Re-Anchoring of Monetary Value in Metabolic Realities
Discussion
Chor Pharn:
"The new order is forming around settlement assets that cannot be fabricated by decree. Four conductors of trust have re-emerged: gold, energy, compute, and fiscal credit. Together they form the material backbone of the coming monetary regime.
1. Gold
Central banks have been net buyers for five consecutive years, purchasing well over a thousand tonnes annually. Through the Shanghai Gold Exchange International (SGEI), vaults in Hong Kong, Singapore, Dubai, and Zurich now clear trades that never touch Western custody. Roughly a fifth of global gold trade flows through this circuit. Metal has resumed its historical role as the ultimate settlement medium: the margin call that ends every argument. It is not nostalgia; it is accounting.
2. Energy
Energy transition has re-attached growth to conductance—the ability of money and credit to move through real assets without friction. Kilowatt-hours, not basis points, determine capacity. Carbon markets, power-purchase contracts, and strategic reserves are becoming fiscal-collateral instruments. Energy, compute, and credit form the production trinity of the next order: electrons replace promises as the unit of reliability.
3. Compute
Semiconductors and data centres are the new refineries. Compute capacity is financed and insured like energy infrastructure. Control of chips is now a reserve issue; compute power functions as collateral for national strategy.
4. Fiscal Credit
In China, fiscal spending has replaced property leverage as the main driver of demand. Empirical work from the China Finance 40 Forum shows the correlation between fiscal outlay and domestic demand has more than doubled since 2023, while monetary transmission has weakened. The state’s balance sheet has become a transmission grid: capital moves through budgets rather than through banks. Sovereign credit has turned into internal collateral—outside money created inside borders.
Together these four conductors constitute the gold nerve: a material nervous system for value after half a century of abstraction. They are measurable, auditable, finite. They turn trust from belief into balance-sheet discipline."
(https://thecuttingfloor.substack.com/p/the-gold-nerve)
The Two Responses: America’s Digital Velocity vs China’s Collateral Mass
Chor Pharn:
"Two responses have emerged to the exhaustion of the credit-confidence order.
Washington is converting its monetary system into software. Beijing is rebuilding its in metal and fiscal power. Both are attempts to restore credibility: one through velocity, the other through weight.
The United States remains the organiser of the global inside-money system. China has built the most comprehensive experiment in outside-money settlement since Bretton Woods. Between them stand the financial hubs—Singapore, Tokyo, and the Gulf—that translate one form of trust into the other.
* America’s Digital Velocity
The United States is trying to preserve monetary centrality by embedding the dollar in code. Stablecoins, tokenised Treasury bills and real-time payment rails are the next iteration of dollar credit: claims on short-term government paper that move instantly across private ledgers. They export liquidity directly to users who no longer rely on banks or SWIFT and ensure that every programmable network still clears through the dollar.
Because these instruments are backed by Treasuries, they enlarge the market for U.S. debt rather than compete with it. Every stablecoin is a miniature Treasury security, turning global demand for liquidity into demand for fiscal paper. Liquidity creation and debt management have become the same process.
Velocity is both the advantage and the risk. A software failure, cyber-attack or coordinated redemption could halt settlement faster than any twentieth-century bank run. Supervision is fragmented—the Fed, Treasury and SEC share partial oversight—so the system’s resilience depends largely on confidence in code.
Its strength is reach; its weakness, redundancy.
As Izabella Kaminska has observed, stablecoins function as narrow banks for the West: private balance-sheets that mint digital dollars fully backed by Treasuries. This innovation extends rather than replaces the dollar’s refinancing core. They transform the U.S. fiscal deficit into a global liquidity service. This is Washington’s structural response to the rise of collateral-based finance—a way of keeping the dollar indispensable by making it omnipresent.
* China’s Collateral Mass
China’s answer is the opposite: to anchor money in material assets and state capacity.
External circuit — gold and trade.
The Shanghai Gold Exchange International (SGEI) connects vaults in Hong Kong, Singapore, Dubai, and Zurich into a single clearing network. Roughly one-fifth of global bullion trade now passes through these channels. Gold moves as settlement collateral for energy and technology imports, denominated in yuan but secured by metal held under Chinese supervision. It gives Beijing an outside-money backbone independent of Western custody and banks.
Internal circuit — fiscal current.
Liu Yitong’s work for the China Finance 40 Forum shows that since 2023 the correlation between fiscal spending and domestic demand has more than doubled, while the effect of monetary policy has declined. Real-estate leverage has collapsed; central transfers and infrastructure spending now generate demand directly.
The state’s balance-sheet has become the transmission grid of the economy.
Sovereign credit functions as domestic collateral, a fiscal equivalent of outside money created within borders."