The Trade Wars Have Begun | Ep 006 Lemonade Stand 🍋

Summary

Podcast Summary: Lemonade Stand - "The Trade Wars Have Begun | Ep 006"

Host Panel:

• Aiden
• Atrioc (Brandon)
• DougDoug

Release Date: April 10, 2025

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1. Introduction to the Episode (00:00 - 01:30)

The episode kicks off with DougDoug humorously announcing his investment in a "real 1776 Spanish gold doubloon," setting a lighthearted tone for the discussion. This playful start transitions smoothly into the episode's primary focus: the escalating trade wars, particularly between the United States and China.

2. Overview of the Current Trade War with China (01:30 - 05:25)

Brandon: Introduces the main topic, highlighting the ongoing and intensifying tariffs imposed globally, especially targeting China. He mentions Doug’s previous insights on overbuilding in the context of Chinese trade strategies and hints at revisiting their approach to hiring a "Korean child" as part of their economic hedge.

Doug: "With all the economic turmoil going on, I have decided to invest in a secure asset, finally." (00:00)

Aiden: Provides a brief explanation of the recent developments, noting the sudden and aggressive tariff increases by the U.S. government, leading to significant market volatility.

3. Detailed Analysis of Tariffs and Market Reactions (05:25 - 22:12)

Aiden: Delves into the mechanics of tariffs and their intended economic effects. He explains the initial strategy to crash the stock market to drive American citizens towards purchasing U.S. bonds, thereby lowering the cost of borrowing for the U.S. However, this backfired as countries like Japan began dumping U.S. Treasuries, causing bond yields to rise and the stock market to plummet simultaneously. This dual negative impact threatened the U.S. economy's stability.

Notable Quote:

Aiden: "We're having a red day after red day. There was one day where it started green. And it went red by the end of the day." (02:16)

Brandon: Questions the rationale behind raising tariffs beyond the already prohibitive 100%, especially on Chinese electric vehicles (EVs), questioning the practicality and purpose of such high rates.

Doug: Highlights the lack of alternative manufacturing options, emphasizing China's dominance in various high-tech industries and the challenges the U.S. faces in reshoring manufacturing.

4. Historical Context and Strategic Comparisons (22:12 - 35:08)

Aiden: Provides a historical backdrop, comparing the current situation to post-World War II dynamics where the U.S. established global trade institutions to maintain its economic dominance. He traces China's rise through the World Trade Organization (WTO) entry in 2000 and its subsequent manufacturing supremacy, which has now led to widespread global trade tensions.

Brandon: Points out the inconsistent application of tariffs, noting how allies like Australia and the EU are treated differently, undermining the potential for a coordinated global strategy against China.

Notable Quote:

Brandon: "The unilateral action that the Trump administration has taken today against every nation in the world does not come as a surprise for Australia. These tariffs are not unexpected, but ... they are totally unwarranted." (27:53)

5. The Impact of Tariffs on the U.S. Economy (35:08 - 51:20)

Aiden: Explains the concept of bond yields and how they influence borrowing costs for the government. He emphasizes that rising bond yields increase the U.S.'s debt servicing costs, exacerbating the national debt crisis.

Brandon: Raises a critical perspective on the relevance of the stock market as an economic indicator for the average American, arguing that its fluctuations primarily affect those invested in stocks, often at the expense of broader economic health.

Notable Quote:

Aiden: "If we buy more of their stuff than they buy of us, and that counts as them charging us a tariff." (05:25)

6. Comparative Analysis: U.S. vs. China Building Strategies (51:20 - 74:40)

Doug: Discusses China's Belt and Road Initiative (BRI) and its global infrastructure projects. He critiques the quality and sustainability of these projects, citing numerous failures such as defective power plants in Ecuador and Uganda's hydroelectric projects fraught with construction defects.

Brandon: Acknowledges the initial success and strategic intent behind BRI but highlights the subsequent pitfalls arising from overbuilding and debt dependency. He points out that while some projects have improved local infrastructure, many have left host countries heavily indebted and with subpar facilities.

Aiden: Connects the overbuilding strategy to China's economic vulnerabilities, noting the shift from aggressive infrastructure expansion to a focus on exporting goods. He underscores the challenges the U.S. faces in competing with China's entrenched manufacturing prowess.

Notable Quote:

Brandon: "If you told me a hundred cracks is chill, I would have been like, oh, fine." (75:03)

7. Ethical and Humanitarian Concerns (74:40 - 81:05)

Brandon: Shifts focus to humanitarian issues, sharing disturbing stories of adoption fraud in South Korea and wrongful deportations facilitated by administrative errors during the Trump administration. These anecdotes highlight the broader systemic issues and moral implications of current policies.

Doug: Relates personal experiences volunteering at orphanages in Nepal, drawing parallels to the fraudulent practices in South Korea. He emphasizes the exploitation driven by financial incentives, criticizing the lack of ethical oversight.

Notable Quote:

Brandon: "These adoption agencies in Korea ... they're just kids put up for adoption with their birth parents still alive." (56:20)

8. Concluding Thoughts and Forward Look (81:05 - End)

Aiden, Brandon, and Doug: Reflect on the complexities of global trade, the pitfalls of overly aggressive economic strategies, and the need for balanced, ethical policies. They express frustration over inconsistent tariff applications and highlight the necessity for coordinated international efforts to mitigate economic disruptions.

Brandon: Announces the upcoming launch of a Patreon community to engage listeners more deeply, offering additional content and collaborative opportunities.

Doug: Ends with a humorous yet poignant remark on the unsustainable nature of their discussions, signifying the depth and seriousness of the topics covered.

Final Notable Quote:

Aiden: "We've done it again, folks. Lemonade Stand does it again." (92:34)

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Key Takeaways:

• Tariff Strategy Flaws: The U.S.'s aggressive tariff strategies aimed at destabilizing foreign markets to drive investment in domestic bonds backfired, leading to increased borrowing costs and economic instability.

• China's Manufacturing Dominance: China's strategic entry into the WTO and subsequent manufacturing boom have positioned it as a global trade powerhouse, challenging U.S. economic supremacy.

• Belt and Road Initiative Critique: While BRI initially bolstered China's global influence through infrastructure projects, quality control issues and debt dependencies have led to significant failures and skepticism.

• Ethical Implications: Trade and economic policies have profound ethical and humanitarian consequences, as evidenced by adoption fraud and wrongful deportations, underscoring the need for responsible governance.

• Need for Coordination: Effective economic strategies require international cooperation and balanced approaches to avoid unintended negative repercussions on both domestic and global scales.

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This episode of Lemonade Stand offers an in-depth exploration of the intricate dynamics of modern trade wars, the strategic maneuvers of global powers, and the multifaceted impacts of economic policies on societies worldwide. Through engaging discussions and real-world examples, the hosts provide listeners with a nuanced understanding of the challenges and implications of current global economic trends.

Transcript

[Doug]

With all the economic turmoil going on, I have decided to invest in a secure asset, finally.

[Brandon]

Which one?

[Doug]

Far coin track. You can probably guess.

[Aiden]

I would say fart coin is a stable reserve.

[Doug]

No, no, older than that.

[Aiden]

Oh, come. Coin.

[Doug]

Older than that.

[Brandon]

I want to. Like what? What do you want me to reach for?

[Aiden]

Litecoin theory?

[Doug]

No, no, no. Older.

[Brandon]

You're investing in rocket before 2009.

[Doug]

That's right. I went on ebay and I purchased a real 1776 Spanish gold douon, which I now own in its entirety right here. Ladies and gentlemen, I am ready now. It is a little bit smaller than I expected. Ladies and gentlemen, my nest egg.

[Aiden]

Wait, is that.

[Brandon]

Is it really.

[Doug]

Is that really a gold Spanish Doubloon? It's about 250 years old.

[Aiden]

Pirate gave their life to try and get this.

[Doug]

$600. And this is my hedge against tariffs.

[Aiden]

You're in the gold club. I'm so excited to have you.

[Doug]

And what's cool is I bought this from Spain before the tariffs, so I didn't have to pay.

[Aiden]

You're playing world markets like a fiddle.

[Doug]

Going to be honest, a lot smaller than I thought.

[Aiden]

Real.

[Doug]

This is real.

[Aiden]

It's so much smaller than I expected.

[Brandon]

My whole life, I thought like.

[Doug]

It's like, barely. I can't even. It's smaller than a dime. It's actually minuscule.

[Brandon]

So how much is this actually worth?

[Doug]

$660.

[Brandon]

Are you serious?

[Doug]

I thought it would be bigger.

[Aiden]

It just runs out.

[Brandon]

That's kind of nuts.

[Aiden]

It's kind of nuts, dude.

[Doug]

What kind of topics are we talking about today?

[Brandon]

Well, you know, I, unlike Doug, chose to buy another CSGO skin this week, so we'll see how that pays out. But today we'll be talking about the ongoing, you know, not that many changes, not many pieces of news about the ongoing trade war with China.

[Aiden]

Any news at all?

[Brandon]

Tariffs. Tariffs around the world, especially those with China, that we are not only keeping, but expanding. In contrast to last week, Doug talking about overbuilding and how building too much could be bad in the context of China. And also, I may or may not be revisiting the reason that we're getting a Korean child in this.

[Aiden]

We are going to get you guys the balloon. You get a Korean child and I'll get a.

[Doug]

These are our nest eggs. Yeah. A hedge against tariffs is a Korean.

[Aiden]

Baby dreams into this Korean child. Yeah.

[Brandon]

I think it's going to pan out.

[Doug]

Once he starts winning Starcraft tournaments, it'll pay off.

[Brandon]

He's going to get really into brood war. And win those like thousand dollar.

[Doug]

I have been getting really into brood war. It's sick. It's honestly sick.

[Aiden]

There is no money in it.

[Brandon]

Okay, well, obviously, if you're coming from last episode, you may have noticed that even within the span of us recording that episode, things changed. When we recorded it that day, we didn't have the calculation for how the global tariffs that were listed were actually made. So I wanted a trio to briefly explain that and just make a correction on what we were talking about last week. And also, if you want to just jump into how things have changed in.

[Aiden]

The past week, it was so much sillier than I thought it was when I was.

[Doug]

I mean, for context, what he announced, announced it like an hour, two hours before we recorded last week. The same thing happened today. He has done another supposedly 40 chess move today, which we are now processing.

[Aiden]

Which is actually pretty lucky. I think we're. I am super glad that Trump is making these big announcements on Wednesday morning.

[Doug]

So that us real journalists can get.

[Aiden]

Ahead of it, because if he announced them on Thursday, everything we say would be completely out of date. The tariff calculation, when he had came out with the big board in the rose Garden and said, this is what they charge us, it turns out that was a mathematical calculation based on basically imports minus exports divided by imports. It just basically said, if we buy more of their stuff than they buy of us, and that counts as them charging us a tariff. That's what they did. And they used that number, which is again, I think made up to charge them a reciprocal tariff. But a lot has happened since then, Aiden. We're in a fucking different world. So as of today, you know, I say up until yesterday, markets were reacting horrendously. Horrendously, people. The stocks were plummeting. We're having red day after red day. There was one day where it started green. Everyone said, oh, what recession? And it went red by the end of the day. And they were, you know, so it's been bad. And you might have mentioned this off POD or on pod, but one of the theories that has been espoused as to a reason why we might want these tariffs is, is that if the stock market is crashing, it is going to push everyone to buy U.S. bonds. We're going to go buy U.S. bonds. And when you buy them, it drives down our cost of borrowing so that we can refinance our many trillions of debt. That was one of the ideas espoused by Scott Besson. Well, in the last few days, the opposite was happening. Our cost of borrowing was ramping up, it was getting more expensive, and it was largely because countries were dumping their US Treasuries. Japan was a major one. They were dumping them. So we were getting a rising US Long bond and we were getting a crashing stock market, which is the worst of both worlds. So I don't know if this is 40 chess, I don't know what happened, but today there was a big pivot because both those things were happening at once. Yesterday, every tariff on any country that didn't retaliate is paused, except for a universal 10% tariff that is still staying on everyone.

[Doug]

So. So everybody still has the 10%.

[Aiden]

Everybody still has a 10%.

[Doug]

Okay.

[Aiden]

But if you didn't retaliate, if you're like, Vietnam or something and you didn't retaliate, then we're getting rid of the 43 and it goes back down to 10.

[Brandon]

Market rebounding switch, tariff lifted.

[Aiden]

Yes.

[Brandon]

What recession?

[Doug]

Yeah, that's true.

[Aiden]

So the market did have the biggest day in, like, I don't know, 60 years. It had a massive single green day. And, yeah, Vietnam is down to a 10%. So a lot of things that, like Twitch 2 are coming, but overall still a 10%. Like, compared to the old world before all this, 10% on everybody. And China, which did retaliate. The war has now begun. The trade war has now begun. It was a. You know, I'll give you a quick, brief timeline. We announced Rose Garden 34% tariffs on China. China goes, no, this is bullying or whatever they say. Fuck you. They announced 34% back. Trump says, big mistake, buddy announces an extra 50% on top of that total 104. Then today, when he, like, removed on everybody else, he added more. So now we're at like one a.

[Brandon]

Couple hours ago, bringing the total to 125%, which when I. Someone saw someone mention this in a message, I thought they were joking.

[Aiden]

Yeah.

[Brandon]

Because as we dove into last week, you know, a direct personal business investment in how this Chinese tariff specifically shakes out in the next few months.

[Aiden]

Yeah.

[Brandon]

And I. I had a quick question for you because one thought I was trying to, like, put into layman's terms basic questions that I could ask you this week about kind of why this is going on. 125 to me, knowing that something like Chinese EVs already had 100% tariff on them before all this. And that's like a big part, the main reason why Chinese EVs can't be sold in the U.S. right. What is the point of raising something from 104 to 125. Aren't we already at a point where there's basically no reason to raise that? I don't.

[Aiden]

What I will say is a 125% tariff is essentially a total trade decoupling that is like no good. Can really be sold profitably at 125%.

[Brandon]

Markup and is 104not that already.

[Aiden]

You know, for some small goods, I think China is so much better at manufacturing like you know, making certain nuts, bolts, what certain thing that we have no factory comparable.

[Doug]

So yeah, if there is no alternative then yeah, they will still pay it for certain things.

[Aiden]

Yeah, exactly. So it is a troll. I mean the number is astronomically high though. It basically means total trade decoupling from us in China. And the only real big question that wasn't answered today, I just want to get this before we go back to China is the EU did retaliate. So the EU before today's announcement did like a 25% counterterroriff back on America. And then today we're like, our allies are good, God is good. We're back only on focusing on China and someone yelled out the question what about the eu? And they ignored it. So I don't know exactly. We, I don't know where we stand on that because EU is our, our massive trading partner, one of our biggest and you know, the second biggest economy block. I don't know what's where we're standing on that because they said if you retaliated we're keeping the tariff. So I don't know that that's the one that I will know by tomorrow. Maybe we don't know.

[Brandon]

Now before I jump into my villain chair questions that I have this week, I was my first thought when I saw this was wow, more immediate inconsistency like this does nothing to fix the concerns around uncertainty. We just hit a 90 day pause on these tariffs for the majority of the countries that they were set on. This feels similar to the back and forth that was happening with Canada and Mexico at the beginning of the year. And because it changes so frequently, it doesn't really give me any. Removing the China factor from the situation and just thinking about this in a global sense. This doesn't really do anything for me personally feeling settled. I can't imagine being the guy with a bunch of capital to make the investments in factories in America or wanting to make investments abroad and this being that comforting.

[Aiden]

Yeah, I saw a great joke that was like, you know the guy who started a factory in America yesterday is feeling pretty stupid, right? The guy who saw these facts, 40% tariffs and it's like, oh, I'll move to America. No one was actually doing that. But the idea, the argument that this is going to bring factory jobs from all these different countries to America seems pretty foolish now that it's up and down.

[Brandon]

The mug mug factory was getting built already.

[Doug]

Yeah. We were moving it. Enough mugs in America. Finally, we can bring those jobs back.

[Aiden]

The thing is, it may happen with China. I mean, this China thing is the real thing because it's. They can't sell in America now directly. I don't know what it's a. It's a new world order.

[Brandon]

I think he hadn't mentioned it last week, too. Something interesting that I saw was they lifted the exception rule to where you could avoid tariffs by ordering directly from China for things valued under $800, which is how companies like Temu and I think Wish she in made basically their entire business model was based off of that exchange small orders. And now that exception is gone.

[Aiden]

Yeah, I had a chatter who. Who's I think works at the North American branch of Sheehan. And he talked to his boss and they were like, yeah, I mean, if this doesn't get figured out, we're fucked. There's no, there's no way to do that profitably. Everything is 100 more expensive. So. So I don't know. I think it's a good time actually to. To just jump into this. I want to.

[Doug]

Oh, you want to show that Scott Bessant.

[Aiden]

Oh, yeah, yeah. Show that interesting thing here.

[Doug]

So Scott Bessant, as far as I can tell, correct me if you guys have heard others, there's like three main players in the Trump administration are advocating for tariffs. Essentially everyone else, including all the people on the right, hate them. There is Scott Besant, who's the Secretary of Treasury.

[Aiden]

Yeah.

[Doug]

There is Howard Lutnock.

[Aiden]

You hate his name.

[Doug]

Howard Lutnick. He's the Commerce. Commerce Secretary. And then there is Peter Navarro, who's a senior advisor to the White House.

[Aiden]

Yeah.

[Doug]

So Howard Lutnick, having watched a little more of his stuff, seems to be a hype man with no substance. Yeah, I was trying to, trying to maybe give the benefit of the doubt. He just, any question he's asked about tariffs, he's just like, american people are going to be so stoked. And it's like, no, that's not what we were asking.

[Aiden]

He also, he specifically said, and this is the first I've seen a commerce Secretary do this. He said to Camera. You should buy Tesla. It's undervalued. Like, he's. He's had a specific stock you should buy and it's down from there. So, like, you can't do that. You can't pick and choose as commerce Secretary. Yeah, specific stocks to pump here.

[Doug]

Navarro is, is advocating a whole bunch for tariffs. He supposedly is like the big guy that is convincing Trump about the value of tariffs. And I listened to an interview with him on cbs, I believe and then again doesn't really answer the questions. And he has this belief. When asked about how long it would take manufacturers to move factories to America, he's like, I don't want to hear about it. During COVID We got things set up in two months. It's not going to take years. So he has this belief that, like, America can ref, like remanufacture factories in a couple months if we.

[Aiden]

He also Peter Navaro has over half a dozen books where he quoted an economist named Ron Vara to make up a justification for some of his beliefs. Ron Vara is his last name rearranged. It's made up. He made up this person. This has been exposed. He has made up a source that's himself. So again, I'm not two out of the three I don't like. But if you get the Scott Bassett, what's beast mode?

[Brandon]

No, that's beast mode.

[Aiden]

That's some Harry Potter, Voldemort, Tom Riddles.

[Brandon]

He's in the Chamber of Secrets. Whipp up the reasons for why, for why this is.

[Doug]

And then Trump found his journal and has been reading from it, learning about. Yeah, he's been talking to the bathroom. Lonely. Trump finally found Navarro's journal. Yeah, Peter Navarro, he. He recently has been saying that car manufacturers are just assembly lines here in the US and they need to start making everything here. And he talks about how Elon has been advocating against tariffs and saying there should be free trade. He's been pushing back. Navarro has gotten into a tip and said, well, Elon is a car guy and they should be manufacturing everything here in America. This so upset Elon, who to Tesla's credit, they do make most stuff in America. They're fairly integrated. Here is now we're calling Peter Navarro publicly on Twitter. Peter Ritardo. And so that's the new. He's now using, like Trump esky and slurs against the people in the cabinet. So there's this strange kind of fracturing happening.

[Aiden]

It's a big fracture.

[Doug]

Yeah, it's very, very strange.

[Brandon]

It is so awes to Watch two high level government officials act like the people in my CS solo queue games.

[Doug]

Yeah.

[Brandon]

I don't. Maybe it's not awesome.

[Aiden]

Maybe Elon should have covered B site as.

[Doug]

Yeah. So however we do have an awper here. His name is Scott Besant. So Scott Besant, Secretary of Treasury, he, I, you know, Atrock. Please elaborate more.

[Aiden]

I was going to say I like Scott Besant. Of all the options that could have been picked. I think he's a, a reasonable, smart guy. I think he's got a background in what he's talking about. I read his stuff before he ever was part of the administration and thought he had. It is funny though because when I read his stuff he used to be like, yeah, tariffs are pretty fucking stupid. And he's in the administration and I think he has to toe the line. But he might be like, I don't know, an operative on the inside who's like trying to, yes, the cozy up the Trump and say the nice things but he's like trying to get reason to what we're doing. And so this is his statement.

[Doug]

Yeah. So he, he last week was advocating for everything about how tariffs are great, how this is good. He was advocating how if we bring the bond Y that's going to allow us to refinance debt and save a whole bunch of money on the debt, which didn't happen.

[Aiden]

Just to be clear.

[Doug]

Yeah. If you pull this up, Perry. So this is him after, after a straight week, right. Of talking about how tariffs are brilliant. This is Trump's plan. We're going to do this. Here's the video. And all this was, again, this was driven by the President's strategy. He and I had a long talk on Sunday and this was his strategy all along. And that, you know, you might, might even say that he goaded China into a bad position. They, they responded. They have shown themselves to the world to be the bad actors. Damn.

[Aiden]

Okay, keep it going, keep going. There's a little bit more.

[Doug]

Yeah, yeah. And we are willing to cooperate with our allies. The allies who did not retaliate. It wasn't a hard message. It's like, dude, if, if like we were hanging out, right?

[Aiden]

Yeah.

[Doug]

At like basketball court, whatever. And then, and then I, I pull out a gun and I start pointing at you guys. I'm gonna shoot you. Right? And a track you say, hey, please don't shoot me. Right? Please don't. I'll do whatever you want. And Aiden pulls out his own gun, says I'll shoot you back if you shoot me. Don't fucking do that. And I put the gun away and I say, that was a test. Aiden, you're not a good friend. I'm only hanging out.

[Aiden]

That is a perfect example.

[Doug]

I'm only hanging out with Atriok from now on. Yeah, he's my ally.

[Brandon]

And it's in this case. If we were following this with the EU example, Atrock also pulled a gun out.

[Doug]

You're still friends with him.

[Aiden]

No, it's crazy because again, I've talked about this before. I want to do a little presentation about why possibly coordinated tariffs on China makes sense. There could be a reason for it. But the idea that this was all a master plan to get us and our allies. No, we want allies. We pissed off everybody. I got a video you may be able to pull up of like the Australian pm. Australia buys more of our stuff than we do of theirs. They're not even, even in the weird formula they used. Australia is our friend. We still put 10% on them. They have. There's Singapore, same thing. All their leaders are like, this sucks. This is, we're, we're mad at you. And that's supposed to be our allies that we like let off the hook. It's crazy. I mean, there's nobody in any country that's like more friendly to us. We still have long standing relationships that haven't totally dissolved. Can sort of be allies. Here again, I can see the rationale behind a China tariff. I think this is like a last ditch. Oh, shit. Everything was breaking because again, when the stocks are down and the bond yields are up. And I want to explain that right now because you asked for a little bit more of a clarification. I think when people say the word bond, people's eyes are the glaze over. And when you say bond yield, people's eyes roll back in their head.

[Brandon]

Yeah, I think this is a good thing to explain, like, in general, because I think a lot of people don't know about this stuff to begin with. And then for me specifically, like, my main interaction with this stuff is I, you know, I bought some treasury bonds last year. So how, how does this.

[Aiden]

At one point you had a portfolio, 50% treasury bonds, 50% CS. Go knives.

[Brandon]

Yeah, the most responsible portfolio. And, and guess what? That portfolio right now would be holding up.

[Aiden]

Like you and Warren Buffett have the same strategy. Okay, so quick, quick primer. If you're a rich person or a pension fund or a government, someone with a lot of money. I'm cursing a lot today. You could pick a lot of things to invest in because you don't want to hold it in cash.

[Doug]

Right.

[Aiden]

You could put it in stocks, you can put it in bonds, you can put it in gold, you can put real estate. And what bonds Is, are essentially IOUs from governments. They pay you back. Okay. A lot of time, especially lately, people have been putting their money into stocks because they've been going up, they've been, they've had so many good years. Lot of money's been stocks. But the idea is based on historical patterns. When stocks have a bad period, when they're crashing, when they're, when they're down, people flee to safety. So they go to things like real estate, gold. Bonds and bonds has always been the bigger one of the three.

[Doug]

And correct me if wrong, bonds generally are going to be lower yield, but it's lower risk. Right. It's like if you just want safe money, that's pretty much guaranteed. That's where you go to. But stocks is the higher return.

[Aiden]

Exactly. Bonds are guaranteed. So if you buy IOU from the government, if you're, if you're America and you're like, can I borrow $100 million and I give it to you, you offer me a guaranteed 4%.

[Brandon]

And historically, I think the idea is that American bonds are the most, are the best thing you could be putting your money in because, you know, the dollar is the reserve currency. It's. It has the US government behind it. It's basically a guaranteed return with no risk, whatever that return happens to be.

[Aiden]

Exactly. And the way bonds work, this is a little, this part gets a little confusing. It's like an auction system. So I say, I'm the US Government, I need to borrow a hundred million dollars. I'll offer you 2% interest. Everyone goes, crickets. They say, no. And I say, well, offer you two and a half percent. Crickets. I say three crickets. I say four. They go, all right, I'll buy some. And they buy some of our debt. So the more demand there is for bonds, the lower that auction, the more years easier it is for me to get a low. Yeah, I can go for 2% and everyone buys it. That's not what would happen. That's why it's so crazy, because that, that was the big idea of tariffs is like, okay, we are going to crash the stock market, but everyone's going to buy US debt and we're going to get a real low interest payment.

[Brandon]

And the idea of it being refinanced at a lower rate from my understanding, is that if bonds are available right now and we can list those bonds at a lower rate, but the economic situation elsewhere is dire enough. It doesn't matter that the rate on the bonds is 1% or lower. People will want to buy those bonds, which is refinancing the debt at a lower rate than what it's been sold at for the last couple of years during inflation.

[Aiden]

They don't want to lose money in stocks. Everything else is unpredictable. But I can get a guaranteed 1% or 2% from America. I'll buy their bonds.

[Doug]

And the reason that's so relevant right now is because we are ridiculously far in debt. We owe a bunch of money. We have to raise more money to keep paying down the debt. So if the US government can raise money via bonds while paying less because the bonds are low, that saves the US government a ton of money. A ton of, like massive amounts of money.

[Aiden]

Interest expense is like almost as big as our military budget right now. So we really need to get the interest rates down. So that was the idea. The problem is people were not buying American bond. They just weren't doing it. In fact, they were selling them, which drives up, makes the bar. You have to go 4 and a half percent, 5%. It was rising because Japan was dumping. China technically didn't dump, but a lot of people were dumping. And so it was creating the opposite effect. And when both things are bad, it's chaos. I mean, it's like it could break the whole system. So I think that's why he panicked.

[Brandon]

Today, or this was my big question for you is that I think that was the part I did not understand. So from my perspective as somebody who's bought a, you know, a Treasury before a bond.

[Aiden]

Yeah.

[Brandon]

Uh, I could. Could I have sold it for the period of time that I had it, like the. I guess the right to get the payout.

[Aiden]

Yeah.

[Brandon]

And why does them selling their bonds at. Is it because they're selling bonds that they bought at the like 4 or 5% during inflation? So if the government selling at the time, they have to offer similarly high rates.

[Aiden]

Exactly.

[Doug]

Yeah.

[Brandon]

Okay.

[Aiden]

Exactly what it is they're selling their bonds, people can just buy it from them. They don't need to buy from America at whatever rate. So you have to go higher to offer. That's the idea. So, you know, probably more than anyone needs to know. But a good way to understand like the plumbing of the financial system and what was happening and why it was so chaotic as of yesterday because the bonds were spiking, the stocks were going down, and that is a terrible double combo. That needed something to change because it could get disastrous now. Now we're in the situation.

[Doug]

People were flooding into the doubloon market.

[Aiden]

So we have our little stock game where we all drafted some stocks. The number one stock yesterday in the whole competition was gold. Was just gold.

[Brandon]

Oh, the, the gold stock. The gold stock directly tied to the.

[Aiden]

Value bricks of gold was number one because everything was chaotic. That's not true today because everything's bounced back, but as of yesterday. So I want to do a little presentation here and I want to. I want to catch people up because we're going to talk about China today. I think this is a good intro into why a China tariff might make sense, but why. I think we went around it a weird way. So this video. Tariffs are on, tariffs are off. We've been out of duck season, rabbit season. We don't know what's going on. I want to flashback to World War II and give like a super brief primer on how we got here and what's going on.

[Brandon]

Because you were there, you know what it's like.

[Doug]

You know what?

[Aiden]

Not only was I there, some other people were there. So there was the Axis powers, as you can see here.

[Doug]

That was a good transition.

[Aiden]

These are the Axis powers and they were fighting. I'm sorry, historical images. Can we please focus here? These are the Axis powers from German Italy in Japan.

[Doug]

That's our thumbnail for the episode.

[Aiden]

And then these were the Allied powers. Ok. The guy in the bottom right kind of played both sides. He was kind of like part of the war. He was on one side. Part of the war. He's on. So we had the Axis and Allied powers. Ok. Turns out at the end of the war, the Allied powers won. And the bottom two here, the American.

[Doug]

President famously only had like 2/3 of a head. Yeah, it was just kind of shark.

[Aiden]

Style at the time. That was the fdr.

[Doug]

That's why he couldn' he was just missing a lot of brain.

[Brandon]

A lot of people don't know that.

[Aiden]

Yeah, it's not. It was brain rot. Anyway, the Allies win. These bottom two here were kind of destroyed, though. UK and Russia were kind of destroyed. So it's kind of like an American empire, American golden age.

[Brandon]

All right.

[Aiden]

Post World War II, America's still got all the infrastructure. They've got everything built and it's a great time. And because they're the most powerful country in the world at the time, biggest military, best manufacturing, they set up the global world order basically in a way that benefits them. So there's the UN there's the World Trade Organization. There's a bunch of other things that the United States sets up and is like the leader of that. That sort of organized global trade and that is run for decades through the Cold War was the only other power that kind of opposed America was Russia. But then by the 90s, they're gone, collapse. So now it's. They called it the end of history, kind of in 92, America's 1. It's over. There's no other. This way of working is going to be the end. Okay, then in 2000 again, this is like all. We're little kids, the year 2000. Something significant happens. I think Bill Clinton's the President of time. They welcomed China into the wto, which is the World Trade Organization. They say, China, you are now getting the same trade rules as everyone else in wto. You can, you can trade freely. There's no tariffs on you. You're all part of the thing.

[Brandon]

We talking, we talking dang era is that.

[Aiden]

That's, you know, I don't know the Chinese leader at the time, but so it's 2000 at the time this happened. These are the nations that traded more with America in blue and ones traded more with China in red. Okay. This is the state of the world at the time of the WTO entering China. Flash forward just 24 years, the world is drastically different now. Almost everybody trades more with China than they do with us. China now makes a third of all manufactured goods more than us, Japan, Germany and South Korea combined. They have just leapfrogged the globe in terms of manufacturing. Half of the new world's industrial robots were made in China. Global shipbuilding, 55% in China, actually. Not important thing. They control the lithium ion battery industry. They control the drone industry. They're leading in electric vehicles. There's a lot of areas that China has now become a strategic power in over the course of the last 24 years of trade. And, you know, whether it's fair. There's many arguments that both sides will make about who's being unfair and what's going on and whether China stole IP or. There's a lot to talk about. And I think there's merits on all sides here. But what I think America is seeing, I think through a really kind of unfortunately foggy, dense Donald Trump lens. But it's like that something is going on here. Something we're. We're falling behind, something in some way. We need to stop this. And that is where the impulse to get these tariffs on China specifically comes from. And again, it's not just America. So I wanted to point this out because I think it's really important is that China has really focused on exports to grow their economy. That's. That's their main thing. They had a real estate bust. Their internal stuff's kind of actually struggling. But exports are great. They're crushing exports. They're selling EVs all over the world. And every other country in the wto, not just America, has been reporting more and more challenges. They've been, they've been flagging, they've been issues. This is a spike you can see in 24, but also just rising over the time of other countries doing W2O complaints or investigations against China. Specifically, on the right, you can see they're coming from India, eu, Brazil, Australia, Turkey. Everyone has been kind of mad that China's. All the manufacturing is leaving their countries and going to China, which has been just the global Mecca, superpower of, of manufacturing. So that's where we find ourselves, and that's why it's such an interesting time. Even the tariffs of Trump's first term did not stop this rise. In fact, it's grown in the past few years. Biden kept the things. So that's where we find ourselves. And that's why a coordinated global. Having a lot of allies working with you to maybe do a slowly but increasing tariff on China to keep some of the manufacturing out of there makes some sense. But when you're pissing off everybody. I want to show this clip. This is Australia.

[Brandon]

The unilateral action that the Trump administration has taken today against every nation in the world does not come as a surprise for Australia. These tariffs are not unexpected, but let me be clear, they are totally unwarranted. President Trump referred to reciprocal tariffs. A reciprocal tariff. Tariff would be zero.

[Aiden]

That's all you really need to say. And that he says not 10%. And we have a 10% Australia. Australia would be a partner that we'd really want on our side if you were trying to make some deal against China. And that's why you can see, I mean, this year hasn't ended yet, but in 25, the probes against China have dropped because people are focusing on America. Every one of these countries in the WTO is more worried about what America is doing than what China is doing with manufacturing. So that's where we find ourselves. But I wanted to set the stage on, like, how much has changed in the past 20 years and why this is like a big issue that's being talked about.

[Doug]

One of the interesting things I was reading about some, some folks who run factories and we're just giving their, their, their experiences with this. One of the things they mentioned is that even like it's not just raw materials to make things. It's even for example, you showed all the, the automation robots to build things in factories. The idea that America is going to rebuild or any of these countries that basically the manufacturing has been lost because China just exports to everywhere and reduces their need to manufacture themselves. Like they make all the equipment that you would use to make a factory. Like you can't. If you were like, you know what? We are going to build our factories here. Okay, where are we going to buy the robots? Where are we going to buy the parts? Where are we going to, where are we going to buy, where's the building these things? It's all from China. So it's like, yeah, it's crazy. Like the, and why I have been shocked at the, you know, again, those couple people who have been saying like, oh yeah, we can definitely rebuild, like Peter Navarro, we can build in America. It just feels, it's not lined up with reality at all.

[Brandon]

So I mean, what you're saying is if you had kept the allies in good standing with the U.S. like if the U.S. had treated everybody better along the way and had said let's come up with a plan to build manufacturing globally in a way that doesn't allow China to dominate this market in this way we can all work together to make that change. Yeah, but we're isolating ourselves from them as well.

[Aiden]

Yeah, that's why, that's the part that makes me the most frustrated because it feels like a self own for no gain. There's like not even a strategy to that. Pissing off Australia and Europe and all these partners at the time when we need them the most for a coordinated plan. You bring up a really good point. And the reason why we need to have coordinated efforts is not just because it's a nice thing to do or because it might work better, is because in the past what happens when you tariff a country like China is, let's say it's a thing called trans shipping. Okay. If they're sending goods to America and we put a 50% tariff on them, then usually what happens is they stop sending it from America and they send it to Thailand first or Vietnam first and they put a bow on it or they add one little thing or they. And now it's suddenly made in Thailand or made in Vietnam or made in Mexico.

[Brandon]

Yeah. The classic example in clothing is that you put the. You put literally just the tag on.

[Aiden]

Yeah.

[Brandon]

The final tag of the good. And then you send it on from there.

[Aiden]

And now it's under a Vietnam tariff of 10% instead of 50. And that. There's no answer to that unless you have that. Unless that country is working with you. And this is what's going to happen even when they're not working with you. I mean, it's so hard to clamp down on global trade when someone is a better manufacturer. So here's an example. We've had a pretty coordinated global blockade or something on Russia, sanctions on Russia. In the meantime, suddenly Finland and Kazakhstan are buying a lot more European and American goods than they ever were before. And it's finding its way across the border into Russia. You know, luxury cars that are not allowed to be sold in Russia are ending up in Finland and suddenly ending up in St. Petersburg. That's just what happens. And that's with, like a coordinated effort. It's like, it's very hard to clamp down on it when if they can't make the cars and they want to buy them, it's going to end up there. They'll find a way.

[Brandon]

It's like how you want the Xiaomi SU7 and you're going to illegally import it through Mexico. Yeah.

[Doug]

You can talk about that on and off the pod.

[Aiden]

I have thought about it, and then I found out that I would be arrested for smuggling. It could be a massive jail sentence and fines. I do want that sec.

[Doug]

We should bring Chinese EVs back to America. Yeah.

[Brandon]

I want what's ours.

[Doug]

Yeah.

[Aiden]

Respectfully, that brings up one last story I want to say, which is about this is a Chinese company named cimc. They make, like, tractor trailers, like the chassis for a trailer. They just take steel. They bend it. They make it good. They make it cheap. It's amazing. They're really good at it. They were selling them in America and undercutting everybody because they were just better at it. American chassis, tractor trailer guys were pissed and they demanded a tariff, some way to stop it. That was his first Trump term. It was granted. So what CIMC did is they rebranded to CIE Manufacturing with an American Star and Eagle.

[Brandon]

Yeah.

[Aiden]

And they set up a factory in America. They did what everyone wants. They made a factory in America. They brought their knowledge and expertise. They set up in a cheap area of America and they started making these things. And then they noticed they were getting out, competed by their American counterparts. They were like, damn, this is crazy. We can't. We just can't. Do it in America. And they looked into it and they found out that their American counterparts were, were buying Chinese ones from Vietnam, shipping them in and rebranding them. So the Chinese company was competing against American companies that were actually Chinese. We, you know, it's a whole weird system that is happening that creates these weird incentives. And what I'm trying to get across is like the best solution is just to be the one that can make it good. If you're good at manufacturing, all these problems disappear. But if you're not, there's so many loopholes and whack a moles you have to do to try and protect your less competitive industries.

[Brandon]

A couple episodes we talked about, I think subsidies is that that's kind of the other end of this, right? Like the, the carrot instead of the stick is that if you wanted to put something into place to help an actual American manufacturer compete with a Chinese company, you could subsidize it instead of applying tariffs to the Chinese goods and go that route as well.

[Aiden]

Yeah, I think that was like the build back, better plan a bit. They tried some of that. They did the chips act. There was, you know, it's mixed because we've had. There's real problems with getting the funding. Companies that got the funding did pretty well. There was growth in manufacturing. It's tough to say, but I would lean more towards that than this entirely stick route because I just don't think it deals with these very obvious workarounds.

[Doug]

That are why also seems so clearly that the tariff should be targeted rather than blanket because then you can be really focused and say like with chips, that's a huge, huge, huge security vulnerability for America and anybody to have to depend on Taiwan for chips. Right. If China goes and takes Taiwan, which is the kind of nuclear scenario that people worry about. Chips are in everything. They're in everything. They're in your car door handle. Not just your car, your car door handle.

[Aiden]

They're in our important Switch 2s.

[Doug]

They're in our Switch 2s. It's not just the things you think about like your phone, it's in everything. It's in our fridges, it's in our smart devices around like everything uses chips now. And there is an increasing level of production that the rest of the world is trying to do, particularly China with less sophisticated chips. But the best ones still come from Taiwan. That's what powers everything right now, including military stuff as we start to like do get military drones and the crazy like sci fi stuff. And so it is so critically important to have chips. And right now that it's. It's like not being manufactured up until recently. TSMC has opened a factory in Arizona that's starting to get up to speed and doing well. But that was like a big focus with the Biden administration that I think they did well. I think it was called the Chips Act. Right? Yeah. With the Chips act, where that was like, okay, tsmc, the company who makes all these chips in Taiwan, basically the only one in the world who's doing this. We got them to come build a factory in America. And that's like a critical vulnerability that is not solved.

[Brandon]

But it's better now in the process of fixing it.

[Doug]

Yes. Yeah. My understanding is like, that's such a small amount of the number of chips that we need for any kind of sustainable future, that if right now Taiwan were to be taken by China and China says, fuck you, Donald Trump, no chips for you. You don't get our chips. Like, we are super boned. Like, super insanely boned.

[Aiden]

Yeah. I mean, it's tough from Taiwan's POV because, like, if they do build the best chip manufacturing in America, then America.

[Doug]

Doesn'T have incentive to protect them. Right. Like, right now, the entire rest of the world is super incentivized to not allow China to take Taiwan because then everybody else in the world is mega fucked.

[Aiden]

Yeah.

[Brandon]

That was my first thought when I started reading about this specific topic. I was like, if I was Taiwan, I would not do this.

[Doug]

I would not do this.

[Brandon]

It's like slowly getting rid of my big shield and then handing it to somebody else.

[Aiden]

You'll protect me right then? Yeah.

[Brandon]

All right.

[Aiden]

Okay.

[Brandon]

Say I'm in the villain chair. I. I think he is playing 4D chess.

[Aiden]

Okay.

[Brandon]

I think there was no problem with the across the board tariffs. I think this is all a part of the plan, and I think we need to shake the system up to make significant change.

[Aiden]

Okay.

[Doug]

You've been saying that off the pod.

[Brandon]

And I've been saying that on and.

[Aiden]

Off the show all week.

[Brandon]

One of the. I had basically a few questions to. To try and get you to. To push against these arguments.

[Aiden]

Okay.

[Brandon]

I don't think a lot of it's interesting because I don't think that many people are necessarily even in this camp. Even if they did vote for Trump, it is interesting to see the public divergence on because of him right now. The first thing I wanted to bring up is the stock market gets mentioned all the time. It's. We're plummeting. We're going into Recession, stock market used as an indicator of economic health. But I would argue, hey, I'm just a normal guy. I'm like, I have a middle income job, I don't have a lot invested in stocks, maybe nothing invested in stocks like most people in the country don't. And if the market's going up or crashing, that affects, you know, rich people and it's not a very good indicator of economic success in the country. What would you say to something like that? Because I do feel like that argument comes up a lot. And the reverse of this argument is when stocks are exploding in value, but wages are stagnating, people are struggling, and people point to it then as like, well, the stock market's going up Nvidia just 300x but I still make the same salary I made 5 years ago. And inflation's digging into it. So from the other side of it, now that it's crashing, why is that something I should care about?

[Aiden]

I totally agree. I don't think stocks are the perfect indicator of economic health. I think stocks can be up and the economy can be doing bad for regular people, people. However, stocks crashing is certainly not good for regular people for two reasons. Number one is most, you say most Americans don't have stocks. Most Americans actually do. It's just that the most of them are owned by rich people, but they do actually own stocks and they have them in a 401k which is largely in the S&P 500. So when the S&P 500 drops, especially for people who are nearing retirement age, they are fucked. We are seeing people actually like flooding social media saying I have to now retire. Five years later, I have to, I have to post my retirement because I was counting on this to sell and retire on. And now it is 20% lower, 30% lower than it was. So that's part of it. The other part of it is the thing called the wealth effect where people that have a certain number of stocks that have been up that are green, they feel comfortable spending, they don't clamp down on spending. They feel like they, they'll buy that RV or they'll go on their vacation or they don't want things, they feel like they're in a good spot. When things are down, they clamp down, they tighten spending, they keep saving, they hold back, which slows the economy down. The third thing, and by the most important, and you can probably deal this with your, with your mogul merch, is like if you are importing a bunch of goods from, let's say China or Vietnam or anything that has a tariff and it gets to the harbor and you have to pay that tariff, you need working capital, you need money in your bank account ready to pay that. And if you don't have that, which most companies don't, you have to do immediate layoffs just to, just to get your goods out of the harbor. Because if you don't get them out, they auction them and then you're competing against your own goods that are being sold at auction. So what we're seeing, and this was happening already, we only had one day of real tariffs or 10% now. But companies are having to do immediate like, like close plants, do layoffs immediately. There's no delay, and that means working class jobs lost instantly.

[Brandon]

So I'm, I'm making this argument as the, as the 28, 8 year old who isn't retiring, who doesn't have a lot invested, you're still saying that the downstream effects of something like this happening do. So trickle down economics is real.

[Aiden]

There's no good downstream effects. That was my point. What I'm saying actually reminds me, speaking of trickle down, the Chinese Communist Party official Twitter account tweeted a Ronald Reagan speech on tariffs. Yeah, we were in the upside down world.

[Brandon]

That's crazy. I saw it.

[Aiden]

I don't know. Yeah, I don't know world, but that was.

[Brandon]

Reagan was a Chinese plant. And I haven't been in a long term saying it the whole time. The whole time.

[Doug]

That's 40 chess. They sent us Reagan 50 years ago. Damn. Part of the deal.

[Brandon]

Okay, fair enough. Eloquent answer. Okay, but haven't there been times, haven't there been times in history where tariffs were necessary for the US to succeed and grow? I remember something from a very own stream of yours where you mentioned that tariffs used in the 1800s when the US was trying to develop its own manufacturing sector, used tariffs against countries like the UK in order to protect from competition of countries that already industrialized, and then they utilized those tariffs to grow in the 1800s. I believe you said that in a video.

[Aiden]

First of all, never use my words against me.

[Brandon]

So I'm wondering, Atrioc, if it worked back then and we can point to an example of it working at least once in the past that I do remember that you brought up. Why couldn't it be that happening again now?

[Aiden]

So what I was.

[Doug]

God, you got him.

[Aiden]

Fuck. What I would say to that is that that sounds like a targeted tariff on a specific industry that you think is critically important. I think in this case it was Shipbuilding where like America wanted to build its own shipbuilding so that and UK could do it better so they tariff so they could build their own. I am not necessarily opposed to it in a very targeted case to get one industry you think is critically important as a broad case. And I think in the 1800s this happened anyway. It still creates rising tensions, trade wars, tit for tat tariffs where they try to counterbalance on you that ends up with everyone being poorer. That, that's, that's my overall stance. I think if, if we thought EVs are so important to have in America that we're going to tariff them. And I don't get my nice Xiaomi SU7 EV that I can drive around and look cool in. I can at least understand. I'm not, I'm mad about it, but I can understand it. But trying to do all goods at all once every country is disastrous. It's, it's, it's, it's crazy.

[Brandon]

I feel like you're, you're deconstructing my generalized argument and making very specific points that are difficult to argue attacks character. So I would like.

[Aiden]

You're a piece of shit.

[Brandon]

You're old.

[Doug]

Old.

[Brandon]

Okay, okay. I'm wearing a hat.

[Aiden]

You can't tell.

[Brandon]

Another thought. I had another thought.

[Aiden]

All right.

[Brandon]

The current Argentinian president, who I forget the name of your Malay, basically campaigned on this idea that in order to repair the economic circumst that we're in, we are going to need to go through a period of pain in order to succeed and come out the other side more successful. The pain that we're feeling right now is a part of the plan. It has to happen in order to create large economic change in the country. In order to get to a state where we're a happier, better financially better off country. We need to go through a period of damage like this in order for that to happen.

[Doug]

And Javier ended his speech calling you bald.

[Brandon]

And then he did mention that this.

[Aiden]

Is the period of pain I'm going through to grow.

[Doug]

Yeah.

[Brandon]

And then he called me bald in private. He apparently is buying a lot of Spanish doubloons.

[Doug]

Yeah.

[Aiden]

Ok, last one I want to say on this. That is fucking insane. That was the dumbest thing you've ever seen. Because, because I want to tell you.

[Doug]

The dumbest thing off effort.

[Aiden]

Because Javier Millet, not that I agree with everything he said, but had a completely opposite viewpoint. He's completely anti tariff, totally open free trade. Totally. So it's like saying if I, if I shoot you in the leg and you're like, I'm in pain. I'm like. Well, Javier Molay said, going through a period of pain, it's an entirely different thing. It's not a relevant example. It doesn't mean all pain will always lead to growth. It just means that guy thought in.

[Doug]

That Javier said, anytime you're in pain, it's good.

[Aiden]

So I disagree. I disagree wholeheartedly.

[Doug]

Okay, counterpoint. In the 1800s, we used to do bloodletting to heal people.

[Aiden]

That was me. Guilty. I'm old enough.

[Doug]

Yeah, okay.

[Aiden]

I used to bloodlet. No, I don't. Listen, I don't know.

[Doug]

I.

[Aiden]

Again, I think I'm. I'm. I'm trying to be as generous as I can to what I think is a pretty dumb idea. I think it. I think we're not benefiting.

[Brandon]

Okay, I have one more question, and this is something. This is something a little more genuine, less villain. Cherry is. You mentioned last week that a big part of becoming a more developed economy is you sort of naturally lose these manufacturing jobs over time to developing nations behind you that kind of pick up those jobs and are able to supply them with, like, lower cost of labor. Right?

[Aiden]

Yeah.

[Brandon]

But you mentioned that the develop developed country, like the U.S. maybe the Norways or the Denmarks or France, you move on to producing more complicated goods that those countries aren't able to produce. And you're specializing in offering, like, new services that allow your country to keep making things. Basically, yeah.

[Aiden]

Like move up the value chain.

[Brandon]

You move up the value chain. That was the way you described it. Is there. No. What is the end game of moving up the value chain, though? We could. There's forever. You're forever progressing in a game where countries are chasing your country and trying to catch up. Is it not worth fighting to maintain the original base manufacturing jobs in some way? Because even if I move up the value chain, maybe 20, 30 years from now, those jobs are being chased by Vietnam because they developed even further along the way. Do you know what I'm saying?

[Aiden]

I sort of know what you're saying. That's not a problem I can solve in this chair, I'll tell you that. I don't.

[Brandon]

I feel like we've been solving so many global issues along the way in lemonade.

[Doug]

After we talked about tariffs last week, they went away.

[Brandon]

They're gone now.

[Doug]

He dropped them.

[Brandon]

They went away before we recorded our next episode.

[Doug]

Right, Right.

[Aiden]

That's a good point, I think. Watch it. I think he's hooked. I don't know. I think you had a good Point actually last week you were talking about this where it's like, if you lose the base manufacturing, eventually you kind of lose the skill set that allowed you to get to the. You were, you know, if, like you can't make batteries, you can't make the.

[Doug]

Yeah, I'm not convinced that we will just be higher on the value chain than the rest of the world forever. I don't think there's many indicators that we as Americans or people in the west are inherently. I mean it's like, if you just think about like most of the centuries where the west has dominated the global world, right. And technology, China, India, the global Southeast, like it's been, they've been in immense poverty and then over the past few decades you've had what, 2 billion people lifted out of poverty. The idea that we are some sort of like God race is just insanity. And like, I don't see. If you just look at what's coming out of China and Taiwan and Singapore and India and the sheer number of people, it's like, I don't see how America maintains its position as like, we are the ones high on the value chain. We should be managing everything. So I'm somewhat pessimistic about this. Like the tech industries are exploding in other parts of the world.

[Brandon]

Well, I think a good demonstration of this actually is Chinese manufacturing. Because I think up until recently and now that these discussions are more popular and more in the news, I think people used to have this idea of sweatshop in China, like getting together this shittily made good. And that's what Chinese manufacturing is. And people have that idea from a really long time ago. But what people don't realize is that the manufacturing industry and this push for exports is they specialized and developed supply chains to create really complex high end goods. Even doing something within the world of clothing that I gave the example of is it's not just about doing like things more cheaply, it's about offering more refined services that are not, they do not really exist in other countries. A lot of the time they're the.

[Doug]

Ones moving up the value chain.

[Brandon]

Yeah, the level of specialization is, yeah.

[Doug]

We don't have, in America, we don't have people who can make these factories. And China has just this obscene amount of like STEM graduates who are focusing specifically on manufacturing. It's like, dude, they're, they're lapping us. Like they're going so far beyond any other country and like, it feels a little daunting. I don't see how it stops. And I don't think Trump's shit is helping at all. But I don't know, man.

[Brandon]

It's funny because to maybe do. Do you have something? One more thing.

[Aiden]

Well, I want to say I don't have the graph in front of me, but what I saw recently is that China is kind of going through the very beginnings, the baby steps of a similar thing where the bottom part of the value chain is going somewhere else.

[Doug]

Yes, yes.

[Aiden]

Like it's going to Vietnam, it's going to Indonesia, it's going to India, where it's like it's now too expensive for that very basic level to do in China. So they're going somewhere else. So it might be a cycle. You know, I think at the end of the day, you want to be the one making the electric vehicle or the Boeing jet or the tech company, rather than the company making the toasters and the T shirts. I think I believe in that. But I can see the value of having some competency at the base level.

[Brandon]

The cap to this conversation in my mind is this stuff is changing literally day to day, almost hour by hour. So it's hard to draw like a conclusion about what even the short term will be. I'm very curious if this 90 day pause will last. I'm very curious to see if it just comes back or if a bunch of the countries.

[Aiden]

Dude, if in 90 days we're in the exact same situation, I'm going to freak out, freak out. I'm going to lose it. Like, I'm assuming this 90 day pause is a nice way of saying we're going to go out and get deals with everybody, bring it all down except for China and focus. I assume at the best case scenario that's what they're doing. But if we end up with no negotiations, no deals, and in 90 days we're back to this, it's gonna, it's gonna be good content, I guess, but it's gonna be disastrous.

[Brandon]

Well, I have a very different topic that I was thinking about bringing up last week that I thought was really interesting, which was recently the South Korean government came out and for the first time ever took public accountability for the fact that they were basically just selling kids for, for a long time. They post Korean War, there was a bunch of South Korean children that were adopted Primarily to the US I think there was over 200,000 children total in this like kind of post war period.

[Aiden]

You bought a couple of them, right? You were, you were.

[Brandon]

Yeah, back when I was back post Korean war, I was like, why don't.

[Aiden]

I get A couple kids, Korean kids.

[Brandon]

Is a different life for me back then, though, I was a different guy. And the, the end of those, like 200,000, 150,000 of them were kids that went to America. The thing is in this, you know, this is kind of during the period of Korean economic miracle, like rapid growth in the country. And there's, there's two sides to this issue that are, that are coming up in. A lot of these kids abroad realized over time that they had fake, like, background or history given to them through a variety of.

[Aiden]

They made it up. They made it up.

[Brandon]

No. Or kind of. So the most common example I could find is in a lot of cases, these adoption agencies in Korea, which are making money off of, like, letting foreigners adopt, the kids would run into situations where maybe a child in their care would die. Jesus. So I, as an American who wants to adopt a child, maybe thinks, oh, I would love to help out this orphan from the Korean War. And I learned her name and I want to bring her over, adopt her, bring her into my family, right? And I go through that process and the agency gives me all their background information. I adopt the child. I sign, like paperwork in the US to make them a US citizen. But on the other side of this is the adoption agency that quietly, that child passed away during the switching. The kids, they just swap a new kid in that, who's, for example, whose parents are still alive. So a lot of the kids weren't orphans at these agencies, right? They're just kids put up for adoption with their birth parents still alive. And then a bunch of these Korean adoptees over time found out that their backgrounds were not orphans and that this large scale, basically adoption fraud had been happening in Korea throughout all this time. And a bunch of people have challenged this and tried to take these cases to the South Korean government and to get them to acknowledge that this happened and to get an apology to get payments for damages, different types of things, right? And I sort of first encountered this story, I think six or seven years ago, way before this apology happened, because there's a short vice piece on this Korean adoptee in the US whose name is Adam. And he was adopted by a family that abused him. They were a really shitty family. He lived basically a terrible childhood and the family he got stuck with never filled out the paperwork in the US to make him a citizen. And then because of his, like, I would say because of his upbringing, he wound up in a lot of situations where he, he wound up committing, like, crimes when he was younger through, like, his teenage Years and his twenties. He cleans up his act, becomes a business owner, has a wife, has a kid. Now he's for you, Adam. Now he's in his 40s, right?

[Aiden]

Okay.

[Brandon]

And he through, through this process, eventually finds out that his paperwork was never done properly and then submits an application for a green card like he should be eligible for. But because he submits that application, it flags the system that if you have any criminal history and you're an illegal immigrant, they deport you.

[Aiden]

Shit.

[Brandon]

But he, he hasn't lived in Korea.

[Aiden]

40 years in America.

[Brandon]

He doesn't speak Korean, he doesn't know anything about Korean culture, and then he gets sent to Korea. And this is a big story back then. During my research of this general story around Korea, apologizing for their end of the fuck ups here, I followed up on Adam's story now that it's been years later, and he managed to successfully sue the Korean government for the situation that he was in. And he got paid out $75,000, but.

[Aiden]

He can't go back to America, but.

[Brandon]

He still cannot go back to the US so he's stuck in Korea. As of 2023, he was still stuck in South Korea and couldn't come back to the United States. And this is a bizarre situation where in the wake of, you know, this, this economic growth period for Korea coming out of the Korean War, at least in like the, within the ceasefire deal that they had, the Korean companies have this awful incentive to like get through, basically get as many kids as they can into their facilities and sell them off as adoptees to as many families as they can because of the money they were bringing in. And then on the other end there, the American process, if the family wasn't willing to do the paperwork or just made mistakes on the other end, it has long, long term consequences for the adoptees on the American side. And I thought that was a pretty wild fucking story.

[Aiden]

That's fucking crazy.

[Brandon]

And then this one, more like little tie in that I thought is, you know, in the wake of the Trump presidency, there's been a lot of changes to the way like immigration and deportations have been happening. There's a big story now with this guy named Abrego Garcia, who basically is from Maryland and he's originally from El Salvador. He came to escape gang violence in El Salvador when he was 16, he's now 29, and he has his paperwork, he has asylum in the country. The reason that this happened is in 2019, he got arrested or pulled over on accusation of being involved in Gang activity in the U.S. okay? And he gets let off because the gang activity accusation is totally baseless. They're saying he's an operative of, like, Ms. 13 in New York. He's literally never lived in New York. He's from Maryland. And through this process, he's granted legal asylum and protection that he cannot be deported. He's now, like, legally living in the United States.

[Aiden]

Okay.

[Brandon]

And now he, you know, just normal, basically, normal citizen in the U.S. has a U.S. citizen wife, has a kid and gets deport. Is in the group of deportees that just got sent to El Salvadorian prisons. So he's in the El Salvador prison right now, and he legally could be in the US and the Trump administration said directly that this is just an administrative error, that it was just an accident.

[Doug]

Whoops.

[Brandon]

But now that he's there, the Trump administration is like, he's under El Salvador's control. We can't do anything about it. And they're not bringing him back. And he's still there right now, which is insane to begin with. And this has been litigated. It's gone to, like, a circuit court. They demanded that he be returned by, like, Monday of this week. And then the Supreme Court just overruled that and said, like, you can't give that deadline. It's, like, unrealistic that it doesn't make sense that you as the circuit.

[Aiden]

They just overruled the deadline that.

[Brandon]

Just the deadline, but they're not commenting on whether or not he needs to come back or not. And the Trump administration's whole argument is, like, this is just out of our hands now. We can't do anything about this. So this guy, who is legally in the US through the asylum process, is now stuck in a prison in El Salvador because of an acknowledged, quote, administrative error, which I think is insane. And I think these are just two examples. I think I have, like, pretty. Pretty, you know, hard opinions about, like, anyone being deported in the first place. But I think these two stories, years apart, you know, in Adam's case, I. I think his may have been in the first Trump presidency, but I think his type of case, it's like, wouldn't have mattered if Biden was president or not. Like, that is nothing necessarily would have changed. It's just two examples of where technicalities ruin people's lives and put them in unwinnable positions because of the way we choose to conduct this process. And then on the other end of it, it's like people being, like, having their history robbed from them because of money. And I, I just thought this was all, like, really interesting in the, the different examples.

[Aiden]

It's actually a sad.

[Brandon]

It's very.

[Aiden]

Yeah.

[Doug]

Interesting wasn't the word.

[Aiden]

Yeah, it's incredibly depressing, me talking to a guy in the prison. This is so interesting.

[Brandon]

Yeah. Obviously. Sorry.

[Doug]

You know what I mean?

[Brandon]

It's not the right. Not the right word.

[Doug]

I'm sorry.

[Aiden]

So interested.

[Brandon]

So, yeah, I just dug into that is like the, you know, the greed. The greed of the adoption agencies, the immigration process.

[Aiden]

Is your point that we should start an adoption agency because there should be good money.

[Brandon]

Well, if we start adopting Korean kids, I think we. We would just do it, right?

[Aiden]

I think we should do the agency. The agency side's making the money. They're selling the kids, Right.

[Brandon]

Oh, so we do want to make the money. We do want to sell the kids.

[Aiden]

Where's the property of the space? 75.

[Doug]

Well, we got to get higher on the value chain.

[Aiden]

Exactly.

[Doug]

You know, it's, you know, it's wild.

[Aiden]

Speaking of.

[Doug]

Hey, hey, Speaking of selling orphans who have parents, Okay. A little, Little segue. I, I. When I was 18, I went to Nepal for three months and volunteered an orphanage. And that sounds great, right? Like, wow, what a virtuous young man. How, how smart and humble and handsome. But which, you know, it's all good. And there's all these pictures of me.

[Aiden]

Like, which I was.

[Doug]

I was, you know, and I am. And was. Yeah. Perry and I went to the same high school. We, like, wrote. They wrote an article about me. It's like Doug went off to Nepal to help the children in the hills. No, this is real. Yeah. Yeah. And so, so I did this. This was right after high school. And, and, you know, I was like, okay, things seem. Seem a little off, but it's a good organization. All that. And then over the subsequent years, turns out that a lot of, particularly in Nepal, these orphanages that are a sort of popular place for foreigners to go and volunteer at to help these orphans, a lot of them aren't orphans because the parents in the rural countrysides of Nepal realize that if they send their child to this orphanage in Kathmandu, the city, that a bunch of foreigners will come and support them with money, and then they will get a better education. And so really what I did is I went and, like, hung out near a school that said it was an orphanage that had parents, like a boarding school, I guess. And so already it felt a little weird when I was there. It's like something felt kind of.

[Aiden]

You can see the kids, parents right over There. Yeah, yeah.

[Doug]

They're like peeking over the corner or whatnot. And so it's strange that I think, well intentioned. I mean, certainly people running the orphanage were very well intentioned. They were trying to help orphans. Right. And there were legitimate orphans. But this reminds me of that story of, like, this orphanage in Korea is literally selling children who have parents. Like, that's a lot more, I think, vile than what was happening in Nepal or is. I don't know. But it's weird that that's a common thing, apparently.

[Aiden]

Well, I think the theme that hits both these stories and almost everything we've talked about is, like, not enough discussion of incentives. You know, that's if. If there's an incentive because there's money.

[Brandon]

To be made from, people are willing to abuse it.

[Aiden]

People.

[Brandon]

And it may not be everybody. Right. It's not that everybody has the same moral code and always faced with the same decision, everybody would be, you know, robbing those Korean kids of their history. Yeah. It's just that because the position is allowed to exist, the someone to make the decision is. Is willing to step up to do it.

[Aiden]

Yeah.

[Brandon]

Which is like, bad. It is bad. It is fucking.

[Doug]

No, no, no. You said it was interesting.

[Aiden]

It was interesting. I think he should be kind of like that. I don't remember what he said.

[Doug]

Yeah, there's like a little smile for the audio listeners. He gave us. He gave us a toothy grin suffered in you.

[Brandon]

You have trauma about your whole history being robbed from you, but I just got to share it on a podcast.

[Aiden]

Every time Aiden sees a really depressing story, he smiles because he knows he can get content.

[Doug]

Green dude, he's clean. Oh, man.

[Brandon]

Maybe I need to be lighter.

[Doug]

I'm.

[Brandon]

I'm sorry.

[Aiden]

No, no, no, no. I. I mean that. I mean, I don't know what to say about it, to be honest. It's really depressing. It's sad.

[Brandon]

No, I don't think it's. It's funny because it's. It's.

[Doug]

It's funny. It's funny.

[Brandon]

Funny.

[Doug]

Funny and interesting. And funny. Funny and interesting story about children being sold.

[Brandon]

If you show any of these stories, if you. If you approach almost anyone at an individual level and you confront them personally about one of these stories and the human being behind it, there is almost every single person would come to an agreement about, oh, this is bad. This is a. This is a bad thing that is happening. Why do we do this? We should fix this. It shouldn't work this way. The easiest example is like. Or a personal example in my life is Shake, who edits for Ludwig, is a DACA recipient. And if Shake, you know, if Sheik had a. Maybe a harder life growing up in the US he came from the Czech Republic when He was like 2, and he made some mistakes when he was younger and, you know, committed a mistakes.

[Aiden]

Now he works for Ludwig. He's made many mistakes.

[Brandon]

Well, he's made, you know, that's not a felony so far.

[Aiden]

And the taxes get out.

[Brandon]

If something just happened, like, if he made a mistake along the way, then he could just be deported from the country. And it's like his, you know, his primary identity. It's like he does appreciate that he's Czech from, like talking to him about it, but then you can just have all of that robbed from you basically on a technicality. And even I think the idea behind this is like, you don't want to protect people that are criminals. You don't want to deal with them in the system or deal with them in your country. But I think it's kind of on the obligation of the system or the country that these people existed within to. To. To deal with it. Yeah. I mean, even if it. Even if this person were like, imagine Shake is. Is a violent criminal. Imagine.

[Aiden]

I don't even imagine.

[Doug]

I can.

[Aiden]

Visual examples.

[Brandon]

He goes on a little rampage. And he's been in the US his whole life. I don't feel like it's chill to just send him back to the check. Like everything's chill.

[Aiden]

You just want to jail him here.

[Brandon]

Yeah. I feel like we should deal. We should take responsibility.

[Aiden]

That action at the very drizzle is our problem.

[Doug]

Start building those vegetables. Venezuelan prisons back here in America. Put the prison.

[Brandon]

Thank you, Doug. And that's where I wanted to circle back to. And if we could. If we could give all of those jobs to private prison. Private prison companies min max the profit of all of those companies. And maybe we dump a little money in the shares of those companies. Maybe we did that.

[Aiden]

No, you bring up a point that I think ties into, which is like, I don't think I'm even at the point where I can disagree ideologically because I don't like the implement. I think the invitation is so random. You know, I'm saying if you're of the opinion that we have to, I don't know, reduce the number of DACA recipients, we give out a year. And you're like measured doing that. That's something you could argue about. But when you, like if you're. If you're randomly setting someone up for 30 years to think one way and then you cut it out from under foot. That's that random cruelty that really bothers me. The idea that you're, you're not making a measured change to like the future. You are undercutting things you've promised in the past or you're like, you're, you're causing damage. No one could have prepared or planned for that. I think that's the really frustrating part.

[Brandon]

It's a basic situation that anybody would look at and agree is unfair. And I think the, I think it helps to boil things down into these specific examples of issues because then if you can also clearly agree about it, then it kind of points we were talking about last week is maybe it can be easier to work towards to change. That's what you would hope at least.

[Aiden]

I think we changed the tariffs. We can change this. Where everything we talk about in this show will get fixed.

[Brandon]

Yeah, this, I think this actually loops into last week because a lot of people had positive and negative things to say about the idea behind abundance, the book, the idea that building is kind of the future of solving problem problems like building up the supply side of things so that the demand for it can be matched. Housing was the specific example that you dove into really heavily. I want to come to the other side of that if we have time to talk about building too much. Yes, because you had talked about that.

[Doug]

On a lighter note from this. God, this extremely sad orphan stuff. Let's talk about this power plant in Ecuador collapsing and all the people that are dying.

[Brandon]

Oh my God.

[Doug]

What? Let's lighten the mood a bit. Okay, so the main thing I want to chat about today is China and the Belt and Road initiative, which is their thing around the world, that they are basically trying to help all of these countries around the world build up a whole bunch of infrastructure. And it's an interesting counterpoint to what the US has done. I do want to quickly follow up on some of the things that were said last week because I was very heated in the way I discussed things and saw a lot of comments that match that passion in various ways. So just a few follow ups just to, to touch on things that I saw in the comments about what I said last week. I talked a lot about housing about like red versus blue states. I just want to follow up and acknowledge that, yes, a city like Houston is blue and I understand that, but the point is more about the fact that so many people are moving from blue states to red states that in an electoral college, the way Our presidential system works, that will actually majorly affect the ability of the Democratic nominee to win. That is the relevancy of red versus blue in the context of building a lot of housing. I might not have expressed that super clearly, but the point isn't that Houston is blue. It's that it's in a red state. That is what is relevant to that particular conversation. On top of that, I think people felt frustrated that I conflated Democrats and various groups on the left. And that's a fair criticism. I will be more cognizant of that going forward. I also realized it'd be really frustrating if you're, if you see yourself as, for example, progressive. You're also very fed up with the way that the Democratic Party is governing, as I have been. And then I am sitting here, like, lumping you all together and being like, you're all doing a bad fucking job. Like, that would be very frustrating. And so I can very much empathize with that. I'll be more thoughtful of that going forward. Again, though, for me, this is not meant to be a left versus right thing with building. It's just, I think the country doesn't build enough, and we just need to build more stuff. And of course, there's a lot of complexities of homelessness, like empty units held by corporate interests. I don't personally think that would solve affordability. Maybe that helps with homelessness, but there's many nuances to that that obviously we didn't get into. I wanted to at least touch on those things. And again, I hate nuance, and I hate you.

[Aiden]

And I'm gonna leave a comment about it.

[Doug]

Yeah.

[Brandon]

The fact that you would cave like this.

[Doug]

Yeah.

[Brandon]

So much respect.

[Aiden]

He caved.

[Brandon]

Don't let them shake you.

[Doug]

Yeah, I triple down, Doug. I appreciate constructive criticism, and I think there's valid. Yeah, and I think there's valid things. I, I, it's not like I'm, I want to, like, get riled up by every single comment, but I think to be fair, maybe I didn't express some nuance to the extent that I could have in my passionate rant. And I think at the end of the day, like, I just want people's lives to be better. And I think building is necessary for, like, people being able to afford to live. It's necessary for the future being better with, like, medicine and healthcare and new technologies and a better life. And it's necessary to solve the climate crisis because we have to build a lot of stuff to solve climate. So I just think building regard I'm not saying the right is doing some great job. I don't think that. I just. We just need to build. And there's examples in abundance, specifically that I kept highlighting over and over that I again, is to me not about Democrats versus Republicans, really. It's just, just build more or you don't build too much, which is what China's done. So let's, let's segue into it. So as you actually mentioned earlier, we're back to China. We're back to China.

[Aiden]

Okay.

[Doug]

And I think it's interesting counterpoint, it's always back to China because again, you know, I was, I was bitching and moaning about how America doesn't build anything, and China has basically done the exact opposite. So in the 90s and 2000s, China was massively ramping up in production. And then based on largely the financial crisis is my understanding. This is from an article by Noah Smith, who's an economist. Due to the financial crisis, China's economy was hit really hard. Basically they were manufacturing all this stuff for people and then suddenly they weren't buying as much because Europe, America are in this huge recession, right? And so to compensate 2ish decades, they started building tons and tons and tons of housing and other infrastructure. And so because they were just building this absolutely obscene amount of stuff, one of the stats is they were spending about 44% of their GDP every year on infrastructure, compared to like 20% that other countries do. So they're like massively investing at like a double rate of anybody else. And then that bubble sort of burst in 2018. The housing prices cratered and they've now shifted to this like heavy export model like you talked about, which is cause, like conflict, you know, causing a lot of the problems in the world. So that's interesting on its own. But then the Belt and Road Initiative is an interesting part of this. So the Belt and Road Initiative is their global plan that they started in 2013, where they're going to go to a whole bunch of countries around the world. There's 150 of them signed up right now that, and they're going to loan them money to do all these big high infrastructure projects. Well, we're going to go into Kenya, we're going to build a train, we're going to go into Ecuador, we're going to build a power plant, we're going to go into Kazakhstan, we're going to build a whole bunch of trains, airports, say ports.

[Brandon]

There's like a big one in Sri Lanka.

[Doug]

Yeah. And so, and so they have this plan and this sounds good on paper, right? It's like, oh, yeah, no, that's, that's awesome. And so this kicked off and at first it was doing great. And the first five years, all these, you know, they were building stuff, all these countries were happy with it. And then there started to be issues. So if you look at the list of projects that China has done under Belt and Road Initiative, it is crazy. It is like, like so many of the major infrastructure, infrastructure projects in Africa are being funded and planned by Chinese contractors and the Chinese government working with the African government. Same with South America now. Same with the Middle East. Same with, with like, you know, Kazakhstan, that whole area, like it's everywhere around the world. China is helping countries to build stuff. It's crazy.

[Brandon]

Do you know how there's a big industry in the Congo of like mining cobalt and other like with your hands.

[Aiden]

Or something and you're dying.

[Brandon]

I mean that is, that is part of it. I think there's, there's an unfortunate reality to the mining share is that it's not being done ethically.

[Aiden]

Yeah.

[Brandon]

But if you watch these undercover reporting videos of stuff like that, of these like mineral mines in Africa in general, there's so many Chinese like intermediaries there.

[Doug]

Yes.

[Brandon]

And you can watch people go with like, you know, little spy cams on their chest and they go check out the mine and the, the human rights abuses and then they go to where the, the, the, the minerals are being sold at a market. And it's too. So many Chinese companies operated in these spaces.

[Doug]

Yep. Like a giant percentage of the infrastructure investment is going to Chinese companies in Africa. A lot of the countries. It's like 40% is something the number I saw. It's crazy. So they've. China has successfully become incredibly impactful around the world building all these projects and that contributes to this like, trade that, that you talked about earlier, Brandon, where like, like now China is the main partner for most of the world in terms of trading in terms of infrastructure. And to their credit. Right. They've been building such an absolutely obscene amount, often to their own detriment. Like they caused this housing crash for themselves a few years ago, but they have just been building an insane amount. So they do have the expertise.

[Brandon]

Could you speak a little more to that? Because I know this is a topic you've talked about a lot too. And you mentioned 2018 and I know that the real estate sort of crisis that was ongoing, like they had a huge, I want to say one of the, the, their biggest was it One or two shuttered, like two of their biggest real estate companies.

[Aiden]

Two of the biggest in the world.

[Doug]

Yeah.

[Brandon]

Why? What is the consequence of how did building too much tie into that specifically?

[Doug]

So basically they tried to get out of this problem where they weren't growing in other areas like exports by basically saying, we are, as a country are going to invest massively in housing and infrastructure and we as the government, we're going to put huge, huge, huge quantities of our money into just building tons and tons and tons and tons of stuff. And so there's one of like Guangzhou is the province. I think they, they like are so proud of the fact they have like 1500 bridges and 11 airports and they're like $400 billion in debt. The province is like the size. It's smaller than Arizona. It's like a small area. I mean, not small. It's China. Right. And there's a ton of people there, but like they way overbuilt, they're way in debt. And that was kind of how they funded things. That's what how we as America are funding a lot of things. We just keep throwing money at the problem and getting deeper in debt. And they just kept doing this. And the reason everybody was like, yeah, let's keep doing this is because the housing prices kept going up. But it didn't make sense because they're building so many. The I can pull up the numbers in this giant stack of paper somewhere, but like they have like hundreds of millions of empty apartments because they just overbuilt. And the problem is just like the financial crisis in the US all of the citizens invested their money into housing as an asset. They were like, this is going to be our investment. So they were paying insane rates to buy into housing. This bubble kept growing, but the actual value wasn't there. It didn't make sense. They had built way too many housing. They don't need that many apartments. The quality turned out to be really bad in a lot of cases, which just gets. Which what we're about to get to at Belt and Road. Turns out massive rapid building isn't perfect. It doesn't work all the time.

[Brandon]

The quality part is interesting to me because I do think how this ties into what we were talking about earlier is that this idea of something like Chinese manufacturing being like cheap and badly made. And so I think when you present the argument initially about homes not being made well, that is as a counterargument is like disdain of the idea that Chinese building is cheap. But on this topic specifically, somebody came into the yard discord. She's originally from China and she talked about how this is a really big issue that the quality of housing in a lot of areas in the country is super low. Like they've built it and it's available but it's very bad.

[Doug]

Yeah. And then all these Chinese citizens like put their entire net worth into buying one of these things because they're like this is one of the few ways as a Chinese citizen I can invest in my future. You don't really have the same options of the stock market necessarily that we do. It's much more controlled by the government. Same with the tech sector sector or ipoing. And so they were like we're going to put all of our money into this. But then like you said it doesn't make sense. And all these problems with the building. So that actually segues into the Belt and Road thing, right? On paper China over the past decade, 12 years has with hundreds of countries, I guess hundred has built all of these incredible things of infrastructure including successfully a train in Kenya or Kazakhstan or Ecuador building this giant power plant. There's, there's many, many, many examples of successfully completed projects. But if you pull up this Wall Street Journal article Perry this is basically they're all falling apart. And so this Wall Street Journal article literally called China's global mega projects are falling apart. And some of, I mean if you can just kind of like scroll down through this, like some of the quotes are insane. Low quality construction on some of the Belt and Road projects risk crippling key infrastructure and saddling nations with even more costs. In Pakistan, officials shut down the Neelam Jalam hydroelective power plant last year after detecting cracks. Uganda's power generation company says has identified more than 500 construction defects in a Chinese built 183 megawatt hydropower plant on the Nile. Ugandan officials have blamed a Chinese built hydropower plant in Angola. The vast social housing project is. The locals there are saying it's not well built. Even Indonesia's high speed rail line in Jakarta which is sometimes successful successfully said like oh this is one of our big key success stories of Belt and Road has had massive cost overruns and fell years behind schedule. It turns out these things are not working well. And so if you go to there's another Wall street article journal that is about. I think it's down here. So this Ecuador power plant that they made with the Chinese, Chinese offer them a bunch of money to make it and there's so many problems now with it. There's 17,000 cracks in the power plants. Eight turbines. This in Ecuador, a small, poor country which.

[Aiden]

A lot of cracks or like.

[Brandon]

Yeah, to be fair, I don't have a good.

[Aiden]

Like, every turbine has a few cracks.

[Doug]

I actually have a quote for that. No crack is acceptable. The utility said in response to questions from the Wall Street Journal.

[Aiden]

That's the first question you want to.

[Brandon]

Ask in my head. If you told me a hundred cracks is chill, I would have been like, oh, fine.

[Doug]

Yeah, yeah. It doesn't seem like that many crack. Turns out, no, you don't want any cracks in your hydroelectric power plant. And this was like, so this is a huge investment for the country. This whole area. It powers like 160,000 homes that weren't powered consistently before. Great thing. Except now it's potentially shutting down. And this thing costs so much money to make. The Ecuador is now in dire straits. And the president, or sorry, Energy Minister Fernando Santos told the. The media in November, over my dead body will I accept this poorly built plant. And so at first they're like, this is awesome. China's coming in. They're going to help us with their expertise and their money. We're going to build all these amazing stuff. We're going to get infrastructure that we wouldn't have done otherwise. And then the. The quality of so many of these projects is so bad that these countries are getting extremely concerned because the problem with this whole Belt and Road initiative is that it's not investment really. If you and I, Brandon, want to go and we want to make a power plant together. If you're. I don't know.

[Brandon]

You guys have been talking about it.

[Aiden]

We have been talking off the pod. We said crack free.

[Doug]

Yeah.

[Aiden]

We're going to go crack free on this one.

[Doug]

In a bold new vision.

[Aiden]

We are going to crack, but we're going to have a crack free.

[Brandon]

Yeah.

[Aiden]

Yeah.

[Brandon]

What if we had no cracks?

[Doug]

Yeah. We could just fill it with spackle. I don't understand why it's a big deal.

[Aiden]

Duct tape.

[Doug]

What's the. What's the slap?

[Brandon]

Flex tape.

[Aiden]

Flex tape.

[Doug]

Let's flex tape it.

[Aiden]

That's why we. This problem in America.

[Brandon]

Ecuadorian president talked about putting flex tape on it.

[Doug]

Unbelievable.

[Aiden]

Not.

[Doug]

Yeah, they're just not.

[Aiden]

Okay. So we're going to build a power plant, you and me.

[Doug]

All right. Yeah. So we're going to build a power plant, you and me. If the way. Let's say you're Ecuador. The way we might do this as partners is you say, hey, ecuador, you invest 10 billion. I. China will invest 10 billion, we make it together and then if it does well and it makes money, we're both well off. Right. And it pays back our loans and we benefit in totality. Right? That is normally how investment work. That's not what's going on with Belt and Road. What China's doing is loaning the money. So I'm saying, hey, Ecuador, you historically don't have the funds for this. You don't have the tax revenue for this. I'm going to lend you billions of dollars and then I want you to pay me and my contractors to build your power plant. And then you have to pay it all back at the end, it's just a loan. But if you don't pay it back, then I get control of the power plant. Yeah, that is how these are structured. And so from China's perspective, it's like, this is great, dude. You loan money, you make them pay your contractors. So your companies in your country get a bunch of work and then they have to pay you back. And then if they don't, you get key infrastructure in these major areas, like for example, Sri Lanka, which is a small city south of India. They have a giant port in Colombo, which is their capital. And China loaned them money to build a new port in Hambantota, which is the south. It's like this small fishing village, right? And so China helps them build it and nobody's really using it. And so instead of it being a co built thing that they're doing together, like Sri Lanka is basically like, we can't fund, we can't pay you back for this stuff. And so in 2017, Sri Lanka had to give China back the port. So China just has for a hundred years they have controlling equity stake and a hundred year lease on this port which people are now worried China is going to use as like a naval military base because it's just in the, it's just in the Indian Ocean. Right. And on the day that China got control, the China official news agency tweeted another milestone along the path of Belt and Road. They completely fucked Sri Lanka. It's wild.

[Brandon]

I do, I do think there's merit to what you're saying. I wanted to push back a little bit because I also read about this, this specific port today because this is one of the ones that I've heard about and for a long time is, yeah, it didn't go back to like the state, which you clarified. A company has like a controlling percentage of ownership and then there's like a 99 year, they're always doing 99 year leases. 99 baby, it's always 99. And the efficiency of the port since this takeover has gone up. Like the amount of, of traffic that goes through this port and the amount that it's used has increased greatly since this change was made. I think it speaks to something of like, okay, well it actually is being managed and used more effectively since then. And then if you were to give like the good faith interpretation of this, it would be that their intention in their export strategy is to create a bunch of bullet points like around this like region so that trade is more viable in this whole region of the world.

[Doug]

Right?

[Brandon]

Yes, I do. I do think that one of the main criticisms that has come along with this strategy in general is that these loans don't come, I mean the loans don't come for free. Beyond expecting to get paid back. You expect to have, would you call it, I don't think you'd call it hard power. Right. You'd call it soft power through the influence of like giving all these countries money. And then I have kind of the pushback to that, if you will, that, that China is offering these opportunities and loans at lower stakes and lower cost, not just monetarily than the IMF is before them. Yeah, that's one of the big pushbacks is like these countries would normally be going to the imf but it's not like the IMF is not abusing the position when they finally give these struggling countries the loans. And the argument is that it is, is has been better for a lot of these places to take the Chinese loan for infrastructure than the IMF one.

[Aiden]

Yeah, it's been called debt trap diplomacy. And people, there's a lot of articles that are written about China side of it, but I think the IMF and the World bank have kind of done a similar thing over the years.

[Brandon]

International.

[Aiden]

It's kind of just like countries that don't have a lot of power get, you know, they, it's like poor people with high interest credit cards and loan sharks. I think countries that don't have a lot of economic heft are often getting abused by bigger, more powerful countries regardless. I mean that, that is just what it seems to be. So I agree that this is happening, but they are in a spot where they have to take a kind of a bad deal to get this infrastructure they need.

[Brandon]

So it's interesting because I think this kind of loops back to another question that I was thinking about because if I were to take maybe my interpretation of Doug a week ago, if we were to ignore the, if we were to ignore, which is a pretty bad aspect, a big aspect of this, the debt trap aspect of it. And I were to just say, well, isn't this build a lot and build fast strategy better than the alternative? Is this not just a normal consequence of when you try to like create this much change in a short period of time and you're trying to build great things?

[Doug]

Yes.

[Brandon]

Is this just not a downside of doing that?

[Doug]

Yeah. So that's why this is so interesting. And it's such an interesting counterpoint to what we were talking about last week, which is build more. And again, you have on one side America just, just building extremely little and China building, I would say, too rapidly and too recklessly. And this is causing huge problems. It's. It doesn't matter if you build a hydropower plant in Ecuador really fast. If it doesn't, if it doesn't stay up, right, Then everybody's screwed. And so they're, they're. Obviously we have to land in the middle. You should not be on the extremes. And there needs to be a degree of sort of, you know, scrutiny around like how this stuff is built. It actually leads into what's happening. So the past few years, if you pull up the second article, parish. So this is from Noah Smith, an article that he wrote about China dropping investing basically at around 2020, a few years before their investments into new belt and road initiatives have plummeted. So China, in response to all of these projects failing, right, of these high profile cases where it's like, hey, we helped Ecuador build a power plant, we helped Uganda do this and those things failing and the government's basically being like, China, you have fucked us. They are now dropping investment dramatically and they're saying essentially they're putting the brakes on the expansion plans and saying we're going to become more focused on the viability of our existing projects.

[Brandon]

Is this is. So is this more a response of the demand for this fading or China choosing to offer it less? You're saying that the, you're saying that the country, countries have been badly afflicted by these choices so many times that there's less people lining up to.

[Doug]

No, no, no, no. So if you go to the next one. So this is a story from Bloomberg where how there is a train. And actually if you scroll to the top here. So this is in Kenya. This was one of the big success stories, right? They built a train in Kenya from Mombasa, which is on the coast on the east, to Nairobi, which is the capital in the middle, they didn't have that before. So this was one of the first big projects. There's. It was lauded by the, by the president, who is saying, this is one of our big infrastructure. This is a huge deal for Kenya. This is massive. And they've estimated the amount of GDP and economic activity and stimulus this has done. So now if you scroll down recently, China said, we're not funding anymore. So they had, if you look at the map, they had made this train track.

[Aiden]

The last.

[Doug]

Yeah, yeah. Well, no, the last bit is half of Kenya.

[Brandon]

I was like, looking at the graph and I was like, Dave, that's a long way.

[Doug]

No, that's a long way. So this black line, they did successfully go from Mombasa to Nairobi. And China had said, we're going to help you fund all the way to Uganda. And they were going to connect Kenya and Uganda. So there's this East African infrastructure and transit route that would really, really help these countries. Great stuff. And they've built 75 miles out of Nairobi. And then China just said, nope, we're done. They were supposed to give them like $4 billion more to do this and just backed out.

[Brandon]

So China's the one pulling the plug.

[Doug]

China is the one who is in response to the projects being received so badly or having so many issues, or at least that's, you know, or not being paid back.

[Aiden]

A lot of them they just didn't.

[Doug]

Get and not being paid back. Right.

[Aiden]

Like it's a bad investment.

[Doug]

Right. They don't want, like the Sri Lankan port, that's a strategic port for them to have. They don't need a broken hydroelectric power plant in Ecuador.

[Aiden]

They're not getting paid back for. The president's saying they're not going to pay.

[Doug]

Right. That's not helpful.

[Aiden]

So that's just lost money.

[Doug]

We, we, we have to assume what China. The reason, you know, they're just saying, we're going to tighten our belt. We're going to focus on. On the viability of existing projects. That's, that's kind of what they're saying.

[Aiden]

I mean, this all ties in. I mean, this is, is the same impulse they had to overbuild in the country. This is the, they had that building era where they were just. Everything was funded through building. And when that sort of stopped working, they made this massive pivot to fuck it. We're going all in on exports.

[Doug]

Yes.

[Aiden]

And that is why we're in. That's, you know, everything has a consequence. Now we're in the area where they're they're dominating global exports and everyone's pushing back, especially the United States.

[Doug]

Yeah.

[Aiden]

And so everything leads to each other thing. Like, so it's.

[Brandon]

So this, what you're saying is that this approach, like these type of projects don't necessarily match map very well to the current strategy, Their current strategy?

[Aiden]

No, I don't, I don't think.

[Doug]

Well, I think it did for about 12 years. It mapped their thing of we are just going to build immensely. And then the past couple years, unlike some of the other parts of their, their economy, they're saying we are going to pull back from just mass infrastructure as a way of getting ourselves out of these problems. So they are pulling back from Belt and Road as a major global initiative. And it, to me it's like, okay, as much as I want to sit here and rant about we should build nonstop, build constantly, this is a real cautionary tale of like if it matters if you build shitty stuff. Like this is absolutely crippling some of these economies. Like Kenya now is trying to go around raising $3.6 billion from all these different private companies. Right. Like they're, this is like a disaster for them. And they just have this, all these plans that are done now. Yeah, it's, it's bad.

[Aiden]

Yeah. I mean if you go to like a Kenya or I don't know if it's Kenya, but a central African country now, or if you go to Kazakhstan now or you go to the countries where there used to be be trying to build power plants or railroads, what they're doing now is they're selling you BYD cars. They're selling them, they're just exporting them. Like that's what, that's their new was.

[Doug]

We are going to build infrastructure in China and around the world. That's our way to get out of our problems. And as that has been failing the past few years, it's now we're just going to build an absolutely obscene amount of stuff in China and sell it to the entire world. Everybody else in the world is going to buy it.

[Brandon]

Well, because one of my thoughts with this is when you said they were pulling back on this, I was like, oh, is this soft power strategy maybe fading away? Maybe that was never as big of a part of it as I thought or it had been reported because there, it seems to be very much about money and not getting paid back on these loans and them deciding not to do this anymore. But if you're the exporter of all goods to the rest of the world, you also exert a Different kind. A different kind of soft power in that way. And people end up falling in line for, like, different reasons. So it's very, very interesting.

[Doug]

It's. I just is.

[Brandon]

I said it.

[Doug]

We gotta be somewhere in the middle. That's. That's the crazy thing that I assume Everybody agrees with.

[Aiden]

Mr. Middle of the Road robots.

[Brandon]

Looks like we need to find a compromise. Yeah. Win an election on that one, Doug.

[Doug]

Anyway, I think building responsibly and affordably is good if it doesn't cause any problems.

[Brandon]

And we saw. And we've done it again.

[Doug]

We've done it again.

[Aiden]

We've done it again, folks. Lemonade Stand does it again.

[Brandon]

So thank you for watching this week's episode of Lemonade Stand. We'll be back next week with 60 different updates on how the tariffs changed again. And honestly, you guys, can we do a little leak? It's not a big announcement, but maybe a little leak. We're going to be launching a Patreon alongside the show. A lot of people have been asking a Discord community to engage in. You're going to be able to give more feedback on stories or things that we talk about in the episodes. You'll be able to submit stories as possibilities of what we talk about on the show. We're going to be doing a book club every month and doing some additional episodes in tandem with the book club, following up to comments and the main benefit, a bonus hour of the show every week.

[Aiden]

So, yeah, should be hype. And every single Patreon. Doug will eat a lemon.

[Doug]

Yeah, yeah, yeah.

[Aiden]

Full lemon on camera. And Aiden will. What are you gonna do?

[Brandon]

Might just double down on the lemon thing.

[Doug]

A Korean child, to be honest with you.

[Brandon]

If you're.

[Aiden]

Yeah. You will adopt a Korean child.

[Brandon]

The problem is if Doug is dead set on the lemon thing and he's the one who eats it every time, he's gonna die within the next two years. So we better. That's Even spread it out.

[Doug]

This is how we fund it. Dude, there's at least a thousand people who want me to die from lemons.

[Brandon]

I don't. I. I don't want you to die.

[Doug]

Get into the discord so you can hurt my feelings more closely to me. Really. Just dig in. You know, I need.

[Brandon]

I. I can't be in this chair forever. I need you to take back up the mental.

[Doug]

I'll be back. Don't worry.

[Aiden]

Next week, Gollum. And you're Sam.

[Doug]

Next week's crypto week. Who's down?

[Aiden]

Crypto week, actually crash out.

[Brandon]

All right. Thank you guys for watching Lemonade.

[Doug]

Sam.

[Brandon]

We'll see you guys next week.

[Doug]

Crypto Week is canceled.