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How Ukraine will affect your personal wealth

I’m just gonna say it — today’s post will take you ~10-15 minutes to read, but you’ll understand the world better!!!

As Tupac once said, “all eyes on me Ukraine.”

I was chatting with my girlfriend the other night, and I brought up my biggest fear (casual) — World War III. 

I get it I get it - you may think that sounds crazy and dramatic.

She asked me what I meant by World War III, so here’s what I told her:

A world led by the U.S. is better than the alternatives. 

When the Soviet Union collapsed in 1991, many believed we had reached what political scientist Francis Fukuyama called "the end of history" – a new era where liberal democracy and free markets would gradually spread across the globe. Woohoo!

But mister smart guy Fukuyama may have been wrong.

The current, dominant power of the world is the United States (duh) - countries everywhere aspire to be like the U.S. and get a taste of the secret sauce that has made the U.S. the most powerful, prosperous country in history, despite our problems.

The U.S. also (typically) pushes for good things, like human rights, democracy, freedom of speech (very dope), and economic prosperity (capitalism).

In the real world, every choice we make has alternatives.

When you’re ordering at a restaurant, you have to choose from the menu. You can’t just barrel into Taco Bell and demand a Crispy Chicken Pizza Burrito Supreme.

When it comes to who could be the dominant military power of the world besides the United States, you should know about the other… menu options.

**EVIL STAR WARS MUSIC** the Axis of Upheaval (or Evil) = China, Russia, Iran, and North Korea.

But the biggest threat here is China (on the bench is Russia tho). Iran and North Korea are more like the groupies, coming off like Totino’s Pizza Rolls — small and harmless, in comparison.

If you didn’t know already, the countries in the Axis of Upheaval (specifically China and Russia) are run by dictators.

There’s no Congress that can be voted in or out, or freedom of assembly or speech. On top of that, these countries want to conquer (many) other countries.

My girlfriend’s response: “Woah. But why do China and Russia want to do this??? Economically that doesn’t even make sense..”

I agree! But dictators don’t have to answer to “economic sense” when they’re the ones running the show.

These two, Xi Jinping and Vladimir Putin, have ambitions, dreams, and ideologies.

What sucks is that lots of Russians and Chinese may agree with my girlfriend - it doesn’t make any sense to invade other countries in today’s world, but their voices don’t matter, because they don’t live in democracies and get to vote people in or out of office.

Xi and Putin can do what they want, as long as it keeps them in power, which is their #1 priority as a dictator.

And they don’t gaf, man.

These naughty boys have one thing in mind - restoring their empires to their “former glory.”

Why? Let’s start with Putin. For him, countries like Ukraine, Estonia, Moldova, Poland, etc. aren’t countries — they’re masses of land waiting to be taken back to where they belong = Putin’s notion of his Russian empire. To him, it sounds so great! He’s made this clear in many speeches and even his hilarious “interview” with Tucker Carlson.

And dictators driven by these dreams (not the good kind, like MLK’s) are capable of doing terrible things, because they’re willing to pay whatever the cost:

For China, Xi Jinping whistles a similar tune — to “revive” his country to its former glory, which involves taking over Taiwan and “solving” other “territorial disputes,” like taking land that belongs to Vietnam, India, Malaysia, Brunei, and U.S. allies, like Japan and the Philippines.

So, to recap real quick: on one side, we have the pro-human rights and democratic United States, which is trying to keep countries from invading each other and doing evil things, which we should all agree is a good idea.

Then we have the Axis, led by China, which is super anti-human rights — killing its own citizens for speaking out, cleansing religious minorities, and wanting to take territory from other countries.

I think we can all agree that this is worse than the U.S.-led order, no matter your personal criticisms of the U.S.

And these Axis countries are on the move against the U.S.

Xi has stated many, many, many times over the years that they must weaken and topple the United States. For example, China just conducted the worst foreign hack of U.S. cell networks in modern history, targeting many U.S. politicians.

But why?

Because, in short, we are the only major power that could stop China from succeeding in its territorial conquests.

Whether you prefer to see the U.S. as an evil empire or not, ever since WW2 ended, we know that relationships between countries have, on average, become more peaceful:

This is thanks to the United States acting as the policeman of the world (which we should be helped with) and telling everyone:

“it’s not very demure to invade your neighbors and invade other countries or massacre others.”

Don’t forget — killing each other was the M.O. for nearly all of human history.

Now, so far we’ve covered:

• Why the world led by the U.S. is better than the evil alternative of a world run by China & Russia

• Why China is actively trying to weaken the U.S.

So let’s complete this circle by:

• Explaining in phases how the U.S. losing a war to China would be terrible for you

• How the U.S.’s response to Russia invading Ukraine may determine China’s (or Xi’s) decision to invade Taiwan

Phase 1: China beats the U.S. in a war and takes over Taiwan — this means China would control the largest (by far) global supply of things called semiconductors, which are in nearly all electronic devices you use every day — cars, computers, phones, many appliances, etc.

This would be really bad because China would be keen to cut off the U.S. from semiconductors.

Remember, China has very little to gain economically from this war, but, as told best by economist Noah Smith:

My girlfriend: “But wait, pause — what are the odds China could actually beat us?”

Great question. This is where the intensity of my fear comes in.

I’m no military expert, but wars usually last years.

And wars are won with ammunition and weapons.

To make this stuff, you have to have factories, or the ability to manufacture things.

During WW2, the U.S. had tons of private companies with factories, like Ford, so the U.S. government was able to use those factories to manufacture weapons.

That’s how we won in WW2 - by out-manufacturing our enemies.

So now that you know that, you’ll understand why this graph below scares me (even more than parabolas did in high school calculus).

China easily manufactures more than double what the U.S. can alone, so we only stand a chance against them with our allies:

The New Allies may look pretty good, but that’s only if the EU + UK can join us. If the U.S. is fighting China, Europe will probably still be dealing with Russia.

More importantly, the U.S. is not the manufacturing superpower that we once were, but China is.

People think we’re still the United States of the 1990s, when our military was MUCH bigger.

Not anymore.

So, to answer my girlfriend’s question - manufacturing more weapons than the U.S. That’s how China beats us.

Phase 2: China becomes the global superpower — if you’re China and just won WWIII, why would you EVER let your biggest rival (the U.S.) build back to challenge you again?

Hint: you wouldn’t — you just spent DECADES undermining them and won. So this means that China won’t just make the U.S. sign papers that say “the U.S. lost 🥺.”

China would most likely decide to do a few things to the U.S. (a.k.a, you):

1. Cut off key trade routes through the Pacific that the U.S. relies on = Americans would be cut off from essential imports and trading partners. This would make things MUCH more expensive

2. Crush any industries in the U.S. that would boost the American economy and compete with Chinese companies. This would make us have less well-paying jobs

3. Hack all major civilian infrastructure (power plants, water sanitation facilities, dams, etc.). China would threaten to destroy these or cause our civilians harm, if the U.S. tries to build back up against them.

With China keeping the American economy in the crapper constantly, you would definitely be poorer.

The oceans around the United States will not save you from the world of modern warfare and technology.

My girlfriend: “ok but how likely is it that China will actually invade Taiwan?"

I mean……. pretty likely.

The CCP (Chinese Communist Party) has been screaming to the world, not subtly, “WE WANT TO INVADE TAIWAN” for many years.

Before WW2, ergo, nuclear bombs and integrated economies, this is basically how rival nations dealt with each other: if you’ve got the bigger stick than the next guy and want what they have, then you use that bigger stick to get what you want.

We’re already seeing early signs of conflict — China’s maritime militia is clashing with the Philippines on the oceans over disputed territories. We shouldn’t forget that this is similar to the lead up to World War II — an accumulation of minor conflicts between rival nations.

Another key detail - when Xi decides to pull the trigger, he may strike U.S. bases in the Pacific first, as a gamble.

Why? Because the U.S. will most likely decide to help Taiwan (good!), so Xi wants to decrease the odds of losing to the U.S. as much as possible.

If your enemy is going to join the fight anyways, why not strike first when they’re vulnerable and open?

My girlfriend: “Wait… I thought I asked you about Ukraine???”

**cracks knuckles** you sure did.

China is studying.

With Xi’s dream on the brain, he has to watch very closely how the world (especially the U.S.) responds to a huge foreign rival like Russia trying to conquer its peaceful neighbor Ukraine.

They’re also observing (via Ukraine’s war with Russia) how modern warfare may be waged with the U.S. in a war over Taiwan.

So (1) the U.S. needs to continue to divest from China, (2) build up our manufacturing at home, and (3) really need Europe to wake up and do more for Ukraine.

If Ukraine loses, Russia will most likely carry on to Poland (which is why Poland is building up their military like crazy — they know this) and other European countries.

This means Europe would officially be in all-out war with Russia.

And the United States too, because, ya know, that little thing called NATO — “an attack on one is an attack on all.” Poland is a member of NATO.

Xi is watching, and he DEFINITELY hopes Russia gets to Poland.

Why do you think China is sending weapons to Russia and North Korea has sent soldiers to Russia?

And why is Xi hoping Putin gets to Poland? Because once Poland is invaded, the U.S. (along with NATO) would have to send our American soldiers to fight in Europe.

With U.S. attention there, Xi would give the order — invade Taiwan.

Now, the U.S. is fighting a two-front war, and remember: the U.S. is not the manufacturing power we once were in World War II.

And whether we like it or not, the world’s dictators are on the move.

Sadly, my Roman Empire is this.

Still curious?

• 1 minute YouTube explanation here on why Ukraine should matter to you, from American intelligence analyst and 20-year infantryman veteran Ryan McBeth

• A longer post on how we’re not ready for China and need to do more now

Thanks for taking the Pack,

Zach

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Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.