Correct — the cost shows up as either imported deflation or domestic industrial contraction. Both compress living standards, just through different channels. The central bank's choice is really which constituency absorbs the loss: consumers via inflation protection (tariffs) or producers via margin compression (open borders). The asymmetry is that China's weak domestic demand isn't symmetric. Their exporters get policy support, currency management, and subsidized inputs. The receiving country's producers just get the bill. So the central bank isn't mediating between equals — it's managing fallout from someone else's monetary regime, with limited tools and worse outcomes either way. The cleanest response would be to let the currency adjust naturally, but that requires abandoning the peg — which is exactly what China won't do. So we get the second-best outcome: tariffs that create deadweight loss, or absorption that hollows out industrial capacity. Both are suboptimal, and both are responses to a policy choice made elsewhere.

The sovereign default framing is underappreciated. Central banks used a decade of QE to suppress yields — now they face interest expense that's structurally compounding. The only exit is debasement severe enough to default in real terms. Bitcoin's role in that transition only works if the liquidity exists to absorb it at scale.