Armstrong Economics Blog/China Re-Posted Aug 19, 2022 by Martin Armstrong
QUESTION: With the bank runs in China, do you still think China will surpass the US economy? What about Pelosi’s trip? China’s response was more shock and see than anyone expected.
ANSWER: Nothing has changed. But you have to understand that the decline in the US economy also benefits China’s rise. The Democrats are attacking corporations and hiring 87,000 IRS agents to harass the people. There comes a point where it no longer pays to work. They do not understand that. I used to manage money in the USA and quit in 1985. I handed back all the money and told clients I was retiring. The auditors were crazy. They view NOBODY as honest, so they will not leave until they can charge you with some infraction. Mine was the tabs on our files were “pink” not “red” so they were going to write me up for improper record keeping. I am not one to cower. That was it. I said, fine. I would close the business. IRS agents are no different, but now they will be armed. Later, the government had the audacity to say I was prejudiced against Americans and refused to manage their money. I warned Congress that they were forcing everyone offshore and thus began the hedge fund business. We are at such a crossroads, and the future does not look bright.
As far as Nancy Pelosi’s recent trip to Taipei, it demonstrated the complete lack of international expertise that has engulfed Washington. There appears to be a complete lack of intelligence, and that is by no means confined to just Democrats. Anyone who supported her trip is totally incompetent in international politics. The trip was supposed to demonstrate US confidence in Taiwan’s leadership, but instead, it provoked a reaction from China that undermined the entire region. Beijing has apparently emerged with much more confidence than ever that it could retake Taiwan by force if necessary.
There were some people in the White House and the US Defense Department who told her to postpone her trip. Pelosi had announced her trip on her own and then faced political pressure not to back down once her plans became public. On July 31, 2022, Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, attended a reception to celebrate the 95th founding anniversary of the People’s Liberation Army (PLA), which fell on August 1. Her sheer stupidity was a slap in the face to Jinping, showing her total ignorance of international politics.
The Biden Administration has been forced to downplay the trip’s significance. In the process, the Biden Administration was forced to reaffirm its commitment to the United States’ long-standing “One China” policy, which recognizes Beijing as “the sole legal government of China,” while the US just ignores any claims to rule Taiwan. The Biden Administration has been forced to try to tell China that nothing has changed despite the stupidity of Pelosi.
China dramatically put on an expert show of military force that was awesome. Beijing, within hours after Pelosi left Taipei, showed to the world that China’s military spectacle was without precedent in scope and scale. Beijing is merely waiting for the right moment to take Taiwan. Beijing no longer trusts that the American policy of “One China” is in play with all the war drums beating over Taiwan. Biden has stated that the United States has a “commitment” to aid Taiwan in the event of a Chinese invasion. Even NATO has joined in the rhetoric against China. The timing of Pelosi’s trip merely reinforced the support for Jinping in the coming Chinese Communist Party leadership.
This demonstration showed the world just how far China has progressed militarily since the poor performance during the 1996 Taiwan missile crisis. They can take Taiwan with air and sea assets. China conducted, for the first time, simulated attacks on Taiwan in the actual airspace and territorial waters. China is trying to demonstrate that Taiwan should surrender rather than see its people die and its infrastructure destroyed, as is taking place in Ukraine.
In addition, China has confirmed to the entire world that it could, at any time it chooses, severely disrupt or more likely outright block critical global air and sea trade routes. That would cut off all Taiwanese-produced semiconductors while staring them out from imports. Pelosi’s trip has backfired completely, and instead of showing support and confidence in Taiwan, she has illustrated its vulnerability.
Worse still, the Biden Administration’s sanctions on Russia have destroyed globalization. It has also forged a hardline alliance between China, Russia, North Korea, and many more states swinging to their side against what many call the arrogance of the United States. This reminds me of the Peloponnesian War over the arrogance of Athens, and many joined their enemy, Sparta, and Athens lost.