most important in making a great empire areâ¦. That is when the âhave notsâ who were losing to globalization, especially those who were seeing their jobs being taken by the Chinese and by immigrants, started to rise up against the elites who were benefiting from globalization.
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