Taiwan troubles china begins to cut ties with the united states and others following the visit of a high-ranking US politician to Taiwan why this could be very bad for the crypto market?
Last week House of representative speaker Nancy Pelosi traveled to Taiwan, for those who don’t know nancy is the third most powerful politician in the united states and she is the most prominent u.s politician to travel to Taiwan since the mid-90s.
This is significant because since the late 1970s the united states have adhered to a one china policy which essentially involves not officially recognizing Taiwan as a country. In order to stay on friendly terms with china which sees Taiwan as being part of the mainland.
Taiwan troubles, It should come as no surprise then that the Chinese government was not too happy when it heard that one of the most powerful politicians in the united states was planning on visiting Taiwan. A move that is interpreted by the CCP as explicit support for Taiwan’s independence.
News of nancy arriving in the island country caused markets to crash due to the uncertainty around how China would react. Luckily nothing much besides some saber-rattling really happened and the markets promptly recovered on the news that nancy had left just a couple of days later.
Taiwan troubles, Unfortunately, the effects of nancy’s visit are still being felt in other ways as china is now reportedly engaged in drills that could escalate into a de facto blockade, meaning it’s becoming more difficult and could soon become impossible to move goods in and out of Taiwan.
This is concerning because Taiwan makes 92 percent of the world’s semiconductors which includes microchips. In case you haven’t noticed microchips are in literally everything from your fridge to your phone. If Taiwan’s trade with the world is reduced or even cut off it could disrupt just about everything which is why I’ll be doing a deep dive into the exact implications these and other scenarios could have for the crypto market and the economy as a whole later this week. I can tell you right now that this could cause inflation to go through the roof, which would force central banks to continue raising interest rates to fight this inflation from the demand side. The Taiwan troubles will affect the whole market.
This would do even more damage to the economy since most of the inflation would be coming from the supply side. Some would say this is already the case today with inflation continuing to hit record highs in many countries. This has resulted in record levels of consumer debt as people try to keep up with the cost of living and in the united states, household debt just hit a record high of 16 trillion dollars.
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When you add rising interest rates into the mix it’s unlikely that everyone will be able to meet their debt obligations even after they’re done selling off all the assets they own including their crypto. This could potentially lead to a deep recession that rivals the great depression of almost 100 years ago.