The Chinese Economy Surpasses the United States

It’s official, China is number 1. And by no small margin. The international monetary order is changing. Bitcoin is waiting for its moment.

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From time to time, we see predictions of China’s collapse due to alleged fabrications of their growth figures.

The truth is that the GDP of the Middle Kingdom is now 22 % larger than that of the United States, at purchasing power parity. That means using an exchange rate that equalizes the cost of living.

If you ever visit Beijing, you’ll quickly realize that a euro converted into yuan allows you to buy more things than in Paris. A haircut will cost you less in China. But why should we value the work of the Chinese barber less than that of the Parisian one?

To avoid this distortion of reality, economists compare GDPs at purchasing power parity.

It is essential to avoid misleading headlines like the recent one around the widespread concern by the European Council that the EU had a larger economy than the United States in 2008, but now it’s 30% lower. It was simply a base effect related to the rise of the dollar.

That’s how it is, exchange rates can fluctuate greatly on the back of passing speculation. The US GDP relies on a dollar that’s artificially inflated by the petrodollar system. Everything comes into focus when we use purchasing power parity:

China > USA pic.twitter.com/SWxeMmYLPN

— Nicolas Teterel (@NTeterel) December 7, 2023

The petrodollar, the American crutch

The strength of the dollar is artificial for the simple reason that the United States has a colossal trade deficit. Under normal circumstances, the dollar should continuously fall until the trade balance is in equilibrium.

Except that the United States benefits from the so-called “exorbitant privilege.” This is due to the fact that oil exports are priced in dollars. And this has been the case since 1974, when Henry Kissinger twisted Saudi Arabia’s arm.

Since then, many other raw materials have been priced in dollars. As a result, it now makes up the bulk of central banks’ foreign exchange reserves (~$7 trillion).

That’s as many dollars coming home since central banks place their reserves in US debt to earn interest. Hence the artificial vigor of the dollar, which will cease the moment exporting nations accept yuan, ruble, rupee, gold, bitcoin, etc., instead.

The United States is abusing this privilege. This is evidenced by a public debt that represents no less than 34 % of the world’s public debt. Only 15% for the People’s Republic.

Furthermore, total US debt reaches 400% of GDP, compared to 300% for China. Debt levels are also important when making GDP comparisons.

Another excellent way to compare two economies is in terms of electricity consumption. The following graph clearly shows where the quality of life is increasing:

Show this next time you get told that china gdp numbers are fake pic.twitter.com/aILdCK9myv

— Nicolas Teterel (@NTeterel) December 7, 2023

Without growth in energy consumption, GDP growth is just an inflationary artifice! GDP can increase for good and bad reasons. The inflation of Netflix subscriptions is not comparable to the construction of nuclear power plants.

This did not prevent Moody’s from placing China’s debt under negative outlook. Yet, the Middle Kingdom has seen a growth of 40% since the last downgrade of its credit rating, in 2017…

Divide and conquer

Washington maintains wars here and there precisely to try and preserve its exorbitant privilege.

It is about intimidating nations that would want to break free from the dollar. The head of Russian intelligence services, Sergey Naryshkin, recently had some very frank words on the matter:

“The emerging world increasingly resembles a classic revolutionary situation, where the ‘top’, in the form of weakening United States, can no longer ensure its leadership, and the ‘bottom’, in which the Anglo-Saxon elite, no exaggeration, includes all other countries, no longer wants to submit to the diktat of the West.

In order to avoid a radical collapse of the entire global ‘superstructure’ that benefits only the Anglo-Saxons, the Euro-Atlantic top ranks will choose to maintain controlled chaos – destabilizing the situation in key regions of the planet by pitting certain ‘recalcitrant’ states against others, and then forming operational and tactical coalitions around them under Western control.

It is evident that the coming year will be marked by the intensification of the confrontation between two antagonistic geopolitical principles: the Anglo-Saxon ‘divide and conquer’ and the continental ‘unite and lead’.”

Vladimir Putin himself declared this week from Riyadh that the West “has discredited the financial infrastructure dominated by the dollar and the euro, the transactions carried out through Western banks and the international payment network SWIFT.”

Gold Standard / Bitcoin Standard

The West is stirring, but Russia’s victory over an army of half a million Ukrainians led by NATO has not gone unnoticed. The petromonarchies are no longer fearful of suffering the same fate as Iraq.

The high-profile visit of the Russian president to the United Arab Emirates and Saudi Arabia is very telling in this regard. Similarly, telling is the presence of the president of the Russian central bank, Elvira Nabiullina.

Let’s remember Saudi Arabia and the United Arab Emirates have just joined the BRICS. By doing so, financing US debt is no longer on the table. The dedollarization of Saudi oil exports and the depegging of the riyal from the dollar were therefore likely at the heart of the conversations.

The memes about X were flying:

Is it? pic.twitter.com/myK6ItD2qE

— Nicolas Teterel (@NTeterel) December 7, 2023

The visit by the Russian president was likely to inspire them with courage. Incidentally, Ramzan Kadyrov was also part of the party. This is a strong sign as well since the president of the Chechen Republic has proven his ability to defeat NATO troops in Ukraine.

The world clearly wants to let go of the imperial currency in favor of gold, which Russia and China (and other countries) have been buying relentlessly ever since the Fed started running the printing press (QE).

A store of value will eventually return to the center of global exchanges. Gold first, and then, eventually, bitcoin, for good reasons explained here: Bitcoin will never stop, Laura.