Commentary on Political Economy

Monday 5 August 2019


“Lenin says that the best way to undermine a country is to debase its currency.” With this perhaps apocryphal attribution to Lenin in his famous tract on The Economic Consequences of the Peace, John Maynard Keynes clearly perceived what many abysmally ignorant Western commentators are just as clearly missing (quite incredibly really, a sign of the hodiernal pervasive mass ignorance in economic matters) – and that is that, however “competitive” they may appear to be, devaluations by sovereign monetary authorities are never a sign of strength but are rather an unmistakeable avowal of weakness.
By allowing the renminbi (RMB) to weaken sharply against the US dollar, the butchers of Beijing have signalled to the world that they are catastrophically losing the battle against the Trump Administration and that indeed they fear (a) uncontrollable upheaval similar to what is happening in Hong Kong due to the fast deteriorating financial and employment conditions in the PRC, and (b) the imminent collapse of their currency which they are not willing to defend given that (i) such defence would ultimately fail to stem speculative attacks and capital flight and (ii) it would rapidly deplete the little that remains of hard currency holdings by the same monetary authorities, thus exposing the hapless authorities to further devaluations.
In effect, far from being an act of defiance on the part of the Beijing rats, the devaluation of the RMB is a preventive measure to try and defuse a currency and financial situation that is becoming catastrophically more explosive by the minute (as we write, the RMB is coming again under attack). The higher domestic inflation due to higher costs of essential provisions for the bulk of the Chinese working population, together with the unsustainable cost of Chinese private enterprise to sustain the higher cost of US dollar denominated debts will soon constitute an intractable and insoluble obstacle for the Beijing kleptocratic Dictatorship that is now turning the entirety of the PRC, and not just the Uighur Province of Xinjiang, into a vast concentration camp.

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