Biden’s National Security Strategy Visited

According to the Biden administration’s latest National Security Strategy, “The People’s Republic of China harbors the intention and, increasingly, the capacity to reshape the international order in favor of one that tilts the global playing field to its benefit…” It goes on to say, and I paraphrase, this is not acceptable, according to Biden’s 21st century plan. Thus, on October 7, 2022 the Biden administration imposed new restrictions on certain technologies that, according to the US Department of Commerce “restrict [China’s] ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.” This action will have far-reaching effects on global trade, not just on China’s current economy and future growth. (It’s also reminiscent of the U.S. treatment of Japan and oil supplies just prior to WWII.)

In my opinion, the Biden administration is requiring, and simultaneously daring The Peoples’ Republic of China to obtain those essential computing chips by some other means. Let me guess, with Taiwan supplying 90% of the world’s chips, this simply gives China one more reason to invade Taiwan. Could Biden be looking for a war? In any event, I’m sure mainland China is weighing its options.

Of course, before war breaks out with China, China will want to sell off its slightly less than $1 trillion of US Treasury Bonds/Notes, otherwise the US can seize China’s US dollars, the way it seized Russia’s US dollars. Better to spend those dollars than have them become a gift to the U.S. government. There’s also roughly $2 trillion in other foreign currency holdings. Could these funds be subject to seizure or sanctions, as well? Is China too dependent on the rest of the world to lose its foreign currency reserves? Only they can decide that. As long as the U.S. dollar maintains its value, China has a strong incentive to cooperate peacefully.

Even an attempted invasion of Taiwan would disrupt Taiwan’s semi-conductor production for the rest of the world. A successful invasion could give China control over the world’s semi-conductor production and possibly turn the tables on the U.S. restrictions? How much leverage would that give China?

Odds are, China’s preparation for an invasion of Taiwan would be noticeable to the rest of the world. Troops movements, equipment movements, even civilian movements would be necessary on a large scale. So far, this has not been evident.

My bet is that China is waiting to see what happens with Ukraine. If nukes start to fly, or the U.S. puts troops on the ground in Ukraine, that will be the cue for China to invade Taiwan. With the U.S. financially strapped, with an imminent diesel fuel shortage and low Strategic Petroleum Reserve (SPR), and involvement in Ukraine, the U.S. might decide to let China have Taiwan. Furthermore, if the chips that are made in Taiwan are no longer available to the U.S. manufacturers, would the U.S. be able to pursue two (or any) wars at the same time?

Of course, if China is patient, it could just wait for the U.S. to print enough money to create hyper-inflation and make it impossible for the U.S. to fight any wars. Then we can revisit Biden’s national security strategy.

Robert F. Sennholz

P.S. National security requires a sound money.

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