Peter, welcome to the show.
Thank you for joining me.
Marty, I got to do this.
And this is going to demonstrate just how long I've been following you guys.
The mandibles.
I mean, I'll leave that to Matt to highlight and let him continue to beat you with a sock full of quarters every week because you haven't read it.
But no, I was I was I just started laughing because I'm like, oh, after we went back and forth last night, I thought to myself, oh, I'm going to I'm going to have to bum rush him at the beginning with the mandibles book.
I don't have it on my bookshelf.
I don't have it on my on my Kindle either.
It's a book.
I'll get to it.
I think eventually I will get to the mandibles.
OK.
As I've said many times, a rabbit hole recap, it's essentially been read to me on air over the course of seven years from that.
Yeah. And to answer your question. Yeah. I'm of the mind that we are in the middle of the mandibles right now.
Lovely. Yeah. Lovely. Well, let's let's set the stage for this conversation.
I wrote a newsletter earlier this week.
We talked about a rabbit hole recap yesterday.
There was a chart of China gold stock on warrant at the Shanghai Gold Exchange.
And if you see the chart, it is straight up and to the right.
Just a crazy step function growth over the course of the last year and a half, really.
And that's in a signal to me, like, what's going on?
Seems like China is preparing for something.
Wrote the newsletter.
You responded on Noster saying that I need to get the full picture of China.
You have been living in China for 30 years, correct?
30 years, correct.
So maybe we maybe we start there.
How did you end up in China and deciding to stay for for 30 years?
I'll give you the the abridged version.
Number one, it's always great to be young and dumb.
And so I was working on Wall Street back in the middle, early mid 90s.
And that was the first time China sort of landed on the sort of Wall Street radar.
And so I was dabbling in what was going on in China, working as an analyst, so on and so forth.
And ultimately, I decided rather than to get my MBA, I was studying a little bit of Chinese in New York and thought, you know what, I'll go to China for a couple of years.
I'll teach English, get a lay of the land, firm up my language capabilities, and then I'll just circle back and come to New York and start up the whole new career.
And what's the old saying?
Life is what happens when you're busy making plans.
And so one thing after another just happened.
I did the teaching gig, and then I got a job working as an analyst for a UK investment bank in Hong Kong.
That lasted about four months. And then the Asian financial crisis hit, got married, had a couple of kids, became what's called the chief rep, which is a glorified sort of secretary for a handful of American companies.
companies, you know, did all that. And then right after WTO, was working for Prudential Financial
of lovely Newark, New Jersey, and, you know, set up a joint venture for them in the finance space.
And thought, you know, maybe there's a maybe there's an opportunity here for me to become
sort of a consultant rather than work for one company or work for a bunch. So I went out and
set up this company called Zeben Advisors in 2004. And it's sort of 20, 21 years later,
I've been doing that. Just basically a consultant helping predominantly European,
American financial firms navigate what the possibilities are in China. And it's not that
easy, not simply because China is a different market, but because especially the American
organizations, they're just so tied to how they do business globally and just an unwillingness
to adapt to the local market. So yeah, it's, you know, 30 years just happens overnight,
you know, and here I am. Yeah. And as I was saying before we hit record, I'm very excited
for this conversation. I've had Balaji on the podcast. He's got a perspective that China's
going to eat the U.S.'s lunch if we don't really light a fire under our proverbial asses to compete
in many different aspects of the economy. I was also telling you that my interaction
with the Chinese over the last seven years has been via the Bitcoin mining industry.
And from what I've observed, these individuals are incredibly ruthlessly capitalistic in a way
that surprised me to the upside considering what I've been taught about the Chinese system of
control over the course of my life. And the Chinese I've interacted with in the mining industry are
incredibly impressive in many ways. But to your point, they do business in a different way that
is literally foreign to the Western way of doing business. And I think to start off this
conversation, you sent an email with incredible detail about different things we could cover
today. And you started with a quote, which I think is a good setting of the stage to really
dive into the differences between the Western Eastern way of doing business and politic,
really. And that is a quote from Lucian Pai, China is a civilization pretending to be a nation
state. And you were explaining in the email, if you don't understand this sort of core concept,
you're not really going to understand this whole situation.
Yeah. I mean, if you consider the concept of a nation state itself, I mean, it's only a couple
hundred years old. It's not really some sort of ancient governance system. And even China didn't
have this sort of nation state governance system until 1912, when the last formal dynasty ended
the Qing dynasty. So when you're trying to look at navigating the entirety that is China, I mean,
I've been here 30 years, and I'll tell you this, I'll always be a foreigner. There's no way that
you can be here for any period of time and not get to a point where you think that, okay,
the expression is bijiungo and haijungo, like more Chinese than the Chinese.
And there's actually an inverse relationship with regards to the time you're here, which is
the longer you're here, the less you actually figure out you know.
It just continues to expand with regard to the uncertainty and the unknowns.
But when you take – I think it's fascinating, and we can get into the SEO
because I think genuinely this past week has been what may be –
I don't know if I want to say will be, but potentially could be a real turning point
because you've got really a group of nations coming together saying,
we're done with the international rules-based order and we're going to move in this direction.
And China continues to operate as a nation state, but at its core, at its DNA.
Xi Jinping is just another emperor of another dynasty.
It just happens to be called the Chinese Communist Party.
Right. So you, I think, have to, and this is, I think, something I really need to stress, which is take the 20th century Western G7 lens off and try to be more open to how it is that the Chinese are going to operate.
And I think one of the other comments that I made to you in that lengthy email was, we're also talking about things like Judeo-Christian ethos.
Like I'll have people say to me, well, the Chinese have no morals. And my immediate reaction to that is, OK, but by whose standards? I understand if you're coming at it and saying they have no morals based on how we do business in the West.
You know, my word is my bond, a handshake, you know, written contract.
The Chinese play that game, but ultimately it's much deeper.
It's much more about, you know, what is in it for various parties.
One of the, you know, I'm going off a little bit here, but I think it's important.
One of the key pieces of advice that I'll give the clients is if you're teamed up with
the Chinese as a counterparty, whether it's a joint venture or you have some sort of distribution
agreement, whatever. You need to keep in mind that the moment the Chinese think that they no
longer need or find value in this partnership, they're going to cut you off. And it's the
perception, not even the reality of the need for the foreign technology, the foreign expertise,
whatever the case might be. The Chinese want to be able to endeavor, gather the information all
they want, and then move on. So this gets into things like international or intellectual property
theft and the like, and we can, you know, of course, parse through that.
But yeah, it's just a completely different environment to be able to operate in.
Yeah, the and how do you think how maybe this is the best part, best place to start?
Like how wide is the divergence between.
the perceived understanding from Westerners of how China does business and the actual
understanding of how the Chinese do business, particularly at the nation state level,
with the Trump administration, all these tariffs and everything going on. You mentioned the SEO.
So how even at the highest level, do you think there's still a fundamental misunderstanding
of the different sort of cultural way of approaching business deals?
Oh, without question.
And it's not even just business deals.
I think it goes all the way up to all relationships like trade negotiations,
geopolitical communication, whatever the case might be.
And again, I'll reiterate a point that I made just a few minutes ago,
which is you have this hegemonic, if you will, perspective of, you know, this is how we do things.
And this is how we've done things since 1945. Some would argue this is how we've done things since,
you know, 1910, whatever the case might be. What is missing from that calculus is throughout that
whole period of time, China really wasn't a player on the stage. So the manners in which
their cultural approach being included into these negotiations, what have you, just doesn't enter that calculus, doesn't enter the thinking about how we're going to go about adjusting for all of this.
So, you know, I'm watching it play out on a daily basis, doubly so.
I mean, it wasn't just current Trump administration, the Biden administration.
You know, they thought that they were dealing with, you know, a normal counterparty as though they were talking to France or Japan or somewhere else.
China was like, no, we're changing the tune and we're going to see how that dance is going to go.
And the Biden administration just tripped over their feet, basically to mix all my metaphors.
So the US right now is nowhere near having the ability to understand how to navigate it.
I think Bessit has a decent understanding of leverage and where the United States finds itself right now with regards to China.
We saw the whole thing with rare earths for chips, you name it.
But ultimately, there has to be a sort of a meeting of the minds, a recognition of what exactly is China?
What is their history?
What drives them?
And that's still missing as far as I can see.
Yeah.
I had a conversation with Mel Madison yesterday on the show that will be posted tomorrow.
But I actually told him.
I've been so excited for this conversation.
I told him I'm speaking to you.
We covered the military parade.
And that's one point we brought up is, I think, particularly here in the United States,
which you've sort of touched on a little bit, but I think we should really expand on,
is America's going to be 250 years old next year.
And China has been around for millennia.
And to think that...
5,000 years.
I think that 5,000 years of history and developing and building a culture is going to be materially perturbed by 250 years of history, I think is a bit naive.
there are definitely deeply rooted sort of cultural practices and
understandings that I think many people just just like we're fishing water.
I'm 34 years old. I'm trying to put,
trying to put some sort of cultural DNA in a 5,000 year context.
It's hard for people.
Right. Yeah, absolutely.
No, I think, look, I'm going to, sorry.
No, you got it.
No, what I was just going to sort of highlight is one of the bigger issues that's occurred of late is how many so-called China experts are there today?
I mean, it's shocked me that over the last five years, everybody is weighing in on China.
There's podcasts about China and so on and so forth.
And that's great.
The more engagement, the better.
But one of the first questions I'll talk to people and when they're coming to me, especially, is I'll ask them, well, when was the last time you were in China?
And, you know, they get a little bit, I think, and there's no judgment.
I'm not judging.
I'm just curious.
And their predominant answer is always 2018, 2019, you know, pre-COVID times.
And I tell them, I'm like, look, you have to get on a plane to come out.
I said, number one is things here have changed dramatically over a six-year period.
I mean, six years in China is a lifetime.
But number two is over that six-year period, there has been an absolute cacophony of headlines and framing and conversations.
I mean, you remember the spy balloon.
I mean, it goes on and on and on.
And it has been a just onslaught of negative headlines.
So I will talk to people and that's their entire framing.
And yet they listening to people who never been to China or haven been to China in five six seven years So I really trying to press people to say look it fine if you out there looking for insights
And I think everybody should be questioning.
I think Matt today, when you guys or yesterday, I guess, did your weekly recap.
I busted out laughing because he was like, oh, he's got a pretty positive outlook on things.
Yes, you could frame it that way, but there's enough negativity being discussed on China that the way that I phrased it, and I think I phrased it to you, is it's not that China shouldn't be critiqued.
There's a ton of areas that you can critique China, but the critiques are very narrowly defined and I think miss an enormity of what else is going on and the fuller picture.
So I think that's kind of emblematic of what I've been witnessing, especially coming out of the U.S. over the course of the last several years.
yeah as an american looking out at the world right now as it seems to be going in this more
multi-polar direction geopolitical tensions rising high war breaking out different parts of the world
economic stress on top of everybody's mind i think it's important to try to make sure that
we're making the right critiques and understand the full breadth of the
situation so that we can make the best decisions.
And especially after reading your email,
I mean the first bullet point you have is America versus China saying it's
not a new cold war for you.
It's far more concerning,
which I imagine is driven by the fact that there's a fundamental
misunderstanding and people in the West don't even know how to properly
critique what's happening.
Well, I think on that point, so you would have seen over the course of the last, I don't know, year that there's been this like, oh, this is Cold War 2.0.
Niall Ferguson, Sir Niall, right?
He's come up with this and he's been making the rounds and talking about it.
And look, it's easy to package.
We have recency bias.
We want to look back to the Soviet Union.
For me, it's been really about the UK and Germany back in around 1905 when you had the UK, which was at that point even a power that was maybe in the early stages of decline.
The colonies and the empire had sprawled so far that it was difficult to maintain.
And critical, I think, is this was around the time that you really had petroleum becoming an essential component for things like ships.
And the UK Navy was all coal-driven or steam-driven, and it was moving over to oil.
And the Germans were rising.
And the Germans, if you look at a lot of the history and a lot of the research, the Germans recognized, and here's what's critical, by the way, the UK, Germany, and Russia at this time were basically run by cousins, you know, grandkids of Queen Victoria.
And these were all relations, and they still couldn't get along.
And, you know, Germany, I think, recognized, if you look at a lot of the research, that, okay, we can't go head to head with, you know, the UK.
We have to try to play nice with them.
And the Brits, in their own typical British fashion, they would placate the Germans. Yes, yes, let's talk about this. Let's get a memo, sit down for a meeting. And they just kind of slow rolled the Germans.
to the British and said, look, let's do this as a joint venture. The British said, sure,
but then they dragged their feet. And then Germany finally was like, look, we're just going to go do
this. And there were a host of these issues that you had this power at the time that rather than
address the issues that they had at home, they were more inclined to look at things like tariffs.
They tried to create this tariff regime where if you were part of the colonial empire,
the Commonwealth, you'd get a better deal. They tried to contain Germany with regard to economic
sanctions. And for me, ultimately, you can draw a line between that action of the UK to the start
of World War I. You could talk about Ferdinand down in the Balkans and what have you. But
I'm seeing so many similarities between how the United States is operating with regard to China
right now that it is concerning, more concerning than is this a capitalist versus a communist
Cold War comparison with the Soviet Union.
I think the latter can certainly be thrown out in the window.
If you're trying to say that the Chinese Communist Party, I think you put it correctly, like
Xi is just a dynastic ruler and his dynasty is just called the CCP if you compare it to
Soviet Russia, like it's completely different. I've been listening to a lot of Bill Gurley's
comments on China. He's one of the few Americans that seems to get over to China a lot and really
understand what's happening. And the way he describes how they invest in companies and
try to ensure that there is there is sort of a free market for ideas to be built and companies
to be built and they steward it with capital and then have a filtering system that lets the cream
rise to the top it's very clear that they're not the soviet russia form of communism um
and so i think a lot of the saber rattling and positioning particularly from the united states
is just using your UK Germany analogy is like the US sort of on the brink of do we go down the road
of empire or try to revert to our our sort of democratic republic and get back to the roots of
being non-interventionist is is where we stand if we go down the route of empire if we want to go
down the route of empire, a lot of the positioning towards China makes sense to me.
Because it just seems like, hey, we want to keep control of this sort of massive footprint
we have over the world.
To do that, we need to play hardball with China.
Well, and you can also, I've made the argument that while the British back in previous empire
days had their colonies, the United States has their own colonies.
They're just called military bases.
You know, I think and again, I haven't said this yet. So let me I mentioned this in a note earlier today on Noster. I'm a red blooded fucking American. Right. I need to stress that. And the commentary that I make about China is with regard to trying to get this ridiculous beltway consensus, as I call it, to understand what the issues are.
And it's frustrating as all hell, because most will look at it and say, oh, we don't need to worry, because the coping mechanism for almost everybody is, don't worry about it, the Chinese economy is going to collapse.
Marty, I've been hearing China's economy is going to collapse for the last 25 years.
Like, what's the joke?
Hope is not a strategy.
If you're waiting on you don't need to change because your mortal enemy is going to collapse, yeah, that's a recipe for disaster.
So, you know, when I look around the region and I see things like 50,000 troops in Korea or 20 odd thousand troops in Japan, the United States last year put a high end typhoon missile system on the northern end of the Philippines.
They just announced two days ago that they're putting another one down in the Okinawa region.
I mean, if I'm sitting back as China, and again, being a realist, you've got to say,
look, we're going to have to at least start trying to project some degree of power as a defensive
mode. And that's not me saying I'm supporting the CCP and I think everything's China is great.
It's more about just looking at it from a realistic standpoint.
I had been, to be quite frank, shocked at the level of restraint that the Chinese have demonstrated over the last several years with the various military exercises the US has taken right outside their doorstep.
yeah i mean we do have uh and this is a very controversial um take for many people many of
my listeners but i think we do have recent evidence that um when the u.s meddles in foreign affairs
particularly of countries that there are other superpowers in the case of russia and ukraine with
the encroachment of NATO around their borders and the conversation of letting Ukraine into NATO
and putting military bases and everything around Russia. I'm a strong believer in that is one of the
driving catalysts of the war between Russia and Ukraine right now. And to think that
we're not going to learn the lessons of that, which has turned into an absolute catastrophe.
And turn it up to another level with arguably a stronger superpower in China just seems suicidal to me.
It's not – and it's funny.
It's not just a stronger superpower.
I think one of the most fascinating developments over the course of the last six months has been, oh, wait.
We, corporate America, entered a Faustian bargain over the last 30 years to produce everything that we potentially need in the mainland.
And then we wake up one day and Walmart is going in with Costco into the Oval Office saying, hey, look, man, our shelves are going to be bare in two weeks because of these 145 percent tariffs.
And Trump folded like a lawn chair. And I don't think he wanted to. He just simply had no choice.
So, you know, what I have found is very endemic by American policymakers has been this.
Look, this is what we think is right. And we're going to go in this direction.
And then second order effects come back and beat you over the head.
And I'll give you a fantastic anecdote.
Back in October of last year, there was this literally week in Congress that was called the China Week.
And it was all of these bills that were being passed about targeting China.
And they were going to stop them doing this and that.
And one of the bills basically was called the Anti-China Drone Act.
And essentially what it was, was a law that has been passed or a bill that's been passed into law that made it illegal for a company called DJI to sell their drones into the US.
DJI is not just the largest.
And it's I'm telling you, it is an amazing company, an absolutely amazing company.
But here's the funny part.
The bill was jokingly referred to as the Skydio bill, because Skydio is a California company that makes drones and was getting its ass kicked.
So, you know, let's go with a little regulatory capture, which is the flavor of the day in the United States, right?
And they were like, this is great.
Two weeks later, Skydio was still sourcing all of the batteries for their drones from China.
And guess what happened?
The battery supply got cut off.
so skydio literally had to go with their point of sale documents to their buyers and say look
we're going to sell you the drone but you need to go on amazon to buy the battery
like okay that is a microcosm of the cancer quite frankly that is you know just
all through the United States when it comes to sourcing.
It's not sourcing just of end goods.
You've got inputs that need to go into manufacturing in the United States.
It's, again, like I said, it was the Faustian bargain that to this day,
Tim Cook as another example, I'm sure he lays awake at night going,
why did I make this deal 15 years ago?
well i think that's the big question on many americans minds is how
i think it's become very clear um to many americans that we have made this
and bargain and we have become wholly beholden to the chinese supply chain just due to the way
we've built our economy over the last five decades more acutely the last three decades
specifically. And how do we fix that problem? And how not only how do we fix that problem?
And obviously the the answer from the Trump administration is let's reassure as much as
possible. But how do you do that in the least disruptive way while maintaining or good
relationships with China and maybe not even maintaining building back good relationships
with China? Because at the end of the day, as American, I was talking about this with Mel
yesterday too like i don't want to be an empire i don't want to be in all these parts of the world
i think i'm mega in the sense of like i think we have a lot of problems here at home we should
fix our problems here uh i am very aligned with george washington and the founding fathers and
let's not be interventionists let's just build a strong country a strong economy and engage in free
trade. And I am a true believer in the Austrian view of free market economics. If you have free
trade and peace and you sort of leave everybody to do their own thing and then engage in trade,
but it makes sense. That's the optimal outcome. I don't think we need to be the world police or
have this hegemonic control over the world, which is massive and filled with cultures that are
truly different and as we're really digging into are completely misunderstood and it just seems
impractical and um from a systems perspective it we've learned time and time again throughout
history just doesn't scale um it can't scale you can't coordinate at that scale
no no and again here's the kicker china actually gets that and people will always ask me because
There this projection by the power base in Washington that because we are a hegemonic power China wants to replace us
Ergo, China wants to be a hegemonic power. In my humble opinion, I don't see that.
Look at all the hegemons over the last, I don't know, 200 years, right? Hasn't really turned down
well for any of them in the end. There's been a period of like, okay, this was great. China wants
regional hegemony in Asia. They want to be able to say, this is our sphere of influence. Look,
the United States, you want to go with your Monroe Doctrine. You want North and South America. We
get it. Let's let Europe do what Europe's going to do. But ultimately, their attitude is just
let us have Asia. And even for the United States, I think that that's non-negotiable.
And for whatever reason, I can understand it. They want to maintain the power projection that they have as the United States hegemon. But that's kind of where I think things are heading at this point in time. But China has, again, my opinion, has no desire to be a hegemon. They don't want allies. Think of it this way. They don't want allies. They want counterparties.
They want to be able to just build and sell and make money and prosper economically.
And that is a very both unpopular and very minority held opinion.
Yeah. Well, let's get into this, like diving into what China actually wants and how our policy is being enacted, because.
You're saying China wants this regional hegemony, but then we have like the Belt and Road.
initiative where they're they have inroads in to africa in latin america um i think a big topic
in pretty niche circles in the u.s right now is the chinese shipping boats going around the world and
really cleaning up the oceans of all the fish and i believe right now they're off the coast of ecuador
so how does the belt and road compute with that idea that asia or excuse me china just wants asian
hegemony?
There's a couple of answers to it.
Number one is
dollar diversification.
Let's call it that. If you look at
what was originally called the
One Belt, One Road program, now
BRI, this was really
launched in
earnest around 2012.
If you look
at a lot of
the events that transpired
in the 2012-2014 period, you started to see China begin to limit the amount of US treasuries
it was going to take on to its foreign currency reserves. You started to have a little bit of
dabbling in other areas as well with regard to foreign currency. But One Belt, One Road, or BRI,
this was the perfect way to deploy foreign capital dollars in a way that was going to be able to
secure hard resources, be able to provide, you know, there's a joke, you know, when the Americans
were before them, the British would go to some developing nation, they would always come with a
lecture, right? And the Chinese come with a hospital or a road. Now, don't get me wrong,
they're not doing this out of the goodness of their heart. They're doing it for two reasons.
One, there's typically loans involved.
So there is this issue of how much is China sort of creating this indentured servitude situation by other nations.
But above all else, it's about the resources.
They want to be able to build the roads.
They want to have the energy that's necessary, all of that to extract minerals, gold, oil, energy, whatever the case might be.
So it has clearly been positioned in a way that it is China's attempt to try to strong arm other nations into its orbit.
But I think, as I mentioned to you in the email I sent to you, for me, this is the Marshall Plan in a different guise.
When the United States, in their benevolent wisdom, came in to help save the world, both the Marshall and the Dodge Plan, in fact, two things people tend to leave out of that, again, benevolent strategy, which was the United States gave loans in U.S. dollars,
which helped to push the U.S. dollars into the global system. And at the same time,
they were loans, and those loans had to be used to hire Caterpillar and all of these American
companies to come in. And that's where the first expats post-World War II sort of went around the
world all through Asia. So it was also in the United States' interest to be able to push forward
with the Marshall and the Dodge plan.
China basically saw this as being something similar and said, this is a great way for
us to diversify and move out.
Plus, we're going to be able to extract a ton of different resources to help us back
at home.
So I don't think really this has much at all to do with hegemony.
And I would say the interesting footnote to this whole point is how many bases, military
bases does the Chinese have? They have one. And it's in Djibouti in Africa. Now, granted,
it's near the Red Sea, I believe, or not the Red Sea. I can't remember. Maybe the Red Sea.
But that's it. So they're not looking in any way to try to project their military power in this
regard. That makes sense. Well, let's pull it forward to recent events and really dive into
what people are probably most interested in, which is the military parade that happened.
Bricks, SEO and the Global South getting together.
Donald Trump tweeting, recruiting, sending a truth out.
I hate saying that, but it is what it is.
It's obviously seeming like he's missing out on the party.
It was very obvious to me, at least a sort of geopolitical flexing.
We're going to have this massive military parade and we're going to bite.
all these world leaders and we're going to keep out the g7 and the u.s and um
how would you describe the land like going back to the newsletter and comments on rabbit hole
recap yesterday both the the gold that is on warrant it seems like they've been building up
this gold inventory for the better part of two decades now um by putting in on warrant registering
it with the shanghai gold exchange that's a signal to me like hey we do have this gold and
we're putting it on where we're willing to use it um in international trade or whenever we want to
they have optionality by doing that and then you have yes this military parade and this sort of
fading of the western hegemon hegemony um by keeping them out of of the guest list keeping
them off the guest list and it just seems like very overt explicit geopolitical posturing
on the stage, sort of a chess move, two chess moves there with the gold and this military parade.
What is this? What are these moves in your mind?
Well, first of all, and I think you guys talked about it on Rabinol Recap. Look,
I'm never a believer in coincidences. Like the Chinese have a tendency of,
I find them, and it's funny because I've seen a lot more people talking about this.
They are the consummate trolls. They know how to use what they have and be able to sort of just, hey, whoa, what are you talking about? They're just brilliant at playing this game.
So a couple of things. I'll start with the SEO meeting at the beginning of the week and then the military parade, and then I'll jump into the gold issue.
First and foremost, I mean, we do have to be mindful that this parade was planned months in advance and the guest list was planned months in advance.
So it really wasn't in terms of the parade and the attendees.
It wasn't all that much of a surprise.
Now, that's not to say that there was coordination that was going on behind the scenes and there were separate meetings that were taking place with regard to call it the broader global financial system.
But the only, I think, real fly in the ointment was the Moody participation in the SEO on the weekend.
And you would have seen all the pictures holding hands with Putin, the whole lot.
You know, look, I've been watching, you know, Donald Trump, the man and his sort of approach to if you want to call it an approach to sort of geopolitics.
And it's a degree of buffoonery that is even surprising to me.
This is on a whole different level.
The antagonizing of India.
I just don't get it.
There's no there's no material upside to it.
And then he doubles down on it, not but a day after the SEO meeting saying, oh, it's a one-sided relationship, what have you.
And look, China and India, they're no close bedfellows.
They've had issues for years.
In fact, Russia and China have had issues for years.
The way that I've sort of tried to describe this to various groups that I've spoken to is, and I wrote this to you as well,
the enemy of my enemy theory. How long can that center hold? Well, it's going to hold as long as
the United States continues to be belligerent on the global stage. But I'll just quickly say with
regard to the military parade, I've been there, done that. I think that was my, I don't know.
They do one every 10 years for this anniversary, but then they also do one every 10 years for the
anniversary of the Chinese Communist Party. So I've seen more than my fair share. It's
very staged. And it's interesting to see what kind of toys they put out.
But on the gold issue, this has been something that I've been focused on for years.
And the most interesting element is the Shanghai Gold Exchange, which I think you highlighted.
They have sort of a subsidiary called the Shanghai International Gold Exchange, which was created in 2014.
And that was the first time they opened up the local market to offshore participation, to be able to trade and to be able to settle.
Going all the way back to 2014, you did have physical settlement if needed with different counterparties.
Now, for the first number of years, there wasn't a lot of volume or activity at that point.
But I found it fascinating because 2014, you're talking about, was like a year or so after Iran got sanctioned and kicked off the SWIFT system.
It was the year in which Russia essentially went in and annexed Crimea.
It was also just so happened the year that I think Chinese treasury holdings peaked.
So you look at sort of the trend over the last decade, and it's very clear that there has been a progression, very slow, no pun intended, but a little bit, Chinese water torture, to be able to move this forward.
And I think this is the important part, and this is perhaps where I'll have a disagreement with you on some sort of impending development, is kind of trying to work at the margins to sort of undermine the American geopolitical position, but not in such a blatant way that it causes an overreaction.
And I think we can both agree that American foreign policy has a tendency to overreact.
I mean, there were a lot of rumors that Gaddafi got taken out because he wanted to start pricing oil in euros.
So China has been at the margins selling a or I should say buying a truck ton of energy using renminbi.
So you've had an increase in volume.
And I think more importantly, just I want to say last month, the Chinese went and opened up a new gold vault in Hong Kong because I think that there is increasing demand.
And I think this is where your issue that you raise with regard to the warrants is there's probably more demand coming in that you had all of this gold that was probably sitting privately in Bank of China, most likely, that was then moved to the gold exchange with the warrants being issued.
What, in my opinion, China has been doing and will continue to do is demarcate between a foreign currency asset and a foreign currency.
Meaning they don't want to replace the dollar.
You want to use the dollar and knock yourself out.
But they want the optionality to be able to say, we're going to go to different counterparties and they're going to use the renminbi.
But again, as you both rightly pointed out on your weekly show, nobody wants to hold the renminbi.
And the Chinese don't want people holding renminbi in their bond market either.
They like their closed capital account.
So what you do is you create the ability over a period of time that if you want, you can settle in gold.
And I'm aware of numerous events where settlement has taken place and some of it stays here, as you guys pointed out, but some of it does get transported elsewhere.
And that is undermining the pure bedrock of the reserve asset, the U.S. Treasury, because the U.S. Treasury has only been really a requirement, if you will, if you have excess savings, if you will, from your trade surplus.
The Chinese, where do the Chinese have a trade surplus?
Predominantly from those exporters of energy and minerals and other inputs, if you will, food, potash, you name it.
And those countries are like, look, we'll take your renminbi and we know that we can come in and we can just settle in gold.
We're fine with that.
And that's going to continue to move on.
Now, taking that next step to create a gold-backed BRICS or a gold-backed Yuan, I personally think that would be viewed as an act of war by the US government, honestly.
And the Chinese know that.
There's no reason for them to take that what would be viewed as a natural step forward if they already get 90% of the benefits of just allowing for settlement in gold.
That makes a lot of sense And again going back to not only misunderstanding uh a culture that is five millennia old but it like the it just reverting to how they probably settle trade
for millennia with gold and that's the other thing is fish and water not understanding we
live in an anomalous time, whether it be the use of our nation in the nation state model
or the fact that we're using this fiat currency.
It's a clear point, like why even do a gold back yuan?
We could just settle on gold itself.
Right.
And China has all the gold right now.
I mean, this is the reason of my opinion why they have been so aggressive in buying as
much gold as they've had is because they want to be able to demonstrate that they're able to settle
for anybody on any trade surplus that might exist and just quickly can we touch on this because i
i'm sure there's a number of listeners uh who were sort of using yuan and renminbi
interchangeably can you describe the dynamics of like the onshore offshore and
how these two currencies actually work?
Well, so there's, first of all, the yuan is sort of like saying the buck, right?
The US dollar, the equivalent in China is the renminbi, the people's currency.
So they're interchangeable, but there is an offshore renminbi or yuan that's traded in Hong Kong.
So it's, to be honest with you, it's more about the Chinese sort of trying to create
this dual system of we have both our onshore market and our offshore market.
And what I've always found fascinating, and I'll ask you this question because I think
it can be quite enlightening.
If I were to ask you from the Chinese perspective, from Beijing's perspective, is Hong Kong foreign
or domestic?
Yeah.
I would say they think it's domestic.
And the right answer is both.
When I go to the airport in Shanghai and I'm traveling anywhere and I go, I have to fly through the international terminal to get to Hong Kong.
And it says in Chinese, international, Hong Kong, Taiwan, Macau.
So what China's been able to brilliantly do is they've had their cake and eat it too with regard to Hong Kong.
they're able to say, oh, this is an international city, so we can do things differently down there.
But if we want to, we can come down and we can bring the hammer of Thor on to Hong Kong as well
and say, no, you're actually ours as well. So whatever the sort of flavor of the day might be
in terms of what's going on in Beijing, they can basically just go and say it's one or the other.
But in terms of the financial service industry, I mean, look at the crypto space, right?
I mean, if it was domestic, they wouldn't be having some massive conference or letting Bitcoin ETFs or anything else trade.
It's just the ability to say we're going to do it down here because it's not really China.
But deep down, everybody knows it is China.
That makes sense.
I'm trying to think of like an analog.
I was going to say like the Virgin Islands of Puerto Rico, but they're not really financial hubs or powerhouses.
But well, I mean, it's it's essentially what Hong Kong was under British rule for 150 years.
The same kind of thing. Yeah, that I mean, we don't have to dive down that rabbit hole.
But the fact that Hong Kong was leased to the British Empire for 100 years is.
Is insane to me, but let's let's reorient this back to the current day and the U.S.-China relationship, particularly Trump and Xi.
you have it in the email that you sent
that Trump is being outplayed.
You mentioned it earlier, but you think percent understands
the lack of leverage the U.S. has in these negotiations
and this sort of chess match that we find ourselves in.
Yeah.
Well, let me give you the perfect sort of evidence
of how things have changed.
you've had three meetings over the course of this year
there was one in Geneva
I think one in the UK
I forget where they were
but you had the Geneva meeting happen
and there was kind of this armistice
okay everything's fine
and then all of a sudden
you had rare earths come into the equation
and you had the US was talking about jet parts
A whole bunch of different things. And for the first time, finally, Xi Jinping gets on the phone, talks to Trump, and they all agree, we're going to meet in Stockholm. We're going to iron the show.
OK, a couple of things. Number one, that call happened supposedly on a Friday, and it was agreed that the parties would meet on a Monday.
OK, and then they met on a Monday and then they came to what and I still can't believe this is being debated throughout the United States.
This was a quid pro quo trade.
China was like, look, we know you need the rare earths.
You're still playing.
You guys are being dicks.
So we'll give you the rare earths and access to all of this.
But you have to give us the H20.
That's what we want.
You've got to stop.
You weaponize trade first.
We're just reciprocating.
That deal was essentially agreed to in a matter of a day and a half.
Now, what's with the recap?
In the entire time I've been here, number one, no meeting happens in 48 hours from the time some senior official says we should get this done.
There's going to be talks.
What are we going to do it?
And it gets dragged out.
The Chinese love the delay aspect of negotiations.
And they know that the Americans, not even if they really are up against the wall, but Americans have had a tendency, from my experience, of being extremely impatient to do things.
And the Chinese use that to their advantage.
And then you have a deal that is agreed to in 72 hours, essentially, 48 hours maybe.
That never happens except when the Chinese get everything they want.
The Chinese will typically walk away and just see how things go.
So as soon as that meeting was over, I laughed and I thought – I think I even put something up on Noster where I said, yeah, I know how this is going to play out.
You know, and Besson had no cards.
And in fact, they wrote – the US side wrote in their communique, and we will deliver what we promised to deliver with no details of what that was.
They said the Chinese were going to deliver rare earths and the batteries and all that, but they didn't say what they were going to deliver.
And then lo and behold, I think it was Siemens and somebody else was able to start selling their chip related equipment back into China.
And then next, you know, it was the H20 and everybody in Washington lost their collective shit.
Right. It was all about, oh, Trump is selling national security.
Here's the thing.
The amount of rare earths required for the defense industry in the United States never gets discussed.
This was as much, if not more, about national security because of the limited access to rare earths than it was about giving China the H20.
And nobody talks about that.
So it's, you know, that's just one example.
And this is why India exports – imports less oil from Russia than China does.
China is still on the sidelines.
Like all of this just demonstrates that Besant sitting there going, I need to keep the wheels on this bus.
And the last thing that I need to do is have something in the supply chain go off the rails.
and again like you can i don't think it bears repeating and i think you're
you can repeat it too much like we are wholly dependent on this supply chain
rares for the defense industry antibiotics consumer goods um like i'll give you the
i'll give you the classic example so everybody everybody's talking about ai chips we control ai
chips. China doesn't have access. Nobody asks, what is the primary ingredient or ingredients that
go into high-end AI chips? Polysilicon. It's like the most purest silicon out there.
It's sourced from China. The majority of it is sourced from China.
So, you know, I try and say to people that, look, NVIDIA doesn't make chips.
TSMC makes chips.
Apple doesn't make iPhones.
BoxCon makes iPhones.
You have all of this focus on IP, and I think the IP is great.
But if you don't control or have a dominant position in how that supply chain is actually going to work, what do you actually have?
And what is the actual solution to this? I mean, this is what people aren't really asking because – okay, here's another anecdote.
So the Biden administration, I think it was, is able to convince Taiwan Semi to come and build in Arizona, right? Fantastic.
Give them a bunch of money, and it's supposed to be a fantastic, fantastic facility. Great.
Three months ago, Taiwan Semi gets served a class action suit for discrimination.
Because a whole bunch of people that came in for job interviews who were nowhere near qualified, basically were like, oh, they didn't want to hire us because we're Americans and they want to just bring in all of their own Taiwanese to do the jobs.
And the courts took it.
They didn't say, OK, we're going to dismiss this.
They're like, OK, we should look into this.
How are you going to build anything if you're not able to – I mean we can go down the rabbit hole that is are there enough people to do the jobs that need to be done in this whole ecosystem?
But here we have something that is desperately needed and you have the litigious nature of the American society going to TSMC and saying, yeah, we're just going to target you because we didn't get a job.
yeah and if i remember correctly too there was some like d d e i influence on on that
litigiousness as well and i mean it goes in whether it's polysilicon being the raw input
of the chips and then the the tsmc arizona foundry question like the intellectual capital
that goes into building the building the foundry that makes the chips that's right raw input
doesn't exist over here either because we hollow out a manufacturing base and
deprioritize that education and it is uh it is extremely disheartening that yeah america has
let it so and that's i think that what i'd really like to get out of this conversation
um too is like what is the best path forward because to your point we don't have a lot of
leverage i think it's pretty obvious we are completely beholden to the chinese supply chain
right now it is clear that the administration and many americans myself included would like to
de-risk that that dependency by building um building our own manufacturing base here in
the united states building up the industrial base um as best that we can while maintaining
I would like I'll speak for myself while maintaining an amicable relationship with our trade counterparts around the world that we are sort of diversifying away from.
And so what I'd love to get out of this conversation is your mind, like what is the best path forward to make this happen?
What needs to happen from a posturing perspective, a blocking and tackling policy decision making perspective?
and how can we sort of get on a playing field and like, hey, let's put the cards on the table.
We understand that we're beholden to you to a certain degree.
We know the reserve system is out of favor.
We want to rebuild our manufacturing base.
What can we do to work together to make this happen?
So there's really two complementary solutions that solve it.
And here's the thing.
You take a page out of the Chinese playbook.
I tell people all the time, the Chinese playbook is pretty thin.
There's not a lot of plays in there, but they're masterful at how they apply them.
So you just do this, massive deregulation and joint ventures.
You basically say to the Chinese, look, BYD, we love your cars.
Your cars are great.
We want you to come here and we're going to do a 5149 joint venture.
We're going to have a bunch of rights and waivers.
You're going to be able to run it.
And we're going to put our own people in there and you're going to train them up.
And you're going to be able to sell your cars into our market.
Or you got, you know, DJI, let them do the same thing.
I mean, all of the goods that are needed.
Now, you can't go across the board, but you can be very smart about how you do this.
But you have to have the deregulation element involved as well, because you cannot continue to get bogged down with all of the issues on, you know, I don't know, OSHA or, you know, liability and discrimination and all of this.
And I'm sure that sounds extremely heartless. Hey, we're in this situation. We need to come up
with solutions. You need the Chinese to invest. You need to lower the regulation. And then you'll
train up a ton of people. That's how the Chinese got trained. The Chinese got trained through all
of these joint ventures that got set up over the last 30 years. So ultimately, that is probably the
best way forward. But I think the first step that would need to be taken by the United States
would be for there to be some big coming together with the Chinese president
and a sit down where the United States says, we recognize that our two countries are equals.
And I think that that's going to be a very difficult ask of the United States government.
And that's really what the Chinese want is just give us give us the face, give us the miens.
Tell us that we're equals and we're good to go. And I think that that would work.
And. We've been running another thing we're going to touch on, we've been running under this stuff.
We have zero leverage.
I think, as a matter of fact, what leverage do we have?
I find it hard to believe that it's exactly zero.
Like what leverage do we have?
Is it our consumer base?
Is it the entrepreneurial spirit?
Oh, OK.
Now you're talking about something different.
Now we're talking about DNA.
I mean there's a couple of things.
Number one, what leverage right now does the United States have?
And very simply, it would be the market.
Even though China has very meticulously reduced its dependency on exports to the United States over the last six years.
I mean, as a quick aside, I think one of the biggest tactical mistakes that Donald Trump made in his first term was very loudly proclaiming all of the various target vectors that were present in China.
Talking about, oh, they need us for our capital markets.
They need us for our markets, so on and so forth.
And the Chinese kind of, from the conversations I had, the Chinese were like, he's not wrong.
And once he was out of office, they spent four or five years addressing the vast majority of those issues, which put them in a much stronger position going into Trump 2.0.
But the market, if there was a significant reduction in access to the United States market, it would have a tremendous, tremendous negative effect on the Chinese economy.
No question.
It would also, though, leave so many shelves empty in the United States.
So it becomes this battle of attrition.
Who can suffer the pain the most?
But the market's still, I think, super important.
I mean, leverage-wise, the United States has the biggest military.
The United States has access to financial markets.
I mean, there are what I refer to as nuclear options.
And I don't think Besson wants to go down that route. But I would argue geopolitically, the most leverage, and I put this in the email because this is going to – people's heads are going to explode later this year when this comes out, is Taiwan.
like a bit of history. Just bear with me for a second. In 1999, the United States accidentally
bombed the Chinese embassy in Belgrade. It was Mother's Day in 1999. I'll never forget it.
And it was a bit dodgy here. There was a lot of anger. And Bill Clinton,
And oh, no, I'm sorry. I take that back. I won't go into the details. Long story short,
Bill Clinton owed Jiang Zemin, President of China, a favor. Jiang Zemin had done something for Bill
Clinton in terms of making sure he could get reelected so he wasn't causing problems in the
East China Sea. Bill Clinton came out here in 1998, and he has this infamous three-nose speech.
And the three no's were basically President Clinton reaffirming, essentially, the American one China policy of saying there's only one China.
Taiwan and China are both the same one China.
And the United States does not support independence.
And that was it.
The Chinese were super happy.
They were like, OK, we're good to go.
Just verbal.
And I think when President Trump comes out here, part of the negotiations, he's going to do something similar. And the quid pro quo that he wants from this, and I kid you not, TikTok. He wants TikTok. And he's going to say, I'll come out and talk about how there's only one China, and you're going to give me TikTok. And then, you know, this is a little bit for us on this call. TikTok, once Trump owns it or his buddies own it, becomes essentially a poison chalice.
how many people in the United States are going to want to use
TikTok if Trump's buddies own it, right?
So where are they going to go?
Well, some of them are going to come here and they're going to go to Red Note.
But most likely, a lot of people are going to all of a sudden learn about Nostra real quick.
Yeah.
So that's, I think, the Taiwan issue is really where the most language lies.
And you have it in the email, too.
the if you look at the map the u.s have china cut off across the east from japan to south korea to
the philippines and australia and so there's this perception that china is really close but it seems
like the the u.s has allies in the region that that create this sort of stalemate in terms of
preventing china from trying to take it over and the whole meme of china trying to take it over
You're literally having a kinetic war around Taiwan.
It just makes no sense considering the strategic importance of the foundries that are housed there.
So let me – just bear with me.
I know it's a bit off topic, but I think it's important maybe for you but also for your audience.
Allow me to sort of state with a pretty emphatic level of confidence.
China is not going to be invading Taiwan anytime in the near future no matter what you read or hear on social media or elsewhere.
China's going to invade by 2027 because Xi Jinping said so.
No, he didn't.
He said for the military to be prepared for what needs to be done.
Jiang Zemin said that.
Wu Jingtao said that.
They've all said it's the same thing.
But OK, let's ignore what these communist leaders say.
They're politicians.
We don't listen to politicians.
Here's an interesting fun fact.
China never really wins wars.
If you look over the last 700, 800 years, better part of 1,000 years, China was taken over first by the Mongolians and then by the Manchurians.
And this is when you get the Yuan dynasty.
Then the Ming dynasty came in and was like, OK, we're going to be Han Chinese again.
And then you had the Manchurians come in and it was the last dynasty, the Qing dynasty.
The reason I bring that up is China has learned that the way in which they exert control as the ethnic Han Chinese, which 95% of all Chinese are, is through what I refer to politely and diplomatically as assimilation.
Meaning you, over time, over generations, through marriage and family and whatnot, you end up all becoming Han Chinese again.
And it's like, okay, we lost the war. We're not going to try to have this resistance or anything else. We're just going to intermarry and whatnot and give us a couple hundred years and we'll be back in power.
And the reason I bring that up is this is what happened in Hong Kong. And it's Hong Kong that I think is extremely important as a case for what is going on with regard to Taiwan.
And when I first came to China and the first time I went to Hong Kong was in 1994.
And Hong Kong was British.
Everybody spoke Cantonese, completely British.
Over the course of 20 odd years, Hong Kong became a nothing but another Chinese city.
The majority of people who were living in Hong Kong were from the mainland.
So when China decided – and by the way, I should mention, in terms of all the things that China has done, this was I think the dumbest geopolitical mistake under Xi Jinping since he's been here, was taking over Hong Kong in the way that he did.
Basically putting the stamp on it saying we're going to make this a real province, if you will.
But the reason it was so relatively successful with limited violence, there was violence, but nowhere near to the extent of, say, Tiananmen Square, was because everybody down there was already Chinese and they were like, yeah, we're used to this.
Okay, whatever.
Compare that example with Taiwan.
Even if China was able to go in, they wouldn't be able to so-called win the peace.
There's no assimilation.
Everybody in Taiwan are essentially Taiwanese.
And the Taiwanese, because they are Han Chinese and they understand this, it's the reason why they have been so reluctant to allow for any mainland Chinese to come and reside in Taiwan.
Because they know that this is how you can play.
You just – it's – what's it called?
The fifth – I don't know.
Fifth column.
Fifth column, thank you.
It's the fifth column approach.
And the Chinese have been brilliant at that.
So because there's an inability to win the peace, and especially there's no assimilation, China's not going to risk doing anything at this stage.
They're just going to play for time.
And this I just continue to see not being addressed anywhere.
People just want to focus on the United States.
We're going to be there.
They're going to attack by 2020.
So what happens when 2027 comes and go?
You're just going to move the goalposts?
Yeah.
Probably. I mean, that's the modus operandi for politics, at least here.
Sorry about that. Sorry about that. I went rogue. I'm not sure if you want to talk about it.
I think that assimilation context is very important, especially as it pertains to Taiwan.
I was completely unaware of that context, and it makes sense.
again, I think it's important
I want to surface as many of these fundamental misunderstandings
as possible, because again, going back to
and Matt alluded to it, he's like, be careful, this guy's very pro-China
and I don't want anybody here to think that I'm pro-China, I've had Bellagio on, he's put a very
pro-China, bullish China
bearish future of the United States thesis out there
And as an American, like as somebody who wants to get to the truth of things, truth for the
commoner is what this what this company is called, TFTC.
And I think we should explore both sides of the argument and try to better understand with the intent of getting to a point where if you have better understanding you can actually get things done to that point
Like I worry that we're spending years with all this jockeying and moving pieces on the chessboard
with fundamental misunderstandings that don't actually allow us to get to a point where we can
have productive outcomes and so like how much time are we wasting what is the opportunity cost of
doing all this posturing and sable rattling from a position of misunderstanding that just
forces us down a path of delayed productive outcomes yeah and i'm in agreement and i do
want to circle back to a point you made which is look i want like i'm i'm a child i'm a child
with the Reagan revolution.
My most formative years
were from 1980 to 1988.
And as someone who's lived
out of the country,
travels back a couple times a year,
just the snapshots each year when I go,
I'm just shocked at how
the stripping away of freedom,
as I wrote today,
it's like the sovereignty of it all,
the independence.
Go out and make it happen for yourself.
Um, and there are just so many gatekeepers across the board all over the place.
Um, and it just seems as though that there's this, this, this element of fear that exists
throughout the United States of, you know, I don't want to sound like all hokey, right?
Like the scarcity mentality.
The United States is still the greatest, easily greatest country on earth.
All of it.
It just needs to go back to what it used to be.
And I don't mean the 1950s and all that horrible stuff.
I'm just talking about, hey, let's get on with the business of doing business.
And let's get – regulatory capture for me, it just drives me insane.
Like that has got to be – you saw that picture, all the tech titans having dinner with Trump.
I mean that's about as shiny as China gets.
Yeah.
It's become, I guess.
particularly with the trump administration where it is it there's a lot of sycophants who just want
to be seen next time the lead up to the election was like we've got the tech the tech right the
tech people are all right now they they're they're absolving themselves of the sins of dei and what
politics and bending the knee to the progressive left and now it's cool to be conservative and
free market oriented but it's all it's all about who can be seen in a picture with trump which
like literally they're i've got invited to meetings with trump or so you pay a hundred
grand to get a picture with them when they were leading up to the campaign it's like it's uh
it's a lot of um a lot of sizzle no stake in terms of substance it's it's really um
it's really like a social posturing and sort of hierarchy game that's being
played where it's like, I, let's actually get some shit done here.
And I, with that being said,
like I much prefer Trump in office than Kamala, but like going back to,
um, there's so many just idiotic mistakes, like in our space,
like launching world Liberty financial, launching the Trump meme coin,
Like just idiot, like no, like no reason to do it.
But it's just idiotic mistake.
And you bring up a really good point.
I think there's a couple of points where I think, you know, if you look at biology, I think it's I always find him fascinating because it's like, OK, number one, enough with the slideshows.
We get it. Right. China produces everything.
But what he never really addresses, and I think this is an important point, is China right now is attempting to traverse from one economic model to the next.
They're trying to move from growth model that was driven by real estate, infrastructure, a little bit of exports, if you will, to one that is going to be high-end manufacturing, more consumption, still exports, but on the higher end.
And I'll be honest with you. I have no idea if it's going to work. Nobody does. Because you also have, on top of all of this, gobs of debt. I mean, the local governments are just absolutely getting themselves – they can't pay bills.
So you can look at all of the, oh, look, they're building this, they're building that.
And I think that's fantastic.
I think there has been an enormous amount of positive momentum there.
But much like the G7, you have tremendous, tremendous debt.
What I will say, and as I commented to you, my catchphrase has been, Keynes is dead in China.
And what I mean by that is you would have seen a lot of headlines saying, oh, look, China's issuing tons and tons of bonds.
They have.
But the majority of those bonds are actually being used to go restructure local government debt in a way that is more transparent.
Now, left pocket, right pocket, it's still a mound of debt.
And you're trying to move to a whole new economic model.
I will certainly give the Chinese credit for rolling the dice.
But you're talking 1.4 billion people.
Property values are still underwater.
stock markets finally starting to catch up.
There's been a bit of a renaissance in terms of sentiment over the course of the last six
or seven months.
But this is not a foregone conclusion.
China is going to have to.
I mean, there's a lot of luck involved.
If the United States didn't go to war for 20 years, would China be where it is?
Probably not.
If the United States didn't focus on a lot more of these social issues that were nonsense,
DEI and what have you. Would China have been able to progress as far as they have? Probably not.
What's the joke, Marty? When you're digging a hole and you're trying to get out,
the first thing you need to do is stop digging. The United States needs to stop digging.
What would be the first step to stop digging in your mind? What's the first thing to do?
It's a sit down in Beijing between Trump and Xi where they say, OK, we're going to figure this out and we want to make sure that we're working together, that we're peers.
We're going to try to figure out a way that we can share the sphere of influence throughout Asia.
I don't think China would even ask for, let alone with the Trump administration, even say things like, oh, you know, Japan's yours, Korea's there, what have you.
It's just, look, we respect you.
We want to try to find ways to work together.
We've had 30 years, 30 years of collaboration that has led to prosperity and to peace.
Now, granted, that prosperity has not been all that well received by lower income levels throughout the United States, the working class.
That's something the United States is going to have to try to figure out, whether it's a UBI or whatever they're going to try to do.
But the very first step is to just sit down and say, OK, the world is big enough for these two nations to be able to get along.
And again, the the degree of. And I hate this word, so please, I apologize.
I just it's the only one. The synergy that exists between these two nations economically.
There's a reason why it worked so well for so long.
It just needs to be adjusted to come up with a way that all of the identified problems, let's say, the United States has with regard to manufacturing can get addressed.
That's where I was talking about joint ventures and the like.
Let China invest in the United States.
Stop freaking out about farmland.
I mean, you're just – guys, like you're making a big deal over something that might have an issue.
But the Chinese are just looking to figure out a way.
How can we take our hard currency, get it out of the country and put it somewhere in the United States is still the best place in town?
Yeah, I mean, that's a very controversial one and one.
I'll admit that does give me pause, particularly if they're buying around military bases.
I mean, that was a big, big thing in Texas specifically.
I think Texas outlawed it outright last year.
And I think that's – I think if there are strategic areas that you shouldn't – absolutely that makes sense.
The United States has got a lot of farmland.
You don't have to buy it right next to Fort Bragg.
Yeah.
Well, that's the other thing I wonder about.
Maybe I'm extremely naive, idolistic.
But to me – I mean we saw there was the two Chinese researchers in Michigan who were arrested for bringing in that fungus that could kill crops.
We've seen obviously the whole COVID thing with the Wuhan lab,
but there was some internet like NIH was funding the lab and the Chinese were
running it. And so there is this, there is this sort of,
you do have to have your guards up to a certain degree, but maybe I'm naive,
maybe I'm idealist, but I think,
I mean,
get to a point where the relationship is on good footing and you have free equal fair trade between
the countries it's a good deal like the incentive to play these war games and um these spy games if
you will is decreased a bit and then the the incentive is to cooperate and not try to sabotage
each other yeah and and again i think this is a this is a good point and and i always stress this
China is an absolute lover of the word asymmetry.
It's all they're looking for is how can they do little things that have bigger impacts?
So do I think that you got people coming into the United States that are trying to find ways to be able to undermine systems the electrical grid and everything else I absolutely do I mean when you what did I write to you right
If you go for the king, you better not miss. And so there's going to be a lot of things that are
going to be going on that we're not aware of, a lot of nefarious actions. I wouldn't put it past
the Chinese to do it. This is kind of their modus operandi. But at the same time, sometimes a cigar
is just a cigar. So you have to find a way, I think, to be a little bit judicious in how you
go and target it. And by the way, if you want my point of view on COVID, because COVID here was,
well, that's a whole different story. I guarantee you, this was literally somebody was somewhere,
dropped something, and it escaped. It's as simple as that. Now, the Chinese are not going to admit
that. That's a huge loss of face. So what do they do? They're like, oh, it came from the United
States. Come on, man. Nobody believes that. I mean, I know there's some supposed incredible
theories coming up. But as I see it, they took the SAR, the original SARs from 2003, where I was here,
and they were funking around with it, getting some funding from the United States. God knows
what reason. Some guys
have lunch one day and he's handling
a Petri dish and he trips.
I've seen things like
this happen. Not to that extent
mind you, but I've seen
big things happen
over very trivial
catalysts.
No.
No, and then
two other things I want to talk about.
Again, it seems to me
that China thinks in centuries
not quarters, which is very important for Westerners to understand.
And I was brought up in the discussion yesterday, like how much the how much of like the outcome of the opium wars and the century between like 1918,
1950 and 1950 is seeped in the psyche of the Chinese to the extent where they have it internally.
Like we never want that to happen again.
We don't want to get owned by foreigners to that extent ever again.
No, I mean it's called the 200 years of humiliation, whatever it's called.
Yeah, that is front and center.
I mean it's taught in schools.
You know, the whole drug culture here, zero tolerance, man.
Like, do not get caught with drugs in China.
Full stop.
I mean, there's zero tolerance for DWI.
You get caught drinking and driving here, you're in jail for 10 days.
No questions asked.
So that's definitely in the back of their minds.
But it's not what I would consider to be a driving motivation.
I mean, the driving motivation is chaos, meaning what transpired during that hundred years is you had warlords, you had civil war.
I mean, it was pure chaos.
And over that 5,000 years, if you go through the Chinese history, you find that typically this is when there's always a turnover in dynasties is things get so chaotic and the country breaks apart.
that you have to have somebody as a new strongman come in and try to keep it together.
So that is a number one priority is making sure that there is stability as best as possible
throughout the system. Now, the opium wars and being owned by any, I mean, even being owned
on a diplomatic level is viewed as being like, you know, the opium wars. You know,
you want to make sure that you're being viewed as an equal.
And right now I keep coming back to this.
Most of the countries around the world will sort of tacitly view China as an
equal,
the large G seven nations.
The U S is the only one that does not.
So yeah,
I think it's,
it's stability more than anything else.
Yeah.
That's another big topic here.
Like is the fentanyl crisis a reverse opium war tactic?
Yeah.
destabilize what's happening.
Oh, I think so.
Yeah.
Oh, I think so.
Yeah.
I mean, it's, again, it goes back to my issue about asymmetry.
And I think the way in which the Chinese are doing it, I think is, again, it goes to the
brilliance.
I mean, I don't mean to sound callous with regard to the outcome, but, you know, they
can honestly say, hey, look, we're doing what we can.
We're not actually sending the fentanyl.
We're just sending the precursors.
And those precursors can be used for a whole bunch of different things.
It just so happens that it's being sold to Mexico. But the Chinese will also look at it and say, hey, you need to close your borders and you need to get this drug issue under control.
And as much as I think that there is a driving element with regard to the Chinese using asymmetry in their tactics to be able to exploit this, no doubt.
I also think that this is what it should be within the power of the American government to stop it.
It's a supply and demand issue. I'm not saying, oh, the war on drugs. But I think there's a lot of money being made by a lot of groups across the whole border. So if you were to stop the demand issue of it, I think there would be – China would be like, all right, we're out of here. We'll figure something else out. But yeah, I'm not going to sit here and say, oh, no, it's just a coincidence. It's not a coincidence.
no no there was just a book written apparently there's
u.s military uh personnel that were that were working with the cartels to move all this stuff
it is uh
are you optimistic or worried about this the future state of the relationship between
the United States and China? Do you think that Trump, probably via the behest of Scott
percent and the advice of Scott percent, can come to recognize the this sort of way, the
best way to do business with the Chinese and swallow his pride a bit and actually get
something productive done? Or do you think we're destined to continue down this sort
saber rattling um uh sort of very uh what's the word i'm looking for confrontational relationship
yeah so in my own dna i'm a raging optimist uh probably much to uh my and probably not too
healthy but i i just i i'll always have an optimistic perspective on things and on the
point of the relationship between China and the United States. I am too grateful that Trump has
assumed power. It wasn't a redo of the Biden administration, because I think there were
very clear signs in that sort of side of the political party that, you know, let's try to
push the buttons. Like Nancy Pelosi flew out to Taiwan. There was a lot of events that, again,
that's why I said the degree of restraint out of China, I don't think really gets appreciated.
But Trump came in and my immediate reaction was, oh, this is not going to be good because if you looked across his headset, Rubio, I mean, you guys in Congress, I mean, China is the most bipartisan issue where there's agreement like we all hate China.
Great.
Like, how's that going to help?
And Trump has been able to keep that whole sort of group in check so far.
So that allows me – that provides me with an enormous amount of comfort.
How it goes forward I think is going to be open to things like the midterms.
I mean China understands, by the way, how the American political system operates.
They learned this the hard way back in 96.
So they're just sitting there saying, look, we're just going to kick the can until November 26.
because in November 26, everybody in the United States turns the brain off. It's Thanksgiving.
They go to the end of the year. Next thing you know, it's January 4th. And what is it?
It's midterms. Everybody's talking about midterms. Everybody's energy is either on
trying to maintain power or trying to reassume power. So the political capital and the ability
to sort of have the bandwidth to deal with China is going to be very minimal. And I think
the next two months are going to be very telling because they've got a lot of wood to chop between
now and call it the middle of November. If there are issues, they'll probably pop up
to one of next year. But like you and like many people on this who are viewing or listening to
this podcast, it's quite possible over that period of time that the United States may have a few
houses that are burning that they need to focus on. China is not going to be the priority.
So the financial situation, as I call it, the United States is absolutely unquestionably fiscally boxed in.
Everybody knows it.
It's the world's worst kept secret.
Nobody talks about it outside of this echo chamber, right?
And how are they going to square the circle?
I just don't see how they're going to be able to do it.
So we'll have to wait and see.
But I think for the time being, I think I'm overly positive that we're not going to go into anything that's going to be overly nasty.
But that could change by the Q1 of next year.
We bring up an interesting point to maybe a controversial thought experiment.
But is the nature of the U.S. political system, particularly elections, completely hamstring us?
In terms of being able to actually get stuff done, because people talk about four year cycles, but it's really.
What we highlighting here two year cycles you have presidential election then two years later you have midterms and many would argue they equally as important And so you have people for the presidential elections a year and a half of bandwidth mental bandwidth talking about and focusing on midterms to your point
Maybe half that or three quarters of that eight months, eight, nine months, January.
Right. And again, you can you can see it.
I mean, look, you're a family man now.
You've got three kids.
You and your wife are the same.
And once Thanksgiving comes, you're mentally going to be checked out until the beginning of January.
You're going to be family and everything.
And you are representative of so many people throughout the country.
So China will use that to its advantage and say, look, OK, we'll just wait for the next guy to come in maybe.
Or we'll see.
well and i've learned this through the mining industry too because you have the u.s
holiday system that rolls right at the chinese new year
where everything shuts down for a month in china and yep so it's like you have even an even smaller
window to actually be productive to get stuff done oh god tell me about it
and that's that's typically when in january through february anywhere yeah anywhere from
the end of January to early February.
Yeah.
It's
funny.
We always have to prep for
Chinese New Year in the mining industry.
It's like, okay, if you want to get anything done
with the Chinese counterparts, make sure
you get it done before the New Year.
Yeah.
It's with
anything.
It's with anything.
Well,
this has been
incredibly illuminating.
What final thoughts
or their words of wisdom,
advice would you give
anybody listening to this?
We do have some policymakers
to listen to this,
I'm pretty sure.
Okay.
Number one,
if you have not been to China,
I implore everybody
to get on a plane and come out.
It's actually,
you don't have to get a visa anymore.
You can do transit visas.
As Americans,
it's pretty easy.
come and see for yourself um now here may be the more controversial do not go to beijing
um i would even argue i can't believe i'm saying this don't even come to shanghai if you can land
in shanghai a day you want to go to shenzhen you want to go to hongzhou and chongqing these cities
are just i mean this is where the excitement is this is where the energy is you're seeing real
chinese entrepreneurial spirit people out having a good just people living their daily lives
get on a plane, come out and spend some time. Every person that I have sort of been with that
has done this over the last 18 months to the man and to the woman have said to me,
this is not at all what I expected. And I just really encourage people to do that.
The other point that I would make to you is whatever you see, and I would implore you to
be very careful when you go about indulging in certain content that's like, China's going to
collapse. It could. It very well could. I'm not going to say it can. But again, I've been hearing
this for two decades. So when you're hearing input from people talking about China, the first
question you should ask yourself is, has this person ever been to China? The amount of second
sourcing of information of late is frightening, meaning that people are talking to people who have
agendas who are then translating it and saying, oh, this meets my confirmed bias. So I'm going to
put this out there. And then finally, and this one is probably, I don't know, we'll see how it goes.
Anybody that wants to have a deeper conversation about any of this stuff,
hit me up on Nostra. I will talk to anybody as open as possible. As I said to you in the email,
Marty, I'm in Shanghai.
I'm in China.
I'm talking about Fenton.
No one's coming in the door and looking black bag me.
Right?
So a lot of the, I have a VPN, as I said, my VPN is from China Telecom.
They just want the money.
Like all of these stories that, oh, sorry.
You got me going.
There's no social credit score.
None.
I'm done with all this stuff.
so be mindful of the messages you get out and just make sure to question who's saying it what
agendas they have including myself and i'm glad matt called me out good
we have we have our next guest jessica jessica i am uh i'm in the middle of recording
an episode now.
And I think, are we scheduled for noon,
I believe? Yeah.
All right.
It works.
We're wrapping up here.
Nice to meet you, Jessica.
See you in an hour.
Bye.
That's the first time that's happened.
Oh, that happens to me at work all the time.
But anyway, so those would be some of the points that I would make.
But again, yeah, just reach out.
I, again, love Nostra.
I'm still shocked that you guys are talking about it.
I'm like, oh, wow, that's pretty cool.
Talking about what?
Talking about me.
Oh, that you're coming on here?
Yeah.
I mean
I'm not trying to blow smoke up your ass either
I was really happy that you responded to that newsletter
and I'll hand up
I'm probably guilty of
hearing information about China
from people with an agenda
and taking it at face value
and sharing it
and I didn't
because I've fallen for it before
Peter Zayan
the whole demographics problem
another one, Kyle Bass
Hong Kong
is going to fail and China
is going to try to take over
America. I've definitely
fallen for those
theses, but they've been around for
at least I've been
paying attention to them from those two individuals for
the better part of a decade. It's like
it hasn't come true. It's what's actually happening here.
So here, just a
quick editorial note on these guys and
there's a host of others.
have the opinion, keep the opinion. That's fine. If you change your points, that should be fine.
But when you go on traditional media like CNBC or CNN, and you're pitching essentially the same
storyline that you've been wrong about for 15 years or 10 years, I would think it would be
in the fiduciary duty, let's say, of the anchor to say, okay, we appreciate this perspective you
have on China. You've been wrong for a long time. Why should we listen to you now? What's changed?
And yet, because of the nature of how media is and everything else, I get it. That's me being
naive. But I think that's more my bigger gripe because these same people are on all the time.
Yeah. No, we see it. I mean, it's funny. It happens in the Bitcoin space too. There's like a
a carousel of people.
Many are good,
but many are like,
you've been particularly in the cryptosphere and you've been consistently
wrong for better part of a decade and you're still getting trotted out and
unable to shill your,
your wares to,
to the,
to the retail public.
It's very disheartening.
And that's why like,
I love having this podcast and being able to have,
we just spoke for an hour and 40 minutes and really diving deep into these
topics.
And I'm,
I'm curious about,
and I will admit I've,
I've,
probably spoken out of line on the topic in the past, but do earnestly want to learn and try to
get to the truth. And I think someone like yourself who's lived in China for 30 years and
definitely has a better perspective than myself and likely others who haven't, but are speaking
confidently on the subject is, is important. Right. No. And again, I, as I said, I'm not
going anywhere and I'm super ecstatic to be able to talk to anybody and be challenged. I mean,
I don't have all the answers, that's for sure.
Well, hopefully this is the first of many.
I'm sure the U.S.-Chinese relationship is not going to be boring anytime soon.
So as things develop, I'll make sure that our conversation is running behind the scenes.
And if we feel that it's important to get on air again, have a conversation to update the freaks about what's going on, we should definitely do it.
Yeah, and I'll be here. And I'll keep doing my China morning missives or whatever I keep calling them. I have a good time with those. And the engagement's been great. I mean, and I am, by the way, Nostra only.
Yeah, I was looking for you on X. I couldn't find you. So it was very impressive to see that you're Nostra only.
I haven't
it's hard when you have the engagement
but for me it was
you know look at the end of the day
I am a
I'm someone who really doesn't
like centralized power
so ironically that I live in China
but
that's why I think Noster
it was so funny I remember in the very beginning
been on two and a half years saying
sending a note to Jack
and I was like I'll tell you two things
The next election meeting, 2028, it's going to be only two topics, Bitcoin and China.
And he wrote back and he was like, probably.
And that's what it was.
That's what it was.
And the border.
The border was a big one.
But Peter, I know it's getting late where you are.
Appreciate you spending your Friday night with me.
I feel very fortunate that you were willing to do that.
And until next time, I can't wait to do it again.
Always going to be around, Marty.
I appreciate the invite.
And you be well with your family.
You as well.
Peace and love, freaks.