It’s a battle for the hearts and minds of the rich. Will they believe in the old metallic foundation of money – gold — or the modern underpinning of currency — credit, and thus, after the Protestant Reformation, in God? The US dollar bears the inscription “In God We Trust.” It’s a matter of faith.
Chinese leverage
Over the past five years, tensions and wars have tripled gold prices. The Chinese government may be hoarding it due to mistrust of the US dollar. China is officially ranked sixth in gold reserves but is suspected of holding far more, owing to opaque reporting and strategic purchases through entities such as SAFE and CIC. This supports de-dollarization strategies.
America is moving in the opposite direction, sidelining gold and launching controversial electronic stablecoins that open new financial frontiers.
However, it’s not just about gold for China. It accounts for almost 50% of the world’s industrial capacity, has a complete supply chain, and low production costs, all of which bolster its RMB. It has overtaken OPEC+ as the leading oil price maker. By stockpiling, Beijing is the biggest factor in oil pricing. In 2026, with an oil glut, OPEC will sit tight on production to prop up prices. The petrodollar is significant to the US dollar’s overall value. The biggest known unknown is what Beijing will do. Will it sell, buy less, or buy even more? It adds elements to the REE (Rare Earth Elements) that have already been “weaponized” in trade talks with America.
Shipping could be next. China has the largest shipping capacity through its fleet and has acquired control of some 40 foreign ports, including those at both ends of the Panama Canal. The United States wanted to repurchase them. A consortium majority-owned by BlackRock and MSC, with COSCO as a minority stakeholder, was expected to take over. In the past few days, COSCO stated it wants a controlling stake, suggesting it could leverage its shipping capabilities against competitors.
The sheer Chinese weight should give the US pause, but this might not be the whole story.
History lessons
Tiny England beat Napoleon, who had become master of all of Europe and most of the world, because it had better diplomacy and finances. William Pitt the Younger introduced Britain’s first income tax in 1799 to finance a long war against the master of Europe. Pitt’s progressive levy and a range of other wartime measures mobilized Britain’s wealthy and commercial classes to underwrite the state.
Britain’s population (around 16 million) was half that of France’s. Still, its financial depth, broad investor base, and the willingness of wealthy men and merchant houses to equip fleets, fund armies, and buy government debt turned money into muscle. Subsidies to allied armies magnified Britain’s reach; industrial production converted credit into cannon, ships, and supplies. The result: a small island outspent and out-financed a continental colossus and helped defeat Napoleon.[1]
The same was true of Venice, a puny state facing the massive Ottoman Empire. The maritime republic survived repeated Turkish pressure by turning private wealth into public power. Venetian nobles, merchants, and bankers responded to the call with forced loans, extraordinary levies, the sale of monopolies, and the direct outfitting of galleys. All of this allowed the republic to punch far above its demographic weight, from the Adriatic to the Aegean. Against a sprawling empire, Venice’s fiscal resourcefulness and the civic commitment of its rich sustained wars, fleets, and efforts to stave off Turkish expansion, ultimately contributing to its demise.
Taxing America’s rich to make them richer
In theory, America is in a much better position; it’s larger than England or Venice was with its enemies. It has a bigger economy than its competitors and stronger finances. Still, it’s saddled with immense public debt, roughly the size of its GDP, sandbagging any political initiative or industrial policy.
The US has a vastly larger pool of private wealth concentrated among the rich — by 2025, roughly $25–$35 trillion in aggregate held by households with over $10 million each, about the size of its national debt — and its capital markets dominate global equity capitalization. That dispersed private wealth, relatively lightly taxed, represents immense latent fiscal power. China is in a different budgetary world.
Converting private wealth into sustainable public capacity requires policies that persuade or compel the wealthy to contribute more—and, crucially, to invest those revenues in manufacturing, logistics, training, and supply chains. Finance alone cannot substitute for factories, ports, skilled workers, and resilient supply networks. Yet the Napoleonic era and Venice demonstrated that credit and industrial deployment win wars.
If the US mobilized its private wealth, it could underwrite national defense, infrastructure, and industrial renewal. It’s a matter of political will and leadership. China has it, and it’s not about the country’s political structure, quite the opposite.
Venice and England were far more liberal than the Ottomans or Napoleonic France. A sense of a common cause marshaled local entrepreneurship, whereas it was suffocated under the iron fist of the Sultan or Napoleon. Winning over Napoleon and the Sultan was an investment that ultimately enriched English and Venetian businessmen. The same was not true for the rich in Napoleonic France and the Ottoman Empire. Ultimately, all the wealth belonged to the head of state.
Still lacking a common sense of mission for the res publica, well-organized empires carry the day.
Here, perhaps, the US and China may have food for thought.
China’s Strains and yet…
Conversely, in theory, China is worse off. Slowing growth, local-government debt, dependence on land-sale revenue, and shadow-banking risks constrain Beijing’s room for maneuver. China’s public finances already face strains: slowing growth, elevated hidden local-government debt, and an aging population that increases pension and health care costs. There is high leverage among property developers and many local factories, heavy reliance on local land-sale revenue, and mounting contingent liabilities in the shadow-banking sector.
These pressures limit Beijing’s fiscal flexibility to underwrite large-scale military or external commitments without incurring domestic backlash.
Moreover, if manufactured goods aren’t purchased, industries become liabilities, not assets. The price of Chinese industrial capacity has been state subsidies and underpayment to Chinese workers, both of which are a growing burden on national finances.
The apparent strategic goal is to corner markets and enjoy the resulting monopolies. Yet monopolies breed poor quality, which fosters stronger competition. There is little or no trust in the RMB; it is not fully convertible and is thus fully controlled by Chinese political whims. China may view gold, goods, and commodities as preferable to trust. But overall, can the Chinese model be sustainable?
The US began de-industrializing in China in the 1980s, convinced it could maintain strong political ties with Beijing. In 2009, with David Goldman, we wrote about the US need to re-industrialize. In 2015, Michael Pillsbury, in his comprehensive book, argued for a sweeping American overhaul to compete with China. Yet apparently, even now in the US and in Europe, there’s little or no sense of urgency. In China, there is evident urgency regarding the United States and the current situation.
China should have carried out political and fiscal reforms 15-20 years ago. Meanwhile, the US should have re-industrialized and fixed its debt, education, and healthcare systems. Neither did it, and certainly it all contributed to the present trainwreck waiting to happen. The American reforms are politically simple, but expensive. The Chinese reforms are cheap and lucrative but politically problematic.
Still, global trust in the US dollar remains strong, though it is wavering and may be declining. Can trust in ethereal e-currencies be translated into steel? How long will it take? Time may decide the battle.
Industrial capacity is necessary in war unless someone can seize control of the enemy’s command-and-control system via cyber and win without a traditional clash. It’s unclear whether the US can do so against China or vice versa. But short of that, industrial capacity wins.
Races and lessons
Then a race is on. China needs time to improve its fiscal structure and domestic consumption to offset potential export shortfalls. The USA needs time to re-industrialize. The question is: who will get there first?
The world’s rich men will play a crucial role; they’ll vote with their fortunes for God or gold. The same goes for ordinary people. Since the Soviet revolution a century ago, first Moscow and then liberal democracies have argued that the interests of the people do not always align with those of their governments, and that other nations’ people are fair game in the battle over trust and belief.
Russia clearly seeks to reach out to people in Western countries; the US seems to have given up on talking to non-Americans, thereby forfeiting a tenet of American policy: aligning the interests of Americans with those of the world and vice versa. It might be a grave mistake; it could abandon God without enough gold. Materialistic, faithless China would be right, and religious America would be wrong.
In practice, if investors come to believe that the US has it under control and national debt declines while state income rises, gold prices will collapse. If not, gold evaluations will continue to spiral upward. There are choppy waters, an ongoing war, and rising tensions everywhere. It seems unlikely that gold prices will go down in the near future.
But things are highly volatile. It may come down to sending the right signal to the world. If Washington finds a new consensus, the situation could turn overnight, sending gold prices down. Such a drop, along with a new broad diplomatic harmony around America and its dollar, could cause significant pain for China. Again, there may be issues to consider for both the US and China here.
(I’m grateful to Frederick Feldkamp for the conversation)
[1] See Kennedy, Paul M. (1989). The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000. Vintage Books and Ferguson, Niall (2008). The Ascent of Money: A Financial History of the World: 10th Anniversary Edition. Penguin.
Lezione magistrale di geopolitica di grande attualità ! Grazie Francesco per questa ottima apertura su un futuro poco chiaro.