Welcome we will be reviewing macro events from this past week from The Post I made at the beginning of this week on 7/31/22.
I have added a Definitions page which will include all of the terms and abbreviations that I use from now on and will be referred to on every post.
Substack has launched an iOS app for those of you using apple devices. I am an android peasant and can’t tell you if its good or not, but check it out if you have an iPhone or some other such trappings of royalty.
Please feel free to skip around or ignore certain sections if it does not apply to you. The Table of Contents is made to preserve your time in this manner. You can always simply read the conclusion if you are in a hurry.
Remember - I’ve been on crackhead mode for the past few months and as I stated on Sunday, I will be taking next week off from my usual forecast and review posts. Depending on how my drafts develop I may post content next week, but I also might not as I am taking the week to myself. I’ll see you on the other side.
Table of Contents
Pelosi’s Taiwan Visit
Australian Interest Rates
UK Interest Rates
US Employment
Crypto Macro
Price Action
Hacks and Exploits
Conclusion
1. Pelosi’s Taiwan Visit
Things are tense, but as I sit right now, the Chinese have so far sat idly by and not done anything other than perform extremely visible spectacle’s intended to be Final Warning’s of military engagement with the US. Even though I think the current visit will not directly lead to armed confrontation because it puts China in a horrid tactical place in terms of their chances of success, it still did us no favors in the geo-political realm.
Unfortunately, our foreign policy since Biden was elected has returned to constant escalation and provocation and despite most of China’s reaction to this visit being loud, hyper visible bluster, you can be certain that at some point China’s actual move to take Taiwan will commence.
Rest assured, any movements that China is loudly telling the international community about (like warships encircling Taiwan) is not the real move. If you genuinely have a masterstroke you intend to make against an opponent the last thing you will do is tell them. If China was actually going to intercept Pelosi’s plane and use that as grounds for a war, they wouldn’t have loudly told us they were going to do so first. They tell us things in order to create a reaction from us. For instance, most of their bluster prior to the visit resulted in our Navy going on high alert with a strike group positioned just South of Taiwan along Pelosi’s flight route in. They would never bait our armed forces into a defensive position just so they could attack Taiwan.
However, Pelosi’s visit to Taiwan is still directly countering the US’s stated diplomatic policy in regards to Taiwan. The US does not recognize Taiwan as an independent country on the diplomatic stage. If we do not recognize their independence, it is a tacit admission that China controls Taiwan. Therefore, we cannot go to Taiwan without Chinese permission, and this week when China explicitly tells us not to enter and we enter anyways it could be defined as an invasion. Yes, that’s right. Based on our own stated diplomatic policy towards Taiwan, Pelosi’s visit qualifies as an invasion. This is the hypocrisy I spoke about on Sunday that China should be exploiting to leverage us on the world stage. It’s incredibly stupid of us to be trying to have our cake and eat it too on this one. This is the major problem with the liberal economic order when it comes to foreign relations. Our words and actions are incredibly inconsistent and global double standards are the norm for the West. In any diplomatic negotiation, the west is an incredibly untrustworthy partner to negotiate with. China should be forcing us to address this hypocrisy by sanctioning us. As of 2021, only 14 countries even recognize Taiwan on the international stage.
This would be the easiest issue to force a discussion on in the diplomatic stage and after the sanctions we levied against Russia it would be very difficult for any country in the West to tell China they could not sanction the US for entering an island that no one recognizes as an independent country without Chinese permission. Russia has already issued a statement of solidarity with China, and it’s not impossible that China could garner widespread international support on the issue despite being a despicable nation. India already does not like the West and has little respect for Europe (frankly, neither do I), so it’s certainly possible that with some clever back-channel negotiation from China they could bring Asia, Africa, and South America to their side in regards to supporting sanctions as a response to this “invasion.” China could easily win India over if they made some concessions regarding their ongoing border dispute, as an example.
If China is smart, they will turn what was a largely visible spectacle that the entire world watched into a diplomatic debate. I suspect that China made this as visible as possible so that any discussion they bring to the UN regarding this visit is given priority. They had to appear as aggrieved as possible and gain as much attention as possible. I’m reminded of another fictional Chinese tale loosely tied to real events. In the below video from 37:50-39:50:
This is from one of the most popular stories in China that survived Mao’s cultural revolution and it’s about the collapse of the Han Dynasty. I’ve shared clips from it before as I quite like the story myself and it’s one of the first cultural exports China tried to push onto the world, many of you might remember the popular video game series Dynasty Warriors from the 2000’s, it’s based on this period in time.
Anyways, in the 2 minutes above; Cao Cao (a powerful warlord at the time) receives news that his father was killed by men that had defected from a neighboring warlord. He had wanted to invade this neighboring warlord and spent the next several weeks loudly mourning and yelling about his fathers death whenever anyone visited until soon most of the neighboring lords were aware of his fathers death and who killed him. So when he finally invaded the neighboring warlord and blamed him for his fathers death, no one came to this warlord’s aid except for one small army and so Cao Cao easily over took these lands.
Consider China loudly commencing live fire drills, issuing empty threats, saber rattling, moving warships into the area, threatening to shoot down Pelosi’s plane, and turning this into the focal point for the entire world this week as similar to Cao Cao loudly wailing about his father’s death. They are gaining the diplomatic high ground by acting overly aggrieved, so that when they don’t engage militarily but instead come before the UN or any other diplomatic body capable of sanctions and demand restitution or claim that they must sanction us; every nation will be forced to either agree or revise their existing diplomatic stance regarding Taiwan. If I were Xi, that is what I would do. As I have stated before numerous times, WW3 is an economic war, it is not a hot war, nor is it one that will be fought with munitions and bombs. Whoever loses the economic war, will start the shooting war.
I will state, that despite my confidence about what China should do, and what risks I think are smart for Xi to avoid, it’s also possible that China does invade now that Pelosi has left, and uses the existing global diplomatic stance not recognizing Taiwan as a global cudgel to smack anyone over the head with who wants to militarily interfere. Unfortunately, I think that if they did this, Japan would likely intervene no matter what. Of note, Japan and Taiwan are currently disputing the ownership of the Senkaku Islands. If China invades Taiwan, then Japan could claim they are defending their interest in the Senkaku Islands which would meet the current interpretation of their constitution for self-defense and allow them to utilize force against the Chinese navy.
Which version of China we get here is up to them. Will we get the savvy subterfuge undermining the liberal economic order? Or will we get the manifestation of bluster into a real invasion. I lean towards diplomatic subterfuge, but I can’t claim omniscience nor certainty.
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