Guest: Arthur Laffer
Title: The Other Side of Taxation: Incentives
Host: Lyric Hughes Hale
Producer: Sam Fu
Recorded: Mon March 17, 2026 · 57 minutes

Art Laffer on Incentives, Policy Design, and the Future of the Global Economy

My conversation with Arthur Laffer explores a central question in economic policy: how incentives—shaped by taxation, trade, and monetary systems—drive outcomes across the global economy. What follows is a short guide to some of the key ideas discussed in the episode.

About our Guest

Arthur Laffer is best known for the Laffer Curve—the idea that beyond a certain point, higher tax rates can discourage work, investment, and entrepreneurship, ultimately reducing both economic activity and government revenue. His work helped shape the tax reforms of the Reagan era and continues to influence debates about taxation and growth today. Trained at the University of Chicago and long engaged at the intersection of academic theory and public policy, Laffer has spent decades focused on a central question: how incentives shape economic behavior.

In this conversation, Lyric Hughes Hale speaks with Arthur Laffer about how those ideas apply today—at a moment when policy decisions are reshaping the structure of the global economy.

🎤 Topics and Key Moments

Laffer’s framework is deceptively simple:

“ Incentives are what economics is all about.”

From this starting point, the conversation moves across taxation, trade, healthcare, and monetary policy—but consistently returns to the same underlying principle: policy does not merely allocate resources, it shapes behavior, often in ways that are not immediately visible.

This is something that, in Laffer’s telling, policymakers either recognize—or fail to recognize—at critical moments.

One of the more striking parts of our discussion—and one that aligns with broader questions about structural imbalances in the global economy—was Laffer’s critique of tax-exempt institutions.

He argues that exemptions, particularly in healthcare and education, have created significant imbalances in how capital is allocated. Resources flow not necessarily to their most productive use, but to sectors where tax treatment is most favorable.

“We could get rid of the income tax… just by eliminating those exemptions.”

The point is not simply fiscal. It is structural. When policy privileges certain sectors, it shapes the direction of investment, the cost structure of services, and ultimately the behavior of institutions.

On trade, Laffer offers a perspective that reflects both classical theory and contemporary reality.

“No one wins from a trade war—but they don’t all lose the same.”

That distinction reflects a shift from theory to application. Trade relationships are no longer evenly balanced, and policy tools—especially those executed through executive authority—can be deployed quickly and strategically.

Here, Laffer’s experience across administrations becomes instructive. He describes Ronald Reagan as unusually open to economic reasoning—willing to adopt ideas such as broad-based tax reform and energy decontrol, even when they ran counter to internal resistance. Policy, in that context, was designed with a clear view of incentives.

That same emphasis on execution appears in his description of Donald Trump—not in ideological terms, but in operational ones. As Laffer recounts, the ability to move from concept to action quickly can itself shape outcomes.

“President Trump doesn’t sit there and study a subject for 300 years… he makes a decision and it’s done.”

Whether one agrees with the policy or not, the observation points to something fundamental: the timing and clarity of decisions can be as important as the ideas themselves.

In discussing energy policy, Laffer points to earlier moments when shifts in policy reshaped entire markets. As he noted at the time—in a New York Times op-ed during the Reagan administration—measures such as oil price decontrol were not simply about prices, but about changing the incentives that governed production and investment decisions across the energy sector.

The lesson is consistent: policy works through the signals it sends—and those signals propagate across the system.

The conversation then turns to healthcare, where Laffer identifies a structural challenge rooted in the absence of information.

Without price transparency, markets cannot function effectively. Consumers cannot make informed choices, and providers face limited pressure to compete on cost or quality. The result is a system in which prices rise, but signals remain unclear.

Here again, the issue is not simply cost, but structure. When information is obscured, incentives shift—and behavior follows.

From there, the conversation turned to monetary policy, where Laffer draws a sharp historical contrast.

Prior to the creation of the Federal Reserve in 1913, he describes a system in which money was largely private—issued by banks, backed by their balance sheets, and subject to market discipline. Bank-issued notes circulated alongside one another, with their value tied to the credibility of the issuing institution.

From his perspective, the transition to a centralized system marked a profound shift.

“Starting in 1913, all hell broke loose.”

Laffer contrasts this with the earlier era of commodity-linked and privately issued money, which he describes as one of long-run price stability. While that period included cycles of inflation and deflation—including during wartime and financial disruptions—the overall price level remained broadly stable over extended periods, rather than exhibiting the persistent upward trend that has characterized much of the modern era.

It is in this context that he views the emergence of digital currencies:

“Stablecoins are the private market’s attempt to replace government money.”

Much like earlier bank-issued currencies, instruments such as Tether are designed to provide a stable medium of exchange, backed by underlying assets and governed—at least in principle—by market mechanisms.

This perspective places current developments within a longer intellectual lineage—one that extends through Laffer’s own work to that of Robert Mundell. Mundell, often described as the father of the euro, argued that the world had not yet gone far enough—that a truly international currency was still needed.

Laffer suggested that we may be closer to that trajectory than many assume—a market-driven, technologically enabled step toward a more global monetary system.

If there is a single thread that runs through this conversation, it is that policy design shapes incentives—and incentives shape outcomes. Taxes are simply negative incentives.

Policy structures evolve quietly, and become embedded in systems that appear stable, even beneficial in the short term. Over time, they influence behavior in ways that are difficult to reverse.

At a moment of structural change in the global economy, the question is whether incentives are aligned with the most beneficial global policy outcomes. And the answer is that we have a long way to go.

📚 Related Reading & References

Taxes Have Consequences: An Income Tax History of the United States, coauthored by Arthur B. Laffer, Brian Domitrovic and Jeanne Sinquefield

🎙️ About Our Host

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💬 What we are seeing is not the end of globalization, but the emergence of a new geostrategic system of alliances—more connected, not less.

If you missed our panel last week, or want to revisit it in light of Japanese Prime Minister Sanae Takaichi’s visit to Washington this week –as well as the postponement of the Trump-Xi Summit, the replay of our March 11, 2026 panel is posted above.

Our panel asked a central question: Are we witnessing the emergence of a new Monroe Doctrine, and what are its geographic boundaries? Panelists include Dr. R. Evan Ellis, Dr. Joshua W. Walker, and econVue Senior Editor Eric Huang.

Why This Matters Now

Today, President Trump will meet with Japanese Prime Minister Sanae Takaichi as markets and policymaker reassess global risk. Japan’s Maritime Self-Defense Force is one of the most capable naval forces in the world, underscoring the strategic weight of the US-Japan alliance.

US actions in Mexico and Venezuela, and the escalating crisis with Iran, could have profound implications for security strategy and trade across Latin America and the Indo-Pacific—including Taiwan.

Key Takeaways

Evan Ellis (Latin America)

“This administration increasingly sees engagement in the Western Hemisphere not as co-development, but as an extension of U.S. homeland security.

Joshua Walker (Japan)

“Japan is our canary in the coal mine—no country needs the U.S. alliance more, but none is watching its limits more closely.

Eric Huang (Taiwan)

“Economic security is no longer a supporting pillar—it is the foundation of U.S. global strategy, and that is where Taiwan becomes indispensable.

Governments across Latin America, Japan, and Taiwan are reassessing assumptions about sovereignty, deterrence, and alliance commitments as the implications of recent events ripple across both the Western Hemisphere and the Indo-Pacific. Recent developments are sending geopolitical shockwaves far beyond the regions directly involved, and China’s leadership is no doubt recalibrating its options after US strikes in Iran.

Are we seeing the early contours of a new Monroe Doctrine in US strategic thinking — one that extends beyond the Western Hemisphere — as Washington navigates a more contested global order?

Introductory remarks by our speakers were recorded, but the Q&A session was off the record.

↳ Panelists

R. Evan Ellis
Research Professor of Latin American Studies at the US Army War College Strategic Studies Institute, specializing in China’s role in the Western Hemisphere.

Joshua W. Walker
President & CEO of Japan Society; former Eurasia Group executive and U.S. government official focused on alliances and Indo-Pacific strategy.

Eric Huang
Geopolitical strategist and econVue Senior Editor specializing in US–China–Taiwan relations and strategic technology competition.

It was a pleasure moderating this panel. My thanks to our panelists, and to our audience, who posed excellent questions. Join us next time to be part of the discussion.

–𝓁𝓎𝓇𝒾𝒸 💬

Editor-in-Chief, econVue

^📍Chicago

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Dear Readers,

Last month, we lost Karen Petrou. I wanted to reshare a conversation I had with her five years ago, a podcast we recorded in March 2021.

I first contacted Karen after reading her excellent reports at Federal Financial Analytics. She did me the honor of reading and commenting on mine. I planned to be in Washington for an event where she was speaking, and we agreed to meet after her speech. As I sat listening in the audience, I noticed that she had a dog at her side. Only then did I realize she was blind.

I could not believe that she was able to digest and analyze the enormous amount of information required for her reports, and I never complained again about having too much to read. I learned so much from her, especially from her book on Federal Reserve policy and inequality, which we discussed during this podcast five years ago, and personally from her remarkable ability to make what she did seem effortless.

It was a great privilege to know Karen. She never let her blindness keep her from the truth. Her work, including as Board Chair of Foundation Fighting Blindness, mattered to so many.

–𝓁𝓎𝓇𝒾𝒸 💬

About this Podcast

The March 2021 Hale Report podcast is my interview with Karen Petrou, discussing her new book, Engine of Inequality: The Fed and the Future of Wealth in America. Just published, it is already the #1 book in its category on Amazon.

Ms Petrou is a well-known and influential commentator on monetary policy and banking regulation, and is managing partner at Federal Financial Analytics in Washington DC. We have often included links to her analysis in our newsletter, and I have had the great pleasure of meeting her both in Chicago and Washington. 

That was not possible this time of course, so I interviewed Ms Petrou remotely. She made several key points: the Fed is responsible for the record rise in inequality between 2010 and 2016, and it continues to look for data in all the wrong places. Other potential countermeasures to inequality such as education simply take too long.

She strongly believes that the Fed should have a third mandate in addition to employment and price stability, economic equality. I've included excerpts from her remarks below, but hope that you will find time to listen to our half-hour podcast via the link below.  I always hope our listeners will learn something they didn't know before, or hadn't thought about in that way. I think this interview accomplishes just that.

Excerpts

❝ I think, sadly, the data the Fed uses are often way off base, because they're averages and aggregates. And in a highly unequal country, as the United States has become, that's very misleading.

❝ Something happened in 2010 and income and wealth inequality grew far worse, far faster than ever before. And the one thing that clearly changed, starting in 2010, after the Great Financial Crisis's worst effects were behind us, was new monetary and regulatory policy. And that's what this book is about. What happened in 2010, and how could it have made us so much less economically equal and, as you said, what can we now do to change?

❝ Think about it though, economic inequality, what's it about? It's about income and wealth. That's the engine that makes us more or less equal. But what is its fuel? In economic inequality, the fuel is money. There is no agency in the United States with the power over money other than our central bank. That's what monetary policy is all about. Bank regulation, what is it about? It's about who has the money, who gets the money, how much does it cost to get the money.

Productivity is the key to the wealth of nations: it rests on a foundation of labor, capital, markets, technology, and institutions that work together to promote efficiency. A single strong component is not sufficient. All of these elements must interact effectively to produce the gains that lead to economic growth.

Today, there is a fierce debate about the geoeconomic significance of artificial intelligence. Enormous sums are being invested in chips, data centers, and machine learning. The two primary players, China and the United States, are in direct competition over AI and their economic futures.

However, technological achievement may not be the decisive factor in this race. Price discovery, not just technological discovery, is the mechanism that drives sustained productivity growth. Innovation generates lasting gains only when markets and economic systems deploy new technologies efficiently across large numbers of firms and workers.

The intensifying competition between the United States and China may therefore hinge not just on AI, but on how this technology and others are integrated into their respective economies. In other words, on symbiosis between public and private technology and economic institutions. Surprisingly, despite China’s vaunted gains in AI and robotics, it is falling far behind the US in terms of productivity.

The Widening Global Productivity Gyre

For the past three decades, beginning with the technology boom of the late 1990s, the United States has led the world in productivity growth. Several factors help explain this divergence from other major economies. The US hosts many of the largest technology firms, and its deep capital markets combined with flexible labor conditions have allowed rapid deployment of key resources to the most productive firms— including new entrants.

The US regulatory environment has also been more conducive to rapid innovation than in Europe, where productivity growth has been stifled by overregulation and limited access to venture capital, which has often slowed the scaling and diffusion of new technologies.

According to OECD productivity data,,output per hour worked in the US is roughly 25 percent higher than in the Eurozone, a gap that has widened since the global financial crisis in 2008. In the last last 50 years, the US has created 241 companies worth $10 billion or more, while Europe has created only 14, according analysis by Andrew McAfee of MIT Sloan reported in the Wall Street Journal.

The Growing US-China Productivity Divide

China’s economic rise over the past four decades has been remarkable. Yet the productivity gains that once drove that expansion have slowed markedly in recent years, especially when measured by total factor productivity (TFP).

Despite the image of China as a manufacturing powerhouse, output per hour worked remains only about one-third of the level in the US. Although TFP grew by 3–4 percent annually during the boom years of reform and opening, productivity growth has slowed to around 1 percent or less in recent years.

While some industries, such as electronics, are more productive than others, the overall average is dragged down by lower-productivity sectors elsewhere in the economy. Beyond manufacturing competence, the issue is the inefficient economy-wide allocation of resources. The momentum of earlier market reforms has continued to weaken as many of those reforms have been unwound.

The productivity gap between the US and China today is roughly comparable to the gap between the US and Japan in the early 1950s, when Japan was still at a very early stage of its postwar industrial recovery.

Two Systems, One Technology

Artificial intelligence influences productivity not only through software and data, but through automation in the physical economy.

China today installs roughly half of the world’s industrial robots each year, according to the International Federation of Robotics. Yet technology adoption alone does not guarantee productivity leadership.

Deploying robotics effectively requires capital investment, management flexibility, and constant experimentation on factory floors. Productivity gains typically emerge not from a single technological breakthrough but from thousands of incremental improvements as firms discover more efficient ways to integrate new technologies into production.

China excels at industrial scale, but in an environment where central planning often picks winners and users, the latest and best technologies may not flow to the firms that could use them most productively.

The Deng Reforms and Price Discovery

Ironically, China’s economic rise itself demonstrates the power of price discovery. When Deng Xiaoping launched China’s reform era in the late 1970s, he did more than open the country to global trade. Deng gradually introduced mechanisms that allowed prices and incentives to guide large parts of the economy. Township and village enterprises, private manufacturing clusters, export-oriented industrialization, and Special Economic Zones all allowed market signals to shape investment decisions.

Deng acknowledged the central role of markets in this process, observing that “planning and market forces are not the essential difference between socialism and capitalism,” meaning that markets could function as instruments within a socialist system.

China’s reform era allowed price discovery to operate across large swaths of the economy, unleashing decades of rapid productivity growth.

One issue worth watching in the United States is growing use of government support for industries viewed as critical to national defense. If prices are supported to give domestic companies time to catch up, such measures should be used sparingly and remain clearly temporary.

Energy and the Discovery of Efficiency

The American shale revolution provides another example of how productivity gains often emerge through decentralized rather than centrally planned experimentation.

The underlying technologies of shale technology, hydraulic fracturing and horizontal drilling, had existed for decades. What transformed global energy markets was the ability of multiple firms to experiment with different drilling techniques in response to price signals: rising oil and natural gas prices in the early 2000s.

Over time those experiments dramatically reduced the cost of extracting oil and gas from shale formations. As Brian Potter argues in The Origins of Efficiency, technological breakthroughs become economically transformative only when firms learn how to utilize them efficiently and at scale.

In both cases, China’s reform era and the American shale revolution, the technologies that were used already existed. What mattered was the economic system’s ability to discover how these technologies could be used most productively.

The Theory of Price Signals

Economists have long emphasized the importance of price signals in coordinating economic activity. A century ago Ludwig von Mises argued that the central challenge of economic organization was economic calculation, or the ability of an economy to determine how scarce resources should be allocated.

Later, Friedrich Hayek explained that market prices transmit dispersed information that no central planner can fully possess. Similarly, János Kornai showed that economies with distorted price signals struggle to identify productive investments.

When price discovery weakens, capital may remain trapped in inefficient sectors even as new technologies emerge.

A Battle of Systems, Not Technology

Much of the geopolitical discussion about artificial intelligence frames the issue as a technological race. But history suggests that technological invention alone rarely determines economic outcomes.

As the historian Joseph Needham observed in his classic study of the history of Chinese science, imperial China produced many remarkable technological breakthroughs centuries before Europe, yet those inventions did not translate into sustained industrial growth. The successful deployment of technology in an economy depends not only on invention but on the institutional systems that allocate resources and reward innovation.

The AI “race” may therefore be less a battle of technologies than a competition between economic systems. The decisive issue may not be technological discovery, but price discovery.

During the early years of the Cold War, George F. Kennan warned that the Soviet system was inherently doomed to failure not because of a technological arms race, but because of inherent institutional weaknesses that would ultimately undermine its economy. In “The Sources of Soviet Conduct,” he wrote that the Soviet Union “bears within it the seeds of its own decay.”

Kennan believed the ultimate test between the two systems would be their capacity to adapt and allocate resources efficiently. In the age of artificial intelligence, that insight may once again prove relevant.

The future of the global economy may depend not only on who invents the most powerful technologies, but on which economic systems are best able to discover how to use them most productively.

^📍Chicago

Sources

• OECD productivity data (annual)

• Conference Board Total Economy Database (TFP)

• International Federation of Robotics World Robotics Report (2024)

• Brian Potter — The Origins of Efficiency (2025)

• Joseph Needham — Science and Civilisation in China (1954)

• George Kennan — “The Sources of Soviet Conduct” Foreign Affairs (1947)

  ---

! REMINDER - March 11th

Featuring Dr. R. Evan Ellis, Dr. Joshua W. Walker, and econVue senior editor Eric Huang | March 11th

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Gold has long functioned as a hedge against inflation, instability, and monetary uncertainty. In this Vuepoint, Morton Lane suggests the price of gold can also serve as a real-time mark…

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💬 We used to live in a kind of high-trust globalization. What we have now is a world of great connectivity — but high-fear globalization.

🎙️Episode Details

Guest: Steve Clemons
Title: The Man About Town in a Fragmenting World
Host: Lyric Hughes Hale
Producer: Sam Fu
Recorded: Mon Feb 16, 2026 · 60 minutes

Episode Overview

What happens when the era of high-trust globalization gives way to something more conditional, more fractured—and far less certain?

On this episode of The Hale Report, Lyric Hughes Hale speaks with journalist and global policy convener Steve Clemons, a longtime observer of power, who has spent decades moving between Washington, journalism, and the world’s major geopolitical forums—from Tokyo and Brussels to Davos.

Clemons did not come to journalism through the usual route. Trained in economics, policy, and U.S.–Asia relations, and shaped by a childhood spent on U.S. military bases abroad, he built a career convening conversations among policymakers, business leaders, and thinkers across ideological and national lines. That perspective informs a wide-ranging discussion of how global alliances, domestic politics, technology, and journalism itself are being reshaped in real time.

From the legacy of Chalmers Johnson’s developmental state to Japan’s political transformation under Prime Minister Sanae Takaichi, from NATO’s evolving role to the growing power of Big Tech, Clemons argues that the world is reorganizing into more conditional and ad hoc arrangements. The United States remains central—but no longer unquestioned.

At home, he sees a Washington defined by internal fractures and performative politics, while globally the risk of conflict may arise less from deliberate strategy than from miscalculation in an increasingly unstable system.

Underlying the entire conversation is a quieter theme: the role of journalism in such a moment. In an era of fragmentation and personality-driven media, Clemons offers a reminder that the journalist’s task remains what it has always been—to illuminate reality, not become part of the spectacle.

About our Guest

Steve Clemons is a journalist, policy strategist, and global convener. He serves as Editor-at-Large of The National Interest and is the founder of Widehall, an international forum convening leaders across policy, business, and media.

Over the course of his career, Clemons has held senior roles at The Atlantic, The Hill, and Semafor, and founded the influential Washington policy blog The Washington Note. He has worked closely with leading figures in U.S. foreign policy and international economics and has been recognized internationally for his contributions to transatlantic understanding.

He is widely known for bringing together diverse voices across ideological and national divides to foster substantive global dialogue.

Topics Discussed

• The formative influence of growing up abroad and entering journalism through policy and economics

• Chalmers Johnson, industrial policy, and lessons for China and the United States

• Japan’s political evolution and the leadership of Prime Minister Sanae Takaichi

• Remilitarization of Japan and Germany post-WW2

• The shift from “high-trust” to “high-fear” globalization

• NATO, conditional alliances, and Europe’s emerging strategic autonomy

• Washington’s internal political fractures and performative partisanship

• Big Tech’s growing structural power and parallels to the robber-baron era

• AI, surveillance, and the future of privacy

• The rising risk of accidental conflict in a fragmented world

• The coming midterm elections in the US

• Journalism’s credibility crisis—and the importance of remaining neutral, factual, and accountable

🎤 Key Moments

❝ Unconditional alliances are over. They are going to be more conditional and ad hoc.

❝ Both parties are an exercise in the study of schizophrenia.

❝ I worry more about escalation, miscalculation, and accident than deliberate war.

❝ Journalists are not the story. They should never be the story.

📚 Related Reading & References

• Chalmers Johnson — MITI and the Japanese Miracle

• Graham Allison — Essence of Decision

• Thomas L. Friedman — The Lexus and the Olive Tree

• Brad Smith — Tools and Weapons: The Promise and the Peril of the Digital Age

• George Orwell — 1984

• Richard Vague — The Banker Who Made America: Thomas Willing and the Rise of American Finance

💬 Join the Conversation

Feel free to share this podcast. To receive new episodes of The Hale Report and additional econVue insights, consider becoming a free or paid subscriber.

Subscribe now

🎙️ About Our Host

📍 Chicago

Editor’s note: Recent changes inside China’s military have prompted renewed debate about command authority, political control, and the country’s longer-term strategic trajectory. In this article, eco…

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A Critical Announcement

On November 7th last year, the US Department of the Interior quietly released its final 2025 Critical Minerals List.1 For the first time, silver was formally designated as a critical mineral. No longer just an investable precious metal, silver underpins the electronics industry, solar manufacturing, and key infrastructure and defense systems. Its industrial superpower: it is the most conductive metal for electricity on earth. This new designation signals a shift in Washington’s thinking about critical resources.

Price Volatility & China

Since early November, the silver price has surged, from $48.15 on Nov 7 to a recent high of $121.79 before retracing sharply on Friday to $85.25. Even after this pullback, prices remain dramatically elevated relative to early autumn.

In the investment world, all eyes are on futures markets and China. Gold’s increase in value is largely seen as a function of central bank purchases over time, particularly the People’s Bank of China. Silver, however, is not widely held by central banks. Its dual use, as a store of value and an industrial commodity, has given it both a retail and commercial base of investors.

What is different this time is that there is a wide divergence between silver prices in Western financial markets and physical markets in Shanghai, where silver is selling at a significant premium of around 40%. This premium suggests tight physical supply and strong local demand, though it has also prompted questions about market structure and policy intervention. (A new website tracks these differentials in real time: metalcharts.org/shanghai.)

The discount to NAV (net asset value) is also enormous in US markets, reaching 19.3% as of Jan 30, closer to the crypto ETF discounts such as GBTC to Bitcoin than to precious metals. What this uptick means is that SLV ( the iShares Silver Trust) is trading almost 20% below the value of the physical silver it holds; historically this discount has been only 1-2%. In the absence of a remarkable decline in industrial demand, this kind of movement signals liquidity stress. Traders are describing this as a “six-sigma shock” or a statistical outlier. Especially since silver, unlike gold, is not a balance sheet stabilizer; it has a dual use as a speculative asset and an industrial commodity.

The simultaneous fall in the prices of other assets such as gold and bitcoin supports the liquidity thesis. During a liquidity crunch, investors sell what they can. There is speculation that massive shorts that went wrong broke the silver market, and there could be collateral damage at institutions that followed this path. At risk is the concept of precious metals as a safe haven asset, given recent volatility.

Here in Chicago, the CME Group raised COMEX margin requirements on these trades.

What happened last Friday? As Jim Bianco notes on X:

❝ Yesterday’s 19% discount to NAV broke the record set on 10/10/2008, the day the TARP was introduced during the Global Financial Crisis…It doesn’t mean we will automatically see a firm fail, but the silver market needs to correct itself quickly; otherwise, it probably will.

Market Reaction

In addition to speculation about Chinese industrial weakness, widespread liquidity issues, there are two confounding factors. The first was the announcement on Friday morning that Kevin Warsh would be President Trump’s nominee for the Federal Reserve Chair. He is neither a classic hawk nor dove, and is known to favor shrinking the Fed’s balance sheet, which means less quantitative easing and tighter financial conditions. The threat of war in the Middle East is also looming closer, as US military assets move closer to striking distance of Iran.

Friday’s shock may ultimately prove financial rather than structural. But volatility does not erase vulnerability. Silver now sits at the intersection of electrification, liquidity, and geopolitics — a small metal carrying outsized weight in modern industry.

The United States has labeled silver as a critical mineral, and markets are attempting to set its value. When silver moves, there could be multiple causes, and so in a volatile geopolitical environment, price variations should be expected. Still, the level of change is surprising. What remains uncertain is whether this episode reflects transient liquidity pressure or is an early signal of deeper structural change, especially in China. Noted with concern at the beginning of a potentially tempestuous week: Chinese EV maker BYD suffered a 30% fall in sales in January, as government subsidies came to an end.

Silver is Everywhere

Beyond the price action, however, is a growing realization of the importance of silver in 21st century life. Previously, silver’s principal use was as money. If you have an old silver quarter, it is now worth many times its face value. You still have silver in your pocket; it is now powers your mobile phone, sits within your laptop, and runs power through your car’s electrical systems.

The strength in the price of silver has coincided with increased usage in Chinese manufacturing. It is not merely a speculative phenomenon, but reflects sustained structural growth in industrial demand. While attention has focused on China’s dominance of rare earths, China remains dependent on imported silver to power its critical export machine. Yet this is not the first time China’s economic system has been closely tied to silver. Over the past century, silver’s role in China has been transformed: it once served as the foundation of the country’s monetary standard.

Silver and China in the 20th Century

In the early 20th century, China was one of the few remaining countries whose monetary system was tied to silver. The rest of the world was on gold. After falling for several years, the global price of silver began to rise sharply in 1931, triggered by Britain’s decision to depreciate the pound against gold, followed by the US doing the same in 1933 with the dollar. A year later, the United States passed the Silver Purchase Act2 a measure driven largely by domestic political pressures that aimed to raise further silver prices.

Milton Friedman and Anna Schwartz interpreted this episode of rising silver prices as a reversal of China’s earlier insulation from global deflation.3 Weak silver prices initially functioned much like a depreciated currency, supporting exports. They believed, as was the official view at the time, that the subsequent appreciation of silver and silver outflows led directly to a contraction in the money supply and deflation, putting huge strains on the Chinese economy.

Later research by economists Loren Brandt and Thomas Sargent, based on evidence that was not available to Friedman and Schwartz, challenged the role of US silver purchases in China’s economic difficulties in that era.4 They offered a more nuanced interpretation:

❝ Recently compiled evidence about events in China are described and interpreted in light of a model of free banking under a commodity standard. Our interpretation is that the U.S. silver purchase program did not set off a chain of bad economic events which eventually forced China off of silver and onto a fiat standard. Rather, China was forced off silver by its own government, which wanted to make itself the beneficiary of the capital gain associated with the appreciation of silver and to relieve itself of the restrictions that are imposed on government finance by a commodity standard.

Brandt and Sargent document that the money supply did not collapse. The decline in silver was more than offset by increases in banknotes that were convertible on demand into silver. The promise of convertibility was maintained over the entire episode. In their interpretation, China’s departure from the silver standard was a political decision by the Kuomintang government, not a collapse imposed from abroad. It gave the KMT greater fiscal flexibility and room to run deficits, and allowed it to capture a significant portion of the appreciation in silver through a nationalization program highly favorable to itself.

This fascinating episode in monetary history remains debated among economic historians, but it illustrates a broader principle: when a nation’s monetary or industrial system is closely tied to a globally traded metal beyond its policy control, there can be domestic consequences. However, causation is not so easily determined without hard evidence.

Silver is no longer China’s monetary standard, but it now critical to its industrial power base in solar energy, automobiles, and electronics. Dependence on silver is a vulnerability in ways that could not have been imagined almost a century ago.

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Iran Update: econVue Panel Discussion (Replay)

As war looms and events unfold in the Middle East, econVue convened a Chicago-based group of economists, commentators, and so…

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If you missed our virtual deep dive by leading thinkers on one of the most consequential financial innovations of our time, enjoy this replay. Want to learn more? Recommended readings from our panelists are listed below.

📌 Subscribe by Jan 20th to secure your subscriber discount and attend our next panel discussion on Iran on Mon Jan 19th at 10 am CST.

The Core Question

Are stablecoins reshaping the plumbing of money and banking, and what does that mean for traditional banks, regulators, and everyday payments?

Stablecoins — digital tokens pegged to fiat currencies — have rapidly moved from crypto fringe to systemically relevant financial infrastructure, offering improved settlement times and new payment capabilities. In 2025, regulatory breakthroughs such as the GENIUS Act established the first US federal framework for stablecoin issuance under trusted collateral rules.

At the same time, stablecoin issuers have become major holders of US Treasuries, giving them real influence in safe-asset markets and placing them at the intersection of banking liquidity, monetary policy, and global payment systems. As banks, fintech firms, and regulators increasingly converge around stablecoins, early 2026 the right moment to take stock of what comes next.

↳ Panelists

SPECIAL GUEST

Gina Pieters

Gina Pieters is and economist and consultant specializing in research on the digital economy and cross-border macro and financial policy issues related to decentralized digital assets, financial infrastructure, stablecoins, and CBDCs.

^📍Chicago

On the integration of stablecoins and the global banking system

^📍Chicago

On the functioning of stablecoins and payment systems

^📍Chicago

Moderated by

Editor-in-Chief

^📍Chicago

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Editor’s Note:
In this Vuepoint, Narimon Safavi looks past familiar political narratives about Iran and focuses instead on the economic pressures and strategic contradictions shaping the country’s cur…

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Editor’s Note: Stablecoin companies have become major holders of US Treasuries. Does this create systemic risk? Economist Karim Pakravan explores how traditional and non-traditional financial systems…

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Guest: Dr Ruby Wang
Title: Update on the Chinese Health Care System
Host: Lyric Hughes Hale
Producer: Sam Fu
Recorded: Tues Dec 16, 2025 · 60 minutes

Our last podcast of the year is about a subject that is close to my heart: the Chinese health care system. And I cannot think of a better person to discuss this topic with than Dr Ruby Wang, speaking to us from London.

Speaking of health, you might be able to tell that I was a little hoarse from a cold. but I am glad that I (hopefully) got that annual winter experience over before the new year.

If you have time over the long holiday weekend, I think you will enjoy this conversation as much as I did. A peaceful, prosperous, and yes, healthy New Year to all of our subscribers!

💬 𝓁𝓎𝓇𝒾𝒸

🎙️ Host of the Hale Report®

📍Chicago

In Episode 76 of The Hale Report® Lyric Hughes Hale speaks with Dr Ruby Wang about how China’s health care system actually works—its strengths, fragilities, and contradictions—and what it reveals about state capacity, trust, and notably, global risk.

About Ruby Wang

Ruby Wang is a UK-trained physician and global health strategist focused on China’s health care system and its global implications. She is the founder of Lintris Health, a cross-border health care and life sciences advisory firm, and the author of China Health Pulse, a Substack newsletter and podcast.

Born in China and raised in the UK, Dr Wang brings a rare cross-cultural perspective to how healthcare, technology, and geopolitics intersect. She trained in medicine and neuroscience at Cambridge University and later earned a master’s degree in health and technology policy at Tsinghua University as a Schwarzman Scholar. She has worked with the UK government and the United Nations in China and is currently an Honorary Fellow at the Asia Society Policy Institute.

Why This Conversation Matters Now

China’s rise has been analyzed through many lenses—trade, technology, military power, and demographics. Yet one critical system remains deeply misunderstood in the West: health care.

Over the past decade, China has undertaken one of the fastest health care transformations in modern history, integrating digital platforms, data-driven medicine, biotech innovation, and state capacity at extraordinary scale. It has done so while confronting rapid aging, declining birthrates, a rising incidence of chronic disease, and intensifying geopolitical strain.

🎤 Key Moments

🔑 Takeaways

In this 60-minute conversation, Lyric Hughes Hale and Ruby Wang discuss:

• Why Western assumptions about China’s health care system lag reality

• Speed, scale, and state capacity—and why they matter

• Innovation alongside inequality in China’s rural–urban divide

• Doctors under strain: incentives, burnout, and patient violence

• Who really pays for care—and why “universal coverage” isn’t free

• Privacy, data, and collectivism in medical decision-making

• AI, biotech, and China’s growing role in global health care innovation

• COVID as a stress test—and the lessons still unlearned

• Pharmaceutical supply chains, decoupling risks, and global cooperation

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💬 After we finished recording, our producer Sam Fu, who, like our guest is also a medical professional, Sam and Ruby had a wonderful conversation about the differences between the US and Chinese hospital systems. I wish we had recorded that discussion as well, but let me take this opportunity to thank both Sam for all he does for the Hale Report throughout the year, and Ruby for joining us.

In Closing: Health Care is More than a Sector—It is a Lens

One point runs through this entire conversation. China’s health care system is neither a dystopia nor a miracle. It is fast, hypercompetitive, technologically ambitious, and capable of operating at enormous scale—but it is also uneven, underinsured, and under intense social pressure.

Understanding that tension matters. It explains why doctors are under strain, why competition becomes corrosive, and why global cooperation, whether on pandemics, biologics, or supply chains, is far more complicated than it appears from the outside. And very hard to unwind.

Health care is one of the clearest windows we have into how China governs, how society absorbs stress, and how global risk travels. And if we don’t understand that system as it actually exists rather than as we imagine it, we risk misunderstanding far more than medicine.

The Holidays have arrived—beyond family and celebrations, a time for reflection about the past, and planning for the future. I am happy to share my thoughts about China’s economy with…

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