In his History of the Peloponnesian War, ancient Greek historian Thucydides told us the tale of a dominant regional power (Sparta) that felt threatened by the rise of a competing power (Athens).
Sparta felt so threatened, in fact, that all the moves they made to keep the Athenian rise in check eventually escalated the power struggle into an all out war.
Modern political scientists call this the Thucydides Trap.
The idea is that when, out of fear, a dominant power takes certain steps to keep its competitor at bay, these actions ultimately lead to war between the two.
There’s a lot of concern that the US and China will fall into the Thucydides Trap.
This is certainly a valid concern. Both are nuclear superpowers with some of the largest militaries in the world.
But in 2016, modern warfare is not about tanks and aircraft carriers anymore. Modern warfare is insurgent, cyber, and financial.
In fact, if you look at the state of the financial system and the tactical brinksmanship between the US and China, it’s clear that the two are already in a Thucydides Trap.
This power struggle is leading to financial warfare of nuclear proportions; and as with any war, there will be a lot of casualties.
Just over the last several months we’ve seen many exchanges of fire between the two nations.
- The US government claimed legal jurisdiction over the Bank of China, one of the largest banks on the mainland.
- The Chinese launched the Asian Infrastructure Investment Bank, a supernational bank designed to compete with the Western-dominated IMF.
- The US blacklisted one of China’s largest telecom companies, forbidding any US company from doing business with China’s ZTE.
- China has been rapidly expanding its global payment network, UnionPay to become a direct competitor with Western systems like Maestro, Visa, and Mastercard.
And don’t forget, China could unleash its nuclear option at any time– dumping its vast trillion+ pool of US government debt, which would potentially cause a major crisis for the US dollar.
It’s a bit sad, because almost EVERY action of the US government only escalates the conflict further… and the Chinese eagerly follow suit.
This is how World War III starts. And it will be financial.
Listen in to today’s podcast and learn more about how this conflict will unfold… and how to not to end up as collateral damage.
(click image for link to podcast)