Category Archives: Economy

FRED REED: Plumbing The Chinese Dijjywan

Asia, Business, China, Economy, FRED REED, Government, Trade

“… When America cuts a country off from SWIFT … the blow is economically devastating. The mere threat of disconnection intimidates. Consequently many countries would like to have an alternative to [spiteful American economic strong-arming via] SWIFT.”

By Fred Reed

Normally I write about things I know. In the case of digital currencies, and in particular the digital yuan (hereinafter dijjywan) I write about something that piques my curiosity. So little seems to be known that it is difficult to find anything definitive. Yet the question is so important, digital currencies so new, the implications so sweeping, that discussion seems a good idea. The following therefore is a sort of declarative question, a listing of ideas from many sources, perhaps sometimes wrong, about which I hope readers can enlighten me. To avoid endless qualifications and caveats, I write affirmatively things that I don’t really know. Correction and thoughts welcome.

Some things to know: The dijjywan, being rolled out in the Winter Olympics, is not a cryptocurrency like Bitcoin, intended to maintain anonymity of users: all transactions are or can be known to Beijing. A dijjywan account is not a bank account, though it is administered by PBOC, the People’s Bank of China.  You don’t need to have a bank account to use it. It does not earn interest. You cannot speculate in dijjywan any more than you can with normal yuan, because the digital yuan is the normal yuan, but in digital form. A dijjywan account does not provide access to credit. It is as close to being physical currency as you can get without being physical currency. Transactions are instantaneous and final.

So how does it work? As an individual, you will download an app that China calls a digital wallet to your cellphone, as you would any app. This is currently being done in China. You do a face scan and the system gives you a unique QR code. You now have a dijjywan account. No bureaucracy, filling out of forms, demands for identification, or examination of financial history. There is nothing new or Star Wars about this. Everyone in China has already done it to use WeChat Pay or Alipay.  Some eighty percent of retail transactions in China are made by cellphone app, making acceptance there likely.

Suppose that you are in Kathmandu and I am in Cancun and you want to send me five hundred dijjywan. You call up the app, go to contacts, tap Fred, type in 500, and hit send. Five seconds later in Mexico, I have the money. (I made that up, but it is close to payments I have seen made in Chengdu.) For practical purposes instantaneous, no bureaucracy.

Interesting question: What would easy, convenient, fast transfer of funds by cellphone do to Western Union? What would it do to debit cards from Mastercard and visa? American credit-card companies get a percentage of every sale. If China, as a tactic of economic warfare, did not take a rake-off or took a smaller one, what would this do to Visa and Mastercard? Merchants would certainly favor a system that cost them less.

When China goes cashless with the dijjywan, which is its stated intention, it will improve efficiency within China but have no great effect in the outside world.  Who outside of China would want to use a Chinese digital currency?

Perhaps lots of people. There being many Chinese tourists in Cancun, hotels and restaurants would like to grab business from Chinese who didn’t want to bother with currency conversion. Mexico likely would be happy to have the money come into the country.  People in Zimbabwe, whose currency is worthless anywhere else, and who might worry that Harare would print even more money and destroy their savings, would be happy with dijjywan that could be taken out of the country or spent internationally online. Such a nation, if it wanted a stable currency, might make the dijjywan the national currency, or a national currency, as Panama and Ecuador do with the dollar. People without bank accounts, estimated at two billion, would find it useful. The result would be a distributed all-yuan Sinocentric financial ecosystem.

The Chinese currency would appeal to the many countries that do not want American influence over their finances. Dijjywan would be a reliable store of value for, say, people in Brazilian favelas as robbery would be nearly impossible: An armed robber could force his victim to transfer money to his phone, but this would create a record in the Chinese cloud of time, place, amount, and identity of both parties. The authorities could simply extract the stolen lucre and replace it with the rightful owner, and freeze the thief’s account. Digital policing of this sort has been mentioned by Chinese authorities.

Intriguing, though not related to China: America is dabbling with the idea of a digital dollar. If America went cashless (granted, not likely before the heat death of the sun), the illegal drug trade would disappear overnight. In retail transactions, on which the trade depends, with the friendly corner crack merchant, the identities of both buyer and seller would be recorded. This would not be good for business.  Dealers could easily be detected. No arrests would be needed, as freezing their dijjywan account would suffice. Since accounts depend on face recognition, the dealer could not set up another account. Totalitarianism has its appeals.

Digital-currency accounts would be programmable. If a country went on an anti-booze crusade, people could be prevented from buying more than a certain amount of liquor per month. China has pointed out the virtues of the dijjywan in stopping money laundering. These ideas justifiably upset civil libertarians, but they represent an upside to the downside. What would be the social effects of ending the drug business in black ghettoes?

The possibilities for surveillance and social control are obvious but, since China is going all-digital anyway, alarm is unlikely to have much effect. Perhaps worth noting is that America is going fast in the same direction, with much of  the surveillance and censorship ‘being done by semigovernmental enterprises such as Google and Twitter. With many countries considering digital currencies, it appears that we will fairly soon have them anyway. And, if history is a guide, the likelihood is that most people would accept surveillance as the price of convenience.

But let’s get to the serious stuff: America’s financial sanctions on countries it doesn’t like. As perhaps most people know, international payments, as for example for oil, go through the SWIFT financial payment system, headquartered in Brussels, supposedly independent but in fact under American control. It is the only practical way for countries to do business with each other. When America cuts a country off from SWIFT, as it has with Venezuela, Iran, and Cuba, the blow is economically devastating. The mere threat of disconnection intimidates. Consequently many countries would like to have an alternative to SWIFT. So where does the dijjywan come in?

Note that the digital yuan is scalable. In principle it is as easy to send a million as a hundred dijjywan, making it practical as a means of paying for, say, petroleum from sanctioned countries. Further—read this carefully: dijjywan transactions are completely independent of Washington, completely independent—eeek!—of SWIFT, and, thanks to heavy encryption, opaque to the US. This threatens America’s ability to strongarm other countries and, if widely adopted, would result in a major diminution of US power in the world.  It may be that China has thought of this. The US certainly has.

Why could a tobacconist in Paris not buy five thousand dollars of cohiba cigars from Cuba, or China a tanker of oil from Venezuela, or any business in Europe goods to or from Iran, or from each other, in dijjywan? The US might make it difficult for sanctioned countries to convert dijjywan to other currencies, but this would simply force those countries to trade more with China.

China has said repeatedly that, why, no, it has no thought of using the dijjywan for international settlement payments. As Deutsch Bank says, it is being set up for domestic use. However, China is working with—whatever exactly that means—Hongkong, Thailand, and the UAE for just this purpose. Why the UAE? Not because China wants to further retail sales to the Emirates by Alibaba, since they have the aggregate population of a large city bus. But they have oil. Interesting. Let us remember that China very, very much wants to internationalize the yuan.

A concern mentioned by the Treasury Department, and the Foreign Policy Research Institute,  is that there could result a distributed Sinocentric financial ecosystem independent of the West. Many countries that trade heavily with China, or have poor relations with America, might come aboard. The Central Asian stans, the BRICS, Latin American countries tired of being under the US boot. China might make use of the dijjywan a requirement for loans and participation in the BRI. It would not be either the dijjywan or the dollar as countries could use both.

American officials often say complacently that the yuan accounts for only a small percentage of international commerce and that the dijjywan is no threat to the dollar’s hegemony. Perhaps. But the world’s economic and technological center of gravity is moving to the east, a market as huge as China’s has persuasive powers all of its own, many countries want to avoid American domination, and the digital yuan is something entirely new. I don’t think anyone really knows what effects we will see.

Thoughtful comments welcome and, again, I throw these ideas out in search of enlightenment, not because I regard myself as an authority.

Read Fred’s Books! Or else. We know where you sleep.

******************************************

FRED REED describes himself as [previously] a “Washington police reporter, former Washington editor for Harper’s and staff writer for Soldier of Fortune magazine, Marine combat vet from Viet Nam, and former long-haul hitchhiker, part-time sociopath, who once lived in Arlington, Virginia, across the Potomac River from the Yankee Capital.”
His essays “on the collapse of America” Mr. Reed calls “wildly funny, sometimes wacky, always provocative.”
“Fred is the Hunter Thompson of the right,” seconds Thomas E. Ricks in Foreign Policy magazine. His  commentary is “well-written, pungent political incorrectness mixed with smart military commentary and libertarian impulses, topped off with a splash of Third World sunshine and tequila.”

FRED’S BOOKS ARE ON AMAZON, HERE

FRED’S ARTICLES ARCHIVE

Killer Kink

Hardboiled is back! (The exclamation point is to arouse wild enthusiasm int the reader, a boiling literary lust.) Gritty crime fiction by longtime police reporter for the Washington Times, who knows the police from nine years of riding with them. Guaranteed free of white wine and cheese, sensitivity, or social justice.

TRUTH: Ukrainian Lobbying Is To Blame For Overheated Atmosphere; Not Biden

America, Argument, Conservatism, Democrats, Economy, Foreign Policy, Globalism, Military, Republicans, Russia

Breitbart: “After Destroying America’s Economy Biden Now Destroying Foreign Economies.

That bit of Breitbart reporting attests to the fact that conservatives would rather score political points against the opposition, Joe Biden, in the tit-for-tat manner that typifies our impoverished political discourse, than TELL THE TRUTH.

THE TRUTH: Ukrainians are tireless and wily lobbyists in Washington and way more cunning than their American counterparts. Like lobbyists for wars in the Middle East; they play Americans for the fools they are. Biden is not responsible for the overheated atmosphere in Ukraine, the one Ukrainian President Volodymyr Zelensky now wishes he could dial back; Ukrainian activists and politicians have brought us this far. Ukrainians energetically lobby the EU, too.

ONE-SIDED NONSENSE via Breitbart: After Destroying America’s Economy Biden Now Destroying Foreign Economies.” This idiotic advocacy from Breitbart is as sub-intelligent as anything that CNN emits. Ukraine agitated for foreign intervention. It almost got it. Now the corrupt enterprise that is Ukraine is regretting the exercise. Biden has actually said, “There is not going to be any American forces moving into Ukraine.

MORE. AND HERE & “Ukraine’s Relentless Lobbyists Take to Congress: How a few Washington firms are seeking to put the U.S. on collision course with Russia.”

Except the Ukrainian lobbyists beat the Russian lobbyists, since America has settled into propagandized hatred of Russia.

NEW COLUMN: Exporting Toxic Wokeism

America, Capitalism, Economy, Free Markets, Left-Liberalism And Progressivisim, libertarianism, Paleolibertarianism, Pop-Culture, Propaganda

Exporting Toxic Wokeism” is the new column now on WND.COM, The Unz Review, Townhall.com, CNSNews.com, The New American and American Renaissance.

And excerpt:

America has made a habit of exporting democracy at the point of the bayonet, be it by fomenting war or agitating for color-coded, plant-based revolutions, blessed and backed by the duopoly.

While not as lethal, cultural trends and products exported can be toxic, too. They, moreover, displace and contaminate indigenous culture. To wit, Wokeism is made in America, is entirely toxic, and, sadly, suffers no supply-chain disruptions in its spread abroad.

In case you’re not awake to it, woke is the current state-of-being in America. In particular, to be woke in America is to be anti-white and to be anti-white is to be woke. More so than “in” and “hip”—to be woke is existentially important; it will often determine whether one gets and keeps a job, a social media account, even a bank account.

Although Wokeism is a product of a distorted and deformed American marketplace of ideas—there is always a libertarian who sees a free and energetic agora worthy of defending and exporting, where there is only coercion and cruelty.

“Wokeism has passed a market test,” effuses Tyler Cowen, an economist writing for Bloomberg.com. “The woke movement could be the next great U.S. cultural export—and it is going to do many other countries some real good.”

Yes, Cowen, a libertarian, both explains and exculpates  an increasingly entrenched, coercive system of pigment-based prejudice and persecution. “Wokeism,” he further enthuses, “is an idea that can be adapted to virtually every country: Identify a major form of oppression in a given region or nation, argue that people should be more sensitive to it, add some rhetorical flourishes, purge some wrongdoers (and a few innocents) and voila — you have created another woke movement.”

Welcome to the quintessential, collectivist, libertarian Jacobinism—Cowen’s. Omelets can’t be made without breaking the few proverbial eggs. Cowen, like most of his ilk—and against all evidence—also thinks that, “American culture is a healthy, democratizing, liberating influence,” so he wants “to extend it.” …

… READ THE REST. “Exporting Toxic Wokeism” is now on WND.COM, The Unz Review and Townhall.com, CNSNews.com, The New American and American Renaissance

 

UPDATED (12/20): America: Aphorisms On Conformity

America, Critique, Culture, Economy, FRED REED, Individualism Vs. Collectivism, Intellectualism, Pseudo-intellectualism, The Establishment

In discussion, Fred Reed, Barely a Blog columnist and writer extraordinaire, offers insight that explains my overall experience:

“America has always had a strong economic back and weak cultural mind, being anti-intellectual and given to envy and resentment of the smart and cultivated.”

De Tocqueville, Mencken and others made similar observations. “Certainly Tocqueville in the 19th century, and Solzhenitsyn in the 20th, noted that conformity of thought is powerfully prevalent among Americans,” as Clyde Wilson has observed.

“A glorious commonwealth of morons,” Mencken called America. “The American moron’s mind”—this “mob-man’s” mentality—is that of a “violent nationalist and patriot,” to whom ideas are a menace, and who would always opt “to keep his Ford, even at the cost of losing the Bill of Rights.”

These are all Mencken’s words, not mine. See: “H.L. Mencken: Misfit In 21st-Century America.”

UPDATED (12/20):  This Facebook reader has the right approach. Relax and enjoy The Difference. Don’t be an Enforcer.

* Image courtesy of Picture Quotes.