Economics

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Why is China running such huge trade surpluses and why is the US abandoning the relatively liberal trade policies of the past eight decades? The answer is the revival of mercantilism.

Mercantilism dominated European thinking on international economic policy in the 17th and 18th centuries. Mercantilists’ underlying belief was that international economic policy is primarily a tool of state power. Since power, unlike prosperity, is relative, mercantilists think of international economic engagement as “zero sum”: you win, I lose. Mercantilists also treasure domestic production and love trade surpluses and protection against imports. Adam Smith, wrote The Wealth of Nations in the 18th century as an argument in favour of free trade, against just such mercantilism.

Mercantilism goes back at least to the 16th century. So, given that we are in the 21st, we should call today’s version “neo-mercantilism”, replacing “neoliberalism” which took a more Smithian view of trade a few decades ago. Yet as the Canadian economist, Eric Helleiner argues, such contemporary neo-mercantilism partly revives earlier neo-mercantilist ideas, notably those of two figures whose ideas were influential in the 19th century — the first US secretary of the treasury Alexander Hamilton and the German political theorist Friedrich List, both of whom argued for infant industry protection.

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Neo-mercantilism is thriving in China, which has not only embraced infant-industry promotion, but created huge trade surpluses. Trump’s US is no less neo-mercantilist: he is obsessed with the evils of external deficits and the need to protect domestic markets.

Arvind Subramanian, former chief economic adviser to India’s prime minister Narendra Modi, recently argued that “Trump’s long-standing tariff obsession derives from his fury-fuelled conviction that trade surpluses abroad have damaged the US economy, especially its manufacturing sector. In that world view, China, with its consistently large trade surpluses, was the provocateur-in-chief.”

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The perspective [of China wanting to dominate global manufacturing by not importing anything manufactured elsewhere] is consistent with the revealed preferences of Chinese policymakers over decades. Certainly, China has never addressed its long-standing structural problem of excess savings.

True, immediately after the financial crisis of 2007-09, its temporary “solution” was to promote a huge domestic property boom. But this has now (inevitably) blown up. More recently, the favoured solution has been enormous investment in advanced manufacturing, which generates excess capacity and even higher exports: China’s mercantilism is embedded, economically and politically.

Trump’s tariffs will now divert China’s exports towards other markets, both other high-income economies and emerging and developing ones. Thus, Subramanian notes that “China’s exports of low-value-added goods to developing countries have been rising sharply, undermining the competitiveness of these countries’ own domestic industries.” The beggar-our-neighbours interaction of China’s mercantilism with US protectionism will spread damage across the world.

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Mercantilism’s zero-sum and state-oriented perspective also tends to create international conflict. Mercantilist powers fought one another constantly: England and France, two of Europe’s great powers, were at war, on and off, from 1689 to 1815. The apparently economically-motivated US decapitation of Venezuela is a classically imperialist resource-grab. Maybe, the fear of nuclear weapons will continue to constrain war. But it is not easy to separate intense economic friction from outright conflict.

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The triumph of neo-mercantilism then raises two fundamental issues.

The first is where it will lead. Some argue that the world will fracture. This seems likely. But it is unlikely to be a neat fracturing, because the interests of great powers overlap. It seems unlikely, for example, that the US will just abandon south and east Asia to China ... The second question is whether the fracturing can be managed. There is, in fact, an answer that is rational, albeit optimistic. It is to build a new system around the notion of a peace treaty among mercantilists. Surprisingly, perhaps, that would not be a new idea: just such a peace treaty was an important element in the post-second-world-war liberal settlement that China and Trump’s US are jointly destroying.

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A somewhat practical guide to living on a hard money standard in a debasing fiat world.

Firstly, let me say, I do not know how long this will end up being. It could be very short, or it could be an entire essay. We shall see.

1. The "why?"

2. Choosing a hard money Unit of Account (UoA)

3. Stability out of instability

4. Shifting your mindset

5. Practical advice and how I do it

6. The "why?": All governments debase fiat currency. This is a fact. You work day after day, hour after hour, and you feel like you can never get ahead. You see your friends turning to socialist and communist policies such as rent control and public takeover of private property. You believe in the idea that what you work for is rightfully yours, and therefore you are labeled selfish. I disagree, and you are not alone.

This is an admittedly incomplete guide as to how I do my best to live my life on #Monero, but these concepts can be applied to other things such as #Bitcoin. I've explained bits and pieces of this before on podcasts and in ephemeral chats that disappear over time, but I figure I should actually write them down in a slightly more permanent way, so here it is, filtered by at least some forethought, though admittedly not much.

2. Choosing a hard money Unit of Account (UoA): This is a personal choice, but from what I can tell, the best contenders are #Monero, #Bitcoin, and #Gold.

Monero prides itself and strives to be peer-to-peer, uncensorable, private digital cash. The Monero community believe fiercely that the right to privacy in your financial dealings is a fundamental human right. An outsider is unable to tell who sent a Monero transaction, who received that Monero transaction, or how much that Monero transaction was for. The only people who have the right to know that information according to the Monero community are the sender and the receiver. The Monero community is openly defiant of state power and control and believe Monero is a tool like any other that can cause great harm or great good depending on the human behind the input device.

Bitcoin these days is commonly referred to as "digital gold". It was the very first cryptocurrency, and we all owe a great debt of gratitude to Satoshi Nakamoto for what he/she/they accomplished. Bitcoin was released as a scathing response to the 2008 great financial crisis. Satoshi embedded a now famous headline into the Genesis block of the network, "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”. What an absolute legend.

Gold has been hard money for thousands of years, retaining its purchasing power, and was only dealt a final killing blow in 1971 when then US President Richard Nixon declared "I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.". In case you haven't been keeping count, this temporary government program has been in effect for 55 years, showing that there really is nothing more permanent than a temporary government program.

As mentioned above, I have chosen Monero to fill this role in my life.

3. Stability out of instability: I will be the first one to admit, living on a hard money standard when everybody else is living on a flexible fiat standard is hard work. If you are not prepared for hard work, stop reading now and go do something else. Depending on the recklessness of your government, this could be literal years of hard work.

If you look at a price chart on any trading service, what you will find is that the prices of Monero, Bitcoin, and Gold can fluctuate wildly, or at least they look like they do. More on that later. The way I have found to combat this problem is by using a simple moving average of the prices instead of the day-to-day fluctuation in the market prices. You have a choice to make. How comfortable are you with instability? If you choose a shorter term moving average, you will be closer to the current market price at any given time, but your net worth will also experience more fluctuation when measured in your failing fiat currency. Choosing a longer-term moving average will keep your net worth more stable when measured in your failing fiat currency at the expense of most of the time underestimating your actual net worth, sometimes by quite a bit.

4. Shifting your mindset: Here's where things get tough. You have to abandon accounting your net worth in the fiat currency that you've used all your life. And that is hard. You have to put yourself in a headspace something like "my fiat currency is worthless, and I want nothing to do with it, if at all possible." you have to take the simple moving average you decided on above and start mentally pricing items from your fiat currency into the hard money you've chosen to use. as an example, instead of "my internet bill is 50 US dollars per month" your thought will need to become "my internet bill is 144 millinero (0.144 Monero) per month". This is where that moving average from earlier comes in. The market price of the hard money can fluctuate wildly in your failing fiat currency and you need to be able to price items you see directly in your new hard money without having to break out a calculator for everything. You don't have to get the pricing perfect by any means, but eventually you should be able to look at a price in your local fiat currency and have a decent idea of exactly what that item would cost in your hard money unit of account. Since your fiat currency is failing against the hard money unit of account you've chosen, what you'll often find is that you can get items at a "discount" from what you would have expected to pay by using the simple moving average. As an example, as of writing, I would expect to pay ~86 millinero for 2 two topping pizzas delivered to my home, but as of now, I would actually pay ~51.7 millinero instead. That is a "discount' from what I would have anticipated to be paying as determined by the simple moving average. However, the opposite can sometimes be the case and you might end up having to pay a "premium" above what you would have expected based on the simple moving average. This happens when your hard money unit of account is being undervalued as compared to the simple moving average in your failing fiat currency and is generally short-lived since your fiat currency is failing. during this "premium" it is best to delay non-essential consumption, if at all possible, until this reverts to normal. You should of course be fiat cost averaging into your hard money currency at all times from your failing currency, but at these times it is best to put any extra you might be able to get ahold of in quickly because you will obtain more units of the hard money and therefore be more wealthy later on down the road.

5. Practical advice and how I do it: 5A: Consume Media: Find podcasts, books, music, etc. to listen to about your chosen unit of account or similar hard monies. The Monero community, the Bitcoin community, and the Gold community have their differences, but deep down we are all striving for the same thing. We want to live in a world where our work is valued in a currency that cannot be debased by other human beings. Therefore, it's fine to listen to content from the other camps. Because the general rules apply even if specifics may not.

I've chosen Monero personally, but I still listen to Bitcoin podcasts and read Bitcoin books because while they may be about Bitcoin, so much of what they have to say is completely applicable to Monero. I also listen to podcasts about gold and silver for that exact same reason.

5B: Redenominate your life: Denominate your life as much as possible in the unit of account you've chosen and encourage others of similar viewpoints to do the same. If you can do so, find companies who take your currency for bill payments and start using them (example: Cloaked Wireless accepts both Monero and Bitcoin for cellphone bills)

For me #XMRBazaar has been fantastic. They have tons of items directly priced in Monero, where I don't have to concern myself with converting from Fiat.

5C: Determine your CAGR (compound annual growth rate): You are using the simple moving average to calculate your net worth, which is going to most of the time be below your actual net worth, and your fiat currency is failing against the hard money you've chosen. This means if you spent nothing from your hard money stack that your net worth in your local fiat currency would actually continue to grow. You could also treat this as a "dividend" and spend that much fiat in the full knowledge that as long as you spend less than that amount, the fiat value of your stack would stay the exact same or possibly grow. Here's a quick example for illustration purposes: monero's 6 month simple moving average is $352 US Dollars and the CAGR is 15%. So 15% divided by 12 months is 15/12 = 1.25%/month. If your hard money stack was worth 1,000 US dollars your "dividend" would be 1000*0.0125 = $12.50 US Dollars/month. If you spent nothing, your hard money would now be worth $1,012.50 or if you wished you could spend that $12.50 on something and your hard money stack would still be worth $1,000 US Dollars. Your stack of hard money would decrease slightly, but the fiat value of that stack would stay the exact same.

5D: Live the gift card life: You will not be able to find everything you want priced directly in your hard money of choice. Deal with it. Therefore, you will need to find merchants who are willing to accept the hard money you have chosen for gift cards denominated in your local currency in order to get some of the things you need. Here in the US, I am able to spend Monero to buy an Instacart gift card, for example, and then buy my groceries using that, so I have paid for my groceries using Monero indirectly.

After all is said and done, what you will find is that your life as denominated in the hard money currency you've chosen will get easier over time. In 2023 I was having to pay 1.2 Monero per month for my groceries and today that has fallen to 0.511 or -57.4% in 3 years. And that's against the US dollar, which is supposedly a stable currency. I can't imagine what it would be like for something like the Argentinian peso or Mexican peso. If the US dollar really is the cleanest dirty shirt, then that's still an extremely dirty shirt.

As U.S. imports from China have declined amid the two countries’ trade war, China has sent more exports to Southeast Asia, Africa, Latin America and elsewhere.

The Federal Reserve is less likely to make cuts this year as it grapples with a criminal probe, analysts say. That could undermine one of Trump's goals.

The Justice Department’s criminal investigation of the Federal Reserve and Chair Jerome Powell’s willingness to fight back are already shaking Wall Street. But Main Street could feel shock waves, too.

The legal showdown makes it less likely that the Fed will lower interest rates this year, according to several analysts. Lower rates could translate into lower borrowing costs for consumers and businesses, helping support economic growth and the labor market.

Powell’s term as chair ends in May. But Friday’s subpoenas to the Fed make it “more likely that Powell will stay on as a governor to help protect the Fed after his term as chair ends,” Krishna Guha, vice chairman at financial firm Evercore ISI, wrote in a note Sunday.

Nine governors including Bank of England’s Andrew Bailey and ECB’s Christine Lagarde say independence is critical

Global central banks have issued an extraordinary joint statement offering “full solidarity” to the US Federal Reserve chair, Jerome Powell, in the face of the latest threat to his independence from Donald Trump’s White House.

“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability,” the statement said.

It was signed by nine central bank governors including the Bank of England governor, Andrew Bailey, and the chair of the European Central Bank, Christine Lagarde. It was coordinated by the Basel-based Bank for International Settlements, which added its chair and general manager to the signatories.

Picture is as murky as a barrel of oil, with US companies in 2026 expecting their first production drop in four years

US shale-oil producers were already contending with oil prices at four-year lows. News that they may soon face a significant competitor in their back yard likely wasn’t how frackers wanted to greet 2026.

The US capture of Venezuelan president Nicolaá Maduro and his wife, Cilia Flores, hit the share prices of independent shale-oil producers, such as Diamondback Energy and Devon Energy, last week.

Over the last 20 years, the US fracking industry has built itself into the main driver of domestic oil production: it accounted for 64% of total US crude oil production in 2023. With average production levels of 13.6m barrels a day (BPD), the US is the world’s largest crude-oil producer.

Hiring slowed more than expected in December, a sluggish end to what was one of the weakest years of job growth in decades, a dynamic that further amplified America’s affordability crisis.

The US economy added an estimated 50,000 jobs last month, slowing from a downwardly revised 56,000 jobs added in November, according to Bureau of Labor Statistics data released Friday.

Still, the unemployment rate edged lower to 4.4% from a revised 4.5% in November.

Economists were expecting a net gain of 55,000 jobs in December and an unemployment rate of 4.5%, according to FactSet consensus estimates.

cross-posted from: https://lemmy.world/post/41390967

cross-posted from: https://lemmy.world/post/41390962

Jiang Xueqin grew up in Canada, graduated from Yale, and has been teaching in China for more than a decade.

Mortgage rates moved lower to end 2025 and start 2026, but that did little to pull demand back to the market.

For the week ended Jan. 2, 2026, total mortgage application volume fell 9.7% on a seasonally adjusted basis from two weeks earlier, according to the Mortgage Bankers Association’s seasonally adjusted index. There were additional adjustments made for the holidays, and the read is for two weeks because the MBA did not report last week.

cross-posted from: https://lemmy.world/post/41307060

Electricity prices are climbing fast for home use, but not for business use.

Recent increases in electricity demand are mostly due to the commercial sector, which includes data centers.

The commercial sector and data centers are consuming ever-more electricity.

Board unwilling to accept hostile takeover despite $40bn guarantee from billionaire Larry Ellison

Warner Bros Discovery (WBD) has again told its shareholders to reject an “inadequate” $108.4bn (£80bn) hostile takeover bid by Paramount Skydance amid an extraordinary corporate battle to control the media conglomerate.

Paramount, controlled by the billionaire Ellison family, had sought to combat WBD’s criticism of its offer and claims it had “consistently misled” investors by saying it had a “full backstop” – a safety net to ensure it has sufficient funds – from the Ellisons.

Larry Ellison, co-founder of Oracle, last week agreed to provide a personal guarantee worth more than $40bn. Paramount said this was in an attempt to tackle WBD’s “amorphous need” for financial flexibility.