The US dollar has lost 97% of its value in the past 100 years, but the biggest risk facing China is the US freezing of their dollar assets. China has little choice but to continue dumping USD holdings and shifting to physical gold held inside China while keeping an eye on when or if the USA will impose primary sanctions as they did with Russia and SWIFT. China has currency holdings in rubles, rupees, riyals, and so on, but they are volatile and still influenced by the vagaries of the US Fed, so to preserve value, gold remains a secure and viable means to preserve value. In the past 12 months, they offloaded $100 billion worth o dollars, a significant part of which was spent buying gold. This has been going on for several years and seems to be accelerating. Nonetheless, China is in a strong position to support the yuan considering that its economic system is production-based. Together with a Belt and Road, this is the foundation of longevity and sustainability, regardless of what may or may not occur with currencies. Read article →

Average 5-year return on foreign investment in China is 9.1%, vs. 3% in the US and EU. In H1, French, British and German investments rose 173%, 135% and 14%, respectively. 60% of American-funded enterprises are optimistic about the Chinese market, and 30% plan to expand their investment in China. Read article →

Advanced industrial societies must have access to a heavy forging presses the size of 10-story buildings, and China is home to the most and the biggest. They are essential to the manufacture of big machines, including cars, aircraft, tanks, oil platforms, and reactor pressure vessels for nuclear plants. Read article →

Effectively barred from the West’s largest markets, Chinese wind turbine manufacturers are selling in Asia, Africa, Eastern Europe, Central and South America, and the Middle East. Goldwind, for example, has a backlog of orders of 2.1 GW in Asia outside China and 1.20 GW in MENA. European orders for all Chinese wind turbines are for 186 MW and North American orders for 12 MW. But Western turbines all contain 50%-70% Chinese components. Read article →

Chinese are giving German manufacturers a run for their money in the EU, especially in advanced industrial goods, where Germany is a leader. "These findings give cause to worry given the challenges of the energy change and problems with Germany's competitiveness," said researcher Juergen Matthes. Read article →

China withheld approval of Intel's $5.4 billion plan to buy Israeli foundry Tower Semiconductor says the State Administration for Market Regulation (SAMR). Read article →

Vinyl flooring manufacturer, Zhejiang Walrus, significantly scaled back production at its Vietnam plant as a result of American customs rules requiring exporters to detail their raw materials sources before shipping finished goods to the U.S. Read article →

China surpassed Greece as the world's largest ship owner with 250 million gross tons, 16% of the global total. Read article →

Russia-China trade grew 30% in 2022, to $185 billion, and will reach $200 billion this year. Chinese auto brands had a 5% market share in 2021. Today, it's 24%, because Chinese manufacturers invested to fill the gap left by the Europeans. The same is true in refrigerators, air conditioners, washing machines and smart phones. Read article →

Exports fell 14.5% in July, YoY,  and imports also fell more than expected, by 12.4%, for an accumulated trade drop of $1.46 trillion, while exports in the same period decreased 5%, totaling US$1.94 trillion; high global inflation and rising interest rates are among the causes of lower demand for Chinese products in the world. Read article →

China will install 15-20 GW of battery storage this year, more than the entire past decade. 8 GW of battery storage capacity has already been added, bringing the total capacity to 21.1 GW; central government policies and the price of lithium – which fell by almost 1/3 in the first half of 2023 compared to average prices in 2022 – accelerated installations. Read full article →

Western semiconductor giants like TI and ADI are building new factories with CHIPS Act subsidies while holding 200 days of inventory. The Chinese are doubling down on older-generation semiconductors to capitalize on the EV surge. BYD makes 34% of its Power Management Integrated Circuits (PMIC), and their capacity rose 140% while the entire market grew 43%. BYD maximizes profits by producing chips tailored to its vehicles, threatening the profitability of standalone Western semiconductor companies. China's expansion might make Western giants' new factories poor investments. Read full article →

Intel's new chip innovation center in Shenzhen deepens China ties, even as Washington pressures semiconductor firms to reduce trade with the country. Read full article →

90% off American, German and Dutch' MRI machines, which start at $32 million plus $15,000/mo. maintenance. China's new MRI machine cost $2.9m., produces equivalent results and still makes 45% profit. Read article →

The prevalence of kickbacks in China's healthcare system is a multifaceted issue. A lack of innovation drives pharmaceutical companies to focus on sales, sidelining R&D, but an overlooked aspect is the economic pressure faced by healthcare professionals. Dr. Yin Jiayin, director of the Adverse Reaction Department at Peking Union Medical College Hospital, charges $2 (14 yuan) for an outpatient visit, and each patient requires 15 minutes. (Beijing haircuts are 30 yuan for 15 minutes). Dr. Wang Renzhi, the director of Neurosurgery, said brain surgery is technically more difficult, but the surgery fee, $150, must be shared by four or five doctors and a nurses. Read article →

Canada is probing Ralph Lauren over forced labor concerns, the country’s corporate ethics watchdog announced. The Canadian unit of the fashion giant is being investigated over allegations that its supply chains and operations in China have “benefitted from the use of Uyghur forced labor” filed by a coalition of 28 civil society organizations in June 2022. Read more →

Canada not approved for tour group travel due to its anti-Beijing sabre-rattling by Ottawa. There are 138 countries on the list. Read more →

The state of Utah is an unlikely battleground between China and Taiwan. In March, an AP report headlined, “Amid strained U.S. ties, China finds unlikely friend in Utah” smeared a number of local politicians from the Beehive State, dubiously presenting them as in Beijing’s pocket. One legislator was questioned by the FBI after he introduced a resolution expressing solidarity with China in the early stages of the COVID-19 pandemic, while a professor advocating for closer U.S./China relations was questioned twice. Read more →

A key feature of mainstream Western media today is the relentless China-bashing. It is off the charts and tiring, often involving regurgitated trivia or fabricated stories with no evidence to support callous statements about the country, demonstrating a deep lack of understanding. But such stories continue to be churned out with no end in sight. Countering this in international media by offering more balanced views for a global audience is near impossible as censorship is rife. There almost seems to be a global compact to control the narrative, a propaganda war powered by today’s digital technology…. Typically, the negative stories adhere to three core ideas, which inform the unspoken guidelines within these press rooms when it comes to reporting on China. First is the belief that China is a threat to the world and that this belief must be relentlessly reinforced at every available opportunity. How and why China is a threat is never explored; such is the deep-rooted and almost religious nature of the belief. Sound arguments do not matter. The basic tenets of good journalism are ignored when it comes to a China story. There is no need to explain or give evidence of why China is a global threat. Read more →

The West’s greatest asset in this struggle is the media whose propaganda helps to garner the public support the elites need to drive the country to war. Regrettably, the plan appears to be working. For example, in 2018 a mere 4 in 10 Americans saw China’s rise as a threat to US vital interests. Today, says Gallup, “66% of U.S. adults consider (China) to be a critical threat to the vital interests of the U.S”. In just 4 years the media has persuaded a majority of Americans that China poses a clear threat to the United States. How can one explain these results other than pointing to the pernicious impact of state propaganda used to poison the minds of Americans against Washington’s biggest economic rival? Read more →

Above: Shenzen. 1982/2022

Mao told Kissinger that normal relations between the US and China, was the big issue, because it impacted peace in the world. Taiwan, he said, “is an island with a population of a dozen or more million,” and “a small issue”. The US should sever diplomatic relations with Taiwan, he said, but unofficial relations could be tolerated for “100 hundred years”. In 1978, the US established diplomatic relations when it accepted three conditions, the severance of US-Taiwan relations, abrogation of the US-ROC Defence Treaty, and withdrawal of US forces from Taiwan. 180 UN members, including Australia, endorsed this approach by treaty and the UN was freed from the ridiculous fiction that Taiwan represented China. Read more →

Mao decided not to take his son's body back to China, but to bury him in North Korea, along with all the Chinese volunteers. On his grave, Mao wrote: 青山处处埋忠骨头 Loyal bones are buried everywhere in the green hills. Watch Chinese Songs (중국노래).

The BRICS summit will show how much of influence remains over the West’s subordinates. If there are controversies or a disappointing result by way of some nation(s)—like India, for instance—playing spoiler, then we’ll be able to see that the Western order has not given up the fight yet. But if the results are more promising than expected, it could initiate the coup de grâce on the Western imperialist hegemonic order. Read more →

Saudi Arabia appointed a consul in East Jerusalem, which Israel illegally annexed. The Saudis did not coordinate the appointment with the Israelis, and it is the first time the kingdom appointed a diplomatic official specifically for some aspect of Palestinian affairs. East Jerusalem has about 400,000 Palestinian residents and the Palestinians want it as the capital of their state. Read more →

All major international conflicts and negotiations ultimately boil down to the US working to stop the rise of China and China working to circumvent those efforts. Middle east policy, Russia policy, Africa policy, Australia policy, Latin America policy; it all ultimately comes back to China. Read more →

Washington offers security guarantees for the Marshall Islands, Micronesia and Palau. They cover the northern half of the Pacific and control the seas, air and land between Hawaii and the Philippines. They must give the US full defense rights in their territory, including keeping out anyone the US deems inappropriate. Read more →

Solomon Islands prime minister Manasseh Sogavare told a high-profile anti-China US congressional delegation he was too busy to see them. “We requested the prime minister’s office for talks but they told us the government is busy this week … It’s a missed opportunity,” US congressman Neal Dunn, who led the delegation, said on Tuesday. Read more →

PLAN tracks US subs' bubbles, created as water moves around them at different speeds, also emit extremely low frequency electromagnetic signals. ELF signals can travel through water and the atmosphere for a very long distances and, when picked up by air assets, provide submarines' range and course. The detection technology is 3 - 6 times more sensitive than acoustic detection. Read more →

Fifty F-35s vs 122 J-20 fighters manufactured annually. The underperformance of the F35 engine has cost billions in additional operating costs. South Korea said the country’s F-35s had experienced 234 flaws in 18 months, including 172 incidents rendering the aircraft non-operational and 62 where the missions could not be performed. Despite hopes for improvement, the first half of 2022 saw little change. Read more →

A powerful, blue-green laser mounted on a plane reaches 160m. below the sea surface. The technology could fundamentally alter submarine warfare. Read more →

What would happen if China attempted an amphibious invasion of Taiwan? In the CSIS wargame the US lost dozens of ships, hundreds of aircraft, and tens of thousands of servicemembers. Taiwan's economy was devastated and the high losses damaged the U.S. global position for many years. China also lost heavily, and failure to occupy Taiwan might destabilize Chinese Communist Party rule. Victory is therefore not enough. The United States needs to strengthen deterrence immediately. Read more →

The U.S. Air Force practiced evacuating thousands of casualties from the Pacific in a drill last month seen as a direct response to the threat of a conflict with China. Read more →

The USA has 375,000 troops in the Pacific region to “counter China”, more than twice the 156,000 soldiers who stormed Normandy’s beaches on D Day. The US military occupies 30% of Guam, with 7,000 troops. It has 23 bases in Japanand Okinawa and a further 15 bases in South Korea. They are currently building four bases in the Philippines, with more in Micronesia and Palau, and, with Australia, are refurbishing an older base in Papua New Guinea. Read more →

Western media  claims that China is militarising Mischief Reef, Subi Reef, Meiji Reef, Panganiban Reef and the Spratley Islands abound, but they’re the same place, and China has built only two civilian airstrips. The Fiery Cross airstrip is 1200 feet shorter than the Darwin Military airstrip which, like Darwin Port, is being extended to accommodate a bigger US military presence. Guam has two runways; both longer than Fiery Cross. The other airstrip, on Meiji Reef is even shorter. And, with the exception of a medical evacuation in 2016, no military plane has landed on either. Read more →

The PLA's high-energy laser weapons operate indefinitely, without overheating. producing high-quality beams indefinitely. Longer, continuous operation times are needed to extend the range of laser weapons beyond a few kilometers. The Chinese system blows gas through the weapon to remove waste heat and keep mirrors clean. Read more →

Peter Lee

Leveraging US global financial dominance to stick it to the other guy has been a mainstay of US foreign policy ever since the US government reamed out Great Britain and the English pound in the 1920s. Today, more of the same.

If you’ve been following the news, you know that the US and EU announced sanctions on Russian banks, sanctions that included some cutoff from the SWIFT settlement system and also provided a carveout for energy exports.

The financial sanctions were not totally unexpected and to an extent an exercise in financial kabuki distracting from the continued trade in energy.

Russian energy exports account for 25% of European consumption and US and EU plans for reaping geopolitical benefits from the Ukraine conflict apparently don’t involve a crippling increase in oil costs to, for instance, $200 a barrel.

What was new was the announcement that foreign exchange reserves of the Russian Central Bank would be frozen in the United States and the European Union.

Russia’s total foreign exchange reserves—convertible foreign currencies and securities and gold held by the central bank amount to around $630 billion dollars. That’s a war chest that Russia expected to deploy to defend the value of its currency on the international exchanges and control the cost of debt service and imports.

Apparently over half that money is held in vulnerable EU and US jurisdictions.

My amateur speculation is that the US and EU decided that, once energy exports were carved out, a supplementary method was needed to inflict a satisfactory level of pain on the Russian economy, so that financial sanctions wouldn’t look too empty and ridiculous.

So Escalate!

Freeze Russia’s foreign exchange reserves, cripple the Russian central bank’s inability to intervene, and then invite the currency markets to hammer the ruble!

Which is happening. The ruble has lost about half its value.

Answering the interesting question of how well this foreign exchange reserve freeze was thought out? will, I guess, have to wait a few years while the memoirs of bankers and diplomats get massaged into print.

Note we’re currently talking about just a freeze of funds, not a seizure. Not yet anyway.

Maybe that was the EU mindset when they decided to do this: This is just a freeze, a temporary expedient to find a way to stick it to Russia while we still buy its oil and gas.

But, you know…US-led sanctions have a way of hanging around and becoming permanent.

And now I think seizure is never going to come off the table, with the inevitable agitation that Russia pay reparations to compensate for the damage it’s inflicting on Ukraine.

The disgrace of the US seizure of Afghanistan’s foreign exchange reserves provide a precedent.

At the Taliban takeover, the United States first froze the $7 billion in Afghan foreign exchange reserves it held; then it made the unilateral decision to seize the money and turn over half of it over to the families of 9/11 victims and use the rest to fund some Afghanistan humanitarian endeavor.

With this context, perhaps Western strategists should be focusing their attention on Russia’s growing conviction that unfreezing of its reserves in the EU and US is less likely than a permanent freeze, seizure, and confiscation…

…and with, therefore Putin should be thinking of turning off the energy taps to Europe while he’s still got the leverage & compel the West to let Russia liquidate its US dollar and Euro holdings to buy gold or Chinese yuan.

The other angle, of course, is America’s number one strategic competitor, that’s China.

China has $3 trillion in foreign exchange reserves, that’s five times what Russia’s got.

And what undoubtedly attracted China’s attention is the apparent US success in winning the EU to its united front financial warfare vision, at least for Russia and at least for the time being.

Using energy (for Russia) and trade (for China) to wedge the EU away from the United States is a dream that, at least for now, remains a dream.

China has to prepare for the eventuality that, when the balloon goes up over Taiwan, it will possibly be subjected to integrated US-EU financial warfare.

And it will have to adjust its financial defenses accordingly.

This state of affairs has attracted the attention of the people who really care about money and there are somewhat nervous discussions of what happens now that weaponisation of the US central position in the global financial system is recognized as a potential threat to any and all nations.

As John Sindreu put it in the Wall Street Journal, If Russian Currency Reserves Aren’t Really Money, the World is In for a Shock.

Well, to inject some economist humor here, the world is in for a Schacht.

That’s “Schacht” as in Hjalmar Shacht, the genius central banker who created international space for the inconvertible and near worthless Reichsmark during the Weimar and Hitler years.

And Schachtian economics—that’s the cultivation of bilateral transaction zones for trade settlement using an nonconvertible currency—is where in my opinion the PRC is going to be headed as it continues to internationalize the yuan, dedollarize (and now de-Euroize) its trade and foreign exchange reserves, and shield itself from the threat of US financial warfare.

Whether intended or not, whether the consequences were fully thought through or not, the financial and economic decoupling of the PRC away from the West will accelerate.

That’s a long term goal of the China hawks that will please US strategists eager to keep the whip hand in Europe, and perhaps will dismay the business-minded moderates who have been herded aboard the anti-Russia bandwagon.

As to whether this outcome reflects a long term strategy of the US or ad hoc improvisation to the opportunity presented by Russia’s invasion of Ukraine, well, I doubt self-serving backgrounders or carefully curated memoirs will tell the true story.

But a quick look at the past history of US diplomacy illustrates the fatal allure of financial warfare, a disregard for consequences, and outcomes that look a lot like failure…at least look like failure before the hagiographers and revisionists get to work.

First up, the granddaddy of modern US financial warfare is, I think, FDR’s regime of sanctions, suasion, and freezes implemented against Japan in the runup to the Pacific War.

I think it’s rather well known that a cutoff of US oil supplies kicked off Japan’s military push into the Dutch East Indies and the attack on Pearl Harbor.

What is perhaps less understood is that some hard-line anti-Japan bureaucrats—hey, we might call them “hawks”—exploited the ambiguity in Roosevelt’s strategy to push the US and Japan into war.

Fortunately, there is a book, a wonderful book I might add, by Edward Miller called Bankrupting the Enemy. It is wonderful because it reveals the inner dynamics of the US-Japanese economic relationship, which was one of near total Japanese dependency on the US for exports and financial facilities as well as commodities like oil.

It’s also wonderful if you, like me, you believe an entire chapter on the desperate battle between Japanese raw silk and American nylon to conquer the legspace of American womanhood is a pinnacle of historical writing; you’re going to like this book.

The US measures against Japan started out as sanctions, actually a license system for strategic goods. In theory, Japanese purchasers could apply for a license which the FDR administration, in pursuit of its larger policy goals of national and economic security, might or might not grant.

In the immortal word of a historian, the intent was to “bring Japan to its senses, not to its knees.”

Well, knees is what Japan got, courtesy of Dean Acheson.

The licensing system was rather disingenuously framed as a measure to conserve strategic materials for US use.

The big daddy was oil, of course, and, even though America was actually awash in oil, the US government talked up an oil shortage to explain limitation of exports to Japan.

Then, after Japan invaded southern Indochina in July 1941, FDR approved a freeze on Japanese assets in the United States, to be administered by an interdepartmental committee of State, Treasury, and Justice Departments bureaucrats.

The asset freeze, unlike the product licensing, was unambiguous financial warfare designed as an instrument of deterrent/coercive/whatever you want to call it diplomacy.

Even if the US government approved export licenses to Japan, another license from the freeze committee was needed to unblock Japanese assets to pay for that particular shipment.

Dean Acheson, at the time a deputy Secretary of State, was the dominant figure on the freeze committee, and he didn’t approve release of any funds to pay for Japanese purchases, most significantly for two shiploads of US petroleum products that had already been licensed in July.

Acheson subjected Japanese diplomats to several months of leisurely chainyanking without issuing the licenses and on November 22, 1941 wrote a self-congratulatory memo noting that exports to Japan had been “slashed to nil”.

As Miller mordantly notes in his book, November 22 was also the day “the last of six Japanese aircraft carriers arrived at Hitokappu Bay in the Kurile Islands, from where they would sail four days later for Pearl Harbor.”

The idea that Acheson goaded Japan into attacking Pearl Harbor is, of course, contested ground.

However, I think there’s a reasonable case that, if Roosevelt had kept dribbling out oil to Japan instead of implementing an unambiguous blockade, Japanese strategic decision making and US preparedness might have evolved in different directions, maybe involving less-than-total war and not requiring the merciless strategic and atomic bombing of Japan.

As to whether Acheson was single-handedly foreclosing diplomacy to indulge his anti-Axis militancy, there’s no paper trail showing knowledge or approval of his draconian licensing practices either at the State Department or from the White House.

During the summer of 1941, the higher levels of the US government were preoccupied with European matters and apparently didn’t have the bandwidth to second-guess Acheson’s diddling with the licenses for the two Japanese oil tankers.

Then again, when news of Acheson’s actions did percolate up the decision-making chain, FDR did nothing to reverse them, either because he had previously encouraged them in the signature FDR fashion, that is to say sub rosa, ambiguously and deniably …or Roosevelt decided that the political, diplomatic, and strategic hassles of a policy U-turn at this late date were simply too great, and he just let events take their course.

In addition to Miller’s book, primary source enthusiasts can consult the State Department documents for this event, which are conveniently on-line.

Anyway, let’s remember the takeaway from the Pacific War: 1) financial warfare 2) implemented on spurious pretenses 3) administered by an unaccountable government operation 4) dominated by headstrong hawks determined to exercise or abuse their discretion that 5) provoked an unexpected geostrategic surprise and 6) ended up with a big nuclear bang.

That’s the template that was followed by the next story in this episode, one that has enormous current relevance: the secret US attack on the Chinese financial system launched by US hawks in 2005.

You lucky subscribers to Peter Lee’s China Threat Report are pretty much the only people who get to hear this story, since the campaign and its disastrous conclusion have been pretty thoroughly memory holed by the incompetent zealots who executed it.

With that preamble, let’s proceed with a discussion of the signature piece of US financial warfare in the 21st century so far: the attack on North Korea via Chinese banks.

The outward manifestation of the 2005 campaign was the designation by the US Treasury Department of a tiny bank in Macau, Banco Delta Asia or BDA, as a bank of “primary money laundering concern” because it was purportedly laundering North Korean “Supernotes” a supposedly undetectable counterfeit of our precious $100 bill.

The designation was the application of a vague section of the Patriot Act designed to impede terrorist financing, but that had been seized upon, reinterpreted, and repurposed by Dick Cheney’s crew of hawks as a financial warfare and regime change weapon.

By its mere announcement the Treasury designation, as intended, provoked a complete severing of Western banking relationships with BDA and a run on the bank. The bank went bust and went into receivership.

Subsequent reporting revealed the Supernote excuse to be, to use an unkind term, unadulterated and completely unsubstantiated flapdoodle.

The real purpose of the designation was to intimidate all international banks with the threat of an arbitrary Patriot Act designation, cutoff from the global financial system, and instant insolvency…unless they cooperated with the US program against North Korea—that’s a program that by 2005 under Dick Cheney, had pivoted from nuclear diplomacy to regime change via financial warfare.

As Lawrence Wilkerson, Colin Powell’s ex Chief of Staff told me, yes, Me! Your humble scribe, there was originally a program of financial pressure targeting North Korean illicit activities.  It was designed to support a dual track of pressure and engagement on nuclear and missile issues through the Six Party negotiations.

However, in the first crazy post-Powell years of the second Bush administration, it got hijacked by the hardliners, and converted into a unilaterally implemented regime change weapon.

Wilkerson said: I believe that once we had gone, John Bolton and others put the [initiative] to use as a stand-alone policy to attempt to force regime change in Pyongyang by drying up the money with which Kim Jong-il essentially kept his generals happy. [In President Bush’s second term] other people, John Bolton, Bob Joseph took away the dual track. They lusted after it, got ahold of it [the illicit activities initiative], went whole hog [to use it to destabilize North Korea].

And once the hawks gained control of the North Korea operation, they ran it through the Treasury Department’s Office of Terrorism and Financial Intelligence which, by design, staffing, and by function creep, was an investigatory, regulatory, and enforcement black box controlled by hardliners with no public process or accountability, even to the rest of the US government.

Amazingly, even when the Bush administration and the State Department under Condoleezza Rice eventually tried to reverse course, the OTFI refused to withdraw the money laundering designation; and when the State Department agreed to return $25 million in North Korean deposits frozen at BDA to Pyongyang, the Treasury Department actively resisted.

Treasury even threatened commercial banks that Condoleezza Rice had approached with a money-laundering designation themselves if they agreed to handle the North Korean funds.

Finally, the US government was only able to return the funds by turning over the transaction to the only US—dollar financial institution in the world not vulnerable to Treasury sanctions: the US Federal Reserve. The money went to the New York Fed, was wired to a Russian bank in Vladivostok, and delivered to North Korea.

With this perspective, let’s return to the takeaways from Dean Acheson’s 1941 execution of a financial blockade against Japan. They were:

1. financial warfare
2. implemented on spurious pretenses 
3. administered by an unaccountable government operation
4. dominated by headstrong hawks determined to exercise or abuse their discretion that
5. provoked an unexpected geostrategic surprise and
6. ended up with a big nuclear bang.

I think the parallels between the anti-Japanese and anti-North Korea efforts are pretty obvious for items 1 - 4.

When the US Treasury designated BDA as a “bank of primary money laundering concern” the North Koreans recognized it for what it truly was and, for that matter, what the US hawks eventually admitted it was: financial warfare against North Korea.

When the BDA designation was announced,  US pretended it nothing to do with North Korea and refused to discuss it at the Six Party nuclear talks,.

North Korea withdrew from the talks in September 2005 and went home.

And, in October 2006, North Korea detonated its first atomic bomb.

Oops.

The anti-Nork hawks midwifing a nuclear-armed North Korea is universally ignored in US discussions of the brilliant US financial warfare strategies, just as historians tend to skate past the possibility that Dean Acheson triggered Pearl Harbor with his maximalist anti-Japanese sanctions.

But the story’s not over.

In response to the North Korean nuclear test the Bush/Rice axis decided to return to the Six Party Talks.

The North Korean price tag: return $25 million dollars in North Korean funds frozen at BDA.

Not so fast!

In opposition to the State Department and the White House, the Treasury Department hawks spent three months in 2007 using the gyrations described above to block the return of the funds; not simply out of institutional pique, but because they recognized the $25 million was the condition for resuming the Six Party Talks and they were trying to sabotage their resumption.

All in all, one of the more remarkable instances of institutional insubordination in recent American history, at least that I know about, and a reminder of the eagerness of hawks to wield—and seize control—over America’s most powerful weapon.

Not the atomic bomb.

US domination of the world financial system.

The Obama administration anxiously reasserted White House control over the financial warfare machine.

Nevertheless, in recognition of the importance of sanctions weapon, the chief architect of the BDA fiasco, Stuart Levey, the director of the Office of Terrorism and Financial Intelligence at Treasury, was the highest level official of the outgoing Bush administration, other than Secretary of Defense Bob Gates, retained by Team Obama.

And of course, beyond everything else, there was China.

BDA had been targeted by the Treasury Department because its chairman, Stanley Au, was politically connected to the PRC.

As David Asher, the zealot-in-chief in charge of the North Korean gambit, testified before Congress:

Banco Delta was a symbolic target. We were trying to kill the chicken to scare the monkeys. And the monkeys were big Chinese banks doing business in North Korea…and we’re not talking about tens of millions, we’re talking hundreds of millions.

Since 2005, in other words, the People’s Republic of China has been acutely and directly aware of the US weaponisation of its central position in the global financial system to target China…and alert to the possibility that this powerful weapon may be seized by, or put into the hands of, maximalist anti-China zealots.

The PRC subsequently gained experience in defensive financial warfare by setting up a separate financial settlement systems to tap dance around US secondary sanctions on trade with North Korea and Iran.

Even the US threat to the PRC’s central bank foreign exchange reserves isn’t a new development.

US anti-PRC enthusiasts have already talked about targeting the PRC’s foreign exchange reserves, particularly the trillion dollars or so its reserve bank, Bank of China, holds in US government securities.

Under Trump, there was a proposal that PRC foreign exchange assets be seized as reparations for Covid-19 at $10 million dollars per life lost; thanks to the US success in racking up Covid deaths, that would be a cool ten trillion dollar payday, which is more than three times the PRC’s stated forex reserves.

Given this history, there is no surprise that the PRC has been preparing against US financial warfare for well over a decade, by internationalization of the RMB to wean its trade from US dollar transactions, by developing an alternate to SWIFT for electronic settlement, by shifting its reserves out of the dollar into gold and the Euro, by digitizing the yuan, and by hardening its economy against US sanctions by stockpiling commodities.

The US/EU jointly announced freeze of Russian Central Bank assets is a major unwelcome escalation. At the same time, it’s simply the biggest and most recent exclamation point in the chronicle of US financial war, hopefully of course, not to be punctuated by the geopolitical surprise and nuclear bang that seem to dog America’s efforts.

I expect the full measure of US financial warfare to be deployed against the PRC sooner or later, not necessarily to destroy a geopolitical and systemic challenger, or in the service of preserving US military and economic pre-eminence in Asia, or to protect the plucky island asset of Taiwan, but simply to protect the US global financial hegemon franchise.

A US assault might be triggered for whatever pretext comes to hand if and when it looks like the PRC appears close to success in creating a parallel global financial system that threatens the primacy and power of the US dollar regime.

I am not completely averse to the conspiracy theories that the ferocity of the US response to Putin’s invasion of Ukraine, like the campaigns against Qaddafi and Saddam Hussein, were provoked by the stated plans of these supremos to de-dollarize their energy transactions.

The United States has cultivated, defended, and exploited its central position in the global financial system for geopolitical gain for a century; the PRC has been learning to fight back for the only the last 15 years.

The outcome is uncertain.

Will US power and experience prevail, or will it be once again undercut by hubris, incompetence, and ill-considered escalation?

Will the PRC be able to shield its vulnerabilities and protect its economy and finances, or will its rookie financial warriors be overwhelmed by the hardened US veterans?

I will say that, as PRC capacities and networks grow, the countermeasures needed to crush them will probably become more extreme.

Beating up on Libya, Iran, Venezuela, Afghanistan, and even Russia is one thing; going after the People’s Republic of China requires a higher level of tolerance for risk, pain, and possible failure.

Let’s review the template for US financial warfare a la Japan and North Korea one more time:

1. financial warfare
2. implemented on spurious pretenses 
3. administered by an unaccountable government operation
4. dominated by headstrong hawks determined to exercise or abuse their discretion that
5. provoked an unexpected geostrategic surprise and
6. ended up with a big nuclear bang.

In case of a conflict, I wouldn’t be too surprised if the US hopscotches over the traditional sanction and secondary sanction stages to roll out the ultimate financial weapon in the US arsenal—the asset freeze, with the threat of eventual asset seizure—sooner rather than later.

The next financial war looks to rage more fiercely…and more catastrophically than the one now burning between the West and Russia over Ukraine.Hopefully the US-China financial war won’t end up with a big nuclear bang, like the other ones did! Peter Lee’s China Threat Report.

Brian Berletic

The United States has announced a new weapons package for Taiwan worth up to 345 million USD. Reuters, in an article covering the package, would suggest it was aimed at providing Taiwan with “security assistance.”

In reality, the transfer of weapons from the US to Taiwan is a violation of Chinese sovereignty under international law, which recognizes Taiwan as an island province of China.The US State Department on its own official website admits, “the United States does not have diplomatic relations with Taiwan,” and that, “we do not support Taiwan independence.” Yet, the continued support of political parties on Taiwan pursuing independence and the shipment of US weapons to Taiwan to underwrite such aspirations constitutes a blatant violation of Washington’s own agreements with Beijing under the “One China” policy.

Washington’s actions in contravention of both international law and its own agreements with Beijing constitute a clear provocation against China and serve as the central driving factor behind Chinese military expansion, especially in and around the Taiwan Strait.

By violating China’s sovereignty by shipping arms to separatist elements on Taiwan, the United States is neither providing for Taiwan’s security nor underwriting regional stability as Washington often claims its presence in the region, thousands of miles from its own shores, is meant to achieve.

A factor, further undermining Washington’s claims of providing for Taiwan’s “security” through such arms transfers, is the very nature of these packages. As Reuters reports:

In recent weeks, four sources told Reuters the package was expected to include four unarmed MQ-9A reconnaissance drones, but noted their inclusion could fall through as officials work through details on removing some of the advanced equipment from the drones that only the U.S. Air Force is allowed access to.

Even if the MQ-9A reconnaissance drones, also known as Reapers, included the most advanced technology used by the US Air Force, their utility in providing for Taiwan’s “security,” would be questionable at best. That the US is stripping them of features maximizing their capabilities further demonstrates the lack of sincerity behind US intentions to “secure” Taiwan through such arms shipments.

Western drone technology including US Reaper drones as well as Turkish Bayraktar TB2 drones have proven to be ineffective in combat roles against peer or near-peer competitors, namely Russia, as seen during the fighting in Ukraine and Syria.

As part of the ongoing conflict in Ukraine, Russian Su-27 warplanes managed to down a US Reaper over the Black Sea simply by dumping fuel in its path, sufficiently compromising its propellers leading to its eventual destruction, CNN reported in March.

Russian warplanes have likewise challenged US Reaper drones flying illegally in Syrian airspace. Air & Space Forces Magazine in a July 27, 2023 article titled, “Russian Fighter Damages a Second MQ-9 Over Syria. So What Should the US Do Now?,” would report:

On July 26, two Russian fighters approached an MQ-9 and one dropped flares, striking and damaging the aircraft’s left wing in several places, according to U.S. officials.

A similar incident several days earlier also damaged a US MQ-9 Reaper.

While US military commanders have insisted they would continue operating the drones in Syrian airspace and “demonstrate some will and some strength,” there is virtually nothing the US can do to stop Russian warplanes from disrupting and even downing US drones short of escorting them with manned warplanes and firing on Russian aircraft.

The drones themselves are incredibly vulnerable to capable peer and near-peer nations like Russia and China and even Iran, who has on multiple occasions disrupted and even hijacked some of the US’ most advanced drones.

The Turkish-built Bayraktar TB2 combat drone shares many similarities with US-made drones. Its use by Ukraine was hailed as a game-changing capability that would decimate Russian ground forces. Just months later, virtually all of Ukraine’s TB2 drones were destroyed.

Russian air defense capabilities as well as its large, modern aerospace forces were more than a match for the type of drone warfare the US had pioneered during its “War on Terror.” What had been lopsidedly effective against irregular forces in the developing world was left wholly inadequate and vulnerable when fielded against the armed forces of a developed industrial power.

China’s air defenses and warplanes are among the most advanced in the world. Some of their most capable systems are, in fact, purchased from Russia, including the proven S-400 air defense system and Sukhoi Su-35S warplanes.

China is more than capable of disrupting or even destroying any MQ-9 Reaper drones Taiwan may acquire as part of this most recent US weapons package, begging the question as to what the US believes it will achieve by sending the drones in the first place.

Other weapon systems the US has pledged to send Taiwan in recent years include the Patriot air defense system, which has likewise been exposed as vulnerable to modern cruise missiles, hypersonic missiles, and drones both in Saudi Arabia’s conflict with Yemen and more recently in Ukraine. In addition to their battlefield deficiencies, the US is simply incapable of manufacturing both the Patriot air defense systems (launchers, radar, and commander units) and the interceptors they use in sufficient numbers to sustain operations in even a moderately-scaled conflict.

The qualitative and quantitative reality behind years of hyped Western military hardware has been fully exposed on and over the battlefields of Yemen, Syria, and Ukraine. Not only is Washington eager to provoke a similar conflict with China, but seeks to do so through a proxy likewise armed with insufficient varieties and quantities of US weapons.

The US sought to use Ukraine to “extend” Russia as a 2019 RAND Corporation paper literally titled, “Extending Russia Competing from Advantageous Ground,” explained. The idea was to continue to antagonize Russia, forcing it to expend resources, thus undermining its sociopolitical and economic stability much in the way the US claims it caused the collapse of the Soviet Union.

Quite clearly, US policymakers miscalculated. Russia’s determination to prevent the “NATO-fication” of Ukraine and its economic and military ability to do so, proved far more formidable than the West imagined.

China, with its much larger military, economy, and industrial capacity, is surely positioned to counter similar tactics used by the US and its allies in regard to undermining its sovereignty over Taiwan and using the island province as part of a wider US policy of encirclement. That Washington continues to pursue its current policy of encirclement toward China despite the military means by which it seeks to do so with have already proven insufficient against Russia in Ukraine indicates a lack of options and, in a sense, growing desperation in Washington.

US foreign policy centers on the singular pursuit of global primacy, despite growing evidence the US no longer possesses the military or economic means to do so. Will Washington continue spending military, political, and economic resources on dwindling returns against a reemerging Russia and a rising China? Or will the US finally abandon its increasingly unrealistic pursuit of global primacy and adopt a more rational policy of working among other nations rather than attempting to impose itself upon all other nations? It is a decision that if Washington doesn’t make for itself now, others will make for it in the near future.

Brian Berletic is a Bangkok-based geopolitical researcher and writer, especially for the online magazine “New Eastern Outlook”.

1. Talent at the Top: Only the brightest, most idealistic people are are admitted to politics–a policy unchanged in 2200 years.
2. Data in the Middle: policies are implemented, tracked, and optimized based on terabytes of data. The PRC is the world's largest consumer of public surveys.
3. Democracy at the Bottom: ordinary people, all unpaid amateurs, assemble twice a year to check the stats and sign off on new legislation. Policies need a minimum of 66% support to become law. That's why 95% of Chinese say the country is on the right track.

For decades, Western media have been narrating the same story about China being this brutal “dictatorship” whose people are killed at the hands of the criminal communist regime, giving the Tiananmen Square massacre as a prime example of the brutality of the Chinese government, wherein supposedly scores of students were killed at the hands of the People’s Liberation Army. However, a new book emerged proving that these claims are false and have no foundation to them except for Washington’s aspirations to tarnish the image of the Chinese Communist Party.

Atrocity Fabrication and Its Consequences: How Fake News Shapes World Order, a new book by A. B. Abrams, highlights that there never were any killings in the infamous Tiananmen Square back in 1989 as had been spread by Western propaganda for decades, and it was revealed that the entire affair was but a mere attempt at showing China as the villain in the geopolitical arena. The book underlines that no killings, let alone a massacre as is proclaimed, took place in Tiananmen Square.

How did the U.S. succeed in manipulating the mainstream narrative and have millions upon millions of people believe that China initiated a mass murder of its own people—young college students—crushing them with tanks and shooting them down with machine guns? The answer is simple: the manipulation of public perception through the press. This could be done using media out of context and providing an incomplete version of the truth.

For example, the most infamous piece of media “documenting” the crime to ever exist is a video showing a tank marching onto a person alleged to have been a student, and right as the tank gets close enough to the young man and stops, the video is cut, with there being some text accompanying the video hinting or proclaiming that the tank went on to run over the protester. However, that could not be further from the truth. In reality, other protesters rushed to the scene and accompanied him from there as the tank was standing in place waiting for him to comply and get out of its way.

The book argues that all the acts committed by the United States were in a bid to “justify wars of conquest and exploitation” and generate multi-billion-dollar profits for the notorious military-industrial complex, as reported by CovertAction Magazine.

Abrams highlighted that the Tiananmen Square protests initially took place not as a push for Westernization or the downfall of the Chinese government. Instead, their primary focus was on reinforcing the principles of China’s 1949 Communist Revolution and addressing the issue of corrupt officials who had deviated from Maoist principles.

This movement encompassed not only students but also a significant number of workers, who exhibited a stronger anti-CCP stance. Their collective objective aimed at the establishment of a socialist democracy within the framework of the movement.

The book cited a cable from the U.S. Embassy in Beijing that WikiLeaks published in 2016. The leak included reports on the eyewitness account of a Chilean diplomat and his wife who were present when the PLA made it to Tiananmen Square to disperse the protesters. The pair made it in and out of the square numerous times without any harassment and observed no mass firing of weapons into the crowds. They never saw any use of lethal force, to begin with.

Moreover, the book cited former Washington Post Beijing Bureau chief Jay Mathews who, in 1998, admitted that “all verified eyewitness accounts say that the students who remained in the square when troops arrived were allowed to leave peacefully.”

It also cited Reuters  correspondent Graham Earnshaw, who spent the night of June 3-4 at the center of Tiananmen Square and reported that most of the students left the square peacefully with the remainder of them being persuaded to do the same.

As is customary, the main source the Western media used to claim that a massacre took place was an anonymous student from Qinghua University making claims to the Hong Kong press, who then made it to the British media.

Still, BBC‘s Beijing correspondent James Miles said there was no massacre.

Western reporting had conveyed the wrong impression and protesters who were still in the square when the army reached it were allowed to leave after negotiations.

The narrative was also completely spun out of proportion, with the perpetrators being painted as the victims of a crime that was never committed in the first place. The book underlined that those who did die in Beijing during the events lost their lives in street battles between the PLA and insurgents far from the square. Reports from the U.S. Department of State underlined that the unarmed PLA officers were attacked with petrol bombs, burning many alive.

Uyghurs, another ‘crime’ China committed

The hoax built around Tiananmen Square was a blueprint for U.S. media campaigns aimed at showing the Chinese government in a bad light, as Washington went on to accuse Beijing of perpetrating a genocide against the Uyghur people in Xinjiang province.

The book stressed that the claims about the so-called Uyghur genocide relied on nothing but hardline extremist U.S.-funded anti-China groups. Namely, they were funded by the CIA-affiliated National Endowment for Democracy, which was tasked with carrying out what the notorious spy agency had done alone under the covers for decades.

Amid the claims of Beijing genociding the Uyghurs, the Uyghur population in Xinjiang saw an increase of 25% between 2010 and 2018 instead of the population experiencing a contraction. Even facilities the West claimed to have been “concentration camps” in which Uyghurs were killed en masse and “brainwashed” or “indoctrinated” appeared to have been a logistics park, a regular detention center, and elementary and middle schools.

Xinjiang looks good, safe, and secure, and all the people I spoke with seemed happy about it, former London Metropolitan Police Officer Jerry Grey, who spent a lot of time traveling in Xinjiang, said.

“Uyghurs in China have been growing faster than the majority Han Chinese in part because they weren’t subject to the one-child policy, they have 20,000 mosques built […] Uyghur children can get into top universities easier than Han Chinese, and have halal foods prepared for them in canteens and they have a prayer area on campus,” Daniel Dumbrill, a Canadian businessman and Chinese political analyst said.

“Portraying an adversary as committing particularly egregious crimes, especially when one intends to initiate military action or other hostile measures against the adversary, has consistently provided an effective means of moving public and international opinion and justifying [US imperial] actions,” Abrams said in his book.

Yugoslavia

The book also shed light on the U.S. propaganda focused in the 1990s on Serb leader Slobodan Milosevic, a socialist who sought to keep Yugoslavia together, accusing him of genocide in Kosovo and elsewhere.

Milosevic, a socialist, aimed to maintain the unity of Yugoslavia and prevent its fragmentation. This effort was driven by his desire to counteract Western nations’ potential expansion of influence and the establishment of U.S. military bases in a strategically vital area.

Interestingly, the most severe instances of ethnic cleansing during the war were actually executed by the Croats through Operation Storm, a plan devised by the CIA.

The Clinton administration additionally provided support to the Kosovo Liberation Army (KLA), which sought to establish an ethnically homogeneous Albanian state. This endeavor involved targeting Serbs and other minority groups.

Financing from the drug trade played a significant role in sustaining the KLA, leading the State Department to label it a “terrorist organization”. The NATO North Atlantic Council identified the KLA as the primary instigator of violence in Kosovo.

The narrative of genocide and the Serbs running concentration camps once again heavily relied on the testimony of an individual who openly admitted to not witnessing any killings—propagandist reporter Roy Gutman. This account was eventually discredited when a British journalist visited an alleged death camp, discovering that the inmates had voluntarily sought refuge from the nearby conflict in surrounding villages.

Yugoslavia was a highly successful state that united numerous contemporary Baltic nations under the banner of communism, and it met its demise when the United States and NATO waged a war against it, killing hundreds of civilians in the notorious bombing campaign it launched on the country in order to “sow democracy” there.

Syria

The same man who was one of the main reasons behind the collapse of Yugoslavia was almost able to do the same with Syria. Gutman played a major role in another similar war launched over a decade later against Syrian President Bashar Al-Assad.

The propaganda effort pushed by Gutman was similar to the one he peddled earlier, with it including the mass murder of people at the hands of the government without any evidence backing up these claims.

Western media and regimes falsely accused Al-Assad of carrying out attacks with chemical weapons against his own people while the attacks were likely carried out by U.S.-backed terrorists.

Back in November, the Grayzone website published a series of leaks that expose how senior officials of the OPCW censored this explosive finding in the Syrian city of Douma.

In its investigation, the website stated that “in the early days of the OPCW’s investigation of an alleged chemical attack in Douma, Syria, expert toxicologists ruled out chlorine gas as the cause of death for more than 40 civilians reported at the scene.”

The Korean War: Another ‘atrocity’

The Korean War, a war peddled by the United States that wound up splitting one people into two, was presented to the public as a “humanitarian intervention” aimed at rescuing the local population from communist forces. To establish this narrative, the Pentagon sponsored a propaganda film, titled The Crime of Korea narrated by Humphrey Bogart. This film falsely attributed atrocities committed by the South Korean government, with U.S. support, to the Democratic People’s Republic of Korea.

This narrative gained traction within the U.S. media and significantly bolstered the perception of the war as “morally justified”. An influential Timemagazine column titled “Barbarity” furthered this perspective by describing a communist massacre in Taejon, which subsequent investigations revealed was actually perpetrated by South Korean troops allied with the U.S.

Charles E. Potter, Chairman of the Senate Subcommittee on Korean Atrocities and appointed by Senator Joseph McCarthy, notorious for McCarthyism, which was responsible for the persecution of anyone even thought to be affiliated with any leftist organization or held any left-wing beliefs, emphasized the inhumane acts committed by U.S. adversaries. He recounted gruesome incidents, such as a “Red Chinese” nurse using garden shears to sever a GI’s toes without anesthesia and American POWs being subjected to torture with bamboo spears and confinement in small iron cages until death, with maggots infesting their eye sockets.

However, the accounts presented by Potter contradicted the testimonies of American and British POWs, who indicated that their treatment by captors was generally decent, although they had to attend lectures on communism.

Meanwhile, U.S.-run POW camps subjected DPRK and Chinese prisoners to severe brutality. These inmates were massacred for singing revolutionary songs and subjected to violent coercion to renounce repatriation to their homelands. This strategy aimed to score Cold War propaganda points by portraying defection to the West as a desire born out of the perceived superiority of its political-economic system.

The campaign of propaganda against the DPRK extended well into the 21st century, with increasingly extravagant made-up tales to portray the country in a negative light. Many of these stories were propagated by DPRK defectors, some of whom were influenced or incentivized by South Korea and possibly the CIA.

Shin Dong-hyuk, a defector, collaborated with Washington Postcorrespondent Blaine Harden to write a highly successful book Escape From Camp 14: One Man’s Remarkable Odyssey from North Korea to Freedom in the West. However, this account was later revealed to be a fabrication.

Yeonmi Park, another defector, who charges a speaking fee of $12,500 on Western media outlets, even made the ludicrous claim that her friend’s mother was executed for watching a Hollywood movie.

Lee Soon-ok, yet another defector, testified before a House committee in 2004 that she had witnessed Christians being tortured and burned to death in DPRK political prisons. However, the head of the North Korean Defectors’ Association, Chang In-suk, contradicted this, asserting that Lee was never a political prisoner.

Abrams noted that fabricated reports about DPRK state executions of prominent figures often coincided with the surprising reappearance of these supposedly deceased individuals on camera.

In a CNN report from May 2015, it was alleged that DPRK leader Kim Jong Un had ordered the poisoning and killing of his aunt, Kim Kyong Hui. However, Mrs. Kim appeared in public in January 2020, highlighting the inaccuracy of the claim.

Abrams suggested that these false defector testimonies and biased media coverage were embraced in the West due to the “self-gratification” they provided, seemingly affirming the notion of Western superiority over the least Westernized state. Additionally, they often served as justifications for hostile policies, including economic sanctions, against the DPRK.

The book talks about the demonization of the Russian and Vietnamese governments, as well as that of Libya and Iraq in a bid to validate the Gulf War, while also revisiting numerous cases of U.S. propaganda aimed at subverting its foes while giving impetus to itself and its beliefs in a bid to uphold the unipolar system that it has been trying so hard to keep propped up—to no avail. The recounting of the countless crimes committed by the United States comes as no surprise to many as the latter has done so for decades, and continues to do so, exploiting its hold on the media to give itself the moral high ground over its geopolitical enemies. Monthly Review. Amazon.

The ISC (Needham) Report

The Report of the International Scientific Commission for the Investigation of Facts Concerning Bacteriological Warfare in Korea and China (the ISC report), published at the height of the Korean War, validated claims by North Korea and China that the US had launched bacteriological warfare (biological warfare, BW) attacks against both troops and civilian targets in those two countries over a period of several months in 1952.
   

The most vilified document of the 20th Century.

The report’s release in September, 1952, brought a withering international attack. It was roundly denounced by American and British politicians of the highest rank, ridiculed by four star generals, accused of fraud by celebrated pundits, misquoted by notable scientists, and scorned by a compliant Western press. Charges were made against the quality and truthfulness of its science. Its “unstated” political agenda was denounced. The ethics of interviewing captured US pilots was excoriated and its authors were publicly flayed as communist dupes. The report was red baited in the US halls of Congress and deemed unpatriotic to read, and therefore went unread and deliberately forgotten over the years, which has been the fate of Korean War history in general. In subsequent decades, volumes placed in American university library collections were quietly and permanently removed from circulation.
   
When the rare copy came up for auction, it was discretely purchased and disappeared from public view. This critical 67 year old truth commission document from the Korean War was slipping towards oblivion. For these very reasons, historians and truth seekers should exalt the wondrous rebirth of the ISC Report from near extinction with the publication of this new electronic edition. We welcome the sunshine that re-publication brings to a shadowy and suppressed chapter of American Cold War history. (from the introduction by Thomas Powell) 800 pages.  $9.99.