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Coin Stories with Natalie Brunell
Arnaud Bertrand: Multipolar World Shift – What It Means for the Dollar, Gold & Bitcoin as East Rises
01:12:23
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- [00:00]
A
We are entering into a multipolar world where no poll can submit another one to its will. So you need to find a way at the end of the day to coexist. So bitcoin is about 2% of my portfolio. Gold is 10%, stocks about 25%, a lot of commodities and so on. I try to be as diversified as I can.
- [00:26]
B
Hey, everyone. Welcome back to the show. Joining me this week is one of my favorite geopolitical analysts, Arnaud Bertrand Arnault is a French entrepreneur who founded House Trip, which was sold to TripAdvisor in 2015. And he is a prolific writer and commentator on China. His writings on China have been followed and read by about 100 million people across various platforms. He lived there for eight years, and some of his tweets have been going very, very viral about our changing relationship with China. So, Arnaud, thank you so much for joining.
- [00:58]
A
Thank you, Natalie. I'm glad to be here.
- [01:00]
B
Well, we have lots to talk about, and I was hoping, before we zoom in on specific topics, that you could just paint sort of the big picture for us. How do you see the changing global geopolitical landscape and what are the major forces that are really reshaping it?
- [01:16]
A
Sure. So I like to look at it in a very, very long time frame. So the way I understand the moment is it's a unique moment since the Industrial Revolution. So what happened basically, is that in the 18th century, we had the Industrial Revolution, where the west, led by Britain at the time, developed, I would say, unfair advantage over the rest of the world, which allowed the west to dominate the entire world. And that's basically been the situation since then. We are arriving at the end of that period where for the first time since you have a non Western actor, which is China, that's reaching technological levels on par with the west, creating a situation where, you know, the west is not dominant anymore. We are arriving in a multipolar world. Some might say that during the Cold War, that was kind of the case, but Russia was, you know, it's not anymore today, but it was kind of Western power. I mean, at the time of colonization and so on, Russia was one of the colonizers of China, for instance. So I lump it in the west in my framework. So, yeah, that's the big change. And I think it will lead to a world that in many ways resembles what we used to have before the Industrial Revolution.
- [03:19]
B
Can you talk a little bit more about how this multipolar world is really emerging? Because so many of my listeners and viewers only know the World as a very US centric, the rules based order, so to speak, with the dollar at the very heart of that system which has allowed America to have quite an immense amount of privilege. But it's also hollowed out the thing that once made it great. Right, our industrial base. We were once the creditor of the world and things are really changing. And China has many strategic advantages over us that I think they're is not a lot of consensus about when it comes to those in power and those on Wall Street.
- [03:55]
A
Sure. So I think there are a lot of misconceptions about what China wants to achieve in that many people think that China will resemble the US basically aim to be a replacement of the US in the same hegemonic manner. But I think China operates in a completely different framework. I like to compare it with the human body. I think that China wants to be the heart of the global system in the way the heart behaves in the body. So it's not right to say that the heart controls the lungs or the stomach or the brain or anything. It just operates at the heart of the system. Everything goes through it without necessarily any control. So I think that's more the way China views itself. It's not going to try to control others, but it's trying to position itself at the heart of global trade and so on and so forth on. It's not going to try, like the US tried to do, to transform others in its image. That's never been the case in China's history. You need to remember that if you look again at the very long time frame over the past 2,000 years, during 1,800 of those years, China was the biggest power. So we have quite a lot of history to look at to understand how China behaves historically as the biggest power. Never in history. There was a time where you had like Taoist monks or Confucian scholars going around the world trying to convert others to Taoism or Confucianism. That's not the way China operates. It's very happy with others being different. What China wants is respect and not only for itself, its culture and so on, but for its interest too. So you're likely to see China pushing a lot on that, as we're seeing right now, for instance, with the pressure it's putting on the US with rare earth and so on and so forth. But it's not going to try to make Americans into Chinese. That's not going to happen. And when it comes to currency on the dollar, I think that works in very long time frames, we are not going to see anytime soon another currency taking over the dollar as a global reserve currency. I don't think so. In fact, if you look at Chinese trade, they still use the dollar to a very large extent. I was recently looking at the share of dollar and purchase of Saudi oil for instance, and it's still something like, you know, more than 80%. So I think China is relatively comfortable with using the dollar, but wants to insulate itself from weaponization of the dollar. But I think they're finding that it's more effective to do that not through making the yuan into a reserve currency, but through other pressure methods, like rare earth, for instance. So rare earth on those kind of pressure points are sort of China's answer to dollar weaponization, if that makes sense.
- [08:01]
B
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- [10:06]
A
Yeah. So, I mean, I'm not a specialist on that. I did look at the numbers when it comes to China on gold. It's true that they bought a lot of gold, but I think this is more a sort of balanced portfolio type thing, thing to make sure that they have the rebalance their overall portfolio and mitigate risks more than some sort of, you know, immediate currency play, if that makes sense. And in terms of gold assets, they are still far behind the US if I remember the numbers correctly. So I don't think that again, there is, in the short or even medium term, there is a move away from the dollar as a reserve currency. It will be a slow movement.
- [11:06]
B
You mentioned rare earths, and that's something that I recently talked about on this show with Luke Groban, who's been pointing out the leverage that China really has. And rare earths are found in everything, especially critical infrastructure, radar systems, military equipment. We've fallen really drastically behind. And we have rare earths we could potentially mine and refine, but China has a monopoly over all of that. And it would take us probably, what, 10, 20 years in order to catch up. Can you share your takes on that?
- [11:38]
A
Yeah. So I think 10, 20 years is even optimistic, to be honest. I looked. So on China's list of export controls for rare earth, if my memory is correct, there were 21 items, 21 rare earth. And the common misconception is that rare earth are rare. That's not exactly the case. It's not about mining, it's not about finding rare earth. It's the processing that's insanely complicated. So I actually wrote an article on just one of those, which is gallium, which is not exactly a rare earth, but it has very similar characteristics. It's One of the 21 minerals that were on elements rather that were on China's list. And so gallium is a byproduct of aluminium production. So the reason why China is dominant in gallium production and it has 95% market share is first of all because it's dominant in global aluminum production. And when you Process aluminium, you find extremely small amounts of gallium. It's one part per 120,000. So for every 120,000 kilos of aluminum that you process, you have one of gallium. So it's very rare. You need to process enormous amounts of aluminum in order to extract gallium. So your first step, if you want to compete with China over gallium, is you will need to recreate an entire aluminum industry, which is a huge deal, right? And aluminium consumes an enormous amount of energy. So I estimated in my articles, I looked at the hypothetical, what will it take for the US to produce just 100 tons of galliums a year, which is about 15% of what China produces. And just in terms of energy, that will mean the equivalent of building six nuclear plants. So, you know, before actually rebuilding an aluminum industry, you need to build the energy for it, right? And we just saw recently in the US they build two nuclear plants in Vector and that alone took 11 years. So you will need to build six to recreate aluminum industry. Once that's done, you need to recreate the aluminum industry and you haven't gotten to the gallium part yet, right? So that is the challenge, that's the rare scar that, that China is playing. So that's why I'm saying that, you know, 10 to 20 years is actually very optimistic, right?
- [14:49]
B
I mean, we have so many barriers. We don't have the energy infrastructure, we have too many regulations. We shipped off the aluminum industry. I recently visited a former aluminum smelting facility in Texas that no longer exists. It was actually turned into a bitcoin mining facility now. But so much of this has been offshored and this administration has made a massive priority to re industrialize. But it doesn't happen in the blink of an eye. And we're going to have to basically probably print money in order to purchase the commodities that we need and to actually build the factories and the infrastructure that we need. Do you see us heading in that direction?
- [15:28]
A
I mean, I definitely see the US trying to do that, but it's very complicated. Because while you do that, you also need to bear in mind that ultimately if you recreate an aluminum industry, it needs to be competitive with China, right? If that's going to work. Otherwise you could assume that you would only cater to the domestic US market. That's fine, but then it means you're never going to be as big as China that sells globally. So to be competitive with China is a rather tall order. So recently there was this paper by a famous economist who used to be one of the founders of JP Morgan in China. He looked at the difference in productivity between the US and China, and he looked at apples to apples, or rather Tesla to Tesla, because Tesla has directly comparable facilities both in China and in the US they have a gigafactory in Shanghai and they have one in the US producing the same cars. He found in this paper that productivity for Chinese workers was 2.5 times higher and they were paid on average, 17% of the salary compared to US workers. Meaning that when you look at it from when you take those two into accounts, that's a 14x advantage over the US so that's what you need to compete with if you want to compete with China on the global market, on bridging a 14x disadvantage is, is, is hard.
- [17:36]
B
Well, can you explain that to the average American worker that might be listening to this? How is it that China can pay less, but they're getting more productivity? I mean, so many people today are struggling. Some of them can't find jobs or, you know, the jobs are being increasingly turned into potentially an AI job. And so people are really nervous. So how is it that China, I mean, they're getting paid less and they're more productive than us?
- [18:03]
A
Yeah, I mean, that's basically the case. That's what the data says. So one aspect of this is working hours. Of course, the Chinese work more than Americans on average. So, I mean, this is sometimes exaggerated. I looked at the actual hours. Many people think there is 9, 9, 6 in China, meaning they work from 9am to 9pm six days a week. That's not exactly true. That will make it 72 hours a week. But if I remember correctly, the numbers I arrived at was closer to like 58 hours a week. So it's less than 72, but it's still significant. I think the average worker in America is closer to 40 hours a week. So already right there you have a significant difference that accounts for a lot of the productivity gains. And then something that China is very, very good at compared with the US is education, especially, what do you call that, you know, specialized schools in specific crafts. So it has millions of students that learn very specific, you know, industrial crafts, which make them, you know, more qualified on average for those than the average US worker who says more qualified means more productive. So it's a combination of things, basically. And then of course there is the salary aspect. So they're paid 1/5 of American workers on average. But also things are much cheaper in China, so it doesn't mean that they have 1/5 of the lifestyle of the average American workers. You know, if you go to a Chinese supermarket, things actually probably cost 1/5 of the U.S. right? So, yeah, that's basically what's the situation.
- [20:21]
B
Yeah, I would guess that they have far more welders, electricians, really true blue industrial workers that we essentially shipped off. Right. We have a bunch of people that have liberal arts degrees and people that have had white collar jobs that are now going to be replaced with artificial intelligence.
- [20:38]
A
Yeah, exactly, exactly. They invested a lot in this type of education. They're doubling down on it. Because many Chinese thinkers are looking at what we did in the west, basically in the US but also to a greater extent in Europe. That's especially true in my country in France, where we shipped everyone to university and basically everyone wants white collar jobs. When you can't provide those jobs. Right. You don't have the need for only C level executives in a society. You also need qualified workers, especially if you want to rebuild an industry. So that's also why it will take a long time to compete with China, if ever, because you basically need to rebuild an entire education mindset, rebuild those schools, rebuild in people's mind the will to actually go study for those crafts and so on. So that's not something that's done in a year or two. That takes that, that takes at least a decade, if not two.
- [22:05]
B
Right. A lot of people don't have the mental capacity to kind of go back to very monotonous or very physical labor jobs. How, how do you see AI affecting the employment market not just here, but also globally? Is China ahead of us on that as well?
- [22:23]
A
That's an excellent question. I think the, the jury is still out on that. So I looked at a recent MIT study that basically studied exactly this question. Does AI improve your productivity? Because who says replacing jobs means improving productivity? That's what it's all about. They surveyed a very large number of firms that had adopted AI, and 95% of those replied that it had done nothing so far for their productivity. So it means that so far the answer is AI is not exactly replacing jobs. That's a bit of a paradox compared to the narrative that we commonly hear. We also thought that the Internet revolution would improve productivity. In fact, I think if you ask most people the question, did the Internet and the rise of mobile phones and so on, did that improve productivity in society? Most people will say, yeah, it's new technology, of course, that improved productivity. But if you looked at global productivity or productivity in developed countries since the early 2000s, the growth of productivity actually goes down. So it might even have worsened it. So I don't know why exactly that is. Maybe people spend more time on YouTube instead of working or something like that. So we shouldn't. There are a lot of assumptions that AI will replace jobs, or new technology automatically means job replacement and so on, but it's not obvious. Actually, it's not always the case. My opinion on this is that it would actually be good news if AI replaced jobs because improved productivity means more wealth, right? Because it means that you can produce more with less. That's what improved productivity means. If you produce more with less, then you end up with more wealth. That's what happened when in the early 20th century farmers were replaced with tractors. You had an explosion of productivity in society and there was more wealth to share with everyone because suddenly you could not only produce farm products, but you could produce a lot of other things and everyone benefited from that. Whereas if you have a technological revolution that does not improve productivity, it means there is a lot of disruption like we saw with the Internet. But wealth does not necessarily increase. There is just redistribution of wet. Like the cake stays the same, but the shares of the cake are distributed differently. And what we saw with tech is that tech oligarchs and so on got a much bigger pie of that cake and there is rising inequality and so on. So that's why it's not necessarily good news if AI does not replace jobs. I think you'd rather see AI replace jobs than the contrary. Let's see if it does.
- [26:17]
B
Did you see Elon Musk at the conference? I think it was this past week where he talked about his belief that in the next 10 to 20 years work will be optional and that, I mean, it sounds like a ubi, you know, universal basic income world where we, we all have AI agents and not a lot of people are working. It's very scary for a lot of people to imagine.
- [26:38]
A
Yeah, but Musk always makes those wide claims and they never pan out to be true. I mean, if you listen to him, we should be on Mars by and. Well, not so. Yeah, I don't pay too much attention to what he says because I think it's a lot of PR for his companies. Maybe him just being overly enthusiastic about tech, but it is generally proven wrong.
- [27:08]
B
Let's talk a little bit about energy because AI is demanding a lot of energy. We see these data centers so springing up. There's more demand on our grid and it's something we're going to need to address. I think this is also an area where China has a little bit more leverage and has planned for this and has the infrastructure that's needed. What can you tell us about sort of the energy needs going forward and how that's going to impact the average American's life?
- [27:36]
A
Yeah, I mean, energy is the saying that the economy is energy transformed. So energy is absolutely critical.
- [27:49]
B
We can't print it out of thin air. Like we can print our dollars.
- [27:52]
A
Yeah, exactly. But actually, the good news for Americans, I looked at the data quite closely, is that your cost of electricity is the same as China. Actually, that's surprising to most people, but you're actually doing quite well energy wise. Those who are not doing well are Europeans. So if I remember the data correctly, China and the US are both at like 8 cents per kilowatt hour, and Europe we're at 19 cents. So we're the ones in trouble. Of course, the issue with the US is that you're not building fast enough new energy. So you managed to maintain, I think, these low prices because you were basically outsourcing what costs energy to other countries, China included. But if you want to re industrialize, then you're going to have to build a lot of new energy generation. Given the recent history with Voktor on what we spoke about, that's not easy to do. Another interesting thing that I looked at, which I found quite fascinating, is so Trump has this narrative on green energy being a scam and so on. And he said at the UN recently that your country is going to fail if you adopt green energy. What is the fastest growing source of energy in the US right now? It's solar. So if you look at Texas, for instance, they're building solar facilities like crazy, which is very interesting because Texas is of course famous for oil and petrol and so on, but they're investing a massive amount in solar for the simple reason that solar is cheap. It's the cheapest or one of the cheapest costs of energy right now. So I think that there is the official narrative which, which makes sense from a US standpoint, because you're the world's first exporter of oil right now. So of course you want to promote oil, which makes sense, like it's good business. But actually for yourself, you know, that green energy also makes a lot of sense economically speaking. You want to do that because adding solar facilities and so on is very fast and is very easy and that's a way to ramp up energy incredibly fast. Building new nuclear plants is actually hard and takes a very, very long time. So it's good news for Americans if you actually go do more green energy because that's a practical, cheap and fast way to increase energy capacity.
- [31:23]
B
It is really sad what Europe has done to itself, really. I mean, it's becoming less and less energy independent and the costs are rising for the average European. I'm from, I'm from Poland, so I followed some of the European news more closely than the average American and it just seems like they're really struggling and a lot of times siding with the west, their Western allies has really been harming them in many ways.
- [31:48]
A
Yeah, absolutely. I mean they cut relationship with their biggest energy supplier. So of course that's going to have consequences. Right, Obviously. And also there has been a lot of ideology. So for instance in Germany where there was a big anti nuclear movement, which means that they destroyed all their nuclear plants pushed by green members of the government. And all in all, the end result, which is incredibly ironic, is that now they rely a lot on coal, which is of course way more harmful to the environment than nuclear. So yeah, it's just senseless, basically.
- [32:38]
B
And they recently cut themselves off because of pressure from the US when it came to chips, right. A Dutch company and then now they're saying, hey China, please give us chips.
- [32:49]
A
Yeah, so I mean that's the Nixperia, the Nixperia story. So Nixperia is a company based in Holland that had been owned by China for a few years by a company called Wintech. And it's a very large company. So it's 14,000 employees, most of them in Europe, that's supplying not latest generation chips, but sort of mature chips a lot to the auto industry. And so the European auto industry and also to a large extent the US auto industry is very reliant on Xperia. And what happened is that the US introduced a new role in September that basically said that any subsidiary so company owned by a Chinese company that was on the US entity list, that subsidiary will go on the entity list as well. It's called bis, 50% for all. And that was the case of Nick Spiria. So Wingtech, Nixperia's parent company, is on the US entity list since December last year. So it would have meant that Wingtech will basically be sanctioned by the US which is incredibly damaging to any company because you can't use the dollar, you can't do any business with any US persons or companies and so on and so forth. So it would have been a big blow. But the US told the Dutch, we have an easy solution for you, just steer the company away from the Chinese and then we won't apply the sanctions. That's what the Dutch did. They basically invoked a very old World War II era law that had not been applied since 1952 to requisition strategic stuff during wartime. And they say we requisition Xperia. The Chinese are out. But interestingly then of course the Chinese retaliated. The Dutch move was very stupid because 70% of the chips of Nixpur are made in China. So of course the first thing that the chains did was well, you know, say goodbye to those 70% chips, right, which, which, which was incredibly damaging to, to the European auto industry and to the US as well, by the way. And after that's also when China applied the rare earth pressure on the US it was directly because of this bis 50% floor. That was China's retaliation to the US as part of the deal between Trump and Xi in South Korea. In Busan, it was agreed that the US withdraws that bis 50% rule in exchange of which China suspends these rare earth exchange control, export control. Sorry, that was the quid pro quo. And so the Dutch were left kind of holding the bag like we stole that company from the Chinese because the Americans told us to. But then the Americans do their own deal with the Chinese, which means we actually didn't need to steal the company. And now we are under incredible pressure from China. And so basically they gave up, they surrendered, basically where now they've rescinded this law and they've given back the company to China. So this whole story is just too funny.
- [37:07]
B
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- [39:55]
A
Yeah, I don't think so either. Simply because.
- [39:59]
B
Because it can't.
- [40:00]
A
Yeah, exactly. Yeah. But both countries are just so powerful that they know they will be basically destroyed if they go to war. So to your point, if the US goes to war against China, then China can basically say we cut the supply of everything, including rare earths and so on. It means you can't produce weapons. And the US Steel is a major military power. So they can of course hurt China extremely badly as well. So I think that's the key sign we're entering into a multipolar world. That's the very definition, in fact, of a multipolar world where no one can submit, no poll can submit another one to its wheel. So you need to find a way at the end of the day to coexist. It doesn't mean that either China or the US will stop trying to gain advantage over the other, but it needs a recognition that there needs to. You can't return back to global hegemony in the way the US used to have, like in the 1990s or early 2000s. That era is gone. And that's why I think you start seeing Trump speak of G2 when he's speaking about China on the US it's a recognition that China has achieved peer status and so that there needs to be more discussion at the high level and ways to find, you know, finding ways to, to, to live with each other. As simple as that.
- [41:59]
B
Yeah. I think that Trump, based on his truth social posts, is passively, aggressively acknowledging that China does have sort of leverage and we can't make certain moves because we just don't have the power that we once did. And speaking of the hegemony that you mentioned, can we talk a little bit more about how this is all impacting the global financial system? Because things are really changing and the dollar was once seen as really that risk free asset that underpinned everything, but it does carry risk in the form of both duration risk. We're inflating constantly and having to print. So the real value of Treasuries is constantly falling, but also potentially default risk. I mean, I know we can always print, but you see so many tremors in the global financial system underneath all of it. Because we've pinned the whole entire system on debt.
- [42:53]
A
Yeah. So I think, I mean, it's an issue, in fact, most countries have, if you look, I've recently posted on Japan, for instance, its own debt is even far bigger than the U.S. they are at 235% of GDP. When the U.S. if I remember correctly, you're around 150% or something like that. And still a huge advantage that the US has is that it can export its problems to the rest of the world because it still is decreasing, but it still has this global reserve currency, which is the dollar. So when the US has inflation, it can export its inflation away to the rest of the World, something that Japan, for instance, cannot do the prime stay at home. I do, however, agree with you that it is unsustainable. At some point there will need to be some sort of change reckoning of some form. I think the Trump administration is trying various tricks to try to solve this issue, like the stablecoins and all those things, but the fact remains that it's unsustainable to just spend much more money than you have on live on credit. At some point that needs to stop. You need better management of the economy. That's the real solution. But politically extremely unpopular because it means that more taxes and more, you know, working harder on all those things that, that people don't like spending less on social programs. You know, all those things are incredibly politically unpopular. So, yeah, that's also one of the downsides in many ways of liberal democracy, where you need to get elected. And so you cannot get elected on a program of I'm going to tax you more, I will give you less money, by the way, you need to work more.
- [45:30]
B
Right, right. Yeah, exactly. Yeah. We are in a crisis, I would say. I mean, our real interest exp. Expense, which is our interest, plus all these obligations, these entitlements that we have, right, that we will keep funding because we sort of have to the Social Security and the Medicare and all of that and the military and that's 96% of our tax receipts. And so we really can't afford for stocks to come down because those are effectively now, it seems like backing the, the, the U.S. treasury market, as Luke Grohman says. So, I mean, it seems like you're right, things are shifting. We're moving towards some kind of other system that will replace the dollar at least as a global reserve asset. So that kind of goes back to my earlier question about gold. Do you see us moving into a more neutral reserve asset world with gold underpinning it? Could it potentially be something else in the future? My audience, obviously a lot of bitcoiners in it, including myself.
- [46:25]
A
But what do you think the honest answer is? I don't know. I think that nobody knows. I mean, Gold is more a question of fiat currency at the end of the day. We used to have gold underpinning everything and then we changed to fiat in the, what was it, the 1970s? So are we arriving at the end of the fiat system? I don't know. We may be. I think that there might be a point where globally there is a collapse of trust in, in the basic logic of fiat. But yeah, that's just a Pure hypothesis. I just have no idea. As to bitcoin, I mean I own some bitcoin but I personally don't see it as the same as gold for the simple reason that I look at my portfolio every day. And when stock crashes or when there is an event that means that investors are fleeing to safety, gold typically goes up, but bitcoin typically goes down. So it means that it is, is an asset that's more, at least in its behavior similar to stock than it is to gold by definition. I think I haven't seen correlation, but I'm sure that if you will do a correlation analysis it will be more correlated with the stock market, perhaps even tech stocks than it is with, with gold.
- [48:44]
B
It's so interesting you say that because so many people do see it as volatile as a tech stock, a risk on asset, it is highly liquid and it trades 24,7. So when there's a geopolitical event, it's probably the first thing to sell off. But what's interesting about what you said is that typically about six months after one of those events, bitcoin outperforms gold. So while people might flee to safety and purchase gold in the very, very short term, when there's a sell off over the maybe six to 12 months after it, they choose bitcoin and bitcoin outperforms. So it's really interesting. When did you decide to start allocating to bitcoin and why?
- [49:21]
A
I started, I don't know, maybe three years ago or something. My personal philosophy is I only look at my portfolio once a year in early January because I really believe in the theory of what you call the dead man's portfolio. Like the best performing portfolio is those of a dead man because he has no feeling. Right? Your worst enemy when it comes to investing is your feeling. And I was beaten a couple of times in the past where I panicked over something, sold everything and then what do you know the day after everything goes back up on the. And you need to buy everything up at a higher price. So now I look at it once a year. I mean I allocate once a year for the year based on simply. Good old balanced portfolio. I don't try to be smarter than the market. I don't think it's possible. I try to match the markets while minimizing risk, which is why my portfolio is balanced. Bitcoin is about 2% of my portfolio, more or less. Gold is 10%, stocks, about 25%, a lot of commodities and so on. So it's a wide range of stuff. I try to be as, as, as diversified as, as I can, basically following the science on diversification, on portfolio management.
- [51:09]
B
What are your biggest concerns? When you look out and you see the current economic situation, which is one similar to what you described, I mean, the average person feels like they're struggling. They're expected to work harder than ever, but their cost of living is running away from them. Here in America we have an affordability crisis when it comes to homes, homes and health care. And yet they look at the elites who are richer than ever before and there is this call to redistribute that wealth because there's a sense of not just inequality, but just an unfairness in the system and how the wealthy achieve their wealth.
- [51:43]
A
Yes, of course, I think that's, that's always, if you look throughout history, that's always been the key trigger for, you know, social unrest, revolutions and so on. It's what Ray Dalio is speaking about, like the long cycle where rising inequality leads to social unrest, which eventually leads to the fall of a cycle and the beginning of a new one. And a lot of things are linked. So yesterday, for instance, I posted a fascinating paper that showed the link between low income and especially housing costs with low fertility.
- [52:33]
B
Oh, yes, I saw that. Yeah, which makes sense.
- [52:36]
A
Exactly. It makes a lot of sense. If you can't afford a big family home, then you're not going to, you're less likely to have kids. Right. Because you have nowhere to put them. That's as simple as that. And so a lot of those things are linked. There will need to be a way, I think you can delay it. So try to basically make society less unequal. Politicians should do that. But it's often hard, especially in some systems like the US which is, if we are fair, very corrupted by money. If you look at who's around, Trump, for instance, it's a lot of billionaires and so on. He's a billionaire himself, of course, so it's hard to expect him to basically take his billionaire's friends money and redistribute it to the average man. So yeah, it's, I think it's, it's more likely that that's going to continue even, even worse, unfortunately.
- [53:56]
B
Well, I would argue that both sides, even when they say, oh yeah, we'll tax the rich, they're not going to. Neither side will tax their friends and their donors. They're going to end up just looting the middle class like they always do. That's just my personal opinion, but I would love to get your take what Is the Trump administration doing really well, in your opinion? And what are its greatest blind spots? What does it really need to be careful about?
- [54:21]
A
So I don't have what you call Trump derangement syndrome. I actually like him for some things. I think he's refreshingly honest when it comes to a lot of things. Especially I love that he kind of stripped away the veneer of a lot of the liberals speak when it comes to other countries in the world. We are basically morally superior to China or to Russia or to all those authoritarian countries and so on. There is none of that with Trump. It's a pure power game, which I think is much closer to the truth than the sort of supremacist, in a way, viewpoint. So I like that a lot. I think in a lot of aspects, he's thinking alongside the bright lines for the US like it makes sense for the US to want to reindustrialize, for instance. It makes sense. I think he does care about the unheard minority in the US To a large extent. He gave a voice to a lot of people that were unheard when there was this feeling at some point that we were at the end of history and everyone was, you know, basically going to be like liberals, white color people. But no, I think there is, you know, rural minority in the U.S. there is, you know, old industrial workers minority and so on. Those people were unheard. So I think that's good. On the other hand, I think is also making a lot of mistakes. So for instance, I think that when it comes to China, for instance, so many things it does shows that it doesn't understand the country at all, which is problematic when it's your peer competitor. So just anecdotally, for instance, he recently joked that when he was at the meeting with Xi Jinping, everyone around him was fearing him. They were very afraid. And Trump was joking that it should be the same with J.D. vance and so on. I don't know if you saw that, but that's, I think, a complete misunderstanding. It was not fear, it was just discipline. Like, they're very disciplined in the way they engage with the US President on. In what they say. So. And his attack on China when it comes to tariffs and the bis, 50% fruit and so on, shows that he completely misunderstood China's strength, right? Like he thought he could crush China with tariffs. He thought China depended a lot on US Exports. He thought he had very strong cars to play. And clearly that wasn't the case because he, he backed off from all of those because China was much stronger than what he thought. And that's a lot of what of the advocacy I'm doing when it comes to, to China online. A lot of people are misinterpreting it as, you know, me being a CCP agent or whatever, which is ridiculous. My basic point is that we're actually as the west hurting ourselves much more than we hurt China when we don't understand them. Because when you have such an important country that plays such an important role is actually suicidal not to understand them. There is a Sun Tzu quote, you know, Sun Tzu is the Art of War author about that around, you know, understanding yourself and understanding your, your enemy. And if you understand neither, then you're basically going to lose every time. So yeah, it's very important. That by the way, is also a key attribute of a multipolar world. I'm very interested to look at past writings of people in the 17th or 16th century, especially Jesuit missionaries that used to go to China. There is none of the ideology that we see now, like around communism, around how bad China is and so on. They went there from a place of genuine understanding. They were genuinely trying to understand China because at the time China was extremely powerful. So in order to convince them they were missionaries, they wanted to convert the Chinese to Christianity. In order to convince them. You could not do that by force. You could only do that by argument. In order to convince someone by argument, first of all, you need to understand how they think, where they come from and so on. So there needs to be a genuine understanding as a first step if you want to convince someone in a multipolar world. And that's why I think we're more and more going to see my type of narrative on China, which comes from a place of genuine understanding, than the sort of Cold war propaganda style McCarthyism that, that we've seen in the past few years.
- [60:40]
B
Such an interesting analogy because there's almost a parallel to money. I mean, if we can print the global reserve currency and we can weaponize it, that is doing something by force as opposed to something like gold or a more neutral reserve asset. You have to resort to argument to make your case. You know, you have to go to a more competition based economic system where real value surfaces as opposed to just printing pieces of paper that really carry no long term value. I think that's actually really interesting. There are a lot of China hawks out there and I think that Wall street consensus in general still believes that the US has all the leverage. Do you think that that consensus is going to change?
- [61:29]
A
Absolutely, absolutely. I think Anything that's out of step with reality is going to change in two ways. Either they will adapt to reality to survive, they will realize they're wrong and that they need to base their actions on narrative, on reality. Or because they persist in analyzing the world in the wrong way, they will keep doing mistakes. They will be less powerful as a result, which is a lot of what we've seen when it comes to China. So many of the actions that the US has taken was taken from a place of hokism, hubris, and so on. Not only with regards to China, by the way, a lot of the actions of the US in general, like the war on terror and so on and so forth, that's not done the US much good. In fact, the very reason why we are in a multipolar world is because of us. Super is the US shot itself in the foot, right? So at some point, there needs to be a reckoning. That when you act with this mindset, this ideology, it's not good for you, like China. It's actually better for China than it is for you.
- [63:01]
B
I really want to visit China. I've been reading so much about these US executives that are flying over there and saying that it's basically like glimpsing the future, like they are 20 years ahead of us in terms of technology. I know you lived there for a long time. I find. I find China to be fascinating for so many reasons. Because it seems like when you think about the global financial system and the monetary system and how it's shifting, China's operating almost in a more capitalistic way than the US which has had a monopoly over money for so long. But if you how Americans understand Chinese culture and the Chinese government, we think of it as just this very communist place with total authoritarian control, total surveillance, digital credit scores, the things that Americans really fear the most. But they've been able to really subsidize a lot of the most important infrastructure, and they've become the factory of the world and now the creditor of the world. And it's just so interesting, the dynamics. And America has changed so much too. And we can no longer say that we are, you know, the beacon of freedom that we've always been. And I just. I don't know, I just find the shift so interesting. And I have to go there to see for myself.
- [64:11]
A
Yeah, you definitely should go. It's a fascinating place. There are a lot of myths that are told. For instance, that social credit score does not exist. That's a myth. That's a complete legend. No One in China has a social credit score. Yeah, you go to China, you ask someone on the streets, just five minutes, stepping out of the airport, you can ask anyone on the street, what's your social credit score? Everyone will look at you like, what are you talking about? It just doesn't exist.
- [64:42]
B
Did they do test pilots of this?
- [64:45]
A
They might have in one or two small villages or something like that. But I've personally traveled to every single province in China, except for two. I've traveled a lot in China. I've never seen any trace of it. Yeah, what does exist is a system, and that's often the misunderstanding. They have a system of blacklists, which means that when you do certain actions, especially related to financial actions like fraud and so on, you can go in front of a judge who will place you on a blacklist, which means that you cannot take the fast train, you cannot take the plane, you cannot borrow money anymore. So you're punished in a number of ways until you repair the damage that you've made. Meaning, if it was a fraud, then you reimbursed people you defrauded, for instance. So I got so many know, two people who are on the blacklist. So I'm very familiar with the system. So that does exist. It has nothing to do with the score that follows your daily life or anything. That's not true. That doesn't exist. It has to do with you did one specific action, someone basically sued you over this, and then you're punished that way. So it's similar to being on the, you know, to some extent, the no flight list in the US or in France. We have this notion of inter debanker, where you're forbidden from banking because you've done certain things. So, you know, it's more similar to this than the myth we have of the social credit score in Western media.
- [66:42]
B
Very interesting. Well, I know we're running out of time, but I did want to ask you, just when you look out at the next five, 10 years, with all of these forces converging and technology taking over more and more in terms of digital intelligence, are you hopeful about the next five to 10 years and the standard of living for the average person, are you concerned?
- [67:05]
A
The answer is it depends where I would say, as a European, I'm extremely concerned. I'm most concerned for Europe because for all of the hubris of the US and some of the bad decisions, what Trump represents is a change and adaptation to a new world, to a multipolar world. It's very messy, but it still change. So that's more positive than Europe, where we're sort of doubling down on the thinking that the US is abandoning right now because it has not worked and we're doubling down on that. So, yeah, I would say on China, I think as challenges, I mean, there is the real estate crisis and so on, but it's also extremely good at change. I think they're making a lot of the rights changes, doubling down on innovation, education, technology. In fact, even the real estate move, I think is the right changes because what it is is deflating a bubble. So I'm also quite optimistic for China. I think if we're in a 5, 10 years time frame, the most worrying are Europe.
- [68:48]
B
Well, my show is really all about economic empowerment. So where I want to leave this is what is your message to the average person in this time where things are changing geopolitically and there's so much uncertainty and political instability? What is your recommendation for the average person to empower themselves financially?
- [69:12]
A
That's a good question, but a hard one to answer. Without sounding cliche, I will say. I mean, I can just speak about what I've always done. I basically always followed my passion and my guts, basically, and always tried to educate myself a lot on everything. So, for instance, I'm passionate about China because I lived there and so and I started writing about it without any conception that it will be useful for my career or anything. It's just, I like it. It's a subject I'm interested in. I started writing about it now. Somehow I managed to be an important voice on the topic and I'm called on shows like yours and so on. That's just how life happened. I was, you know, for my first company, which I sold it just I had a bad experience with, you know, it was at a time where it's a holiday apartment platform. It was Airbnb before Airbnb, basically. Yeah. And it stemmed from a bad experience where I booked a bed and breakfast in Scotland and the process was super messy and I was like, there has got to be another way and yeah, I'll fix it. And I just had the idea like that in my car when I was driving and I just decided to go for it. Right. So that's just the way I do things. I'm not going to say that that's the best way for everyone, but it's basically trust in yourself, follow your passion, what drives you, and typically, I guess you end up in a good place. At least I did. I think.
- [71:23]
B
I think that's a great message. Trust yourself, follow your passion. Solve a problem if you see one, and I'll add another. Acquire hard, scarce assets that they can't print out of thin air. Arno thank you so much. It was so great to speak with you. I'm going to link your work. I recommend that everyone check out your newsletter. Also your Twitter X page. You have some great insights there. Thank you so much for joining me today.
- [71:47]
A
Thank you.
- [71:47]
B
Natalie, thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes. And if you can turn on those notifications and leave us a positive review, they really help the show grow organically with new listeners. We have a free weekly newsletter you can sign up at thenewsblock Substack. This show is for educational and entertainment purposes only. Nothing should constitute as official investment advice and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach out at info@talkingbitcoin.com. i'll see you next time.