How long before the US is going to use AI to run its economy?

I feel like this is now a very distinct possibility and will certainly have a disastrous outcome. Maybe the empire is really going to collapse under its own weight by chasing the AI crap lol.

How is saying that China should raise its wages so that the Chinese working class has the purchasing power to import from other Global South countries, a “chauvinist” position?

This is going to cause the Chinese manufacturing industries to be redistributed to the Global South. At the same time, living standards in China and the countries they import from will improve because of increased wages. How is that a bad thing?

Alternatively, a Chinese-style Marshall Plan that floods the Global South with yuan, which gives people from the other Global South countries the purchasing power to purchase Chinese goods, and this will in turn raise the wages of the Chinese working class, raising their own purchasing power, and this back and forth will lead to a more balanced and equitable development between countries.

This is way better than China investing in some poor countries to extract their minerals and resources to fuel their own manufacturing sector at home, and in effect, just another form of colonization. What I am proposing is actually going help develop and industrialize the other poor countries, like what the US did to post-war Germany through Marshall Plan.

Currently, China wants to have its cake and eat it too. They want to be the global export superpower (which squeezes the wages of the other Global South countries because they simply do not have the production of scale to match China’s) and at the same time they don’t want other countries to save in yuan, because they want other countries to import Chinese goods, not to save in its currency. This is leading to the exporting countries competing with one another, and why they all still depend on the US to become the “buyer of the last resort”, because there is nowhere else for the surplus goods to go. How is that “chauvinist”?

The reason I brought up the EU is because the euro is still a far more acceptable currency for most countries to save in (see the figure in my previous comment) than yuan (how many Global South countries do you think would prefer to hold euro than Chinese yuan? The vast majority of them!), and quite frankly, the real concern for the US imperialists if the dollar is ever going to be challenged. I seriously think that the US has calculated that China is never going to weaponize its yuan, and so far they have been proven right.

Just remember to take everything I say with a huge grain of salt lol.

This is going to come across as a bit of incoherent rambling, but let me try:

Honestly, I think the take that “China already has a strong economic base and financial system to challenge US hegemony” is far more optimistic than what I’ve commonly heard in Western leftist spaces like “nooo China still needs MORE primitive accumulation of capital to become socialist!” and “China is playing the long game and this liberal policy is actually a WIN for BRICS”.

Like, my friend, China already has a global manufacturing share of 31% (compared to 18% in the US, and 5% each for Germany and Japan). If this is still not enough, then our entire socialist project is doomed. How else are other countries ever going to achieve socialism?

I’m also not going to sugar coat it: China’s economy is the only one that can directly challenge and realistically replace the US, at least in short-intermediate term. It is a policy choice. The key challenge is how to get the world to accept the yuan, and to get the local bourgeoisie who have accumulated trillions of dollars over the past decades to give up their huge privilege.

And just to dispel the idea that my analysis is frequently “China centric”, I’ll remind everyone that this source of optimism that we have for the past few years was only because of Russia’s valiant defiance against the entire Western-dominated economic and financial system. People often under-appreciate what Putin had done that, while the Ukraine war was provoked and caused mass casualties, its defiance to unprecedented global sanctions forced the US to take a high risk gambling approach to protect the hegemony of the dollar.

You’ll often see me praising Putin for canceling $23 billion of Africa’s debt, because that’s absolutely the right thing to do, if only China had followed up with its trillions of dollar reserves - it can achieve a lot for the Global South just by making the big numbers of its bank statement to go down. And Russia indeed had rallied many Global South countries to its call for de-dollarization (anyone remembers the summer of 2022? It was nice, albeit a bit naive in retrospect) Unfortunately Russia’s economy was simply too weak to take on the global hegemon, and China’s eventual doubling down for preserving the dollar hegemony sealed the fate of this unprecedented opening never seen in decades.

I will also give it that Putin’s willingness to let the world sanctioning its oligarchs is far more of a baller move than China has ever done in recent years. Too bad, when your economy is weak, and doesn’t help with the liberal economists continuing to sabotage from within, there is only so much energy you can exert on a global scale - exactly what I have said about most countries simply being too weak to take on the global hegemon.

On the flip side, I often wonder how much longer can China keep going with the charade? No, this is not the right wing’s “China’s going to collapse because of COMMUNISM” lol. While the US economy itself seems teetering on an impending crisis, my pessimism is more a reflection of what many people around me have felt in recent months: the initial surge (often fueled by nationalistic propaganda) of “China is defeating Western countries in handling Covid!” in 2020 had gradually turned into “the economy’s gonna recover after Zero Covid, we just need to give it some time” in 2023 to the more pessimistic “welp, the recovery that was promised isn’t happening, I’m gonna be careful with how I spend with so much uncertainty in the world” last year. With the uncertainty of getting laid off at any point, people chose to save instead, because a lack of welfare means that people fear their current level of income, once lost, cannot be easily replenished.

The plunging property market (it’s cooked) and the deflationary spiral despite multiple rounds of subsidies have fueled a lot of disappointment, if not resentment. For many people, it’s almost as if the government will do anything just to avoid raising the wages of the people. Lots of big charts showing the economic recovery, but people continue to feel their wallets getting lighter (reminds me of the Bidenomics propaganda in the US not too long ago).

Meanwhile, the two key economists who pushed for the whole property market investment scheme for the past decade, Justin Lin Yifu and Meng Xiaosong, continued to be revered by the leadership, doubling down on rhetoric like “we need to double down on more investments to raise the wages of the people so they can consume”, when one should be asking: “how is producing even more goods going to raise wages when nobody has the money to buy them?”

It doesn’t help that for those paying attention to left politics, Xi’s ten years of reining in private capital and cracking down neoliberalism have ended in complete reversal over the span of the past few months, with Xi now doubling down on affirming the “sanctity” of private capital (that the COMMUNIST Party of China will DEFEND lol) and disgraced capitalists like Jack Ma have now returned to the altar.

There has been a lot of nationalistic propaganda about how China’s consumption has recovered “look at the record turnout to watch Ne Zha 2” lol and “wow look so many people traveling on May Day holiday, who says China has a consumption problem?” as if people aren’t frontloading their vacations to take advantage of promoted subsidies. But, how long can these “feel good” propaganda last?

There is now a lot of technocratic push to promote a technological revolution like EVs (the price wars are decimating hundreds of companies and suppliers), solar panels (the industry registered one of the worst losses last year) and AI and robotics, hoping that a technological revolutiom is going to bring forth an economic transformation, magically propeling the country to a high income country. Too much emphasis on STEM (too much worshipping Elon Musk) and too few attention paid to social policies and reforms. Anything to avoid giving people money and welfare.

So, how long before people are going to endure before they have had enough? How long can the liberals continue to sell their snake oil economics before the central leadership (which unfortunately is full of them right now) decides that they can no longer be trusted? Furthermore, how long before the central government rein in on the outsized authorities of the local governments (a sequelae of decentralization since the post-Mao reform), that have continued to cause troubles at the national level?

No, I’m not saying that China’s economy is going to collapse lol, that’s never going to happen. But if you had asked me if China is treading the path of Japan, even just two years ago, I would have thought ridiculous. Now, I’m not so sure anymore.

Sorry for the long rant. I hope it gives you some perspective from my end.

Honestly, it probably came down to economics.

Everyone seems to have forgotten that there is still a 10% global tariffs on every country other than China, and Trump has made it clear that support for Israel is non-negotiable, not only for their foreign “partners”, but also for domestic US citizens.

This is one place where I think the US ruling imperialist class really leaned in on Trump’s pompous performance to psychologically manipulate the world’s reception towards US policies.

If Trump had just announced a 10% global tariffs, there would have been huge public outcry across the world.

Instead, what we get was at first, an insane Trump tariff plan where everyone laughed at how stupid it is “haha he’s imposing 150% tariffs on the penguins!!” and then Trump would “walk back” to “only 10%” and the world suddenly breathed a sigh of relief and quietly accepted the rate - for the fear that any noise could irritate a vindictive Trump to raise tariffs against their particular countries again.

A tariff is a tax on US consumers, it would raise the price, but on the flip side, it also means that the exporting countries have to deal with surplus export capacity. Every country now hopes for a deal with Trump because the first countries that manage to bring their tariffs down to 0% would be the winners against their exporting competitors.

Trump’s global tariff is actually threatening to unleash a mercantilistic fight among the exporting countries, and this is very dangerous because you can’t just keep adjusting the prices - at some point, overproduction leads to price collapse, and economic recession.

And while this is all playing out, the US is reshaping the global supply chain to its own interest.

This is happening because the world (many Global South countries) have bought into the “export led growth” model (lie) proposed (imposed) by the IMF. The idea that you have to earn export revenues before you can invest domestically can only work as long as there is a country willing to run a huge trade deficit at all times so you, the exporting country, can accumulate the trade surplus.

This was how Taiwan and South Korea “won” the race back in the 1970s-90s (the Four Asian Dragons), before the rise of China, and every other country has since flocked to emulate that strategy, believing that one day they will also become like Taiwan and South Korea.

Trump is now saying “I’m bored of the old winners, they no longer benefit me, I’m now reshuffling the board to pick a new set of winners. Here is your chance to rise to the top if you stroke my ego enough.” Pure mercantilism.

This is also why you see so many pro-BRICS, pro-China “alt media” people are now going through their cognitive dissonance. “US import only comprises 2% of China’s exports lol! Who cares??” But somehow many countries found themselves unable to just stop exporting to the US and replace their demand somewhere else. Strange.

I know I sound like a broken record at this point, but for the 25th time this week (lol), if there is no country willing to take on the net importer role to replace the US as a net deficit spender, then the US will always have a say on global trade.

That’s simply how the world has been shaped over the past several decades with the US and China enjoying running huge trade imbalances at the expense of the rest of the world. One of these two countries have to decide they no longer want to be part of this cursed marriage, and the shocking revelation is that the US seems to be the one who wants to break off from this marriage, and China doing everything it can to save it.

Also, bonus: there used to be another economic bloc that could challenge US’s dominance, and that is the EU. The euro is a far more acceptable saving currency for the rest of the world compared to yuan - and the real threat to the dollar hegemony in recent years. (If you somehow think I’m a “chauvinist” for China, you’ll see here that this is not the case).

However, very conveniently, Russia’s invasion of Ukraine just had to happen, and with the EU losing their cheap gas supply from Russia, it’s all but over for Europe:

The Russia-Ukraine war killed the euro and subjugated the entire European subcontinent to the US. This is what allowed Trump to advance to the next stages of US imperial strategy.

MMT is simply a description of how money and the banking system works. It doesn’t matter what the leaders and economists believe though, the central bank will behave as described in their operating protocol and the politicians and economists cannot change that.

As an analogy, I don’t understand how exactly does a computer work - but every time I type the key “a” on my keyboard, the character “a” will show up on the screen. I cannot change that, no matter what my beliefs are, unless I invent a new type of computer that operates with a different set of logic.

The mainstream economists don’t understand how the system works, that’s why they keep fumbling and get it wrong. No matter how hard they try, the national debt isn’t going to make the US go bankrupt.

The only way the US leaders can reduce the national debt is if the government taxes more than it spends, so either increase taxes, or reduce spending.

And yet despite all the DOGE cuts, and all the freezing of federal funds, total government outlays continue to rise in FY2025. In the first 100 days, Trump’s deficit spending is $200 billion more than the previous year:

Unless Trump rams through significant budget cuts, or if he lowers interest rates where interest income payment can no longer support the strong deficits the government is running, the national debt will continue to go up.

The problem with the US is not that the government isn’t spending enough, it is that the spending isn’t being distributed to the working people who need it the most.

Win-win for both US and China. The new status quo.

If the US succeeds in shifting its export of dollar from running trade deficit into foreign investment, then in principle, the US gets to preserve its dollar hegemony while also allowing it to reduce its trade deficits. The US wants to have its cake and eats it too (although whatever contradictions that might arise from this, I don’t know).

China gets foreign investment to save its failing property and stock market prices (which they believe that, when stabilized, could encourage domestic consumption), and as offsets to its dwindling export revenues. If my prediction is correct, the Fed will lower the interest rate come June (as part of the deal) as inflation eases, and Chinese banks will then lower their rates and alleviate the massive overhanging local government debts. China’s economy gets stabilized, and it continues to develop/alleviate poverty as before.

The losers are Europe and the Global South.

Europe now faces a very difficult dilemma. The US tariff rate on China determines how much Chinese goods are dumped into Europe and elsewhere. If Europe lets cheap Chinese goods enter its market freely, then say goodbye to its domestic industries. If Europe goes protectionist and enacts tariffs against Chinese goods, its high energy input prices (thanks to Nord Stream bombing) have already made its exports uncompetitive, and this will kill off its growth trajectory.

It’s lose-lose for Europe, and opens them up to making a deal with Trump.

The US tariff imposed on China is like the valve on a gas stove with Europe being boiled, and just the possibility of US raising tariff rate against China [is enough to make the Euros tremble(https://www.bloomberg.com/news/articles/2025-05-15/eu-economy-chief-urges-china-self-restraint-on-diverting-goods). Still being defiant and don’t want to make a deal? I’ll turn up the temperature (more Chinese goods being dumped into Europe) and see if you’ll start feeling the pain?

Europe will probably end up with unfavorable bargains, being forced to purchase US goods while selling off their high tech industries. This will allow Trump to claim trade deficit reduction, while the US acquires key European technologies and industries without having to reindustrialize themselves.

For the Global South, this is of course a massive loss of opportunity to escape from the yokes of Western imperialism. I have written at length how China can run a Marshall Plan with Chinese characteristics to create an alternative economic bloc, so won’t be repeating it here.

Instead, the sword of Damocles hangs over every exporter economy in the Global South. If the US reduces import (either by raising tariffs, or the US goes into recession itself), then everyone will have to compete with China to export their goods to an ever smaller slice of market, and they will lose. Failing businesses cause local recessions, priming those countries for harvest by global financial capital and institutions like the IMF.

The “export-led growth” model that many countries, especially in Asia, adopted, can only work when there is a country willing to permanently run a large deficits to import from them. This is simply the outcome of how the world’s economy has been shaped over the past 50 years.

Over the longer term, the US seeks to dominate over the global supply chain. The US reshapes the global supply chain by buying up the failing assets across the Global South.

So, no, jobs aren’t coming back to the US. And no, imports will continue to enter the US, because there is nowhere else for them to go.

US finance capital may also start buying up Chinese businesses that have been failing under intense competition (for example, the solar panel industries have been eating huge losses last year, and many smaller EV companies are imploding). China won’t let the US touch the major corporations and the key industries, but the US can still acquire the many thousands of intermediate suppliers and the cutting edge technologies of the smaller Chinese companies that are going out of business under intense competition.

This is why I keep saying that the only way to break this nefarious plan is for China to step up, raise the wages of the Chinese working class such that they have the purchasing power to absorb the surplus export capacity of the Global South. If that happens, then nobody will have to export stuff to the US anymore, and it will become the biggest loser.

News from May 16th:

U.S. business community hoped to further promote China-U.S. common interests: Chinese VP (Xinhua)
(Official readout from People’s Daily, in Chinese)

BEIJING, May 16 (Xinhua) -- Chinese Vice President Han Zheng on Friday expressed hope that the business community of the United States will play a greater role in promoting bilateral relations and the common interests of both countries.

Han made the remarks when meeting with Invesco Chairperson Richard Wagoner in Beijing, saying that China and the United States share extensive common interests and have ample room for cooperation.

The economic and trade talks between the two countries have recently made substantial progress, Han said, adding that the two countries should properly resolve differences and frictions in economic and trade cooperation through equal dialogue.

He said China will actively draw on the development experience of the international capital market and accelerate the reform of its capital market that suits China's national conditions.

As a long-term participant in China's capital market, Invesco is welcome to continue to strengthen cooperation with China, Han added.

Hailing China's tremendous development achievement, Wagoner said Invesco and the U.S. business community were delighted to see the substantial progress made at the U.S.-China economic and trade talks, and pledged to continue exploring the Chinese market and contribute to U.S.-China economic and trade cooperation.

As predicted, China is opening up to American finance capital.

I already said that this was likely part of deal during the negotiations.

Moody’s downgrade just caused 30-year treasury yield to spike? Already over. Didn’t even last 24 hours lol.

Once again the market panics over something so inconsequential.

Here’s the MMT lesson for the day:

are set by trust in the issuer

Of which the currency issuer has a LEGAL monopoly. It is not trust, it is coercion. This is what many people don’t understand about how money and taxation works. If you can’t pay your taxes, you face legal consequences. This is what drives the “trust” in the currency.

if imports to usa decrease, could be funny conundrum for usa.

If no other country is willing to run deficits to import from you, you still sell to the country who’s willing to run a deficit. You will sell, or you close down your factories and layoff your own labor, consumption demand plunges, recession ensues, you get kicked out of the government by angry people, and IMF still comes in and privatizes everything anyway. And… you still end up lowering your own interest rate hoping to offset the loss of demand for consumption.

yields fuck real economy

Bonds are savings instruments. If there are nobody selling bonds, then people will just “save” in their deposits accounts in a bank instead. Since they are going to save anyway, it would not have impacted the “real” side of the economy.

The US government sells bonds to drain reserves. In a free floating exchange rate system, it’s just an accounting tool to let people who have accumulated surplus dollars to put their money in a drawer that magically generates interests.

What you said would make more sense in a fixed exchange rate regime i.e. what the Austrian school believes. (Bonds make sense during the gold standard/Bretton Woods era because if there are too much money in the circulation, it fucks with your exchange rate and bonds act to absorb the excess money to prevent inflationary risks.)

It is funny to see the market chases over something so inconsequential though, and eventually they’re all gonna learn the hard lesson anyway.

also nothing ever happens.

I’m usually not one to post memes but this just reminds me of these crazy MMT memes made by an insane, terminally online Polish MMT communist twitter acc I recently came across, I just couldn’t resist lol:

My point is that if you expect revolutions to fall onto your lap, it’s not going to happen.

In the US, they haven’t even had their own vanguard party yet, and people are already giving up? Not even trying to shoot their own shot, and already believe everything will fail?

They haven’t even had their own Bolshevik-Menshevik split yet, the years of exile for its leaders and organizing underground for those who stayed while evading persecution and terror by the Okhrana secret police.

Or the Long March in China - a 6000 miles trek through the most arduous mountainous terrain, where 95% of the CPC rank and file were murdered or died of attrition.

That’s the price you have to pay for a revolution. In both Russia and China, if things had just gone slightly differently, the entire party would have been wiped out. And yet they emerged victorious in the end.

The problem with the left in the Imperial Core is that they already gave up without even making an attempt. Incidentally, these are also the same people (online, at least) who cheered about how brave the Palestinians and Houthis are, how noble their sacrifices have been etc.