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What in the World?

Relations between the US and China have hit rock bottom

Feb 22, 2023

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President Biden’s surprise visit to Kyiv just days before the one-year anniversary of the start of the Ukraine War was designed to send a clear message to Russia that the U.S. remains firmly in Ukraine’s corner. The visit may have also been a message to China. The U.S. is pushing to isolate Russia on a global scale, and Secretary of State Anthony Blinken has warned Chinese officials not to provide support to Russia.

Straight Arrow News contributor Peter Zeihan says this is the latest indication that relations between the U.S. and China have hit rock bottom.

Excerpted from Peter’s Feb. 21 “Zeihan on Geopolitics” newsletter:

Senator Lindsey Graham captured the essence of what today’s video is all about – “If you jump on the Putin train now, you’re dumber than dirt.”Between President Biden’s visit to Ukraine and VP Harris’ comment on Russia’s crimes against humanity, it’s clear that the US has drawn a line in the sand, and Russia is on the other side. This means that Russia (or at least Putin’s government) is on the blacklist of world affairs.According to Secretary of State Antony Blinken, the Chinese are considering providing lethal aid to the Russians, so that blacklist might be getting a little bigger. Unfortunately for the Chinese, any disruption to the already crumbling relations between the US and China could prove catastrophic.The breaking point has been on the horizon for years now, and we all should have seen this coming. The ramifications will be huge, and a complete reordering of the global economic system is just the tip of the iceberg.

Hey everyone, Peter Zeihan here coming to you from Colorado. It is the 20th of February, a Monday. You’re going to be seeing this on Tuesday morning and we have to talk about some of the big changes that have happened in the situation in Ukraine, because they have global consequences that we’re all going to be feeling pretty quick. First and foremost, the most obvious development is that U.S. President Joe Biden has made a trip to Kyiv…in the middle of an air raid, no less. And it’s difficult to find a more focused announcement of American policy about what its long-term impressions are, and commitments are to the Ukrainian cause…you know, sending the big guy himself. He’s on a trip to Europe, and this was his first stop. 

Second, over the weekend, Vice-President Kamala Harris specifically and very concisely accused the Russian government of crimes against humanity. Now that is a term that the U.S. government does not trot out on a regular basis. The word genocide may have lost a little bit of its meaning because it’s been overused in the last couple of decades, but crimes against humanity are the kind of thing that you only accuse the government of if you will never, ever, ever, ever let them back into the family of nations. So from the American point of view, diplomatically, strategically, economically, financially, all of it…this is now the status of our relations with the Russians as this is a fight until they are gone. And by they, I mean, this government specifically.

If the Putin government is ultimately replaced by something else, there will be a conversation about what next steps are. But there is not going to be a diplomatic solution to this at any tier. Honestly, it’s not too hard to see why. We knew back in April of last year that there were at least 70 different torture camps throughout the Ukrainian space. We found about half that many just in the territories that have been liberated so far in the war, but well over half the territory that the Russians have occupied since the beginning, are still under Russian control. So this is going to get ugly before it gets better. But the Americans have made it very clear where their line is, and the line is on the other side of Vladimir Putin. 

But the…most significant development came from Secretary of State Tony Blinken, who over the weekend made it very clear from American intelligence publicly, that the Chinese are very seriously considering giving lethal aid and ammunition and equipment to the Russians. Now we have seen over the course of the last year that American intelligence has gotten very, very good at…intercept, especially in the Russian space. I suspect there’s some good information on the Chinese space, but if I was a betting man, I’d guess that the information that Blinken was referring to is coming from the Russian side of things, because that’s where most of the monitoring is going on. 

We’re also in the general…in a general meltdown in relations with the Chinese. So the Foreign Ministry rep Yang, who was in Munich for the security conference, which is where Blinken made the statement, was publicly saying right up until he met with Blinken that the balloon incident was absurd and of course, it was a weather balloon. You know…Blinken has the hardware in hand! I mean, like there’s no doubting that it was an espionage attempt. But the degree of just organizational breakdown within the Chinese government has reached the very top and they’re incapable of making cohesive decisions and implementing them across their entire system. So if we’re having a system that is driven entirely by propaganda, and the propaganda is quite literally batshit crazy, it’s not that the United States is upping the ante here and pushing for a more hostile relationship; it’s that the Chinese are now incapable of being a good faith actor and we’re seeing a degree of disintegration across the decision-making apparatus. And it appears, at least from the American point of view, that that is now going into strategic fields with assistance of the Russians on hand.

As Senator Lindsey Graham put it in that charming South Carolina way he has, if you jump on the Putin train now, you’re dumber than dirt. And we’re definitely see dumber than dirt break out across the entire Chinese apparatus. Now, if this happens…hasn’t happened yet…but if this happens, there will be strict American sanctions on the Chinese system. And I would bet that the very first step is going to lose…involve financial step sections. And I would bet that the very first step is going to involve financial sanctions with sharply limited access to the U.S. dollar. For all the talk out there about the U.S. dollar going away, the Chinese are by far the most enthusiastic users of the U.S. dollar. They massively print currency to the tune of…it used to be two to five times what we did…we’re actually reducing our money supply as part of our economic recovery; the Chinese have sped it up because they no longer have consumption because their population’s in collapse. And so the Chinese have no use for their own currency. They try to get U.S. hard dollars wherever they can for everything. So if you restrict that access, it does a number of things. And it really depends on how the Americans do it. But it’s definitely going to restrict their ability to move money around the world. 

That is going to make it very, very hard for Chinese firms to access food, which is all denominated in U.S. dollars, oil, which is all denominated in U.S. dollars and the U.S. market, which obviously, is all denominated in U.S. dollars, and is by far, far, far the single largest customer that the Chinese system has. And there is no way that that can happen without some degree of blowback, either indirectly or directly by the CCP for foreign companies operating in China. And so we are now nearing the break point. 

And I…I’ve been warning folks that if you have assets that you wanted to sell in China, you’ve probably ran out of time about a year ago. And I’ve been warning that now was the time to get your people out but we may have now passed that, too. Now, we’re at the point where you might still be able to get some of your operating cash out, but you really shouldn’t count on that anymore. And if I’m being perfectly blunt here, folks, we should have seen this coming. 

The crackdowns in Hong Kong, the genocide in Xinjiang, the slide into full, not authoritarianism, but dictatorship, the Trump trade war, the Biden codification of the trade war, the fact that the only IP theft that was more extreme than what the Chinese did every day on cyber, is what they actually did in foreign facilities in China itself. No one should be caught surprised by the disintegration of this relationship. 

But trade, if you can believe it or not, with the Chinese at least in terms of exports from China, are at an all-time high. So people have chosen to ignore the writing on the wall over and over and over, and we are getting very close now to the point where this just ends.  

There are going to be any number of ramifications of what will happen if the Chinese really go down this path and it looks like they probably are. But a complete reordering of how global economics works is just the tip of the iceberg. And as it happens, I’ll try to keep you up to date with what’s happening in real time, because it’s going to be a wild ride. All right, more on that as it happens. Take care everyone.

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