The so-called monetary sovereignty means that under the market economy, the government must print money to meet the requirements of the market, and at the same time, the printed currency can be used to purchase treasury bonds and hand them over to the Ministry of Finance. A market economy always needs a lot of money, and it grows with the economy, so that the government can print more money without having to repay the national debt, which is equivalent to using it for free.
The power of monetary sovereignty can be best demonstrated before and after the founding of the People's Republic of China. After the end of the three major battles, the war spread throughout the country, and the number of troops also increased substantially, from 3 million to 5 million, and the required military expenditure also increased in a straight line. At this time, the domestic economic situation was extremely severe, due to the traffic jam caused by the war, production declined, and material supplies were scarce, and before and after the founding of New China, compared with the highest peak in history, the output of industrial products fell by about 50 to 90 percent, and the output of grain fell by 25 percent. Second, the Kuomintang relied on the issuance of banknotes for a long time to engage in civil war, and the gold yuan bills and fiat currency issued by the Kuomintang collapsed one after another and turned into waste paper, and the people no longer trusted paper money, while many businessmen became speculative businessmen, taking advantage of the shortage of material supplies, hoarding, manipulating the market, driving up prices, and aggravating inflation. Third, the state finances were extremely difficult, when the state fiscal revenue was converted to 30.3 billion catties, but the expenditure was as high as 57 billion catties, many places had just been liberated, and there was no ability to collect taxes, and at the same time the policy of retaining military and political personnel of the Republic of China regime was implemented, winning over the majority of centrists, reducing resistance, and also making the number of financial payrolls grow rapidly to more than 9 million. In the spring of 1949, there was a severe drought in North China, and by April and May, prices had generally risen by about 50 percent, and wholesale prices in 13 major cities had risen by an average of 72.4 percent in a single month. By July, speculators had manipulated the price of silver dollars to drive speculation in grain, cotton yarn, and other commodities, and the average price index rose by 104.6 percent in a single month.
At that time, the Communists relied mainly on their monetary sovereignty and on printing money to solve their military expenditures. According to the report of the Central Finance Commission, a total of 2,995.1 billion yuan of currency was issued in 1949, an increase of 167.3 times over the end of the previous year, with an average monthly increase of 53.2 percent. By February 1, 1950, the amount of banknotes issued had increased to 4.1 trillion yuan. In that year, the total fiscal revenue of the liberated areas was 2.58 trillion yuan, but the expenditure was as high as 4.99 trillion yuan, and the difference of 2.41 trillion yuan was provided by printing money, accounting for 80% of the amount of money printed. In that year, military expenditure accounted for half of the fiscal expenditure, so military expenditure was basically settled by printing money, accounting for more than 95 percent of military expenditure. In other words, currency issuance became the main source of government financing and the most important source of funds to promote the process of the liberation war at that time.
At that time, the mainland was still dominated by small-scale peasant economy, the share of market transactions in economic activities was very low, and the ratio of the amount of money needed to the domestic output was much lower than it is today. It was not until most of the country was liberated, military activities were reduced, and the army began to be reduced, that the over-issuance of currency was gradually stopped and prices were stabilized. More importantly, it is necessary to establish an independent currency issuance system, issue the renminbi in a unified manner throughout the country, and prohibit the circulation of foreign currency or other currencies, so as to monopolize the currency circulation market, expand the scope of renminbi circulation, increase the amount of currency demanded in the market, and issue more renminbi. In short, it is to take back monetary sovereignty so that you can increase the amount of money you print for your own use.
Old China never formed a unified, autonomous, modern financial system based on the commodity economy, and the monetary system was very chaotic. First, foreign-funded banks absorb huge amounts of deposits, issue banknotes, operate foreign debts and stocks, enjoy the privileges of buying and selling gold and silver and foreign exchange, disrupt the currency market, and affect currency stability. Second, local warlords issue a variety of currencies to flood the market, making it difficult to control and manage. One of the consequences is that people don't trust paper money and don't want to hold it; Third, the government of the Republic of China issued currency indiscriminately, resulting in serious inflation that could not be controlled; Fourth, speculation is prevalent in the financial sector, resulting in chaos in the social and economic order. New China soon returned all monetary power to the central government, issued and managed currency in a unified manner, that is, grasped the sovereignty of currency, and at the same time, its profits were completely handed over to the government, thus producing great power. It can be said that the war resources needed to liberate the whole of China were solved by using monetary sovereignty and printing money.
Contemporary China has become the world's factory, all kinds of industrial products are among the best in the world, many products account for more than half of the world, coupled with the large output of modern industrial products, the division of labor is very fine, each industrial consumer goods are produced by many enterprises in the division of labor, the market transaction volume is much greater than the gross domestic product, the amount of money required is huge, and every year due to economic growth, it also needs huge growth. For example, the total amount of money at the end of 2023, including derivative currencies, will be as high as 292.3 trillion, close to 2.5 times the output value of the year, an increase of 25.9 trillion yuan from the end of the previous year, and 4.2 trillion more than the fiscal revenue of 21.7 trillion yuan that year. At the beginning of the founding of the People's Republic of China, in order to win the war of liberation, the additional issuance of currency was close to fiscal revenue, but it was basically an over-issuance of currency, which caused serious inflation. Nowadays, the amount of money that exceeds the fiscal revenue is printed every year, but that is the need of economic development, not only does it not produce inflation, but it is often due to insufficient issuance, which leads to inflationary contraction and affects economic development.
However, it is a pity that the large amount of money that has been printed every year since the reform was not handed over to our own government, but mainly to Western capitalists. This is because the government promises to open up the financial currency, agrees to currency exchange, and allows Western elites to print dollars and euros, so that they can go to China to exchange for yuan, and at the same time, they can ask for yuan to be exchanged for dollars and euros, so that even if the government exchanges a large number of dollars and euros, it must reserve reserves for currency exchange, otherwise, it will not be able to carry out the currency exchange commitment. Therefore, the additional currency we printed was basically exchanged for foreign exchange and handed over to Western capitalists. This includes directly using the base currency issued by the central bank to exchange foreign exchange for Western "investment" in China, or foreign exchange for the purchase of Chinese goods. Most of the derivative currencies issued by commercial banks are also lent to Western capitalists, including loans to support Western capitalists' "investment" in China, which are often 3-5 times the direct investment of Western capitalists. Today, the central bank has more than $3 trillion in foreign exchange reserves, which has been around for more than 10 years. The RMB cash circulating in the market and the foreign exchange reserved by the central bank have long been one-to-one. The renminbi is equivalent to a foreign exchange substitute bill, which means that the central bank will hand over the sovereignty of currency issuance to the West, and the cash issued will be given to the West free of charge.
In today's market economy, the main transactions are between businesses, mainly through banks. Under the commitment of currency exchange, the use of foreign exchange and the use of renminbi is basically the same as going through one more procedure for enterprises, which is equivalent to foreign exchange becoming China's currency, which is equivalent to handing over monetary sovereignty. In contrast to the United States, there are no major banks responsible for currency exchange between the dollar and the yuan.
In 1694, United Kingdom established the Bank of England, and one of the main contributions to United Kingdom was the bank notes issued by the Bank of England, that is, bank IOUs, when the currency in circulation, was mainly used to purchase government bonds, thus providing the government with a huge amount of money. At that time, the king of United Kingdom ruled the country mainly through the feudal aristocracy, unable to directly tax all the people, and the ability to collect taxes on the feudal nobility was also very limited, and was often opposed, and it was difficult to meet the requirements of foreign aggression and expansion. With the funds provided by the Bank of England, the United Kingdom Navy can be developed, and United Kingdom's ability to invade and expand abroad can be significantly improved, which is the most important factor in the development of United Kingdom's hegemony according to the financial system. Later, the British king promoted marketization, which also increased the demand for domestic currency, so that the amount of money could be increased, so that the government could get more funds.
Historically, United States has relied on printing money to settle war costs. During the Revolutionary War, the United States elite at that time was unable to collect taxes under the slogan of opposing the British Crown's taxation, and mainly relied on issuing bonds as currency to solve the war expenses. Due to the large circulation, it quickly depreciated into waste paper.
During the United States Civil War, because United States belonged to the federal state, the states were economically independent, and the federal government only had tariffs, which were difficult to receive during the war, President Lincoln issued $500 million in paper money, and at the same time passed the National Banking Act to control the major commercial banks in the states, and through tax increases, commercial banks stopped issuing bank bills, so that the domestic currency mainly came from the federal government, plus 25% of the deposits of commercial banks were required to be reserves, which could be exchanged for dollar banknotes. As a result, commercial banks absorbed a large amount of banknotes issued by the United States government. At that time, the federal government of United States spent $3 billion on the war, much of it by printing money, and the rest by issuing bonds, and within a large range of national debt, basically did not need to be repaid. The consequence of repaying too much of the reduced national debt is that it reduces the net funds available in the market, making it difficult for the market economy to function.
After the spread of the new crown epidemic in the United States, the United States central bank issued an additional $4.8 trillion in two years, mainly to buy government bonds, and handed it over to the United States government. United States Although it is widely advertised that banks are privately owned, United States large banks are all controlled by the government, for example, the four major banks, which account for 46% of the total assets of the United States banking industry, are all listed banks, and their shares are mainly controlled by various funds managed by the government, such as pension funds and education funds. There are 90 listed banks in the United States, making it the largest bank dominated by the financial industry in the United States. Therefore, United States is actually the government issuing money through banks, including commercial banks issuing derivative money, organizing economic activities, and managing and regulating the market economy.
Today we have a huge production capacity, and under the market economy, we are able to provide the government with a huge amount of money every year, far exceeding the fiscal revenue. But our problem is that committing to open capital and currency convertibility is tantamount to letting the West print money so that it can go to China and exchange it. Moreover, they can invest in the mainland, buy factories and even open banks and newspapers. Nowadays, United States and the West are relying on money printing to "invest", controlling the economic resources of many countries, even including the Internet media, propaganda United States ideology, including the hegemony of the dollar, the dollar is a hard currency and the ideology of the dollar such as international currency, thus controlling people's minds, resulting in the third world countries generally unilaterally opening their finances to the United States, and having to reserve a large number of Western currencies such as dollars and euros. The currency issued is handed over to the West free of charge, resulting in the sovereignty of the currency and the proceeds of its issuance basically being handed over to the West.
The bigger problem is that money is issued on the basis of Western currencies, which are stored in the financial system of the West, controlled by the West, and thus largely controlled by the West. For example, banks are set up in many countries to issue derivative currencies. According to the statistics released by the United States Economic Analysis Bureau, as of the first quarter of 2021, United States had total external liabilities of US$47.1 trillion, total external assets of US$32.8 trillion, and net liabilities of US$14.3 trillion. This shows that United States printed $47.1 trillion in money, not only taking $32.8 trillion in assets from other countries, but also taking several times as much as $14.3 trillion in supplies.
We do not need to commit to convertibility of capital items, which is neither a requirement for our participation in international agreements, nor a reciprocal commitment to us by the United States and the West. Moreover, such a commitment will inevitably hand over monetary sovereignty and its benefits, thereby giving the West control over our finances, and also seriously threatening our financial security. Today we have about $9 trillion in assets and $2 trillion in net worth in the West. We have at least $1 trillion in national debt in United States, and hundreds of billions of dollars in two-house debt. And United States does not have a penny of official reserves in China, and a lot of United States private investment enters China through other countries, even if they freeze and confiscate each other, our losses are very large.
We should draw lessons from the Russia-US financial war in dealing with the hegemony of the US dollar, including the issue of opening up capital items, and pay special attention to the resulting security of the mainland's $9 trillion in assets and $2 trillion in net assets abroad, most of which are in the United States and Europe. In the past, public intellectuals always preached that US imperialism had the spirit of contract, but since last year, United States has confiscated Afghanistan deposits and United States treasury bonds purchased by Russia, and froze Russia public and private assets, thus breaking the myth of long-term propaganda.
Now that United States is becoming more and more hostile to China, it is likely that China's overseas assets will be frozen and confiscated in the near future. Last year, Academician Yu Yongding also publicly reminded the Chinese people to make necessary adjustments. The author has also written a number of articles on this issue. We should take immediate action to put foreign exchange into the currency exchange market as soon as possible without changing the market economic mechanism, on the one hand, to raise the renminbi exchange rate and increase the export price, so as to reduce exports; At the same time, the price of imported renminbi will be reduced, so as to encourage enterprises to use foreign exchange to buy materials in the international market and reserve them, and also reduce imported inflation.
One of the consequences of promising that the capital is convertible requires the government to reserve a large amount of foreign exchange is that the supply of foreign exchange in the market will decrease, and the exchange rate of the local currency will fall, leading to the sale of domestic products at low prices and serious losses. In the past 30 years, the real exchange rate of the renminbi has not even been one-fifth of the purchasing power parity exchange rate, and until now it is only about half, which means that the income from exports is only about one-fifth to one-half of the actual value. The continent is now the world's largest trading nation, surpassing even the second and third largest United States and Germany combined, and loses trillions of dollars of wealth every year due to low prices. In 2021, the mainland's export revenue was 3.36 trillion US dollars, but it was only half of the actual value of the mainland's export products, which is equivalent to the trade loss caused by low prices and cheap sales that year, which was as high as 3 trillion US dollars.
Secondly, in terms of currency issuance, under the commitment of convertibility of capital items, it is necessary to print money to purchase foreign exchange reserves, and not only the issuance of currency is mostly handed over to the West; Moreover, they never buy treasury bonds and hand them over to the government, nor do they dare to issue an appropriate amount of treasury bonds to provide net funds to the market. Although the national debt has reached 16 trillion yuan, the deposits of governments at all levels often exceed the national debt. Under the modern monetary system, Western banknotes are used to buy various bonds, including US dollar IOUs, but they do not actually provide net funds to society. Only when the government borrows money is spent does it provide net funds to the market. Marx pointed out as early as in Capital that "the only part of the so-called national wealth that is truly owned by modern people is their national debt." The modern theory that a nation becomes the richer the more deeply it is in debt is perfectly logical." As a whole, the debt ratio has been as high as 115 percent, and in recent years, it has been as high as 135 percent. The government is simply unable to manage the economy according to market principles, because most enterprises are regularly short of money and have to go bankrupt if they strictly manage the market.
The United States and Western countries claim to be freely convertible into capital currency but countries have very little foreign exchange reserves, for example, the United States has only more than $40 billion in foreign exchange reserves for many years, and the entire European Union has only $112.5 billion. For example, on May 14, 1997, the Bank of Thailand sold $10 billion, which led to a financial crisis, and how many countries collapsed their economies as a result of such financial crises. If China were to fully convert the dollar, it would face an exchange requirement of 290 trillion yuan in deposits, and the dollar reserves would be as high as $40 trillion, an order of magnitude higher than the base currency issued by the United States. If you still have to freely exchange euros, yen, and pounds, then wouldn't the reserves of foreign exchange be astronomical? How much supplies do we need to hand over to the West in order to have enough Western currency to meet the requirements of full convertibility as defined by the West?
The so-called capital item US dollar and euro are freely convertible, which is a kind of financial fraud. In reality, in China, the dollar and the yuan are convertible, while in the United States, the dollar and the yuan are basically inconvertible, and even the United States does not even implement the current account stipulated in the IMF agreement. The facts are also clear, because the commercial banks of the United States do not provide exchange between the US dollar and the RMB, nor do they accept and reserve the RMB; On the contrary, China's major banks offer exchange services between the US dollar and the renminbi, receiving and storing large amounts of US dollars. If the dollar is really something that we can freely exchange for the yuan, why do we have to reserve a lot of dollars? But United States is doing everything possible to prevent us from recognizing this deception. At the first G10 meeting after the collapse of the Bretton Woods system United States former Finance Secretary Connally quoted Weintraub's black-and-white ideological lie about the dollar: "The dollar is our currency, but it is your problem", and promoted the dollar that Western countries did not even want beggars at that time as a "dollar shortage". What was the hegemony of the dollar then?
Western capitalists have taken most of the renminbi issued by the mainland, as can be seen in the author's analysis in the article "The Successful Experience and Enlightenment of the Yan'an Model in Financial Economy", and also controlled most of the mainland's assets, such as Internet media, which are basically controlled by US capital, which is equivalent to controlling China's main ideological platforms, and thus taking most of the fruits of China's labor.
On January 8, 2013, the National Health Research Group of the Chinese Academy of Sciences released the National Health Report No. 1, which disclosed that in 2011 alone, United States extracted US$7,396.09 billion in dividends from the world, accounting for 96.8% of the global total, making it the country that grabbed the most dividends. China lost $3,663.4 billion in wealth, accounting for 47.9% of the world's wealth loss, making it the country with the largest wealth loss in the world. The report pointed out that the average loss of wealth in Chinese amounted to US$2,739.7, equivalent to 1.2 times China's annual per capita disposable income; in 2011, China's hegemonic dividends were equivalent to 33 times China's military spending, 44 times the investment in science and technology, 16 times the investment in education, and 37 times the investment in health care. If calculated in terms of working hours, about 60% of the working hours of Chinese workers are spent in the service of international monopoly capital without compensation, creating "surplus value".
As early as more than 10 years ago, some scholars pointed out with grief that in the same 20 years of rapid development, Japan's per capita income has caught up with United States and the West, but the mainland's per capita income is only 3% of United States. That is, Japan has been stagnant for 30 years, we have developed rapidly for 30 years at the same time, and the output of most industrial products accounts for about half of the world, and the per capita income far exceeds that of Europe, the United States and Japan, but now the per capita income of Chinese is still less than one-sixth of Japan and one-fifteenth of United States.
We should not unilaterally accept the US dollar order and implement capital currency exchange for the United States and the West, but should be reciprocal and open to friendly countries. United States We should issue additional treasury bonds to replace the central bank's foreign exchange reserves, so that we can put the official reserves of foreign exchange into the market, raise the exchange rate, promote the use of foreign exchange to import materials, and honor foreign exchange IOUs, not only to recover monetary sovereignty and economic sovereignty, and to put an end to low prices and cheap sales, but also to make the EU unable to follow the US imperialists to make profits, and can only be unilaterally plundered by the US imperialists, which is likely to be like the 1970s, which will break down the European and American alliance.
We can open up investment like the West, but foreign investment must be converted into RMB in China and invested in China, rather than using other countries' currencies to exchange RMB for investment in Chinese banks. We should stop engaging in currency swaps, so as to avoid allowing other countries to print money and obtain renminbi and invest in China. United States currency swap with the West is only used in times of crisis, to solve the financial crisis of the West, not to provide currency to the other side. We should take back the control of the equity of the mainland network companies and eliminate the influence of United States and the West in the ideological field, so that the people can emancipate their minds, get rid of the influence of Western cultural aggression, and shape a consensus for the real rejuvenation of Chinese civilization and the construction of a human community, so as to lay an ideological foundation.
[Related Reading]
[1] Huang Tingmin: Is the American imperialist a powerful and kind angel, or a robber and a paper tiger? - Kunlun Ce https://mp.weixin.qq.com/s/sEuiUvzqFe2OIjeTZ_dL0g
[2] Huang Tingmin: The Successful Experience and Enlightenment of Yan'an Model in Financial Economy-Kunlun Policy
https://mp.weixin.qq.com/s/xH_hBH5yxhCCAIYZ6wdwKg
[3] Huang Weidong: The internationalization of the renminbi should learn from the historical experience of the renminbi that replaced the US dollar as the international currency
https://mp.weixin.qq.com/s/AnfqJ7D0vb-EfmYAvakrig
[4] Huang Weidong: "King Kong River" is a film that promotes the ideology of United States - Red Culture Network
https://www.hswh.org.cn/e/DoPrint/index.php?classid=17&id=65995
[5] Huang Weidong: The central bank never prints money to lend to the government, but buys United States Treasury bonds to lend money to the enemy, the land of nothing
http://www.wyzxwk.com/Article/jingji/2020/12/427443.html
[6] Commenting on the central bank's monetary policy in 2021: Who did the central bank print money to? - Vision/Taoke
https://www.talkcc.net/thread/4721526
[7] Huang Weidong: Commenting on the views of a central bank official on Modern Monetary Theory - Red Song Society
https://www.szhgh.com/Article/opinion/xuezhe/2021-06-17/271152.html
(The author is a special researcher of Kunlun Ce Research Institute; Source: Kunlun Ce Network [Original] Revised Draft, Author's Authorized First Release)