The Pivot To China: Bad To Worse

In the video discussion yesterday between Judge Nap and Doug Macgregor, at the very end of the video, the Judge quickly asked Macgregor about China—because of the Yellen trip there. The Judge wanted to know what Macgregor thought of the US placing troops on the islands that used to be called Quemoy and Matsu. Macgregor shook his head at the stupidity of it all and simply confirmed what he has repeatedly said. The US has no strategic interest in what’s going on in China’s neighborhood.

Ostensibly, Yellen’s trip to China—which follows hard on the heels of Zhou’s phone call to Xi—is about Chinese “overcapacity.” That’s the goofy notion that one day, decades ago, China decided to flood the world with cheap “stuff” and thereby destroyed out manufacturing sector. It had nothing to do with our own deliberately adopted policies—remember how we were going to deindustrialize and become an information nation?—it was all up to a predatory China making cheap stuff.

The other day, Simplicius the Thinker did a very interesting substack on the topic of Yellen’s trip. I have some reservations, but I do recommend it. I’m not an economist, but Simplicius’ argument is, as I understand it, that China is adopting an economic model that differs fundamentally from our pseudo-market, financialized capitalism. I think we’re all adults here, so nobody should be shocked if I assert that our supposed “free market” system is now and only could be a libertarian fantasy—doomed to turn into a predatory financialized oligarchy, which occurred many decades ago. Deregulation simply got the job done faster.

That said, and to give readers a flavor of what Simplicius is on about, here’s an excerpt that comes near the end:

The above is particularly astounding in its admissions. Read carefully:

Market-based US and European economies are struggling to survive against China’s “very effective” alternative economic model, a top US trade representative has warned, according to Euractiv.

Katherine Tai told a briefing in Brussels on Thursday that Beijing’s “non-market” policies will cause severe economic and political damage, unless they are tackled through appropriate “countermeasures.” Tai’s remarks came as the EU-US Trade and Technology Council (TTC) kicked off in Leuven, Belgium.

“I think what we see in terms of the challenge that we have from China is… the ability for our firms to be able to survive in competition with a very effective economic system,” Tai said in response to a question from Euractiv.

In short: China isn’t playing fair—they’re actually privileging their people and economy over financial speculation, and this is causing their firms to outcompete ours!

But what she’s really talking about gets to the essence of the difference in the two systems:

The trade official described China as a system “that we’ve articulated as being not market-based, as being fundamentally nurtured differently, against which a market-based system like ours is going to have trouble competing against and surviving.”

These are code words: what she means by “market based” is free market capitalism, while China uses more of a centrally-planned directive system, as outlined earlier. Recall just recently I posted complaints from Western officials that their companies are not able to compete with Russian defense manufacturers due to their ‘unfairly’ efficient ‘central planning’ style.

Here too, what they mean is that the Chinese government creates directives that spurn ‘market logics’ and are aimed at direct improvements to the lives of ordinary citizens. In the West there’s no such thing: all market decisions are based merely on the totally detached financial firms’ speculations and are exclusively at the behest of a tiny claque of finance and banking elite at the top of the pyramid.

You see, the U.S. is threatened because it knows it can never compete with China fairly, by squelching or containing its own gluttonous financial elite—so that leaves only one avenue for keeping up: sabotage and war.

This is the real reason the U.S. is desperate to stoke a Chinese invasion of Taiwan by various provocations, including weapons shipments. Just like the U.S. used Ukraine as the battering ram to bleed and weaken Russia economically, disconnecting it from Europe, U.S. hopes to use Taiwan as the Ukraine against China. It would love to foment a bloody war that would leave China battered and economically set back to give the failing and greed-suffocated U.S. economy some breathing room.

But it’s unlikely to work—China is too sagacious to take the bait and fall for the trap. It will patiently wait things out, allowing the U.S. to drown in its own endless poison and treachery.

As you can see, Simplicius starts with economics, but ends with geopolitics. The two, of course, are intertwined. The American Empire’s debt crisis is a major part of what is driving geopolitics these days, and Simplicius doesn’t miss that.

For my part, I agree with the two Alexes at The Duran that the Zhou phone call and Yellen’s trip to hector the Chinese is fundamentally about Russia winning the war that the US initiated. The US narrative to explain its defeat is that, Hey, we wuz winning—Russia was almost out of washing machine chips—until China unfairly bailed Russia out! The Neocons have convinced themselves of this fundamentally unconvincing narrative, so they’ve now pivoted to try to detach China from Russia, using the only methods Neocons can think of: Threats. The Chinese aren’t buying any of that.

Today, in a blessedly brief (24 minutes or so) video the two Alexes turned to this topic once again. I’ve done a highly edited summary/transcript of their conversation, which really does a nice job of clarifying the lay of the land in this great power struggle:

China takes a hard line with Yellen

One of the major reasons why Yellen went to China was to warn the Chinese, or try to warn the Chinese, and to underline Biden's warning about China's support for Russia. Yellen came to China and warned Chinese companies that if they continue to trade with Russia then they face sanctions from the United States. That seems to me to have been her primary message, and the reaction from China has been very interesting. Firstly, they've again made absolutely clear that the Chinese Russian relationship is not up for discussion. Xi Jinping said that to Biden, the Chinese officials that Yellen met with told her the same thing.

But there have been a whole series of very interesting commentaries now appearing across the Chinese media telling us that in his conversation with Biden Xi Jinping took an unusually strong line about Taiwan--but not just about Taiwan but about all sorts of other issues. There are commentaries in the Chinese media about how the United States's debt problems are now so bad that the United States is going to need China's help, and for that reason the US needs to be "nice" to China. But the most interesting thing of all are comments that the United States is trapped in Ukraine and trapped in the Middle East and therefore can't risk starting anything new against China in Taiwan or the South China Sea.

So the overall sense--and I think this isn't just bluster--is that the Chinese actually feel that they're in a very strong position with the Americans, that the Americans have massively miscalculated especially over Ukraine, that they're bogged down there, that far from becoming stronger and the Russians becoming weaker, it is turning out the other way around and that the Chinese are in a good position to take a hard line on other matters. And of course the unspoken thing is that from China's point of view supporting Russia is turning out to be a good investment because it is tying America down.

Yeah, you're hearing a lot of talk now from the collective West media about how it is China that has turned the tide of of the war for Russia. It's China's support of Russia's war economy--that's what's really made the difference. Blinken told the Europeans at the NATO Summit pretty much the same thing. This narrative is the way that the collective West is going to explain away Russia's success. You know, we had them right where we wanted, right at the edge of defeat, but then China came in and they ruined everything.

They have to try and rationalize it and explain it in some way, so the way they explain it is it's not the Russians doing it all by themselves, it's actually the Chinese. I have no doubt that the Russians have had a certain amount of technological and economic support from the Chinese. There is an element of truth to that, but of course it is a huge exaggeration. But beyond that there's also no doubt as well that in the United States there is this strong hostility to China. They are trying to win over the Europeans to adopt that as well. There's still some resistance from some people in Europe but overall you can see the trend, Europeans gradually also following where the Americans lead them, becoming more antagonistic to the Chinese as well.

But the Chinese are looking at this now in a somewhat different way. I think they've now come to accept that the open door to the United States is closing, that the United States is not going to take Chinese imports. They probably think the same is going to happen with the Europeans. The Chinese however are recalibrating their trade, they're building up their new trading systems. India is becoming a big market, Russia's becoming a big market, other countries in the global South are becoming markets as well. Countries like Vietnam import goods from China, especially machine tool equipment, they then set up factories using these Chinese things and they make the consumer products that China used to make and which are then resold to the United States.

The Chinese economy has stabilized. I think the Chinese say to themselves, Look, that relationship with the Americans has gone. The divorce that we were talking about some years ago has essentially happened. It's now more than anything else a geopolitical relationship, or is gradually becoming that, and the Americans are trapped. They're bogged down in Ukraine and to a lesser extent in the Middle East, so this is the moment where we can take a hard line over Taiwan and the South China Sea and promote our own interests. And that's what the Chinese media is saying.

Yeah and there's a big difference between China providing machine tools or chips to to Russia and 40 countries in the collective West providing Storm Shadows and Scalps and tanks and Leopards and Himars and hundreds of billions of of dollars to Ukraine. So it's very strange for Blinken to come out and and warn the European partners about China's involvement with Russia when they're knee deep in Project Ukraine--a point, by the way, which the Chinese never cease making. I mean, they say, You know, you're coming along, you're criticizing us because we maintain normal trading relations with the Russians. Look at what you're doing, look at the kind of support you're providing to Ukraine. We are coming up with peace proposals, you're coming up with more tanks and bombs and shells and weapons and all those sorts of things. Don't blame us for the fact that there's a war. If the war isn't going as you planned, well, that's your mistake. It's not something that we brought about.

Who would have imagined that imposing sanctions on Russia might actually one day mean that the Russians say to themselves, Well you know, why don't we start opening up close relations with [China and] North Korea again? Obviously none of the geniuses in Washington thought that might happen. Blinken and all of these people that write about the Russians importing more machine tools and more chips from China--I mean, why was that a surprise?

It's very strange that these supposedly clever people, these Neocons, never think these things through. They never do, and things always boomerang against them. The reason that they never do is because they don't talk with people outside their own bubble. They only talk to people who agree with themselves and, of course, what they do is they urge each other on, rather than say, well, hold on a moment, let's think this situation through, all the variables. Amongst this crowd that kind of discussion never happens.

As I write the latest indications are that the DC regime is doubling down on its blank check commitment to Israel. They are playing out the scenario that the Chinese are seeing.