The world economy has faced numerous challenges in recent years, including a global pandemic, economic instability, geopolitical tensions, trade fragmentation, and rising financial stress. In response to these challenges, major powers have engaged in significant over-issuance of currency, leading to concerns about the impact on global economic uncertainty. This issue was discussed in NTD’s “Pinnacle View” program, where experts provided insights into the role of currency over-issuance in shaping volatile economic trends.
China’s M2 money supply has consistently grown over the past decade, reaching almost 300 trillion yuan (approximately $41.6 trillion) at present. This amount is nearly equal to the combined money supply of the United States, Europe, and Japan. Despite the infusion of money, China’s economy is not growing at a high speed, raising questions about where the money has gone and whether the world economy will achieve a soft landing as predicted by analysts.
The current surge in money issuance differs from previous episodes as cash is being injected directly into households, particularly in the United States and Europe. This has led to an immediate increase in the money supply, contributing to inflationary pressures. Factors such as a shift in consumer spending patterns, rising labor costs, and disruptions in global supply chains due to the pandemic have further contributed to the current inflationary environment. While some analysts project a soft landing for the global economy, others express a more pessimistic view, highlighting the potential for a prolonged period of inflation.
The panelists also discussed the divergent paths of quantitative easing in different countries. While many governments promote the idea that government intervention, including printing money, can stabilize the economy, this approach may actually result in the wealth of society being stolen. The central bank policies in authoritarian models like China allow unrestrained printing of money to satisfy the government’s political objectives. However, excessive money printing does not necessarily lead to real economic growth. In China, the printed money often ends up in the hands of state-owned banks, enterprises, and corrupt officials, leading to significant wealth inequality and hidden inflation.
The relationship between gold and the U.S. dollar, often characterized as inverse, is also shifting due to major changes in the global economic and political structure. The dollar’s strength has been weakened by inflation, excessive borrowing, debt, and spending by the U.S. government. Many countries are buying gold instead of holding the dollar due to a lack of confidence in U.S. economic policies and global inflation outlooks. China, in particular, has been on a gold-buying spree as it seeks to diversify its assets and reduce its reliance on the dollar.
Beijing aims to internationalize China’s currency, the Renminbi (RMB), but faces a dilemma due to its authoritarian nature. The CCP wants to challenge the U.S. dollar and the euro by internationalizing the RMB, but it cannot allow free conversion of the currency as it may lose control over the exchange rate. The CCP fears that excessive money printing may lead to a sudden depreciation of the RMB, causing financial turmoil. Uncertainty about China’s future, geopolitical tensions, and insecurity about U.S.-China relations contribute to Chinese individuals’ increasing interest in gold as a safer investment.
These discussions highlight the complex and interconnected nature of global economic trends and the role of currency over-issuance in shaping these dynamics. As the world enters a turbulent period with changing wealth distribution and power dynamics, it is crucial to be prepared for the challenges that lie ahead. The next twenty years could be a transformative time for both the United States and the entire world, requiring careful navigation and strategic decision-making to ensure economic stability and prosperity.
