China: I See Your Trade War And Raise You A Cyberwar
China: I See Your Trade War And Raise You A Cyberwar
Notes From the Field By James Hickman (Simon Black) April 2, 2025
It was sometime in the spring of 323 BC when Alexander the Great-- the “King of the World”-- passed through the gates of ancient Babylon for the last time.
He had already conquered the city nearly a decade before. But his men were worn out from fighting in India and Persia, and Babylon was a secure place to give his army a much-needed rest.
They remained there for a few months, until, quite suddenly, Alexander became extremely ill on either the 10th or 11th of June and then died.
China: I See Your Trade War And Raise You A Cyberwar
Notes From the Field By James Hickman (Simon Black) April 2, 2025
It was sometime in the spring of 323 BC when Alexander the Great-- the “King of the World”-- passed through the gates of ancient Babylon for the last time.
He had already conquered the city nearly a decade before. But his men were worn out from fighting in India and Persia, and Babylon was a secure place to give his army a much-needed rest.
They remained there for a few months, until, quite suddenly, Alexander became extremely ill on either the 10th or 11th of June and then died.
The cause of his death is unknown. Some say he was poisoned. Others blame malaria, typhoid fever, or complications from his battle wounds.
What is certain, however, is that he left behind no legitimate male heir, as his wife was still pregnant at the time of his death. So almost immediately a power struggle broke out as to who would succeed him.
Macedonian tradition at the time dictated that whoever buried Alexander’s body would be the rightful claimant to his empire.
Well, Alexander’s dying wish was to be buried at an oasis in North Africa-- more than 1,000 miles away. So you can just imagine the nearly year-long cat-and-mouse game where all of these generals and nobles vying for the throne continually tried to steal Alexander’s corpse from one another.
There were assassinations, sabotage, secret missions, and more, not to mention full-blown warfare among the various factions which ultimately lasted for decades-- ironically far longer than Alexander reigned.
In the end, Alexander’s empire broke apart. And one of the victors-- a former general and bodyguard, named Ptolemy-- ended up taking over Egypt and established a ruling dynasty that lasted for centuries.
Their economic system in the ancient Ptolemaic Kingdom was essentially what we would today call “national capitalism”.
The bureaucracy was massive. Absolutely massive. Onerous regulations controlled commerce and trade. Nothing was produced that wasn’t in the government’s interest. Caravan routes and waterways were owned by the state, and their use was heavily taxed.
There were taxes on salt, stamp duties on legal documents, taxes on inheritance, and a sales tax of 10%. Plus, the tax on income reached as high as 50%.
Then there were the tariffs.
The Ptolemaic Kingdom possessed some of the finest technology in the world at that time; their fields were the most productive, and their manufactured goods were among the highest quality on the planet. So, their exports were vast and lucrative… and they traded with markets as far away as China.
Yet even though Ptolemaic Egypt’s productive technology gave them many competitive advantages over other kingdoms, the state decided at a certain point that it needed to ‘protect’ its domestic industries. So, they imposed heavy tariffs.
The results were rather predictable. Without the benefit of low-cost imports, prices rose significantly. Greek olive oil, which cost just 21 drachmas in Athens, sold for 52 drachmas in Egypt. Trade dried up, hurting both the domestic and foreign economies alike.
Trade disputes soon festered into trade wars, which quickly became actual wars.
The loss of blood and treasure mounted, while rivals (like Carthage, and eventually Rome) became stronger.
This is the basic principle behind ‘mercantilism’, i.e. the prevailing zero-sum economic philosophy that dominated the world for thousands of years. It’s based on the idea that, in order for me to win, you have to lose. I become wealthier by taking from you.
Adam Smith finally codified why this way of thinking was stupid when he published An Inquiry into the Nature and Causes of the Wealth of Nations in the year 1776. Smith, the father of capitalism, realized that wealth and abundance were infinite, and that trade was not a zero-sum game. Both sides could become better off.
Yesterday-- supposedly ‘Liberation Day’-- constituted a gigantic step backward from capitalism… back to the zero-sum mentality of mercantilism.
I’ve written before that, yes, America has very legitimate gripes with respect to some of its foreign trading partners.
But it seems naive that these can be solved with across-the-board tariffs on essentially the entire planet.
If Apple doesn’t want to sell iPhones in China, they can choose to do that on their own. It seems silly to make hundreds of millions of Americans pay higher prices for imported goods to ‘avenge’ Apple’s lost profitability from Chinese import duties.
There are so many things wrong with this policy… and very few ways in which it could go right.
In order for tariffs to be a win, the rest of the world would just need to take it in the teeth. No other nation could impose retaliatory tariffs. Foreign businesses would need to cut their prices, and foreign central banks would need to devalue their currencies.
US consumers would need to be very forgiving and buy the narrative that the price inflation due to tariffs is “transitory”, and that domestic production will soon bring prices back down.
Most importantly, US businesses will need to immediately begin building new factories in America and ramp up domestic manufacturing.
But this is far easier said than done. New factories will require a host of state and local permits, and that bureaucracy could bog down industrial construction for years.
Not to mention that many building materials for all of these new factories will need to be imported. There are exemptions in the tariffs for copper, lumber, and steel, but other imported construction materials will be 10% to 50% more expensive now.
In short, build all of these factories will take a great deal of time and be lot more expensive. Consumers will be expected to pay the price in the meantime.
One of the biggest questions, of course, is what happens next.
History tells us that trade disputes often escalate into larger conflicts. And is anyone naive enough to think that the Chinese will simply bow obsequiously?
Perhaps they’ll use their army of hackers to take down parts of the US power grid and launch a mini cyberwar. Or perhaps they’ll cease exporting critical rare earth metals to the US-- so kiss your iPhone goodbye.
We also could easily see a number of countries (including in Europe) retaliate by canceling visa-free travel for US citizens… and several countries start pulling their funds out of the United States-- either in retaliation or out of fear.
This might even lead to the US imposing capital controls in order to stop foreigners from moving their money out.
Bottom line, it could get very messy, very quickly.
To your freedom, James Hickman Co-Founder, Schiff Sovereign LLC
If tomorrow is “Liberation Day”, today is “Rational Day”
If tomorrow is “Liberation Day”, today is “Rational Day” [Podcast]
Notes From the Field By James Hickman (Simon Black) April 1, 2025
Tomorrow is being billed as Liberation Day— where tariffs will supposedly free America from those pesky, parasitic foreign markets.
But what’s actually going to happen?
This is the subject of today’s podcast.
If tomorrow is “Liberation Day”, today is “Rational Day” [Podcast]
Notes From the Field By James Hickman (Simon Black) April 1, 2025
Tomorrow is being billed as Liberation Day— where tariffs will supposedly free America from those pesky, parasitic foreign markets.
But what’s actually going to happen?
This is the subject of today’s podcast.
We discuss:
How odd it is that no Liberation Day details have leaked... which makes us wonder if there actually are any plans or details to leak.
If this administration truly believes tariffs are so obviously great for the economy, why would they wait until now instead of doing it day one, as they did with so many other executive actions?
What might actually unfold, and what it means for markets that are already jittery.
Questions any rational investor should ask themselves about their goals— for example, are you speculating on share price, or investing in a company’s long term prospects?
Will tariffs make successful companies immediately and permanently less valuable?
To answer these questions, we bring up examples of well managed, value companies we present to our investment research subscribers, particularly undervalued real asset businesses.
One example’s entire market valuation is less than the cash it has in the bank. Plus it’s profitable and pays a dividend.
Finally, we discuss:
The long shot scenario of what would need to occur for tariffs to actually work as intended.
The very plausible scenario that America could become a manufacturing powerhouse again—not thanks to tariffs, but technology.
The surprising company we identify which likely stands to gain the most from this AI/ automation/ robotics boom.
If tomorrow is “Liberation Day,” then today is the day to be rational.
I encourage you to give it a listen. You can listen in here.
(For the audio-only version, check out our online post here.)
To your freedom, James Hickman Co-Founder, Schiff Sovereign LLC
Here’s How The US Might Force Foreign Nations Into Submission
Here’s How The US Might Force Foreign Nations Into Submission [Podcast]
Notes From the Field By James Hickman (Simon Black) March 27, 2025
On June 8, 1974, President Richard Nixon dispatched Treasury Secretary William Simon and his deputy to Saudi Arabia in an attempt to strike one of the most critical—and secretive—economic deals in modern history.
Three years earlier, in August 1971, Nixon had severed the final link between the US dollar and gold, officially ending the Bretton Woods system. That meant foreign governments could no longer redeem their dollars for gold, effectively turning the dollar into a pure fiat currency backed by nothing but political promises.
Here’s How The US Might Force Foreign Nations Into Submission [Podcast]
Notes From the Field By James Hickman (Simon Black) March 27, 2025
On June 8, 1974, President Richard Nixon dispatched Treasury Secretary William Simon and his deputy to Saudi Arabia in an attempt to strike one of the most critical—and secretive—economic deals in modern history.
Three years earlier, in August 1971, Nixon had severed the final link between the US dollar and gold, officially ending the Bretton Woods system. That meant foreign governments could no longer redeem their dollars for gold, effectively turning the dollar into a pure fiat currency backed by nothing but political promises.
After Nixon’s move, the US could effectively ‘print’ and spend as much money as it wanted—something that Congress enthusiastically embraced.
Inflation soared, confidence in the dollar plummeted, and foreign countries began dumping dollars as a result.
So Washington hatched a plan.
The mission to Riyadh was a covert, high-stakes operation to engineer artificial demand for the dollar.
They went to convince Saudi Arabia— the world’s largest oil producer— to sell its oil exports exclusively in US dollars. In return, the US would offer military protection, political support, and access to sophisticated weaponry.
It was the birth of the petrodollar.
Pretty much every country on earth was buying oil from Saudi Arabia. And if Saudi Arabia was only selling oil in US dollars, it meant that every country on earth had to continue to own US dollars... and by extension, continue buying US government bonds.
This arrangement has continued for half a century and allowed the US to run massive deficits, ‘print’ money at will, and export inflation around the globe—all while maintaining an illusion of monetary stability.
Today, there is once again grumbling around the world about reliance on the US and its currency.
Even allies like France and Germany are actively working on diversifying out of the US dollar and investing their savings at home, rather than buying more US government bonds.
In response, the Trump administration seems intent on resetting the global financial system and almost forcing foreign countries to continue holding US debt; insiders within the administration refer to it as the ‘Mar-a-Lago Accord’, and given the ongoing tariff announcements, it appears they are actually putting the idea into action.
I wrote about this earlier in the week: this is an extremely high-risk gamble.
But there’s one thing the US has going for it... a way to ‘engineer’ demand for US dollars and encourage foreigners to buy US government debt.
Back in the 1970s, the need for oil forced foreign nations to continue owning US dollars.
The oil of today is technology. And foreign nations will most likely line up to get their hands on US technology.
The US is still the leader in advancements like AI and high performance computing, quantum, other advanced semi-conductor technologies, robotics, small scale nuclear, and more.
Obviously other countries possess some of this technology; China still leads in supercomputing and has plenty of its own AI. But much of the core infrastructure— especially advanced semiconductors— is dominated by the United States.
This is potentially an advantage that the US government might exploit (through export controls and more) in order to force foreigners to continue owning dollars... and Treasury bonds.
This is the topic of our podcast today— and we also discuss:
How the Mar-A-Lago Accord is an enormous gamble
What happens to the US dollar if the gamble doesn’t pay off
How they’re also might plan on dismantling Federal Reserve independence
A 1960s-era economist’s view on why the reserve currency is doomed
Peter Schiff’s father Irwin, and his testimony to Congress in 1968
And the right way to solve America’s debt problems.
(For the audio-only version, check out our online post here.)
To your freedom, James Hickman Co-Founder, Schiff Sovereign LLC
