Defense Experts Game Out US-China War Over Taiwan; Dalio Warns Escalations 'Very Dangerous'

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thedinarian@thedinarian

August 10, 2022

Defense Experts Game Out US-China War Over Taiwan; Dalio Warns Escalations 'Very Dangerous'

A group of American defense experts operating out of a 5th floor suite in Washington DC have been mapping out a hypothetical war between the United States and China over Taiwan.

"The results are showing that under most — though not all — scenarios, Taiwan can repel an invasion," said Mark Cancian, a senior adviser at the Center for Strategic and International Studies, which has been simulating various war scenarios. "However, the cost will be very high to the Taiwanese infrastructure and economy and to US forces in the Pacific."

In sessions that will run through September, retired US generals and Navy officers and former Pentagon officials hunch like chess players over tabletops along with analysts from the CSIS think tank. They move forces depicted as blue and red boxes and small wooden squares over maps of the Western Pacific and Taiwan. The results will be released to the public in December. -Bloomberg

The base assumption is that China invades Taiwan to force unification, which the US responds to with its military. Another assumption (that's 'far from certain') is that Japan would grant 'expanded rights' to use US bases on its territory - but wouldn't intervene directly unless Japanese land is attacked.

Nuclear weapons are not part of the scenarios, and the weapons used in the simulation are the most likely to be deployed based on current capabilities of the nations involved.

News of the war game simulations come as China began test-firing missiles in recent days following House Speaker Nancy Pelosi's (D-CA) visit to Taiwan.So far, 18 of 22 rounds of the simulation to date have resulted in Chinese missiles sinking a large part of the US and Japanese surface fleet, and would destroy "hundreds of aircraft on the ground," according to Cancian, a former White House defense budget analyst and retired US Marine.

"However, allied air and naval counterattacks hammer the exposed Chinese amphibious and surface fleet, eventually sinking about 150 ships," he added.

"The reason for the high US losses is that the United States cannot conduct a systematic campaign to take down Chinese defenses before moving in close," Cancian continued. "The United States must send forces to attack the Chinese fleet, especially the amphibious ships, before establishing air or maritime superiority."

"To get a sense of the scale of the losses, in our last game iteration, the United States lost over 900 fighter/attack aircraft in a four-week conflict. That’s about half the Navy and Air Force inventory."

According to the simulations, the Chinese missile force "is devastating while the inventory lasts," which makes US subs and long-range-capable bombers "particularly important." Also key, is Taiwan's defense capabilities, because its forces would be primarily responsible for countering Chinese landings from the South.

"The success or failure of the ground war depends entirely on the Taiwanese forces," said Cancian. "In all game iterations so far, the Chinese could establish a beachhead but in most circumstances cannot expand it. The attrition of their amphibious fleet limits the forces they can deploy and sustain. In a few instances, the Chinese were able to hold part of the island but not conquer the entire island."

"For the Taiwanese, anti-ship missiles are important, surface ships and aircraft less so," because surface ships "have a hard time surviving as long as the Chinese have long-range missiles available."

There have been no estimates so far on lives lost, or the sweeping economic impact of such a conflict between the US and China.

As Bridgewater's Ray Dalio notes, "The US-China Tit-For-Tat Escalations Are Very Dangerous."

Unfortunately, what is happening now between the US and China over Taiwan is following the classic path to war laid out in my book "Principles for Dealing with the Changing World Order.” If events continue to follow this path, this conflict will have a much larger global impact than the Russia-Ukraine war because it is between the world's leading superpowers that are economically much larger and much more intertwined.

For reasons previously explained, the Russia-Ukraine war is minor by comparison, though the two conflicts are related and the Russia-Ukraine war, like all wars, is having terrible consequences. For example, consider that China's share of world trade is over seven times larger than Russia's [1] and constitutes about 19% of all American manufactured goods imports. [2] Imagine if importing goods from China and doing business with China became the same as they are with Russia now. Imagine what the supply chain and economic impacts on the world would be. Imagine what sanctions on China would be like for the world. Supply chains would collapse, economic activity would dive, and inflation would soar. And that’s just what would happen to economies due to economic warfare which would pale in comparison to the impact that military warfare, which we are obviously dangerously close to, would have.

For reasons explained in my book, the situation that now exists between the United States and China is very similar to that which existed between powers immediately prior to World Wars I and II and many other immediate prewar periods. The chart below shows my US-China conflict gauge since 2000. As you can see, the readings for conflict between the US and China are the highest ever.

This index is composed of many indicators such as changes in military spending, personnel, and deployment; sentiment of each country's people about the other country; media attention given to the conflict, etc. The combination of military spending and attitudes toward each rival country has been particularly indicative. The chart below shows the shares of global military spending for the US and China which significantly understates China’s military spending because much government spending that supports the military is not included as direct military spending. Also, American military spending covers the world while Chinese military spending is more focused in the region. Knowledgeable parties tell me that China has significant military superiority around Taiwan.

The chart below plots recent Gallop poll data and shows that 80% of Americans now have an unfavorable view of China—which is now on par with how Americans view Russia (and is up meaningfully over the past few years).

To put the existing level of conflict between China and the US in perspective, the table below compares the current US-China conflict gauge reading to past readings of other great conflicts. As shown, the current reading for the US and China is nearly 1.2 standard deviations above the average, which is a reading in the high end of the range of major conflicts. While this conveys a high level and risk of conflict, it should not be misinterpreted to mean that a worsening is to come. Sometimes, these moments of heightened conflict are followed by a stepping back from war. For example, the period leading into the Cuban Missile Crisis had a relatively high reading of 0.9, but wise heads prevailed, so a potential disaster was avoided.

There are many more measures that convey the changing picture that are explained in my book which I don’t have the space to show you here, but will continue to plot along with the historical analogies I outlined in the book. I will use them to paint as accurate a picture as I can about what's happening and put it into an historical context. The dot plot will speak for itself as to which path we are on.

As for what's now happening, the Chinese are responding to Nancy Pelosi’s visit by cutting off most relations and demonstrating that they can militarily control the area around Taiwan, which implies that China could shut Taiwan off from the rest of the world. Imagine that and its implications, e.g., imagine if semiconductor chips couldn't get out of Taiwan. China is also displaying its military power and it is crossing previously uncrossed lines of demarcation, thus closing in on Taiwan. [7]

Pelosi's visit was perceived by China as a move in favor of Taiwan's independence rather than toward one China with Taiwan part of China, and it is essentially challenging the US to stop it from doing what it is doing. The question is whether the US will respond with another escalation that will prompt another Chinese response, in the classic tit-for-tat acceleration into war, or if the sides will step back.

To gain a picture of the past and the forces that are driving the evolution of the US and China toward war (i.e. the Big Cycle) I suggest that you review Chapter 13 "US-China Relations and Wars." I suggest that you pay particular attention to my explanation of previous Taiwan Straits crises and why I said I would worry if we had a "Fourth Taiwan Crisis" which is the crisis that we are now having. To understand what is happening you must understand these things.

As I summarized on page 455 of that Chapter in the section "The Risk of Unnecessary War:" Stupid wars often happen as a result of a tit-for-tat escalation process in which responding to even small actions of an adversary is more important than being perceived as weak, especially when those on both sides don’t really understand the motivations of those on the other side. History shows us that this is especially a problem for declining empires, which tend to fight more than is logical because any retreat is seen as a defeat. Take the issue of Taiwan. Even though the US fighting to defend Taiwan would seem to be illogical, not fighting a Chinese attack on Taiwan might be perceived as being a big loss of stature and power over other countries that won’t support the US if it doesn’t fight and win for its allies. Additionally, such defeats can make leaders look weak to their own people, which can cost them the political support they need to remain in power. And, of course, miscalculations due to misunderstandings when conflicts are transpiring quickly are dangerous. All these dynamics create strong pulls toward wars accelerating even though such mutually destructive wars are so much worse than cooperating and competing in more peaceful ways. There is also risk of untruthful, emotional rhetoric taking hold in both the US and China, creating an atmosphere for escalation.

While the power of the forces behind the Big Cycle explained in "Principles for Dealing with the Changing World Order” can be overwhelming, people still have choices that will affect the outcomes. This conflict is still a low-grade military conflict (which I call a Category 2 military conflict) because 1) it has not yet produced an exchange of bloodshed of people from the two major sides i.e., Chinese and/or Americans and 2) it is not taking place on either country’s homeland (though the Chinese would say Taiwan is part of their homeland even though it’s not part of mainland China). If either of these were to change, that would be the next big step up toward unimaginable all-out war which I still consider improbable.

A good thing is that sensible people on both sides are scared of war even though they don’t want to look like they are. A bad thing is that some people on both sides want to intensify the fight because to not do so in the face of the provocation wound be perceived as a sign of weakness. That dynamic of upping the ante to avoid looking like one is backing down has throughout history been shown to be a very dangerous dynamic. We have seen many historic cases which have led to terrible wars because neither side wanted to back down and only few in which sensible people stepped back from the brink when faced with the prospect of unacceptable destruction.

My hope is that China’s escalation will not lead to the next US escalation which will lead to the next Chinese escalation which, despite the strong desire of sensible people on both sides to avoid war, would lead to a war. But hope is not a strategy, so I will try to be as realistic as possible, navigate accordingly, and communicate well with you.

https://www.zerohedge.com/geopolitical/defense-experts-game-out-us-china-war-over-taiwan-dalio-warns-escalations-very

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Through Theta’s Edgecloud technology, AIR has the foundation to go beyond traditional streaming and bring truly dynamic, customized content to users at scale.” — Larisa B. Miller, CEO, Phoenix Global Media Group

ABU DHABI, UNITED ARAB EMIRATES, November 27, 2024 In a landmark collaboration set to reshape the future of audio streaming, Phoenix Global Media Group has joined forces with Theta Labs to launch the world’s first blockchain and AI-driven audio streaming service. Built to deliver a seamless and highly personalized experience, the AIR-Theta partnership combines Theta’s Edgecloud infrastructure with AIR’s advanced AI technology to offer an immersive blend of audio and video content. This holiday season, the collaboration will also introduce exclusive NFT offerings for celebrity hosts, paving the way for a new era of user-driven entertainment.

AIR is currently web streaming at onairnow.ai, providing a dynamic and interactive listening experience for audiences worldwide. Building on this success, the upcoming launch of AIR’s mobile apps on both Apple and Android platforms will mark a strategic move that aligns with evolving consumer habits, positioning Theta and AIR at the forefront of the next wave of audio streaming innovation. By integrating Theta’s EdgeCloud technology, the AIR app will deliver decentralized, high-performance content delivery to over 1.3 million daily users. Enhanced by blockchain-backed infrastructure, AIR is set to establish itself as an interactive, AI-powered destination for listeners and viewers worldwide.

Through Theta’s Edgecloud technology, AIR has the foundation to go beyond traditional streaming and bring truly dynamic, customized content to users at scale,” said Larisa Miller, CEO of Phoenix Global Media Group.

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thedinarian@thedinarian

November 27, 2024

Trump and the GOP will challenge Europe’s MiCA as top crypto regime

A new president and Congress will flip crypto regulation back to the US from Brussels.
A freewheeling US approach will contrast with the European Union's prescriptive model.
Trump isn't just a crypto supporter — he's a player.

Howdy. Ed here. In just the last few weeks, the crypto regulatory story has been turned on its head.

“Regulation by enforcement” is dead. And the industry’s wish list is very much alive.

Crypto, which raised almost $200 million to influence the 2024 US election, is poised to land its holy grail — a bespoke law that codifies cryptocurrencies as assets separate from stocks, bonds, and other securities.

Even better, the incoming Trump Administration appears content to let crypto be crypto.

Donald Trump and his sons, after all, aren’t just supporters, they’re also players.

Their newly minted crypto venture, World Liberty Financial, promises to lead a revolution “by dismantling the stranglehold of traditional financial institutions.”

In other words, let the disruption rip.

A question of clarity

A year ago, all the crypto industry wanted was clarity.

Rather than acquiesce to the industry’s desire for legislation that treated cryptocurrencies as a separate asset class, the US Securities and Exchange Commission insisted on applying laws passed during the 1930s to the fledgling marketplace.

That meant a lot of very messy, and costly, litigation.

Crypto leaders such as Coinbase CEO Brian Armstrong cried foul and rang the alarm about US competitiveness.

Amid the tumult, it was the European Union that offered hope.

Here comes MiCA

With the 2023 passage of the landmark Markets in Crypto-Assets Regulation, or MiCA, the 27-nation bloc clarified the do’s and don’ts for an industry bristling at Gary Gensler’s crackdown.

Crypto giants such as Coinbase and Circle may not have jumped for joy as Brussels imposed fresh regulations in the world’s second biggest economic area.

But they did welcome an approach that eschewed Gensler’s taste for legal combat in favour of clearly drawn rules.

But now, with the advent of Trump’s second term and a Republican Congress, all bets are off.

It will be Washington that resets the regulatory agenda for an industry that has added $1.2 trillion in market value since election day on November 5.

If crypto champions such as Senator Cynthia Lummis, a Wyoming Republican, introduce legislation that memorialises the industry’s exceptionalism in law, MiCA is going to look downright thorny by comparison.

Detailed blueprints

This is because when it comes to regulating technology, the US tends to err on the side of letting businesses do what they want. If companies do run afoul of the law, well, that’s what the courts are for.

In contrast, the EU prefers a preemptive and prescriptive approach to regulation. This is why MiCA lays out detailed blueprints for everything from stablecoins to crypto exchanges to NFTs.

Now the US is about to pitch up a more freewheeling alternative regime. Some officials say it’s high time.

‘Brutish and short’

In a speech earlier this month, Hester Peirce, the crypto-supporting SEC commissioner, urged her fellow regulators to stop clutching their pearls at the mere mention of crypto.

“Crypto-asset skeptics and enthusiasts alike can understand that a regulatory environment that is characterised by instability, uncertainty, and fear inevitably renders entrepreneurial prospects nasty, brutish, and short,” Peirce said.

As a new era dawns, crypto entrepreneurs won’t have regulators to kick around anymore.

They’ll already have what they want.

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thedinarian@thedinarian

November 27, 2024

Tornado 🌪️ Cash users score ‘incredible win’ for crypto privacy in US court

Court agrees existing law doesn't cover smart contracts.
TORN soars 400% in 24 hours.
Crypto legal experts caution against reading too much into ruling.

Code is not the same thing as a person or a company. Full stop.

For months, six plaintiffs have been arguing that point in connection with the US Treasury Department’s punishment of Tornado Cash.

Supported by Coinbase and other crypto stalwarts, they contended the Treasury Department erred by sanctioning the crypto mixer for executing transactions by North Korean-linked hackers and other national security threats and criminals.

Now a US court has agreed and delivered the crypto industry an eye-opening legal victory.

‘Immutable smart contracts’

In a 34-page opinion issued on Tuesday, an appeals court in Texas reversed a lower court ruling and said the smart contracts utilised by Tornado Cash to anonymise crypto transactions are not covered by existing law.

The court said the Treasury’s Office of Foreign Assets Control, or OFAC, was wrong to sanction the venture in 2022 and ordered a lower court to grant the plaintiffs’ request for dismissal of the sanctions in part.

“We hold that Tornado Cash’s immutable smart contracts… are not the ‘property’ of a foreign national or entity,” the three-judge panel wrote. “OFAC overstepped its congressionally defined authority.”

In the last 24 hours, TORN, the token associated with Tornado Cash, soared 400%, according to CoinGecko.

Longstanding argument

Crypto privacy advocates said the decision affirmed their longstanding argument that automated smart contracts should be treated differently than developers or DAOs or any other entity managing an anonymising platform like Tornado Cash.

“Incredible win here,” Matt Corva, general counsel at ConsenSys, said on Tuesday.

‘Put another way, the government’s overreach will not stand.’
— Paul Grewal, Coinbase

Paul Grewal, the chief legal officer at Coinbase, hailed the decision as a game changer for blockchain technology.

“These smart contracts must now be removed from the sanctions list and U.S. persons will once again be allowed to use this privacy-protecting protocol,” Grewal wrote on X.

“Put another way, the government’s overreach will not stand.”

Weapons of mass destruction

To be sure, the court recognised the importance of addressing online national security threats.

The judges said it was clear that a North Korean-linked hacker group had laundered $7 billion in illicit proceeds from crypto thefts to fund the development of its weapons of mass destruction and ballistic missile programmes.

But the panel found that the law invoked to sanction Tornado Cash — the 47-year-old International Emergency Economic Powers Act — was ill-suited to “target modern technologies like crypto-mixing software.”

If Congress wants to take action against blockchain-based platforms to protect national security it should pass another law, the court suggested.

On trial

The plaintiffs in this civil case made a similar argument to Alexey Pertsev, the Tornado Cash dev who was sentenced to a five-year prison term in May by a Dutch court following his conviction for helping launder $1.2 billion in illicit funds on the platform. Pertsev is appealing his conviction.

Pertsev’s former colleague, Tornado Cash co-founder Roman Storm, is scheduled to go on trial for similar charges in the US in April. He has pleaded not guilty.

Legal experts cautioned against reading too much into the US appellate ruling.

“While we should celebrate this, we should temper our celebration,” Reuben Yap, co-founder of privacy protocol Firo and former partner at Malaysian law firm Reddi & Co Advocates, told DL News.

This covers only whether smart contracts can be sanctioned and does not necessarily give protection to the developers of such protocols.”

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