No Need to Wait For Shots Fired to Know War Is Coming. Finance Comes First.

Many non-expert armchair generals believe a Chinese invasion of Taiwan will be easy to see coming in advance. It’s a huge logistical exercise involving tens of thousands of troops, navy vessels, landing craft, air cover, supplies, ammunition, and much more. Surely this can be seen by satellite images, drones, and other sources and the Taiwanese and U.S. can prepare.

That sounds easy, but here’s the reality. The Chinese practice the invasion of Taiwan with the elements described several times per year. Without direct intelligence, it’s almost impossible to know if what you’re seeing on your satellite feed is an actual invasion or another practice.

If you’re Taiwan, you can’t mobilize your population several times per year for a string of false alarms. By the time you sort out that a practice is real, the Chinese will be halfway across the Taiwan Strait and almost ready to land.

What’s the solution to this? Is there a source of intelligence that would give a strong indication of a real invasion without a high frequency of false alarms?

The answer is yes, and the source is finance and the economy. If an invasion is coming, the Chinese will be building financial reserves, especially gold, and preparing the economy to do without certain imports, especially energy.

It’s also the case that wealthy Chinese who know the war is coming will secretly try to get their wealth out of China in advance. These and other financial moves leave “footprints” in markets that can be identified and interpreted by expert systems and analysis.

This article features an interview with Kyle Bass, head of Hyman Capital Management, a major hedge fund in which he discusses these and other financial signs that point toward war.

I’ve jointly taught courses on financial warfare with Kyle at Texas A&M University and can attest to his astute judgment in this area. Don’t wait for the first shots to be fired. Follow financial signals if you want to know when the war is coming.

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