The US and China aren’t doing so well out of it though.
So what happens when the world’s two largest economies pull out their financial weapons out of their trousers and start waving them around at each other?
Well, we’re finding out. It turns out that a tit-for-tat trade war with a major economic powerhouse is going to end in casualties on both sides, no matter who wins. The US might be drawing blood, but the process hasn’t exactly been painless. The stock markets are jittery, GDP growth is slowing, the dollar is having second thoughts and there are serious implications in the fact that it’s putting political pressure on the Fed to do something about it – not great for an organisation that’s supposed to be independent of government, for the very good reason that when there’s a conflict of interests between the ones who print the money and the ones who spend it, the result can be something like Zimbabwe.
China, meanwhile, is also feeling the pain. They’re devaluing their currency, the yuan, to make their exports more competitive. But here’s the thing. That means it’s worth less for all those millions upon millions upon millions of Chinese who earn it, save it and spend it on a day-to-day basis. So what do you do if you’re currency is dropping in value?
Yup. Sell it for something that’s not. And what if capital controls prevent you from shifting piles of cash offshore?
Yup, that’s right. You find a currency that’s immune to capital controls. Something decentralised, borderless and, not to put too fine a point on it, bitcoin-y.
With the yuan down 2% against the dollar in the last fortnight, that appears to be what’s happening. It’s hard to be sure because the People’s Bank of China banned bitcoin exchanges back in 2017 (and a few other times, as it suited them). But lots of OTC trading goes on over WeChat. The government tried to ban that, too, recently – but it’s easier said than done.
TL;DR China and the US have got into a competition that neither can win without hurting themselves, and bitcoin says ‘thank you’.
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