USD_vs_RMB.jpg

USD is US dollar

CNY is Chinese Yuan or RMB

In last story, I wrote this: IS CHINA TAKING ADVANTAGE ON US OVER TRADE?

I emphasized one fact most people didn’t think carefully: MONEY IS A PRODUCT. It is not just product, it is high tech product, it is backed by the future of a nation, means the constant good system, the people, resources, creativity, economy and military. Fundamentally,  US dollar is backed by the best brains.

In the what so called ‘Globalization’ business model, America exports USD to China and exchanges manufacturing products, China re-export USD to rest of world to exchange mainly resources, oil, mineral, high tech, agriculture products…Because of America exports USD, because of the ‘deficit’ of the US, USD is the most popular product in the world, takes more than 40% of the ‘market share’.  Which as I said before, if the most important product—-US dollar wasn’t calculated in the trade then called ‘deficit’, otherwise it is called ‘balance’.

Now the US decided to ‘reduce’ the deficit, which means reduce the exporting of US dollars, what’s gonna happen?

A: US dollar loses market share of the global trade.

B: US dollar will be more precious.

The different result of A or B bases on one major factor—-‘If this product is replaceable’?

If a product is replaceable the less you create the market share will be taken by other products;

When a product is not replaceable the less you create the more expensive product gonna be.

US dollar is back by the best brain, CNY is back by the hardest workers, who will win the future?

In my point of view, the workers can be replaced, by other workers or machine, but the brains are not replaceable. That’s why US dollar will still dominate the world trade, globalization of CNY is not workable. I said that at very beginning when China started talking about globalization of CNY back 2013. However one story I wrote in 2012 ‘Digital currency will be the future’—-Some day a major central government backed digital currency base on blockchain technology will be the next domination：

There are few critical matters:

A: It is digital currency—–Obviously

B: It has to be backed by central bank of a major economy—–BTC never has chance

C: It is base on blockchain or similar technology  —-That means this central bank gives up their own monetary policy and becomes totally transparency, the money creation will base on some formula relates GDP or other measurable numbers and become  totally predicable.

Now China is trying the digital currency but it seems like a centralize currency and the US doesn’t want to give up monetary policy because it dominates high market share already. Which major economy making the first move will be interesting to watch.