Welcome to "The world, simplified", a weekly show that will break down some of the biggest developments in finance and economics that are shaping our world.

You can listen to the podcast on Spotify, Apple Podcasts, or wherever you get your podcasts and videos on YouTube.

In this episode, we break down two major stories reshaping our world:

• The Chip War: US vs China

• BRICS: A New World Order?

The Chip War: US vs China

Let's start with a question: What’s the most essential piece of technology in your life? You might think of your smartphone, laptop, or car. But what if we told you that, hidden inside all those devices, there’s something even more important—a tiny, powerful chip called a semiconductor. These small chips are in everything, from the smartphone in your pocket to the car in your driveway, from the data centers that keep the internet running to the supercomputers driving new breakthroughs in artificial intelligence. Semiconductors are the invisible engines powering modern life.

But now, these tiny chips are at the center of a major rivalry between the world’s two largest economies: the US and China. This story brings together technology, global politics, innovation, and economic influence—and it’s a story that could shape the future of our world. So join us as we explore the journey of semiconductors, from their roots in the Cold War to today’s race for technological dominance, and take a look at what could happen if the delicate balance of global chip production is disrupted.

Segment 1: What Are Semiconductors and Why Are They Important?

Let’s start with the basics: What exactly are semiconductors, and why do they matter so much? Imagine you want to control the flow of electricity—like turning it on, off, or even controlling how much flows through. Semiconductors are special materials that can do just that. They’re not quite like copper, which easily lets electricity flow, and not like rubber, which blocks it completely. Semiconductors sit in the middle, allowing for precise control of electrical signals. This control lets us build 'switches,' which are essential for computers because they allow computers to process information and make decisions.

The story of semiconductors began in 1947 at Bell Labs when the first transistor was invented. A transistor is basically a tiny switch that controls the flow of electricity in electronic devices. Computers contain millions of these transistors, much like our brains have billions of neurons. Before transistors, computers were huge, clunky machines filled with vacuum tubes that were inefficient, unreliable, and sometimes as big as a room. The invention of the transistor changed everything by replacing these vacuum tubes and making computers smaller, faster, and more reliable. Then, in 1958, Jack Kilby at Texas Instruments invented the first integrated circuit, which put multiple transistors onto a single silicon wafer. This innovation laid the groundwork for modern computers.

But semiconductors weren’t just important for gadgets like TVs and radios. During the Cold War, semiconductor technology became vital for national security. The U.S. government realized that stronger computing power could provide a critical edge in areas like missile guidance, radar, and space exploration. Integrated circuits, which are small circuits packed with many transistors, were used in the Apollo missions that took humans to the moon in 1969 and in the guidance systems of intercontinental ballistic missiles (ICBMs). The competition between the U.S. and the Soviet Union fueled massive government investment, speeding up the development of semiconductor technology.

By the early 1960s, the pace of semiconductor advancements skyrocketed. In 1965, Gordon Moore, one of Intel’s co-founders, predicted that the number of transistors on a chip would double roughly every two years, while the cost of computing would go down. He was more accurate than he could have imagined. This prediction, known as ‘Moore’s Law,’ guided the rapid growth of computing power and became a rule for the semiconductor industry.

Fast forward to today, and semiconductors are the brains behind nearly every modern piece of technology. They power smartphones, manage complex systems in electric cars, make artificial intelligence possible across industries, and are critical for defense technologies like self-operating drones and satellite surveillance. Semiconductors aren’t just parts of tech—they are the backbone of economic strength, national security, and military power. That’s why they’re so important—and why they’re at the center of a global competition.

Segment 2: How Are Semiconductors Made?

So, how are semiconductors made? It’s a blend of cutting-edge science and impressive industrial precision—a mix of chemistry, physics, and engineering that brings together expertise from around the world.

It all starts with silicon, one of the most abundant elements on Earth. Silicon is extracted from quartz sand and purified to an incredibly high level (99.9999% pure). The purified silicon is then melted, cooled into large cylinders called ingots, and sliced into thin discs known as wafers. Each wafer will eventually hold hundreds or even thousands of tiny chips.

Next comes one of the most intricate steps—photolithography. Imagine trying to draw an extremely complex circuit on the wafer, but at a scale so tiny that it’s measured in nanometers. This is done using ultraviolet light in a process called Extreme Ultraviolet (EUV) Lithography. Light passes through a mask, like a stencil, and projects patterns onto the wafer, creating billions of tiny transistors that act as switches. This process is so precise that each detail is smaller than a single red blood cell.

The machines that make this possible—called EUV lithography machines—are built by ASML, a company based in the Netherlands. Each machine costs around $200 million, has more than 100,000 parts, and takes years to assemble. These machines aren’t just expensive; they’re critical. Without them, making the most advanced chips used in AI, smartphones, and high-tech military gear wouldn’t be possible.

After photolithography, the wafers go through a series of additional steps, like etching, doping, and layering, to create multiple levels of circuits that all connect. Every step takes place in a cleanroom—an environment that is 10,000 times cleaner than a hospital operating room—because even a tiny speck of dust can ruin a wafer worth millions. Finally, the wafers are cut into individual chips, tested for quality, and packaged. It’s a months-long process that involves thousands of people and facilities spread across different countries.

Segment 3: The US-China Rivalry Over Semiconductors

This brings us to the heart of our story: Why are semiconductors such a big deal in the rivalry between the United States and China? To understand this, we have to recognize what semiconductors really represent. They’re not just components in our gadgets—they’re the backbone of technological power. Whoever controls semiconductors holds the key to the future of AI, defense, and economic influence.

For decades, the United States has led the way in semiconductor innovation, with companies like Intel, Texas Instruments, and Qualcomm pushing chip technology forward. But China has also recognized the critical role of semiconductors and has invested heavily to catch up. Through the Made in China 2025 plan, China aims to become self-sufficient in producing semiconductors. Since 2014, China has spent billions—around $47 billion—through a program known as the ‘Big Fund’ to strengthen its own chip-making industry.

However, China faces a major obstacle—it can’t produce the most advanced chips. To make chips at 5 nanometers or smaller, you need EUV (Extreme Ultraviolet) lithography machines, which are only made by ASML, a company in the Netherlands. The United States has pressured ASML and its allies to stop selling these machines to China, blocking China’s access to the technology needed to create the world’s most advanced chips.

To complicate matters further, the U.S. has imposed strict export restrictions on Chinese companies like Huawei and ZTE, preventing them from accessing the latest chips. These companies were poised to lead in building 5G networks worldwide, but these U.S. restrictions have severely slowed them down. This isn’t just about business; these chips are also used in military and surveillance systems, which is why the U.S. considers this a national security issue.

In response, China has turned to alternative methods, including espionage and innovation in less advanced technology areas. Reports suggest that China uses various tactics—from government-backed hacking to leveraging its citizens abroad—to try to acquire semiconductor technology. Despite these efforts, China still lags behind in producing advanced chips. The best Chinese factories can currently produce chips at 28 nanometers, far behind the cutting-edge chips made by companies like TSMC and Samsung.

Segment 4: Fabless Model and the Rise of TSMC

Now let’s talk about TSMC, the company at the heart of the global semiconductor supply chain, and how its rise fits into the bigger picture. In the early days of semiconductors, companies like Intel would both design and manufacture their own chips. But as technology advanced, making chips became incredibly expensive and complex. This led to the rise of what’s known as the fabless model.

In this model, companies like Apple, Qualcomm, and Nvidia focus solely on designing chips, while the actual manufacturing is handled by foundries like TSMC. By specializing in chip production, TSMC became incredibly skilled at one thing: making chips. Founded in 1987 with support from the Taiwanese government, TSMC has grown to dominate the market. Today, it produces 90% of the world’s most advanced processors right in Taiwan.

So, what makes TSMC so powerful? It’s their ability to produce the most advanced chips—those at the 5nm and 3nm levels—at a scale that no other company can match. Samsung in South Korea is the only company that comes close, but even they don’t have TSMC’s level of expertise in these cutting-edge chips. This makes TSMC—and by extension, Taiwan—a crucial part of the global tech supply chain, making Taiwan’s stability vital to the entire world.

Segment 5: What If China Invades Taiwan?

This brings us to one of the biggest “what ifs” in global politics today: What if China were to invade Taiwan?

Taiwan is at the heart of global semiconductor production. It’s not just a place with factories; it has an entire ecosystem needed to make chips. This includes highly skilled workers, a network of specialized suppliers, and infrastructure that provides everything from precision tools to materials. While other countries are working to build similar facilities, recreating this setup from scratch is extremely challenging.

If China were to invade Taiwan, this entire ecosystem would be in jeopardy.

The impact of such an invasion would be enormous. Think back to the chip shortage in 2021—car production halted, consumer electronics were hard to find, and the global economy lost around $240 billion in GDP. Now imagine a disruption on an even larger scale. It wouldn’t just be about gadgets; it would affect national defense, medical equipment, communications, and critical infrastructure worldwide. This is why the U.S. and its allies are working to spread out semiconductor production by investing in new facilities in places like the United States, Japan, and South Korea.

The U.S. is helping TSMC build new factories in Arizona through a $12 billion project aimed at reducing reliance on Taiwan. But building new semiconductor plants takes time—typically 3 to 5 years—and a lot of money. Until these new facilities are up and running, the global tech industry will remain heavily dependent on Taiwan.

Segment 6: The AI Race and US Restrictions

Another major reason semiconductors are so important is their role in artificial intelligence (AI). Advanced AI requires massive computing power, which comes from specialized chips like GPUs. Right now, Nvidia is the top company for AI chips, and these chips are manufactured by TSMC.

AI isn’t just about making our smartphones smarter; it’s about transforming entire industries, building autonomous military technology, and strengthening cybersecurity. The United States understands how crucial AI is for future dominance, so it has restricted the sale of these powerful GPUs to China. By limiting access to these chips, China’s progress toward leading in AI is slowed down. This is a strategic move to curb China’s strength in AI-driven military and economic technology.

In response, China is heavily investing in developing its own versions of these chips, but it still lags behind. The most advanced AI chips require extremely tiny transistors—down to 5nm or even 3nm. Since China hasn’t yet developed the capability to produce these advanced chips domestically, it faces a significant disadvantage in the AI race.

Segment 7: The Global Semiconductor Race and Investments

The global race for semiconductor leadership is in full swing, and it’s worth hundreds of billions of dollars. The U.S. CHIPS Act is pouring $52 billion into boosting U.S. chip production, while South Korea plans to invest a massive $450 billion by 2030 to strengthen its own semiconductor industry. Japan is also offering major incentives to reclaim its position as a key player in chip manufacturing.

Meanwhile, China is moving quickly, with 28 new fabs (factories) expected to be completed by 2025. However, most of these factories will focus on producing older, less advanced types of chips. This means that while China is increasing its production of basic chips used in appliances and cars, it still lacks the technology needed to produce the most advanced chips essential for AI and other high-tech industries.

The European Union has also jumped into the race, aiming to produce 20% of the world’s semiconductors by 2030. This effort includes partnerships with companies like Intel to build factories in Europe, highlighting the importance of semiconductors not only for technological progress but also for economic stability and national security.

Segment 8: Fun Facts and Surprising Stats

Before we wrap up this story, let’s take a look at some numbers to see just how crucial semiconductors really are. During the chip shortage of 2021, the global auto industry lost an estimated $210 billion in revenue, and 6 million fewer vehicles were produced worldwide because of a lack of chips. India felt the impact too. Car manufacturers couldn’t keep up with the demand for new vehicles for years, causing prices for new cars to rise by 50% in just five years. These chips aren’t luxury items—they’re essential, and their shortage slowed down the entire industry.

Building TSMC’s most advanced semiconductor factories costs over $20 billion each, and each EUV lithography machine—needed to make the world’s most advanced chips—has a price tag of $200 million. These machines are incredibly complex, requiring tens of thousands of parts from a global network of highly specialized suppliers to put together.

As we’ve seen, semiconductors are far more than just components in our gadgets—they represent power, innovation, and national pride. The fight to control chip technology is about more than just business; it’s about who will shape the future. And right now, the outcome of this battle could influence everything from our personal tech to global security. If the delicate balance of global chip production shifts, the effects will be felt across the world.

While the U.S. and China are squaring off over technology, there’s another important story playing out in the world of finance. Imagine a group of countries feeling left out of the current global financial system and wanting to create a new one—one that doesn’t revolve around the U.S. dollar or rules set by the West. That’s where BRICS comes in.

BRICS: A New World Order?

In October 2024, something unusual happened in Kazan, Russia. Vladimir Putin, the leader of a country isolated from much of the global financial system, hosted a summit that directly challenged the influence of the United States on the world stage.

Sitting alongside him were leaders from countries that together make up nearly half of the world’s population. This group was focused on finding new ways to do business and trade, separate from Western-dominated financial systems. This wasn’t just another international meeting—it was the first gathering of an expanded BRICS group, signaling a growing divide in how the global economy is organized.

Let’s take a closer look at what BRICS stands for today. It now includes 45% of the world’s population, accounts for 35% of the global economy (GDP), and produces 40% of the world’s oil. But what really makes it stand out is that BRICS represents growing frustration with the current global financial system, which many believe is structured to favor Western countries over others.

The journey of BRICS from an investment term to a major global alliance took time. In 2001, an economist from Goldman Sachs, Jim O'Neill, coined the term “BRIC” to describe four fast-growing economies—Brazil, Russia, India, and China.

After the 2008 global financial crisis, these countries turned BRIC into a real group to push back against Western dominance in the global economy. South Africa joined in 2010, turning it into BRICS. In 2024, Egypt, Ethiopia, Iran, and the UAE were added, driven by a need to counter Western control over the global economy—a push that accelerated due to the impact of the Russia-Ukraine war. This expansion underscored BRICS’ intention to reshape the balance of economic power.

To understand why BRICS matters, let’s compare it to Western-led organizations like the IMF and the World Bank. In these organizations, voting power is based on how much money each country contributes, giving the US and European countries significant control. For instance, the US holds 16.5% of the voting power in the IMF, enough to block major decisions. Now, consider the BRICS New Development Bank. Here, all founding members have equal voting rights, regardless of their size or economic power.

The G7, which includes the US, UK, France, Germany, Italy, Japan, and Canada, operates in a more formal way, with the US often taking a leading role. BRICS, on the other hand, is structured differently. It’s less formal, makes decisions by consensus, and rotates its leadership each year. While the G7 often works to promote similar policies across its member countries, BRICS focuses on respecting each member’s independence and avoiding interference in each other’s internal affairs.

However, this brings us to the internal conflicts within BRICS, which can make it seem less united compared to Western groups. For example, there is a significant rivalry between China and India. These two countries have serious border disputes, which even turned violent in 2020. They are also competing for influence across Asia, and their economic systems are very different—India follows democratic capitalism, while China has a state-controlled system. Despite these differences, they are expected to work together to reshape the global financial system.

The Middle East brings another layer of complexity. Iran and the UAE, both new BRICS members, have conflicting views on regional security. Iran’s nuclear program causes tension, while the United Arab Emirates maintains close military ties with the US, which Iran views as its main rival.

Ethiopia and Egypt, also new BRICS members, have a serious conflict over sharing the Nile’s water. Ethiopia’s Grand Renaissance Dam project has created major tensions between these two African nations.

Even among the original BRICS members, there are significant differences. Brazil’s democratic values don’t align with the more controlled, authoritarian systems in China and Russia. South Africa’s economy remains closely tied to Western countries, even as it tries to show support for BRICS. And Russia’s invasion of Ukraine has created uncomfortable dynamics, as other BRICS members try to stay neutral while still maintaining business ties with Russia.

Despite these differences, BRICS has made real progress in creating alternatives to Western institutions. The BRICS New Development Bank has already funded 96 projects, totaling $32.8 billion. The Contingent Reserve Arrangement provides $100 billion in emergency funds without the strict conditions often attached to Western loans. Trade between BRICS members is also beginning to shift toward their local currencies. For example, trade between Russia and China conducted in U.S. dollars dropped from 90% in 2015 to just 20% by 2023.

At the Kazan summit, BRICS announced BRICS Pay, a new system designed to replace SWIFT for international payments. If you’re wondering what SWIFT is, we’ve explained it in detail earlier. China’s Cross-Border Interbank Payment System (CIPS) is already processing over $50 billion daily. BRICS countries are also reducing their reliance on dollar reserves and now collectively hold more gold than the United States.

But replacing the dollar is much harder than it seems. The dollar’s dominance isn’t just because of America’s power—it’s built on strong advantages that are tough to match.

First, U.S. financial markets are incredibly deep and stable. The U.S. Treasury market alone is worth over $24 trillion and offers a safe, reliable asset that global investors and central banks depend on. No other market in the world can match its size and stability.

Second, the dollar benefits from what economists call ‘network effects.’ The more people use the dollar, the more valuable it becomes—similar to a widely spoken language. People learn English not because it’s necessarily the best, but because everyone else speaks it. Today, the dollar is used in over 80% of international trade transactions.

Third, there’s the legal and financial structure that supports the dollar. The U.S. has highly developed financial markets, strong property rights, and an independent legal system. When issues arise with dollar transactions, there is a clear legal process to resolve them. Building this level of trust has taken decades.

Consider China’s efforts to make the yuan more global. Even though China is the world’s second-largest economy, the yuan only makes up 2.5% of global payments. Why? Because China has strict controls on money leaving the country, and its financial markets aren’t fully open to foreign investors. India faces similar challenges with the rupee.

Even when BRICS countries try to trade using their own currencies, they face practical challenges. For example, if Brazil wants to trade with South Africa, they have to agree on which currency to use, manage exchange rate risks, and find banks that can handle the transaction. Let’s say Brazil sells something to South Africa and gets paid in South African Rand. Brazil can only use that Rand to buy something made in South Africa or find another country willing to accept the Rand. Using the dollar avoids these issues because there’s already a large and stable market for exchanging dollars.

Even the BRICS Bank, which was set up to reduce dependence on the dollar, still conducts most of its business in dollars—only about 30% of its loans are in local currencies. This shows how difficult it is to operate without the dollar, even for institutions that aim to do so.

Russia’s experience with Western sanctions also highlights this challenge. Even though Russia is largely cut off from the dollar-based financial system, it still prices most of its oil exports in dollars, even when selling to China. The global oil market is too deeply tied to the dollar to easily switch.

But dollar dependence isn’t the only hurdle. The BRICS Bank’s $32.8 billion in approved projects is small compared to the World Bank, which commits around $117.5 billion each year. BRICS payment systems are also fragmented—there isn’t a single unified system to replace SWIFT. Some BRICS members have even proposed creating a common currency, but that would require a high level of cooperation, which seems unlikely given their political differences.

At a basic level, many BRICS members don’t actually want to completely break away from the Western system. India has key security partnerships with the U.S., Brazil relies heavily on trade with Western countries, and the UAE hosts large U.S. military bases. Even China, while competing with the West, remains deeply connected to Western economies.

Expanding to BRICS+ also brings new challenges. Making decisions was already tough with five members; now, with nine, it’s even more complicated. Each new member comes with its own priorities and issues. The group now has to balance different interests across three continents while trying to keep everyone on the same page.

So, where is BRICS headed? The reality is that BRICS isn’t trying to replace the Western-led system but is instead building a parallel one. We’re moving toward a world with competing financial systems. Countries might use SWIFT for some transactions and BRICS Pay for others. They could borrow from both the World Bank and the New Development Bank and hold reserves in dollars, euros, and yuan.

This complexity brings both opportunities and risks. For developing countries, it means more options for funding and trade. For Western countries, it means they may have less leverage to use financial pressure as a tool of influence. For businesses, it means adapting to different systems and standards.

One thing is clear: the economic system created after World War II, centered on American financial power, is now facing its biggest challenge yet. Whether or not BRICS fully succeeds in creating an alternative system, the changes it is driving will shape the global economy for years to come.

Thank you for reading, do share your feedback in the comments and also spread the word by sharing with your friends.

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Welcome to “The world, simplified”, a weekly show that will break down some of the biggest developments in finance and economics that are shaping our world.

You can listen to the podcast on Spotify, Apple Podcasts, or wherever you get your podcasts and videos on YouTube.

In this episode, we break down two major stories reshaping our world:

• The Truth About Cyber Scams

• Big Financial Risks Around the World

You’ve probably heard about crypto scams and investment scams, or maybe even know someone who’s been a victim of cybercrime. To really understand how these scams work, we dove into a report from the United Nations Office on Drugs and Crime—and what we found was both fascinating and alarming, revealing just how big a threat this is to society. That’s exactly what we’ll cover in our first story.

But cybercrime isn’t the only challenge out there. Right now, there are some serious risks facing the global economy. To get a clear picture of these risks, we reviewed the Global Financial Stability Report (GFSR), which explains how the global financial system operates. In our second story, we’ll share the most interesting and impactful insights from this report.

Introduction to Transnational Organized Crime

Let’s start by talking about something that sounds like a cyber-thriller, but is very real. Around the world, new organized crime groups are gaining power—they’re smart, tech-savvy, and ruthless.

So, what is transnational organized crime? It’s basically crime that crosses borders. These criminal groups don’t just operate in one place; they span multiple countries. But why should we care? Because these crimes directly affect our daily lives, from our money to our safety. When we hear about people losing their life savings in an online scam or cryptocurrency being stolen, it’s often these groups behind it. Over the past five years, these crime groups have grown quickly, raking in up to $37 billion in 2023 alone. Just think—$37 billion is as big as some of the world’s largest companies.

These criminals operate like businesses, but instead of selling products, they sell lies, scamming innocent people on a massive scale. This is happening globally, and the impact is devastating for people who not only lose their money but also their sense of security. These scams have become a global nuisance, with a scale and reach that’s hard to imagine.

The Professionalization of Crime Syndicates

Now, here’s something even more surprising—these crime groups are extremely professional. They have offices, HR teams, and even training programs for their workers. They offer rewards and set performance goals for their teams. These groups have become so efficient that stopping them is a massive challenge.

In countries like Myanmar, Cambodia, and Laos, there are places like KK Park that look like tech parks but are actually heavily guarded compounds. People are lured in with promises of real jobs but are instead forced to scam others online under harsh conditions. These compounds are controlled by powerful figures and rented out to different criminal groups, each running its own illegal operations, like online gambling or cyber fraud.

These crime groups are also using advanced methods to recruit people, like posting polished job ads on LinkedIn and offering “exciting” jobs in Southeast Asia. Victims end up trapped in these compounds, forced to scam people under extreme conditions. This shows how organized, professional, and efficient these groups have become, which is why it’s important to understand the threat they pose.

Now, let’s dive into the different types of scams.

Types of Scams - Pig Butchering, Investment Scams, and Job Scams

Let’s dive into three common scams—Pig Butchering, investment scams, and job scams.

1. Pig Butchering Scam: One of the biggest scams making headlines today is called “Pig Butchering.” Despite the strange name, it’s extremely dangerous. Scammers spend months gaining a victim’s trust before introducing an “investment opportunity” that seems too good to be true. By the time the victim realizes it’s a scam, all their savings are gone.

   
   For example, a young professional in Singapore met someone on a dating app. They got along well, and over a few months, this new “friend” introduced them to an investment opportunity that looked amazing. Everything seemed legitimate, with realistic websites, fake testimonials, and even a fake customer service team. He invested over $100,000, or about ₹83 lakhs, only to find out it was all fake. The scammers disappeared, taking his money with them. The victim thought he was building a genuine relationship, which made the betrayal even more painful.

2. Investment Scams: Investment scams often promise high returns with little or no risk, preying on people’s desire for financial security. These scams look like real investment opportunities, usually in areas like stocks, cryptocurrency, forex, or real estate. Scammers even pose as representatives from well-known investment firms, using fake websites and professional-looking documents to gain trust.

   In one case, scammers impersonated a reputable investment company, promising guaranteed returns through a cryptocurrency platform. They showed victims a professional website, fake client testimonials, and even provided call center support to make the scam seem real. Victims could watch fake dashboards showing their “profits” growing, which encouraged them to invest even more.

   Eventually, the scammers vanished, leaving the victims with significant financial losses.

3. Job Scams: Job scams are especially harmful because they target people’s hopes and dreams. Scammers post fake job ads on legitimate job sites, promising high-paying positions in other countries. Victims often travel to Southeast Asia, where they’re trapped in locked compounds, their passports confiscated, and forced to work.
   

   For example, a young man from India was promised a well-paying IT job in Cambodia. When he arrived, his passport was taken away, and he was forced to work 14-hour days scamming people online. The conditions were terrible—crowded sleeping quarters, limited food, and constant threats from armed guards.

   Although he eventually managed to escape, many others are not as fortunate. In some cases, the scammers demand ransom from the families of those trapped, making the situation even worse. Families often have to sell property or take out loans to pay the ransom, but the criminals rarely intend to release the victims.

Now, let’s discuss how money laundering connects to all of this.

Money Laundering and Underground Banking

This is where things get even more complex. Criminal groups use something called “underground banking” to move money without using regular banks. It’s fast, efficient, and extremely hard to trace. Casinos, especially in places with loose regulations, are popular spots for these criminals to “clean” their money. They also use cryptocurrencies and unauthorized virtual asset services, which help them move billions of dollars under the radar.

One common method involves junket operators in casinos. These operators help criminals move large sums of cash, making it look clean through the casino’s records. This practice is prevalent in places like the Philippines, Cambodia, and Macau, creating a major challenge for law enforcement.

Another tactic is the use of cryptocurrency mixers—services that blend different users’ cryptocurrencies, making transactions nearly impossible to trace. Criminals use these mixers to launder millions, and because cryptocurrency operates outside regular banks, it’s very difficult for authorities to follow the money trail. Cryptocurrencies have become a major tool for crime groups, allowing them to move money anonymously. Fake crypto exchanges are also used to move and hide funds, making it hard for regulators to track where the money is coming from.

Why does this matter to us? Because these scams don’t just affect the direct victims—they harm entire economies. Criminals use their “dirty” money to buy property, driving up housing prices and making it harder for regular families to afford a home. These scams create real problems in our everyday lives.

Crime-as-a-Service

Now, let’s talk about something called “crime-as-a-service.” Organized crime is increasingly operating like a business. Imagine being able to hire a hacker, someone to launder money, or even someone to run a scam—just like hiring a freelancer. These crime groups have essentially created a market for crime. Specialists offer services like hacking or money laundering, all for a price, making it easier for even small-time criminals to act like big crime organizations. Instead of building everything themselves, they can simply “rent” the skills they need.

For example, underground data markets sell stolen credit card information, malware, and hacking services at a cost. Bulletproof hosting services provide criminals with the tools they need to carry out cyberattacks while staying hidden from the authorities. These services have made it easier for cybercriminals to get started and to specialize in different types of crimes, making their operations more effective and scalable.

The ability to outsource different parts of a crime helps criminal organizations grow and adapt quickly, which makes them incredibly challenging for law enforcement to tackle. Imagine trying to fight a network that is always changing and has access to the latest tools and skills, no matter where they are. That’s the real strength of crime-as-a-service.

Adoption of New Technologies - Deepfakes, AI, and More

If you think these crime groups are old-fashioned, think again. They’re adopting new technologies faster than anyone could imagine—often faster than law enforcement. Tools like generative AI, deepfakes, blockchain, and more have become essential weapons for these crime groups. These aren’t just buzzwords; they’re now powerful tools used to gain an edge.

• Deepfake Crimes: Deepfake scams are becoming more common, with criminals using AI to create fake identities that look and sound real. Imagine getting a video call from someone who looks and sounds like your friend, but it’s actually a deepfake designed to scam you. This tactic is now regularly used by crime groups.

For example, in Japan, a businessman lost over $200,000, or about ₹1.6 crores, after receiving a deepfake video call from someone who looked and sounded like his business partner. The fake partner claimed to urgently need money for a new deal, so the businessman sent the funds—only to find out later that his real partner knew nothing about it.

Another troubling example is the use of deepfakes to impersonate CEOs. Imagine being an employee who gets a call from your boss, telling you to transfer money to a new supplier immediately. Everything seems real—the voice, the sense of urgency—but it’s actually a deepfake. Criminals are getting increasingly skilled at using these tools to take advantage of trust.

• Generative AI for Phishing and Fake Profiles: Generative AI tools are now used to create phishing emails, scripts, and fake identities that make scams more convincing. These AI-generated profiles are used on social media to build trust with victims over time. Criminals can create fake profiles with detailed backstories, photos, and activities, making it almost impossible for people to tell the difference between a scam and a real person.

• Blockchain and Cryptocurrency: The use of blockchain and cryptocurrencies has transformed how criminal groups move money. Blockchain allows them to transfer funds globally while mostly hiding their identity. With unauthorized virtual asset services, these groups can launder millions with minimal risk of getting caught. Cryptocurrency mixers make tracing transactions nearly impossible, creating huge challenges for law enforcement trying to follow the money trail.

Why does this matter to us? Because technology isn’t just helping regular people—it’s also making things easier for criminals. These tools enable criminals to operate more effectively and stay ahead of the police. The more advanced these tools become, the more at risk we all are—from individuals to large companies.

Trafficking and Forced Criminality

Now we come to the darkest side of all this—human trafficking and forced labor. This might be the most shocking part of today’s story. These crime groups don’t just scam people; they also traffic them. Thousands of people from countries like India, China, and Malaysia have been lured into scam compounds with false promises, only to be forced into criminal work. They’re made to run online fraud operations and face brutal punishments if they refuse. In the last five years alone, around 200,000 people from at least 60 countries have been trafficked into these compounds.

Imagine being promised a good job, packing your bags, and flying to another country—only to end up trapped in a locked facility with no way out. You’re forced to scam innocent people every day. If you refuse, you’re beaten. If you try to escape, you’re punished. It’s a terrible reality, but it’s happening right now, all over the world.

In one case, a group of women from the Philippines was tricked into going to Myanmar with promises of high-paying jobs in customer service. When they arrived, they were taken to a heavily guarded compound and forced to work in online fraud. They were threatened that if they didn’t comply, their families back home would be harmed. It’s hard to imagine the fear and desperation they must have felt, but this is the reality for thousands of people caught up in these scams.

Closing Remarks

So, what does all this mean for us? These cybercrime groups aren’t going away anytime soon. They’re becoming more advanced, more organized, and more dangerous. But knowledge is power. Understanding how they operate and knowing how to protect ourselves is the first step in fighting back. Whether it’s recognizing the signs of a scam, being cautious about job offers that seem too good to be true, or just understanding the scale of these operations—we can all play a part.

Now, cybercrime isn’t the only threat we’re facing. Let’s zoom out and talk about some of the biggest risks threatening the global economy today—and why they matter to us all.

Big Financial Risks Around the World

The Global Financial Stability Report (GFSR) is published twice a year by the International Monetary Fund (IMF) to check how stable the world's financial markets are. Most reports from international agencies can be a bit dry, but this one is different. If you're interested in understanding how the global financial system really works, it’s worth a look.

The report is hundreds of pages long, but don’t worry—we’ve gone through it so you don’t have to. What caught our attention were the different risks the IMF is keeping an eye on. Speaking of risks, it brings to mind a quote by Morgan Housel: “The biggest risk is always what no one sees coming.” But it’s also crucial to pay attention to the obvious risks we can see right in front of us.

Sovereign Debt Risk

Let’s start with sovereign debt risk.

So, what is sovereign debt, and why does it matter?  

Sovereign debt is the money that countries borrow to pay for things like healthcare, education, and infrastructure. Think of it as the government’s credit card—used to cover costs now, with a promise to pay it back later.

Problems start when this debt grows too large, making it difficult to pay back. Imagine maxing out your credit card and struggling to make even the minimum payment—countries can face similar challenges. There's a big difference, though, between how rich and poor countries handle debt. Wealthier nations like the United States or Japan borrow in their own currencies, allowing them to print more money if needed. For example, Japan has a debt of over 260% of its annual economic output (GDP), but because they borrow in yen (its currency), they have ways to manage it.

The U.S., with debt exceeding $32 trillion, can still borrow at low interest rates because the U.S. dollar is trusted worldwide. On the other hand, emerging countries like Argentina or Ghana don’t have that advantage. They often borrow in U.S. dollars because investors don’t fully trust their local currencies. Argentina's debt is about 90% of its yearly economy, and it couldn’t make its payments again in 2024—the ninth time it has defaulted. Ghana’s debt is around 80% of its economy, and high interest rates make it even harder to keep up with payments.

The real challenge for these countries is that when U.S. interest rates rise, it becomes more expensive to pay back loans in U.S. dollars. Imagine if the interest rate on your credit card doubled—suddenly, making the monthly payment would be much tougher. This is what many countries are experiencing, which means they have less money left for essential services like schools, hospitals, and infrastructure.

Smaller economies, including Zambia, Sri Lanka, and Ghana, are also struggling with high borrowing costs. In 2024 alone, they’re due to pay around $4 billion in debt, with $13 billion in 2025 and $14 billion in 2026. Around 60% of this debt is held by countries paying steep interest rates of 10% or more.

High U.S. interest rates force these countries to pay more to borrow, creating a tough cycle where they must raise taxes, cut spending, or borrow more just to stay afloat. The IMF estimates that about 60% of low-income countries are either struggling to pay their debts or at high risk of falling into this struggle. More than 20 countries are already in the process of defaulting or restructuring their debts, showing just how widespread the sovereign debt problem is. This has a real impact on people’s daily lives—governments have to cut spending on things that matter to citizens to cover their loan payments. Schools close, healthcare becomes less accessible, and important infrastructure projects are paused.

These cutbacks, often called austerity measures, can lead to protests and unrest because it’s the people who feel the impact. In recent years, we’ve seen the effects of debt crises firsthand. In Sri Lanka, massive protests erupted in 2022 as the government struggled to pay back its debt, causing severe shortages of fuel, medicine, and food. This shows how quickly a debt issue can turn into a crisis affecting people’s most basic needs.

Corporate Debt

Now, let’s talk about corporate debt—the money companies borrow. Just like countries, companies take out loans to grow—building new factories, hiring more workers, or creating new products. Right now, though, corporate debt is at an all-time high, around $88 trillion worldwide. In the United States alone, companies owe close to $12 trillion, and interest rates on that debt have doubled compared to a few years ago. This means companies that borrowed heavily when interest rates were low are now struggling to make higher payments. For companies with lower credit ratings (often called 'junk' bonds), about 4.8% are currently unable to pay back their loans. That’s nearly 5 out of every 100 companies in this category.

Companies in emerging markets are in an even tougher spot. They borrowed when rates were low, but now that rates have gone up, their interest costs have risen sharply. The average interest coverage ratio—which measures how easily a company can pay its interest—has dropped from about 6 times the interest payment in 2020 to just 3.5 times in 2024 for risky companies. This means many are now struggling to make enough to cover their interest payments. The average refinancing rate for these companies has climbed to 5.5%, much higher than the previous rate of 3.5% on their existing debt.

This situation puts significant pressure on companies, especially those in emerging markets that borrowed at low, fixed rates before interest rates rose. Now, refinancing costs are high, and companies struggle to renew their loans without facing much steeper costs. In industries like retail and technology, this has become a major challenge. Retailers that borrowed to survive the pandemic are now burdened with higher interest payments, just as consumer spending has slowed.

The tech sector is also feeling the squeeze, particularly smaller companies without steady income, as venture capital has dried up, making loan repayments tougher. In Europe, companies face similar issues with rising borrowing costs, further impacted by the energy crisis due to the war in Ukraine. Industries like chemicals and manufacturing are especially strained, with the default rate for European companies sitting at around 3.5%, and sectors like car manufacturing and heavy industries under even more pressure from increased costs and supply chain issues.

This matters because when companies can’t pay their debts, they may have to cut jobs, stop projects, or even shut down. This slows the economy and impacts jobs and spending. For instance, if a major employer in a small town goes bankrupt, it’s devastating for the community—people lose jobs, local businesses lose customers, and life gets much harder for everyone.

Commercial Real Estate

Let’s shift to commercial real estate—like office buildings, shopping centers, and other business properties. The pandemic brought big changes to how we work, with many companies realizing they didn’t need as much office space because more people were working from home. As a result, demand for office space has dropped, and in cities like New York and San Francisco, office vacancy rates are now between 20% and 30%—almost double what they were before the pandemic. It’s not just office spaces; shopping centers are struggling, too. More people are shopping online, so many malls are having trouble keeping stores open, with some being repurposed or even abandoned.

Since 2020, the value of retail properties has dropped by about 15%. The main concern is that a lot of the loans for these properties are held by smaller regional banks. In the U.S., these smaller banks hold around 70% of all commercial real estate loans. If property values keep falling and landlords can’t pay back their loans, these banks could face big losses, making it harder for them to lend to small businesses and people, which would slow down local economies. For example, if property values drop by 10%, it could lead to a 15% decrease in how much these banks can lend, leaving less money available for businesses wanting to grow or people looking to buy homes.

Commercial real estate prices in the U.S. have fallen by 12% over the past year, with the office sector experiencing a big 23% decline. Nearly $1 trillion in commercial real estate loans will be due between 2024 and 2025, with a funding gap of $300 billion. The number of overdue office property loans has risen above 8%, up 3% from last year, signaling more stress in the market. This drop in property values is especially tough for smaller regional banks, which don’t have the resources of large national banks.

If these regional banks face significant losses, they may not survive without government help or merging with other banks. This could affect the communities they serve—not just by reducing available loans but also by impacting jobs and local investments. In 2008, falling property values caused many banks to fail and led to a credit crisis—a situation regulators are keen to prevent from happening again.

Nonbank Financial Intermediaries (NBFIs)

You may not have heard much about Nonbank Financial Intermediaries, or NBFIs, but they play a huge role in today’s financial system. NBFIs include institutions like hedge funds, private equity firms, and insurance companies. Unlike traditional banks, these institutions aren’t as heavily regulated, which gives them more flexibility—but also adds more risk. Since the 2008 financial crisis, NBFIs have grown significantly and now manage over $240 trillion in assets globally. The reason for this growth is that after the 2008 crisis, regular banks faced stricter rules and couldn’t take on as much risk. NBFIs stepped in to fill that gap.

While NBFIs can help spread financial risk and provide funding, they also introduce new risks. The challenge with NBFIs is that they operate largely in the shadows, often referred to as the “shadow banking” system. When they face trouble, it can catch everyone off guard, and these problems can spread quickly. Due to a lack of oversight, risks can build up without anyone noticing until it’s too late. If NBFIs continue to grow unchecked, the next financial crisis could easily start from this hidden part of the financial system, leaving regulators with little time to respond.

The Carry Trade Unwind

Now, let’s talk about something called the “carry trade.” Imagine borrowing money from a country where interest rates are really low—like Japan—and then using that money to invest in a country where interest rates are higher—like the United States. You make money on the difference between the low borrowing cost and the higher return. This is called a carry trade, and it can be very profitable—until something changes. In August 2024, we saw a “carry trade unwind.”

The Bank of Japan surprised markets by tightening its monetary policy, which made borrowing in yen more expensive. Investors who had borrowed in yen to invest in riskier assets suddenly had to reverse their trades. The result? The Japanese stock market (Nikkei) dropped by 12% in one day, and similar drops happened in other global markets. Within days, around $150 billion worth of carry trade positions were reversed, causing the yen to rise sharply against other currencies.

Hedge funds were hit especially hard. They had borrowed in yen and invested heavily in U.S. stocks, so when the yen got stronger, they had to sell their U.S. investments, causing prices to fall. The VIX, often called the “fear index” of the stock market, jumped from 16 to over 65—the biggest one-day increase since 1987. This carry trade unwind highlighted just how connected global financial markets are. A single policy change in one country, like Japan, can instantly affect financial markets around the world.

This situation is particularly concerning because many investors use leverage, meaning they borrow money to invest. Leverage can amplify both profits and losses, so even small changes can lead to big price movements, causing a cycle of forced selling and more instability. NBFIs played a significant role here as well. These institutions had borrowed yen to invest in assets like U.S. tech stocks and emerging market bonds. When they suddenly needed cash, they sold off their investments quickly, impacting markets everywhere.

Their rapid sell-off affected various types of investments, showing how fragile and interconnected the global financial system really is. One event can trigger a chain reaction that affects markets worldwide.

High Asset Price Valuations

Let’s talk about asset price valuations. Recently, global stock markets have climbed significantly, driven by hopes of a smooth economic recovery. But even with solid economic growth and strong earnings, stock prices still seem high in many regions. This has made high asset prices a significant risk to financial stability.

Since early 2024, Canada, China, and the United States have seen some of the biggest stock market gains. However, this upward trend was briefly interrupted in August when concerns about a possible economic slowdown led to a spike in market anxiety. The “Magnificent 7”—companies like Apple, Microsoft, Amazon, Google (Alphabet), Nvidia, Tesla, and Meta—continue to dominate the U.S. market, now accounting for about 30% of the S&P 500’s value.

While these tech giants have shown strong earnings, the market’s heavy reliance on them adds considerable risk. If any of these companies were to face significant issues, the entire market could become unstable because of their large influence. Currently, the “Magnificent 7” are trading at high price-to-earnings (P/E) ratios—Nvidia and Tesla, for example, have P/E ratios around 60, reflecting high expectations for future growth.

The S&P 500 is also trading at a P/E ratio above its historical average, currently sitting at around 26.28. This suggests that the market is priced with high hopes for earnings growth in the coming years. For valuation levels to return to normal by 2026, earnings for the S&P 500 and Nasdaq would need to grow by about 25% and 30%, respectively—growth rates that are much higher than current economic forecasts. If these optimistic expectations aren’t met, the market could face a sharp correction.

Meanwhile, stocks in emerging markets are trading at a much lower P/E ratio of around 14.9, which is within the typical range for these markets. This lower valuation suggests that while investors are willing to pay a premium for major U.S. tech companies, they remain cautious about growth prospects in emerging markets.

A sharp drop in asset prices could create widespread issues in the financial system, as institutions with large investments would face significant losses. This could lead to even more selling, affecting both developed and emerging markets, as global financial markets are deeply interconnected. Such a downturn could shake investor confidence and hurt economic activity around the world.

Interconnectedness of the Financial System

Finally, let’s talk about how interconnected the financial system really is. All the risks we discussed today—like government debt, corporate debt, commercial real estate, nonbank financial intermediaries (NBFIs), and the carry trade—don’t exist in isolation. In today’s global economy, everything is connected. Picture the financial system as a spider’s web: if you pull one part, the whole thing moves.

A powerful example of this interconnectedness is the 2008 global financial crisis. It started in the United States, where banks had heavily invested in mortgage-backed securities. When people started defaulting on these loans, the value of mortgage-backed securities crashed. Major U.S. banks suffered significant losses, and the crisis quickly spread to financial institutions around the world. European banks also held these securities or had close financial ties to U.S. banks, so the crisis wasn’t just contained in the U.S. The result was a severe credit crunch, leading to a slowdown in the global economy.

Similarly, if commercial real estate values in the U.S. keep falling, smaller banks that are heavily invested in commercial real estate could face serious losses. If these banks struggle, they might stop lending to small businesses and individuals, hurting local communities. When banks reduce lending, economic growth slows down, leading to higher unemployment and less consumer spending. This chain reaction shows how problems in one part of the financial system can spread to others.

The carry trade unwind we talked about earlier is another example of this connection. When investors suddenly pulled out of yen-funded investments, it wasn’t just Japan that was affected. The sell-off spread across global markets—stocks, bonds, and even safe assets were impacted. Because global markets are so interconnected, a single policy change by the Bank of Japan led to increased market instability worldwide.

Nonbank Financial Intermediaries, or NBFIs, add another layer of complexity. Hedge funds and private equity firms are closely tied to the broader financial system. When NBFIs need to sell assets quickly—like during the “dash for cash” in March 2020—they can create massive disruptions in financial markets. This “dash for cash” was sparked by a rush of investors selling assets during the COVID-19 pandemic to hold cash. Investors sold everything—from stocks to even “safe” assets like government bonds—just to have cash on hand. This panic led to sharp price drops across markets, forcing central banks to step in to stabilize things. This event showed how quickly fear can spread through the financial system, especially when NBFIs rapidly sell off assets.

These sell-offs push prices down, hurting other investors and creating panic, which leads to further falling prices and more sell-offs. The key point from recent analysis is that while short-term financial risks seem manageable, medium-term risks are higher because of weaknesses building up in the financial system. Low borrowing costs in recent years have helped keep immediate risks down, but they’ve also encouraged excessive risk-taking and borrowing, which can lead to bigger problems down the road.

While market stability might look calm now, underlying economic uncertainties mean that sudden shocks could cause significant instability in the financial system. This is why regulators and investors need to stay vigilant as these risks accumulate over time. The main takeaway is that the global financial system is deeply interconnected. Problems in one area can quickly spill over into others. This is why regulators work so hard to maintain stability—not just to prevent a single crisis but to stop a chain reaction that could lead to a major economic downturn.

Welcome to "The world, simplified", a weekly show that will break down some of the biggest developments in finance and economics that are shaping our world.

You can listen to the podcast on Spotify, Apple Podcasts, or wherever you get your podcasts and videos on YouTube.

In this episode, we break down two major stories reshaping our world:

• The Trigger: Antitrust Lawsuits Against Google and Visa

• Chokepoints and Weaponized Interdependence

The trigger: Antitrust lawsuits against Google and Visa

You probably use Google’s services more than once in every waking hour. If you're looking something up, you likely "Google" it. To communicate, there’s Gmail. For entertainment, there's YouTube. If you’re finding your way somewhere, Google Maps is your go-to.

On the other hand, if you’re big on using cards for payments, Visa is likely your main link to the world of shopping and transactions.

We depend on these companies for much of our daily life. So, what happens if these companies start taking advantage of that reliance?

This is the big question the American legal system is grappling with right now. In recent years, the U.S. Department of Justice has filed two major antitrust lawsuits against Google — and it has already lost one. These cases might fundamentally change how Google operates. Visa, meanwhile, has also been sued for allegedly blocking competition in the debit card business.

Today, we’re diving into the core of it all — why these lawsuits are happening and why they matter to you.

A World of mega-businesses

Our world is run by mega-businesses. We rely on companies that are sometimes larger than entire countries to handle big parts of our daily lives.

Here are just a few examples:

• Every time someone swipes a card, there’s about a 60% chance that Visa is processing the transaction behind the scenes.

• Of every ten rupees spent on digital ads worldwide, seven go to either Google or Meta.

• One-third of the world’s cloud market — the backbone of the internet — is controlled by Amazon.

And the list goes on.

There may be no other time in history when so few companies have controlled so many parts of our lives — from how we communicate to how we pay to how we work.

These companies have certainly made life more convenient, but they've also made us more vulnerable. From important documents to personal details, they hold a lot of information about us. And they often set the rules we have to follow. Think about it: if you disagree with Google’s privacy policy, what are your options? Can you really fight it, or do you have to go along with it?

Thankfully, there’s a part of the law that can stand up for us — antitrust law, the ‘people’s champion.’

What is antitrust, and why does it exist?

Antitrust laws make sure businesses compete fairly. They’re based on one simple idea: competition keeps businesses in check. If customers can easily switch to a competitor, businesses have to work hard to keep them happy.

The problem today is that many big businesses don’t have any real competition. If you’re not a fan of YouTube’s membership model, for instance, there’s nowhere else you can find millions of videos on every topic imaginable. If you feel that Instagram is designed to hijack your attention, there’s still no other platform where you can keep up with your friends in the same way. We’re essentially trapped, which gives today’s mega-businesses a lot of power.

Antitrust laws aim to prevent these imbalances. When a business becomes too powerful, antitrust laws step in to stop it from doing things that might harm customers or push out other competitors.

This is why these cases matter to all of us. While they’re happening in America, they could help level the playing field between companies like Google and the rest of us worldwide.

Antitrust: A brief history

Antitrust laws came about during a time much like ours when the big businesses of the day had a huge influence over people’s lives.

It was the late 19th century, and the U.S. economy was booming. Railroads were expanding, connecting the country from coast to coast and creating a unified national economy for the first time. During this "Gilded Age," American businesses grew on an unprecedented scale.

While this era was one of amazing growth, it was also one of major consolidation. Those who owned these companies held immense power over the American economy and politics.

Take John D. Rockefeller, for example. His oil refining company, Standard Oil, became infamous for its aggressive tactics — exploiting workers, buying out competitors, and lobbying for political influence. By the 1880s, after two decades of operations, Standard Oil controlled 90% of the U.S. oil refining market.

The rise of monopolies like Standard Oil set off alarm bells. Oil workers faced harsh conditions, small businesses struggled to survive, and consumers had fewer choices. Something had to change.

In 1890, Congress passed the world’s first modern antitrust law, the Sherman Act, to break up monopolies and prevent companies from teaming up to kill competition.

In 1911, this law was enforced against Standard Oil. The U.S. Supreme Court found the company guilty of using monopolistic practices to maintain its dominance and ordered it to break up. Standard Oil was split into 34 independent companies, many of which — like ExxonMobil and Chevron — went on to become major oil players in their own right.

For much of the 20th century, people believed that a healthy market was one with plenty of companies, so no single one could dominate. This idea came from the Harvard Structuralist School. Structuralists argued that big companies would inevitably use their size to block new competitors, limit innovation, and control prices — even if they didn’t immediately raise prices for consumers. These ideas heavily influenced antitrust law.

In the 1970s, however, a new perspective emerged from the University of Chicago. This “Chicago School” argued that large companies weren’t necessarily bad for competition. It claimed that big firms could even be more efficient than smaller competitors, offering better services at lower costs.

Instead of focusing on the number of companies in a market, the Chicago School argued that antitrust laws should focus only on consumer welfare. They claimed that consumers cared less about having many choices and more about keeping prices low. So, they argued, the government should only step in if a company’s actions directly hurt consumers by raising prices. This view became popular in the 1980s, leading to a more selective enforcement of antitrust laws.

As Big Tech companies like Google and Facebook began their rise, this narrow focus on prices shielded them from antitrust scrutiny. These companies offered services that were technically “free.” Since they weren’t charging consumers, it was hard to argue they were causing harm in the traditional sense.

But behind the scenes, these companies were growing into giants, gaining the power to shape entire industries — and they often used that power freely. Their rise went largely unchecked because regulators weren’t looking beyond price to consider their broader impact on digital markets.

The increase in markups and profit margins suggests that these firms are using their market share to boost profits.

Now, we find ourselves in a new Gilded Age, where a handful of massive companies hold huge influence over markets. On one hand, we benefit greatly from the services they provide, but on the other, their immense power raises concerns. It’s hard to even imagine a tech industry that isn’t dominated by a few key players.

This is why today’s antitrust battles are so important.

The case for greater antitrust scrutiny

Big Tech companies like Google, Amazon, and Meta have undoubtedly brought tremendous value and convenience to our lives. But there’s a big unknown: how might digital markets have evolved if they’d been more competitive from the start?

For over a decade, the digital economy has grown without the constant pressure of competition to keep these companies in check. Without rivals pushing them to innovate responsibly and protect consumer interests, these companies set the rules for entire markets, shaping how technology evolves. Imagine a world where those rivals existed:

• While Big Tech has driven groundbreaking innovation, with more competition, we might have seen even more diverse approaches to new technology and faster advancements.

• In a competitive market, different platforms could have handled issues like misinformation or polarizing content differently, possibly leading to a less divided online environment.

• If competition were stronger, some companies might have created privacy-first business models, giving users genuine choices that protect their personal information and the list goes on.

The true potential of these industries can only be realized when many companies are free to pursue their own paths. Right now, a few companies control the direction of entire sectors, limiting the diversity and benefits that open competition could bring. Greater antitrust scrutiny is key to unlocking these possibilities.

The complexities of digital antitrust

We’ve looked at the potential benefits of enforcing antitrust laws, but there are major challenges when it comes to suing digital companies. Antitrust laws were originally designed for an era of steel mills and railroads, not for digital empires built on data and free services.

1. For an antitrust case to succeed in court, it has to show that a company has caused harm. But it’s hard to prove “harm” when a company’s services are free. As long as digital companies provide something for consumers without directly charging them, it’s difficult to argue that they’re causing harm, no matter what their practices may be.
   

2. This is further complicated by the fact that, unlike traditional businesses that charge money, digital companies collect user data as their currency. People tend to treat their data very differently than they treat their money, so our current ways of defining consumer harm don’t quite fit.
   

3. Another challenge is that Big Tech companies operate globally, often beyond the reach of a single national regulator. Antitrust laws vary from country to country, making coordinated enforcement difficult.
   

4. And finally, these companies are also seen as strategic assets in the global economy, especially in competition with rivals from countries like China.

All these factors make digital antitrust enforcement far more complex than in the past due to which Antitrust Enforcement Cases Have Dropped Since the 1970s.

The Google cases: Search & Advertising

Let’s start by breaking down these two cases.

The first case centers around Google’s dominance in the search market, where it controls an astonishing 90% of global search traffic. How does Google maintain such a strong lead? Part of it comes from the billions of dollars Google spends each year—reportedly around $20 billion annually—to ensure it’s the default search engine on popular devices like Apple’s iPhones.

The U.S. Department of Justice (DOJ) argues that these deals effectively shut out competition. Competitors like Bing or DuckDuckGo can’t gain the same visibility when Google pays to be the default option everywhere.

Google argues that users choose its search engine because it provides the best experience. However, a judge recently ruled that these practices are anticompetitive, declaring Google a monopolist in the search market.

This ruling has led to several proposed remedies, each of which could dramatically change the search market:

1. Banning Exclusive Agreements: One option is to stop Google from making exclusive deals with companies like Apple. Imagine setting up your next device and being given a choice of search engines—Google, Bing, or DuckDuckGo.

2. Splitting Google’s Search Business: Another possibility is breaking up Google’s search business from its other products, like its advertising business or Android. This would prevent Google from tying its search engine to other services.

3. Data Sharing: Lastly, Google could be required to share anonymized search data with competitors. This would give other search engines access to similar data, making it easier for them to offer relevant search results and promoting fair competition.

Each of these remedies could significantly alter the search market, giving smaller competitors a fairer chance. However, it’s worth noting that Google will likely appeal, and these legal battles could take years to fully resolve.

The second major case against Google centers on its dominance in digital advertising, and things get even more complex here.

Google controls multiple layers of the ad tech ecosystem. It owns platforms like Google AdSense, which publishers use to sell ad space. It also runs Google Ads, the tool advertisers use to buy that space. And, on top of it all, Google controls Google AdX, the exchange where those ads are bought and sold. This setup gives Google an enormous amount of power—essentially making it the gatekeeper of digital advertising.

To put this in perspective, imagine a stock market where one company owns the exchange, acts as a broker for both buyers and sellers and even controls some of the stocks being traded. That’s essentially what Google has created in digital advertising.

The DOJ claims that Google uses this dominance to shut out competitors and force both advertisers and publishers to use its services, driving up ad prices and reducing transparency. This creates a market where small businesses and competitors struggle to compete, as Google controls nearly every part of the advertising process.

To address this, the DOJ is proposing that Google break up its ad tech business. By separating different parts of the ad ecosystem—such as the platforms where ads are bought and sold and the exchange where transactions occur—it could ensure that no single company holds all the power.

But, as with the search case, these legal battles will take time. Google is expected to appeal, so we may be looking at years of proceedings.

In both the search and advertising cases, the consequences could be enormous—not just for Google, but for the entire tech ecosystem. If these antitrust measures go through, they could reshape how we experience the Internet and how businesses operate in digital markets.

But Google isn’t the only giant facing regulatory scrutiny. Let’s turn our attention to Visa, a financial powerhouse whose dominance in the payments industry is now at the center of its own antitrust battles.

The Visa case: A gatekeeper of global transactions

Visa is more than just a name on the card you swipe. It’s a giant in the financial system, acting as a gatekeeper for most global transactions. With a network that processes trillions of dollars annually, Visa dominates the credit and debit card markets.

But Visa’s business model isn’t like a traditional bank. It doesn’t issue credit or hold deposits; instead, it operates as a payment network. When you use your debit or credit card, Visa handles the transaction and takes a small fee for each swipe. These interchange fees, paid by merchants to the banks and then split with Visa, make up a large part of the company’s revenue. So, in nearly every card transaction, Visa takes a cut.

The heart of the Department of Justice (DOJ) lawsuit is the claim that Visa is using its market dominance to stifle competition, especially in the debit card market. The DOJ alleges that Visa has created barriers to competition by controlling a large share of U.S. debit card transactions. In doing so, Visa has supposedly limited smaller networks and fintech startups from scaling effectively, locking them out of a market where Visa sets the rules.

One of the main tools Visa allegedly uses to maintain its dominance is exclusivity agreements. By requiring merchants and payment processors to route transactions solely through its network, Visa limits competing networks’ ability to grow. These restrictive measures make it challenging for smaller, PIN-based networks or new payment platforms to expand.

The DOJ argues that Visa’s practices effectively block competition, which could lead to higher fees for small businesses and, eventually, higher costs for consumers. Visa has also been accused of actively working to maintain its monopoly by making it difficult for newer, lower-cost payment systems to gain traction.

So, what might happen next? If Visa is found to be abusing its market power, we could see some major changes. The DOJ may require Visa to change its business practices to foster more competition in the payments industry, which could lead to lower fees for consumers and merchants alike. Much like the Google cases, the outcomes here could reshape the industry and change how we think about and interact with financial transactions in the future. However, there’s still a long legal road ahead.

Global antitrust efforts: The world takes on Big Tech

It’s not just the U.S. dealing with the dominance of companies like Google, Amazon, and Visa. Regulators around the world are facing the same challenge, each with its own approach. In particular, the European Union has been very active in addressing these tech giants.

The EU’s approach to competition law focuses on ensuring fair access and stopping gatekeepers—like Google and Apple—from abusing their dominant positions. This is why we’ve seen big fines against these companies in Europe and why the EU passed the Digital Markets Act (DMA). This legislation specifically targets companies with disproportionate power, preventing them from unfairly promoting their own services over those of competitors. For example, Google can no longer favor its own shopping services in search results over others.

In contrast, the U.S. has typically taken a hands-off approach to regulating Big Tech, focusing more on consumer welfare, particularly on keeping prices low. Since companies like Google, Facebook, and Amazon offer many services for “free,” it was challenging to justify antitrust cases under this framework. After all, how can consumers be harmed if they aren’t paying for the service?

But with growing concerns over privacy, misinformation, and the sheer market power of these companies, the U.S. has started to ramp up its antitrust efforts. Through these lawsuits and investigations, the government is now trying to rebalance competition.

So, why should this matter to you? Ultimately, it’s about choice and fairness. These powerful companies impact nearly every part of our lives—from what we see online, to the hidden fees we pay, to how innovation is shaped by their dominance. The choices you have, the services you use, and the costs you incur are all influenced by how these giants operate.

We’re at a pivotal moment in history in regulating some of the most powerful companies the world has ever seen. The decisions made in these antitrust cases could reshape not only the tech industry but also how we interact with technology itself.

Chokepoints and weaponized interdependence

Imagine a world where entire economies can be crippled—not by bombs or armies, but by controlling a single strategic resource or location. Picture the flow of oil, semiconductors, or global finance being turned on or off like a tap. This isn’t a movie plot but the fragile reality of our interconnected world.

Today, let’s talk about something that quietly shapes global markets, trade, and even our daily lives—chokepoints.

Chokepoints are critical pathways in global trade, and any disruption has immediate consequences. We’re going to explore how vital resources move through these chokepoints and how nations are increasingly using them as tools of economic warfare.

You might be wondering, "Why should I care about these chokepoints?"

Well, our global economy depends on keeping these chokepoints open. When one gets blocked, the impact is immediate and severe. For example, about one-fifth of the world’s seaborne oil passes through the Strait of Hormuz every day.

Now, imagine if there were a conflict in this narrow waterway, which is only 21 miles wide at its narrowest point. Oil prices would skyrocket globally, and we’d all feel the pinch at the gas pump.

The Taiwan Strait is another critical chokepoint—an essential route for global trade and home to Taiwan, a major semiconductor hub. If this chokepoint were blocked or attacked, it wouldn’t just delay the latest iPhone you ordered. Everything from washing machines to lifesaving medical devices could become little more than useless pieces of metal and plastic, left unfinished on factory floors.

And those are just two of the hundreds of chokepoints in the global economy.

We live in a world built on fragile connections, and these chokepoints are the weak links in that chain. They can be blocked, disrupted, or even weaponized. And this isn’t just a theoretical threat—it’s happening more and more as global tensions rise and the world becomes more fragmented.

Let’s take a look at some history to understand how we got here.

In the early 20th century, a British journalist named Norman Angell made a bold prediction. He argued that war between major nations had become pointless because of economic interdependence. His logic was simple: if countries were economically tied together, war would only harm their own economies along with their enemies’. After all, who would willingly set fire to their own house?

In a world where trade and industry were growing more global by the day, Angell’s idea made sense. Why would any rational nation destroy the very system keeping it prosperous?

Was he right? Just a few years later, World War I erupted, drawing in deeply connected nations like Britain, France, and Germany. The devastation proved Angell’s theory wrong—wars didn’t happen in spite of economic ties; sometimes, they happened because of them.

So what went wrong?

While economic connections can encourage peace, they also create vulnerabilities. Becoming too dependent on another country for resources or trade can pose serious risks. When those ties break, it can create severe problems for dependent nations, as World War I tragically demonstrated.

Fast forward to today, and the idea of interdependence has morphed into something even more dangerous. Welcome to the age of "Weaponized Interdependence." What does that mean? In simple terms, it’s when countries use others’ economic dependence against them as a tool of power.

Political scientists Henry Farrell and Abraham Newman coined this term to explain how, in our hyper-connected world, military force isn’t the only way nations exert control. Now, countries can weaponize the very systems that drive the global economy—trade, technology, and finance—to gain leverage over their adversaries.

When that happens, it can lead to chaos, as we’ll soon see.

So, what are the world’s most critical chokepoints, and why should we care?

Let’s start with natural chokepoints. These are narrow geographic passages connecting major waterways. With over 90% of global trade moving by sea, any disruption here could have massive consequences.

Take the Strait of Hormuz, for example. Picture an oil tanker departing from the Persian Gulf, a region that’s home to the world’s biggest oil producers, including Saudi Arabia, Kuwait, Iran, and the UAE. To deliver its cargo, the tanker must pass through the Strait of Hormuz, a narrow waterway just 39 kilometers wide at its tightest point, linking the Persian Gulf to the Arabian Sea. This strait is one of the most strategically crucial passages on the planet.

Why? Every day, around 21 million barrels of oil—roughly 20% of the world’s total supply—flows through the Strait of Hormuz. And it’s not just oil; 20% of the world’s natural gas also passes through here.

If this narrow waterway were blocked due to conflict, global oil prices would surge, sending shockwaves worldwide. The costs of everything—fuel, pharmaceuticals, fertilizers, food, and consumer goods—would spike.

This isn’t just hypothetical; ongoing tensions between Iran and Israel are increasingly putting the Strait at risk.

Another critical chokepoint is the Strait of Malacca, a narrow sea passage running between Indonesia, Malaysia, and Singapore. It connects the Indian Ocean to the South China Sea, with over 40% of global trade flowing through it. For major economies like China, Japan, and South Korea, 64% of their maritime trade passes through the Malacca Strait.

If the Malacca Strait were blocked, these economic giants would feel the impact almost immediately. Factories would run out of fuel, industries would grind to a halt, and the ripple effects would reach every corner of the global economy. Shortages, price hikes, and widespread disruption would follow, all because one narrow stretch of water was compromised.

Finally, there’s the Suez Canal, another chokepoint that often makes headlines.

Located in Egypt, the Suez Canal is a vital shortcut between Europe and Asia, allowing ships to avoid the long, costly journey around Africa’s southern tip. Around 12% of global trade, 7-10% of the world’s oil supply, and about 8% of global natural gas pass through this canal. To put that in perspective, one-third of all global shipping container traffic goes through this narrow waterway.

In 2021, we saw just how fragile this chokepoint could be when the Ever Given, a massive container ship, got stuck, blocking the canal for nearly a week. The incident led to an estimated $9 billion in losses per day, with more than 400 ships stuck waiting to pass through at the peak of the crisis.

Fast forward to November 2023, and the Suez Canal faced yet another challenge—this time linked to the conflict between Israel and Gaza. Houthi rebels, backed by Iran, have been targeting vessels in the Red Sea, near the Bab al-Mandab Strait—a crucial route for ships traveling between Europe and Asia.

As a result, many major shipping companies began redirecting their vessels around the Cape of Good Hope. This alternative route added 30% more travel distance or an extra 3,500 nautical miles. Traffic through the Red Sea dropped sharply, with container ship activity falling by 50-60% compared to previous years.

But not all chokepoints are physical. Some are production chokepoints—specific places where the world’s critical goods are made.

Take Taiwan, for example. It’s a small island, but it’s essential to the global economy. Taiwan produces over 90% of the world’s most advanced semiconductors and around 77% of the global market for integrated circuit manufacturing. One company in particular, TSMC (Taiwan Semiconductor Manufacturing Company), makes nearly 90% of the world’s most advanced chips. These tiny chips are the brains behind everything from smartphones to electric cars. Without them, much of modern technology simply wouldn’t function.

Imagine if Taiwan’s chip production were disrupted, either by natural disaster or rising tensions with China. This wouldn’t just delay your next phone; it would force entire industries to halt. Car manufacturers would struggle to meet demand, tech companies would face production delays, and prices for anything with a chip inside would skyrocket.

We got a preview of this scenario during the COVID-19 pandemic. Taiwanese chipmakers faced factory shutdowns and supply chain disruptions, leading to severe shortages worldwide. The automotive industry was hit especially hard. Companies like General Motors and Volkswagen had to pause production, losing billions due to chip shortages. This was just a glimpse of how crucial Taiwan’s semiconductor industry is to the global economy.

The United States, specifically North Carolina, is also critical due to its supply of ultra-pure quartz. This isn’t just any mineral; it’s essential for semiconductor manufacturing. Without ultra-pure quartz, producing advanced semiconductors would be impossible. In 2024, when Hurricane Helene hit North Carolina, mining operations were affected, raising concerns over quartz supplies for the semiconductor industry. Now, imagine a scenario where the U.S. and China are in conflict, and the U.S. stops exporting quartz to China. Such a disruption would cause chaos in the global semiconductor market, rippling through the entire global economy.

Now, let’s talk about China, a mega chokepoint for many resources. One of the most critical is its control over rare earth elements. These minerals are essential for everything from smartphones to military equipment, and China controls about 80% of the world’s supply. Rare earths are difficult to substitute, and back in 2010, during a territorial dispute with Japan, China briefly stopped exports of these vital minerals, creating chaos in Japan. It was a powerful example of how disruptive these chokepoints can be when weaponized.

And it doesn’t stop there. China also leads the market for lithium-ion batteries, controlling over 70% of global production capacity. As the world shifts toward electric vehicles and renewable energy, these batteries are becoming the backbone of green technology. Any disruption in China’s supply chains would have far-reaching consequences, not only for the electric vehicle market but also for the entire green transition.

Now, let’s shift our focus to something even more fundamental: food. In 2022, the world got a harsh reminder of just how fragile global food systems are when Russia invaded Ukraine. Together, these two countries account for nearly 30% of the world’s wheat exports. When the war disrupted their ability to export, global wheat prices soared by over 70%, hitting some of the poorest economies the hardest.

The impact wasn’t limited to food—the war also shook up the global fertilizer market. Before the conflict, Russia and Belarus made up 40% of the world’s potash trade. Potash, a potassium-rich mineral, is vital for plant growth and is primarily used as fertilizer to boost agricultural production.

After the invasion, global fertilizer prices spiked due to disruptions and sanctions against Russia and Belarus. This drop in supply led to fears of widespread impacts on farming, especially in developing countries that heavily rely on these imports.

The hardest-hit countries were poorer nations in Africa and the Middle East, which depend heavily on wheat imports from Russia and Ukraine. For these regions, it wasn’t just about rising food prices—it became a matter of survival as global food insecurity grew.

Now, let’s talk about something less visible but just as powerful: financial chokepoints. At the heart of this is the U.S. dollar—a tool that doesn’t involve missiles, armies, or bases, but banks.

The U.S. dollar became the backbone of the global financial system due to a mix of historical events and strategic choices. After World War II, the world needed a stable financial system to support post-war recovery. At the 1944 Bretton Woods Conference, the dollar was chosen as the global reserve currency, backed by gold. This system linked other currencies to the dollar, providing much-needed stability.

In 1971, however, President Richard Nixon took the U.S. off the gold standard, effectively decoupling the dollar from gold. From that point on, the dollar wasn’t backed by anything tangible; its value was linked to the strength of the U.S. economy. Despite this shift, the dollar’s global dominance continued to grow.

At the height of the Cold War, the U.S. was not only the world’s military leader but also its financial leader. As it became clear that control over global finance could be a powerful tool, the U.S. began to weaponize the dollar. Economic sanctions became a core part of U.S. foreign policy, allowing it to pressure adversaries without resorting to military action.

Understanding economic sanctions

Economic sanctions are penalties imposed by one country on another or specific individuals, aiming to deter or weaken them. Sanctions come in many forms: trade restrictions, asset freezes, bans from the global banking system, travel bans, and even technology blocks. The goal? To exert influence without firing bullets.

The U.S. has a long history of using sanctions to assert its power. One of the longest-running sanctions targets Cuba. After Fidel Castro nationalized U.S.-owned companies in 1960, the U.S. imposed a trade embargo to isolate Cuba from American goods and capital, aiming to weaken Castro’s regime. Over 60 years later, that embargo is still in effect.

But Cuba was only the beginning. During the Cold War, the U.S. ramped up sanctions against the Soviet Union and its allies, using economic penalties to counter countries aligned with communism. The goal wasn’t just to punish but to cut off adversaries’ ability to fund their military actions—all without a single shot fired.

Then came the terrorist attacks of 9/11, marking a turning point in how the U.S. viewed its financial power. The government realized that terrorist groups like al-Qaeda weren’t just using guns and bombs; they relied on complex financial networks to move money across borders, often through shell companies and hidden accounts.

The SWIFT network and financial tracking

This realization led the U.S. to use its financial control to combat terrorism, expanding its powers to track transactions, freeze assets, and investigate suspected terrorist financing. Central to this effort was the SWIFT network.

SWIFT is not a bank but a secure messaging system that allows banks worldwide to transfer money across borders. It’s essential to how modern banking functions. Being cut off from SWIFT is like losing access to the global financial system.

After 9/11, the U.S. started using SWIFT to track money flows related to terrorism. Here’s the catch: while SWIFT is a European organization, a copy of its data is stored on U.S. servers, giving U.S. authorities access to vast amounts of financial information worldwide.

This move wasn’t without controversy. European nations argued that the U.S. was overstepping and violating privacy. But despite the pushback, the U.S. had found a powerful new way to leverage its global financial influence.

Sanctions and SWIFT weren’t limited to tracking terrorist networks. Soon, they were used against entire countries. Take Iran, for example. In the early 2000s, the U.S. imposed strict sanctions on Iran by targeting its access to SWIFT, aiming to stop its nuclear program.

The impact on Iran was severe. Oil exports plunged, inflation soared, and unemployment rose sharply. With just a few decisions, the U.S. had effectively cut off one of the world’s largest oil producers from the global financial system.

The most dramatic use of sanctions came in 2022 after Russia’s invasion of Ukraine. The U.S. and its allies froze $300 billion of Russia’s central bank reserves and cut Russia out of the international banking system, making it nearly impossible for the country to stabilize its currency or fund its war efforts. It was a stunning display of the power of the dollar.

Imagine spending decades building up financial reserves as a buffer, only to lose access to them overnight.

While these sanctions have been effective, countries are increasingly wary of U.S. dominance over global finance. China and Russia are leading efforts to create alternatives to the U.S.-centric system, developing their own SWIFT-like networks and encouraging others to join them.

These systems are still in their early stages, but they signal a desire to break free from U.S. financial control.

So, where does this leave us?

The U.S. remains the gatekeeper of the global financial system, wielding the dollar to influence global politics without firing a shot. But as more countries are targeted by U.S. sanctions, they’re increasingly looking for ways to operate outside of the U.S.’s reach. This could lead to a more fragmented financial system, where power is less centralized.

To truly understand this concept of weaponized interdependence, it helps to look at a bit of history.

Let’s start with World War I. At the time, Britain was the dominant naval power, and it didn’t just use its navy for military operations. Britain turned its naval supremacy into an economic weapon by enforcing a blockade against Germany. This blockade wasn’t just about stopping military supplies—it aimed to cut off essential goods like food and raw materials that civilians needed to survive.

The effects were brutal. Germany’s civilian population suffered greatly, and by the end of the war, over 400,000 German civilians had died from malnutrition and related diseases. The blockade crippled Germany’s economy and pushed it closer to defeat.

But sanctions aren’t the only tools of weaponized interdependence. Trade wars play a role too. Take Australia in 2020: after calling for an international investigation into COVID-19’s origins, China responded by imposing tariffs on Australian wine, restricting coal imports, and slowing shipments of key agricultural products. The message to Australia was clear: “If you cross us, we can cause you serious economic pain.”

These examples show that wars aren’t always fought with weapons. Sanctions, blockades, and trade restrictions have become powerful tools in the global economy, causing damage that can be as devastating as bombs.

At the heart of modern economic warfare is the growing tension between the U.S. and China. As the world’s largest economies, their rivalry isn’t just about trade tariffs or currency disputes. This conflict could have far more serious consequences if it continues to escalate, with some experts even warning of the risk of direct confrontation. But instead of relying solely on traditional military tactics, both countries have learned to weaponize their global economic influence—though in very different ways.

For the U.S., economic warfare has traditionally revolved around its dominance of the global financial system. The U.S. dollar is the world’s reserve currency, giving America immense leverage. Since World War II, the U.S. has used sanctions as a primary tool, imposing financial penalties on countries that defy its policies. This power only grew after 9/11, as the U.S. incorporated the SWIFT system—the backbone of global financial messaging—into its financial strategy.

China, on the other hand, takes a different approach, relying more on its role in global supply chains and its massive domestic market. While China doesn’t use sanctions as frequently as the U.S., it uses its market access to punish countries or companies that challenge it. For example, when Australia called for a COVID-19 investigation, China responded by imposing tariffs on Australian goods.

A recent example of this approach is China’s export restrictions on gallium and germanium—materials critical for advanced semiconductor production. In 2022, China produced 98% of global gallium and 60% of germanium, giving it leverage over the global tech industry, especially as tech tensions between the U.S. and China continue to rise.

But resources and market access aren’t the only tools these giants use in economic battles. The U.S. has a history of leveraging international organizations to its advantage. For example, under the Trump administration, the U.S. threatened to weaken the World Trade Organization (WTO) by blocking the appointment of judges.

China, meanwhile, has been accused of using its Belt and Road Initiative (BRI) as a form of economic pressure. The BRI involves major infrastructure projects in developing countries, but critics argue that many of these projects lead to “debt traps”—situations where countries borrow from China, can’t repay, and end up giving up control of strategic assets. For instance, when Sri Lanka couldn’t repay loans for the Hambantota port, it had to lease the port to a Chinese company for 99 years. Similarly, countries like Djibouti, Kyrgyzstan, and Montenegro are dealing with unsustainable debt tied to Chinese infrastructure projects, raising fears that they, too, might lose control of key resources or territories.

In the end, both the U.S. and China are engaged in a high-stakes game of economic warfare, but they play it based on their unique strengths. The U.S. dominates financial networks and influences international organizations, while China uses its market power to pressure other nations. As these superpowers continue to weaponize their economic relationships, countries around the world find themselves caught in the middle, trying to navigate a web of economic dependencies that could shift at any moment.

This ongoing economic conflict between the U.S. and China isn’t just about trade policies or financial systems—it’s about power. And as both nations flex their economic muscles, the rest of the world is left dealing with the consequences of this new kind of warfare.

Now, let’s step back and look at how all these shifts in global power are shaping a more divided world—one that’s increasingly split into competing blocs. The consequences of this fragmentation could be far more dangerous than we realize.

Today, the world is splitting into distinct blocs—reminiscent of Cold War divisions, but with some key differences. After World War II, the world was divided into two main camps: the Western Bloc, led by the U.S., and the Eastern Bloc, led by the Soviet Union. Most countries were pressured to pick a side, though some chose a different route, forming the Non-Aligned Movement in the 1950s, with countries like India, Yugoslavia, and Egypt trying to stay out of the East-West struggle.

By the 1990s, the collapse of the Soviet Union seemed to mark the end of this divided era. The U.S. emerged as the world’s sole superpower, and many believed that liberal democracy and free markets had “won.” There was a sense that this new order, based on these values, was here to stay. But history doesn’t move in a straight line. By the 2020s, the global landscape had started to shift again, with new powers rising and old rivalries re-emerging.

Historians now argue that today’s world isn’t simply returning to a Cold War-style bipolar structure. Instead, it’s becoming multipolar, with countries like China, Russia, and India, along with coalitions like BRICS, trying to carve out their own spheres of influence. This has created a world far more complex and fragmented than the Cold War divisions ever were.

One worrying aspect of this fragmentation is what some experts call the rise of an “Axis of Authoritarians.” Political scientist Aaron Friedberg describes this bloc as led by China and Russia, whose partnership has only grown, especially since Russia’s invasion of Ukraine. Their “no limits” alliance is just one piece of a broader trend where authoritarian states unite to counter Western influence. This alliance extends beyond China and Russia to countries like Iran, North Korea, and Venezuela.

As this authoritarian bloc grows, the West—led by the U.S. and its European allies—finds itself once again in a values-based confrontation. Russia’s invasion of Ukraine, China’s assertive stance in the Indo-Pacific, and Russia’s close ties with Iran and North Korea all signal a growing challenge to the liberal order that has largely guided global affairs since World War II.

At the same time, countries across Africa, Latin America, and Asia are choosing to stay out of the U.S.-China rivalry, much like the Non-Aligned Movement of the 1950s. For instance, many nations, representing nearly half of the global economy, chose not to condemn Russia’s invasion of Ukraine, showing that the world isn’t easily divided into two camps anymore. These countries are using their independence to negotiate better terms with both the U.S. and China, avoiding being caught in the middle of great-power politics.

This fragmentation isn’t only about changing diplomatic alliances—it’s also creating economic blocs. China is redrawing global trade routes, forming supply chains that fall increasingly under Chinese influence. Meanwhile, the U.S. and its allies are working to build their own alternative supply chains to reduce dependence on China. This trend is leading to a world where global trade, technology, and even finance are becoming more regional and fragmented.

Political scientists like Hal Brands and historians like Niall Ferguson have raised concerns about where this fragmentation could lead. They warn it could trigger a series of interconnected global conflicts. We’re already seeing wars in Europe and the Middle East, with rising tensions in East Asia, especially around Taiwan, that could easily escalate. If conflict were to break out in multiple regions, we could be looking at a new kind of global war—not as coordinated as World War II, but just as devastating in impact.

In this fragmented world, control over chokepoints becomes an even more powerful tool. Whether it’s the Strait of Hormuz, the Taiwan Strait, or financial systems like SWIFT, nations are likely to seek control over these key points. As supply chains grow more regional and less global, countries may feel freer to weaponize these chokepoints, knowing their actions will hurt their rivals more than the global economy.

What does all this mean for the world we live in?

We’ve explored how chokepoints and weaponized interdependence allow crucial locations and resources to be turned into tools of control. As the world splits into distinct blocs, this growing fragmentation raises the likelihood of countries weaponizing their control over resources, trade routes, and financial systems. With less global cooperation, nations may increasingly use chokepoints as leverage.

Conflicts in Europe, the Middle East, or East Asia might seem distant, but they are deeply connected through networks of trade, technology, and energy. Each conflict would add pressure on the others, creating a domino effect that destabilizes not only individual countries but entire regions, potentially leading to an uncoordinated global crisis.

So, what’s the takeaway? The modern world is a delicate web of interdependence, and as that web fractures, tools for economic coercion become sharper and more frequently used. Control over chokepoints—whether they are physical locations, industries, or financial systems—can be wielded as a weapon, making international relations even more precarious.

We are now living in a time where global connections are both a source of strength and a vulnerability.

Thank you for reading, do share your feedback in the comments and also spread the word by sharing with your friends.

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