For the record Burkino Faso has an overhanging 1.2 TRILLION CFA-denominated debt. For all the talks about Sahel leaving the CFA franc zone (which is itself pegged to euro), it turns out that China still comes in and added more fuel to the fire.
How do you think these countries are ever going to get out of French imperialism? They are now even more entrenched to the French colonizers because of the debt owed to a currency they have no sovereignty over. They now have to earn more by selling to the French to pay back their Chinese creditors.
China needs to lend in yuan (a currency that China can print) or even better yet, pay off their debt and flood these countries with yuan in a Marshall Plan style, if they really want to help free African countries from Western imperialism.
However, China has so far refused to take that role as a leader of anti-imperialism because they still want to be a net exporter country that runs huge trade surpluses (which benefits greatly from the US running huge trade deficits), so they don’t want to create more yuan than needed to maintain this advantage over others. Instead, the dollars and euro they accumulated from selling cheap goods to Western consumers were turned into loans to the developing countries, further entrenching Western imperialism over the Global South.
Compare this approach to Russia’s, a far far weaker economy, going around and canceling whatever debt they can that the Global South owed to Russia and the USSR. Russia seems to be the only country who has the right idea on how to fight Western imperialism, being infested by liberals notwithstanding.
This is a good critical analysis, but I don’t think it’s entirely fair.
China are absolutely dominating on the world stage because they’ve played western countries at their own game, and are utterly beating them. It won’t really be in a practical position to be a serious anti- imperialist force until it exceeds western powers on its own feet, which it is some years away from yet.
China is doing far more to help third world countries than the odd euro-currency investment. But dominating the western currencies as well as your own gives you enormous global influence, whereas converting to solely yuan may keep them wealthy and independent, but have less stranglehold on the west.
The Chinese economy has already overtaken the US as the world’s largest economy back in 2015, FYI. The US economy is propped up by virtual sectors (real estate, finance) that have no bearing on the real economy.
Its only strengths are its military (seems to be handily defeated even by the Yemenis) and its currency (inflated thanks to all the money in the virtual sector). It is the latter that the US has been using to wreck the economies of the developing countries.
Yes China is doing a lot to help the developing world, but the problem is still the currency. China has no control over the huge piles of dollars and euros they have earned. They are as good as junk papers.
Chinese labor and resources utilized to serve Western consumers’ insatiable demand, and China only gets a pile of junk papers in return. All those disproportionate amount of Chinese labor and resources employed for export sectors could have been used to develop their own country instead. Can you imagine that.
This is the reason why China has been lending out these foreign currencies to Belt and Road and the other developing countries, because they literally don’t know where else to spend those junk money. They’ve stopped accumulating US treasuries since 2013, and started spending them on Belt and Road.
The problem here is that the developing countries now inherit the debt denominated in currencies that China has no control over, which means that the only way for the developing countries to pay them back is to sell stuff to the West to earn their currencies. This is not dedollarization, this is dollarization.
China’s problem is not that it still hasn’t have enough capital to take on the US. It’s the opposite: its economy has been geared so heavily towards the export sector that it needs Western consumers to have the ability to keep spending (that means a strong US currency), otherwise a lot of factories are going to have to shut down and many workers will lose their jobs. This means a recession and a crisis in China.
The only way out is to re-orientate towards its domestic sector (what they’re now calling the Great Internal Circulation) so that if Western economies fall, China doesn’t have to go down with them.
Again, there is always a price to be paid. You make a pact with the Great Satan, you are not allowed to get away unscathed.
For context 15 billion CFA Franc = 25 million USD. At a state level for China its literally nothing, probably couldn’t buy a couple of Mcmansions in any Chinese T1 these days. Its pennies and as you said perfectly on a imperialist backed currency.
If there is any silver lining perhaps it should be taken not at face value but as a sign of possible future cooperation and bigger loans/investments.
As you said, 25 million USD is pennies for China, why not just lend in yuan?
That’s extra 25 million USD equivalent for Burkina Faso has to earn from the French (because only the French can print CFA franc, not China) to pay back Chinese creditors. At least with yuan, Burkino Faso can trade with China to earn yuans to pay back their creditors (although it is still very reasonable to cancel all those debt together).
In contrast to Western propaganda that China is setting a “debt trap” in developing countries, it’s more accurate to say that China is helping to set a “debt trap” for Western imperialists.
It is clear that China has been accumulating so much of these junk papers that they don’t know how to spend them. That’s the problem with huge trade imbalances, where the US can just print and print and print to import cheap stuff, and China is forced to accumulate the junk papers but is not allowed to use their huge US dollar reserves to purchase anything critical. In other words, Chinese labor and resources in exchange for junk papers.
That’s the same problem with “petro dollars”, where petroleum export countries are forced to sell their oil in USD but they are not allowed to spend them to industrialize their own countries, other than to buy US weapons and treasury bonds. The Saudi oil tycoons are allowed to enrich themselves with luxury items, but anything that would help industrialize and develop their countries is out of the question.
That’s also why China has been lending out so much dollars in Belt and Road, to get away from buying US treasuries, which to be fair is good for the economy but it comes at the cost of having no control over the currency. The debtor countries now have to earn US dollars to pay back China, so just kicking the can down the road.
Keynes had proposed bancor as a competing system for Bretton Woods, and it would not have come to this if it had been adopted back in 1944.
For the record Burkino Faso has an overhanging 1.2 TRILLION CFA-denominated debt. For all the talks about Sahel leaving the CFA franc zone (which is itself pegged to euro), it turns out that China still comes in and added more fuel to the fire.
How do you think these countries are ever going to get out of French imperialism? They are now even more entrenched to the French colonizers because of the debt owed to a currency they have no sovereignty over. They now have to earn more by selling to the French to pay back their Chinese creditors.
China needs to lend in yuan (a currency that China can print) or even better yet, pay off their debt and flood these countries with yuan in a Marshall Plan style, if they really want to help free African countries from Western imperialism.
However, China has so far refused to take that role as a leader of anti-imperialism because they still want to be a net exporter country that runs huge trade surpluses (which benefits greatly from the US running huge trade deficits), so they don’t want to create more yuan than needed to maintain this advantage over others. Instead, the dollars and euro they accumulated from selling cheap goods to Western consumers were turned into loans to the developing countries, further entrenching Western imperialism over the Global South.
Compare this approach to Russia’s, a far far weaker economy, going around and canceling whatever debt they can that the Global South owed to Russia and the USSR. Russia seems to be the only country who has the right idea on how to fight Western imperialism, being infested by liberals notwithstanding.
This is a good critical analysis, but I don’t think it’s entirely fair.
China are absolutely dominating on the world stage because they’ve played western countries at their own game, and are utterly beating them. It won’t really be in a practical position to be a serious anti- imperialist force until it exceeds western powers on its own feet, which it is some years away from yet.
China is doing far more to help third world countries than the odd euro-currency investment. But dominating the western currencies as well as your own gives you enormous global influence, whereas converting to solely yuan may keep them wealthy and independent, but have less stranglehold on the west.
The Chinese economy has already overtaken the US as the world’s largest economy back in 2015, FYI. The US economy is propped up by virtual sectors (real estate, finance) that have no bearing on the real economy.
Its only strengths are its military (seems to be handily defeated even by the Yemenis) and its currency (inflated thanks to all the money in the virtual sector). It is the latter that the US has been using to wreck the economies of the developing countries.
Yes China is doing a lot to help the developing world, but the problem is still the currency. China has no control over the huge piles of dollars and euros they have earned. They are as good as junk papers.
Chinese labor and resources utilized to serve Western consumers’ insatiable demand, and China only gets a pile of junk papers in return. All those disproportionate amount of Chinese labor and resources employed for export sectors could have been used to develop their own country instead. Can you imagine that.
This is the reason why China has been lending out these foreign currencies to Belt and Road and the other developing countries, because they literally don’t know where else to spend those junk money. They’ve stopped accumulating US treasuries since 2013, and started spending them on Belt and Road.
The problem here is that the developing countries now inherit the debt denominated in currencies that China has no control over, which means that the only way for the developing countries to pay them back is to sell stuff to the West to earn their currencies. This is not dedollarization, this is dollarization.
China’s problem is not that it still hasn’t have enough capital to take on the US. It’s the opposite: its economy has been geared so heavily towards the export sector that it needs Western consumers to have the ability to keep spending (that means a strong US currency), otherwise a lot of factories are going to have to shut down and many workers will lose their jobs. This means a recession and a crisis in China.
The only way out is to re-orientate towards its domestic sector (what they’re now calling the Great Internal Circulation) so that if Western economies fall, China doesn’t have to go down with them.
Again, there is always a price to be paid. You make a pact with the Great Satan, you are not allowed to get away unscathed.
For context 15 billion CFA Franc = 25 million USD. At a state level for China its literally nothing, probably couldn’t buy a couple of Mcmansions in any Chinese T1 these days. Its pennies and as you said perfectly on a imperialist backed currency.
If there is any silver lining perhaps it should be taken not at face value but as a sign of possible future cooperation and bigger loans/investments.
As you said, 25 million USD is pennies for China, why not just lend in yuan?
That’s extra 25 million USD equivalent for Burkina Faso has to earn from the French (because only the French can print CFA franc, not China) to pay back Chinese creditors. At least with yuan, Burkino Faso can trade with China to earn yuans to pay back their creditors (although it is still very reasonable to cancel all those debt together).
In contrast to Western propaganda that China is setting a “debt trap” in developing countries, it’s more accurate to say that China is helping to set a “debt trap” for Western imperialists.
It is clear that China has been accumulating so much of these junk papers that they don’t know how to spend them. That’s the problem with huge trade imbalances, where the US can just print and print and print to import cheap stuff, and China is forced to accumulate the junk papers but is not allowed to use their huge US dollar reserves to purchase anything critical. In other words, Chinese labor and resources in exchange for junk papers.
That’s the same problem with “petro dollars”, where petroleum export countries are forced to sell their oil in USD but they are not allowed to spend them to industrialize their own countries, other than to buy US weapons and treasury bonds. The Saudi oil tycoons are allowed to enrich themselves with luxury items, but anything that would help industrialize and develop their countries is out of the question.
That’s also why China has been lending out so much dollars in Belt and Road, to get away from buying US treasuries, which to be fair is good for the economy but it comes at the cost of having no control over the currency. The debtor countries now have to earn US dollars to pay back China, so just kicking the can down the road.
Keynes had proposed bancor as a competing system for Bretton Woods, and it would not have come to this if it had been adopted back in 1944.
Good post
Join the BRIC and tell western creditors to piss off.
Unrelated, but I wanted to ask you, since I’ve seen you mention this before. In MMT, how does taxation reduce the money supply?