Lenin’s bayonet

ABERDEEN, SCOTLAND – I make the biggest efforts possible to not support the Chinese economy in any way. Supporting the economy is supporting the CCP. It’s crazy more people in the world are not standing up against this.”

So says a reader – and I agree. It is crazy. And it’s unfortunate that the only thing the everyman can do to protest the Chinese Communist Party’s vile behaviour (besides spreading the word) is to boycott Chinese goods. After all, the average Chinese citizen just wants to work hard and get on with life like the rest of us – it’s their government that is guilty of crimes against humanity.

But when the government weaponises their economy for the greatest strategic advantage, pursuing a policy of “civil-military fusion” where virtually anything within their economy can be used by the state to further its reach, what choice does one have but to limit your own empowerment of the CCP? I do my best to avoid Chinese goods for this reason.

While China’s dominance in manufacturing is common knowledge, it still surprises me just how much of our everyday goods are made in the Middle Kingdom: toothbrushes, kettles, fabrics, consumer electronics… just finding products without the “MADE IN CHINA” label can become quite an odyssey, and lead to some interesting discoveries.

Did you know there’s a company that still makes televisions in the UK? It’s called Cello – it’s got an assembly line in the North East of England. I recently acquired one of its flatscreens after my monitor broke: it works great and was very affordable – and I highly recommend one if you’re after a new TV. While I suspect some of the subcomponents have been made in China (hopefully elsewhere in Southeast Asia), I was surprised there’s still a “Buy British” option for this kind of product.

The reader above included a link to a very good article recently published in the Guardian. It’s an excerpt from the recently published memoirs of a Uighur woman who was imprisoned in a re-education camp for seven years, detailing the soul crushing horrors the CCP have been and are continuing to get away with inflicting at this very moment. I strongly suggest you read it – see here. Just be ready to pour yourself a stiff drink afterwards.

I was pleased to see the spirit of bipartisanship on display when both former Conservative Party leader Iain Duncan Smith and the shadow foreign secretary Lisa Nandy both overtly compared the situation in Xinjiang to Nazi Germany.

But these are only words, and much more must be done. Richard Nixon shrewdly observed that communists follow the Leninist directive to “Probe with bayonets. If you encounter mush, proceed; if you encounter steel, withdraw.”

The CCP has encountered nothing but mush in the West for decades. For years it has pushed its bayonets through the mush of our decrepit political establishment that will do anything to appease it, and is terrified of offending it. It’s high time the CCP was shown nothing but steel.

Further to our comments on the CCP in Where oh where is Rupert Bear Jack Ma? (11 January), a reader had this to say on the party’s weakness:

… we should remember several aspects of China which affect the CCP’s behaviour. Yes, they are scared of their 1.2bn population rejecting their authority, not least because their demographic slide into old age is unstoppable and threatens to ruin their economy. Old folk have less to lose from revolution than younger generations.

Secondly, the CCP is corrupt. As in much of Africa, South America – and in some surprising other regions – bribery and other corrupt ‘favours’ are normal behaviour which entrenches the elite. The threat of losing this and its extent becoming public, scare the CCP equally.

Geo-politically, China is surrounded by fierce competitors. The US across the Pacific with India and SE Asia to the west. Modi is facing up to China. India has the most favourable demographic in the World, has an increasing, highly educated population, and is investing heavily in their defence capabilities.

China is holding trillions of US Treasuries in ever-depreciating dollars. China cannot just ‘dump’ these dollars – who will buy at par? China has the classic ‘banker’s problem’.

All of these could make the CCP reckless and wanting to rally their population by creating an external threatening enemy. This could be dangerous for all of us.

India is key to tackling China. I believe it is in our best interests to empower India’s rise as much as we can through the extension of a favourable trade agreement, and really deepen our economic relationship. This is one of the very exciting opportunities presented by Brexit, (which hopefully our government will not squander) with compelling investment opportunities to boot – a topic we’ll return to in a future letter.

Returning to Nixon, I received this interesting response to What should Nixon have done in 1971?  (12 January) regarding the growing dollar supply after the Second World War and finding scarcity amid quantitative easing (QE):

There are always the same two sides to the value of anything, Demand, and supply. In the case of money, no supply eliminates the demand, so people cannot buy goods, as they have no money, and no one will make goods because there are no customers. That is all self evident. On the other hand a shortage of supply of goods and spare cash in the public hands has two effects, it pushes up prices, but also spurs increased production so that supply generally grows to meet the demand and prices tend to fall again. As a generalisation it is in this last situation that we find ourselves, so that despite massive increases in the amount of cash being fed into the market through QE and the low interest rates designed to boost demand, there has not been much inflation. As the population ages also there is a limit to what we old folk want. I am soon to be 80 and have been disposing of spare properties, I am never going to buy a yacht and even the care of the 11 acres around the house is becoming a burden. So the ageing population in the developed world will dampen demand and keep a lid on prices.

After the war the US flooded Europe with Dollars, it was generous but really very much in their own interest. Just after the war I went as a child to France and Germany and was astonished by the numbers of American cars there as recipients of dollars spent most of them buying US products. Also since the US had all the Gold reserves and was by far the world’s richest country the dollar was an excellent means of exchange whilst Inflation ravaged the value of the Franc, and the Lira. The reason why those two were weak was the lack of confidence in the administration. Only the Deutschmark kept its value as the chancellor embraced a totally free market and made a bonfire of regulations. That freed the market to provide in short order the need of the country and we were able to buy things there which were just not available in Socialist UK. Meanwhile America boomed as all those Dollars they had given Europe came back to buy their goods.

Today the only thing which remains in short supply that I can think of is housing, and that is because of planning regulations making it hard to find building land and hard to get permission to build, thus limiting the supply. That points to a continuation of spare cash going into buying land, preferably building land, and continuing increases in the price of property.

Land does indeed present a compelling opportunity as one of the ultimate scarce assets in a world of monetary excess – its properties of both scarcity and utility give it that extra boost when governments are pursuing an “economic growth at any cost” strategy. (Incidentally, that’s one of the same reasons I like silver so much right now…)

That’s all I’ve time for today I’m afraid – but thank you for all your great emails. I’ll be back again tomorrow – hopefully with something chirpier to write about…

All the best,

Boaz Shoshan
Editor, Capital & Conflict

Category: Geopolitics

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