Sleepwalkers II.
Capital realignment
Sleepwalkers II
He who has the gold rules
The previous section provided a brief overview of the changed strategic relationship between the US and the EU and its consequences for EU member states.
The second part, precisely as a consequence of US domestic and international indebtedness, analyzes the financial situation of the United States in recent months, whether the tariffs imposed on other countries will change this, and whether we are indeed close to a “capital war,” a concept coined by Ray Dalio, the owner of the world’s largest hedge fund, and which I discovered thanks to Tanvi Ratna’s series of articles.
The essence of this concept is that if geopolitical realignment begins, and it has already begun (EU-US, the exclusive hegemony of the US in the Western hemisphere, as formulated in the new national security strategy). Domestic social realignment begins in the countries concerned; a capital war will break out, the winners and losers of which are not yet known. This does not necessarily require a war, although two are already underway; it is enough that the restoration of the former, but now shaken, American hegemonic position will trigger the use of many unprecedented methods.
In short, the war for capital means a fiscal, trade, and investment war in which the most economically (technologically) advanced countries are participating, and it is not a “zero-sum game,” meaning that some will lose and some will win. If readers are interested, please read Tanvi Ratna’s five-part essay on capital war.
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AN ERA HAS COME TO AN END
Although only two months have passed, the year began with American action in Venezuela, the future acquisition of Greenland, a “solution” that has been floating around to this day, and to the layman, all this seems like a brainstorming session, a flood of improvisations, but behind it all, serious economic, financial, and geopolitical realignments are taking place.
The first news of the year was that China had crossed a threshold: in 2025, its export surplus exceeded $1 trillion. More than a third of this came from products exported to the EU market. The total value of Chinese exports was 3.77 trillion US dollars.
All this was accompanied by the introduction of continuous, often changing US tariffs, so the Chinese economy suffered minimal losses. The Chinese economy grew by 4.5 percent in the same year. (See Ratna.)
However, exports do not come for free, meaning that huge amounts of money flow back into the Chinese economy. In 2026, the Chinese Foreign Exchange Authority, under the direct control of the Chinese central bank, revised its foreign exchange policy by introducing a currency basket. This new currency basket reduced the weight of Western currencies and replaced them with the currencies of China’s most important trading partners. (See the BRICS countries and their contracted partners.)
Thanks to the Belt and Road Initiative (BRICS), the US dollar and the euro have a lower weight in the currency basket, as countries in Asia and Africa are becoming increasingly important trading partners for the Chinese economy. This payment system frees individual countries from the exchange-rate fluctuations of both Western currencies by enabling regional payments. The currency of East Asia’s leading economy is the Japanese yen, which has become a “competitor” to the Chinese yuan in the region, because the yuan offers predictability and stability across Asia and Africa. In contrast, the Japanese yen is closely aligned with the US dollar and represents the strategic alliance of the United States.
Based on this, most economists argue that it is precisely because of China’s dynamic trade surplus growth that the US dollar’s former role as a key currency has been shaken, and that the Chinese currency, the yuan, will soon take over this role.
However, this is not the case, because China is not directly seeking to weaken the dollar’s dominant role; rather, it is a different kind of monetary policy that characterizes the strategy of the Chinese central bank and the quasi-state giant banks.
In addition to the currency and foreign exchange basket, China is rapidly divesting itself of US government bonds. In the past six months, the Chinese central bank has sold almost a third of the government securities in its portfolio. Similar to Japan’s financial strategy almost half a century ago, this tool is quick and effective, and it is no coincidence that a few months ago, Donald Trump withdrew his previously announced, completely unrealistic tariff measures threatening China. (About this
The US is forced to use all previously unimaginable economic and financial policy tools against China.
The first part of this article discussed how America only supported (or allowed) the economic development and growth of Germany and Japan, the two most technologically advanced countries that lost World War II, as long as it did not threaten its own position in the global economy.
Japan had been threatening this position since the late 1960s, and within a decade, South Korea, Singapore, and Taiwan had joined the fray. Then, in the first decade of the 21st century, as China’s economic and financial rise accelerated, the US government realized the threat was coming from the Chinese economy. Due to its fundamentally different political and economic institutions, China cannot be won over as an ally of the “West.” The US cannot even use a partial amount of China’s capital accumulation to finance its budget deficit. Nevertheless, the growing Chinese exports to the US itself cause a growing American budget deficit. For half a century, Japan, the US’s most important military ally in East Asia, willingly financed American consumption on extremely favorable terms.
Almost a century and a half ago (in the 1880s), Japan established an institution to encourage savings among the low-income population, the Postal Savings Bank, which paid (very low) interest even if the depositor used some of the money in their account. Savings were tax-free, and by the middle of the 20th century (the 1970s), there were more postal savings accounts than there were people in Japan.
These savings were placed in a separate (secret) fund managed by the Minister of Finance, and it was thanks to this “second budget” that Japan’s industrial development and infrastructure investment program was realized. Thanks to its export surplus and extremely low interest rates (0.7-1 percent), foreign investors, including the US government, were able to obtain Japanese loans at extremely low cost, which they then “converted” into more profitable investments. In the 1970s, Japan’s savings still amounted to 40 percent of its annual national product. Today, this figure is only 30 percent, and neighboring Singapore and South Korea (both former Japanese colonies) boast higher household savings thanks to institutions similar to those in Japan. However, unsurprisingly, the region’s biggest saver is China, where household savings account for almost half of the annual GDP.
Thanks to its new prime minister (as briefly mentioned in the first part of this article), Japan has broken with its half-century-long policy of “cheap money for foreign investors.”
Japan is currently struggling with the world’s largest public deficit (230 percent of annual national product), it needs to arm itself (because the US dictates this to the Japanese government), and it needs to reduce food inflation to maintain social peace, as it is untenable that the price of rice has risen by 100 percent.
The US has therefore lost its former stable financier, Japan, for a long time, or perhaps permanently. Despite all this, the Japanese central bank is the largest holder of US government bonds in East Asia. (South Korea is second in the region.)
So we are faced with a new “financial map.”
Within Asia, there is competition between the Chinese and Japanese currencies, the declining role of the US dollar in the region, and the growing dependence of the euro on both the yuan and the US dollar.
The “hidden” financial hegemony of the US
In December and January, a “gold and silver rush” began on the international financial markets, which subsided by the end of January. The market prices of gold and silver rose significantly, and many stock market experts described this as capital flight, i.e., a loss of confidence in currencies. However, as so often before, America posted huge profits thanks to the rise in gold prices. The US currently has the world’s largest gold reserves, with 76 percent of the Fed’s (central bank) reserves held in gold. (By comparison, the Chinese central bank holds only 5 percent, and Japan 4 percent.)
All this seems like accounting sophistry, but the US dollar currently plays a dominant role thanks to these gold reserves.
Therefore, financial experts can interpret (as Dalio, Ratna, and others do) that the dollar-based international payment system as a whole is institutional, i.e., it is not identical with the American means of payment, but rather reflects confidence in the financial system as a whole.
This, then, is the background to the looming capital war. The US government is trying to use all available financial and economic means to push the Chinese economy’s international activities into the background. China has created a regional currency and foreign-exchange system that bypasses the Western (American) SWIFT payment system. After half a century, Japan has quickly stopped feeding the American market with cheap capital. Currently, the euro and the US dollar play a significantly smaller role in investment and foreign trade within Asia than they did five years ago. Financial competition between China and Japan is therefore inevitable, as Japan cannot end its dependence on US foreign policy, and its status as a client state remains unchanged.
Any threats and blackmail involving customs tariffs only intensify the capital war being waged for the redivision of the continents.
Katalin Ferber
Berlin