I wrote a blog, 8 years ago, trying to understand the impact of the Romans on our evolving monetary, military and trading history.

https://borderslynn.com/2017/07/16/from-roman-empire-to-the-new-world

Now I’ve reached the modern day, and I’m now asking about the mysteries of the global economy, trade and the power plays of those who seek to be the next dominant force in this complex arena.

Below you will find extracts from Saleh Mohsin’s book, Paper Soldiers, which has so enlightened me I have intertwined my thoughts with hers below. Here I am thinking about what my future might be like without Chinese products if the US places tariffs on Chinese imports which may mean the UK does too.

I do hope more people will read her fascinating book, also referenced in previous blogs.

I have purchased goods made in China in recent years, but not because I select Chinese made goods knowingly, but because they have become a major, high quality producer of many items I choose.

My community once fought an application to build a wind farm which would have wrecked our ancient landscape. This was my awakening to the importance of neodymium:

https://borderslynn.com/2013/07/24/a-wind-farm-threatens-our-landscape

This was in 2013. Studying what is involved in sourcing essential materials to build turbines made me realise how Chinese people paid a heavy health price mining such minerals as neodymium. And now I realise China led the world as a supplier of neodymium which is used extensively in all our familiar electronic devices.

China saw it could exploit the high demand and supply the west by bringing the rural workers to cities to work to satisfy demand.  I subsequently realised our advanced, clean environments were thanks to those Chinese working in heavily polluted areas of China.  As they toiled tirelessly in unsafe conditions to sell to us what we cannot produce for ourselves, they also made us feel good about our goal to be a Zero Carbon country. They increased their carbon footprint burning coal, but created all the industries which once we were famous for, like steelmaking.

Our western societies are consumer driven which is not encouraged in Chinese society. But our addictive purchasing culture is fed by China and it understands how to create a dependence on its vast range of products, often designed in western countries but built in China.

Their work ethic is high but financial rewards are much lower than, say, America. Earnings in the US are the highest in the world, so they can’t begin to compete with Chinese manufacturers as employees would not accept the lower salaries which are necessary to offer similar goods at competitive prices. And if tariffs are applied on vital goods we have so far bought cheaply, we will be unable to recreate them in our post industrial societies. Suddenly our regular and reliable goods will be off the shelves.

After reading Paper Soldiers I realise the US administration is always nuancing the signals to keep global trade healthy and avoiding harmful volatility. For this, all countries try hard to work to this end for mutual benefit. However, ‘the slightest slip between tongue and lip’ can tip the economies of the world into hazardous situations.

In the UK the Tories made it very difficult for foreign students to study in the UK, and yet the funds from them underwrite UK student universities funding. So as we lose the value of our students making friends on their courses with foreign classmates we also note universities are forced to offer fewer courses due to less funds.  Subjects such as English are less likely to be taught. Whole departments will disappear. How is that advantageous to our struggling educational system which once led the world?

Political decision making can stifle world cooperation. It is educational activities where cultural differences are encountered and harmful prejudices are often diminished.

Saleha Mohsin, in her book Paper Soldiers, is helping me along with this. This book helps me see behind political rhetoric and spin.

Read about Saleha:

https://www.csmonitor.com/About/People/Parenting-Bloggers/Saleha-Mohsin

And

https://salehamohsin.com/about-2/

We might not understand why our economic life has suddenly become disrupted until we one day find out why it happened, damaging and redirecting our lives unexpectedly.

Mohsin also shows the human weakness of the volatile stock market which can be panicked so easily by the wrong words at a crucial moment in time by people in positions of influence.

She provides a historic perspective of what occurred after the trauma of 9/11. The ongoing shock of that event on the World Trade Centre pervades the mental approach to retaining cooperation amongst the banks of the world. Significant efforts were made to regain confidence in the dollar after that attack, then a few years later we suffered the global slide due to the 2007/8 financial crisis. Political parties had to find solutions which were not easy to find.

She explained that, after the 2007 financial crisis, caused by US reckless banks, China became the protector of the dollar by continuing to buy American bonds. This fuelled China’s growth as well. Gradually the struggling global economies recovered as long as China kept buying US debt in the form of US bonds. Thus the two major US mortgage companies, Fannie Mae and Freddie Mac received 30 percent investment from Beijing in their $5.4 trillion securities. This was a tense time of diplomatic engagement to retain that investment, creating close cooperation between US and China.

In turn, China’s recovery depended on Americans ‘eating up its exports’  whilst China soaked up the US debt. Below are some extracts from Mohsin’s excellent book.

China’s currency had become the ultimate trade weapon, supporting its economic ambitions. A highly undervalued renminbi caused a surging current account surplus and a humongous bilateral surplus with America. Even when it belatedly let its currency rise, the central bank continued adding massively to its foreign exchange reserves, slowing the currency’s rise. This behavior created huge distortions in the pattern of global trade, hurt many U.S. manufacturing firms and took away U.S. jobs, and generated severe protectionist pressures in America. China was also becoming more brazen as the world dealt with the American-brewed global financial crisis. The overlords of the U.S. dollar had made huge mistakes, and allies were now paying for them through blowback from the financial meltdown. China’s high exposure to dollar-denominated financial assets was damaging to the nation, boosting the case that countries should wean themselves off their dollar addiction. Sick and tired of bullying from America on its currency regime, in 2009 China’s central banker called for a “super sovereign reserve currency” to be housed in the International Monetary Fund, to replace the dollar. The concept went nowhere, but it was the introduction to a concept that for decades was considered inconceivable: a world not reliant on the dollar.

In order to not rock the boat, the US could never openly call out China for currency manipulation, which it had once done when Tim Geithner, Treasury secretary, spoke out of line during the early days of the Obama administration, saying to senators,” President Obama, backed by the conclusions of a broad range of economists, believes that China is manipulating its currency.” This was just as Washington needed to maintain a strong reliance with Beijing to help keep the world economy afloat. Investors panicked. China reacted furiously.

The Chinese government reacted quickly and fiercely. “This kind of wrong accusation against China on exchange rate issues will intensify protectionism within the U.S., and will not help resolve the problem,” its Commerce Ministry said. A top central bank official said Geithner’s allegations were “untrue and misleading.” The episode illustrates the deep-rooted fear among global investors of a fight between the world’s two largest economies, with interdependencies and rivalries borne of their contradictory views on governance but shared ambition to expand influence. It was anxiety that crept into how senior U.S. Treasury officials dealt with key economic issues with China for the preceding years, and it continued to serve as the mood music for the next decade.

Mohsin has explained to me something I never knew. She must have thought more people needed this historical perspective or she would not have written the book. But new political administrations need to also read this book to understand how words matter, especially in a time when the dollar is losing credibility.

Since the Roman empire, trade and currency exchange has created so many positives yet unavoidable negatives and imbalances across the globe. There is never just one ‘villain of the piece.’ It is often some off the cuff remark in a sensitive situation which can trigger panic and result in a thousand errors of judgement.