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China and the Art of War

March 19, 2000

"Qui Desiderat Pacem, Praeparet Bellum" or Let him who desires Peace, prepare for war. So spoke the ancient Roman Flavius Renatus in 200 B.C. About the same time in ancient China, the poet/warrior Sun Tzu was writing a military treatise called "The Art of War." I've been thinking about both of them a lot recently. Not just in the current global context of institutionalized chaos; not just in the current global context of institutional economic anarchy; but, in the context of a war between the United States and China. I believe that the China/United States/Taiwan situation is woven together with the precious metals markets. The political, economic and military situation will quickly find itself expressed in the precious metal markets. Gold is the canary in the Chinese mine shaft. The company line is that political events aren't reflected in the price of gold anymore. Let the Chinese put 800 missiles into Taiwan in one hour and we'll see about that.

While I don't consider myself a China scholar, I have read independently and widely about Asian history. At one time, I even considered getting a degree in Asian studies. I didn't, but I have kept my eyes open over the last few decades. The following thoughts represent my analysis of the current Chinese/Taiwan/United States situation as it might affect the precious metals market. I believe using the Sun Tzu's war precepts will shed some light on the grave danger facing the world. Grave danger isn't too strong. The Chinese have said they intend to reunify with Taiwan by 2007. They have said they intend to use force to do it if they have too. They have said this and I believe it. I also believe that the Chinese would use several unorthodox methods to fight the United States. At least two of them would have immediate impact on the precious metals markets. The first is cyber warfare and the second would be mass dumping of dollars. A coordinated cyber attack on both the NASDAQ and Wall Street would cause a level of economic chaos the stock market bulls can't fathom. If a teenager can shut down Yahoo, then what would happen when the Chinese military made an organized, disciplined attack on America's economic infrastructure? What would happen to the value of the dollar when the Chinese dumped billions of them onto the market? Both of these events would be happening in the opening phases of a Chinese missile attack upon Taiwan; both of these events would be happening to a United States woefully unprepared for any military response: the result should be obvious. Aside from the military and political effects, the main economic one would be a flight to safety by buying up whatever gold and silver were available. In other words, the price of gold and silver would explode. A far fetched scenario or a reasonable one? You be the judge. One thing Y2K taught me was to do my own analysis and not rely on others.

Just as an aside, I went and saw the movie "The Emperor and the Assassin" yesterday. Besides being an excellent movie, the opening credits describe the time this Qin Emperor was living in, around 221 B.C. It goes on to say that China had been reduced from 700 kingdoms to seven during 550 years of civil war. So, when you view China, modern or ancient, you must understand that the Western fetish about time is laughable to them. There is also an opening scene where the Qin Emperor is asked by a retainer if he has forgotten the sacred task of unifying China. The Emperor replies "Never." Then the question is shouted again and the Emperor makes an even louder reply. It is a very powerful scene that impressed upon me the multigeneration time frame of Chinese thought.

The Qin dynasty took nearly 600 hundred years to fulfill what it saw as its sacred obligation to unify China. Why does the United States feel the Chinese passion to unify Taiwan with the mainland is any less intense? Why does the United States feel the modern Chinese are any less determined to fulfill what they regard as a sacred obligation? Is it just another example of American arrogance? Or as I believe, a fundamental disconnect between Western and Eastern thought process'? I want to repeat this again, understand that the mainland Chinese government is perfectly willing to go to war to reclaim Taiwan. Understand that the Chinese government is perfectly willing to vaporize an American Aircraft Carrier Battle Group insolently steaming through the Taiwan Straits. And understand, that in my opinion, the child king would do nothing in retaliation. At which point, the United States would collapse as a world power and the price of gold would explode into outer space. This being the third way the precious metals markets would be impacted, the public humiliation of the United States. The humiliation being either through an old fashioned military defeat or a Chamberlain/Munich style blatant appeasement. I'm inclined to think the Chinese will wait before they attack Taiwan. However, I cannot rule out a more immediate military response. The theory is they will strike while the child king is in power, while the United States is weak and disorganized and doesn't expect an attack.

But, back to Sun Tzu and his insight into modern Chinese attitudes towards both Taiwan and the United States. My blow by blow analysis covers the first four chapters of the book. His first precept is "Military action is important to the nation-it's the ground of death and life, the path of survival and destruction, so it is imperative to examine it." Does the child king, his advisors or most American politicians have any understanding of the military at all? I rest my case.

The second precept is "Therefore measure in terms of five things, use these assessments to make comparisons, and thus find out what the conditions are. The five things are the way, the weather, the terrain, the leadership and the discipline." In Biblical terms, it would be " A king should carefully consider things before he goes to war." Does anyone think the American people or leadership have a clue as to what is going on? The idea is to figure this stuff out before the shooting starts. Advantage China. The Way is defined as " inducing the people to have the same aim as the leadership, so that they will share death and share life, without fear of danger." Does anyone believe the American people are unified? Does anyone think that the child king is viewed as a suitable war leader? Advantage China. Leadership is defined as "a matter of intelligence, trustworthiness, humanness, courage, and sternness." No comment. Advantage China.

Discipline is defined as "organization, chain of command and logistics." The United States military is stretched thin, badly understaffed, equipped and in general suffering serious defects. Advantage China. Sun Tzu goes on to say, "Therefore use the assessments for comparison, to find out what the conditions are. That is to say which political leadership has the Way? Which general has ability?...Whose discipline is effective? Whose troops are the stronger? Whose officers and men are better trained? Whose system of rewards and punishments is clearer? This is how you will know who will win?" Advantage neither. Neither China or the United States leadership has the way. China's manpower and scale neutralize any advantage the United States has. The long distances involved neutralize the United States military air force in particular.

Sun Tzu admonishes that "a military operation involves deception. Even though you are competent, appear to be incompetent. Though effective, appear ineffective." Advantage both China and Russia. The United States is making the same mistake Hitler made when viewing Soviet military performance in 1940's Finland war. The Soviet barbarians seem to be murdering very effectively in Chechnya.

With the trade agreement in mind we read, "Draw them in with the prospect of gain, take them by confusion." Does this even need to be explained? Can anyone doubt the Chinese have played the trade card brilliantly? The next precept is "Use anger to throw them into disarray." The Chinese commentator Cao Cao says "Wait for them to become decadent and lazy." Pretty good description of the United States in Y2K I'd say. Sure looks the USA is ready for a war with China. Might interfere with all the dot. com IPO's on the stock market. What about Al Bore's reelection chances if the Chinese nuke Los Angeles?

"Cause division among them?" Can anyone doubt that the Chinese have split the United States into factions due to their brilliantly executed espionage, economic and political subversion campaign? Aside from stealing most of the nuclear technology to equalize things, aside from seizing control of the Panama Canal and aside from building a military base in the Splatly Islands, the Chinese have brilliantly perverted and divided the United States political system.

The second chapter of "The Art of War" is called "Doing Battle." The general idea if for a quick war that allows you to seize most of the enemies goods. "Therefore I have heard of military operations that were clumsy but swift, but I have never seen one that was skillful and lasted a long time. It is never beneficial to a nation to have a military operation continue for a long time." Wise advice to a United States scattered globally in Kosovo, Iraq, Europe, Korea, Japan and everywhere else. It would take the United States months, even assuming the Panama Canal wasn't destroyed, to even get to Taiwan, much less defend it.

The third chapter is called "Planning a Siege." The first precept is paraphrased by Ho Yanxi as "The best policy is to use strategy, influence and the trend of events to cause an adversary to submit willingly." Anyone doubt that this is precisely what the Communist Chinese are doing?

The next precept is paraphrased by Li Quan as "Overcome your opponent by calculation." Anyone doubt this is what the Chinese are doing? The next precept is paraphrased by Mei Yaochen as "This means winning by intimidation." Anyone doubt the Chinese are trying to intimidate both the United States and Taiwan?

Sun Tzu also says "Therefore one who is good at martial arts overcomes others' forces without battle, conquers others' cities without siege, destroys others' nations without taking a long time." He goes on to say, I believe this has direct relevance to Taiwan, "Therefore if the smaller side is stubborn, it becomes captive of the larger." Meng Shi says "The small cannot stand up to the large-this means that if a small country does not assess its power and dares to become the enemy of a large country, no matter how firm its defenses be, it will inevitably become a captive nation. The Spring and Autumn Annals say, "If you cannot be strong, and yet cannot be weak, this will result in your defeat." Does anyone think that Taiwan would have any chance in a military confrontation with Red China? Or as Li Quan also paraphrases, "If the smaller side battles stubbornly without taking its strength into account, it will surely be captured by the larger side."

The question is just how much will the United States do to prevent a foregone conclusion; namely, the reunification of Taiwan with Red China. The answer is, not much once it figures out that the Red Chinese have the technology, will and delivery systems to inflict multiple million dead upon the American West Coast. Taiwan will become a part of China again. The only issue is how and when. The question really becomes is the United States willing and able to go to war with Red China? Does anyone really think the answer is yes? There are several more chapters to the "Art of War", but I will close with several quotes very applicable to the United States. "So there are three ways in which civil leadership causes the military trouble. When a civil leadership unaware of the facts tells its armies to advance when it should not, or tells its armies to retreat when it should not, this is called tying up the armies. When the civil leadership is ignorant of military affairs but shares equally in the government of the armies, the soldiers get confused. When the civil leadership is ignorant of military maneuvers but shares equally in the command of the armies, the soldiers hesitate. Once the armies are confused and hesitant, trouble comes from competitors. This is called taking away victory by deranging the military." Does anyone doubt that this is the current state of the United States military?

Ho Yanxi advises to "Assess yourself and your opponents" in paraphrasing the next precept. The final one is this: "So it is said that if you know others and know yourself, you will not be imperiled in a hundred battles; if you do not know others but know yourself, you will win one and lose one; if you do not know others and do not know yourself, you will be imperiled in every single battle." The child king should ponder these truths before he decides to "show the flag" in the Taiwan Straits. The Chinese just might shove it down our collective American throat.

The average human body contains 0.2 mg of gold with the bone containing .016 ppm and the liver .0004 ppm.
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