- From trade war to shooting war…
- The end of “the grand illusion”…
- A new class of millionaires could be created by May 3rd…
Dear Reader,
Warns a Bloomberg article:
“There’s a thin line between a trade war and real war.”
“Consider all the major conflicts that began as trade disputes,” the article continues:
- The Lelantine War; the Punic Wars; the first Byzantine-Bulgarian War; the Anglo-Hanseatic War; the French and Indian War; the Opium Wars; the First Anglo-Dutch War and its even more fun sequel; the Battle of Naboo — in fact, more often than not it’s hard to separate economic wars from the shooting kind.
Just so. The first Byzantine-Bulgarian War has always held out particular fascination for me.
Day and night it seizes my attention… as a neighborhood candy store may seize the constant attention of a child.
Yet I let it pass.
Trade War Lead to Shooting War
Here the author cites the United States trade embargo against Japan prior to the nasty surprise at Pearl Harbor:
- Most Americans think the Japanese surprise attack on Pearl Harbor was… a total surprise. And while it’s true the Japanese Navy’s target was unexpectedly audacious… the proximate causes were the American embargoes in 1940 on scrap iron, steel and especially oil to the Japanese Empire, followed in 1941 by a freeze on Japanese assets in US banks.
- The US was cutting off the blood supply of the heart of a Japanese war machine fighting expansionist conflicts across Manchuria, China and Southeast Asia. When bellicose countries are backed into an economic corner, bad things happen.
Here then is a question:
Might Chairman Xi “wag the dog” against the president’s 145% tariffs?
Can China Survive Trump’s Tariffs?
The dog wag refers to a military escapade. It is intended to divert a people’s focus from domestic wobbles.
They will circle around their flag, as the theory runs — and their political leader.
Let us consider, then, the Chinese economic example.
China’s economy had been shedding steam prior even to the tariff rumpus.
It has been expanding at its lowest pace in decades. Its credit markets are under fantastic strain.
Unemployment — particularly youth unemployment — is on the jump.
Meantime, the American president’s tariffs may axe one entire percentage point from Chinese economic totals.
Thus China’s economy may suffer abominably under them.
Beijing Fears Losing “The Mandate of Heaven”
Above all else… China’s political leadership wrings its hands over domestic tumult.
Well is it aware of Chinese history. That history is a nearly ceaseless cycle of fracturing and uniting.
China stands presently united. Yet its leadership fears fracturing.
And severe economic woes, in their estimation, risk another fracturing.
Might China’s leadership therefore waggle the canine against domestic economic distress?
Might it even initiate armed conflict with the United States to maintain domestic legitimacy?
Freedom Financial News contributor Jim Rickards:
- Communist Party leadership is desperate to maintain the support of the people, or else it risks losing the “mandate of heaven.”
- China does not want war at this time. But diverting the people’s attention away from domestic problems toward a foreign foe is an old trick leaders use to unite the people in times of uncertainty. Rallying the people around the flag is a tried and true method to garner support.
- If China’s leadership decides that the risk of losing legitimacy at home outweighs the risk of conflict with the United States, the likelihood of war rises dramatically.
- I’m not predicting it, but wars have started over less.
Why China Might Not Risk War
Would China proceed against the United States for the reasons listed?
I am not half so convinced that it would.
Many fear China’s dog-wagging would assume the form of a Taiwanese invasion.
The prospect of Chinese moves against Taiwan — in fact — animate boosters of United States aid to Ukraine.
They argue that should Mr. Putin seize Ukraine, it would inspire Chairman Xi to seize Taiwan.
Chairman Xi would conclude that “aggression pays.”
Yet would he?
His Russian chum has been chewing into Ukraine three years and running.
He has not bitten off very much land.
And his army has withstood substantial losses — likely nowhere near the losses Western sources claim — yet substantial losses.
Even if Ukraine throws down its arms tomorrow… would Chairman Xi take inspiration from it?
I do not believe he would. He would likely fear an extended campaign.
And being Chinese, he would likely recall his Sun-Tzu:
“There is no instance of a country having benefited from prolonged warfare.”
Invading Taiwan Would Be Very Risky
What is more, modern China has little martial experience.
Its last significant tangle occurred in 1979 against neighboring Vietnam — during which it absorbed a lovely trouncing.
Meantime, a Taiwanese invasion would be an exceedingly risky affair.
Taiwan squats some 100 miles off China’s southeast coastline. A maritime assault would be menaced by submarines, aircraft, mines and likely swarms of naval drones.
The surviving invading force would find few suitable locations to wade ashore. That is because the Taiwan coastline is largely rugged.
Thus I do not believe China will attempt to gobble Taiwan.
The risk/reward ratio simply runs against it.
And a botched invasion would almost certainly cost Chinese leadership heaven’s mandate.
More likely, I believe, is a Chinese naval blockade of Taiwan.
It too entails risk… yet less so.
Regardless, the entire discussion reveals that “The Grand Illusion” is itself an illusion.
The Grand Illusion
Just prior to the First World War, British journalist Norman Angell authored a book, “The Grand Illusion” by title.
The grand illusion — in his telling — was that nations in the modern age benefited from armed conflict.
He argued that extensive economic interconnectivity between nations had rendered great power war obsolete.
They simply stood to lose too much. Thus in October 1913 Mr. Angell wrote:
- The cessation of military conflict between powers like France and Germany, or Germany and England, or Russia and Germany […] has come already. […] Armed Europe is at present engaged in spending most of its time and energy rehearsing a performance which all concerned know is never likely to come off.
That performance came off 10 months after writing. The curtain did not fall for four illusion-shattering years.
Today’s drummers of globalism have maintained that economic interconnectivity between nations — between the United States and China in particular — would pacify their relations.
Yet the present drift of events indicates theirs was the grand illusion.
And all illusions yield ultimately to reality.
Brian Maher
for Freedom Financial News
