How Is Digital Yuan Different?

How is Digital Yuan Different?

In our last story on Digital Yuan, we saw the composition of Digital Yuan and some of its disruptive features. In this story we dive deep into some strategic areas of the currency and try to understand how it is positioned to impact the global economy in long run. And of course, this story answers many of the questions surrounding the new digital currency.

Crux of the Matter

How Is Digital Yuan Different From Bitcoin?

  • Bitcoin is a decentralized currency which means that it has no controlling authority like a government or a central bank. Digital Yuan on the other hand is the legal tender issued by China’s central bank.
  • In bitcoin, the identity of its users is not known. While Digital Yuan with its innate traceability feature overcomes the user anonymity issue.

Currency Stability
China will not increase its money supply by introducing new form of currency. With every Yuan introduced digitally in the market, an equivalent worth of physical cash will be drawn out from the circulation thus ensuring the stability of economy.

Will Digital Yuan Disrupt The Global Financial System?
The US Dollar holds 88% share in international foreign-exchange trades. Moreover, at present most of the international settlements happen over the SWIFT technology which is a messaging network used to securely transmit information through a standardized system of codes. The US administration has a significant authority over both the mechanisms.

The Chinese Renminbi holds mere 4% of share in international foreign-exchange trades. Hence, simply with its own digital currency, China cannot replace US Dollar in international transactions. But it will definitely open up new options for people to transfer money and maybe at better margins.

Dollar Weaponization
With US being the prime source of dollar, it has the ability to freeze institutions and nations by laying various sanctions on them. Sanctioned nations are kicked out of the global financial system as banks and financial institutions are prohibited from doing transactions with them. This entire phenomena is known as Dollar Weaponization.

Examples Include:

  • Crippling Economies of Iran and North Korea owing to US laid sanctions.
  • Blocking the movement of top military officials financial assets in Myanmar amidst the coup.
  • The unending US – China conflict followed by multitude of economic and financial sanctions laid on China.

Aim Of China
One of the prominent aims of Beijing for introducing Yuan is to limit the power of US dollar in international settlements.
Thus, nations that are penalized by US can transact and transfer their money through Digital Yuan – without the knowledge of US.

This takes away sanction leveraging power of the US.

Nicholas Burns, American diplomat

Final thoughts?
It is maybe farfetched to say that Digital Yuan will take over US Dollar. Nevertheless, the building blocks are too important to be ignored.

Curiopedia
  • The official currency of China is Renminbi. Yuan is the basic unit of the renminbi, but internationally the word is also used to refer to the Chinese currency.
  • One yuan is divided into 10 jiao and one jiao is divided into 10 fen.
  • The United States dollar is called Meiyuan in Chinese, and the euro is called Ouyuan.

Why is US Dollar World’s Base Currency?

Why is US Dollar World's Base Currency?

US has been a super power since long! And the supremacy comes largely also with the fact that its currency is base indicator and is used as a medium of exchange for huge transactions across the globe. But how did US dollar came to this prominence? Has it been like this forever? We are here to tell you the story of how US dollar became the base currency of the world.

Crux of the Matter

Introduction
Each nation’s Central Bank keeps foreign exchange reserves. Globally, all such reserves are reported in US Dollar (USD), making it the base currency worldwide. You would have also seen that most currencies today are quoted in dollar terms only.

But, the question is: What made the USD global base currency ?

Rewind to World War I
In 1914, world’s major transactions were conducted in British Pounds (£). By the end of World War I, Britain had lost quite a chunk of money and for the first time in the history, Britain had to borrow money from the outside. With this, Pound lost most of its value and the only lender of choice which also replaced the former was US Dollar.

During World War II
During World War II, US was the main arms supplier to all of its allies. During the 1940s, Gold was the major medium of all trade. Thus, in return of all the weapons supplied, US used to get paid in Gold, making it the largest holder of Gold.

Bretton Woods System
Leaders from 44 nations met in the town of Bretton Woods, New Hampshire to establish a stable system of managing foreign exchanges that does not put any nation at a disadvantage. Thus, came into the existence the famous Bretton woods System as per which: The world’s currencies were linked or more precisely pegged to the US Dollar. While the US Dollar was linked/pegged to Gold.

Crowning of the Reserve Currency
With Bretton Woods System, US Dollar became the official reserve currency of the world. Reserve Currency is one of the fundamental mediums of exchange for global trades and transactions, making Central Banks to hold them in huge amounts.

The Working
The exchange rate for currencies worldwide was fixed at $35 per ounce of Gold, meaning, for every ounce of gold that nations deposited with the US, they got US $35 in return. Thus with Bretton woods, instead of Gold, countries started accumulating US Dollars.

Collapse of Bretton Woods
In 1971, US ran into financial deficits owing to the Vietnam War combined with funding of various development projects. In order to finance the same, they started printing money, flooding the global market with USD. As world nations were worried of the stability of the US dollar, they started converting their USD reserves and Treasury Bills back to Gold.

But at that time, total US dollars held overseas were much more than the Gold held by the US, which also broke the premise of Bretton Woods Agreement. US in no way could suffice the Gold demand with its existing reserves. And hence, the then President Richard Nixon de-linked the US Dollar from Gold.

The collapse established the present day floating system – wherein the market forces of demand and supply determine the exchange rate of global currency.

Nonetheless, USD with 61% share in currency reserves held by global central banks is still considered to be world’s reserve currency.

Curiopedia
  • The International Monetary Fund (IMF) was set up during the United Nations Monetary and Financial Conference in Bretton Woods in 1944. Currently, the Chief Economist of IMF is Gita Gopinath.
  • The World Bank was also created during the Bretton Woods Conference in 1944. The motto of the organization is ‘Working for a World Free of Poverty’.
  • Presently, Kuwaiti Dinar (KWD) is the highest-valued currency in the world.

Colorado-Georgia Shootings And US Gun Laws

Colorado-Georgia Shootings And US Gun Laws

Debate over Gun Laws in the US has sparked again with mass shootings occurring in Colorado and Georgia within a span of few days. While calls for stricter Laws have increased, no easy path for reforms exists as the Constitution itself allows Gun rights (although debate exists over there too). In that light, let’s look at the recent shootings, the stats in the US and the Laws associated with it.

Crux of the Matter

Boulder, Colorado
On 22 March, 10 people were killed in a mass shooting at a King Soopers store. A 21-year-old man is a lone suspect. No motive for the crime is known yet, although some reports claim he has a mental illness.

Atlanta, Georgia
On 16 March, just a week back, shootings at 3 spas in Atlanta occurred where 8 people were killed. 6 out of them were Asian descent women, which has led to the racial angle being called possible as per reports though the suspect denies it.

Another 21 year old man is the lone suspect in this case.

Number Of Shootings
As per USA Today, mass shootings in US:

  • 2019: 407
  • 2020: 611
  • 2021: 103 (as of 22 March) – 53% more than “1st-quarter average of the past four years”.

Gun Stats
As per RAND Corporation:

  • The US has the highest gun ownership rate by civilians in the world.
  • Arms rate: 12 firearms for every 10 civilians.
  • US gun ownership per capita is double of the country 2nd in the list – Yemen.

US Gun Laws
Although different states have different gun laws, the major law is the 2nd Amendment of US Constitution.

“A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.”

2nd Amendment

Debate continues if it allows gun for “militia” or individuals, but so far, it has ensured gun ownership by individuals.

  • 1968: Gun Control Act was passed after the assassination of President Kennedy, Martin Luther King, Jr, etc.
    It banned the possession of arms for people having a criminal background, mental incompetence, etc.
  • 1994: Brady Handgun Violence Prevention Act was passed.
    It made background checks compulsory for purchases.
  • 1994: Violent Crime Control and Law Enforcement Act was passed.
    It was one of the most notable acts as it banned the possession of several assault-type weapons. However, it expired in 2004 and hasn’t been renewed even after several attempts.

Current Incidents
The recent Colorado shooting is a notable instance regarding Gun Laws, where Colorado state had banned possessing assault rifles in 2018. However, on 12 March, Boulder County District Court overturned the ban, claiming that it “forbids what state law authorizes.”

As per CBS News, on 16 March, the Colorado shooting suspect bought an assault rifle, and just 6 days later the shooting occurred on 22 March.

Calls for stricter gun control have again increased. However, their passage is called difficult by experts over lack of Republican support in the 50-50 Senate.

Curiopedia
  • Hate crime” generally refers to criminal acts which are seen to have been motivated by bias against a certain social group or race. The term “hate crime” came into common usage in the United States during the 1980s, but it is often used retrospectively in order to describe events that occurred prior to that era.
  • A racial hoax is a hoax that occurs “when someone fabricates a crime and blames it on another person because of [their] race or when an actual crime has been committed and the perpetrator falsely blames someone because of [their] race”. A racial hoax can be performed by a person of any race, against a person of any race.
  • According to GunPolicy.org, 75% of the world’s 875 million guns are civilian controlled. Roughly half of these guns (48%) are in the United States, which has the highest rate of gun ownership in the world.

American History Of Exporting War

American History Of Exporting War

American elections are perhaps the most followed elections in the world, with Democrats and Republicans being projected as diametrically opposite over immigration, taxes, gun control etc. However, the two parties share a major aspect besides their belonging to the US: foreign ‘intervention’ (which, if any other nations do, may successfully qualify as ‘war’). With Biden continuing the American tradition by bombing Syria, let’s take a look at every intervention (read: war) that the US has been a part of since its inception.

Crux of the Matter

Note: Most of the supposed ‘interventions’ are not officially recorded as ‘wars’ in US history. However, with the blatant disregard of rules and humongous casualties involved, assessing them as such would not be an exaggeration.

19th Century

20th Century

21st Century

Stats

  • 117 “partisan electoral interventions” in other nations by US (1946-2000) as per Channel 4.
  • 46 US military interventions (1948-91) increased to 188 (1992-2017).
  • As per The News International, US “has been at war for about 225 of the 243 years since its inception in 1776”.

“In the US, there is basically one party – the business party. It has two factions, called Democrats and Republicans, which are somewhat different but carry out variations on the same policies. By and large, I am opposed to those policies. As is most of the population.”

Noam Chomsky, Linguist, Cognitive Scientist, Political Activist and Social Critic

Read about the role of America in Korean war here

Curiopedia
  • The CIA Tibetan program was a nearly two-decades-long anti-Chinese covert operation focused on Tibet which consisted of “political action, propaganda, paramilitary and intelligence operations” based on U.S. Government arrangements made with brothers of the 14th Dalai Lama, who was not initially aware of them. The goal of the program was “to keep the political concept of an autonomous Tibet alive within Tibet and among several foreign nations”.
  • The 2009 Nobel Peace Prize was awarded to United States President Barack Obama for his “extraordinary efforts to strengthen international diplomacy and cooperation between people“. Obama accepted the prize in Oslo on December 10, 2009. In a 36-minute speech, he discussed the tensions between war and peace and the idea of a “just war”.
  • Just war theory is a doctrine of military ethics studied by military leaders, theologians, ethicists and policymakers. The purpose of the doctrine is to ensure war is morally justifiable through a series of criteria, all of which must be met for a war to be considered just. The criteria are split into two groups: “right to go to war” and “right conduct in war”. The first concerns the morality of going to war, and the second the moral conduct within war.

India Will Exceed Paris Agreement Goals, Says PM Modi

India Will Exceed Paris Agreement Goals, Says PM Modi

With PM Modi praising India’s adherence to the Paris Agreement, which US President Biden is also set to join, let’s look at what the Agreement is and some controversies associated to it.

Crux of the Matter

Recent Incident
Addressing the ‘Climate Adaption Summit 2021’, Prime Minister of India Narendra Modi said that India is on the path of exceeding its targets under the Paris Agreement. He also claimed that India is aiming for 450 GW renewable energy capacity by 2030 and currently providing “clean cooking fuel to 80 million rural households”.

What Is Paris Agreement?

  • Signed in December 2015 – came into force on November 4, 2016.
  • Ratified by 188 out of 197 signatory countries (as of November 2020).
  • Aim: To keep the 21st-century global temperature rise “well below 2° C above pre-industrial levels” and ideally limit it to 1.5°C.

How It Would Be Done?

  • Aim to be achieved by limiting amount of greenhouse gases and have “net zero emissions” between 2050 and 2100.
  • Each country sets ‘emission-reduction targets’ or National Determined Contributions (NDCs) for itself – reviewed every 5 years.
  • Rich countries to provide $100 billion/year by 2020 to poor nations to tackle climate change – reached $78.9 billion/year as of 2018.

As Per The UN
Limiting the temperature rise to 1.5°C would:

  • Prevent small island states from sinking.
  • Save millions of people from extreme weather.
  • Reduce the possibility of “an ice-free Arctic summer”.

Why Trump Left The Deal?

  • Trump has denied climate change several times.
  • Labelled it “unfair” for the US economy and ‘interests’.
  • Announced withdrawal from Agreement in June 2017 – finally left on 4 November 2020 due to its minimum time limit for withdrawal.

What Next Under Biden?

  • After his inauguration, Biden sent a letter to re-enter the Agreement – set to rejoin after 30 days.
  • He has placed tackling climate change at priority.
  • Recently cancelled Keystone XL Pipeline meant to carry oil from Canada to Nebraska in the US.
  • The pipeline had drawn strong criticism from environment activists at the time of approval. Obama had rejected the project – now stopped again after being restarted by Trump.
Curiopedia
  • Kiribati is an independent island nation in the central Pacific Ocean. Kiribati is the only country in the world to be situated in all four hemispheres. As an island nation, the islands are very vulnerable to climate change and addressing climate change has been a central part of its international policy. 
  • Alliance of Small Island States (AOSIS) is an intergovernmental organization of low-lying coastal and small island countries. AOSIS was established in 1990, ahead of the Second World Climate Conference. These island countries are particularly vulnerable to climate change and its related effects on the ocean, including sea-level rise, coastal erosion and saltwater intrusion.
  • The Global Stocktake is a fundamental component of the Paris Agreement which is used to monitor its implementation and evaluate the collective progress made in achieving the agreed goals. The Global Stocktake thus links the implementation of nationally determined contributions (NDCs) with the overarching goals of the Paris Agreement and has the ultimate aim of raising climate ambition.