Spanish life is not always likeable but it is compellingly loveable.
Christopher Howse: A Pilgrim in Spain
Spanish Politics- Possibly a widespread view . . . In the face of Brexit, the Catalan challenge and a global trade war, it's suicidal to be without a unifying government and to be about to have yet another general election.
- Malaga's decision to legislate on e-scooters has been vindicated.
- An El País article on the quality of public education in Spain avers this won't improve until more time is spent on getting the kids to think, as opposed to learning by rote. A failure to think can extend well into adult life, of course.
- August's good news is that, in this the heaviest of driving months, deaths on the road were the lowest ever.
- September's bad news is that Eastern Spain will take a long time to recover from its worst storm in 140 years. Oh, and we still don't have a government. Maybe late this week. Maybe after November elections.
- On less important matters . . . Country Girl tells me that the Catalana grape is not one of the varieties grown in Cataluña but a particular grape sold and cultivated here in Galicia. And here and here is evidence of this. But there's nothing else on the web about it and, as there's a reference to an uva catalana caino, I'm now wondering if it's this grape. Or related to it at least.
- I've referred more than once to Pontevedra's plague of panhandlers. Which only has alliteration going for it. I often wonder if there's an itinerant group touring the cities of Galicia on a regular basis. Or at least those where they can avail themselves of gypsy trapicheo. Here's the latest one doing the rounds of Pontevedra last night, with his attractive Mohican:-
- Talking of fotos . . . Someone called Txema Salvans began a series on Brits in the Med in El País yesterday. Here and here are the first two of these. Not very flattering so far. As you'd expect.
The USA
America’s power is on a financial knife edge: Niall Ferguson, Milbank Family senior fellow at the Hoover Institution, Stanford
China’s online payment platforms are the real threat to US hegemony
‘How would you like to pay for that, sir?” For most of my lifetime, there have been three possible answers to that question: cash, a cheque or a plastic card. Go to Beijing, however, and you will see few transactions in those forms. People pay with their phones, using systems created by the two biggest Chinese tech companies, Alibaba and Tencent.
And not only in Beijing. For the Chinese way of paying is spreading around the world — from taxis in Tokyo to the Harvard giftshop in Cambridge, Massachusetts. I think this is a big deal. Indeed, it could be a much bigger deal than China’s dominance of 5G telecommunications networks.
Since 1971, when Richard Nixon severed the last link between the dollar and gold, the world has been on a fiat monetary system (meaning the money supply is unconnected to any scarce reserve asset such as gold). Because of the size of the American economy and its dominance of financial and commodity markets, the US dollar has been the No 1 currency since that time.
To varying extents, governments abused their ability to print money, leading to an era of high inflation. But gradually a variety of rules evolved (central bank independence, inflation targets) that brought down inflation in most places. Indeed, in the early 21st century, it began to seem as if the central banks had done too well. People began to worry about deflation. That worry intensified after the 2008-9 financial crisis.
The crisis led to monetary policy innovations, notably zero (and then negative) interest rates and quantitative easing. Despite all this, the dollar has remained the dominant currency in international transactions and central bank reserves. Confident in dollar dominance for the rest of history, American policymakers have grown used to exploiting it as a lever of foreign policy. That financial sanctions were a very powerful tool was only really appreciated after September 11, 2001, when US Treasury officials went after the financial supporters of al-Qaeda. People tend to focus on the seeming failure of the military interventions in Afghanistan and Iraq. But the assertion of US financial power after 9/11 was much more effective and less expensive.
Before too long, America was using financial sanctions against other enemies too, notably Russia, Venezuela and Iran, and even against friends (Switzerland, for example) suspected of protecting tax dodgers or other kinds of criminal, not to mention allies that wished to trade with Iran.
Because international payments between banks have to go through a Belgium-based but US-controlled entity known as Swift (Society for Worldwide Interbank Financial Telecommunication), America has the power to kick an individual, company or country out of the cross-border payments system. This power has grown increasingly irksome to other large economies.
Until recently, there seemed to be no real alternative to the dollar. Indeed, the world’s appetite for dollars and dollar-denominated securities has tended to grow even faster than their supply, resulting in a strong dollar and historically very low interest rates (as US bond prices have risen). As Mark Carney, the governor of the Bank of England, said at this year’s Federal Reserve conference in Jackson Hole, Wyoming, this is not a satisfactory system. Donald Trump also finds it unsatisfactory, though for different reasons: he would simply like to see a weaker dollar, but finds that he cannot unilaterally will that.
The advent of various kinds of digital currency creates a new state of affairs. Since the launch of bitcoin, the world has seen a wave of monetary innovation. Cryptocurrencies have proliferated. Many of these, it is true, have been mere experiments. Some have been downright frauds. And maybe it will turn out that blockchain as a technology has more appropriate uses than money. But those who have written off digital money will soon look as silly as the people who said the internet would never replace the fax machine.
The proof is in China, where digital payment systems established by Alibaba (Alipay) and Tencent (WeChat Pay) have grown explosively. Partly because of timing, partly because of regulation designed to protect banks and credit card companies, Americans never switched as enthusiastically to digital payments.
Phase two of this story is the expansion of Chinese fintech. One emerging market at a time, China is building a global payments infrastructure. Right now, the various systems are distinct national versions of the Chinese original. But there is no technical reason why the systems should not be linked internationally. Indeed, Alipay is already being used for cross-border remittances.
If America is stupid, it will let this process continue until the day comes when the Chinese connect their digital platforms into one global system. That will be D-Day: the day the dollar dies as the world’s No 1 currency and the day America loses its financial sanctions superpower.
If America is smart, it will wake up and start competing for dominance in digital payments. The shortest cut to a system to rival Alibaba and Tencent is Libra, the digital currency proposed by Facebook, which, with its 2.4bn active users, is uniquely positioned to create something on a Chinese scale — and fast. This would not be a true blockchain cryptocurrency, but more like a digital currency in the Chinese style, with the difference that it would be backed by a reserve, held in Switzerland, of dollars and other main currencies.
There are many obvious arguments against letting Facebook do this, not least its questionable track record when it comes to harvesting and exploiting users’ data. However, as Carney said in Jackson Hole, something such as this needs to happen, with the sponsorship and regulatory oversight of government.
Right now, the US Treasury is opposed to Libra and the Federal Reserve seems sceptical. But these attitudes seem symptomatic of the risk-aversion that presages decline. From a national security perspective, there is an urgent need to compete with the Chinese before they dominate digital payments globally. And from Trump’s perspective, backing Libra could offer perhaps the only way out of the problem he currently cannot solve, which is the strength of the dollar.
Libra would be partly dollar-backed, not wholly. So it would be a kind of dollar substitute, reducing international demand for dollars. But it would not offer an alternative to Treasury bonds, so it would not reduce the global demand for those.
History teaches us power is inseparable from financial power. The country that leads in financial innovation leads in every way: from Renaissance Italy, through imperial Spain, the Dutch republic and the British Empire to post-1930s America. Only lose that financial leadership — just ask poor Mr Pound, once worth $4.86 — and you lose your place as global hegemon.
The US-China rivalry today (what I call the Second Cold War ) is too focused on trade and telecoms. Washington needs to turn its attention, as a matter of urgency, to the race for monetary leadership, which America is in danger of losing.
- Is US financial hegemony finally on the wane? See the article below.
- Phrase of the Day: Pincelada: Brushstroke.
- How about this for a coincidence. . . I was reading about a play called The Life I Lead when an announcer on the BBC said the title words exactly at the same time as I was reading them.
- Having listened to a fascinating podcast on Anglo-Saxon, I found this Wiki list of more than 7,000 words in modern use which have come down to us from that language, despite competition from Latin, Danish, Norse, and Northern French
- An interesting fact about the post-Roman era in Britain . . . The Anglos Saxons didn't occupy the abandoned cities during a period of hundreds of years. As evidenced by the fact that all the Anglo-Saxon objects found in these can fit into a shoe-box!
America’s power is on a financial knife edge: Niall Ferguson, Milbank Family senior fellow at the Hoover Institution, Stanford
China’s online payment platforms are the real threat to US hegemony
‘How would you like to pay for that, sir?” For most of my lifetime, there have been three possible answers to that question: cash, a cheque or a plastic card. Go to Beijing, however, and you will see few transactions in those forms. People pay with their phones, using systems created by the two biggest Chinese tech companies, Alibaba and Tencent.
And not only in Beijing. For the Chinese way of paying is spreading around the world — from taxis in Tokyo to the Harvard giftshop in Cambridge, Massachusetts. I think this is a big deal. Indeed, it could be a much bigger deal than China’s dominance of 5G telecommunications networks.
Since 1971, when Richard Nixon severed the last link between the dollar and gold, the world has been on a fiat monetary system (meaning the money supply is unconnected to any scarce reserve asset such as gold). Because of the size of the American economy and its dominance of financial and commodity markets, the US dollar has been the No 1 currency since that time.
To varying extents, governments abused their ability to print money, leading to an era of high inflation. But gradually a variety of rules evolved (central bank independence, inflation targets) that brought down inflation in most places. Indeed, in the early 21st century, it began to seem as if the central banks had done too well. People began to worry about deflation. That worry intensified after the 2008-9 financial crisis.
The crisis led to monetary policy innovations, notably zero (and then negative) interest rates and quantitative easing. Despite all this, the dollar has remained the dominant currency in international transactions and central bank reserves. Confident in dollar dominance for the rest of history, American policymakers have grown used to exploiting it as a lever of foreign policy. That financial sanctions were a very powerful tool was only really appreciated after September 11, 2001, when US Treasury officials went after the financial supporters of al-Qaeda. People tend to focus on the seeming failure of the military interventions in Afghanistan and Iraq. But the assertion of US financial power after 9/11 was much more effective and less expensive.
Before too long, America was using financial sanctions against other enemies too, notably Russia, Venezuela and Iran, and even against friends (Switzerland, for example) suspected of protecting tax dodgers or other kinds of criminal, not to mention allies that wished to trade with Iran.
Because international payments between banks have to go through a Belgium-based but US-controlled entity known as Swift (Society for Worldwide Interbank Financial Telecommunication), America has the power to kick an individual, company or country out of the cross-border payments system. This power has grown increasingly irksome to other large economies.
Until recently, there seemed to be no real alternative to the dollar. Indeed, the world’s appetite for dollars and dollar-denominated securities has tended to grow even faster than their supply, resulting in a strong dollar and historically very low interest rates (as US bond prices have risen). As Mark Carney, the governor of the Bank of England, said at this year’s Federal Reserve conference in Jackson Hole, Wyoming, this is not a satisfactory system. Donald Trump also finds it unsatisfactory, though for different reasons: he would simply like to see a weaker dollar, but finds that he cannot unilaterally will that.
The advent of various kinds of digital currency creates a new state of affairs. Since the launch of bitcoin, the world has seen a wave of monetary innovation. Cryptocurrencies have proliferated. Many of these, it is true, have been mere experiments. Some have been downright frauds. And maybe it will turn out that blockchain as a technology has more appropriate uses than money. But those who have written off digital money will soon look as silly as the people who said the internet would never replace the fax machine.
The proof is in China, where digital payment systems established by Alibaba (Alipay) and Tencent (WeChat Pay) have grown explosively. Partly because of timing, partly because of regulation designed to protect banks and credit card companies, Americans never switched as enthusiastically to digital payments.
Phase two of this story is the expansion of Chinese fintech. One emerging market at a time, China is building a global payments infrastructure. Right now, the various systems are distinct national versions of the Chinese original. But there is no technical reason why the systems should not be linked internationally. Indeed, Alipay is already being used for cross-border remittances.
If America is stupid, it will let this process continue until the day comes when the Chinese connect their digital platforms into one global system. That will be D-Day: the day the dollar dies as the world’s No 1 currency and the day America loses its financial sanctions superpower.
If America is smart, it will wake up and start competing for dominance in digital payments. The shortest cut to a system to rival Alibaba and Tencent is Libra, the digital currency proposed by Facebook, which, with its 2.4bn active users, is uniquely positioned to create something on a Chinese scale — and fast. This would not be a true blockchain cryptocurrency, but more like a digital currency in the Chinese style, with the difference that it would be backed by a reserve, held in Switzerland, of dollars and other main currencies.
There are many obvious arguments against letting Facebook do this, not least its questionable track record when it comes to harvesting and exploiting users’ data. However, as Carney said in Jackson Hole, something such as this needs to happen, with the sponsorship and regulatory oversight of government.
Right now, the US Treasury is opposed to Libra and the Federal Reserve seems sceptical. But these attitudes seem symptomatic of the risk-aversion that presages decline. From a national security perspective, there is an urgent need to compete with the Chinese before they dominate digital payments globally. And from Trump’s perspective, backing Libra could offer perhaps the only way out of the problem he currently cannot solve, which is the strength of the dollar.
Libra would be partly dollar-backed, not wholly. So it would be a kind of dollar substitute, reducing international demand for dollars. But it would not offer an alternative to Treasury bonds, so it would not reduce the global demand for those.
History teaches us power is inseparable from financial power. The country that leads in financial innovation leads in every way: from Renaissance Italy, through imperial Spain, the Dutch republic and the British Empire to post-1930s America. Only lose that financial leadership — just ask poor Mr Pound, once worth $4.86 — and you lose your place as global hegemon.
The US-China rivalry today (what I call the Second Cold War ) is too focused on trade and telecoms. Washington needs to turn its attention, as a matter of urgency, to the race for monetary leadership, which America is in danger of losing.
No comments:
Post a Comment