Excellent analysis, thank you. Yes, we’ve been in a heated cold war since Putin and Xi announced their best-friend status and Putin turned around and started a hot war at NATO’s border. Since we are at war, it’s time we Americans remembered how we won the last war and begin to act accordingly. Hank Paulson can continue to invest in China, but our politicians should not help him. Friendshoring and other forms of decoupling will gain even more momentum.
But the people who will soon start to feel the cold breezes are school administrators. As soon as the Supreme Court bans affirmative action there will be calls in Washington to ban Chinese student visas. For how can it be that seats previously going to Blacks and Latinos will now go to the children of the CCP...? No, that will not work in a democracy. Rubio is probably already working on the draft.
And then the administrators of Florida universities will tell him how much those student studying in Florida contribute to the state economy and he’ll erase that draft
Even when the debates devolve to mud slinging on Noah’s articles, the commenters mostly retain their faculties of reason and powers of persuasion. You never hear these lengthy arguments in mainstream media, where everything reduces to pithy sound bites to be taken out of context. So continue arguing your positions, because as read each perspective I am forced to contemplate what I think and why and maybe even subtly upgrade my own limiting beliefs.
I should not have commented. The default position of most people who are pro-war is to verbally abuse and attack any others who state it is not only directly destructive of human lives, it is also destructive of non-military economic and social activity.
What's funny about that? Half my family died in the Holocaust, 3 million in SE Asia, and they are suffering in conflicts around the world right now. Ha Ha Ha!!!!! Hilarious!!!!! Go play Call of Duty.
It's a painfully naïve take that has no basis in reality. It's such a bad take I almost wonder if you're literate. Look at the world. Do you notice how hegemonic the United States is? Do you like that state of affairs? Do you enjoy living in the wealthiest and most powerful civilization ever to exist, the land of perpetual peace? Do you enjoy making little "COEXIST" posts on your $1200 smartphone while in your luxury vehicle that drives itself? I sure do!
You know how it was built? Victory in wars. Wars that took place in other countries and largely killed other people. Something like 25 million Soviet citizens died in WW2, while only about 400,000 Americans died. At the end of the war, the United States accounted for a full HALF of the world's economy, with something like a 2,000 ship navy that was as large as the next ten or so combined. Most of those navies were floating American hardware too. The enemies of the United States and of peace lay shattered, physically, morally, militarily, and economically, at its feet. Even the Soviets, the other victor of WW2, were hardly more than a speed bump at the time (albeit one with an absurdly large army).
THAT is victory, such a thoroughgoing and complete victory it has no parallel in world history, except maybe the Third Punic War. And on that basis the United States built its global hegemony, and established an unbeatable edge that would lead to another absurdly complete victory in the Cold War. It bound the states of the world, even the great old empires like the UK and France, to itself as clients.
Wars cost lives and property, and inflict damage in countless other ways as well. I'm sorry for your own losses, and I'm sorry in a normal way for the losses others have sustained. But I'm not so ridiculous as to suggest there's no difference between victory and defeat, or that victory is bad. And even if you were right, which you absolutely are not, the difference between victory and defeat is enormous.
The United States of America wins wars, and its citizens reap the benefit. They benefit economically and in security from a world that is subservient to the United States, and where those who would threaten its security are either quiet or are crushed. It wins wars because of geography, and because of policy. And it's going to keep winning wars because it is still unbelievably far ahead of the rest of the world. And even the supposedly most potent adversaries of the United States, such as China, don't seem to have the stomach for long-term confrontation.
Give thanks every day, as I do, that your ancestors were wise enough to come here. Me personally, I live in California. Here, there has never been a war. Literally not even one time (indigenous conflicts excepted). Do you know how much compound interest accrues from that kind of perpetual peace? You do. Just look around. Why is this the case? Because we made it so.
Meanwhile, the benighted denizens of the old world seethe every day that they or their ancestors haven't migrated here while the artillery rumbles in the background and their children are conscripted to fight in trenches like it's 1916.
Point is, you may not want war, but the alternative might be worse. For instance, would the US staying out of WWII have prevented the Holocaust, or would it have been worse?
This does seem like the direction we're headed. It will be good to decouple what is too tightly coupled now both to on-shoring and friend-shoring so we can't be held hostage to not being able to manufacture. Also learning curves happen in manufacturing.
We should not let finance screw the world again like they did by forcing the off-shoring and gutting of US Manufacturing. Great line " I predict, will end up being the “dumb money” that swoops in to give some Chinese investors a timely bailout from their mistakes in the 2010s" its ok if its their money but unfortunately its really our money from retirement funds, etc.
There should be no "finance industry" its just accounting that has been hijacked to grift the world.
Okay, you're correct that the most likely path forward is a Cold War scenario, but it's worth also thinking about what a scenario might look like in which we avoid that.
I don't have a clear sense, but it would require, on all sides, that it will involve negotiating a shifting relationship in public, as China exercises more global power, and that won't be easy.
Yeah basically I don't see any realistic path now that avoids it -- certainly nothing that the U.S. can do unilaterally. My hope is that Cold War 2 is much shorter and less destructive than its predecessor.
I mean, Cold War 1 was not only less destructive than the 2 World Wars but a great era of world peace and prosperity compared to almost all of human history before. People have forgotten/don’t realize just how violent and desperate life on earth use to be.
Good stuff, Noah, as always. The balloon was a provocation for sure. They are testing things in the new environment. China is still smarting from the Hong Kong and Covid backlash in the rest of the world. Ukraine is also giving them food for thought. If their proxy (Russia) is defeated, China is less likely to risk it over Taiwan and may seek accommodation. If, however, Ukraine (US proxy of sorts) falters, China will b emboldened to escalate cold war 2, thinking that Russia's nuclear arsenal is strengthening their hand.
What better way to bolster PacRim countries than moving U.S. business investments into South Korea, Vietnam, Japan, Malaysia, etc.? Paulson is old school. He should know by now a desperate reach for yield most often ends badly. Who could forget Paulson was vomiting into his office wastebasket at the outset of the Financial Crisis? His time has passed. He should stick to his pastime: bird watching.
Why didn’t the U.S. shoot down the balloon over land so it could examine the payload? But what do I know?
The payload sustains less damage on water entry than it would falling on land. And from 60,000 ft the radius of fall is so large that it's hard to find any place over land where you would have essentially no risk of danger to populated places. It's virtually certain that the entire payload will be recovered. I expect to open my copy of Aviation Week soon and see a photo of the whole array spread out in a hanger at Langley AFB. Not that there will be any surprises.
The United States has spent something like $1 trillion on the F-22 program since the late 90s. It appears that this incident was the platform's first air-to-air kill. I think someone wanted to start getting their money's worth. I agree.
You bring up Southeast Asian nations balancing against China, and while that may be somewhat true on the military side, it's also true that ASEAN does not want to choose between the US and China and has explicitly rejected the idea of being a "pawn in a new Cold War." So for many of China's neighbors, it's not that they're becoming totally anti-China but that they want balance. The interdependence story you touched on is key.
Of course. Southeast Asian countries look to the U.S. as a balancing force. China's aggressive actions in the SCS end up increasing U.S. involvement in the region -- the opposite of what China would probably prefer.
Some one either high up in the CIA or in the Joint Chiefs of Staff, once said something to the effect that, the best brake the U.S. got in the Cold War was that Lee Kuan Yew, wound up in Singapore and not in China.
The neutral position of SEA countries is a pragmatic position. China is a regional power and the US has heavily invested in military assets far from US territory in an attempt to secure US primacy. No one here wants US primacy over regional stability. No one wants trade to stop for the benefit of a domestic political imperative on some continent thousands of miles away. On top of that, US attempts to undermine regional infrastructure (such as the Asia Investment Bank) are seen as clumsy geopolitics at best, and hypocritical at worst given the influence the US had at Breton Woods. But the real issue: if the US flies spy planes over China, then they should stop whinging about the reverse happening. But I guess it suits US rhetoric to have a great enemy and this specific incident allowed a lot of chest beating.
Any US company with a supply chain through China should have a team dedicated to getting out, and they should be working 6 days a week right now. Why leave? There is of course the historical risk of IP theft that should drive this, but let's be honest - it has already happened. There is also the risk that these companies will be in a lurch if/when the shooting starts over Taiwan. Everything will be as good as lost once that happens, so why should a company sit back and wait? More important, though, is the risk posed by meddling, gamesmanship and political crackdowns in a new cold war - would you want your company's supply chain to be a bargaining chip in Cold War 2? Your factories shut down and tacitly held ransom so China can extract a policy outcome on some unrelated matter? Because that is the world we are moving towards. Companies should leave now. And the US govt should encourage them to move to friendly countries elsewhere in SE Asia, as well as Africa (which will be a key area of competition btwn the US and China in Cold War 2).
This is not tomorrow's issue. This is all happening in real time. Any company not already taking precautions is too late.
Investing in China seems incredibly risky. Corruption, manipulated metrics, and a capricious government that could decide to kneecap any company or industry at any time. Makes me wonder if American investment firms are so used to the protections of American law they can't see the obvious red flags waving in front of their faces.
This cold war is different. Expect fewer open military confrontations, more backstage coalition diplomacy.
China isn't as militaristic or ideological as the USSR. Unlike the Soviets, China hasn't relied on dramatic invasions or sponsored coups. Instead, we see "frog-boiling": escalating military and economic pressure.
Against China's frog-boiling, America's aim will be as much "counter pressure" and "deny leverage" as "deter conquest."
(Although that diplomacy will still be ultimately backed by traditional arms shipments, military treaties, and trade preferences.)
The United States hasn't been very good at diplomacy in the past. On the other hand, China's been even worse. No country wants their peace or prosperity to be at the mercy of Xi Jinping's next mood swing. Overall, America's odds are good.
Interestingly, for Cold War 2, it does not seem like China has a roster of committed allies. Not that Soviets did either, but I think that China is facing some difficult decisions regarding its future. That could be why certain factions are trying to dial back the invective/“wolf-warrior” diplomacy.
China shares borders with very powerful countries, I think it is starting to realize that their neighbors can only be pushed so far.
Thanks. Interesting analysis and relevant facts. It seems odd to use a balloon in such a way. Not many people realize that satellites have a resolution limited by physics and optics: it doesn't matter how good your tech gets, you aren't going to be able to resolve objects smaller than about the size of a truck from a satellite. A balloon can do better. But it's just so obvious compared to something like just fixing cameras to the bottom of what looks like a commercial cargo flight, it seems hard to understand why any country would do things that way.
I think there are a few possibilities. One is that I'm remembering the conversation wrong. It was many years since I worked with the output of satellite imagery firms and so my memory of what's possible is probably just garbled.
Another is that the person I was talking to was confused/wrong about the physics of it and I remember correctly.
The final possibility is that the definition of "satellite" is somehow different; perhaps us military satellites fly a lot lower than people previously thought it was possible or sensible to put them.
I suspect the right explanation is the first one and I just misremembered what I was told. It was years ago now.
Mmmm, foreign financial investments in China. Just wait until the investors discover that the US is not the only jurisdiction that can impose sovereign risk on foreign financial investors …
The parallel I immediately thought of wasn't the Cold War, but 1930s Japan, when civil authority was steadily being encroached on by the military. Is that the only plausible explanation for the spy balloon situation? No, but in my view it's a worryingly plausible one.
Why is that "disingenuous"? It's obviously true. You think FDI fell as a percentage of Chinese GDP in the 2010s due to something that happened way back in the 90s???
Some people have a certain mindset to the point that making money is the most important activity a person can be involved with. It is quite possible China's leaders are banking on this short-sighted view. All are to be forgiven if there is an opportunity to make money.
China lied about Hong Kong, repressed democracy in brutal ways, and incarcerated minorities. This is not even considering its threats to take Taiwan back by force.
I think any money invested in China will disappear when it suits the government to do so. They have told us what they intend to do, and I see no reason to doubt what they say.
Excellent analysis, thank you. Yes, we’ve been in a heated cold war since Putin and Xi announced their best-friend status and Putin turned around and started a hot war at NATO’s border. Since we are at war, it’s time we Americans remembered how we won the last war and begin to act accordingly. Hank Paulson can continue to invest in China, but our politicians should not help him. Friendshoring and other forms of decoupling will gain even more momentum.
But the people who will soon start to feel the cold breezes are school administrators. As soon as the Supreme Court bans affirmative action there will be calls in Washington to ban Chinese student visas. For how can it be that seats previously going to Blacks and Latinos will now go to the children of the CCP...? No, that will not work in a democracy. Rubio is probably already working on the draft.
And then the administrators of Florida universities will tell him how much those student studying in Florida contribute to the state economy and he’ll erase that draft
"How we won the last war ..." Nobody really wins wars. Humans and the planet always lose.
lol, lmao
Even when the debates devolve to mud slinging on Noah’s articles, the commenters mostly retain their faculties of reason and powers of persuasion. You never hear these lengthy arguments in mainstream media, where everything reduces to pithy sound bites to be taken out of context. So continue arguing your positions, because as read each perspective I am forced to contemplate what I think and why and maybe even subtly upgrade my own limiting beliefs.
I should not have commented. The default position of most people who are pro-war is to verbally abuse and attack any others who state it is not only directly destructive of human lives, it is also destructive of non-military economic and social activity.
What's funny about that? Half my family died in the Holocaust, 3 million in SE Asia, and they are suffering in conflicts around the world right now. Ha Ha Ha!!!!! Hilarious!!!!! Go play Call of Duty.
It's a painfully naïve take that has no basis in reality. It's such a bad take I almost wonder if you're literate. Look at the world. Do you notice how hegemonic the United States is? Do you like that state of affairs? Do you enjoy living in the wealthiest and most powerful civilization ever to exist, the land of perpetual peace? Do you enjoy making little "COEXIST" posts on your $1200 smartphone while in your luxury vehicle that drives itself? I sure do!
You know how it was built? Victory in wars. Wars that took place in other countries and largely killed other people. Something like 25 million Soviet citizens died in WW2, while only about 400,000 Americans died. At the end of the war, the United States accounted for a full HALF of the world's economy, with something like a 2,000 ship navy that was as large as the next ten or so combined. Most of those navies were floating American hardware too. The enemies of the United States and of peace lay shattered, physically, morally, militarily, and economically, at its feet. Even the Soviets, the other victor of WW2, were hardly more than a speed bump at the time (albeit one with an absurdly large army).
THAT is victory, such a thoroughgoing and complete victory it has no parallel in world history, except maybe the Third Punic War. And on that basis the United States built its global hegemony, and established an unbeatable edge that would lead to another absurdly complete victory in the Cold War. It bound the states of the world, even the great old empires like the UK and France, to itself as clients.
Wars cost lives and property, and inflict damage in countless other ways as well. I'm sorry for your own losses, and I'm sorry in a normal way for the losses others have sustained. But I'm not so ridiculous as to suggest there's no difference between victory and defeat, or that victory is bad. And even if you were right, which you absolutely are not, the difference between victory and defeat is enormous.
The United States of America wins wars, and its citizens reap the benefit. They benefit economically and in security from a world that is subservient to the United States, and where those who would threaten its security are either quiet or are crushed. It wins wars because of geography, and because of policy. And it's going to keep winning wars because it is still unbelievably far ahead of the rest of the world. And even the supposedly most potent adversaries of the United States, such as China, don't seem to have the stomach for long-term confrontation.
Give thanks every day, as I do, that your ancestors were wise enough to come here. Me personally, I live in California. Here, there has never been a war. Literally not even one time (indigenous conflicts excepted). Do you know how much compound interest accrues from that kind of perpetual peace? You do. Just look around. Why is this the case? Because we made it so.
Meanwhile, the benighted denizens of the old world seethe every day that they or their ancestors haven't migrated here while the artillery rumbles in the background and their children are conscripted to fight in trenches like it's 1916.
I don't hear any artillery. Do you?
Point is, you may not want war, but the alternative might be worse. For instance, would the US staying out of WWII have prevented the Holocaust, or would it have been worse?
This does seem like the direction we're headed. It will be good to decouple what is too tightly coupled now both to on-shoring and friend-shoring so we can't be held hostage to not being able to manufacture. Also learning curves happen in manufacturing.
We should not let finance screw the world again like they did by forcing the off-shoring and gutting of US Manufacturing. Great line " I predict, will end up being the “dumb money” that swoops in to give some Chinese investors a timely bailout from their mistakes in the 2010s" its ok if its their money but unfortunately its really our money from retirement funds, etc.
There should be no "finance industry" its just accounting that has been hijacked to grift the world.
Okay, you're correct that the most likely path forward is a Cold War scenario, but it's worth also thinking about what a scenario might look like in which we avoid that.
I don't have a clear sense, but it would require, on all sides, that it will involve negotiating a shifting relationship in public, as China exercises more global power, and that won't be easy.
Yeah basically I don't see any realistic path now that avoids it -- certainly nothing that the U.S. can do unilaterally. My hope is that Cold War 2 is much shorter and less destructive than its predecessor.
I mean, Cold War 1 was not only less destructive than the 2 World Wars but a great era of world peace and prosperity compared to almost all of human history before. People have forgotten/don’t realize just how violent and desperate life on earth use to be.
Good stuff, Noah, as always. The balloon was a provocation for sure. They are testing things in the new environment. China is still smarting from the Hong Kong and Covid backlash in the rest of the world. Ukraine is also giving them food for thought. If their proxy (Russia) is defeated, China is less likely to risk it over Taiwan and may seek accommodation. If, however, Ukraine (US proxy of sorts) falters, China will b emboldened to escalate cold war 2, thinking that Russia's nuclear arsenal is strengthening their hand.
What better way to bolster PacRim countries than moving U.S. business investments into South Korea, Vietnam, Japan, Malaysia, etc.? Paulson is old school. He should know by now a desperate reach for yield most often ends badly. Who could forget Paulson was vomiting into his office wastebasket at the outset of the Financial Crisis? His time has passed. He should stick to his pastime: bird watching.
Why didn’t the U.S. shoot down the balloon over land so it could examine the payload? But what do I know?
The payload sustains less damage on water entry than it would falling on land. And from 60,000 ft the radius of fall is so large that it's hard to find any place over land where you would have essentially no risk of danger to populated places. It's virtually certain that the entire payload will be recovered. I expect to open my copy of Aviation Week soon and see a photo of the whole array spread out in a hanger at Langley AFB. Not that there will be any surprises.
Evidently, even if you fire a ton of bullets in to a weather balloon, it deflates so slowly that it takes 6 days to touch down.
The United States has spent something like $1 trillion on the F-22 program since the late 90s. It appears that this incident was the platform's first air-to-air kill. I think someone wanted to start getting their money's worth. I agree.
You bring up Southeast Asian nations balancing against China, and while that may be somewhat true on the military side, it's also true that ASEAN does not want to choose between the US and China and has explicitly rejected the idea of being a "pawn in a new Cold War." So for many of China's neighbors, it's not that they're becoming totally anti-China but that they want balance. The interdependence story you touched on is key.
https://www.rfa.org/english/news/china/indonesia-asean-09262022151328.html
Of course. Southeast Asian countries look to the U.S. as a balancing force. China's aggressive actions in the SCS end up increasing U.S. involvement in the region -- the opposite of what China would probably prefer.
This was written about by Lee Kuan Yew in Singapore many years ago.
Right yeah that makes sense, self-fulfilling prophecy and all that haha. Thanks for responding!
Some one either high up in the CIA or in the Joint Chiefs of Staff, once said something to the effect that, the best brake the U.S. got in the Cold War was that Lee Kuan Yew, wound up in Singapore and not in China.
The neutral position of SEA countries is a pragmatic position. China is a regional power and the US has heavily invested in military assets far from US territory in an attempt to secure US primacy. No one here wants US primacy over regional stability. No one wants trade to stop for the benefit of a domestic political imperative on some continent thousands of miles away. On top of that, US attempts to undermine regional infrastructure (such as the Asia Investment Bank) are seen as clumsy geopolitics at best, and hypocritical at worst given the influence the US had at Breton Woods. But the real issue: if the US flies spy planes over China, then they should stop whinging about the reverse happening. But I guess it suits US rhetoric to have a great enemy and this specific incident allowed a lot of chest beating.
Also, countries between two big powers can really benefit if stays cold war.
Any US company with a supply chain through China should have a team dedicated to getting out, and they should be working 6 days a week right now. Why leave? There is of course the historical risk of IP theft that should drive this, but let's be honest - it has already happened. There is also the risk that these companies will be in a lurch if/when the shooting starts over Taiwan. Everything will be as good as lost once that happens, so why should a company sit back and wait? More important, though, is the risk posed by meddling, gamesmanship and political crackdowns in a new cold war - would you want your company's supply chain to be a bargaining chip in Cold War 2? Your factories shut down and tacitly held ransom so China can extract a policy outcome on some unrelated matter? Because that is the world we are moving towards. Companies should leave now. And the US govt should encourage them to move to friendly countries elsewhere in SE Asia, as well as Africa (which will be a key area of competition btwn the US and China in Cold War 2).
This is not tomorrow's issue. This is all happening in real time. Any company not already taking precautions is too late.
Investing in China seems incredibly risky. Corruption, manipulated metrics, and a capricious government that could decide to kneecap any company or industry at any time. Makes me wonder if American investment firms are so used to the protections of American law they can't see the obvious red flags waving in front of their faces.
This cold war is different. Expect fewer open military confrontations, more backstage coalition diplomacy.
China isn't as militaristic or ideological as the USSR. Unlike the Soviets, China hasn't relied on dramatic invasions or sponsored coups. Instead, we see "frog-boiling": escalating military and economic pressure.
Against China's frog-boiling, America's aim will be as much "counter pressure" and "deny leverage" as "deter conquest."
(Although that diplomacy will still be ultimately backed by traditional arms shipments, military treaties, and trade preferences.)
The United States hasn't been very good at diplomacy in the past. On the other hand, China's been even worse. No country wants their peace or prosperity to be at the mercy of Xi Jinping's next mood swing. Overall, America's odds are good.
I must say, the US has perpetrated more than its fair share of invasions and sponsored coups. Let’s not drink the cool-aid that keeps being fed to us.
Interestingly, for Cold War 2, it does not seem like China has a roster of committed allies. Not that Soviets did either, but I think that China is facing some difficult decisions regarding its future. That could be why certain factions are trying to dial back the invective/“wolf-warrior” diplomacy.
China shares borders with very powerful countries, I think it is starting to realize that their neighbors can only be pushed so far.
Thanks. Interesting analysis and relevant facts. It seems odd to use a balloon in such a way. Not many people realize that satellites have a resolution limited by physics and optics: it doesn't matter how good your tech gets, you aren't going to be able to resolve objects smaller than about the size of a truck from a satellite. A balloon can do better. But it's just so obvious compared to something like just fixing cameras to the bottom of what looks like a commercial cargo flight, it seems hard to understand why any country would do things that way.
Thanks! Clearly I'm wrong then.
I think there are a few possibilities. One is that I'm remembering the conversation wrong. It was many years since I worked with the output of satellite imagery firms and so my memory of what's possible is probably just garbled.
Another is that the person I was talking to was confused/wrong about the physics of it and I remember correctly.
The final possibility is that the definition of "satellite" is somehow different; perhaps us military satellites fly a lot lower than people previously thought it was possible or sensible to put them.
I suspect the right explanation is the first one and I just misremembered what I was told. It was years ago now.
Thank you. This makes sense.
Mmmm, foreign financial investments in China. Just wait until the investors discover that the US is not the only jurisdiction that can impose sovereign risk on foreign financial investors …
This makes for fascinating if disconcerting reading:
https://www.nytimes.com/2023/02/04/us/politics/chinese-spy-balloon-shot-down.html
The parallel I immediately thought of wasn't the Cold War, but 1930s Japan, when civil authority was steadily being encroached on by the military. Is that the only plausible explanation for the spy balloon situation? No, but in my view it's a worryingly plausible one.
Why is that "disingenuous"? It's obviously true. You think FDI fell as a percentage of Chinese GDP in the 2010s due to something that happened way back in the 90s???
In the Chinese govt?
Won the first one. Win the next one. Three cheers for the red, white, and blue.
Some people have a certain mindset to the point that making money is the most important activity a person can be involved with. It is quite possible China's leaders are banking on this short-sighted view. All are to be forgiven if there is an opportunity to make money.
China lied about Hong Kong, repressed democracy in brutal ways, and incarcerated minorities. This is not even considering its threats to take Taiwan back by force.
I think any money invested in China will disappear when it suits the government to do so. They have told us what they intend to do, and I see no reason to doubt what they say.