1. State/progress information provides more trust as more progress information becomes available, and therefore less trust is needed from financial instruments such as escrow. Much of the new information is provided via 5G and the internet.
2. The US has derived enormous benefit from these financial instruments, since they often provided the US with an interest-free loan as a side effect. As these instruments are less needed, less money will be lent to the US on these terms, so the US needs to either borrow less or pay for interest-bearing loans like the rest of us.
3. The US federal government doesn't understand what's coming.
(I disagree with one of the points. The above is a summary, not my opinion.)
The solution is to not allow the digital yuan app into the swift system. As soon as people figure out they can't convert their Yuan back into dollars they will use the app less. But if it gets approved for Swift then it would make sense to pay for items from China with the app and that would circumvent having to be converting dollars all of the time. Once people get used to not using Dollars and that will certainly hurt the US monetary system most.
Certainly China will also be able hide more money printing behind the app. They can give out Digital Yuan as stimulus unlimited and no one would know any better.
Kyle Bass is a cold war warrior that assumes that China is like the US and is caught in terrible one dimensional thinking.
What if it is actually true that China doesn't want to be a reserve currency and own seniorage from the rest of the world? (As Chinese leaders repeatably have said.)
What if they instead want better credit mechanisms, risk controls and logistics? So credit creation can be backed by future oil produced by Iran, future jet planes produced by Russia, future phones produced by China. And trade can be settled with very little actual central bank currency moving around.
> What if it is actually true that China doesn't want to be a reserve currency and own seniorage from the rest of the world? (As Chinese leaders repeatably have said.)
What if it is actually true that China won't militarize reefs in the South China Sea or encroach on Hong Kong's autonomy, as Chinese leaders repeatedly said?
This is the least head on method... give the app ten years. China makes everything and eventually if you want to buy from China you will be made to use the app. China uses the Microsoft method. Embrace, extend, extinguish.
You realise it's not a single app? Rather, it's universal connectivity dressed up in buzzwords.
Today, people ship little things in their containers that report e.g. temperature aberrations, so when you take delivery of something you can see whether it's been cooled continuously. The article is saying that these things will instead report temperature (and other things) online, so you can monitor the temperature in each container of your mango/yoghurt/fish/… shipment in real time.
If you as buyer don't want to, why would the seller care? But if you want to sell to a buyer who's used to that from many other sellers, you might have a problem. So Chinese technology replaces dollar escrow.
That solves the problem in the sense that it replaces the problem with another, functionally identical problem.
If the need for escrow diminishes because trust is provided in other ways, then it doesn't really matter to the escrow agency which currency the former customers now use to settle their purchases.
I think the point is about the need to buy money to upfront it, and have to pay to make it secure. Imagine a factory saying: you can pay on delivery if you use this currency, or you have to upfront 50% to the escrow (which you'll have to pay for it's service, and the interest if you used credit).
This second scenario you won't have your money stalled for months while paying for it.
1. State/progress information provides more trust as more progress information becomes available, and therefore less trust is needed from financial instruments such as escrow. Much of the new information is provided via 5G and the internet.
2. The US has derived enormous benefit from these financial instruments, since they often provided the US with an interest-free loan as a side effect. As these instruments are less needed, less money will be lent to the US on these terms, so the US needs to either borrow less or pay for interest-bearing loans like the rest of us.
3. The US federal government doesn't understand what's coming.
(I disagree with one of the points. The above is a summary, not my opinion.)