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

Category: China Page 1 of 15

When Does Money Matter?

The core reason for America and Europe’s decline (and, in a way, Japan’s) was the belief by our elites that money was the only thing which mattered.

Money is the ability command resources from anyone who will, or must, sell. People who need to sell their labor or starve—Marx’s famous “whip of hunger.” Countries who must sell to get your money because you either make them militarily (see Venezuela right now and Iraq, both of which must sell their oil in US dollars and let the US treasury keep the money on account for them, then decide what they can spend it on, plus, of course the entire colonial era); or because they need to buy what you have.

For a long time the West had a monopoly on much of what you had to have: medicines, engines, planes, cars, tractors, fertilizer and so on. The Petrodollar was about having a monopoly on oil and all its products: gasoline, diesel, bunker fuel, jet fuel, plastics and fertilizer again. If you wanted electricity, well the equipment to make it came from the West too. If you wanted advanced weapons — the West, especially after the fall of the USSR.

During the early post war period you had options: you could get most of this from the West or the Soviets. But starting in the 70s, the USSR went into decline and then it fell, and the West was the only option.

Back to American elites: since everyone had to buy in dollars, and because they needed to get so much from the West, also had to sell in dollars, well having dollars was all that mattered. The more dollars, the more power.

What the elites forgot, thanks to complete retards like Francis Fukuyama, and sheer stupidity and greed was that smarter people than them had arranged the system this way: that it was contingent on the West having what everyone else needed, and having the military whip-hand.

Japan, poor fuckers, built an incredible industrial base and was pushing on taking the industrial lead. American leaders in the 80s, not having been taken over by complete retards made the Japanese sign the Plaza Accords, in which they would give that tech to America, open factories in the West and so on: give up their momentum, because it matters where you build.

As I’ve said many times, the tech lead follows the manufacturing floor: this is the LAW. Japan wasn’t strong enough to tell the US to go to hell. So they spent the last 4 decades in slow decline. This wasn’t primarily because of their big crash, though that was mishandled, but because they were no longer allowed to continue their industrial and technological snowball.

But by the 90s the last smart competent American elites were dead or retired, and the triumphalism over the fall of the USSR made them think, a la Fukuyama, that their system was superior, their shit didn’t stink, and they’d be on top forever. Everyone would have their system, and everyone would just keep buying and selling in dollars no matter what: it no longer mattered where things were made.

The key moment was when Clinton let China into the World Trade Organization (WTO) with developing world status. Western financiers (they weren’t capitalists, capitalists aren’t so stupid) looked at how cheap Chinese labor was and how willing they were to pollute and let workers get maimed, and they salivated. (And yes, lack of worker protections was part of it. One of my friends, in the 90s, visited a battery factory where the batteries were made by hand. Batteries are basically full of acid. Think it thru.)

So they sent industry to China and told themselves “well, we do the design here. That’s what matters.”

The Chinese leadership nodded, smiled and among themselves said, I’m sure, “what a bunch of suckers. Thank God they’re such idiots.”

And in learning to make all these things the Chinese learned the design and so on, and in time took the manufacturing lead. Then about 20 years later they took the tech lead decisively. Even three years ago American sanctions worried them. 

(In 2023) Xi Jinping warned that U.S.-led technology restrictions posed “unprecedented severe challenges” to China’s development.

Today:

Han Wenxiu, the senior official overseeing day-to-day operations at the Central Commission for Financial and Economic Affairs (CCFEA) — the Party’s top economic policymaking body — told the China Development Forum (CDF):

“After years of effort, China’s indigenous innovation capacity has passed a critical inflection point, making it difficult for external forces to derail our development”

As for overcapacity, the Chinese are no longer apologizing for it or dancing around it. They say our companies are uncompetitive and that’s our problem.

The bet seems to be that most countries, or trading blocs, won’t get their acts together enough to materially push back against China’s export juggernaut.

  • Even the U.S. tariffs on Chinese goods — unprecedented in recent history — have only succeed in diverting low-value manufactures (think toys, textiles, and fast fashion) away from the U.S. and toward new markets.
  • They’ve had less impact on higher-value exports to the U.S. — either because those goods were never sold there at scale (i.e. NEVs) or were exempt from the tariff regime anyway (i.e. smartphones and medical equipment).

To put it simply, the world needs what China has and can’t make it themselves. If they can make it themselves, well, it’s much cheaper coming from China and how many Western countries are willing to take a big hit to re-start their industries, and are competent enough to pull it off? (My approximate count is zero.)

And that, folks, is the end of the Western order. No one needs to buy from us any more. They’d still like to sell to us, sure, but they don’t need to because they don’t need dollars. If it’s something they need they can get it from China or, to a lesser extent Russia, India and so on. We don’t have a monopoly on anything that matters any more: the last real one was chip manufacturing, but the Chinese are catching up fast and confident that in a few years they’ll be there. In the meantime, they can make all but the most advanced chips and those are the ones that go in almost all manufactured good: the most advanced stuff is only useful for things like AI, and China’s find its way around that.

Now we come to Iran. Iran is showing that a fairly modest kit: missiles and drones, is sufficient to keep the US navy and air force far away and make any attack prohibitively expensive in men and material. Plus everyone knows that expensive US military gear needs Chinese supplies: the West doesn’t have the full kit any more, the Chinese can and in some case have, cut the West off any time they want. All those expensive radars the Iranians blew up? Well it’s not the cost (that’s irrelevant) it’s that they require materials on the Chinese have. They get rebuilt if the Chinese let America and there’s basically nothing the US can do about that.

Keynes famously said “anything we can do, we can afford.” The corollary, as I’ve written before is that it doesn’t matter how much money you have, anything you can’t do you can’t afford—or rather you can’t afford it if the people who can do it won’t sell it to you.

America had a great thing going, for America and for its allies. But American elites got stupid and didn’t understand the actual structure upholding their power. They though it was innate to a superior system and superior people, not a structure built by very smart and ruthless people over a period of about a hundred and fifty years: a structure that required maintaining.

And so, it’s over. It’s just over and anyone who tells you otherwise has zero idea what they’re talking about.

And everyone else is realizing this. Let’s take Australia, run by ‘tards even stupider than America. Twenty years ago, they had eight refineries. Now they have two. They’re running out of diesel and even if they could get crude oil (certainly not impossible, though hard) it doesn’t matter, because they can’t refine it.

This lesson should have been learned during the Covid Pandemic when the West restricted medical supplies and the logistics system stopped delivering enough international goods.

Anything really important: fuel, machinery required to maintain your infrastructure, food, medicine, etc… is something that you should be able to make yourself. If you truly can’t, you must have huge stockpiles. I would never want a country to have stockpiles less than three years of medicines, food, parts for important machinery like the electrical grid, and fuel.

None of us do.

Anyway, the structure of Western dominance is now dismantled, by Westerners. Perhaps the Chinese could have industrialized fully without us, but it would have taken a lot longer and as long as we had our own industry and tech stack, it would have just meant a cold war situation with two blocs and, absent de-industrialization, perhaps the West could have held its own, though China is innately stronger than the USSR ever was, especially with Russia as an ally.

We did this to ourselves, or our elites did, because of sheer stupidity and arrogance. Don’t underestimate how bad this will be. I’m in the “better China as hegemon than America” crowd. I think they’ll kill a lot less people. But be clear, they are going to be a hegemon, at least in industrial terms and this is going to mean a serious standard of living drop in much of the West. Europe will get hit the hardest (especially Britain) but everyone’s going to get hit hard. A few of us may make the switch over to the hegemon on favorable terms. Canada and Australia have the best chance of doing this being large countries with tons of resources and relatively small populations, but it’s not a sure thing.

Dominance and prosperity are both structural. They are always created by competent leaders and populations and when their successors become complacent they are always lost.

That’s where we are.

Everyone reads these article for free, but the site and Ian take money to run. If you value the writing here and can, please subscribe or donate.

 

Friday Morning Highlights and Lowlifes

~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.

 

 

 

Short Take: Modern Infrastucture Miracles

~by Sean Paul Kelley

The Chinese rail network now carries 23 million passengers a day. Multiply that by 365 and it carries 8.365 billion passengers a year. And does not account for the increase in passengers during major holidays.

Now consider these two facts. First, India’s rail network carries 23 million passengers a day also. But it took the Brits and Indians 172 years to build out the network. China did it in under 30 years.

Second: California voted in 2008 to build a high speed rail network between Los Angeles and San Francisco with a completion date of 2022. Operations are projected to start in 2030 now.

Ponder that for a moment and then puke.

The future does not happen in America anymore.

Nota bene: Jan’s comment reminded me of something I saw in China. It was the summer of 2003. After the first big SARs outbreak. I was in far west China trying to get to India. At the time there was zero high speed rail. Understand? Zero. To get to Tibet and then Nepal and finally India I had to travel across Qinghai, starting in Goldmud where I ended up in Lhasa, Tibet.

If you’ll allow an old backpacking traveller a brag, I’d be grateful. At the time, every backpacker I ever met considered the Golmud to Lhasa bus trip the sine qua non of the complete backpacker/traveller. You could not consider yourself a true traveller if you had never made this journey. 40 hours above 10,000 ft. (3,050 meters), often times as high as 14,000 feet (4,267 meters) on a sleeper bus, in which every passenger has altitude sickness of one degree or another. Puke in the aisles. No clean up. Restroom breaks rare, maybe five the entire journey. It is a badge of honor I wear with pride to this day.

Late at night about 24 hours into the journey we drove in to a traffic jam of epic proportions. A crazed, disorganized, enormous traffic jam on a dirt road somewhere between Golmud and Lhasa high up on the Himalayan Plateau. It took an hour to get through. But what I saw mezmerized me like nothing else and I will never forget it. The Chinese, busy at Buddha knows what hour, building a High Speed Rail Link between Golmud and Lhasa, much constructed on damn near permafrost conditions. Look it up if you disbeleive me.

They did it. It’s a first class wonder, the new rail link, complete with oxygen bars, etc. . .

But me, I’m glad I did it the hard way. It has more meaning.

Lamentatio finalis: Our mad rush to adopt technology in every aspect of our lives has robbed us of many beautiful and rare experiences, many of which are gone forever. I’ll leave you with one example. In 2008 I took the ferry from Penang, Malaysia across the Straits of Malacca. It was a leisurely six hour ride from Penang to Medan, Sumatra. While making the crossing I saw just how strategic a waterway it was: the sheer mass of container ships was mind boggling.

When I returned to Malaysia in 2011 specifically to share with my father the experience of the ferry ride acrosss the Straits, the ferry had been shuttered by low cost airlines flying from Penang to Medan. To me that is a loss equivalent to someone torching a Rembrandt in a Dutch museum. Irrevocable. Gone forever.

Silver: East Versus West

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. 

 

The China Super Boosters Are Super Tiresome

I stand second to few in my admiration for how well China has done. But the super boosters are super tiresome. If China had been a small nation, the best they would have done is parallel Japan: do very well, then the US breaks your legs. Reminds me of Americans in 1950 or 95.

They remind me of many Americans in 1950 or 1995. “We are at the top because we are the best. Our governance is superior, our culture is superior. It’s just because we’re better than you all, and we always will be.”

I doubt the CPC’s leadership is this stupid or arrogant (yet). They remember China getting its face pushed in for over a hundred years.

China is at the start of a good run. Leaving aside climate change and ecological collapse it’ll last 100 to 150 years, EXACTLY the same as the American run. China’s current rise is just a hegemonic replacement cycle story. Not even as impressive as Britain creating the industrial revolution. This is just taking the lead, China has done NOTHING revolutionary yet. This is a dirt standard hegemonic replacement cycle. Happens every 150 years or so.

(The American run began in the 1880s, when they overtook Britain in industrial production.)

The reason China succeeded when other nations didn’t comes down to three things: competence, the prior hegemon’s help and size. All three were required The Japanese were super competent after WWII, absolutely amazing. When they started to challenge the US, they were forced into the humiliating Plaza Accords. If China was the size and population of Japan, the same thing would have happened to them, no matter how “superior” their culture or leadership is. India failed despite its size because the government and leadership were (and are) terrible.

This also makes Chinese booster sneering at smaller nations the US has beaten down tiresome. It’s not the same situation. “Oh, they’re incompetent.” No, idiot, Cuba is an Island nation with 9.75 million people and no resources to speak of which has been under sanctions for every year of its existence since it through the Americans out. That they even still exist is amazing. Venezuela had 28 million and is close, Iran (though it is larger and further away and thus had a far better hand to play) has likewise been under sanctions since day one, and the Iraq/Iran war was sponsored by America.

China has done great. No regular reader of mine can think I don’t admire the hell out of China’s leadership and people (and I like Chinese culture and Chinese people and have all my life, I was practically raised by Chinese for my first five years.)

But stop with the glazing and remember that hubris is always punished.

This site is only viable due to reader donations. If you value it and can, please subscribe or donate.

 

Silver Short Take

Jaysus on a popsicle, Mary and all the Saints do I have some egg on my face. Since January 27 silver has been on one seriously wicked ride. I’ve been banging my head to Metallica’s Whiplash for the last ten days.

So, WTF happened?

In short: from where I sit the paper markets are trying to create a force majeure situaiton for March contracts. The market is incredibly volatile and highly illiquid. Traders are draining the vaults of bullion. Indeed, as Dario notes,Silver physical deliveries at the Comex just crossed 4,000 contracts (~20m/oz)and we are only 6 days into February.” That’s nucking futs. 

If the Comex defaults to force majeure (SHFE is a bit of a different matter) the Comex will lose all credibility as a fair functioning market dedicated to price true discovery. Never mind that silver prices in the USA has been a cozy Fed-supplied rentiers market for decades, should this happen businesses will begin a mad scramble to source silver for themselves. That leads to supply and demand chaos. Bad. Vewwy bad.

On the SHFE–Shanghai–one day last week over 1.3 billion ounces of silver volume were traded. That’s one year of global demand in a day. The Chinese government’s motto regarding traders shorting silver on the SHFE seems to be FAFO. The Chinese are cracking down hard. Why? Well, to produce one gigawatt of power using solar panels requires 1 million ounces of silver.

You read that right. One million ounces.

Fundamentals matter. Global demand is strong. Businesses need silver for industrial applications beyond just solar panels and dentistry. But traders can keel-haul fundamentals sometimes with epically shitty consquences. Watch this video by Dario starting at minute 6:43 for how this possibly plays out.

It’s ugly. And it seems to me that maintaining a viable silver market is now fully in the hands of the Chinese. US traders are determined to destroy price discovery and reinstate the cozy rentiers market in the US.

I have no idea how this will end.

American and Chinese Elites Both Achieved Their Goals

Chinese and American flags

The period around 1980 was pivotal to the fate of nations. In the West Thatcher and Reagan came to power and finished the destruction of the post-world War II order, setting the West on a new path. This process had been ongoing since 1968, but the form of the new consensus was not clear until Reagan’s victory: financialization, crushing workers, destroying the middle class, asset bubbles and so on.

In 1978 Deng came to power in China and instituted reforms, especially market ones. This coincided with the West, and especially America, wanting to offshore and outsource their industry. This increased profits and impoverished the working and middle class. It financialized the economy: you could have the profits without the production and without dealing with uppity and powerful workers.

Reagan went after unions hard, Thatcher broke the miner’s union, the most powerful in Britain. The Federal Reserve started a long term policy of raising interest rates every time wages rose faster than inflation, meaning that over a period of decades wages rose less than inflation, and thus were reduced in real terms. The BLS moved towards understating inflation systematically, to undercut things like pensions with cost of live adjustments and to help “boil the frog”. Every change in how inflation was measured, for decades, which I am aware of, reduced the measured inflation rate. That doesn’t happen randomly or if your goal is the accurate measure of inflation.

Deng lucked into a geopolitical moment, and knew exactly how to take advantage of it. “Tired of dealing with uppity workers? Hate environmental regulations? Want more profits without the work of production? Move your production to China and we’ll make you rich!”

Deng exactly spotted the West’s weakness and knew how to take advantage of it. He also delivered: offshoring and outsourcing did make the West’s elites, and especially US and British elites filthy rich.

In exchange China got the industry and with the industry came the know-how and the technology. The technological lead always (always) moves to the country with the factory floor, and so it did in this case. It took quite a while for this to become obvious, so people could fool themselves, but the movement was inexorable. The same thing had happened when the industrial base moved from Britain to America (with tons of British financing). It took about 30 years for the tech lead to follow the industrial base. In this case it seems to have been about 20 years from China taking the industrial lead to tech supremacy, but the movement was the same.

American elites, wanting to be rich without real work and to destroy their internal enemies, those pesky workers who wanted a cut, got what they wanted. In exchange they destroyed their empire, because the real basis of the American empire was industry and technology.

The Chinese got what they wanted: China became the world’s leading industrial and technological power and a billion people were lifted out poverty.

The Gods often grant want we desire, if we’re willing to work for it. American elites got their wish. So did the Chinese.

Welcome to the Chinese century.

This site is only viable due to reader donations. If you value it and can, please subscribe or donate.

Just How High Can Silver Really Go?

~by Sean Paul Kelley

Everyone is talking about gold topping $5k an ounce. The yellow metal is captivating and big moves by it tend to suck all the oxygen out of the media space regarding other metals. In 2025 gold rose a whopping 64% against all comers, i.e the dollar, the S&P 500, oil, Bitcoin and on and on.

Gold’s meteoric rise last year is a fucking piker compared to what silver did. Silver was the best performing asset of 2025 rising an astonishing 147%. Yeah you read that right. 147% from January 1, 2025 to December 31, 2025. This raises some important questions, such as why did silver, after decades of disappointing performance, blow past every asset this planet has to offer and consequently how high can it go? Does silver have a ceiling?

So, questions asked, let’s now examine the known and/or knowable variables affecting silver prices at present.

First, what’s silver’s all time inflation adjusted high? This depends on who you ask and how you measure inflation. By our current CPI measurement silver’s all time, inflation adjusted high was roughly $150 an ounce. This was in February 1980 when the Hunt Brother’s tried to corner the silver market. Now, as most of you know, Ian and I both distrust current inflation measures, like the CPI, because it overweights consumer goods with stable or falling prices, using accounting legerdemain like hedonic pricing which equates increasing computer chip power and/or efficiency as disinflationary. At the same time the CPI underweights prices of goods that are rising, like food and other non-durables.

Seriously, I defy anyone to tell me food prices are stable or falling: you can’t do it. The CPI does this primarily to avoid COLA adjustments on entitlements, cheating retirees.

Other measures of inflation, indices, weighting using purchasing power parity or other yardsticks, delivers an all time silver high closer to $190. So, I’m going to channel King Solomon and split the baby in half and call the all time high at $170. But however you measure inflation it’s clear silver isn’t even close to its 1980 Hunt Brother’s high.

Second, price moves in gold and silver are not coupled and have not been for at least 150 years. They don’t correlate. Gold is considered a safe-haven against fiat currency hyper-inflation or economic collapse. Silver, on the other hand, is essential to modern electronic manufacturing. So gold had a nice run last year, but silver was number one by a very, very wide margin, outperforming gold, the way Shohei Ohtani outclasses everyone else on a baseball diamond. Even as silver and gold have been decoupled since the late 19th century evidence is mounting that last year’s silver move might have been the opening act of their long awaited re-coupling.

Perhaps a précis on how and why they decoupled and what a re-coupling would look like is in order.

The first question is to ask, “how long were gold and silver coupled?” Well, from ancient times—yes, fucking Greeks and Romans ancient times—until the 19th century silver and gold traded at a 15:1 ratio.

Don’t believe me?

Consider then how the 1792 US Coinage Act established a 15:1 ratio between the two in our newly constituted republic. That said, during the next century—the 19th—a handful of rare developments coalesced to break the two thousand year old linkage between the two royal metals, thereby widening the ratio nearly exponentially.

First, the gold standard for measuring currency values between nations was established. It soon became the, well, gold standard for all international trade.

Second, the conventional wisdom prophesied the end of America’s silver boom—never mind that the aggregate value of silver mined in Arizona and Nevada had a notional dollar value greater than the California, Yukon, Deadwood, Montana and Alaska gold rushes combined. Gold’s price during the 19th century, due in large part by its merciless acquisition by European banks, blew out the ratio, decoupling the two metals for a century and a half. The ratio between the newly decoupled metals had widened from 15:1 to 50:1 by the turn of the 20th century. By the turn of the 21st the gap was nearly 100:1, in large part due to US government manipulation of silver prices. The US government sheltered a rentiers market in silver bullion for decades. Wholesalers got silver at spot prices. They then charged retail buyers high premiums and pocketed the sizable difference. This cozy arrangement, due to silver’s recent price moves is breaking down, and fast. Good I say.

That said, I argue, based on a reasonable man’s assumption, that the spread, now roughly 50:1, will continue narrowing and sometime in the next few years complete a reversion to its 2,000 year historical mean. That puts a potential price of an ounce of silver at $320 an ounce and might even overshoot a little bit, as reversions are wont to do at times. Overcorrections are a real thing. Hitting the Hunt Brother’s high of $170 an ounce is just a mental milestone, nothing more. The silver bugs are getting their revenge and how.

Now, my assumption is based on a single premise, a reversion to the mean/norm. Not a bad premise to base an assumption on, but not enough for intellectual coherence and honesty. So, let’s explore another variable: silver’s supply versus demand forecast.

What is the global supply versus demand picture like? In short, extremely unbalanced. The numbers are staggering. Aggregate global demand per year is 1.3 billion ounces. Annual global mining supply maxes out at roughly 850 million ounces. Let’s be generous and toss in recycling raising global supply to 1 billion ounces of silver a year available for industrial purposes.

The maths paints a grim supply picture: a whopping 23% gap between supply and demand. Because silver is the single most important industrial metal—it is in every electronic we own— demand is not going down any time soon. A single tomahawk missile requires 500 ounces of .999 grade silver. Yes, 500 ounces. See where I’m headed with this demand equation?

Why is it in everything? It’s the goldilocks of metals. Silver might not be as conductive as some but it’s less resistant than most. It doesn’t overheat like some and burn through plastic coating, but its best left exposed and uninsulated. It’s place in the bell curve of the electrical performance of all metals is right before the big bulge grows. Most of the time we want things good and fast. In reality, however, we must choose between good or fast, but silver? Well, silver gives you good and fast together. Goldilocks!

One big variable exists concerning global silver supply that has no easy short or even medium term fix. It’s physically impossible for global mining companies to ramp up mining production enough to even begin closing a 23% gap between supply and demand in any time frame less than 2-3 years. And this assumes no economic growth leading to increased global demand. That is some wicked nasty inelastic demand for silver and it has zero supply side answers, except very high prices that lead to retail silver owners cashing out. Central banks would have to print precisely three metric shit-tons of fiat currency to induce silver bugs to sell. I know some of them—they make rabid dogs seem like puppies—and they are adamant: no selling until the ratio reverts to 15:1. Until they get their ring there will be no huggy or kissy.

Another fundamental we ought mention are draconian export controls on bullion instituted by the Chinese central government. Note: China is the world’s leading consumer of industrial silver. It also has an extremely long and complex history using silver as its monetary base. Much, much less so with gold. If you want a book recommendation on the subject just ask.

Then there is our southern neighbor, Mexico, our number one supplier of silver to this day, is considering retaliatory tariffs on silver for United States because of Trumpian fuckery. Much fuckery there and I applaud Mexico’s president for sticking to her guns.

Consider as well dollar weakness and potential QE. Both point directly towards higher silver prices. Add to all this a wildcard fundamental hiding in plain sight: the magic price point that compels the addition of physical silver to the portfolios of Central, Commercial and Investment Banks around the globe. It’s a simple equation: storage costs fall as prices rise. At $40 an ounce there is no reason to hold silver in a vault. At $170? We’re getting close. At $300? Bingo! You’re goddamned right there is a reason. Such a development would spike demand by an order of magnitude as it would reinforce the powerful upward trend already in place. This is the dynamic that could at long last force the reversion of the gold to silver ratio back towards 15:1. Gold’s present price of $5000 an ounce implies a target of $333 per ounce of silver. In my opinion, and this is not investment advice, this is where we are heading. Right now. It may take 18-24 months, but it’s going to happen.

These are just some of the fundamentals. I can’t cover them all. If you think I missed an important one, add it in the comments, please.

Let’s talk about some technicals followed by sentiment.

Late in 2025 silver achieved a triple top breakout. Triple top breakouts are very rare in any asset. But when they occur they are an extremely bullish signal, conveying that there is no predictable upper limit to the assets potential advance. This is silver today. Silver hit $50 in October, backed down to the low $40s, made another run in November to try and overcome $50 and didn’t make it. But then in late November and all of December during the Santa Claus Rally silver blew through $50 and ended the year at $72.05. Market observers I respect, all unsure but all equally intuitive, explained the triple top breakout as the result of a handful of factors coalescing in the short term, such as Chinese export control tightening, high retail demand, Mexico threatening tariffs on silver, and a short squeeze on the Comex. This confluence makes sense to me.

The underlying technicals that lead to triple top breakouts are usually either a short squeeze or a gamma squeeze. In late 2025 silver underwent a short squeeze. But in early 2026 led by a bank frenzy to cover what were in essence some very large naked shorts in the SLV and PSLV ETFs, coupled by a bizarre change in margin requirements—from a straight percentage to one based on the notional value of the contracts (I mean, WTF?)—backfired spectacularly, leading to the rarest of rare technical developments, one I’ve only seen once in my life as an investor—the mythical unicorn, the gamma squeeze.

In short, a gamma squeeze “is a rapid [asset] price surge from [futures] trading, where heavy retail (read: investment banks, spk) call buying forces market makers to buy shares to hedge risk, creating a feedback loop that pushes the price even higher.” A gamma squeeze can be viewed as one powerful force intent on creating and sustaining an upwardly positive feedback loop “[where the] cycle escalates because as the [asset] price rises, market makers must buy more [futures or the hard asset] to cover their increasing delta risk, driving prices up further and attracting more call buying, often in low-float, i.e. low-volume [assets].” Silver is now, for all intents and purposes, in a virtuous rising feedback loop, leading to higher prices which force more buying to cover expected demand thus leading to higher prices. When it comes to shorting a gamma squeeze FAFO. You will lose your ass.

These developments all serve to reinforce my call late last year that silver is not on a cyclical bull run. It is engaged in a secular bull stampede.

Cyclical trends last between 3-5 years, represent basic price discovery and a market composed of two healthy opposing forces: supply and demand. Cyclical bull or bear runs tend to predict the business cycle as well, serving as a leading economic indicator.

Secular trends, however, are a different animal altogether. Like Earl Campbell, that human rhinoceros, running over middle linebackers like they were children, a secular bull or bear is powerful, based on large scale structural economic rearrangements, demographic realignments, and/or crushing but ‘unforeseeable’ externalities—like the Arab Oil Embargo of the 1970s or losing wars like Vietnam, Iraq, and Afghanistan——that leave robust long-term consequences, like inflation, busted supply chains, broken armies, revanchist politicians, rising internal violence and other variables, in their wake. Secular bulls or bears last decades, some as long as 40 years.

Now a word on sentiment. Sentiment is a fickle bitch, much like the muse. Nothing can bankrupt an investor with more rapidity and totality than a sudden turn in sentiment. Two forces, ultimately rule investing: fear and greed. Beware the latter and respect the former, said my mentor at Morgan Stanley.

Right now silver is flying under the radar. Everyone is talking about gold. It’s gold, why the hell not? Gold makes people febrile. I’ve literally seen it with my own eyes. I’ve felt my forehead warm up and my fingers get a sudden subtle itch when I’ve held certain gold coins in my life. I had a Julius Caesar gold aureus in the palm of my hand once. Wow! So I get why silver remains the red headed step-child of the metals market. And the lack of commentary on silver reinforces my conviction of silver’s inevitable rise to $250-$300. As I used to say when I worked on Wall Street, “buy the rumor, sell the news.”

It worked every time. And right now silver is hardly a whisper much less a rumor.

So, realistically at what price would I begin selling my silver?

$275-$300 an ounce.

I’m patient.

And certain.

Page 1 of 15

Powered by WordPress & Theme by Anders Norén