Russell Napier: China's Rise Ends the Post Bretton Woods Era

America, China, and the Death of the International Monetary Non-System

America, China, and the Death of the International Monetary Non-System

[ Edit- China’s new system is Gold-based in our opinion. ]

Russell Napier

Something changed in America in the 1990s. The U.S. federal funds rate began a decline from above 5 percent to reach the effective zero bound by 2009. U.S. ten-year Treasury yields declined from above 6 percent to levels not even recorded during the Great Depression. Credit to the U.S. nonfinancial corporate sector rose from 56 percent of GDP to a new all-time high of 87 percent, and U.S. Government debt rose from 60 percent of GDP to a recent high of 106 percent, very near the peak level recorded during World War II.¹ The valuation of U.S. equities rose from a cyclically adjusted price-to-earnings ratio (CAPE) of 15x to the current level of 34x, having reached a new all-time high of 44x in 2000.² U.S. tangible investment declined from 7 percent of GDP to as low as just 1 percent of GDP, a level only previously recorded in the Great Depression and briefly in the hiatus of investment after World War II.³ The nature and scale of these adjustments are strongly suggestive of a structural change, rather than merely the rotations of any business cycle.

The key structural change that led to these distortions was the creation of a new international monetary system in 1994, when China devalued its exchange rate and, through prolonged and extensive ex­change rate management, imposed an international monetary order on the world. This international monetary system is now collapsing under the weight of its own debt and the geopolitical tensions that it played a key role in creating.

The Non-System

In previous eras, we had an international monetary system that could have been named by any financier or businessperson and by many members of the public. Whether that system was called the gold stand­ard, the Bretton Woods system, or something else, its name confirmed its existence. Most people took time to understand the system’s opera­tion and its consequences for credit, money, asset prices, and the economy.

Today, we have an international monetary system that does not have a name. Just because something does not have a name does not mean that it does not exist, yet the lack of a name has obscured the profound impact that this system has had on distorting credit, money, asset prices, and the economy. Paul Volcker, who spent many years at the U.S. Treasury coping with the breakdown of the Bretton Woods system, referred to our current international monetary system as the “non-system.” It is a non-system to the extent that its terms and conditions were never agreed upon by all the parties involved, but instead it was born from choices made by a few, most notably China, that the other parties accepted and adjusted to. The extremes of interest rates, debt levels, asset price valuation, and investment in tangible assets in the United States are just part of that global adjustment to the new international monetary system that grew from China’s unilateral decision to manage its exchange rate beginning in 1994. This system would never have been agreed to in any negotiation, as it was a system replete with distortions that would lead to dangerously large imbalances with dangerous political ramifications. Indeed, briefly, in the wake of the Asian Financial Crisis in 1998, there was a seeming realization that the international monetary system needed to be negotiated and reformed. Speaking at the meeting of the World Bank and the IMF in Washington, D.C., on October 6, 1998, President Clinton warned of the likely consequences should an “international financial architecture” not be agreed to as part of greater globalization:

Creating a global, financial architecture for the 21st century; promoting national economic reform; making certain that social protections are in place; encouraging democracy and democratic participation in international institutions—these are ambitious goals. But as the links among our nations grow ever tighter we must act together to address problems that will otherwise set back all our aspirations. If we’re going to have a truly global marketplace, with global flows of capital, we have no choice but to find ways to build a truly international financial architecture to sup­port it—a system that is open, stable and prosperous.

To meet these challenges, I have asked the finance ministers and central bankers of the world’s leading economies and the world’s most important emerging economies to recommend the next steps. There is no task more urgent for the future of our people. For at stake is more than the spread of free markets, more than the integration of the global economy. The forces behind the global economy are also those that deepen liberty, the free flow of ideas and information, open borders and easy travel, the rule of law, fair and even-handed enforcement, protection for consumers, a skilled and educated work force. Each of these things matters not only to the wealth of nations, but to the health of nations.

If citizens tire of waiting for democracy and free markets to deliver a better life for themselves and their children, there is a risk that democracy and free markets, instead of continuing to thrive together, will shrivel together.⁴

Nothing was done. We are now living with the imbalances that followed this failure to move away from the Chinese-imposed system, and we will have to create a new international monetary system that can unwind those imbalances while sustaining, hopefully, both democracy and free markets. Given the current breakdown in relations between China and the West, it is most likely that we are moving toward the establishment of two global monetary systems, much as we did in our last Cold War. The separation of China from the current international monetary system will be, given the country’s integration into the global trading regime and its large holding of reserve assets, much more im­pactful than the exclusion of an already isolated Soviet economy in the aftermath of World War II. As President Clinton stated in 1998, there is more than money at stake as we develop this new system, and there is a risk that “democracy and free markets, instead of continuing to thrive together, will shrivel together.”

Unstable Arrangements

The crucial distortion imposed by China’s decision in 1994 was a decoupling of developed world growth rates from interest rates, the discount rates used in asset valuations, which many assumed to be a new normal. When interest rates appear to be permanently depressed relative to growth rates, asset valuations rise, leverage increases, and investors are incentivized to pursue gain through rising asset prices rather than through investment in new productive capacity. The decoupling of growth and interest rates was driven by the People’s Bank of China’s (PBOC) appearance as a non-price-sensitive buyer of U.S. Treasury securities, and indirectly by the role China’s excessive fixed-asset investment played in reducing global inflation and hence interest rates.

The PBOC’s exchange rate intervention was financed by the creation of new renminbi reserves and continued for as long as there was up­ward pressure on the Chinese exchange rate. Throughout this period, the upward pressure on the Chinese exchange rate came both from a current account surplus and a large inflow of foreign capital, much of it foreign direct investment arriving to further boost fixed-asset investment and China’s productive capacity. The undervaluation of the Chinese exchange rate and the mobilization of the country’s cheap labor encour­aged developed-world corporations to focus their fixed-asset investment in China or to subcontract their manufacturing to companies based in China. The value of foreign direct investment in China by foreigners rose from $369 billion in 2004 to $3.6 trillion by 2023.⁵

For developed-world companies facing the cheap resources, cheap finance, and cheap exchange rate of China, there was little incentive to invest in tangible assets at home. In the United States, in particular, where companies are managed to maximize return on equity and returns to shareholders, the corporation was able to benefit from both cheap Chinese production and the low interest rates that allowed balance sheets to be levered to buy back equity. In other countries, with different social contracts and less focus on rewarding management via stock options, closing productive capacity and pursuing financial engi­neering were more difficult. Thus, it was U.S. corporations that most fully adapted to the new international monetary system.

When the Bretton Woods system was established, severe restrictions were placed on the free movement of capital. The architects of that system recognized that maintaining exchange rate stability would not be possible if capital were allowed to move freely. Our current system permits, at least into and within the developed world, the free movement of capital. In this system, the private sector capital that left the developed world for China was transformed, via PBOC exchange rate inter­vention, into an accumulation of developed-world debt securities financed by the creation of renminbi reserves. This shift in the stock of savings from the United States and elsewhere in the developed world financed both direct investment and the purchase of Chinese portfolio assets. The value of foreign holdings of Chinese portfolio assets rose from $99 billion in 2004 to $1.7 trillion in 2023. These capital inflows added to the upward pressure on the renminbi exchange rate created by China’s current account surplus, and forced the PBOC to intervene to buy more U.S. Treasury securities and other developed-world government debt, creating more renminbi commercial bank reserves in the process. The drive by foreigners to invest in China also added to the country’s high levels of fixed-asset investment and led to PBOC liquidi­ty creation that facilitated greater lending by Chinese banks to fund fixed-asset investment. Excess liquidity created by such intervention can lead to higher domestic inflation, but in China the state control of the commercial banking system ensured that this liquidity facilitated bank funding of investment more than consumption. Thus, in the peculiar alchemy of this system, foreign fixed-asset investment in China super-charged the ability of the local banking system to fund higher levels of fixed-asset investment by local entities.

China’s move to devalue its exchange rate in 1994 and manage its currency forced other countries to follow suit. Following the exchange rate devaluations of the Asian financial crisis, other countries also inter­vened to prevent their exchange rates from rising relative to developed-world economies and to China. This supercharged the growth in central bank accumulation of developed-world debt securities and domestic liquidity creation. In the period from 1998 to the end of 2019, China’s foreign exchange reserves rose by $3 trillion, and the rest of Asia saw a rise in foreign exchange reserves of $3.2 trillion.⁶ The scale of non-price-sensitive buying of developed-world debt securities, primarily U.S. Treasury securities, further decoupled interest rates from growth rates, encouraging more domestic leverage and higher domestic asset prices. The intervention to depress other Asian exchange rates also allowed cheaper exports from Asia ex-China to play a role in depressing global inflation.

The world has never seen anything like the fixed-asset investment boom that this new international monetary system facilitated. The value of China’s fixed-asset investment increased from $360 billion in 2000 to $7.9 trillion by the end of 2022.⁷ China’s gross capital formation, already high at 35 percent of GDP in the mid-1990s, facilitated by the liquidity created as part of the exchange rate management program, rose to its current 43 percent of GDP.⁸

The provision of subsidized credit from state-run banks, combined with the mass mobilization of Chinese labor from the fields to the factories, flooded cheap manufactured products into the world and, in the process, undermined the return on capital of China’s global competitors. China’s export price index remains unchanged since 1994.⁹Companies pursuing standard Western returns on capital could not invest and hope to meet their targets in a world where China pursued such large-scale investment, often without reference to future returns on that investment. In the developed world, corporate cash flow was redirected to investment in intangible assets, where Chinese competition was more muted, and in financial engineering which would likely have a better return than investment in tangible assets subject to the most intense Chinese competition.

In previous international monetary systems, the assets of central banks—their foreign exchange reserves—tended to grow slowly. The growth of reserves was limited either by the supply of gold or, in the case of the Bretton Woods system, the scale of the U.S. external deficits that supplied U.S. dollars to foreign central banks. In our non-system, there is seemingly no limit placed on the growth in reserves. The larger the surpluses run by China and other managed exchange rate regimes, the larger their reserves. Their reserves include a range of developed-world currencies, and thus can reach higher levels than the external deficits run by just the United States.

Importantly, this system came with the free movement of capital, and thus surpluses on the capital account could play a role in accelerating reserve accumulation. From the devaluation of the renminbi in 1994 to a peak in the second quarter of 2014, world global foreign exchange reserves rose from $1 trillion to $12 trillion. No system intentionally designed and negotiated between countries would ever have permitted the possibility of such rapid growth in foreign reserves. The archi­tects of the Bretton Woods system would have been astounded by the scale of this growth. They would also be surprised that it did not create high inflation given the pace of growth in commercial bank reserves in those countries whose central banks were accumulating foreign ex­change reserves. The ability of China, in particular, to focus that liquid­ity creation on the financing of supply and not demand may have curtailed the inflationary impact of the non-system, but this came at the cost of distortions to credit, money, asset prices, and the economy. These distortions, in turn, have generated the gross imbalances in the United States and elsewhere that we live with today.

The growth in China’s foreign exchange reserves and world foreign exchange reserves ended in 2014. To this day, however, China maintains an exchange rate policy that the PBOC explains as pursuing “a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies.” The country’s gross capital formation as a percentage of GDP remains excessively high, above 40 percent of GDP, and its export prices are lower than their 2014 level.

The country’s managed exchange rate policy has restricted the growth in the PBOC balance sheet, but growth in investment and the economy has been sustained by running ever higher debt-to-GDP ratios. With the growth in money supply restricted by the continuation of a managed exchange rate policy, the country’s total nonfinancial debt-to-GDP ratio has grown from 211 percent in 2014 to 290 percent in 2024.¹⁰ While higher nominal GDP growth in the developed world since 2022 has somewhat reduced debt-to-GDP ratios there, China’s debt levels march ever higher. In just the first three months of 2024, China’s total nonfinancial debt-to-GDP ratio rose from 284 percent to 290 per­cent of GDP.¹¹ The country has falling property prices, falling producer prices, consumer price inflation just above zero, and significant distress in its credit system. Have we finally reached the stage at which the international monetary system, anchored upon China’s managed ex­change rate regime, no longer works for China?

A Collapsing Financial Architecture

In September 2024, China announced a package of reflationary measures which may well prove to be incompatible with the continuation of the managed exchange rate regime. Measures focused on bank recapitalization to facilitate bank credit creation and more money creation are not what one would expect from a central bank seeking also to target the exchange rate. The PBOC has also begun to increase its holdings of local currency Chinese government bonds. This is not the action of a central bank whose balance sheet expansion and contraction will be driven primarily by its buying and selling of foreign-currency-denominated government debt securities in an exchange rate management system.

The initial reaction to these announcements was a positive move in the Chinese exchange rate. Foreign portfolio investors likely bought renminbi to fund their purchase of local equities, as they have been running underweight positions in these assets relative to their benchmarks.

It will take some time for the local banking system to create the growth in credit and hence money that the authorities clearly see as the cornerstone of their reflation. Perhaps only then will we see that the new willingness to target the growth in the supply of renminbi is ultimately incompatible with the desire to also manage the exchange rate. If so, when the realization of the incompatibility of the two monetary targets dawns, the market will come to accept that China has moved to a flexible exchange rate and that the post Bretton Woods non-system is dead.

Monetary systems fail fairly regularly. Our current system was born out of ad hoc monetary arrangements, such as the Plaza and Louvre Accords, patched together following the death of the Bretton Woods agreement in 1971–73. Bretton Woods had been around since 1945, replacing a “gold exchange standard” that had collapsed in stages through the 1930s. Before that, there had been the gold standard, which largely ended with the outbreak of World War I.

The end of the non-system should not come as a surprise. But it will for many people because the lack of a name for this system makes it difficult to define as the cause of the gross imbalances in interest rates, asset prices, debt, and investment levels—which we have long recognized but do not attribute to the global monetary system. The failure of the Bretton Woods system was foreseen by many commentators who understood that the continued, excessive deficits that the United States needed to run to supply reserve assets to the system also undermined the credit worthiness of the United States. Eventually, the U.S. deficit was so large, and the drain on its gold reserves so great, that the international monetary system known as Bretton Woods collapsed. China’s inability to run sufficient surpluses since 2014 to generate sufficient broad money growth and prevent the escalation of its already high debt-to-GDP ratio is not widely recognized as a similar problem. Yet China’s move to a flexible exchange rate to avoid a debt deflation and create sufficient growth in broad money to reduce its debt burden will end the non-system as surely as President Nixon’s announcement that the U.S. dollar was no longer linked to gold ended Bretton Woods. Few analysts understand the impact that this move will have on the international monetary system and the long-accumulating distortions to credit, money, asset prices and the global economy.

When China moves to a flexible exchange rate, it is difficult to foresee how just one new international monetary system could replace the non-system. Given current geopolitical tensions, the prospect of China and the United States hashing out a new Bretton Woods–style agreement is highly unlikely. The Bretton Woods system was effectively imposed upon the rest of the world by the United States as global superpower in 1945, but today that superpower cannot impose its will on China, and it may struggle to impose its will even on its partners. At Bretton Woods, the United States was the key creditor nation and the dominant military force. Today it retains its position as the preeminent military force (though its weak defense industrial base is now a major chink in the armor), but the country is a debtor with a net international investment deficit of $22.5 trillion.¹² America’s net deficit on its liquid portfolio assets is $14.2 trillion, and foreigners’ total ownership of U.S. portfolio assets is $30.2 trillion.¹³

In negotiating the structure of any new international monetary system for itself and its allies, the United States now speaks with the strength of the debtor and not the creditor. The new international monetary system will have to be based upon the U.S. dollar, as the existing holdings of dollar assets by the participants in the new system make it unrealistic that it could be shifted to other reserve assets. For those countries wishing to avoid this system, there is only membership in whatever new international monetary system will be devised by China. With foreign central banks holding just 2 percent of their allocated foreign reserves in renminbi, there are already clear indications that few see their future within the developing Chinese monetary system.¹⁴

Predicting how any new U.S.-centric monetary system will develop is not easy, but such a system must allow for excessively high debts, the legacy of the non-system, to be inflated away. While much of the focus is on the high U.S. total nonfinancial debt-to-GDP ratio of 255 percent, there are many countries in the world struggling under even higher debt ratios: Canada, 311 percent; France, 315 percent; Japan, 400 percent; Netherlands, 316 percent; Switzerland, 297 percent, etc.¹⁵ The rise and rise of debt-to-GDP levels, a product of the gap between interest rates and growth rates under the non-system, will now have to be addressed.

With austerity, default, hyperinflation, or very high real GDP growth unlikely to be the solution, a new global monetary system will have to be created that offers a path of moderation toward reducing debt‑to-GDP levels. That path of moderation is likely to take the form of financial repression—suchas that imposed upon savers in the after­math of World War II, to force their savings to fund the investment needed for postwar reconstruction, but at interest rates that did not reward them for the current and expected levels of inflation. That is a world in which bankers will create more credit and more money and more inflation than they have in recent decades. Higher nominal GDP growth combined with imposed purchases of low-yielding debt securi­ties will, over time, reduce debt-to-GDP levels, just as it did in the decades following World War II. Whatever the new international monetary system looks like, it will have to accommodate the financial repression that will finally begin to reduce debt-to-GDP levels.

Rebuilding the International Monetary System

Politicians are constantly proclaiming emergencies. Whether it is a climate emergency or a defense emergency or a supply-chain emergency, the answer to all of these proclaimed emergencies is greater investment. We are currently disentangling our supply chains from China and pursuing what U.S. Secretary of the Treasury Janet Yellen has called “friend-shoring” and investing with more of a home bias.⁶ It is a world where governments will support the direction of private sector capital to fund the “industrial policy” that President Macron of France has just declared to be essential.¹⁷National emergency will require the mobilization of national savings for national investment under government direction.

To put it more directly, as President Macron did in a speech at the Sorbonne, “every year, our savings, amounting to around 300 billion euros a year, go to finance the Americans, whether we look at treasury bills or capital risk. This is absurd.” With a government debt-to-GDP ratio of 106 percent, it is no surprise that the French government is turning to private sector savings to fund the industrial policy it believes is now essential. Whatever our new international monetary system will look like, it is unlikely to permit the free movement of capital. Governments need to bottle up their domestic savings to finance the investment they believe is necessary, and to inflate away the debts that threaten to engulf the developed world in a debt-deflation spiral.

The failure in the 1990s to negotiate a new international monetary system that could bring China into the global trade and capital regime without creating large and dangerous economic distortions has had dire consequences. The United States and the developed world have under­invested in fixed assets, in a belief that China’s investment boom, un­paralleled in global history, would always provide the tangible products that are still the bedrock of any economic system. Now things have to change.

The international monetary system has to be reformed around a non-Chinese bloc, with a view to creating a system that allows the inflating away of debts and which drives much higher levels of fixed-asset investment, now necessary for national survival. At the core of this new system will be limitations on the free movement of capital and the conscription of local commercial banks and savings institutions to fund this greater investment in fixed assets. This will not be a system that can permit credit to fund financial engineering by listed corporations or by private equity, as credit will be directed to fund fixed-asset investment and the creation of new income streams, rather than the leveraging of existing income streams. For most U.S. corporations, particularly those with large market capitalizations deriving from their successful adapta­tion to the non-system, this is not good news. Yet for those corporations at the forefront of the new capital expenditure boom, which could last a decade or more, there are brighter times ahead.

U.S. policymakers need to agree with their trading partners, if possible, on a unified response to China’s move to a flexible exchange rate and devaluation. All trading partners should be clear that a lower renminbi brings no trading benefits for China but instead tariffs that will at least offset any competitive advantage gained through devaluation. In the initial storm that follows, a free float of the renminbi-dollar swap lines should be freely available to allow emerging markets to prevent their currencies from devaluing relative to the dollar. If their utilization of foreign reserves to sustain exchange rate stability is instead achieved through liquidating their dollar reserves, the Fed needs to be prepared to buy U.S. Treasury securities to prevent a dangerous spike in yields. If a new global monetary system is to be built, it is important that its foundations are built upon exchange rate levels as close to equilibrium as possible. A particularly large disequilibrium is likely should emerging market exchange rates not be defended by their respective central bankers in the aftermath of the free float of the renminbi.

In the long period in which developed-world debts will have to be inflated away, policymakers will have to take a view as to which section of society will bear the heaviest cost. One of the quickest and least painful ways to enforce a deleveraging is through encouraging a rapid re‑equitization of the private sector. The ability of all corporations to deduct interest expense in calculating their taxes has to be reconsidered. In an era when much greater fixed-asset investment is essential, the tax privilege of deducting interest expense should not be available to cor­porations using debt to lever up an existing income stream; rather, the tax code should reward corporations using debt to build new businesses and new income streams. There are of course losers from such a change in taxation, but they are those who have been the winners from the prolonged period of falling interest rates and rising asset prices that have been the key feature of our now failing non-system. A long financial repression is in nobody’s interest, and the longer it prevails, the more likely it will create wealth redistributions that threaten social stability. Proactive intervention to force re-equitization upon a small section of society through the withdrawal of a tax privilege is painful for some but is a more equitable path to reducing high debt-to-GDP levels while facilitating greater investment.

To reduce the high and dangerous debt-to-GDP ratios of the developed world, nominal GDP must grow faster than total credit. This can be achieved by increasing the growth rate in bank credit while limiting the growth in nonbank credit. While the non-system was a key driver of the rise and rise of debt-to-GDP, the disintermediation of credit also played a key role. It is commercial bankers who create money, and if nominal GDP growth is to remain at a high enough level to reduce debt-to-GDP levels, bank balance sheets must grow faster than they have over the past three decades. Commercial banks create money when they expand their balance sheets, and if they do not create enough money, nominal GDP growth will remain low while credit growth, spurred by the growth in nonbank credit, can remain high.¹⁸ A combination of faster growth in bank credit combined with the re­striction of the growth in nonbank credit will be at the core of reducing debt-to-GDP ratios. The targeted ending of interest deductibility in the computation of corporate income tax, mentioned earlier, can assist in promoting the growth in bank credit and hence money at the expense of growth in nonbank credit. If it is bankers who are at the vanguard of funding the necessary investment renaissance in the United States, and not credit markets, then the move to lower debt-to-GDP levels will be less painful than if we are forced to take the hard path of austerity, default, hyperinflation, or a very long financial repression. A new focus on the growth of bank credit and therefore money is at the core of any policy to reduce dangerously high debt-to-GDP ratios.

The distortions to credit, money, asset prices, and the economy that arose under the non-system cannot be unwound quickly. A rapid rever­sal could probably only be accomplished via deflation and depression or, alternatively, a hyperinflation—events that would bring huge socioeconomic disruption and likely political dislocations. To prevent such an outcome, governments will increasingly see their role as managing the wealth of the nation to ensure that the imbalances of the non-system are unwound gradually.

This greater government action will make it very difficult for savers to preserve the purchasing power of their wealth. For those who wish to attempt to do so, it is time to take the radical step of preparing to benefit from a fixed-asset investment boom in the United States and across the “friend-shoring” world, which is the antithesis of what has come before.

Few investors can correctly anticipate future returns. In a time of structural change, many investors, however, do not even begin by asking the right questions to assess likely future returns. Today, the key question is whether China is already moving away from its managed exchange rate regime and thus destroying the current international monetary system. Those who ask that question have a radically different outlook for the future of credit, money, asset prices, and the economy.

This article originally appeared in American Affairs Volume VIII, Number 4 (Winter 2024): 3–15.

---

Notes

¹   Bank for International Settlements, “Credit to the Non-Financial Sector,” accessed October 14, 2024.

²   Robert Shiller, “Online Data—Robert Shiller,” Yale University Department of Economics, accessed October 14, 2024.

³   Andrew Smithers, Productivity and the Bonus Culture (Oxford: Oxford University Press, 2019).

⁴   Bill Clinton, “Remarks by the President to Opening Ceremony of the 1998 International Monetary Fund/World Bank Annual Meeting,”International Monetary Fund, October 6, 1998.

⁵   State Administration of Foreign Exchange, “SAFE Releases China’s International Investment Position as at the End of March 2024,” June 28, 2024.

⁶   Russell Napier, The Asian Financial Crisis 1995–98: Birth of the Age of Debt (Hampshire: Harriman House, 2021).

⁷   “China Statistical Yearbook: 2023,” National Bureau of Statistics of China, accessed October 14, 2024.

⁸   “Gross Capital Formation (% of GDP)—China,”World Bank, accessed October 14, 2024.

⁹   “Coverage of Major Imports & Exports,” China General Administration of Customs, accessed October 14, 2024.

¹⁰  Bank for International Settlements, “Credit to the Non-Financial Sector.”

¹¹  Bank for International Settlements, “Credit to the Non-Financial Sector.”

¹²  U.S. Bureau of Economic Advisers, “International Investment Position,” September 25, 2024.

¹³  U.S. Bureau of Economic Advisers, “International Investment Position.”

¹⁴  “Currency Composition of Official Foreign Exchange Reserves (cofer),” International Monetary Fund, September 27, 2024.

¹⁵  Bank for International Settlements, “Credit to the Non-Financial Sector.”

¹⁶  Janet L. Yellen, “Remarks by Secretary of the Treasury Janet L. Yellen on Way Forward for the Global Economy,” U.S. Department of the Treasury, April 13, 2022.

¹⁷  Emmanuel Macron, “Emmanuel Macron: Europe—It Can Die. A New Paradigm at The Sorbonne,”Groupe d’Études Géopolitiques, April 26, 2024.

¹⁸  Michael McLeay et al., “Money Creation in the Modern Economy,” Bank of England, March 14, 2014.