Preparing For The Escalation That’s Likely To Come

Preparing For The Escalation That’s Likely To Come

Notes From the Field By James Hickman (Simon Black)   April 17, 2025

There’s rumors floating around alleging that top secret plans from the Chinese Communist Party have been leaked, indicating that China’s President Xi Jinping views this conflict with the US as the opening to a complete and total war.

Personally I’m skeptical if these leaked documents exist, and if they are legitimate. I don't think anyone has any way to know.

But I will reiterate my view that, while I don’t believe war is imminent or certain, it’s clear that the US and China are closer to conflict now than they have been since at least the 1960s when China participated in the Vietnam War.

It’s not hard to understand why. The two largest economic powers in the world are deliberately trying to hurt one another. And history is full of examples of economic wars which escalate into much larger conflict.

We can certainly hope that cooler heads prevail. But as we used to say in the military, hope is not a course of action... and it’s imperative to acknowledge that this major risk exists.

How might things escalate?

First on the list is the very real and immediate risk of a cyberattack from China.

In fact that’s already happening.

Remember SolarWinds— the massive cyberattack in 2020 where state-sponsored foreign hackers compromised a widely used IT management platform to infiltrate US government agencies and major corporations?

That single attack gave the CCP access to countless US networks.

More recently, a top Chinese official admitted Beijing’s responsibility for the Volt Typhoon cyberattacks targeting US infrastructure, in a closed-door December 2024 meeting.

In 2015, Chinese hackers breached the US Office of Personnel Management and stole sensitive data on over 22 million federal employees, including security clearance files and fingerprints. They were inside the systems for months before they were detected.

And just this week, major US banks including JPMorgan raised the alarm after discovering the email system of the Office of the Comptroller of the Currency (OCC)— a US banking regulator— had been hacked, potentially to steal credentials that gain further access to systems and information.

It doesn’t really matter which of these can be directly linked to the CCP. Russian hackers, North Korean infiltrators, Chinese non-state entities— they are all in it together.

And the fact that China seems to leave everything intact after their attacks, without damaging or disrupting systems, is actually the scariest part.

We’re talking sleeper viruses. Malware that’s already inside the system.

And the target? Some of the most critical infrastructure in the country. The power grid. Water systems. Financial institutions. These aren’t exactly hardened digital fortresses. In fact, many of these systems are laughably insecure.

The US energy sector in particular still operates on shockingly low-tech infrastructure with outdated code. Same story with large parts of our financial system.

I’ve written before about how SWIFT—the nerve center of global financial transfers—was recently running outdated Windows (version 7!!) operating systems.

Bottom line, Chinese hackers and malware are embedded in vulnerable US systems. They have access. They have credentials. Let’s not be naive about this.

Imagine waking up one morning and your bank app doesn’t load. Your credit card doesn’t work. You can’t send a wire, can’t make payroll, can’t even pay your rent. Maybe you don’t even have electricity, or clean running water.

A Plan B for this scenario has never been more important.

The first step is easy— buy a secure home safe, and keep enough cash on hand to pay for a month or two of necessities.

Add some precious metals which allow you to maintain physical custody of some savings, with no third party in between you and your money. Have gold and silver coins and bars in a variety of weights so you could spend them in an emergency.

Holding some cryptocurrency isn’t a bad idea either— offline, on a hardware wallet that can also go in the safe. Again, this takes some of your savings out of the vulnerable financial system, and allows you to maintain physical custody of your funds.

Here’s another key point aside from money: China manufactures over 40% of the world's active pharmaceutical ingredients— the chemical compounds which make up drugs— and up to 95% of particular compounds, such as crucial ingredients in the antibiotic penicillin.

So even if the final product isn't labeled "Made in China," the underlying ingredients may still originate from Chinese manufacturers.

That’s a significant role in the global pharma supply chain that could cause massive disruptions if they chose to weaponize it. 

So if you take regular medication, make sure to keep extra on hand.

Having a power generator is another good backup plan, whether it runs on propane or gasoline, or solar panels and batteries. The same goes for extra water storage.

Again, I’m not saying that there’s some imminent danger. But we shouldn’t ignore the risk. And the point is that there’s no downside to taking sensible precautions.

That’s the basic premise of a Plan B: identify the biggest threats against your safety and prosperity, and take reasonable steps now that give you confidence in the face of uncertainty.

These are all fairly easy steps to take that give us options to respond to whatever happens, since none of us know exactly how any of this will play out.

Soon, we’ll discuss additional Plan B strategies that give you even more dexterity in the event of prolonged system disruptions, and equally disruptive potential emergency responses from the US government.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/preparing-for-the-escalation-thats-likely-to-come-152552/?inf_contact_key=6f0cbd6941df8d38cfa6f0a90e96eddd0c973b8936282bcfa17ad90af1aa6cc5

Some Of This Is Completely Delusional. Some Of It May Actually Be Pretty Smart

Some Of This Is Completely Delusional. Some Of It May Actually Be Pretty Smart

Notes From the Field By James Hickman (Simon Black)  April 14, 2025

It’s been nearly two weeks of whipsaw, roller coaster tariff moves and countermoves… all of which threatens to upend not only economic stability, but even the global financial system as we know it.

 I can’t stress this enough: what we’re witnessing right now will almost certainly go down as one of the most monumental events in US economic history. And the consequences will have far-reaching implications far beyond a trade war or potential recession.

 It’s fair to say that the approach to tariffs so far has been erratic… almost bipolar. And the instability has already caused tremendous damage to consumer, business, and investor confidence.

 But last week we saw a glimmer of something that might actually look like a real strategy.

 Stephen Miran is the Chairman of the Council of Economic Advisors, i.e. one of the most important people in the administration right now. And in a speech last week to the Hudson Institute, he very succinctly laid out what looks like a plan.

 Some of it is completely delusional. But some of it is actually pretty smart and suggests there may be a bigger picture here. There’s still a LOT of risk about whether or not it will work, and frankly some terrible assumptions. But it’s worth understanding.

 First, the delusional--

 Miran explained in his speech that he believes the US generously provides the rest of the world with vital “public goods” which are very “costly” to America.

 And one of those “costly” public goods, Miran states, is providing the world with US dollars and Treasury Securities. And by “Treasury Securities”, he means the US national debt.

 This part is outright delusional. In Miran’s view, it’s almost as if America is doing the world a favor by racking up a $36 trillion debt. Gee aren’t we great guys for borrowing your money and running multi-trillion-dollar deficits each year?!?

Miran claims that US Treasury securities are “costly to provide”.  Uh…

 Seriously? On the contrary, it’s an exorbitant privilege.

Having the reserve currency is the only reason why the US government gets away with such a massive debt and enormous budget deficits each year. It’s the only reason why there can be so much political chaos over and over again… yet the rest of the world still buys US Treasury securities.

 These are obvious benefits. Yet Miran complains that having the world’s reserve currency is some major burden to America that the rest of the world should have to pay for...

... except that they already do! The rest of the world literally pays for the reserve currency when they buy US government bonds! Duh. Also, when they import US inflation, or when they look the other way and pretend to not notice the $36 trillion national debt.

 Yet Miran weirdly believes that foreign nations do not ‘pay’ for their dollars (do they steal them?). And he outlines several ways in which the world could start paying for this vital public good.

 One of those ways-- and I still can’t believe he said this out loud-- is that foreign countries “could simply write checks to Treasury that help us finance global public goods.”

 Wow. They think Brazil should just send money to the US government each year for the privilege of buying Treasury bonds. I’m sure they would pay up with joy and gratitude.

 So, this is some of the stuff that is completely delusional.

 But Miran went on to describe what might be the end goal: isolating (and hurting) China while bringing back some high-tech manufacturing jobs to the US.

 In fairness, not all manufacturing jobs are making socks and underwear. China does do a lot of that stuff-- in fact they still produce 70% of the world’s apparel.

 But China also produces mid-range goods (like automobiles, pharmaceuticals) as well as some very high-end manufactured goods (like high-tech industrial machinery).

 In short, China produces across the entire value chain. And to hear Miran describe it, the goal is to ‘steal’ the low-end manufacturing (i.e. apparel, cheap trinkets, and other low margin products) from China and redistribute all of that production to other countries.

 The idea is to take ~$100+ billion of revenue from Chinese factories and sprinkle those orders around Vietnam, Cambodia, Malaysia, Thailand, etc. $15 billion here, $20 billion there.

 Because those countries are so much smaller, an extra ~$20 billion in exports will be a major boom for their economies, making them much more prosperous and dependent on the US.

 They would obviously agree to zero tariffs and trade barriers with the US, and with their newfound prosperity, buy more US-manufactured goods.

 So, in summary--

1) Destroy China’s low-end production/export sector by shifting US imports to other countries

2) Those countries agree to eliminate trade barriers

3) Their economies prosper, and they import more from the US

4) America reshores mid-range and high-end manufacturing

5) The administration cuts large numbers of government workers, freeing up labor to staff those new manufacturing jobs.

6) More jobs, more trade, more tax revenue… primarily at China’s expense.

 I’m reading between the lines a bit, but this seems to be the strategy that Miran outlines.

 It’s a bit devious-- an attempt to take out their #1 adversary while America still has the ability to do so.

Could it work? Well, that’s far from certain.

Again, as we wrote last week, it appears that China is dumping US Treasury bonds and buying the euro in an attempt to cozy up to Europe. So, it seems the Chinese are trying to make their own deal and isolate the United States.

 This is why we’re no longer witnessing a trade war. This is full-blown economic warfare… and we’ll be lucky if it remains just that.

 The world’s two largest economic superpowers are now engaged in deliberate efforts to hurt one another… which means, again, this will likely go down as one of the most important events in global economic history.

To your freedom, James Hickman  Co-Founder, Schiff Sovereign LLC

 LINK

What Matters More Than the Stock Market

What Matters More Than the Stock Market

Notes From the Field By James Hickman (Simon Black)  April 12, 2025

Yesterday when I was talking to my friend and business partner Peter Schiff, he made it clear: China is trying to drive a wedge between the US and Europe by dumping US bonds, and buying euros. (Gold too, for that matter!)

This would account for why the dollar has been sinking against the euro… and why Treasury yields have surged.

I sat down to record a podcast about this because, frankly, it’s the most important thing happening right now. This topic is critical to understand—not just what’s happening, but why this is no longer a trade war… it's an economic war.

Think about it: the world’s two largest and most dominant superpowers are directly threatening each other’s economic interests. And that could spiral out of control quickly if cooler heads don’t soon prevail.

You can watch or listen to the podcast here.

If you missed it this week, we also wrote about:

Escalation gets real: No more sex with Chinese women

Even the US government is ordering embassy employees in China to discontinue romantic relationships. If she's into you, assume she's a spy. 

Read here → 

OK- it's almost definitely China who's dumping Treasury bonds

If you thought this was just a trade war, think again—China may have just fired the first real shot in an all-out economic war.

Read here → 

It's like the dumbest AOC logic applied to global trade

Imagine crashing the global economy because someone forgot how to divide—welcome to U.S. trade policy in 2025.

Read here →

 Recent Twitter Highlights:

YouTube Shorts  https://www.youtube.com/watch?v=EfwpDLnzjlg

The Hidden Risk Behind Tariffs: What Nobody's Talking About

James Hickman  Co-Founder, Schiff Sovereign LLC

OK— It’s Almost Definitely China Who’s Dumping Treasury Bonds

OK— It’s Almost Definitely China Who’s Dumping Treasury Bonds

Notes From the Field By James Hickman (Simon Black) April 10, 2025

Yesterday I wrote to you that something very fishy was going on in the bond market. And not just fishy— potentially destructive for the federal government and US economy.

For the past several days, US government bond yields have been surging at a rate not seen since at least 2008. And in some cases not since the early 1980s.

And this is a very, very big deal.

 Higher bond yields not only mean that consumer interest rates (like mortgages) become more expensive. But they also dramatically increase the government’s borrowing costs.

 Bear in mind, the US government is already spending $1.1 trillion per year, just to pay interest on its $36 trillion national debt. That’s 22% of all US tax revenue, i.e. twenty-two cents out of every tax dollar collected go to pay interest on the national debt.

 (Plus another 47c out of every tax dollar go to Social Security and Medicare. And that’s before you get to other mandatory entitlements like Medicaid, food stamps, and more...)

 That annual interest payment is rising quickly; the government has roughly $10 trillion worth of debt this year to either finance, or refinance, which could easily result in hundreds of billions of dollars in additional interest expense each year.

 So higher interest rates are a very big deal for a debt junkie like Uncle Sam.

 That’s why it’s so alarming that bond yields are rising so quickly.

There’s realistically only a few ways this could happen.

 One way that yields might have risen so quickly, which I suggested yesterday, is that big Wall Street firms could have been shorting the Treasury market, causing bond yields to rise.

 Possible, yes. But not super likely.

 Many of those big Wall Street investors might have feared retaliation by the Trump administration. Or that, at a minimum, the President would single them out in social media, creating a lot of complications for their personal lives and businesses.

 But I think we can safely take this possibility off the table; given yesterday’s furious stock rally in which markets surged, any Wall Street firm shorting the bond market would have closed out its short positions and piled back into the stock market.

In other words, the trend of rising bond yields would have ended yesterday afternoon.

But that didn’t happen. Bond yields continued rising and are up again today.

 The US government’s 30-year bond has been especially hard-hit and is up another another few basis points today, notching an astonishing 50-basis point (0.5%) increase in just a few days.

 So with Wall Street busy trading the stock market, that only leaves a handful of possibilities.

It’s also unlikely that big banks (JP Morgan, Citi, etc.) would have dumped their US government bonds, because they have regulatory constraints in terms of what types of assets they are allowed to hold.

 Plus, any major selling of bank-owned Treasury bonds would have resulted in significant increases to bank reserves on the Fed’s balance sheet— and that doesn’t seem to have happened.

 So at this point the most likely culprit is some disgruntled foreign country, whose government or central bank wanted to lash out and punish the US government over the tariffs.

 Two or three days ago that could have been anyone. France. Germany. Japan. Etc.

 But after yesterday’s announcement which paused tariffs for almost the entire planet, there’s only one suspect: China.

After the tariff pause, there wouldn’t be any point for the European Central Bank or German government to sell its Treasury bonds. Why risk Donald Trump’s wrath when a deal is at hand?

China, on the other hand, is stuck with a 100%+ tariff. So they definitely still have an ax to grind.

 The concept of “face” (mianzi) runs very deeply in China; this is the idea that every individual, business, and even the government must uphold a reputation for strength. It would be culturally unthinkable for the Chinese government to accept tariffs without responding aggressively.

Dumping a portion of their vast US Treasury holdings is an easy way to send a message to Washington: “we can hurt you too.”

 If I’m right, it means this trade dispute has now graduated to full-blown economic warfare. And we could see some pretty rapid escalation.

For example, if China keeps dumping its Treasury bonds (and hence raising US interest rates), I wouldn’t be surprised to see the US administration sanction the CCP and Chinese central bank, essentially freezing the bonds that they own and preventing any further sales.

 China could escalate with export controls over vital rare earth minerals, which are essential in the electronics industry.

 Then there’s the possibility that each government could expropriate foreign-owned assets, i.e. US business operations in China, or Chinese investments in the US.

 Then would come the cyberattacks, and more.

 We can hope for cooler heads to prevail. But history is full of examples of how economic warfare can very quickly spiral out of control and escalate into much larger conflicts. And, at the moment, that seems to be the direction that this is heading.

 
To your freedom, James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/ok-its-almost-definitely-china-whos-dumping-treasury-bonds-152480/?inf_contact_key=6086b62d58e663d5fb93e186ed5d020f6bf72b7be6507ffa57af3236798ca349

Is China Dumping US Government Bonds?

Is China Dumping US Government Bonds?

Notes From the Field By James Hickman (Simon Black)  April 9, 2025

You probably saw the headline this morning that China is retaliating against US tariffs with an 84% tariff of its own.   This trade war is obviously far from over… which probably means that financial markets are in for a lot more volatility.   Most people focus on the stock market. And that has obviously been a wild ride.   But what’s happening in the bond market right now is actually a much bigger deal.

 Remember that US government bonds have been considered a “safe haven” asset for decades. And that was the case, very briefly, late last week. Investors dumped stocks and then parked all that cash in the bond market.

As a result, demand for bonds surged, and yields plummeted to as low as 3.8%.

 But that sentiment has very, very suddenly reversed. And in a matter of days, US government bond yields have spiked.

 The 30-year Treasury yield, for example, is normally quite stable and moves very slowly. But its very sudden surge over the past three days has been its quickest increase in more than 40 years. The 10-year Treasury yield has also surged at its fastest clip since the 2008 financial crisis.

 This sudden rise in Treasury yields-- what’s supposed to be a very safe and boring asset class-- is a very big deal.

 For consumers, it almost certainly means higher interest rates; many consumer loans, including 30-year mortgages, are based on US government bond yields.

 So higher yields means that it will be more expensive to borrow.

 And that’s especially true for the federal government. Remember, the Treasury Department has to refinance more than $8 trillion worth of US government bonds just between now and the end of the year.

 Plus, on top of that $8 trillion, they’ll probably issue at least another $2 trillion in new debt just to finance the deficit.

 So higher interest rates are an absolute killer and will cost the government hundreds of billions of dollars more per year, just to pay interest on the national debt.

 Why is this happening, i.e. why are yields increasing so quickly?

 Well, about the only thing that can cause yields to rise so quickly is a major supply and demand imbalance, i.e. too many investors are selling their bonds, and not enough investors are willing to buy them.

 And this could easily result from someone (or multiple parties) deliberately dumping their bonds and flooding the market.

Who might do such a thing?

 Well, perhaps some of the big Wall Street firms-- many of which have already expressed anger and dissatisfaction over the tariff policy. And some of them might simply not want to own US government bonds anymore.

 Remember, it wasn’t that long ago (September 2022) that then-British Prime Minister Liz Truss unveiled her economic plan. It was a pro-business, pro-market plan that involved tax cuts and more.

 But bond investors were concerned that Ms. Truss’s plan would result in a significant deficit. So they dumped their British government bonds (known as gilts). Bond yields skyrocketed, and the British pound went into freefall.

 It’s possible the same ‘bond vigilante’ mentality might be at work here.

 It’s also possible that some disgruntled foreign country could be divorcing themselves from the US dollar. Maybe it’s a supposed ally, like France. But it could just as easily be China (which owns more than $1 trillion of US Treasury securities).

 If true, the havoc that China can wreak by dumping their Treasury bonds and causing an interest rate spike in the US will substantially exceed any economic damage from their 84% retaliatory tariff.

 Perhaps it’s all of the above-- multiple countries AND bond vigilantes together.

 Who knows. But if this trend continues and US government bond yields keep rising, that pressure could be enough to get the President to back down.

 One thing’s for sure: gold is going higher. No surprise there; after an initial sell-off in which investors sold everything, gold has been surging back to its record highs.

 Most likely this is because foreign governments and central banks have resumed their buying in an effort to distance themselves from the US dollar.

 The interesting part about this is that gold companies are now also going higher.

 We have been talking about this for months. And months. We said that gold is at an all-time high, yet gold miners and related businesses were dirt cheap. We also said that bizarre anomaly won’t last.

 Well, it appears that investors have finally woken up to the new reality, and gold companies are now finally moving much higher.

 No matter what happens from here, it’s becoming more and more clear that there will definitely be a major reset in the global financial system (and gold may be a part of that).

 In fairness, it’s also worth pointing out that there may be a grand strategy here by the Trump administration. We’ll discuss this more soon but suffice it to say they’re obviously making a huge gamble with the future of the US economy.

 
To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/is-china-dumping-us-government-bonds-152455/?inf_contact_key=3da8ba2b61deaf22190dff286cd8b2f25ed554ec5cb65b266886a8a7a9bbed85