There is so much noise in the news these days that some seemingly innocuous events have a way of sneaking through unnoticed. Often these events fester and have ramifications for our lives. Recently in Saudi Arabia there was a discussion between China and the royal family about the Saudis taking settlement for at least part of China’s oil purchases in yuan instead of dollars. Shortly thereafter, when President Biden called to talk to the Saudi crown prince about pumping more oil, no one picked up the phone.
The Chinese are better at the “long game” than any other country. Perhaps it is the perspective of a country that has been around for millennia. China has a willingness to accept incremental progress toward very long-term goals. It is perhaps a unique Chinese trait, but one we all need to be attentive to when it occurs.
For those of us who were born in the 1940’s we have had the benefit of growing up during a period known as the “PAX AMERICANA.” Several things have contributed to this era of relative peace. Our national values, coupled with a robust economy, and a strong military have given us this luxury. Unfortunately, it is all many of us know, so we often take it for granted. But we also take for granted our strong currency, and this is the end game for China.
China wants to unseat the dollar as the world reserve currency. For the average American this translates into higher prices for just about anything made overseas. This would make everything more expensive from electronics, to gas, and travel. This is one reason why “Made in America” takes on more significance. It also makes our government bonds (debt) less attractive overseas, which is key to the lifestyle we all enjoy. But make no mistake, our reserve currency status around the world is one key to the lifestyle we enjoy each day, and attacks on it are as serious as an invasion on our west coast. Our inflation story is another discussion, but they are all tightly coupled.