Goldtent TA Paradise

A Grand Game Theory take (China and Taiwan focus)

1. pedro_deleon says:

   August 5, 2025 - 9:47 pm at 9:47 pm

   From the start I have been highlighting that the current admin was dealt a poor hand and is attempting to deal with all its problems simultaneously via macro grand strategy.

   Let’s review.

   Problem 1. Credible intelligence that China was contemplating invading Taiwan within the span of Trump 2.0’s admin

   Problem 2. A fiscal debt burden that was mostly funded via short-dated paper and a deficit that was artificially boosting an otherwise weak economy

   Problem 3. Recent memory of runaway inflation that would prevent bond investors from accepting ZIRP-era rates

   Problem 4. Nominal GDP growth that was over inflated via the injection of millions of illegals which entailed a material slowdown the moment you enacted a halt/deportation policy

   Problem 5. A major cohort of the working population (boomers) reaching the peak retirement rate. And millennials have no interest in working many of those type of trades jobs.

   Problem 6. This cohort is wayyyyy over-levered towards equities vs where they normally would be this close to retirement, but they have been able to defer liquidating stocks because they are collecting a juicy 4.5% on their money market funds. That changes if you lower rates.

   Problem 7. China has established strategic chokeholds on supply of everything the U.S. would need to defend Taiwan.

   Problem 8. If the U.S. fails to defend Taiwan not only does it lose semis it also loses its status as hegemon with countries like JP/SK immediately shifting to a posture of appeasement. The U.S. would effectively be demoted to a second-string player with the fastest growing economic bloc on the planet.

   Now think about what the least bad options are to address all of the above?

   Well first you want to outgrow your fiscal debt … but you can’t because unless you have miraculous levels of productivity growth you basically are guaranteed inflation and bond holders would revolt…

   ….unless… like we’ve been over countless times, you take the battery out of the smoke alarm by manipulating treasury auctions using the funds you forced allies to commit.

   You heard Trump today: “I can use it for whatever I want”

   Good luck trying to short treasuries lol

   They will carry you out in a body bag.

   Ok so what else?

   Well now you [run?] a virtually un constrained budget and you’ve de regulated.

   But that’s not enough.

   Now comes the hard part. You need to mobilize the world ex China to rebuild Chinese capex within a war time timeframe. [???? say what?]

   Anything less and you are doomed.

   So how do you do that?

   You wrap this under the guise of A) retaining access to US consumer B) fund everything and anything C) find a way to mobilize a bloc that provides preferential treatment to for economies that re-orient themselves to compete with China instead of acting as middle men for China.

   We’ve discussed the game theory needed to accomplish this and how that ties in to leveraging things like access to swap lines and the U.S. defense umbrella so I won’t re-hash it.

   But so far it seems like there is some buy-in.

   If you don’t think there is, then I challenge you to explain terms of deals from EU/JP for example.

   I’m laying this out not because I have certainty … only a hypothesis that seems to be more directionally right by the day.

   And if I’m right then vol only increases from here

   https://x.com/TMTLongShort/status/1952906473450647774