The Quiet American Reset
The great de-coupling is here. The U.S. now has plan a to purge Chinese tech companies fully from America’s internet, creating what the Trump administration has dubbed the Clean Network. It mirrors the White House’s existing 5G Clean Path initiative to remove all Chinese components from systems ‘everywhere’, and which now extends it to everything tech on the ‘net.
China fears a financial ‘Iron Curtain’ is about to fall – a complete expulsion from the dollar sphere. In fact, soft capital control is already birthing, with Bloomberg reporting that the U.S. is now asking colleges and universities to divest from Chinese holdings in their endowments, “warning schools in a letter this last week, to get ahead of potentially more onerous measures [coming] on those holding the shares”.
Reportedly, the Chinese leadership annual August Beidaihe retreat, agreed (should the recommendations be subsequently endorsed at the Central Committee plenum in October) that China should prepare for war; build food and energy reserves; establish the Eurasian continental economic system, recover its overseas gold and broaden the global RMB settlement system (including its digital Yuan) – and prepare for the complete interruption of relations with the U.S.
Yet, whilst the media focus is all on this ‘tech’ and ‘sphere’ de-coupling, something profound – and quite separate – is already shaping the global monetary order (quite apart from likely Chinese exclusion).
It is set, in the longer term, to be more revolutionary – and contentious – than even ‘de-coupling’. It is getting sparse attention.
However, as it becomes ever more evident that no ‘V’ shaped economic rebound will be arriving soon – as the U.S. ‘house’ catches fire again with Coronavirus over the autumn and winter, presaging a further economic closedown – the chances are that this bombshell will indeed ignite.
First, a little background:
Earlier this month, Zero Hedge published a remarkable interview with two former Fed economists – Simon Potter (who was also the former head of the Fed’s Plunge Protection Team for many years) and Julia Coronado – both of whom have tremendous impact on thinking at the Fed.
They hinted at the Fed’s ‘last ditch’ stimulus and bailout strategy (i.e. should the U.S. economy be further stalled by Coronavirus): It is ‘to wire’ digital money directly into Americans’ smartphone financial apps, bypassing the banking system entirely.
“The two propose creating a monetary tool that they call ‘recession insurance bonds’, which draw on some of the advances in digital payments and ‘wired’ instantly to Americans”:
“As Coronado explains the details, Congress would grant the Federal Reserve an additional tool for providing support — say, a percent of GDP [in a lump sum that would be divided equally and distributed] to households in a recession. Recession insurance bonds would be zero-coupon securities, a contingent asset of households that would basically lie in wait. The trigger could be reaching the zero lower bound on interest rates or, as economist Claudia Sahm has proposed, a 0.5 percentage point increase in the unemployment rate. The Fed would then activate the securities and deposit the funds digitally in households’ apps.
https://www.strategic-culture.org/news/2020/08/24/the-quiet-american-reset/