Ian Welsh

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

Category: China Page 1 of 13

Trade Is Not The Primary Driver of Currency Rates

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On November 27, 2025

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The misunderstandings packed into this little bit of writing are stupendous:

Over the past few years, China has been in deflation, while the US has been in inflation. Yet despite this stark divergence, the CNH has still depreciated more than 10% against the US dollar. This combination — falling relative prices in China and a weaker currency — has made Chinese goods and services extraordinarily cheap in global terms. A vivid example: a night at the Four Seasons Beijing costs roughly $250, compared with more than $1,160 in New York

First, a 10% drop does not make a hotel room cost one quarter as much in Beijing as in New York. That’s ridiculous on the face. Almost everything costs less in China than in America. America has an economy optimized to drive prices high to extract maximum profit. China has economy with actual competitive markets: if you raise prices someone else will come in underneath you. Almost all of America is operating in or as if it is in an oligopoly. There is little actual price competition because even when there are competitors they figure that competing on price is stupid: it hurts both of them. Why not both raise prices to usurious heights? Win/Win.

This doesn’t happen in China because it has competitive markets and it has competitive markets in large part because China will throw executives in prison or execute them if they engage in this sort of price collusion, whereas in the US, though ostensibly illegal based on the laws on the book, such collusion has been made legal by decades of court decisions and prosecutorial decisions. (Prosecutors mostly don’t, and when they do courts almost always refuse to convict.)

China also has lots and lots of firms and genuine low barriers to entry. If you try to collude, someone from outside your industry will enter and undercut you, and often this will be someone with deep enough pockets that you can’t win a price war with them.

Second, currency values outside of hyperinflation are driven primarily by demand for currency. That isn’t primarily about trade, it’s about investors and financial carry trade. China unquestionably has a more dynamic and larger economy than any Western nation, but it isn’t financialized: Chinese companies don’t produce the sort of returns that American companies have over the last 50 years. This is deliberate policy: if they did, then China’s economy would suck for ordinary people, like Western economies suck for ordinary people because prices would be much higher. (See that Hilton room, though it cascades thru the entire economy, with rent and food at the low end much cheaper in China too.)

It is also pretty hard to invest in China as a foreigner, while the US is set up for foreign investors. Even if you want “China exposure” it’s hard to get.

So the Yuan isn’t in massive demand, because there aren’t bullshit over-sized returns like the AI bubble. The central bank doesn’t run its policies based on “the stock market must always go up.” America has spent 50 years burning down its real economy to produce outsize “profits” due to asset pumping. China keeps asset prices under control, and when a bubble does occur, as it did in real-estate, they deliberately deflate it, bearing the cost.

None of this is particularly unique, by the way. It’s basically the way the US economy was mostly run from the 30s thru the mid 70s or so. The policy details, the ways things are done are different, but American policies were meant to encourage real economic growth and if you look at a stock market graph you’ll see it traded sideways. No 50 year bull market. Asset bubbles were discouraged. You can’t have a good economy with high real-estate prices, just can’t be done and the stock market is a secondary market, not a primary one. Emphasizing it is sheerest insanity.

There is very little that China has done which is genuinely unique, despite jingoistic assertions otherwise. The playbook they have run is the same one almost every successful industrializing nation after Britain used, and very similar to the Japanese model. What is different are two things. First, the scale, when 1.4 billion people industrialize and modernize, it shakes the world. Second, a genuine desire to help the poor, which is extremely rare during industrialization, though not unheard of. (The Gilded Age did not care about the poor. Britain’s industrialization period was driven by hurting the poor as much, or more, than they could bear. They were far better off as peasants than in factories.)

Anyway, countries can be real rich (lots of genuine productive capacity with low prices and dynamic markets) or they can be fake-rich, with financialized markets that squeeze the last penny out of consumers and immiserate workers, leading to non-competitive markets and oligarchy. China is rich. America is fake-rich.

 

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By The People? For the People?

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On November 25, 2025

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The simplest measure of a government’s legitimacy is whether or not it works for the benefit of the people. Democrats also believe the government should be selected by the people.

America does not meet either criterion at this time. Yes, there are elections, but the duopoly means that voters tend to choose from a small slate, pre-selected by others. The most visible occasion of this was when Obama had every Democratic presidential nominee candidate drop out so that Biden could defeat Bernie Sanders. Year in, year out, most of the candidates put up for election are those chosen by party insiders.

This is not always true, of course. It is less true on the Republican side, where primarying incumbents often works and where a vocal but grassroots minority does have significant power in choosing candidates. On the Democratic side it’s mostly true, but some candidates do slip thru: Mamdani for New York City mayor being the most recent example.

Still, overall, it’s questionable that Americans really choose their own government, and that’s true in most Western countries. In Romania, for example, the unacceptable candidate who was going to win was simply arrested and banned from running and there is a movement to make Germany’s AfD illegal. In Canada the party leaders simply refuse to allow pro-Palestine candidates, even those who are selected as candidate by their riding, to run.

The more accurate view is that political parties in most ostensibly democratic countries are political oligarchies. How much this is true varies. First past the post system tend to have very strong oligopolies, while proportional representation countries allow more flexibility.

Perhaps worse when outsider candidates do break thru and win they usually don’t wind up voting for and doing what they ran on. You can see this (though it’s a bit of a stretch to call him an outsider) with Trump. It’s visible with AOC, the darling of the left who has voted for almost all Israeli aid packages and who has clearly decided to become an insider.

So first there’s a huge barrier to electing people who support outsider views, then most of them are co-opted. If there’s a real threat of an outsider taking the top seat, the establishment works hard against them. We saw that with Corbyn, where one academic study found that about 80% of all news stories lied about his policies.

It’s fair to say that most Western countries don’t really have “government by the people.” The mechanisms still, partially, exist. The form is there, but the reality isn’t. They’re political oligarchies. (The EU is worse than the US.)

And we all know that most Western governments aren’t “for the people.” For fifty years they’ve been immiserating their own people, becoming rich themselves and forcing money upwards, creating a financial oligopoly on top of the political oligopoly. I often say that for most Westerners their most dangerous enemies are their own politicians. Putin isn’t a danger to you as a EU member or America. But Macron or Von Der Leyen are. They’re the ones destroying your standard of living and piecemeal destroying social supports. This is even more the case in Britain, where there hasn’t been a Prime Minister whose primary legacy wasn’t hurting most Britons since the 70s. (Well, maybe Tony Blair had that as his secondary goal, his primary goal being hurting Iraqis to toady to America.)

Great systems are judged by their great opponents. For much of the 20th century that was the USSR and it is not entirely a coincidence that when the USSR was strong, Western governments treated their people well. Of course that isn’t all there is to it, there were the oil shocks, Vietnam, etc… But the West was ideologically scared of communism and when it seemed to work, they felt they had to make capitalism work.

These days the great opponent is China, and the one party communist state running a hybrid capitalist/socialist economy. And the problem for the West is that China’s government, while not “by the people” is definitely “for the people”. They’ve brought more people out of poverty than anyone else ever has. They keep rent and housing and health care prices low, as deliberate policy. Incomes are lower than in the West, but costs are much lower. You can buy enough food to feed someone for a week for $50 in most of China, with ease.

They also create the future: high speed trains, for example. They build real public infrastructure. I was very impressed when they built rest and relaxation places for delivery workers: they cared that such workers were miserable and exploited. And they build things like this:

Now it’s fair to say that this isn’t precisely “socialism” vs. “capitalism”. There was a time when the West built lots of public parks and so on. It’s the difference between a real rich society and a financialized society. One has plenty of excess capacity, the other has plenty of money but very little actual ability to build and create and no desire to do so if someone can’t make an unfair profit from it.

The problem for the West is simple: China is better governed than almost any (perhaps actually any) Western country. And that governance shows plenty of signs of being in the interests of the vast majority of Chinese, whose lives it has vastly improved. Democracy itself is in danger. If it doesn’t produce better results for ordinary people, and if it’s basically fake anyway, why keep it?

The risk here is that the anti-democratic forces in the West aren’t the CPC, they’re billionaires who think the problem with the current government is that it still does some things for ordinary people which aren’t primarily about benefiting billionaires. They’re fascists, at best.

Democracy, if it wants to survive as a major force in the world, needs real reform (all so-called reforms in the West over the past 50 years have been about hurting ordinary people to benefit rich people). If it isn’t re-aligned to work for the majority, its day as a major force in the world faces a bloody sunset.

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Is China Going To Win The Humanoid Robot Race & End Capitalism As We Know It?

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On November 18, 2025

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Elevated from Comments. Piece by KT Chong

China is now entering the next phase of its economic-growth engine — humanoid robots.

And just like with EVs, the shift is happening fast, quietly, and with the same pattern: Chinese companies industrialize before Western analysts even realize it’s begun.

UBTech, Unitree, XPeng — they’ve all started mass-producing and delivering humanoid robots. This is not “prototype hype” or “lab demo” stuff anymore. It’s real machines getting shipped to real factories, hospitals, and even homes. China’s humanoid sector is going to be the next multi-hundred-billion-dollar growth curve, and the West is, once again, completely oblivious.

Frankly, IMO it’s already too late for the West to catch up.

Anyway, my point here today is… the Unitree G1 Ecosystem.

While reading deeper, I found something much more important: a lot of these new humanoid startups aren’t building from scratch. Instead, they’re standing on the Unitree G1 frame and layering their own proprietary AI on top. That means Unitree has quietly become the default hardware platform for China’s humanoid boom — like the Android of robot bodies.

A few examples:

1. A-Bots Robotics (Shenzhen, 2024)

• Focus: precision assembly, modular SDK

• AI layer: Baidu Ernie-ViLM for object manipulation

• Notes: 150+ units in Foxconn trials; ~$22k package; tuned for fragile electronics

2. HPDrones Tech (Guangzhou, 2023)

• Focus: warehouse logistics + drone hand-off automation

• AI layer: proprietary SLAM + multi-floor routing

• Notes: partnered with Unitree; 500-unit rollout for e-commerce warehouses in Q1 2026

3. LeRobot Labs (Beijing, 2024)

• Focus: open-source robotics + reinforcement learning

• AI layer: embodied datasets, tool-use improvisation

• Notes: hacked 20+ G1s for universities; GitHub repo exploded; expanding to eldercare

4. Weston Intelligence (Hangzhou, 2023)

• Focus: healthcare — vitals scanning, bedside conversations

• AI layer: Tencent Hunyuan conversational model

• Notes: deployed in Shanghai hospitals; sub-$20k price; measurable patient-compliance benefits

5. DexAI Dynamics (Shenzhen, 2024)

• Focus: dexterity — folding fabric, micro-adjustments, teleop self-supervision

• Notes: $80M raised; 100 units deployed in garment factories; arguably the best hands in China now

And then there’s MindOn — the one that caught my eye earlier — using the G1 frame to build a full butler/housekeeping robot (“MindOne”). One of their engineers even said they eventually want their own frame, but that’s the point: everyone is starting on Unitree first.

Unitree has locked down the humanoid robot ecosystem

All these startups — even if they eventually design their own skeletons — are still tying their early models to:

• Unitree’s frames

• Unitree’s actuator supply chain

• Unitree’s low-cost motor ecosystem

• Unitree’s software layer and APIs

Once you build your first few generations on someone else’s chassis + firmware, you’re effectively locked into their ecosystem. Switching costs explode. You’d have to rewrite half your AI stack.

So Unitree has already achieved what Western robotics companies wish they could do:

Become the default hardware substrate for an entire national robotics industry.

This is exactly how China overtook the West in EVs — standardized hardware, cheap mass manufacturing, and dozens of startups building on top of the same base.

Unitree is still a private company.

Given everything above, the most obvious question becomes: When does Unitree IPO?

On 15–16 November 2025 (literally this weekend), Unitree completed its pre-IPO regulatory tutoring with CITIC Securities — an unusually fast four-month process that normally takes 6–12 months.

The company publicly stated in September that it expects to submit the formal prospectus and listing application to the Shanghai STAR Market between October and December 2025.

Market sources still quote a targeted valuation of up to US$7 billion (≈50 billion RMB).

Once the prospectus is accepted (usually 2–4 rounds of CSRC questions), the actual listing can happen remarkably quickly in a hot sector — sometimes inside 3–6 months. A Q1/Q2 2026 listing is the base case, but a very late-2025 listing is still possible if the regulator fast-tracks it the way they have the tutoring.

What About America?

Meanwhile… America’s Great White Hope Elon Musk is already behind.

Elon Musk promised that the U.S. would lead the humanoid robot race with Tesla Optimus — but the timelines have slipped, and the window has basically closed. By the time Musk’s robot is actually ready for real-world deployment — 2 years from now? 3? — China’s robotics companies will already be deep into mass production, with tens of thousands of units deployed across factories, warehouses, homes, hospitals, and service industries.

And let’s be real — we all already know this:

Tesla will NOT be cost-competitive. Not even close.

China has already hit the sub–$20k price point for serious humanoids. Several G1-derived platforms will likely break below $15k. Meanwhile, Tesla Optimus — if it gets out of prototype limbo — will land somewhere between $20k–$40k+, before customization, localization, or integration costs. It’s the exact same pattern we saw with EVs, solar panels, drones, lithium batteries, telecom gear — the U.S. builds one expensive proof-of-concept; China builds ten factories and ships globally.

So yes, Tesla’s robot may survive inside the U.S., but only through:

• tariffs,

• import bans,

• national-security excuses,

and whatever industrial-policy tool Washington can wield.

It won’t survive on merit. It will survive on protectionism.

But step outside the U.S.?

Why would any ASEAN, Middle Eastern, African, or Latin American country buy a Tesla robot when Unitree, UBTech, XPeng, and others are offering machines that are:

• cheaper,

• and available now — not in 2027,

• generations ahead and more advanced by 2027.

You think Indonesia, Malaysia, Brazil, Mexico, Turkey, or Saudi Arabia is going to pay double the price for a worse robot just to keep Washington happy? You think they’re going to turn down a $12k Unitree or $16k UBTech because Trump tries to bully them into paying for a $35k American robot instead?

The U.S. will absolutely try to pressure, coerce, or outright threaten developing countries into “buying American” — the same way it pressures them on telecom, semiconductors, energy infrastructure, ports, and industrial policy. But this time I don’t think most countries will obey.

They have options now.

By the time the U.S. finally ships its first commercially deployable humanoids in 2–3 years, the rest of the world will already be locked into the Chinese robotic ecosystem — Unitree frames, Chinese actuators, Chinese SDKs, Chinese AI integration, Chinese supply chains.

The EU, Australia, Japan, South Korea, and Taiwan — effectively U.S. satellites — may follow Washington’s orders and switch to American robots. Maybe. If their economies in two years can still afford it.

Everyone else?

Forget it.

Forcing U.S. factories and businesses to buy “American-only” humanoid robots — which will be more expensive and less advanced — will cripple U.S. competitiveness across the board.

If American companies are stuck paying $30k–$40k per unit for less capable Tesla or U.S.-made robots, while factories in China, Malaysia, Indonesia, Brazil, Vietnam, Mexico, Turkey, and everywhere across the Global South are deploying $12k–$18k Chinese robots at scale, the cost gap between U.S. and foreign manufacturing will explode. And it won’t stop at robotics — it will cascade downstream into every single sector that depends on automation:

• logistics
• warehousing
• construction
• agriculture
• textiles
• electronics assembly
• packaging
• even retail, service, and hospitality

If U.S. firms are locked into a high-cost, low-capability robotic ecosystem while the rest of the world uses cheaper, better, faster machines, then every American industry that relies on automation gets structurally handicapped. That’s not just a disadvantage — that’s YUGE and permanent.

So Trump’s protectionism will actually accelerate the decline of U.S. manufacturing competitiveness. Because the battlefield is no longer labor cost — the battlefield is automation cost.

And China will win that fight by orders of magnitude.

This is also why I doubt even America’s closest aligned countries will follow U.S. orders when Washington eventually demands they drop Chinese robots and buy American ones. Unless they’ve developed a death wish for their own industries, they simply can’t afford to sabotage themselves like that — especially when their economies will likely be in even worse shape two years from now.

Except Europe. Europe will probably obey, because their heads are shoved so far up America’s arse they can’t even think straight — and then there’s that incessant, obnoxious demand of theirs: “You must stop be friend with Russia first or we won’t play with you!”

In my opinion China will eventually move toward some form of universal income or redistribution. Once robots replace most human labor, the state will simply “tax” robotic productivity — in whatever form it chooses — and channel that output back to the population. China can do that because the government actually has the authority, the ideology, and the political structure to redistribute.

After all, that’s the logical endgame of communism, isn’t it? A fully automated productive base supporting human welfare.

America? No such luck.

In the U.S., the elites — the top 5%, or really the top 1% — will own the robots. They’ll own the factories, the logistics chains, the land, the means of production, and the automated labor force. Everyone else below them will get… nothing. No jobs, no prospects, no future, nada. Just a growing underclass structurally locked out of the new automated economy, where human labor is obsolete and redundant.

And unlike China, the U.S. government can’t — and won’t — redistribute. It won’t tax robots because it won’t tax the ultra-rich. It won’t implement a universal income. It won’t structurally rebalance anything. The millions displaced by automation will simply be left to rot — not because the technology is bad, but because the political system is incapable of adapting to it.

And if there’s one thing I’ve learned comparing Americans and Chinese: Americans are astonishingly ideologically rigid, stubbornly wedded to outdated principles even when reality punishes them. The Chinese, by contrast, are pragmatic — willing to bend, adapt, and change. That adaptability will matter a lot when robots replace human labor and make capitalism, as we know it, obsolete.

That’s why America is panicking. They know they can’t adapt.

Ian Comments: again, China is ahead in most technologies and they have an unparalleled ability to scale. Once they scale, no one else can compete. You either find a place where you’re ahead and concentrate on staying ahead, or you find a niche. It used to be that China didn’t feel the need to be ahead in everything, but Trump, in his first time, with his sanctions, changed that. The Chinese realized they had to own full stack of everything.

One side effect of this is that Musk isn’t going to get his one trillion dollar payday. It’s based on him hitting targets, including in humanoid robots which he won’t be able to make, because Tesla’s too far behind and lacks the ability to scale.

More on the transition away from labor-distribution capitalism soon.

And great piece by KT. Thanks for letting me post it.

The New Cold War Is Taking Form

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On October 31, 2025

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We’re near the end of our fundraiser, and now about $1,100 out from our fundraising target. If you read regularly and value the site and have the money to spare, please consider subscribing or donating. Over 10k people read this site every day, and it’s free, but it and Ian do take money to run. Huge thanks to all who have given so far, a number which is now slightly over 100 people.

This speech by Russian Secretary of State Glazyev is important, and underlines how the days of dollar hegemony are close to an end:

“The easiest way to stop the arms race is by ceasing the use of NATO countries’ currencies,” he stated unequivocally. “Because to the extent that we use the dollar, euro, and pound, we finance their defense expenses.”

He provided a staggering figure: “The total volume of [Western] monetary issuance last year was five trillion dollars. Of this, two and a half trillion dollars is what the Eurasian states, among others, have taken on. If we stop using these currencies… we will practically halve the financial potential of the global hybrid war.”

“In the US, their satellites have completely destroyed international law… The World Trade Organization is not functioning, the norms of the global financial system are violated, and the generally accepted norms of business ethics are ignored,” he said, endorsing the Belarusian-led “Charter of Multipolarity and Diversity” as the ethical alternative.

He announced concrete steps to build this new system, revealing that work is “already underway to create a large social network that would unite hundreds of millions, maybe billions of citizens, who are ready to adhere to traditional norms, ethics, and follow their commitments.”

But it’s not just about money. For example the Power of Siberia pipeline means more than a hundred billion cubic meters of natural gas, which once went to Europe, will now go to China. Europe gets to buy much more expensive American natural gas. African countries are kicking France and the US out, ending their base leases, at an increasing rate, and from Japan I read:

Japan must stop importing liquefied natural gas from Russia. It means developing alternative energy sources, including the restarting of nuclear power plants.

Even as the G7 countries are stepping up sanctions against Russia, Japan finds itself in the position where it is now procuring just under 10% of its LNG from Russia.

However, there is a chance that Japan will not be treated as an exception. US Secretary of the Treasury Scott Bessent has said that he is “expecting” Japan to cease energy imports from Russia.

Japan’s public and private sectors need to prepare to ensure that LNG availability is not disrupted.

Japan does roughly equal trade with the West, and with BRICS, with about a 2% edge to BRICS. This is a terrible position to be in, though I’d suggest that going with the rising powers rather than the falling ones is the way to go.

The problem is that America is forcing nations to choose. Playing both sides: trading with both, may not be possible going forward. There will be two payment systems, so simple financial sanctions won’t work, but other types of market controls like tariffs and import/export controls have come roaring back into use.

Trade that can be cut off or curtailed at any point, apparently arbitrarily, can’t be counted on. When one looks at America and China’s strategy, China’s is mostly “punch back”. They rarely initiate sanctions except in cases where a country chooses to side with Taiwan. America, on the other hand, is… erratic. One can’t make plans, because one never knows when the rules of trade may change.

This is another reason why I think joining BRICS and that trade bloc is the sensible move. The old “rules based order” as Glazyev has pointed out, no longer exists in practice: the rules change at a whim and aren’t fairly enforced. While this was always true to some extent (Canadians remember how the US just ignored rulings against it on softwood lumber) it has become so common that the rule is now “whatever the US wants, and who knows what that will be tomorrow?”

America is trying to force a clean split into two blocs. But the other bloc is richer, more trustworthy and arguably stronger. And if it isn’t stronger yet, it will be in a decade, guaranteed.

This also relates to America’s actions in South America, an attempt to try and keep the America’s “American”, which is bound to fail. But as the declining power America wants to use its military force while it still has local superiority and before China and Russia can sell or give local nations enough weapons to become effectively immune to US force.

This process is the culmination of one of the major themes of my writing for almost a quarter century. The US era of sole supremacy has now ended. It can no longer force China to do what it wants, and it can’t even keep the sea lanes open, as Yemen has proved.

The old era is dead. There will be a brief period of co-equality, then America and Europe will fade into has-beens. I thought at one point we might have a new real cold war. We will, but not for very long. America isn’t going to be as strong as the old USSR, it won’t be able to hold up its end, and its current policy is to bleed its vassals, especially Europe, white. That will make them virtually worthless as vassals and will most likely lead to a revolt sometime between ten and fifteen years from now, as the European standard of living collapses under de-industrialization and without its sub-vassals selling it under-priced resources.

Centuries of Western rule of the world are coming to an end, and the Middle Kingdom is resuming its accustomed role as the most important country in the world. It’s a fascinating change-over to live thru, if not much fun if one lives among the Golden billion, who are being demoted  to the Bronze or perhaps Copper billion.

Massive Cuts Incoming At NASA As America Just Gives Up

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On October 24, 2025

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So…

NASA’s civil servant workforce has varied in size over the years, peaking during the Apollo program. During the 1990s, the Clinton administration reduced the workforce by 25% over five years, a process that some claim laid the groundwork for the shuttle Columbia disaster. This budget proposes to slash NASA’s workforce by nearly 1/3 in a single year via involuntary layoffs, resulting in the agency’s smallest workforce since fiscal year 1960, before NASA’s Marshall Space Flight Center, Johnson Space Center, and Stennis Space Center even existed.

In pretty pictures:

No. SpaceX doesn’t make up for this. China does both, massive public spending and multiple space launch companies.

What else is China doing? 

Space-Based Solar Power (SBSP or SSP), the concept of gathering solar power in space using solar power satellites (SPS) to send it back to Earth, may sound like science fiction, but it is getting closer to reality.

China plans to build a 1km-wide solar array in the geostationary orbit about 36,000km above Earth.

At this distance from atmospheric interferences such as day-night cycles and changing weather, the array will constantly gather solar energy, anticipated to surpass terrestrial photovoltaic systems by more than tenfold in efficiency.

Once collected, this energy will be transformed into microwaves and transmitted to a ground-based collector station.

Colloquially known as a powersat, this was suggested by O’Neill back in the 70s. It could have been done with tech that within reach in about a decade, but, of course, America did no such thing. The space shuttle cost way too much to launch, funding had dried up to do things better and cheaper and space was no longer a priority.

China’s following O’Neill’s playbook, weirdly enough. They’re doing what the US decided not to do. To put it bluntly, if humanity has a future in space, it will be Chinese, not American. This isn’t primarily about colonization, though some people will live in space for a time, it is about putting manufacturing, refining and mining into space so we can re-wild the Earth, and avoid the resource trap.

It’s not a sure thing, by any means, but given that Earth is limited and space is much less limited, it’s the only way out of the limited resource trap. China either succeeds (and it’s them or no one, because there is a ticking clock) or we face inevitable civilization collapse. Once that occurs, having already mined all the easily accessible resources, there is unlikely to be a second chance at a future in space, or even a particularly high tech society.

Anyway, as usual, the future happens in China, and America has given up. AI is bullshit, even if it works, American capitalists want it so they can put a third of the workforce out of work. Meanwhile China builds civilian robots, automates entire factories and ports, has flying cars and drones galore and is actually working towards a real future in space.

We’re about 3 weeks into our annual fundraiser. Our goal is $12,500 (same as last year). So far we’ve raised $9,235 from 82 people out of a readership of about 10,000. 

If you read this blog, you’re usually ahead of everyone else. You know, years in advance, much of what’s going to happen. The intelligence from this blog is better than what people pay $10,000/year for. Without donations and subscriptions, this blog isn’t viable. If you want to keep it, and you can afford to, please give. If you’re considering a large donation, consider making it matching. (ianatfdl-at-gmail-dot-com).

Palestine’s Last Hope

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On October 23, 2025

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We’re about 3 weeks into our annual fundraiser. Our goal is $12,500 (same as last year). So far we’ve raised $9,010 from 79 people out of a readership of about 10,000. 

If you read this blog, you’re usually ahead of everyone else. You know, years in advance, much of what’s going to happen. The intelligence from this blog is better than what people pay $10,000/year for. Without donations and subscriptions, this blog isn’t viable. If you want to keep it, and you can afford to, please give. If you’re considering a large donation, consider making it matching. (ianatfdl-at-gmail-dot-com).

It is now over 20 years ago that I first wrote that Israel would either become a single, secular state, or it would ethnically cleanse or genocide the Palestinian. There were no other solution sets: the land is not actually large enough, nor does it have enough water to divide it into two states and in any case, it was obvious Israelis would never go for that.

Even at the time I figured genocide and ethnic cleansing was more likely, there’s a point where the depravity of a people becomes so pronounced (as it was for colonial North Americans) that no other solution is likely, given the means.

I don’t know how many of you have read bin Laden’s writings. (I don’t endorse him, but he was a smart man.) His fundamental point was that America must be defeated before various local evils, because America was propping them all up.

As retired IDF general Yitzak Brick said:

“All of our missiles, the ammunition, the precision-guided bombs, all the airplanes and bombs, it’s all from the U.S. The minute they turn off the tap, you can’t keep fighting. You have no capability. … Everyone understands that we can’t fight this war without the United States. Period.”

The only way the Palestinians don’t get genocided and ethnically cleansed out of Palestine (the ceasefire/peace will be temporary, and has been violated multiple times by Israel even as they ramp up attacks on the West Bank), is if Israel can’t. And the only way Israel can’t is its economy collapses and takes the country with it, possibly with its neighbours opportunistically jumping in.

Fortunately Trump, with his escalating trade war, is working on it.

First we have the rare-earth export controls from China. Most weapons need rare earths, the West is ten to twenty years from being able to produce enough (always bet the under on China, and over on the West), and China’s controls include any use of rare-earths for weapons. If Trump doesn’t make peace with China, on their terms, the weapon flow to Israel will slow to a trickle. (It will be even worse for Ukraine.)

But there’s far more that China could do. A cursory search shows that it controls the majority of production of the following:

  • Graphite. US is 100 import dependent. China controls 90% of the processing. Used in batteries, EVs, lubricants and steelmaking.
  • Gallium. China does 98% of this. and the US is 100% import reliant. A lot seems to come in from 3rd parties, but China could shut that down. Used for semiconductors, LEDs, solar panels and radar.
  • Solar panels and wafers are about 80% China manufactured. 95% for polysilicon wafers.
  • Lithium ion battery cells and packs. China has about 80% of the manufacturing, and these things go in everything, including almost all consumer electronics.
  • Refined graphite anodes. China produces 90% and you need them for Lithium-ionC batteries.
  • Consumer drones. (Important for agriculture and the parts often used for military drones.) China controls about 80% of production. More, I’d guess.
  • About 80% of generic drugs are produced in China.
  • Legacy semiconductors (28nm+). As Europe is finding out, since China will no longer let Nexperia import them, and auto assembly is having to shut down as a result, China controls a lot of the manufacture of these items. Taiwan, etc… have moved on, but these are used in consumer electronics and autos in vast quantities and mostly supplied by China.
  • High Capacity transformers and inverters. (Can’t transmit electricity without them, and China has at least 70% of the manufacturing, probably more.)

Imagine if China put export controls on all of this?

The US economy would collapse. Nothing of significance can be manufactured in the US or Europe without Chinese components. It’s that simple. China would take a big hit, but they can tank it if they have to.

And, almost overnight, Israel would be without its suppliers. Plus, of course, they are reliant on US subsidies, and America wouldn’t be able to afford them. Europe wouldn’t be able to make up the difference, even assuming they didn’t get hit hard too.

Now I don’t necessarily expect this, it’s not a prediction, but it’s the only route I see left for any sort of relief for Palestinians.  And if it does happen, I doubt Israel would survive.

It’s also worth running thru to understand just how precarious a position the West has put itself in with regard to China. More on that later.

China Seizes The Master’s Weapon As It Makes Itself The New Hegemon

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On October 17, 2025

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John Maynard Keynes

John Maynard Keynes believed that ideas, hospitality, travel, knowledge and science should move freely between nations.  if a country could reasonably produce something physical it needed, it should. Trade should exist, but be kept to a minimum.

I’d like to highlight something Matt Stoller (the anti-trust guy) recently wrote:

In May of 2020, the Chinese Communist Party (CCP) declared its economic strategy, using the phrase “dual circulation.” Dual circulation meant fostering a domestic productive apparatus that is independent of foreign technology and finance, while making sure the rest of the world is dependent on Chinese control of key supply chains, whether it’s shipping, railroad construction, electric batteries, or solar panels. Chinese ‘grand economic strategy,’ in other words, is to operate as a giant monopoly on which the rest of the world must rely.

Matt says this isn’t about Trump, but notice it’s from 2020. It is about Trump: Trump in the first term, with his anti-Huawei sanctions. The Chinese realized they were vulnerable and the national effort became making sure they controlled all their own critical supply chains. Having seen how the US used financial sanctions and supplier boycotts, they regrettably decided to reverse the situation.

Now what one needs to understand is that after WWII American controlled most of the key supply chains outside of the Russian bloc. They had over 50% of the world’s industry. If you wanted something, you have to get it from them. Over time, this franchise expanded, first back to the Euros, as they re-built their industry, then to the Japanese, Taiwanese and South Koreans. All of these nations were firmly American vassals. Not allies, vassals with military bases in their countries.

The West, led by America and the USSR had all the advanced tech. In the 70s the USSR fell behind, they couldn’t manage the digital revolution happening, and then the USSR collapsed and the West, really America, ruled unchecked.

If you wanted any advanced tech: planes, cars, computers, weapons, etc… it had to come from America or one its vassals. The US effectively had “dual circulation”, especially since it also had full control of the international finance system and could lock anyone out at will.

This wasn’t theoretical, US sanctions on Iraq in the 90s under Billy Clinton killed at least hundreds of thousands of people. I once talked to an Iraqi oncological pediatrician from the 90s and her incandescent rage over all the children who died of cancer she couldn’t save because of American sanctions was so hot it blotted out the sun.

Once such sanctions had been rare (though there are cases back in the 50s.) The most notable is the multi-generation trade blockade of Cuba.

But from Clinton on use of these sanctions became routine, “Treasury’s Wars.” Millions died, many more were impoverished.

So, China has learned from the evil master. And it has decided that if there is such a weapon, it will have it and  use it and no one else can have it.

Everyone who rages against this is correct. No country should have this power. Not America. Not China. No one.

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What should be the case is a trade regime where everyone makes most of what they need. Need medicine? Make it in your country. (Shut up about prices, if the supply chain is domestic then almost all that crap that MMTers go on about becomes true. Prices are irrelevant, it’s all in money you print.) To the largest degree possible, everyone makes what they need. Smaller countries will have a harder time, and trade-states like Singapore obviously can’t, but this is what a good world looks like.

This maximizes political autonomy, too. You can’t be blackmailed by other countries. Spread nukes around, and much military force goes off the table too. (And they are going to spread. The US has taught everyone that if you have nukes you’re safe, and if you don’t, you’re dinner.)

So. China is teaching the Western world the same lesson America taught China and Africa and Iraq, and Iran and Cuba. We: Europe, the Anglo countries, South Korean, Taiwan and Japan, were inside the bubble during the period when the US allowed its vassals decent lives. (Oh, they destroyed Japan’s tech and industrial lead, they gutted Britain after WWII, they forced Canada to destroy its world leading aviation industry), but overall, if you were on the inside of the “Golden billion” or, early, “the golden 500 million”, life was pretty damn good.

America used the whip, its vassals jumped to obey and everyone else was poor.

Then Americans got stupid and thought that China was like Japan, they could ship their industry there, makes lots of money and if necessary bring China to heel if it got out of hand.

Wrong. Morons. I and others warned about this for decades, how stupid it was, but no one in power listened. Probably a good thing, since it led to a billion people getting out of poverty, but it’s not going to be fun for those us living in the West.

So: the weapon is being wrested from the old hegemon’s palsied hands, and being wielded by the apprentice, the new master, the new hegemon.

Bow, insects, the new lord is here. And no, America isn’t going to get its hegemon status back, nor should anyone who isn’t American want it to.

The actual solution is Keynes solution. No one should have the weapon—the power—because every country should make, grow and dig as much of they need as possible, using trade only for what they genuinely can’t make or for luxuries they can do without in a pinch.

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China Is Going To Leave The US What America Left Britain: Nothing

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On October 10, 2025

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Chinese and American flags

So, China has slapped draconian export controls not just on rare earths, but on all technology related to rare earths. If you want rare earths you have to beg for permission and certify it won’t be used for anything military or anything technologically related. If you want the rare earths or tech to catch up, you can’t have them. (Like when the US banned advanced lithography machines.)

As an extra fillip, China has also announced that all American ships must pay port fees. (This is symbolic, few ships are flagged American.)

The writing was on the wall for this when China, just recently, told all domestic firms to not buy Western chips. That mean that they had enough of the chip technology stack that they felt they were immune to counter-sanctions.

And now the whoop-ass.

You can thank Trump for this. His chip and Huawei sanctions taught the Chinese they had to control their entire own tech stack. Before that they preferred American, Korean and Taiwanese chips. No big Chinese company would buy Chinese crap chips. If the US hadn’t decided on its moronic trade war, China would have allowed it to gracefully age out of its Empire, letting it keep some areas of technological superiority.

As usual, the Chinese played this ice cold. They took their lumps, they devalued the yuan, they made concessions. When Biden came in, he doubled down so they realized it wasn’t just a democratic hiccup, but core policy agreed to by both parties. Then Trump came in and went on his insane tariff blitz. Worked against his vassals, but China doesn’t have to take America’s crap any more and it isn’t.

Now, as the kids like to say, having fucked around, America and the West are about to “find out.” Revenge served ice fucking cold.

I want to be really clear on a couple things here.

First, China is not going to leave the US or the West anything meaningful in terms of tech lead. They are going to take the tech lead, with the industry to back it up, in essentially everything (they’re already in the lead in at least 80% of areas, so don’t kid yourself about the rest.) And they are going to break the US’s hold on the Americas too. By the time China is done with America, they’ll be lucky to still have have Mexico and Canada as vassals (which is why they might invade and is why the US is threatening Venezuela before it gets a full suite of Chinese and Russian weapons.)

Second: if you are in charge of any country in the world that is an American vassal and you have an IQ above 90 and the smallest amount of interest in the future of your country, your job right now is to transfer your allegiance to China and get the best deal you can in exchange. The longer you wait, the worse the deal will be.

I do mean everyone: Canada, Europe, Australia, Japan, South Korea.

Everyone.

Get out, now. The US has already lost the war, and while there may be a lot of screaming and even a shooting war (without rare earths, the US needs to fight a war in the next two years, or wait tent years as it rebuilds its military stack) it’s over. Just like Japan had already lost even before Pearl Harbor (and that sort of attack is the danger now.)

China is going to run the world for the next forty to sixty years, minimum, barring ecological collapse. It has zero love for the old hegemons. The US, the Anglo countries and the Euros will not be treated kindly out of some feeling of kinship or because they are needed, neither is true. Only Australia and Canada have something to offer the Chinese might want. Everyone else is just wasting assets.

Besides, the Americans are bastards. Right now they aren’t offering anything but “stay our vassal and let us loot you.” Pull out your knife and your pen. Sign an agreement with the Chinese, and drive a knife right between America’s shoulder blades.

I’d say “they do it to you” but they’re natural born bullies and you’re already on your knees begging them not to hurt you more. (EU, I am especially looking at you. To say you have the dignity of slaves would be to malign slaves, who at least have no choice.)

America’s done. All statesmanship for the next fifteen years will be about handling the fallout. If the West had any statesmen, even one, that might be good news.

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