(This is not scary, short fiction and probably not fit for click-farming.)
Sometimes I’m serious, a girl can be serious. I have to write a lot of analysis papers in school (yeah, some people still waste their time and money like that). I’m leveraging that effort here. This is part* of an academic paper I’m writing on the world economy in crisis (this part covers world inflation and China/Taiwan). It’s a draft in progress and, in the spirit of brevity (my target ~1000 words) and avoiding the verbose, I’ve simplified the narratives and removed graphs, diagrams and footnotes. Here we go:
Have you noticed that the world seems less stable and that your spending power has eroded since 2009 and especially since covid? You aren’t wrong.
The Fed balance sheet had never been over a trillion dollars before 2009. However, from 2009 (the banking collapse) to 2022 (COVID) the Fed moved our balance sheet from sub-1 trillion to 9 trillion - pushing about 50% dollar inflation on the world. We ourselves experienced 8% inflation.
Everything in the world is priced in dollars. If you look at cross-world currency settlements, you might think, ‘well, there's the dollar and the euro, the pound, the dirham and all these other currencies’ but there’s really not. There's only the dollar and the other currencies back-solve for how they pay for things in their own countries. That's the way the world works. So when we push 50% inflation (in dollar terms) to the world it affects everyone. Marginal currencies on the bottom of the financial structure collapsed. That would be Turkey, Iran (Iran controls Iraq now), Pakistan, Lebanon, and many many other currencies throughout the third world that hyper-inflated (became worthless).
So when people say, “can we all just all calm down and go back to business as usual?” There is no easy way to go back to 2% world growth and stability. Inflation is an insidious, destabilizing force. Even China’s economy is in deep, deep trouble - they’re in the midst of a real estate crisis, a banking crisis, a youth unemployment crisis, a trade surplus decline (because of their threat to invade Taiwan), a debt to GDP crisis (much worse than ours) and now, Trump is threatening tariffs that could bring their net income to zero.
China has said many many times - too many times to doubt it - that they will attack and absorb Taiwan by 2027 - period.
Why would they do that? Aren’t our economies too linked? Knowing we will have to retaliate? We don't know what President XI Jinping’s calculus is. The CCP doesn't see the world the same way we do and, like Putin, we may not be dealing with someone rational. It’s like when Putin moved his blood banks, tankers, air force and army to the edge of Ukraine - some said it was just ‘saber rattling.’ No, when the blood banks and tankers are moved - you’re a ‘GO’ - it’s just a matter of time.
Neville Chamberlain, the British Prime Minister now vilified for appeasing ******, wasn’t an idiot. He could not get his head around why ****** would plunge the world into war. They had lived through WWI and where was the profit in it - what reasonable reason was there for a world war in 1938? Let’s not make that mistake. Let’s take a moment and think it through.
Why is China obsessed with unifying with Taiwan? (1) History, the Chinese, who lost the revolution that brought the CCP to power fled to Taiwan (2) The democratic government in Taiwan is four times as successful as communist counterpart. Their GDP is higher, their worker productivity is four times higher, they enjoy a higher standard of living, (3) they are a success story that demonstrates what China could be if it weren't hamstrung with the communist party. (4) they want to deny us the tech, (5) Their culture and world view is different. In China there are no human rights and no truly private property. There is only what’s good for (Chinese Communist Party) CCP power - the CCP is everything.
Why protect Taiwan? Taiwan Semi is the chip manufacturer for the world. They are the only maker of 2mn chips - the most vital, powerful component for the AI and quantum computing races. The country that wins those races will control information for the next century. The loss of that capacity is an absolute, existential threat to the security of the United States. The fact that the US failed to keep current in this area is a major *****-up decades in the making.
Messages of deterrence are flying. One reason we bombed Iran - where we had to drop munitions, with precision down three tiny shafts, covered by a mountain, from whatever heights - and we did it - was a message of deterrence partially aimed at China. Proof that America still has the best and most lethal military in the world - and we aren't afraid to use it. The US admiral who commands our indo-pacific forces recently said - publicly - that “if China thinks they're going to either blockade or engage in some kinetic conflict with Taiwan, we will turn the Taiwan strait into a hellscape.” Even a limited naval engagement with China, in the Taiwan strait, could cost thousands of American casualties (think Korean War people).
What kind of leverage does China have VS the us? Recently:
China has stopped supplying the US with rare earth magnets - those are critical to making EV vehicles run.
China is denying America processed synthetic graphite - a critical component in every single EV battery.
China is withholding the lasers used in fiber-optic communications from the US (they are the single world manufacturer).
Those are single points of failure for US technologies and we must ‘Manhattan Project’ our capacity for their replacement.
Why did the Trump administration remove subsidies for EV vehicles? First, it plays to his base but secondly, removing the subsidies slows demand until we can fill those gaps ourselves. Part of the ‘Big Beautiful Bill’ earmarks billions to start addressing the failure points mentioned above.
What non-military leverage do we have VS the Chinese?
We hold the upper hand. China imports 13 million barrels of oil every day, 9 Bs of natural gas every day, 40% of their food every single day.and they need access to the American dollar system to acquire those goods. They are a closed capital account - no one will accept Yuan as payment. That is a single point of failure for them.
Conclusions: We should let the CCP know - make it very clear - that if they attack Taiwan, the first thing we’ll do is take them out of the dollar system. Pushing that button would be easy - but it will hurt us too in the short run. It may be a better deterrent than those US carrier strike forces - which are still an option if it comes to that.
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Songs for this:
Canary In a Coalmine by The Police
Invisible Sun by The Police
BLT Merriam Webster word of the day challenge 07/01/25:
Verbose = use too many words to convey their point.
*Other parts of the paper address subjects like the Russian economy (the effects of sanctions) and the Saudi & UAE turn back away from China towards the west (after Biden’s disastrous embrace of Iran and our new, harder Iran line) and ideas on steps to stabilize world currencies.
