China vs US: the distraction of noise

plus: a tokenized securities warning, oil, tariffs, BTC all-time high, and more

“An adventure is only an inconvenience rightly considered. An inconvenience is only an adventure wrongly considered.” – G. K. Chesterton ||

Hi all! I hope the heat isn’t too bad where you are.

We are now closer to the year 2050 than we are to the year 2000. That shouldn’t surprise us since it’s pure maths, but the fact that it’s disconcerting shows how far away the future always seems, and how recent the past.

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IN THIS NEWSLETTER:

• China vs US: the distraction of noise

• Tokenized securities: an SEC warning

• Macro-Crypto Bits: more tariffs, BTC all-time high, OPEC

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WHAT I’M WATCHING:

China vs US: the distraction of noise

A recent post by Doomberg caught my attention as it falls into a bucket I often bring up here: the underlying shifts in global influence that are often smothered by surface noise about rates and tariffs and bluster.

The article lays out how China’s dominance of global energy and steel production is feeding its military superiority. My extended take is that there’s nothing the US or any other power can do about this.

An instinctive reaction honed by years of western education is that of course the US military is superior in numbers and technical capability. That was certainly true once, and probably still holds true in certain specializations and equipment classifications; but it’s no longer a safe assumption, and in some areas an incorrect one.

Beyond the state-funded emphasis on scientific exploration that has produced breakthroughs such as cyborg bees, satellite-to-satellite refuelling and exploration of the far side of the moon, there are the raw numbers. Reputable reports put the number of active-duty personnel at just over 2 million vs America’s 1.3 million. It also has the largest navy in the world, according to the Department of Defense, and dominates drone production. And this is despite the US outspending China by a factor of more than 3x.

All of that should be enough to at least dent US confidence, but an even greater concern is the lack of anything on the horizon to stop the current trend.

Two key components of any military expansion are energy and steel. China dominates in both.

While the US has struggled to expand its electricity production, China has streaked ahead, largely because of its lack of political limitations as to energy investment. Senator Ted Cruz recently pointed to long-running Chinese-funded anti-fossil fuel campaigns in the US, which have struck a political chord and stymied the development of inexpensive sources of power while making the US dependent on China’s clean energy technology. Energy executives with whom the Doomberg team regularly speaks confirm this but have little incentive to comment on it publicly.

Just how far ahead is China in terms of electricity production?

(chart via Doomberg)

And how did it get there? Unlike the US, it doesn’t have much in the way of oil and gas deposits. But it does have a lot of coal – China’s coal consumption is roughly 15% of total global energy supply.

Ample energy supports ample production of steel. China’s annual output is roughly 13x that of the United States.