Episode 221 – Taiwan: Manufacturing Consent with Carl Zha

Macro N Cheese – Episode 221
Taiwan: Manufacturing Consent with Carl Zha
April 22, 2023

[00:00:00] Carl Zha [intro/music]: Mark Farber said in his newsletter when he visited in the United States, he said he was trying to figure out what do the US produce anymore nowadays. And then he realizes basically three things: beer, hooker, and weapons. That’s it. That’s the US.

About 80% of the trade going through South China Sea is either to or from China. So, United States Navy is really claiming they’re protecting the sea lanes from the Chinese for the Chinese, right? Which doesn’t make sense.

[00:01:35] Geoff Ginter [intro/music]: Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43] Steve Grumbine: All right. This is Steve, the host of Macro N Cheese, and yes, are about to do a fun podcast. But I’m gonna have some fun at my guest’s expense because we have been trying like heck to line this thing up. We’re 12 hours apart. My guest is in Bali, and I’m on the east coast and the first time it didn’t work out, we find out that the poor guy’s Twitter feed had been hacked.

So our communication paths have been cut off. We do it the second day. We get the 12 hours flipped around. So now we’re on the third day and the Eagle has landed. I’ve got Carl Zha of the Silk And Steel podcast here to talk to me all things Taiwan and China.

Welcome to the show, sir.

[00:02:25] Carl Zha: Thank you, Steve. Thank you. Third time is a charm.

[00:02:29] Grumbine: Yes, I did not do this on purpose, but our last time was beautiful. Three episodes of Mao. But it was precisely one year ago when I was going through my memories, my Carl Zha first interview popped up. Wow. How convenient is it that we’re on the annual plan? So welcome back, sir. I’m really glad you could join me today.

[00:02:51] Zha: Well, thank you, Steve. It literally felt like just yesterday. If you just had me talking, I can just go on and answer.

[00:03:00] Grumbine: It’s beautiful, and that’s what we love here because that’s why you’re here. So, I want to approach this one slightly differently. I want to make this an evergreen podcast so people understand the history between Taiwan and China, but more importantly, I also want to evaluate it through the lens of today.

China claims Taiwan as its own. Taiwan claims its independent place, and of course, the US and the other G-7 countries are trembling in their boots at China’s ascendency. And I’ve been tracking this going back to President Biden’s first State of the Union, where he put the bullseye on China, amidst all the Russia propaganda as well.

He basically said China was our number one problem, our number one concern. My jaw just dropped. Here we go again, again. We’re gonna have another cold war. This is the US strategy for how it keeps its economy going, because they cannot find it within themselves to spend on the domestic economy. So instead they do military keynesianism, they pour money into all these military projects and it’s extremely frustrating.

But I’m gonna read this article from the Washington Post. John Hudson wrote it April 18th, 2023. It says “G-7 stresses unity on China following unease over Macron’s comments. Leading democracies downplayed their differences at a meeting in Japan after France’s President revealed concerns about getting dragged into a war over Taiwan.”

And that’s gonna be the subject of our talk today. So, “In Japan, the diplomats from Group of Seven major industrial democracies stress the need to unite against China’s economic, military and cyber assertiveness. In a display of solidarity Tuesday, after differences emerged recently over the fate of Taiwan.” I’m not gonna read the entire article, but this statement here should really set the stage for everything:

“We recognize the importance of engaging candidly and expressing our concerns directly to China, said the communique from the G-7 meeting, representing the views of the United States, Italy, France, Germany, Britain, Canada, Japan, and the European Union. ‘We reiterate our call for China to act as a responsible member of the international community.’

This comes as calls for unity, followed by French President Emmanuel Macron’s recent visit to Beijing, after which he suggested that Europe needed to avoid getting dragged into a confrontation between China and the United States over Taiwan.” They’re lifting the veil, aren’t they Carl? They know it’s not the G-7, it’s the US. What are your thoughts, first of all, just on the current scene, and then let’s go back to the history of this whole thing.

[00:06:02] Zha: Well, first I’m surprised they include China as a member of the international community because as I understand, international community consists of North America, EU, Australia, Japan, South Korea, and bunch of other US allies. And frankly, what Macron has said is nothing controversial.

All he said was, Europe should not be a vassal to the United States and Europe should not be dragged into the conflict over Taiwan between US and China. This is common sense. Why would Europe want to be the vassal of anybody? And why would Europe want to be dragged into a conflict that’s halfway around the world from them?

France, Europe faced no strategic threat from China whatsoever. There’s no strategic competition between Europe and China. Their sphere where it overlap is the trade. That’s what the Europe and China relation is really about. It’s about trade because right now, China is the most important market for Volkswagen.

Well, in fact, that should be the relationship between China and US as well, because GM today sells more cars in China. But like you say, our politicians have gone crazy and they wanted, just, as you say, pushes military Keynesianism. I was reminded what investor Mark Farber said in his newsletter when he visited United States.

He said he was trying to figure out what do the US produce anymore nowadays, and then he realizes basically three things: beer, hookers, and weapons. That’s it. That’s the US. But you are right. It could be different. It could be different. United States government could be investing in our infrastructure.

It could be investing in public education, but no, no, no. We can’t do that. That’s what China do. We’re not communist, we’re free market capitalist. We can’t do such things. So weapons, it is we have to continue to funnel dollars into Raytheon and I’m frankly really surprised about the collective freakout over Macron’s visit and Macron’s statement.

And it really shows that the so-called G-7, their so-called solidarity is really about rallying around United States. Following the orders of Washington because the whole Taiwan thing is Washington’s baby. It’s not Europe’s baby, it’s not France’s baby. Why do they have to get themselves involved over Taiwan?

But United States sees it quite differently because they see if China somehow gains control over Taiwan… in fact, many US think tankers and pentagon officials has stressed over and over again if China somehow gained control over Taiwan, this is somehow the domino effect that will destroy the US security arrangement in East Asia, and that will lead to the downfall of US influence around the region, and which you really think about.

How do you make the case to everyday working class American that somehow Taiwan is a US national interest. Doesn’t make sense. Only to these Raytheon [and] Lockheed Martin funded think tankers. They take it as self-evident truth that US have to defend Taiwan no matter what, which I have to remind people: there’s a common misconception that somehow United States must come to the defense of Taiwan as obligated by the Taiwan Relations Act, which was passed by US Congress in 1979.

That’s actually a big misconception. I read the Taiwan Relations Act. Anybody can Google Taiwan Relations Act, find it on the US government site, and look up what it says. What it says is United States takes the Taiwan’s issue very seriously and it wishes for the peaceful resolution of the Taiwan issue. United States will provide weapons of defensive nature to Taiwan and United States will maintain its own military capability to the point that you will discourage any effort to change status quo over Taiwan through non peaceful means.

So none of that language obligates United States to do anything. This whole language is about so-called strategic ambiguity that United States is giving itself plenty of room to maneuver. It’s not backing itself into a corner, which is a wise thing to do. What Biden administration has done is now increasingly painting himself into a corner.

When Biden was asked by the news reporter whether US would defend Taiwan, he said yes, and then later, White House official have to come out and backtrack a little bit, but this already is a big step back from the prior US commitment to the one China policy. Which, back in 1972 when Nixon visited China and signed the Shanghai Communique with Premier Zhou Enlai, that formed the foundation of the Sino-American relationship going onwards.

This is a language in the Shanghai communique, United States recognized that Chinese on both sides of the Taiwan Strait recognize there’s only one China and United States takes no official position. And they recognize the Taiwan issue is to be resolved among the Chinese themselves.

So this is a Shanghai Communique, and if you look at the US government webpage on the US-China relationship, United States have reasserted its commitment to “One China” policy over and over, and that led to the 1978, 1979 final formal normalization of ties between the two countries.

And since then, for a period about 30-40 years, US-China ties has been rocky at times, but overall it has been pretty good. And it got to the point where the two economy today are so intertwined to the point now some hawks are talking about decoupling.

Because the whole point of decoupling is that US and China has became too intertwined that it will make any kind of hot conflict between the two countries increasingly messy because what’s United States gonna do? Is gonna shoot down all these ships loaded with Chinese goods coming to the United States coast? I mean, so the idea is, no, no, no, this is too much.

We gotta go back to the Cold War era. When we have no relationship with the communist countries, because that’s a game that a lot of the US military planners know how to play. We know how the Cold War 1.0 played out. We isolated Soviet Union and Soviet block.

We cut off all the trade and then eventually Soviet Union collapsed. This is how we won the Cold War 1.0. So we’ll just play the same playbook to win Cold War 2.0 against China. But this is crazy talk because China is nothing like Soviet Union of the yester years, and China is the world’s largest trading economy.

It has trade not just with United States and Europe but also has a huge trade with the global south. So what US is doing in its attempted decoupling from China, actually it’s cutting US off from the rest of the world. Right now, what US is doing is trying to build a wall around US, EU, and a bunch of other close US allies, but not all of US allies even signing onto the program.

Macron is a big public break. I think that’s why we have a big freak out among the G-7. Before the consensus is we’re all gonna stand together, we’re all gonna cut ourself off from China, and in doing so, cutting ourself off from the rest of the world. But Macron is a tool of the neoliberal order, but he is not stupid or crazy.

He recognize that France have certain interests. It’s not in France national interest to follow US on this very crazy path of decoupling. Stop me anytime, Steve. Otherwise I’ll just keep going sir.

[00:15:13] Grumbine: Well, in this particular case, I want you to keep going, but I do wanna bring it back. I think folks misunderstand the nature of what the US has done, and just a quick history of this over the last 50 years. The United States has slowly given up its industrial base, has allowed companies to offshore and move production around the world.

We saw the frailty of supply chains during the pandemic. The United States has gone largely from being one of the industrial powers in the world to being a service economy that stopped producing things, much like what you said in the beginning. And so we allowed our infrastructure to crumble.

And China didn’t do that. China built up its capacity for trade and for delivering goods and services around the world, and it did so in a way without tanks and nuclear arms and planes. China has been working in a much more cooperative way and people are lining up to say, sign me up. I don’t want the US having its hands on me.

And so you see the rise of the BRICS. Now, mind you, I think there’s a much more technical answer. This is not as clean as maybe some alt media has tried to make it. The US is not stupid. It is a wounded empire and it does things that make you scratch your head. But reality is the United States allowed itself to fall behind.

It thought that it could survive on cheap imports forever, and now we’re watching the rest of the world buck. And Taiwan represents a piece of that capitalist structure. In this case, though, we have allowed our internal infrastructure, our social safety nets, our schools, our roads, our bridges, our power grid.

We have entire cities that have turned into rust as we’ve watched production leave through these free trade agreements, that the neoliberal order has forced on us, and now they’re trying to claw that back out of necessity. And so the panic is palpable, and it didn’t have to be that way, but because we chose to be capitalist scum and war hawks and warmongers, and because we were afraid to push back on our own government and got wrapped up in nonsense, here we are now trying to drag everyone to the finish line with us because we didn’t do what we were supposed to do.

Take care of our people. And they’re bitter. And they’re jealous of China doing it and, quite frankly, they’re getting lapped with this one Belt One Road Initiative. So my question to you, Carl, is what do you think China’s play is? Are they just watching amused or are they concerned? What is China’s angle here as they watch the US do what it’s doing?

[00:18:08] Zha: I will respond to you, Steve, with that meme that has been going around the internet that says CIA has uncovered the secret Chinese plot to just sit back and watch as US crumbles, and it was a picture of Xi Jinping leaning back on his chair and looking pensively into the camera.

Really, the crumbling US empire is largely self-inflicted. China didn’t have to do much. China is focusing on China’s own problems. They have enough problem as it is trying to feed 1.4 billion population, and that’s what United States government should be doing, should be more focused on United States. But I think what it is, is our elite really don’t care about us.

We are just peasants. They’re lords in their manors. And the US political elites, they have already made their billions. What do the people like owner of Amazon, Jeff Bezos, care about common people in the United States other than using them as peons in the Amazon warehouse? I think that’s one big difference between, say the Chinese leaders United States.

Because the Chinese elites, I’m sure they’re also accumulated large wealth themselves, but they at least still try to do good for their people. They still try to grow China, grow the pie larger, so the tide lift all boats. In the US, our elite is more focused on holding onto their portion of the pie and, and not letting the rest of us getting any crumbs. So I think that’s one big difference.

[00:19:57] Grumbine: With respect to watching the US crumble, what is the strategic value of Taiwan? Why does Taiwan matter?

[00:20:06] Zha: Much have been said about the parallel between Taiwan and Ukraine. There’s major differences, but there’s one similarity. Ukraine is emotional issue for many Russians. In the very similar vein, Taiwan is an emotional issue for the Chinese.

Chinese can sit back and relax and watch American Empire crumble and be chill about it, but they cannot be chill about it when it comes to Taiwan because the whole issue of Taiwan, it pulls a lot of emotional strings. The whole reason Taiwan was separated from mainland China originally, it was during the century of humiliation.

Taiwan was part of the Chinese empire back in the 19th century, but then China was defeated by Japan, the newly industrialized westernized Japan. That defeated China in 1894, 1895, the first Sino-Japanese War. As a result, China was forced to cede the island of Taiwan to Japan. And what follow was 50 years of Japanese colonization on the island until 1945, until the end of World War II.

And as result of the settlement of the World War II, Taiwan was returned to China, as specified in the Cairo Declaration and the Potsdam Declaration that all stolen territories from China, Taiwan Manchuria will all be returned to China. So Taiwan actually returned to China after World War II in 1945.

But what happened was China immediately entered into Chinese Civil War between the communist and the nationalists. And as we all know, the nationalists, they lost out. So in 1949, the former government of China led by Chiang Kai Shek, they fled Chinese mainland having lost the Civil War, and they came to Taiwan, which they had been holding since 1945 after the Japanese surrender.

Again, the separation started in Chinese Civil War. And Mao was fully intent to finish the Chinese Civil War and unify Taiwan by force. However, in June, 1950, just when the People’s Liberation Army was about to cross the Taiwan Strait, the Korean War happened.

As a result of the Korean War, Truman authorized US Seventh Fleet to sail into the Taiwan Strait. At that time, Mao’s Army did not have Air Force or Navy, so there’s nothing they could do when the US Aircraft carrier Group sailed down the Taiwan Strait and blocking any attempts for the PLA to cross Taiwan.

So United States physically blocked the communist troops from finishing off the Chinese Civil War, and the separation of Taiwan and mainland continued to today. So this is a legacy of both Chinese century of humiliation and also the Chinese Civil War, the unfinished business that was forcefully intervened by United States.

And mind you, when Truman sent Seventh Fleet into Taiwan Strait in June, 1950, that was before the Chinese involvement into the Korean War, which happened much later. And in fact, all the PLA troops that was poised to cross the Strait to go to Taiwan was later redirected to the north through Manchuria to enter into North Korea.

After General MacArthur have crossed the 38th parallel, despite Chinese warning into North Korea, and that led to the Chinese involvement into the Korean War. So there’s a lot of history there. And for the Chinese people, Taiwan is an emotional issue. It’s about finally achieving unification of the Chinese nation, and you cannot argue with emotion.

This is very sensitive subject, but mainland China was very clear about what the red line is because for 70 years mainland China did not make attempt to change the status quo of Taiwan. Well, one reason is first, the capability issue. They first have to develop a Navy and the Air Force.

But the relationship actually became almost amicable during 1980s when the final artillery duels stopped and the Taiwan martial law was lifted in late 1980s, and the old KMT soldiers were allowed to go back to mainland to visit their families.

And there’s a lot of exchanges have been going up between mainland China and Taiwan. People in United States don’t know this, but now there’s about somewhere around 2 million Taiwanese currently studying working on mainland China, and that’s out of a total population of 25 million.

So 10% of the Taiwan population currently is living on mainland China, pursuing academic studies or their careers. There’s a lot of cultural exchange, a lot of restored bonds. But whereas US is seen as outsider always intervening, always getting in the Chinese domestic affair. So this is a Chinese perspective on Taiwan and this is why it’s a very sensitive issue.

When Nancy Pelosi flew herself to Taiwan on a US Air Force plane with US Air Force fighter escort. Very highly provocative issue, but again, China had adopted a rational approach. They didn’t shoot her down to many people’s surprise, and they let her land because China has been very clear where the red line is.

As long as Taiwan do not declare formal independence, everything is fine. The status quo can go on. But what has happened, I would say, is in the last decade is United States is unilaterally backing away from the pledge it made in 1972 when Nixon visited Shanghai and United States is starting to take a step back from the one China policy it has adhered to for over 40 years.

And now we have different US politician fly into Taiwan on government jet and loudly proclaiming Taiwan is a independent country, but it’s all for grandstanding because even United States itself does not have official diplomatic ties with Taiwan.

That happened 1979 when us officially switched the recognition from Republic of China government on Taiwan to the People’s Republic of China government in Beijing, and it has been ever since. There is only a so-called defacto US embassy on Taiwan, the American Institute on Taiwan, and none of the G-7 nations have a official embassy or have official relationship with Taiwan, so it’s a little bit hypocritical for them to say Taiwan is already independent and we will not allow mainland China to make a move.

Mainland China is not making a move. That’s the thing. What they did is waited after Nancy Pelosi’s plane has left Taiwan, and then they launched a military exercise around Taiwan, which hasn’t happened for two decades. So it’s a reaction to the US provocation, and this is the part that the western media often missed.

They switched the lens to show the China conducting military exercise around the Taiwan, not the cause. The cause was Nancy Pelosi’s visit. And more recently, the Speaker of the House McCarthy meeting Taiwan leaders while they were in Los Angeles. And that led to the fresh round of Chinese exercise around the Taiwan Strait.

So China was always responding to the US action. China wasn’t trying to unilaterally alter the status quo, but US action is actually de facto changing the status quo right now. Before the grand standing of US politicians, China have never done the mock blockade of Taiwan before, and now they’re doing that and it’s gonna happen more and more as US politicians up their ante.

But in US, we understand our politician are a bunch of dumb-dumb loudmouths. It’s all a game to them. The Chinese leaders, they take what US leaders say seriously. When they hear US is saying, we support Taiwan. We’re gonna defend Taiwan. They plan accordingly.

[00:30:11] Intermission: You are listening to Macro N Cheese. A podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon. Like and follow our pages on Facebook and YouTube and follow us on Periscope, Twitter, Twitch, Rokfin, and Instagram.

[00:31:01] Grumbine: Russia invaded Ukraine and my first impulse was, oh no, what’s going on? But there’s another impulse in the back of my head that says, typically anything I get from the news is propaganda. And as I started peeling back layers, then digging into NATO and what aggressive nature we were undertaking, and then learning the history of NATO and understanding should have been disbanded long ago instead of being expanded.

What would happen if Russia or China expanded their reach into, say, Cuba? I wonder what would happen with the US and its military if some foreign power did something right on its doorstep. We never talk about that, but we’re watching US aggression through diplomatic and economic means through using the IMF, World Bank, World Trade Organization, all these other NGOs and all the assets at its command and its minions around the world. Why are you doing this?

And then it dawned on me, the US has given up its productive capacity. And what does Ukraine have? Ukraine has lots of resources, and by cutting Russia off from it, once again, it further enhances and establishes their hegemony. So what is the US value? Is it just to put a thumb in the eye of China, or is there some strategic value to Taiwan? Is this the security state you are referencing? What is the point of the US doing this?

[00:32:35] Zha: Well, one of the game, which is a consistent theme in both US Congress and Pentagon is to continue to sell weapons to Taiwan. In fact, that’s what is actually stipulated in the US Taiwan Relation Act. I actually have it open in front of me, so I can read it.

What the Taiwan Relation Act for 1979 actually says. It says, “Declares it to be the policy of United States to preserve and promote extensive, close, friendly commercial culture and other relationships between the people of the United States and people on Taiwan, as well as the people on China mainland and all other people of the Western Pacific area.

Declares the peace and stability in the area. It’s in the political, security, economic interest of United States and are a matter of international concern.” This first two sentences are just like, we love babies. Of course, everybody love babies. Then it says, “States that United States decision to establish diplomatic relations with people’s Republic of China rests upon the expectation that future of Taiwan will be determined by peaceful means, and that any effort to determine the future of Taiwan by other than peaceful means, including by boycott or embargo, is considered a threat to the peace and security of the Western Pacific area and of grave concern to the United States.”

So what us is really saying, If the Taiwan issue is to be resolved through military action, United States will have grave concern. Again, it does not obligate United States to do anything. Now, what it does say is, United States shall provide Taiwan with arms of defensive character and shall maintain the capacity of United States to resist any resort to force or other form of coercion that could be jeopardized the security, social or economic system of the people of Taiwan.

So again, it just says allow the United States to maintain the capacity to resist, but it actually doesn’t obligate United States to do anything. So the most substantial part of the Taiwan Relation Act is actually United States shall provide Taiwan with arms of the defense nature.

And then if people Google US Taiwan weapons and they will see that there was a recent news that US just approved potential sale of 619 million in new weapon sales to Taiwan. Including missiles for its F 16 fleet. Okay, now let’s talk about the nature of US weapon sales to Taiwan.

US actually never sell the top of the line military hardware to Taiwan, for example, US will never sell F 35 to Taiwan, even though F 35 is a piece of crap. But the reason for that is, United States in the back of mind, they always think that whatever weapon they sell to Taiwan could one day potentially fall into the hands of mainland China.

Reunification really happens, so they never sell Taiwan the good stuff. So instead of they sell Taiwan, very expensive but outdated weapon platform. And even people on Taiwan acknowledge that these weapons will do nothing to enhance the actual security of Taiwan. So what are those weapon sales about? Well, one goes back what you said earlier, the Americans military Keynesianism, and then Taiwan actually ranks number six in the world in terms of dollar reserves it hosts, because Taiwan throughout the decade has ran a large trade surplus with United States.

So Taiwan’s foreign currency reserve is quite large and today the Taiwan foreign currency reserve in US dollar stands at $558 billion. Wow. What the weapon sales to Taiwan is basically recycling the Taiwan dollar reserve back to United States. This again, it’s about grift. It’s providing more contracts to our military industrial complex.

This is why all the congressmen is in on it, because they all get kickbacks from Raytheon and Lockheed Martin. This is why Pentagon is behind it. Last week, the chairman of the Joint Chief of Staff, general Milley actually give an interview to defense one where he’s actually said, okay guys, whoa, let’s cool off with a talk about coming war with China. This is not helpful.

We don’t actually want to go to war with China. He’s basically coming out, telling all the congressmen to cool it off with the rhetoric, because at the end of the day, both the Pentagon and the Congressmen, they just want to keep the grift going where they can retire very comfortably with large, generous retirement account when they can go retire in their Virginia mansion.

Uhhuh, they’re actually not crazy enough to start World War III. But again, like I said, for the US politicians general, it’s all a game. It’s all game like all about posturing. But the Chinese leader, they pay attention to what US leaders are saying. And they plan accordingly. So this is why recently Xi Jinping gave a talk like a public speech to the Chinese people.

He said, United States is committed to contain China’s rise. Now I think Chinese leader have held this view for a while by now. But they have never made the case so publicly to the Chinese people. I think the fact that Xi Jinping has said that suggests that the Chinese leadership basically have given up at this point any improvement in the US-China relationship, any return to sanity from the US side, and this is why Xi Jinping is not picking up Biden’s calls.

A White House has been trying to arrange call to Xi Jinping for a while now, and then the Chinese just left them hanging because what’s the point of talking to Biden when every time Chinese diplomats meet with Tony Blinken, after the end of the talk, US just roll out the new rounds of sanctions against more Chinese tech companies.

So what’s the point of talking? And by this time they’re probably also waiting to see what the election is gonna bring in United States, because what’s the point of talking to a president and his administration if they’re gonna go out of power pretty soon. I think that might be another angle there playing there.

[00:39:44] Grumbine: I spoke with Dan Kovalik about the Nicaragua book that he wrote and specifically talking about how Honduras has been very good friends with Taiwan. It broke off the relations and recommitted their relations to China and a lot of different countries in an act of solidarity with China as part of this larger, multi-polar world that is evolving, have been doing the same thing.

What is the Chinese international plan for their development program that they’ve been working so diligently on? They’re tying up the global south? What is your understanding of China’s economic model that they’re pushing as they go forward?

[00:40:30] Zha: So we have to go back to the Belt and Road Initiative around the time of the great financial crisis of 2008, China already realized they have a problem. There is a problem because they have been running a large trade surplus with United States and the Western economies for decades. Their dollar reserve, it dwarfs even, whatever Taiwan has.

Oh yes. But the problem is, what is that? It’s just a bunch of IOUs. Right. And US Federal Reserve can print money until the kingdom come. We have the Fed Reserve’s Neel Kashkari, or “cash carry” as we call him publicly said our interview two years ago, he said, oh, your ATM is safe, your dollar is safe. Because Federal Reserve have infinite supply of money.

[00:41:27] Grumbine: The US government can blow money like crazy, all it takes is the stroke of a pen. Yep.

[00:41:31] Zha: Exactly. And then now everything is digital. They can’t literally just type a zero. So China has realized this might not be advantageous for China to continue to accumulate such a large dollar reserve and getting nothing in return.

So that’s why they started to actually using their large foreign currency, try to reinvest it into something meaningful. They tried to direct their investment mostly into global south countries because US and these Western allies are not making it easy for Chinese companies in their home markets.

So they had to go to places where the other Western multinationals are not willing to go because the risk and the idea of the Belt and Road initiative is twofold. Economically. It makes sense. China has throughout its decades of developing its own domestic infrastructure, it had built up immense amount of capacity.

A lot of construction companies, a lot of equipment companies, but China is starting to get built out. Everybody can see China have high speed rail going through some really remote mountains. It’s really impressive lot of bridges and mountains. But with this. Capacity, it makes sense to export China’s productive capacity to bring these companies to places like Africa, to build the ports over there, to build the infrastructure over there.

And a lot of this project are financed by Chinese banks, and the contract are given to Chinese construction companies. So in a way, the money still comes back to China, but what they leave behind is physical infrastructure in Africa, ports in places where there were no ports before, and that increased global connectivity on the whole, when China builds a port on the east coast of Africa, it’s a port.

The port sits on the ocean. China could use it, anybody could use it. It’s an open system. But the increased global connectivity helps China because China now is the world’s largest trading nation. Now with the ports and roads and railroads in place, now China can export more goods to those regions.

China is bringing cell phones and communication towers to a continent before that solely lacking in infrastructure. Chinese made smartphones allow hundreds of millions of people to get on the internet, and this is a story that has very rarely been told in the West.

So this global connectivity is good economically, but you also make strategic sense because United States Navy has always made it clear that intends to choke off the lifeline to China Foreign Trade, which is the Straits of Malacca. 80% of the Chinese energy supply come from the Middle East, travels through the Straits of Malacca, up the South China Sea, into the Chinese port.

This is also why US Navy is doing the so-called freedom of navigation patrol in South China Sea, by the way. Ostensibly is to demonstrate that China cannot block off this vital sea lane that $6 trillion of world trade passed through. But what they don’t tell you is this major trade lane.

About 80% of the trade going through South China Sea is either to or from China. So United States Navy is really claiming they’re protecting the sea lane from the Chinese for the Chinese, right? Which doesn’t make sense. But what they’re really doing is to show China, we can screw your vital sea lanes anytime we want.

We are gonna be here. We are going to sail around the Straits of Malacca. We know your choking points. We can seriously threaten your energy supply. And so the whole point of the Belt and Road initiative is to build out networks branching out from China.

That doesn’t go through one choke point that US Navy could just choke off. So now with the land connection through Russia, with Arctic Sea route again through Russia, and they’re building ports on the coast of Pakistan, on the coast of Myanmar, with all these different other possible routes, US Navy cannot be at all places at same time.

Even United States will be spread thin, trying to block off all these point of access. So China Belt and Road Initiative is maximize connectivity, that there’s no one single point of failure for the Chinese external trade.

[00:46:46] Grumbine: I’m incredulous when I hear people that defend the US’s approach to things. And that used to be me because I didn’t know any better. I’m a victim of propaganda just like everybody else in this country, but it doesn’t take much to realize that everybody reacts to the US’s aggression.

The US takes a step. They make a move to protect themselves. Every time the US does something to destabilize a region to put its interests above those in the area that they’re going into. I don’t understand people that can make excuses for the US saying, oh look, they’re being aggressive. You just went into their back door.

You just put weapons around their country and you mean to tell me they didn’t just take it? What bad guys they must be. It doesn’t make sense to me. Well, actually it does. It makes total sense. Yeah. Our media is completely controlled by four or five oligarchs who have absolute interests.

Because their financial interests are tied up in US policy as well, so it makes sense why they would push this state-based propaganda. But you sound like a kook to a lot of these people. You’re standing up for China, you’re standing up for Russia. It’s not pro-Russia. It’s just simply pro reality.

US aggression creates a response. And just like the kid that gets shot in the eye with a spitball and punches the kid that shot him. It seems like all we do is focus on when China responds to US aggression, we gotta do something. Look at these people. So I hope listeners of this podcast who maybe trend to the establishment, please open your eyes.

Please don’t be such a sellout for the red, white, and blue. We need to be proud of this country again, and I’m not proud of it at all. Watching what we do, it has been an absolute embarrassment and I like to say, oh, it all ended with Trump. It’s gone on steroids under Biden.

The rich people that own these media sites felt comfortable with Biden’s brand of fascism as opposed to Trump’s brand of fascism. So here we are once again. All the power elite are calm and happy cuz of this. Reality is it’s the same trash, only different and it’s gotten worse.

What are your thoughts on that?

[00:49:13] Zha: People should be outraged in United States that only two choices that we have is between Biden and Trump. This is terrible. Nobody is questioning that? It’s so unfortunate. Our media has been hijacked by basically a few corporations and they just pump out essentially propaganda, and most people are quite unaware, if not seriously misinformed about how the world really works.

And especially at this juncture. US is facing some serious crisis. This is a result of changes that started way back, like you said, back back in 1970s when US industrialists chose to export the industrial capacity in looking for greener pastures in search for cheaper labor and cheaper land, and China did not come to United States to physically take the plants and to move them to China.

China did not come to United States and demand Apple move their factories to China. No. Steve Jobs did that. All the US industrialists made a willful decision that they would outsource to East Asia and at that time they thought, okay, China is this vast pool of cheap labor they’re gonna exploit.

And they probably thought China would continue to remain that way for foreseeable future. But to everyone’s surprise, China climbed the value chain and they developed their own tech base and build up their own industrial capacity. And next thing you know, they’re making everything.

When I was growing up in China back in 1980s, China didn’t make anything. China didn’t make even TVs or refrigerator. We were so happy back in 1985 when my dad sent money back from United States so we could buy a Japanese made refrigerator and Japanese made color tv.

It’s not because we’re not patriotic Chinese citizens, it’s because back then the Chinese factories didn’t make those things. China didn’t make refrigerator until 1986. But what China did is to continually invest in education, continually invest in their infrastructure until they build up their capacity.

They also force the corporation who want to do business in China to do technology transfer. Now, people in United States: oh, that’s so unfair. China steal are jobs. They steal our technology. Well, nobody is forcing these industrialists to go to China to open plans.

They will did that for profit and China in assertion of their own sovereignty. They are demanding these industrialists to share technologies so the Chinese firms could catch up. The Chinese people could learn. That’s what any responsible government should do. The real question is why can’t United States have an industrial policy? Our only industrial policy is continually funneling taxpayers money to the weapon manufacturers. That’s our industrial policy.

[00:52:41] Grumbine: The US has made its decision that it is going to use dollar hegemony to try to control the world and live off of the cheap labor and cheap access to resources around the world. And I just gotta correct you on one small thing. It’s not even tax dollars. The tax is simply there to control inflation.

They never use tax dollars when a tax dollar is received by the federal government, it goes through a strange little system into the treasury’s general account, but it’s deleted. They never are reused. That money is spent once into existence and then deleted out of existence.

This is why China’s claim these guys can just print more money, they just keystroke this into existence and it’s not tax money, that’s the problem. Taxes are completely decoupled from spending, we can spend trillions. In fact, right now, the most evil thing is going on, the increase in interest rates.

The only reason why the United States government and the United States economy is not in full-blown recession right now is because of this perverse raising of interest rates, which is pumping money into the interest income. Which is going straight to the wealthy, which is further exacerbating wealth inequality. It has nothing to do with tax dollars.

They’re literally giving the rich money. It’s like a UBI for rich folk, and it’s the only reason why the economy hasn’t tanked, and they’re depending a hundred percent on trickle down economics to keep the economy going. It’s absolutely terrifying. But with that, Carl, I wanna thank you so much for this. I would love to have you back on sooner than later.

Hopefully we can do it more than once a year because I have so many other things I want to ask you. I really appreciate everything that you’ve said today, and I didn’t understand the Taiwan situation at all, but I had no idea of the implications of these various agreements that have been made over the last 40 years. And so you’re a wealth of knowledge and a great guy, and I really appreciate you spending time with me.

[00:54:54] Zha: Thank you, Steve.

[00:54:56] Grumbine: Where can we find more of your stuff? I know we got silk and steel podcasts, folks. Check it out. But where else can we find you? What else you got going on?

[00:55:04] Zha: Okay, so I, I have to make announcement. My Twitter account got hacked, unfortunately. So please do not go on Twitter and go to Carl Zha and buy laptops. I’m not in the business of selling laptops ever, so don’t do that. So I have opened a Telegram channel. Just go to t.me/CarlZha. That’s my new Telegram channel, and I have my Silk and Steel podcast, and most of my appearances will appear on my Patreon page.

Just search silk in Patreon. The first result should be the Silk and Steel podcast. It’s unfortunate because Twitter is one of my main channels for shit posting. Now I’m gonna have to, it’s divine intervention. This is a sign that I need to focus my energy elsewhere. But I do have a YouTube channel. So look for Carl Zha.

I upload a lot of my interviews on the YouTube channel as well, and the Silk and Steel podcast has a lot of the free content you can find freely available on any major podcast platform like iTune, pod Bean, all of them.

[00:56:22] Grumbine: Yes.

[00:56:23] Zha: I’m all there.

[00:56:25] Grumbine: Well, Carl, this has been fantastic. Again, hope to have you back sooner than later, and please check out all of Carl’s work. It’s worth your time. I am Steve Grumbine with my guest Carl Zha with Macro N Cheese, and we are outta here.

[00:56:44] End Credits: Macro N Cheese is produced by Andy Kennedy. Descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.