This highly unique era of low interest rates as we know it today began only after the end of the Cold War.

Historically speaking, the presence of low interest rates in England and the Netherlands coincided with the rise of the “Protestant Work Ethic” and the capitalism that accompanied it: low interest rates reflected easier access to capital, and hence easier borrowing.

And it is not hard to imagine how hopelessly jealous the French were of the British and Belgians who could secure capital funding so easily, while they themselves sat in a wealthy France with large gold reserves but somehow could not become home to such a market. Their final solution to this problem was — of course — state interventionism à la Napoleon, à la De Gaulle.

Yet no matter how low the interest rates are or once were, they should never have dipped below zero. This is something new under the sun that made its appearance only after the Cold War.

When central banks resort to negative interest rates, they are conducting nothing less than a gradual confiscation of properties, a way of borrowing from or even mortgaging the future in order to spend now. Which makes it all the more important to remember that interest rates, which in its origins were always positive, reflect the expectation that this speculation is worth it, that the future — this particular future we are betting on — will be better than its present. It naturally follows that negative rates betray the pessimism that one might eventually end up without a single dime, that it is now time to be bearish on this particular future vision; by rolling out negative interest rates, the banks are communicating exactly such a bleak perception. And when you already assume the future will have an irredeemably downward trajectory, “investing” becomes meaningless since your predictions are effectively telling you to short-sell your way out of the system you find yourself in, be it financial, social or else.

Such low rates are characteristic of the current age of global economic prosperity we are in, whose scale and magnitude — although taken for granted by many — were nonetheless never before seen by mankind, such that it seems to seriously suggest the utopian possibility of everlasting universal prosperity, which has otherwise never held true in recorded history. Yet here it is, flying straight in our face, daring us to give an explanation of its existence.

And that explanation is to be found in what are essentially expendable labor forces that were suddenly freed up and then flocked in droves to the world market from post-USSR Eastern-bloc and China after 1990s. Although India and other populous Third World countries also contributed by making some of their population available to the market, yet their scale of involvement pales in comparison to the former socialist countries — especially China with its enormous population — which released into the global market their massive workforce with staggeringly low labor costs associated with it.

Besides low labor costs, one crucial characteristic sets them apart from the workforce of any other country: like the interest rates mentioned earlier, there was virtually no limit to how low the wages can go and there would still be workers applying for the job, including even zero wages. Why would anyone on earth do that? Readers in the West may have a harder time relating to this, yet it made perfect sense to them given the situation they were in: by signing such a labor contract, they are expecting less in terms of monetary compensation in return for their labor, but rather a guarantee of their own safety in an otherwise orderless society.

This seemingly bizarre calculation starts to make sense once we understand the reality many Chinese are forced to live in: 1) the real Chinese society — not the one seen by the world in Beijing or Shanghai, but the much larger portion of the iceberg that is under water — is characterized by a state of de facto anarchy, where physical and sexual violence, criminal gangs and total unresponsiveness from public authorities rule the streets, all of which make life as a migrant-worker alone in the city extremely dangerous (and even more so in rural areas); 2) migrant-workers could not count on either state benefits or any substantial assistance from NGOs, as the latter — churches, spontaneous unionizing, etc. — were always seen as potential threats to the regime; 3) since local officials were hardwired to treat GDP growth as their god, they would order the local police — who already had limited resources — to focus on protecting and keeping the order for these proverbial geese that will continue to lay golden eggs.

Once we factor in all these conditions, an otherwise unconvincing yet inevitably realistic image surfaces: for the Chinese migrant-workers, who were even officially designated as “low-end population”, having a job in a factory that pays little is always better than having none, since a job at a place under the protection of local authorities means at least some sort of bulwark against the total chaos out there.

Now we find the answer to the question of who or what exactly has been keeping the negative interest rates afloat: a labor force that is — to put it bluntly — not so different from slave labor. As we have already seen, the underlying assumption in China is that they cannot even take their personal safety for granted if they are no longer part of such a system, so in extreme conditions they are even willing to pay to get a job (absurd as it might sound), as they are really paying for their safety. Again, this is something you would only expect in a communist country, since even when people bribe their way into a state bureaucracy, they still do it for the sake of ultimately gaining better access to money. Only in China, where the social fabric has already begun to irredeemably unravel, could concerns for personal safety trump the desire for money otherwise ubiquitous in our age.

Never before in human history has the power of capital been so effectively projected to all corners in the world that welcome its presence. But in many of these corners this projection takes on a form that has been loathed by the ideological Left as “sweatshops” — and correctly so. Yet what the Left failed to grasp (or refused to, because of their uncompromisingly high moral standards for everyone) is that for the vast multitudes outside of North America and Europe, this “sweatshop economy” ultimately bestowed on them not just a shot at becoming rich, but more importantly an access to peace and order they could never have dreamed of — the case of Chinese migrant-workers is an extreme one, yet still a valid case in point. In the meantime the interest rates in the West plummeted to a historical low, whereas investment and other financial bubbles continued to pump up a façade of unprecedented global economic prosperity that could last forever.

Greenspan and his successors dictated the monetary policies in the last three decades: being zealously aggressive during monetary expansions, and debilitatingly hesitant when the time came to reduce the balance sheet. All this has led to the overflowing global circulation of the U.S. dollar and that of the inflation that comes along with it. At the heart of this global economic prosperity is the American consumers’ purchasing power, which tied in with an ever-bullish U.S. stock market, despite the hiccups in between. It was against this backdrop that almost all the post-Cold War U.S. middle class families were used to buying and holding significant amount of stocks while savings accounts failed to appeal, since the rates provided by a bank in an age of low interest rates would be constantly outperformed by even the worst of all stocks, and it made completely no sense to let their money sit in a bank account and rot because of inflation — to say nothing of holding cash, which is stereotypically associated with criminal activities.

I must add that these insatiable demands by the U.S. consumers have always been the single most important driving force behind the economic prosperity in Third World countries, and by that I am not referring to Americans’ need for life necessities, but for items that serve to rather garnish one’s life than to nourish it, such as flashy cellphones and toys for kids. Here we must also factor in the gigantic amount of dollars America has been pumping out, the vehicle through which the American consumers’ demands are projected globally. Significantly, the dollar is the real life-support that sustains the vital signs of both RMB and the so-called Chinese economic reform, which is nothing more than a slave-labor factory that caters to Americans’ wants and desires. The same function it also serves in Southeast Asia, but the dollar cannot perform as many miracles there as it does in China given the general population’s still limited exposure to the market.

In other words, apart from the more urbanized, international metropolises in Southeast Asia (or on other continents), a great majority of its population is still mostly if not completely insulated from what is ironically called the global market. They do not have what it takes to buy or sell in this market; yet they also have no intrinsic need or desire to interact with it. That said, from time to time individuals can still be lured away by the prospects of wealth and the promise of an urban lifestyle to leave their communities for the cities. Now, we must remember that the commerce, the manufacturing and all the other cogs in the wheel of globalization that are present in these cities are all connected to and contingent on the chiefly U.S.-consumer-sustained global market. When these young and brave city-dwellers start working in factories and earning their wages in ringgit or rupiah, they are indirectly receiving their pay issued in dollars by American consumers, their true employer.

And in this gradual, sometimes osmotic process of introducing to the global market those who were not part of it, the market sees a bright future of expansions; and as the number of previously-unreached people converted to this gospel of globalization increased, signals of new available markets were continually conducted back to Wall Street investors, who then took this positive feedback as their cue for another round of lending to megacorporations in the U.S. and to the oligarchs in Third World countries. The corporations and especially the oligarchs would then incur these liabilities to perpetuate the said process of spreading the good news about the global market.

In conjunction with that horizontal expansion of this market worldwide was the vertical trickle-down of many financial privileges — traditionally associated with the middle class — into the hands of the urban working-class in the U.S. The salespeople of credit expansion, which first greeted the upper class in the 19th century and then embraced the middle class during the Cold War, finally came knocking at the doors of working-class Americans in the cities, enthusiastically catering to their most fundamental desire — decent housing in town. The promise being sold was that they could afford that exquisite house down the street by simply taking out this mortgage; on the specifics of paying it back — all included in the fineprint — nothing was said at all. From there it was a straight path to the 2008 subprime crisis.

Then again, it was the oligarchs and workforces in Third World countries that pumped up this appearance of an everlasting prosperity. And especially the latter group: what they understood about globalization and the prosperity it brought about, which they could directly feel in their lives and their surroundings, can never hold a candle to the ever-blazing sun of immeasurable wealth and opulence in the West. Yet even this bite-size breadcrumb proved irresistible enough for some of them to even accept zero employment benefits and zero union protection in exchange for this prosperity that overflows from America’s cup. This lack (or waiver) of workers’ rights at the periphery significantly slashed labor costs, further translated into extremely low interest rates at the center.

While the Wall Street swiftly pounced on such an opportunity as usual, it is unlikely they understood why it was so. Perhaps now and then it would occur to some of them that this prosperity might be unsecured and uninsured, if not fundamentally unsustainable; but the fleeting moment of clarity would soon be swept aside by all the undreamed-of investing opportunities in the next second.

These undreamed-of opportunities were created and sponsored by a sudden, tremendous influx of sweatshop workers (which can be roughly understood as the sum of the entire Chinese and Indian population, and then some) into the global market, ushering in a new gilded age in the U.S. and Europe that would have been unthinkable even to those living in the Gilded Age. It should then come as no surprise to us that Americans who otherwise would have never got a mortgage approved now felt emboldened to go with the flow and take out high-interest loans with their questionable credit ratings, as I mentioned earlier, and put that money on the down payment of their dream home, one that probably would only appear in the sweetest dreams of many in the Third World — if ever.

And here we see what was lying at the heart of the world economy in the Obama-era: the problematic growth and expansion in the U.S. of what Marx would have labelled a “rentier proletariat” — that is, a working-class who receive bountiful dividends from the expansions of their capitalist-globalist state but with little to no contribution of their own to that process, whose ascendancy entirely depends on the American financial and military hegemony in the style of the Roman Empire. Needless to say, the mortgages taken out by this new class of proletariat were the cause-in-fact of the 2008 financial crisis, and also why neither Yellen nor Powell in the age of Trump could ever seriously shrink the Fed’s balance sheet: that would have burst the debt bubble, thereby dooming the said rentier proletariat who now sit at the core of it. With popular democracy and American military might on their side, this class feel entitled to their privileges as citizens of the single most powerful state in the world, and it is highly unlikely they will ever put up with something like that.

The demands of high wages (relative to slave labor in China) made by this class have completely blunted the competitive edges the U.S. manufacturing industry once boasted, sending the big corporations to look overseas for alternatives. Such an outsourcing process gradually transitioned the U.S. from a manufacturing powerhouse into the financial-military hegemon à la Rome we see today. In this new America, the investors keep the Wall Street up and running, while the American “legions” — the U.S. military presence overseas — maintain peace and order under which global free trade can prosper. Soldiers supplied by America’s heartland fill the barracks, while the cosmopolises on the West and East Coast usher in waves after waves of capital and venture capitalists. On such a binary foundation — the liberal-leftist megacities and their bankers, the rural America and their marines — sits today’s Pax Americana.

At this point in time, these two different Americas — that of the Left-liberals and that of the hicks and rednecks — are still to a large degree politically well-insulated (or even segregated) from each other by the relatively great geographical distances and social differences. Yet a severe de facto constitutional crisis will become inevitable as soon as these two groups and above all the two opposing visions of a future America they represent lock horns in a prolonged political clash against each other: a heralding omen is already to be heard from the election of Trump, or more exactly, from the inherently paradoxical platform that got him elected: improving the economy to woo the voters while simultaneously pushing an anti-globalization agenda.

Trump furthermore demands other NATO members and countries such as Japan and South Korea to pay up their “fair share” on the bill for U.S. protection, while also re-negotiating the trade deals with most countries bilaterally, bypassing the WTO. He walked away from many important international agreements and organizations, boosting American unilateralism. As Hilary Clinton remarked on her campaign trail, this amounts to a frontal assault on the world order dominated by — and mostly beneficial to — America itself. In other words, no one can both have the cake of skyrocketing stock market and low unemployment rate and then eat it by scaling back globalization, from which the cake itself is made.

At the task of bringing back manufacturing jobs to the U.S., Trump is doomed to fail (and already has). The reason lies in the fundamental structural differences between the society of a financial and military empire — where the U.S. is now — and that of a country home to booming manufacturing industries — which the U.S. once was. To be more precise, the latter rested on the rustic, traditional, small-town Christian communities that still exist to this day in the U.S. like the sand of the sea.

Unfortunately, such a “redneck Christianity” and its value system are inherently incompatible with the societal structures required to power on a global empire. If the American heartland still appears to be persisting and wielding as much political influence as the liberal elite does, that is only because of its seemingly endless supply of manpower to the U.S. armed forces, in a sense the modern equivalent of Roman Legions. And these heartlanders are to America what the citizen-soldiers were to Rome: as long as they still formed the backbone of the Republic’s military, the Senate did not need to recruit any auxiliary legions from Transalpine Gaul, nor did they have to crown Romanized Spaniards such as Trajan and the other “Good Emperors”, let alone welcoming invading Germanic tribes who would later settle down and establish their own kingdoms.

Yet in terms of sheer money, these citizen-soldiers of the 21st-century Rome are almost inconsequential. A prominent if stereotypical example can be found in Trump’s Vice-President Mike Pence, whose family in Indiana has barely more than $15,000 in their bank account. On the other hand — a scene especially familiar to Chinese speakers — anecdotes abound of how mistresses of petty Chinese Communist Party (CCP) officials constantly manage to have millions upon millions of US$ with them when they land, in a display of wealth enormously disproportionate to their place in the world order. Yet what people like Pence do not have in terms of money, they more than made up for it with their social capital, living comfortably in their small towns or cities where the housing prices are not ridiculously high, where blue-collar Americans do not have to worry all day about losing their home one day, let alone getting a highly risky mortgage to buy one.

That said, you can bank on such a pastoral landscape to be shattered by waves after waves of anti-Chinese protests, if and when the Chinese buyers flock to their communities and start buying all the residences, jacking up the prices sky-high as they already did in other places such as Seattle. I wouldn’t be surprised if apart from high housing prices they are also going to introduce the typical East Asian cram-schools to these small-town Americans, who would probably never pass the exam of learning how to stomach these made-in-China “innovations”. Now some may scream that I am being xenophobic, Sinophobic, anti-immigrant, etc., but if the ultimate goal is to preserve and maintain the combat effectiveness of the U.S. armed forces — which further means to preserve and maintain the social fabric of traditional heartland communities — then such an outcome, for better or worse, remains inevitable; it will only be a question of when and how.

Furthermore, isn’t it unbecoming of an empire to buy into the narrative that “labor creates wealth”? Shouldn’t its motto always be “hegemony secures wealth”? At the micro-level, that means Americans’ affluence should never be contingent on whether they work or not, but on the said imperial world order, with the Wall Street bankers and the U.S. army being its two pillars. This may seem counterintuitive at first glance, but it becomes reasonable once we really grasp how crucial and indispensable Americans’ role is in the world economy today: for it to stay afloat, Americans must have their ability to consume unrestrained, no matter what. In other words, money for Americans is not merely a compensation handed out for work performed, but the currency that connects the center — the U.S. economy — to the periphery — the rest of the global market.

Think about it this way: if Americans do not work or will only work for uncompetitively high wages, their corporations will always manage to find workforces elsewhere, let’s say in Malaysia for example; yet if the Americans run out of money to support the credit expansion of the global market due to a stock market meltdown, these poor Malaysians will soon financially freeze to death as the sun of the global economy suddenly darkens, long before Americans themselves could be hit with the chill of bankruptcy. Because of this the Malaysians have every reason to make sure that the Americans have money to continue buying stocks and are happy with it, so that the sun always rises on their horizon despite — or even thanks to — the fact that Americans don’t need to work. The only contribution required of the Americans in this seemingly unequal bargain: their worldwide military presence — their ability to uphold Pax Americana.

In no small coincidence, the city of Rome’s economy was also kept afloat by the ancient counterparts of “investors” and “consumers”, for simplicity’s sake. As long as the investors were still pulling the financial strings and the legions abroad were still taming the barbaric regions, these bread-and-circus consumers never had to work (although they could). But the Republic must always guarantee their ability to purchase and consume even if they could not or would not work, and not even for Rome’s own sake, but for the sake of the entire known world.

When a major stock market crash — such as the one we have recently witnessed — evaporates a significant fraction of an ordinary American family’s value, it is not an underestimate to say the entire global market will shrink by 20–30%, at which point countries such as Malaysia or Venezuela must brace themselves for massive sovereign debt crises and national bankruptcy. It is chiefly for their sake that American consumers’ demands must remain robust. Even in an extremely challenging scenario where one fifth of Americans become unemployed, U.S. policymakers still have to find ways to make sure the entire population — including those without a job — can still make their usual purchases. No wonder how a sudden influx of $6 trillion (liquidity and stimulus combined) — almost a quarter of the current U.S. national debt — is now flooding the market.

Not without a good reason did the Trump administration roll out this biblical sum of dollars. Not only have they taken into account the stimulus needed to help the stock prices and consumers within the U.S., but also the major holders of U.S. national debt, e.g. China and Japan, who will be swallowing the pill. Then again, at this point we should hardly be surprised why it is the East Asians bearing the brunt of it. But just in case, an analogy of Pax Romana should suffice to demonstrate why.

If we get to the bottom of it, for Imperial Rome Egypt was its one-and-only cash cow, from which it expected steady streams of revenues; no other provinciae or gentes in the entire Empire had ever been subjected to an even remotely similar treatment, including the barbarians in Transalpine Gaul whose tendency to betray Romans on a whim never quite died down. Even the well-trained Roman legions struggled to gain a foothold against these bellicose and barbaric tribes in Western Europe, whereas Egypt even before Augustus’ annexation had always been characterized by its ability under a highly centralized administration to generate a cornucopia of grains and tax revenue. But since the Romans prized the ability to fight over the ability to pay, they honored the rebellious tribes in their way by constantly trying to secure the latter’s allegiance to the Empire, whereas Egypt was left in its original state of producing grains and taxes for whoever its current master was.

It may be politically incorrect to suggest that the battle-hardened barbarians from Spain who served in the legions were better Romans than the Egyptian cash cows, yet it was exactly such a politically-incorrect preferential treatment that perpetuated Pax Romana. The Romans put the Romanized barbarian legionaries first — who could expect to be promoted from the ranks and to even become Imperator Caesar — , over the Egyptians who would continue to do what they were the best at doing — being a de facto vassal state that paid tributes to Rome as their ransom.

As we come back from surveying the past, it should strike us how closely the nature of the U.S. national debt mimics that of the Pax Romana hierarchy: this debt will ultimately become the responsibility of the rest of the world — which must pay its due to Pax Americana — but not by Americans themselves. Regardless of the amount of dollars printed out by the Fed, after a brief circulation within America it will get out through financial institutions into the rest of the world and absorbed by holders of U.S. debt and manufacturers of U.S. consumer products. Meanwhile, the price fluctuations within the U.S. will be hardly noticeable.

That said, your ordinary American Joe is unlikely to be aware of the fact he is enjoying these privileges as a citizen of the world empire, privileges that can be seen in the prices of staple items such as banana and sugar, respectively cheaper than even those in the Philippines and Cuba: the same principle applies to almost all products sold in the U.S.

As much as everyone stands to lose in a fatal cardiac failure of this global trading network, China will be hardest hit given its visibly crumbling social fabric: there, everyone is hired on a de facto part-time basis with no employment security or benefits (no matter what their contract states), as their employment ultimately depends on the Western market. If you are already treading on such thin layers of ice, and suddenly you are no longer needed by the U.S. market to export manufactured goods, what options do you have — other than to immediately resort back to planned economy and people’s communes?

The situation will be slightly better for countries like Malaysia and India, since their traditional communities that constitute their social fabric — their villages and even tribes — are still largely intact. Only those who strive to make it big in the metropolises will be hit hard, but even they can always pack up and go back to where they socially belong. The same cannot be said for those in many former communist countries (and again, especially in China), given how the communists had effectively eradicated the traditional communities to create this army of workers in the first place; which is why I consider them de facto slave labor, as they have nowhere to go back to once they lose their master.

Yet it was exactly these slaves — free workers in name only — that made close-to-zero low interest rates and the economic prosperity that came with it possible. It was also them that allowed central banks in the West to forego the conventional instruments of shrinking the balance sheet and cutting government expenses, replaced by their habitual deployment of massive QE and negative rates to weather the storms of financial crises — despite going against almost every single law and principle in Classical Economics.

So, what exactly did the U.S. export to the rest of the world? Frankly speaking, maybe not even the U.S. dollar, but only the world order, the Pax Americana whose promise of universal stability and peace is embodied and reflected in the circulation of the American dollar. The dollar — along with its vouch for a market, for a however remote and restricted access to Pax Americana — entered the sweatshops in Third World countries, securing for the laborers many invisible benefits, including the earlier-mentioned freedom from being hacked to death on the street in a society where a war of all against all rages on. For this “freedom”, they are more than willing to pay a ransom fee with their de facto slave labor — this ransom fee on a global scale made negative rates possible and even favorable.

To be more precise, one important hypothesis in modern economics that is valid elsewhere cannot apply to the Chinese workforce: that of the “economic man”. It is contingent on one crucial presumption that is commonly overlooked outside of places like China (and with a good reason): the presumption that if you do not take on a certain job, you will not have to fear for your own life; only then can you always freely choose to quit your current job and look for a better offer, and only then can the hypothesis hold. Both Classical and Neoclassical Economics presume this: that you have to pay virtually nothing to keep yourself safe, in the most biological sense of the term.

And the good reason to overlook this assumption in most cases is this: under the universal “coverage” of order and safety provided by modern nation-states, indeed most people have only a career-related choice to make — not a life-and-death one — in the job market. Such was, however, not always the norm, and it took some time and steps to get to where we are today from what was the case in a feudal system. Back then, you must choose your side and swear your allegiance carefully, because your lord would be your protector and the guarantor of your safety, and not all lords were created equal.

In contrast, citizens of nation-states take their personal safety for granted, and with good reason in doing so, as they have been taught to believe the state should always provide everyone with such safety for free. Although nothing is really “free” and there are always invisible costs associated with public services provided by the state — as in the case of “free” universal health care — , these costs have been taken care of in ways people do not usually notice (e.g. higher tax rates), so people intuitively think of it as a free, public good. On exactly this cornerstone is laid the framework of Neoclassical Liberalism.

A corollary that naturally follows is that the Neoclassical framework has no place for the Chinese population, as China is not a typical nation-state that provides safety as a public good and so the “economic man” hypothesis at least fails to apply to them. But it is exactly this bizarre existence of an army of slave labor in the 21st-century global market that accounts for the perplexing co-existence of negative interest rates and booming economies worldwide.

What do both the feudal lords, the nation-states, the Roman Empire and the United States provide? A product, a service called “peace and order” for those covered under it. Lords provided order to their lieges; nation-states to their citizens; Romans to Egyptians and the rest of the Mediterranean region; and finally Americans to the rest of the world. In most if not all cases the order provided is not free, its costs must be accounted for; and just as Egyptians paid for the costs of Pax Romana with their taxes, the Chinese paid for Pax Americana with their sweat factories.

In this regard, the U.S. is not a country that primarily exports its agricultural products or financial services; rather as the modern heir of Imperial Rome, its ability to provide order — to maintain Pax Americana — is the single most important export it offers to the world.

That said, not everyone feels the same level of urgency in purchasing and paying for this made-in-USA global order: some can already produce for themselves an order and remain self-sufficient, so they are understandably reluctant about upgrading; but for others — such as the Chinese — it is the last lifeboat whose hull they must cling onto at all costs, or they will immediately drown in the ice-cold void of an orderless society, where all kinds of inconceivable atrocities lurk in the depths that the sunlight never penetrates.

It serves us well to remember that, just like in the case of taking out a loan, people who do not have much to begin with usually cannot afford to be choosy. When someone with a problematic credit rating tries to borrow money, the only options available to him — if any — would have either many strings attached or an unhealthily high interest rate, such as the now-infamous subprime mortgages. By analogy, people who are used to living in an orderless “society” (if that can be called a society at all) without peace and order as we understand the term in the West can only expect harsh and terrible rulers, since these are the best they can get for themselves and will at least create some sort of order.

And in the case of China, under the order created by the harsh and terrible CCP, the rulers have never had a guilty conscience about whipping these people into the sweat factories to fulfill the manufacturing orders made by the West. On the other hand, people working there could pay with their labor the ransom to not only the CCP for offering them a bulwark against the all-devouring void of social order that is the true nature of the Chinese society at large, but also indirectly to the U.S.: it was the U.S.’ “deal with the devil” that projected Pax Americana first into China — which allowed the Party’s existence in its current state and helped it avoid the fate of its brethren in the Eastern Bloc — and then into these sweat factories and onto their slave workers, in the immediate form of local authorities’ protection.

With all that taken into account, when will this age of negative rates end? When we reach the critical juncture where the Chinese workforce can no longer afford the indirect access to Pax Americana, an access granted to them by globalization on the condition of their slave labor. In other words, it will end when it no longer makes financial sense for U.S. corporations to continue their production in China, as they have depleted the potential of Chinese slave labor and its low costs. Many have a vague notion of this capacity limit and what might happen if it is reached, yet it is not something empirical data can help us pinpoint. One thing is still certain: we are now dangerously close — and crossing the point of no return — to this economic and political singularity.

In the meantime, the cyclical crises of capitalism still hold true. Capital sleeplessly pushes for the expansion of existing markets and the opening-up of new ones, but even then the supply still tends to far outgrow the demand: the periodic crises are therefore “needed” to flush out those on the supply side who have miscalculated and produced what the market does not need.

Such a crisis is now needed, and not only in the global financial system. For a business that fails to grasp the market signals and hence fails to provide what the market demands, its bankruptcy awaits; similarly, for a provider of peace and order that fails to provide what the “market of order” needs, it is also time for its exit. For a state-level provider, this exit would be its dissolution or annexation by others. And this was why wars where nations’ fates were at stake (the equivalent of financial crises in the “market of order”) would periodically and necessarily break out: to allow the “market of order” to readjust and recalibrate itself after its continued operation had accumulated too many distortions and bubbles.

The advent of Pax Americana does not change this fundamental market principle, since what the U.S., the largest provider of order in our age did, was effectively offering to cover all the other providers under its umbrella, even those who could not provide order at all. As much as this kind gesture backed with its national power attests to its primacy in this market, it has naturally allowed bubbles to form, as providers of unmarketable order could cling onto the one provided by America and fake their competence. Even worse, however, are those who cannot even provide any, but in an urgent need of it from other providers. Since this last group — yes, I am referring to the Chinese population again — could put up with any kind of order (evidenced by their acceptance of even the CCP), it would send a highly distorting bullish signal to this market once it became part of it.

Become part of the market it did — by grace of Nixon’s ad hoc alliance with China against the USSR since 1972, and then by grace of Bill Clinton’s “panda-hugging” diplomacy in the 90s, to which I will return shortly. And it promised to pay for order with its cheap slave labor. This sudden explosion of low-risk, high-yield opportunities sent the market into an unprecedented stage of euphoria, reflected by the almost three decades of universal prosperity never heard of in the history before.

Yet even this gigantic army of slaves will run out of steam one day, no longer able to afford the American order they’ve already started to take for granted. And this will be the time for previously suppressed conflicts to finally come to the surface and escalate; already we are seeing the signs of this. Meanwhile, the Fed and central banks in other developed countries will continue to beat the horse long after it’s dead by rolling out negative interest rates, in an attempt to replicate past successes with this tool in preempting deflationary spirals. All these attempts will be in vain, as the slave population’s ability to continue paying for that order with their labor — a must-have for negative rates to work — is now already in decline.

Will measures such as higher, broader tariffs or competitive devaluation offset the problems? Perhaps not this time, if ever, since it will be channeled back to whoever first implements them. As I argued earlier, it was the world order dictated and guaranteed by the U.S. that served as the foundation of all these years of prosperity, yet America must recoup its costs somehow; so holders of U.S. national debt must bite the bullet of American inflation as their “payment” for Pax Americana.

No matter how high this pressure of inflation within the U.S. is, it will always get conducted away into the rest of the world. And RMB’s almost parasitical dependence on the dollar will make it the first major domino to fall. Trying to shake off the scorching-hot potato of devastating inflation in its hands, Beijing’s only option will be to resort to stringent regulations that will effectively mark China’s reversion to the days of planned economy, as well as the complete withdrawal of its slave labor from the global market. Similarly, central banks in countries such as Malaysia, Thailand and India will race against each other to take emergency measures in protection of their own currency values, severing their economies for the time being from the rest of the global market. To put it another way: we will be seeing a return of the 1997 financial crisis in Southeast Asia, only that this time on a global scale.

Now that no one is willing to be the losing party in this international live show of prisoners’ dilemma by allowing this financial tsunami to flood their shore, it will ultimately be channeled back to the U.S., wiping out any initial gains under the already massive bailouts by the administration, proving the futility of playing a financial “beggar-thy-neighbor” game.

In an attempt to get the situation under control, central banks will also rush to implement every last instrument of monetary policy in their toolkit, many of them horrifyingly unimaginable even to those living through the 1929 crisis. Effects of this “cocktail therapy” will not include a local or global recovery, but the mutation of a relatively straightforward bear market situation into complex and unpredictable scenarios of stagflation and recession: a lesson the U.S. learned the hard way in the 1970s.

Many will then look all the way back and blame Bill Clinton for having aggressively pushed for the outsourcing of manufacturing industries to China after what’s happened in 1989, saying it was his responsibility all along. But he was not going all-in without first hiding the trump card up his sleeves: he knew that, as long as America remains the only military superpower in the world, all money flows will lead back to New York.

And the last step towards this utopian project must be walked by China itself, and the Chinese technocrats enriched by the economic opening-up were more than willing to comply: needed was the fulfillment of China’s obligations to the WTO, to open up its financial markets. Once that was done, all the assets previously monopolized by the local “GDP factions” would now be sold at steep discounts of 70–80% off to American investors. This ambitious long-term plan of Bill Clinton would have come to fruition through Obama’s astute political arrangements: to further embed China into the global market, and to win back the gone-astray hearts and minds of the communist China to the way, truth and life of striving to be a peaceful and democratic country.

It would really be anticlimactic if nobody from within the Party comes along in the last second and blows up all the tracks. And Xi Jinping — the Beloved Leader of China, the Great Saviour of the Chinese Nation — did not disappoint. He accomplished just that by pushing from his side a political agenda that in effect accelerates the China-U.S. “decoupling” process. Yet the real challenge for him still lies ahead: he will have to tackle the aftermath of said decoupling and the subsequent changes in economic and social structures. Right now Xi still relies on the revenue from the China-U.S. trading surplus to keep everyone in the Party content with his rule, and just like any politician he will not easily give up what he already has in his firm grasp without a fight — unless someone knocks that out of his hand by force. In other words, either the Western countries (especially the U.S.) or some force majeure (like, say, some bioweapon experiment gone terribly wrong) would need to take action — and they arguably already did — in order to force his hand into a complete reversion to planned economy.

So, where are we now in terms of history? One thing is certain: those who trust the government have a much, much bleaker future awaiting them. And by that I do not simply mean those who are stupid enough to place their trust in the Chinese government, but anyone who has faith in any government: all policy options available to them will never succeed in salvaging the situation or performing a soft-landing. The only alternative not yet considered is a war, a war to burst all these bubbles and return things to normal, but it’s a solution no one dares to be the first to talk about, let alone initiate. And indeed it won’t be initiated by anyone — war comes like a thief at night, biding its time to strike.