Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

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Friday Morning Highlights and Lowlifes

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On February 27, 2026

48 Comments

~by Sean Paul Kelley

Couple of random notes this Friday morning, mostly economics related, some silver news and my personal reaction to portions of the discusssion in Ian’s “Is Virtue An Advantage Or Disadvantage For Societies?” post.

First, econonomics. It looks more and more like we are heading into a 2008-style credit crisis/crunch.

Don’t believe me? Well, the FED flooded the US banking system with $18.5 billion to ease liquidity concerns during the week of Feb. 17 because cockroaches be busting out of just about every private equity/credit shop present. And we all know, if you just don’t turn on the lights, you don’t see roaches.

These kind of economic events don’t do what you think they are going to do. Many people assume any economic crisis in the US will lead to a rapid dollar hegemony collapse. But as I explain, the dollar will actually get stronger:

“[W]hen the credit crunch gets a full head of steam it won’t lead to reserve status collapse of the dollar. It will, counter-intuitively, but inexorably pump the dollar higher and stronger as NYC becomes a 2008-like Black Hole for cash allocated dollars world wide desperate to fill potential insolvency holes in banks and shadow-banks/private equity credit boutiques . . . . “

That’s what happened in 2008. As I conclude, “Dollar reserve collpase will be a result of national insolvency, not a global credit-crisis/crunch.”

Basically what End Game Macro is saying in this post is the following: the economy grew little to naught post-COVID to present. It basically did what equity markets sometimes do: trade sideways for years, decades even. For example, after the 2008 Financial Crisis the S&P 500 traded sideways for four years until it broke out in late 2012, early 2013. That’w what the US economy has done since 2020: move sideways, although Biden-inspired over-immigration skewed the growth numbers, as End Game Macro notes:

“From 2021 to 2024 the U.S. saw over 11 million arrivals, more than 3 million in 2023, and net migration around 2.4 million per year in 2021 to 2023. That can lift GDP and payrolls while masking weaker per capita momentum. As the surge cools, the masking fades.”

I’m not being anti-immigrant here, I’m just stating the facts. As Trump dug his heels in and unleashed his ICE goons, the econ surge faded, and fast. End Game Macro also notes, a lá 2008 that system-wide credit stress is popping up whack-a-mole like in almost every category:

“As of February 2026 serious delinquency is flashing late cycle strain. Auto loans 5.2 percent, credit cards 12.7 percent, student loans 9.6 percent 90+ days past due with estimates as high as 16.3 percent turning delinquent late 2025, and FHA delinquency 11.52 percent. Job quality also reflects strain.”

And I’m not even going to touch on the downward revisions to US employment except to say we’ve not gained a single job, but actually lost millions. The BLS hints at the size of the disaster in jobs “recovery.”

Last econ note: big move in India just confirms my thesis/argument/assertion that the combined wealth of the West is undergoing a multi-decade transfer back to the East:

“For decades, the price of silver in India—the “diamond hands” of the silver world—was dictated by a small group in London and USA. Indian ETFs used the London Bullion Market Association (LBMA) prices, which often had nothing to do with the actual physical demand on the ground in India.

The Move:

On February 26, 2026, SEBI officially announced that starting April 1, 2026, Indian mutual funds and ETFs will no longer rely solely on London’s “AM fixing” prices. Instead, valuation will be based on polled spot prices from recognized domestic exchanges like the MCX.”

That’s one serious high hard one to the Comex and LBMA! This is a big fucking deal.

Next up: war in the Ukraine.

I’ve repeatedly argued that the Ukraine has lost all any and all possibility of regaining strategic initiative, and this reinforces it, way wickedly:

As I have noted ad nauseam for months now: the #Ukraine has lost any chance to sieze the initiative on the battlefield. All the #AFU can do is ineffectively counter-attack like a punch-drunk boxer. Trading lives for time will not work out for #Zelensky in the end and the end is coming sooner than he thinks.

On that note, the Red Cross confirms the Ukrainian to Russian KIA ratio. And it is bloody awful: 34/1. People often tell me that my belief in realism in foreign affairs is deeply immoral. Fuck that shit. International liberal hegemony is 100% at fault for all the deaths in the Ukraine. All. Of. Them. The denizens of Davos are uttely complicit.

In another grim note: Russia is in the initial stages of attacking The Big Banana. For the first time artillery shells are falling down with impunity on the city of Kramatorsk, like rain does on an average Portland Wednesday.

In regards to the conversation on Virtue and especially regarding the 800,000,000 number of Chinese lifted out of poverty. Well, Ian is correct. I did the numbers here back in September.

As regards Chinese leaders being better or worse than those in the West, especially the US: Ian, again is correct. The best way to view the argument is by winnowing it down to two prepositions. The Western view of liberty has its origins in peasant upward mobility in the aftermath of the Black Death and the clash of classes. Ergo: in the West we have the freedom “of” speech, assembly, bear arms, etc. . The Chinese view of liberty derives its origins from a long exigetical tradition of the origins and limits of dignity. In essences, the Chinese see liberty as freedom “from” poverty, warlordism, chaos, illness, crime, rapine, etc. . .  Both views are valid. Both views are limited. But at present the Chinese view of liberty is more effective in increasing the common good than that of the West.

On the posssible, now looking more probable, war with Iran, the US has ordered the evacuation of its embassy in Israel. I don’t know what could make it more obvious, you?

More as it happens.

And more happens. This comment by Ray Dalio reminds me when I was a young broker I read Robert Rubin’s memoirs, In an Uncertain World, and took to heart many of his investment rules, going so far as to write many down on old fashioned white catalog cards–this was before the internet, btw! and memorize what I wrote down. Don’t judge me. I was young and dumb.

Love Rubin or hate him, like James Carville said, when I get resurrected I want to come back as thet bond market. Rubin knew how to invest and make consistent returns. So did Barton Biggs, long time chief investment strategist at my alma mater, Morgan Stanley. Those two men shaped my view of economics, markets and political economy more than anyone or anything else. And yes, I read Jesse Livermore’s memoirs. They did little for me precisely because at his heart Livemore was un-disciplined. And discipline is key to making money.

If you take your own advice you’ll do well. If you’re like me and stayed retarded longer than markets remained illogical, well, you’re fucked. If I’d taken my own advice I’d have a small fortune like a handful of former clients do to this day.

One of my key rules: if you want to get rich, speculate in the stock market, but if you want to be truly wealthy, invest in bonds. In other words, the real wealth, massive cash-flow comes from debt service. That’s just an ugly reality humanity has yet to escape.

Another rule to live by: if an investment goes more than 15% against you, cash out. You can recover from a 15% loss, but a 25% or 30% or even 50%? Not a chance in hell. Ever.

Last rule: if you double your money in an investment, sell half of your gain and let the rest ride. I guarantee you’ll never lose a dime on that investment if you follow that rule.

One last comment on Rubin: he was a ‘careful contrarian’ and being a contrarian has served me very, very well. It’s a painful and lonely place to occupy at times so be prepared to man up. In the end recognize when you feel the least amount of risk is the precise moment of the most risk, the instant before you lose your ass.

Maybe more, maybe not. Time dictates all.

So the muse is a fickle-bitch. This analysis of the transcripts of the Trump-Xi phone calls is brutally and hysterically accurate:

This time it’s particularly funny because the Chinese transcript (fmprc.gov.cn/eng/xw/zyxw/20) has Xi telling Trump: “It is always right to do a good thing, however small, and always wrong to do a bad thing, however small.” This proverb might not sound like much but it’s actually extremely meaningful when you understand the reference.

The reference comes from the Romance of the Three Kingdoms, China’s Illiad and Odyssey plus the Aeneid and a smattering of Dante’s Inferno for good measure. It’s indicative of how urbane and historically literate the Chinese are. And a clear notice that China is what historians, anthropologists and others of such ilk refer to as a “high context” culture: 

China is a High Context culture, a communicated message has different layers of meaning, While America as majority of the West is Low Context. The other culture/language that is High Context is Arabic. To understand the spoken words one need to be deeply rooted in its culture, its history and religious tradition.

Spoken like a true scholar and humble student.

I want the last word. Heh! But seriously, silver trading at the Comex closes the day sharply higher, firmly walking through a wall of resistance at $92, ending the day at $93.06, up 7%. A very bullish closing price for silver. Silver bugs should sleep happy tonight.

 

 

 

Silver: East Versus West

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On February 12, 2026

16 Comments

In my long post about silver prices, I talked about a reversion to the mean. This is something that frequently happens in life: something overshoots the norm and then it swings back and overshoots the abnormal. Slowly but surely it finally settles smack in the middle of the bell curve, to use a shit metaphor.

This is what we’re seeing in silver right now. For 150 years silver has underpinned a great deal of US monetary decisions. Then, for the last 50 years the United States fostered and protected a rentiers silver market by turning a blind eye to manipulations in the paper markets at the Comex and simultaneously creating a rentier situation for the distributors of silver buillon in the country. If I went into detail how that happened this post would never end. Needless to say it was a very cozy arrangement that is unraveling every day and it’s something that has the large silver distributors very, very worried.

I’ll give you the short version: the US mint prints the coins, proofs, bars, etc. It then sells that silver to about five large national distributors for a little bit under the spot price of silver. Then those large distributors turn around and mark up the silver bulliion by about 25% and charge huge premiums for every coin, bar, proof, etc., Cozy! Like I said, and like all good rent markets it produces no value. N0w, sometimes this has been done to keep silver in a stable range for industrial purposes, but after the US wholesale deindustrialized beginning with Clinton but turbocharging under Bush–to fund our illegal wars–the justitication fell apart.

While we sold off all our capital stock to China, its demand for silver became unslakable. As I noted in a previous post one gigawatt [error corrected, mea culpa, SPK] hour of power from solar panels requires 1,000,000 ounces of silver and that’s just for solar panels. Silver goes into so many more things than we can possibly imagine. Pick someting electronic in your house; its got silver in it. Silver is the single most important industrial metal in the world because it is the most conductive and oxidizes less than only one other metal: gold.

But I’ve digressed from my argument.

For at least 150 years, starting with the opium wars, the balance of trade from East to west was very much skewed to the west: let’s call it what it was: economic pillage masquerading as lifting up all our little brown sisters and brothers. All of the wealth in the east, and that includes India, was over the course of 350 years, siphoned west. That’s economic fact, although people don’t teach economic history, which is a shame. They should.

I say all of this because the Comex has literally become a casino. For example, the total number of registered bars, registered meaning it’s in the vaults and it’s there for delivery has fallen under 100,000,000 ounces it’s now 98,000,000 ounces.

To make matters worse, there are 65,000 contracts of open interest on silver futures at the Comex right now, due in two weeks, that if optioned require the delivery of 325,000,000 ounces of physical silver. Where is that kind of silver going to come from? Pawn shops? Coin dealers? GTFO! Comex is in the grips of a slow, existential crisis, that it’s going to lose.

If those contracts are exercised at the end of February, because they’re March contracts, there is absolutely no telling what kind of chaos the US financial system might endure. Why do I say the entire financial system? The dreaded ‘D’ word.

Remember mortgage backed securities, CDOs, CDO2, synthetic CDOs etc. . .

There are similar derivatives in the silver market, but they exist in a black box, undisclosed so nobody really knows how much the open interest or notional value really is or who owns the risk—although the prevailing guess is about $1trillion USD notional. If the Comex implodes the cascade effects might well resemble what happened to those two Bear Stearns Hedge Funds in the summer of 2007 that set off the 2008 Financial Crisis.

Even if the Comex manages to extend contracts out a few more months, the physical supply of silver does not exist. I repeat there is no physical supply anywhere that can meet this year‘s demand for silver. Only two places comes close to the silver necessary for global demand: one is already fully allocated in the Canadian vaults in Ottawa in Toronto and that silver is not going to be let go of. The other is silver owned by retail investors. But as I have said before: silverbugs aren’t going to sell for $95, not $120, not $175. Not going to happen.

So in two weeks time, it looks like the Comex is going to implode.

How about over in the East? What’s China doing?

Chinese market regulators are actually doing their job. Here’s how, as I am quoting Dario at this link:

“What the Shanghai future exchange just did and what they did yesterday is effectively saying that starting from the last month of February that (it’s not a coincidence is the same day when the settlement for March 2026 futures contracts and the Comex begins starting) from that day any participant in the exchange that is not purchasing contracts for [physical] hedging purposes and even if purchased for hedging purposes they haven’t been allocated [a] physical delivery quota all their quota for silver in the front end contract is going to be brought down to zero.

So what the Shanghai future exchange here is saying is like okay game is over. We have to restrict the physical silver that we have left here for settlement for those that need it from an industrial perspective. So for hedging purposes and we need to keep the real purpose of the exchange going otherwise if things continue in this way we can effectively shut for business and that is going to be a huge mayhem not only across China but across Asia.

What’s China doing? Well, those communist bureaucrats that oversee the Shanghai Futures Exchange are doing something remarkable: they are working as hard as they can to preserve the sanctity of a free and fairly functioning market dedicated to true price discovery. Listen to the full podcast. You’ll listen in disbelief. The Chinese are better free-marketeers than the corrupt managers of the SEC. I’m dead serious. Chinese regulators make our SEC look like a collection of jackasses at a rodeo-clown show.

So, here is how this plays out: if Comex implodes—which is probable—but Shanghai muddles through, which given its bottom of the barrel minimum silver reserves is going to be extremely hard to pull off, but not impossible, massive amounts of wealth will accelerate their repatriation into the mainland. For over a thousand years silver formed the basis of Chinese monetary policy. They know what they are doing.

And the West? The West will reap what it sowed for near on 500 years. Our wealth is soon to be a multi-century river filling the current account surplus of the East.

Just watch.

IT SHOULD GO WITHOUT SAYING, EXCEPT IT MUST BE SAID: THIS IS NOT INVESTMENT ADVICE. THIS IS OPINION, FULL STOP. DYOR. 

 

On the Necessity of Bearing Witness

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On November 11, 2025

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Some stories are too difficult to tell in the hours, days or weeks after you experience them. Over time, however, they fester; begging to be told; becoming more insistent as the months and years pass. Some even begin to haunt a writer more and more, day by day until the tale must be told. Last night’s nightmare compels me to relate my tale now.

In late November of 2008 my bus from Vietnam to Siem Reap developed issues and required a stopover in the Cambodian capital, Phnom Penh. It had been a sleeper bus so we were told we’d have a full day in the capital and the bus would leave the next day. Traveling plans like war plans rarely survive contact with the road. Growing ever more patient with detours, I inspected my guidebook, back when using Lonely Planet’s was a thing, and planned my day.

Let me be clear: I am no fan of war or atrocity porn, but I do understand its allure, although I am, thankfully, largely immune to it. On the other hand and possibly more importantly, I also recognize and empathize with the need to preserve places where truly reprehensible atrocities of human history occurred. They are to be preserved that future generations witness, feel, and have the opportunity to comprehend even the smallest portion of the enormity that took place underfoot. Maybe, just maybe, such lessons might be passed on to others who will never be able, or be allowed, to experience such hallowed ground.

Many practicing and secular Jews make pilgrimages to sites where the Shoah occurred. I’ve inquired why and each query has been answered universally. They describe a compulsion to bear witness, to honor the fallen, that they remain alive in living memory. Hard to argue with. Because the Armenian genocide occurred in a more dispersed manner Armenian pilgrims face much more significant hurdles. But, when possible Armenians likewise honor their ancestors. I cannot speak to what happened in Rwanda in 1994. I am aware of such places in Guatemala, heard in faint whispers where no gringos are welcome, nor visit, quite understandably.

How to explain how my choices that day were made? I may have only been 13 years-old but the 1984 movie ‘the Killing Fields’ left me with a powerful impression. An impression I recalled that November day and I felt oddly, inexplicably, duty-bound to see what I did not want to see. The killing fields were not my first stop that day however. That honor (poor word choice, I know) fell to the former interrogation and torture center of the Pol Pot Regime’s perceived enemies Tuol Sleng. Here I endured, what I can only describe as a feeling of almost unbearable witness to sickening crimes.

Two, and only two, examples need suffice.

First, in one room of the prison sat a metal frame bed where regime “enemies” were restrained. Once restrained, electrical leads were attached to the frame. Most expired for no reason at all. Sometimes the guards just left the room to have a smoke. At others they left to eat lunch. But most often the guards let them die because they knew no questions they might ask would be satisfactorily answered. They knew they were killing regular people, completely innocent.

The second example is this photo, a photo that haunts me to this day. The walls of Tuol Sleng are papered with them, all of them innocent and to this day they go unnamed. If you cannot feel the fear radiating from this photo you are devoid of the empathy gene.

In all I spent about two hours wandering through Tuol Sleng. I will never return.

But, my day was far from over. After walking out of Tuol Sleng I hailed a tuk-tuk and asked him to take me to the killing fields, which are about two kilometers outside of Phnom Penh. What I recall most vividly about this horrifying place was the care I had to take where I walked. (NOTE: click on the following links at your own risk.) The ground was uneven and I was told at the entrance to stay on the high ground, as the sunken spaces were mass graves. Christ, I shudder visualizing it even now. Then there were what I can only describe as large glass cases, best suited as terrariums for large pythons or boa constrictors. Each case was filled with one of the following: femurs of the dead, human ulnae and radii, and hip bones. Piling Pelion on top of Ossa, mason jars filled with human teeth sat atop each glass case. Finally, the Cambodians being Buddhists made a four story glass stupa—a Buddhist reliquary—filled with human skulls.

Towards the end of my increasingly heavy-hearted meanderings I noted crimson rays filling the sky. I hailed a cab to my hotel, shambled up to my room, slouched off my backpack and sank onto the bed, sighing deeply from emotional exhaustion. I didn’t know what I felt—except despair. I walked downstairs and asked where the nearest bar was. Now, I am not one to drink alone; but, I confess that I was incapable of dealing with what I was feeling at the time. So, I sat down, alone and in silence and got drunk. Not tipsy, but drunk. I barely recall making it back to my room, but I did. The last thing I recall thinking before I passed out was, “I’m going to be haunted by this for a long time.”

The next morning after dreamless sleep, no ghosts woke me up. All that greeted me were overcast skies, a wicked hangover and my noon bus ticket to Seam Reap.

Two Quick Hits

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On November 4, 2025

18 Comments

~by Sean Paul Kelley

First, Dick Cheney died today. He was 84 years old. It’s a personal policy of mine to avoid speaking ill of the dead on the same day they die. I’ll comment on the consequences of his time in office some time soon. You are certainly free to say whatever you want in the comments.

Second, when it comes to military power, Singapore is a nasty, mean little porcupine crossed with a skunk whose motto is FAFO and if I were a neighbor I wouldn’t want to find out. (What a damned fine run-on sentence, yeah?) It’s also something their new Victory Class MRCV (multi-role combat vessel) makes abundantly clear and reminds me of an experience I had while living there.

In the run-up to National Day, or Independence Day, I don’t remember what it’s officially called but the military was out in full force, rehearsing its marching routes for the celebrations.

I lived on Beach Rd. and was sitting out in front of my favorite duck restaurant when an absolutely terrifying thunderclap occurred. I damn near pissed my pants. I looked up at the clouds, as thunder is kind of rare in Singapore, and saw the shadow of a triangle pass a kilometer down Beach Rd. from where I sat.

“What the hell was that?” I asked the waiter.

“Just a jet practicing for the parade down our street,” he said all nonchalantly.

Then the f**king thing made another run down Beach Rd. no more than 300 feet overhead. The windows rattled everywhere.

My experience in that moment gave me just a small inkling of how terrifying it must be to face the business end of a US F-15. It’s a feeling that cannot be described.

One I am not interested in repeating, either.

 

 

Four Randon Econonic, Political, Geopolitical and Scientific Musings

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On September 15, 2025

9 Comments

First economic: The US dollar is down 5% over the last six months against a basket of currencies. And over the past year, it’s lost 9.6%. The biggest winner against a dollar has been the euro which has gone up 13% however, which truly is a win for Europe because it makes their natural gas imports from the US less expensive. But their natural gas imports are still a poison chalice. Expect the dollar to continue its slide, perhaps precipitously at some point in the New Year.

There were large moves out of US equities in the spring confirming the adage “sell in May and go away.” What September will look like is anyone’s guess, especially as Israel is more than likely to start the second phase of its war against Iran? Or October—that worst of months for Wall Street? What happens if Iran closes the Straits of Hormuz and oil goes above 100 dollars a barrel? That would be great for oil producers, but it would be terrible for markets across the globe, even China, possibly leading to a worldwide recession, especially with Chinese growth being somewhere between 4% and 5% at present.

Regardless of what happens in September or October—both always being bad month’s economically for the US economy, America’s bond market and the value of the dollar will continue its downward trajectory because America’s lenders are now demanding gold for loans instead of treasuries. This smells to me like the beginning of the end of dollar hegemony.

It makes me wonder what kind of “store of value” the BRICS will adopt to support their currency? Will it be a basket of their currencies? Will it be backed by gold and petroleum? That would be truly hard-core, because it would mean we were in for a long era of tight money. Our entire lives, actually, the entire history has been based on easy money. And as you know money creation is only possible when using a fiat currency.

There are many ways to imagine what they’ll do. Maybe blockchain? Who really knows? But there are other commodities that do have a store value, silver among them, maybe even rare earths and others they could use. It certainly is an interesting time to live.

Second domestic political: Niall Ferguson in his interview by Charlie Rose posted a week ago on the Internet was asked about Trump‘s challenges of outright ignoring the constitution with the following question: are we the Roman Republic, is this or are we witnessing the collapse of the constitutional order like the Roman republic. Rose asks if Trump is Augustus. He clearly is not. I would say that Trump is more like Marius and the Kennedys were more like the brothers Gracchi. In fact, I made this argument on a graduate school paper that I got a very good grade on, but in which my professor seriously disagreed with my analogies. Regardless I would say that we are at the beginning of the end of our constitutional order, and that we are looking down the barrel of Caesarism. It’s on the way. Maybe two years, maybe four years but it’s coming. Will it be a general? Will it be a politician? Those are questions we simply can’t answer. But as Ian Welsh has consistently predicted America is heading for a collapse, be it constitutional or economic or both it’s gonna happen and there isn’t anything anyone of us can do about it. Besides, Ferguson, while whip-smart, is kind of a tool.

Third is about some weaknessess the SCO currently must contend with if they are to become the anti-NATO military block. Here they are in no particular order of importance: One, the nations that make up the SCO are too diverse and often times their interests do not align with everyone in the SCO. For example, China and India have serious border issues. Pakistan and India have serious issues in Kashmir. Those are just two examples of several potential conflicts between members of a block, supposedly to oppose NATO. The issues between Pakistan and India make the intra-NATO issues between Greece and Turkey look like a family arguement on Thanksgiving.

Second, as the former director general of Russian international affairs Council said in a recent interview, “ the mandate of the SCO is too general.” The SCO can focus on security, development, or terrorism. Not all three.

Third, China is by far the most powerful member of the SCO and that creates a dangerous asymmetry in the organization. Much like the United States dominated NATO for so long and skewed it’s purpose after the Cold War for its own unfathomable means.

Fourth: This essay on the relative merits of “Superradiance,”.  Is well worth the three minutes it will take to read, plus it is comprehensible to the layman. The essay describes Superradiance as “a collective quantum optical effect in which a group of emitters, such as atoms or molecules, emit light in a highly coherent and amplified manner.  In the context of mammalian neural systems, superradiance occurs when a group of neurons collectively emit photons, resulting in a stronger and more coherent signal compared to individual neuron emissions. This coordinated emission of photons across vast networks of microtubules within neurons could potentially achieve the long-range coherence necessary for the emergence of consciousness.”

The essay stands as a correction of sorts to Sir Roger Penrose’s “Orchestrated objective reduction (Orch OR)” theory of human consciousness, which Wikipedia describes thusly: Orch Or “is a controversial theory postulating that consciousness originates at the quantum level inside neurons (rather than being a product of neural connections).” In short, says Penrose, “Consciousness does not collapse the wave function; instead it is the collapse of the wave function that produces consciousness.”

One thing we do know is that consciouness is decidely not computational and most likely occurs in the quantum realm.

As you can tell, I dig this kind of stuff.

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The Solution to The USA’s Taiwan Dilemma

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On September 11, 2025

16 Comments

“The empire, long divided, must unite; long united, must divide. Thus it has ever been.”

三国演义 ~by Luo Guangzhong

Earlier I promised to post my plan to prevent a war between the United States and China over Taiwan. I’ve traveled and met with Taiwanese diplomats. They are some of the most sophisticated operators I’ve ever encountered. Taiwan is a highly advanced technological country. Very wealthy, with a sophisticated full coverage heath care system and a vibrant democracy. Furthermore, based on the Shanghai Communique issued on February 27, 1972 by Nixon and Mao, both mainland China and the USA formally acknowledged that “all Chinese on either side of the Taiwan Strait maintain there is but one China”.

The Communique goes on to state the US side does not accept a violent solution to the unification of the two parties and the Chinese side retains the option to violence if Taiwan ever declares independence, paraphrasing here, folks. It’s been a long time since reading my Kissinger.

Conversely, I have traveled seven times to China. Here is an idea most Americans will probably never understand. China’s potential to utilize enormous amounts of soft power is profound. This is based on China’s circular view of history and that China has been invaded and ruled by foreign powers many times in its history. In each and every case China has overcome said invaders very differently than the way the Russians have. Or anyone else for that matter. Where the Russians trade space for time to husband their resources for a great counter attack and push the invader out of the country, China seduces the invader, with its ancient, deep, amazing and incredibly seductive culture. I cannot emphasize enough the depth, breadth, and tantalizing sophistication of its culture, be it material, artistic, political or spiritual. I do, after all, practice Chinese Chan Buddhism in my own life. Every time China has been invaded and completely taken over by a foreign power this strategy works. Even today we’re watching Chinese movies on Netflix. That is the use and export of soft power. And unlike America, that has only 250 years of history to draw upon its soft power, China has almost 4000 years of history to draw upon. The efficacy of Chinese soft power is not to be underestimated. It is indeed seductive.

Now the question moves to goals and intentions. And here an understanding of Chinese history can aid us in a better understanding of the present Chinese leader, Xi Jing Ping.

What are Xi Jing Ping’s true goals? Simple, he seeks membership among the greatest of Chinese emperors. The greatest of Chinese emperors are judged by a single metric: did they unify all of China? As the opening sentence of the great Chinese novel, The Romance of the Three Kingdoms, I quoted at the beginning of this essay, unification is the way the Chinese see themselves when in a golden age.

This compulsion to unify all of China is the defining source of Xi’s ambitions. And that means Taiwan. Taiwan is the last remaining province of a fully unified China. China equal to that ruled by the Qin Shih Huang Di, the very first emperor to unify all of China, or the great conqueror Han Wu Di, or Li Shimin of the mighty T’ang or Zhu Yuanzhang of the wall building Ming. It is to this rank of Chinese men that Xi aspires.

What should America do? I have spent a lot of time thinking about how to avoid a war with China that most people are certain is inevitable. They call it the “Thucydides Trap.” But, if the study of history has taught me anything it is that nothing is inevitable, contingencies matter, and human agency means the most. We may live in a complex adaptive system, but nothing, nothing is inevitable. Therefore, America must find a way tone down its arrogance and find a way to peacefully unite Taiwan with China.

Here is how I would do it if I were president.

First, I would engage in a series of CBM’s (Confidence Building Measures in diplospeak) with Xi Jing Ping regarding our naval stance in the Straits of Taiwan. I would make it policy that no American naval ships traverse the Straits of Taiwan any longer. Then I would halt the sale of advanced weapons to Taiwan.

Second, I would begin preparing the Taiwanese to consider peaceful unification with the mainland along the lines of the British handover of Hong Kong to China in the 90s. I would make it clear that we would not consider unification unless Taiwan was allowed to keep its democracy, and democratic traditions for a minimum of 80 years. I would do this to assuage the Taiwanese about a possible authoritarian takeover of the island in the case of unification. China did one nation, two systems successfully once before. They can do it again.

Third, I would secretly engage Xi Jing Ping with the following proposal: the United States of America would fully encourage and accept the unification of Taiwan with the mainland under the following conditions. Number one, Taiwan would have three representatives on the politburo, one of which would be a power ministry, either interior, defense, or foreign affairs. My fallback position, which is my true goal of course, would be the acceptance of two politburo members from Taiwan, but I would not relent on one serving as a power minister in one of the three ministries aforementioned.

I am relatively certain that Xi and the current politburo would agree to this proposal. It would serve to put Xi in the exhalted ranks of Chinese leaders in which he craves to be included. Mos timportantly, it would not harm a single vital national interest of the United States. The Chinese might have a salient in the first island chain, that being the island of Taiwan, but the United States would still have Korea, Japan, Okinawa, and the Philippines. Not to mention the defenses in depth that the second island chain provides us in the Pacific ocean. Much less the great fortress of the third island chain of Midway, Wake and Hawaii. Defenses in depth matter much more than a salient in the first island chain.

Now, I recognize this goes against every national security intellectuals thinking. It is completely contrarian. But the more I’ve thought about it over the last few years the more I believe that is the best way to avoid general warfare between two nuclear great powers from the Straits of Malacca to the South China Sea and into the deep blue waters of the Pacific.

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Losing Our Asian Allies – And Fast

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On June 25, 2025

32 Comments

Ian in his last post mentioned that our Asian allies are slipping away from us. While we pretend to strategically re-orient the Japanese are engaging in massive rearmament begun by Abe and being continued by the current government. Japan has lost confidence in the American security umbrella because of the deceit we’ve displayed in foreign relations. The Koreans? I lived in Korea. They’re simply apoplectic. Some are even at the point where they are willing to consider a loose confederation with the north, an entente of sorts so the South has the protection of the North’s nuclear umbrella and the North gains goods and services from the South.

This is simply unheard of. When I talked to one of my former students who now works in the foreign ministry and he told me this I was gobsmacked.

Ian’s correct. For 400 years the balance of payments from the rest of the world went to the Littoral seapower states. For the last 50 years the balance of payments has been reversed.  All that gold is going back home. In one generation the United States has squandered all the goodwill and wealth it received during WWI and WWII. China in the last 50 years has lifted more people out of poverty than the rest of the world did during all of recorded history. Chew on that stat for a moment.

I will be visiting China and South Korea to do a 20 year retrospective tour and a 30 year retrospective tour on the former and the latter. I don’t know what to expect, but I remember China 20 years ago and being blown away.

The USA is in deep strategic shit. For 200+ years our power has been based on our complete hegemony of this hemisphere. For 75 of the last 100 years our main strategic goal has been the prevention of one power or an alliance of powers attaining hegemonic power over the Eurasian landmass. In the last six years we’ve abandoned that VITAL national interest for what? We’ve driven Russia into the arms of China. India lost all confidence in us. Now East Asia has.

If a single power or coalition of powers dominate the Eurasian landmass our two oceans will not protect us.

It appears I might have been wrong about the Israeli-Iran pissing contest being the opening act of WWIII. Good. What it really feels like is the first Balkan War in 1912. The calculus is being made in Beijing. And Tokyo. And Seoul. And Taipei. We lack the ability to protect our allies conventionally. And no one wants nukes.

I don’t have any smart quip to conclude with except a Spanish expletive, “la puebla es jodida.”

You get the idea.

The Palestinian Option for Kashmir?

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On August 14, 2019

4 Comments

Back in 1980, I visited Kashmir with my parents. This was before the troubles, and it remains perhaps the most beautiful place I’ve ever been.

Last week, India’s PM, Modi, abrogated clauses in the Indian constitution relating to Kashmir, which does not allow non-Kashmiris to buy property. As Margolis says:

Modi is clearly copying Israel’s Netanyahu by encouraging non-Muslims to buy up land and squeeze the local Muslim population. Welcome to the Mideast Conflict East. China is also doing similar ethnic inundation in its far western, largely Muslim, Xinjiang (Sinkiang) region.

Dai Lake, Kashmir

By their friends, you shall know them. I’ve never liked Modi, his demonitization was incredibly damaging to the Indian economy and hurt the poorest Indians. That he spends all his time buddying up to Israel’s Netanyahu tells you all you need to know about whether he’s more good than bad. (If it doesn’t, you need to self-reflect a bit.)

But Indians did vote for Modi in droves. It’s another episode of people, who are scared and have shitty lives, voting for the tough guy, thinking he’ll be tough for them, rather than for his core supporters. In Modi’s case, hard-right Hindus.

It’s worth remembering that the UN called for a referendum in Kashmir and that India never held it, because they know that, given a choice, Kashmiris would rather be part of Pakistan.

So, ethnic cleansing time! This is the world we live in, more and more, a place where the weak do as they must and the powerful do as they will (ever has it been thus, but sometimes it is less thus). For now, India’s the powerful one. Soon enough, it won’t be–because this BS is a distraction from actual existential threats to India, mainly around water. I can’t think of any major nation which is going to get hit harder than India.

Meanwhile, of course, both the Pakistani and Indian militaries are on hair-trigger alert, and both have nuclear weapons. Because India has a much larger army, if war does break out, Pakistan either goes to nukes or loses.

Brilliant.

 

 

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