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- [00:07]
Peter
You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitco. If you're not paying attention, you probably should be. Probably should be. Probably should be.
- [00:37]
Marty
Peter, welcome to the show. Thank you for joining me, Marty.
- [00:41]
Peter
I got. I got to do this. And this is going to demonstrate just how long I've been following you guys. The Mandibles.
- [00:52]
Marty
Mandible right now.
- [00:56]
Peter
I mean, I'll leave that to Matt to highlight and let him continue to beat you with a sock full of quarters every week. Because you haven't read it. No, I was. I was. I. I just started laughing because I'm like, oh, after we went back and forth last night, I thought to myself, oh, I'm gonna. I'm gonna have to bum rush him at the beginning with the Mandibles book.
- [01:18]
Marty
I don't have it on my bookshelf. I don't have it on my. On my Kindle either. It's a book. I'll get to it. I think eventually I will get to the Mandibles.
- [01:28]
Peter
Okay.
- [01:29]
Marty
And as I've said many times, a rabbit hole recap. It's essentially been read to me on air over the course of seven years from that.
- [01:37]
Peter
Yeah. And. And to. To answer your question, yeah, I. I'm of the mind that we are in the middle of the Mandibles right now.
- [01:45]
Marty
Lovely. Yeah, lovely. Well, let's. Let's set the stage for this conversation. I wrote a newsletter earlier this week. We talked about. Talked about a rabbit hole recap. Yesterday, there was a chart of China gold stock on warrant at the Shanghai Gold Exchange. And if you see the chart, it is straight up and to the right. Just a crazy step. Function growth over the course of the last year and a half. Really? And that's in a signal to me, like, what's going on? Seems like China's preparing for something. Wrote the newsletter. You responded on NOSTR saying that I need to get the full picture of China. You have been living in China for 30 years, correct?
- [02:32]
Peter
30 years, correct.
- [02:34]
Marty
So maybe we. Maybe we start there. How did you end up in China and deciding to stay for. For 30 years?
- [02:43]
Peter
I'll give you the. The abridged version number one, it's always great to be young and dumb. So I was working on Wall street back in the middle, early mid-90s, and that was the first time China sort of landed on the sort of Wall street radar. And so I was dabbling in, you know, what was going on in China, you know, working as an analyst, so on and so forth. And ultimately I decided rather than to get my mba, I was studying a little bit of Chinese in New York and thought, you know what, I'll go to China for a couple years, I'll teach English, get a lay of the land, firm up my, my language capabilities, and then I'll just circle back and come to, to New York and start a whole. And, you know, what's the old saying? You know, life is what happens when you're busy making plans. And so one thing after another just happened. You know, I did the teaching gig and then I got a job working as an analyst for a UK investment bank in Hong Kong. That lasted about four months. And then the Asian financial crisis hit. Got married, had a couple kids, you know, became what's called a chief rep, which is a glorified sort of secretary for a handful of American companies, you know, did all that. And then right after WTO was working for Prudential Financial of lovely Newark, New Jersey, and, you know, set up a joint venture for them in the finance space and thought, you know, maybe there's a. Maybe there's an opportunity here for me to become sort of a consultant rather than work for one company or work for a bunch of. So I went out and set up this company called zebet Advisors in 2004, and it's sort of 20, 21 years later, but doing that, just basically a consultant helping predominantly European American financial firms navigate what the possibilities are in China. And it's not that easy. Not simply because China's a different market, but because especially the American organizations, they're just so tied to how they do business globally and just an unwillingness to adapt to the local market. So, yeah, it's, you know, 30 years, just happens overnight, you know, and here I am.
- [05:01]
Marty
Yeah, and as I was saying before we hit record, I'm very excited for this conversation. I've had Balaji on the podcast. He's got a perspective that China is going to eat the US's lunch if we don't really light a fire under our proverbial asses to, to compete in many different aspects of the economy. I was also telling you that my interaction with the Chinese over the last seven years has been via the bitcoin mining industry. And from what I've observed, these individuals are incredibly ruthlessly capitalistic in a way that surprised me to the upside, considering what I've been taught about the Chinese system of control over the course of my life. And the Chinese I've interacted with in the mining industry are incredibly impressive in many ways. But to your point, they do business in a different way that is literally foreign to the new western way of doing business. And I think to start off this conversation, you sent an email with incredible detail about different things we could cover today. And you started with a quote which I think is a good setting of the stage to really dive into the differences between the western eastern way of doing business and politic really. And that is a quote from Lucian PI. China is a civilization pretending to be a nation state. And you were explaining in the email, if you don't understand this sort of core concept, you're not really going to understand this whole situation that I mean.
- [06:45]
Peter
The, if you consider the concept of the nation state itself, I mean, it's only a couple hundred years old. You know, it's not really some sort of ancient governance system. And even China didn't have this sort of nation state government system until 1912, when the, the last formal dynasty ended, the Qing Dynasty. So when you're trying to look at navigating the entirety that is China, I mean, I've been here 30 years and I'll tell you this, I'll always be a foreigner. There's no way that you can be here for any period of time and not get to a point where you think that, okay, the expression is more Chinese than the Chinese. And there's actually an inverse relationship with regard to the time you're here, which is the longer you're here, the less you, you actually figure out. You know, like it just continues to expand with regard to the uncertainty and the unknowns. But when you take, I think it's fascinating and we can get into the SEO because I think genuinely this last, this past week has been what, maybe, I don't know if, I don't know if I want to say will be, but potentially could be a real turning point because you've got really a group of nations coming together saying we're done with the international rules based order and we're going to move in this direction. And China continues to operate as a nation state, but at its core, at its DNA, Xi Jinping is just another emperor of another dynasty. It just happens to be called the Chinese Communist Party. So you I think have to. And this is, I think something I really need to stress, which is take the 20th century Western G7 lens off and try to be more open to how it is that the Chinese are going to operate. And I think one of the other comments that I made to you in that, that, that lengthy email was we're also talking about things like Judeo Christian ethos. Like, I'll have people say to me, oh, the Chinese have no morals. And my immediate reaction to that is, okay, but by whose standards? I understand if you're coming at it and saying they have no morals based on, you know, how we do business in the west, you know, my word is my bond, a handshake, you know, written contract. The Chinese play that game, but ultimately it's much deeper. It's much more about, you know, what is in it for various parties. One of the, not. I'm going off a little bit here, but I think it's important. One of the key pieces of advice that I'll give the clients is if you're teamed up with the Chinese as a counterparty, whether it's a joint venture or you have some sort of distribution agreement, whatever, you need to keep in mind that the moment the Chinese think that they no longer need or find value in this partnership, they're going to cut you off. And it's the perception, not even the reality of the need for the foreign technology, the foreign expertise, whatever the case might be. The Chinese want to be able to endeavor, gather the information all they want and then move on. So this gets into things like international or intellectual property theft and the like, and we can, you know, of course, parse through that. But yeah, it's just a completely different environment to be able to operate in.
- [10:19]
Marty
Yeah, the, and how do you think, how. Maybe this is the best part, best place to start, like how wide is the divergence between the perceived understanding from Westerners of how China does business and the actual understanding of how the Chinese do business, particularly at the nation state level with the Trump administration, all these tariffs and everything going on. You mentioned the SEO. So how, even at the highest level, do you think there's still a fundamental misunderstanding of the different sort of cultural way of approaching business deals?
- [11:01]
Peter
Oh, without, without question. And it's not even just business deals. I think it's, it goes all the way up to, you know, all relationships like trade negotiations, geopolitical communication, whatever the case might be. And, and again, I'll reiterate a point that I made just a few minutes ago, which is you have this hegemonic, if you will, perspective of this is how we do things and this is how we've done things since 1945. Some would argue this is how we've done things since 1910. Whatever the case might be, what is missing from that calculus is throughout that whole period of time, China really wasn't a player on the stage. So the manners in which their cultural approach being included into these negotiations, what have you, just doesn't enter that calculus, doesn't enter the thinking about how we're going to go about adjusting for all of this. So I'm watching it play out on a daily basis, doubly so. I mean, it wasn't just current Trump administration, the Biden administration, they thought that they were dealing with a normal counterparty, as though they were talking to France or Japan or somewhere else. China was like, no, we're changing the tune and we're going to see how that dance is going to go. And the Biden administration just tripped over their feet, basically, to mix all my metaphors. The US right now is nowhere near having the ability to understand how to navigate it. I think Bessant has a decent understanding of leverage and where the United States finds itself right now with regards to China, we saw the whole thing with rare earths for chips, you name it. But ultimately there has to be a sort of a meeting of the minds, a recognition of what exactly is China, what is their history, what drives them? And that's still missing as far as I can see.
- [12:59]
Marty
Yeah, I had a conversation with Mel Madison yesterday on the show that'll be posted tomorrow. But actually she told him, I've been so excited for this conversation. I told him I was speaking to you. We covered the military parade and that's one point we brought up is I think particularly here in the United States, which you've sort of touched on a little bit, but I think we should really expand on is America's going to be 250 years old next year and China has been around for millennia. And to think that 5,000 years, 5,000 years, I think that 5,000 years of history and developing and building a culture is going to be materially perturbed by 250 years of history, I think is a bit naive. There are definitely deeply rooted sort of cultural practices and understandings that I think many people just like proficient water. I'm 34 years old. Trying to put, trying to put some sort of cultural DNA in a 5,000 year context is hard for people.
- [14:09]
Peter
Right? Yeah, absolutely.
- [14:11]
Marty
Yeah.
- [14:12]
Peter
No, I think. Go ahead. Sorry.
- [14:15]
Marty
No, you go ahead.
- [14:17]
Peter
No, what I was just going to sort of highlight is one of the bigger issues that's occurred of late is how many, how many so called China experts are there today. I mean, it's shocked me that over the last five years everybody is weighing in on China. There's podcasts about China and so on and so forth. And that's great. The more engagement the better. But one of the, the first questions I'll talk to people and when they're coming to me especially is I'll ask them, well, when was the last time you were in China? And you know, they get a little bit, I think, and there's no judgment, I'm not judging, I'm just curious. And their predominant answer is always 2018, 2019, you know, pre Covid times. And I tell them, I'm like, look, you have to get on a plane and come out. I said, number one is things here have changed dramatically over a six year period. I mean, six years in China is a lifetime. But number two is over that six year period, there has been an absolute cacophony of headlines and framing and conversations. I mean, remember the spy balloon? I mean it goes on and on and on and it has been a just onslaught of negative headlines. So I will talk to people and that's their entire framing. And yet they're listening to people who've never been to China or haven't been to China in five, six, seven years. So I'm really trying to press people to say, look, it's fine if you're out there looking for insights. And I think everybody should be questioned. I think Matt, today, you guys, or yesterday, I guess, did your, your weekly recap. I busted out laughing because he was like, oh, he's got a pretty positive outlook on things. Yes, you could frame it that way, but it's, there's enough negativity being discussed on China that the way that I phrase it, and I think I phrased it to you, is it's not that China shouldn't be critiqued. There's a ton of areas that you can critique, critique, critique China. But the critiques are very narrowly defined and I think miss an enormity of what else is going on and the fuller picture. So I think that's kind of emblematic of what I've been witnessing, especially coming out of the US over the course of the last several years.
- [16:42]
Marty
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- [19:15]
Peter
Well, I think, I think on that point, so, you know, you would have seen over the course of the last, I don't know, year that there's been this like, oh, this is Cold War 2.0. You know, Niall Ferguson, Sir Nile, right. He's come up with this and he's been making the rounds and talking about it. And look, it's easy to package. We have recency bias. We want to look back to the Soviet Union. For me, it's been really about the UK and Germany. Back in around 1905, when you had the UK, which was at that point even a power that was maybe in the early stages of decline, the colonies and the empire, you know, had sprawled so far that it was difficult to maintain. And critical, I think, is this was around the time that you really had petroleum becoming an essential component for things like ships. And the, the UK Navy was all coal driven or steam driven, and it was moving over to oil. And the Germans were rising. And the Germans, if you look at a lot of the history and a lot of the research, the Germans recognized. And here's what's critical, by the way, the uk, Germany and Russia at this time were basically run by cousins, you know, grandkids of Queen Victoria. And these were all relations and they still couldn't get along. And Germany, I think, recognized, if you look at a lot of the research, that, okay, we can't go head to head with the uk we have to try to play nice with them. And the Brits, in their own typical British fashion, they would placate the Germans. Yes, yes, let's talk about this. Let's get a memo, sit down for a meeting. And they just kind of slow rolled the Germans. And this for me all came to a head when Germany wanted to build a, a railway from Berlin to Baghdad for the purpose of, you know, moving oil from the Middle east up to Germany. And they went to the, went to the British and said, look, let's do this as a joint venture. British said, sure. But then they dragged their feet. And then Germany finally was like, look, we're gonna, we're just gonna go do this. And, you know, there were a host of these issues that you had this power at the time, that rather than address the issues that they had at home, they were more inclined to look at things like tariffs. They tried to create this tariff regime where if you were part of the colonial empire, the Commonwealth, you'd Get a better deal. They tried to contain Germany with regard to economic sanctions. And for me, ultimately you can draw a line between that action of the UK to this. You know, the start of World War I. You know, you could talk about Ferdinand down in, you know, the Balkans and what have you, but I'm seeing so many similarities between how the United States is operating with regard to China right now that it is concerning. More concerning than is this a capitalist versus a communist Cold War comparison with the Soviet Union.
- [22:23]
Marty
I think the latter can certainly be thrown out the window because if you're trying to say that the Chinese Communist Party, I think you put it correctly, like G is just a dynastic ruler and his dynasty is just called the ccp. If you compare it to Soviet Russia, like it's completely different. I've been listening to a lot of Bill Gurley's comments on China. He's one of the few Americans that seems to get over to China a lot and really understand what's happening. And the way he describes how they invest in companies and try to ensure that there is sort of a free market for ideas to be built and companies to be built and they steward it with capital and then have a filtering system that lets the cream rise to the top, it's very clear that they're not the Soviet Russia form of communism. And so I think a lot of the saber rattling and positioning, particularly from the United States, is just using your UK Germany analogy is like the US sort of on the brink of do we go down the road of empire or try to revert to our sort of democratic republic and get back to the roots of being non interventionist is where we stand. If we go down the route of empire, if we want to go down the route of empire, a lot of the positioning towards China makes sense to me because it just seems like, hey, we want to keep control of this sort of massive footprint we have over the world. To do that, we need to play hardball with China.
- [24:10]
Peter
Well, and you can also, I've made the argument that while the British back in previous empire days had their colonies, the United States has their own colonies. They're just called military bases. You know, I think, and again, I, and I haven't said this yet, so let me. I mentioned this in a note earlier today on Noster. I'm a red blooded American, right. I need to stress that. And the commentary that I make about China is with regard to trying to get this ridiculous Beltway consensus, as I call it, to understand what the issues are. And it's frustrating as all hell because most will look at it and say, oh, we don't need to worry because the coping mechanism for almost everybody is don't worry about it. The Chinese economy is going to collapse. Marty, I've been hearing China's economy is going to collapse for the last 25 years. What's the joke? Hope is not a strategy. If you're waiting on you don't need to change because your mortal enemy is going to collapse. Yeah, that's a recipe for disaster. So when I look around the region and I see things like 50,000 troops in Korea or 20 odd thousand troops in Japan, the United States last year put a high end typhoon missile system on the northern end of the Philippines. They just announced two days ago that they're putting another one down in the Okinawa region. I mean if I'm sitting back as China and again being a realist, you've got to say look, we're going to have to at least start trying to project some degree of power as a defensive mode. And that's not me saying I'm supporting the CCP and I think everything's China is great. It's more about just looking at it from a realistic standpoint. I had been, to be quite frank, shocked at the level of restraint that the Chinese have demonstrated over the last several years with the various military exercises the US has taken right outside their doorstep.
- [26:18]
Marty
Yeah, I mean we do have.
- [26:22]
Peter
This.
- [26:23]
Marty
Is a very controversial take for many people, many of my listeners, but I think we do have recent evidence that when the U.S. medals in foreign affairs, particularly of countries, that there are other superpowers. In the case of Russia and Ukraine, with the encroachment of NATO around their borders and the conversation of letting Ukraine in the NATO and putting military bases and everything around Russia, I'm a strong believer and that is one of the, the driving catalyst of the war between Russia and Ukraine right now. And to think that we're not going to learn the lessons of that which has turned into an absolute catastrophe and turn it up to another level with arguably a stronger superpower in China just seems suicidal to me.
- [27:19]
Peter
It's not, it's, and it's funny, it's not just a stronger superpower. I think one of the most fascinating developments over the course of the last six months has been, oh wait, we, we, corporate America entered a Faustian bargain over the last 30 years to produce everything that we potentially need in the mainland. And then we wake up one day and Walmart is going in with Costco into the Oval Office. Saying, hey, look, man, our shelves are going to be bare in two weeks because of these 145% tariffs. And Trump folded like a lawn chair. And I don't think he wanted to. He just simply had no choice. So, you know, what I have found is very endemic by American policymakers has been this, look, this is what we think is right and we're going to go in this direction. And then second order effects come back and beat you over the head. And I'll give you a fantastic anecdote. Back in October of last year, there was this literally week in Congress that was called the China Week. And it was all of these bills that were being passed about targeting China and they were going to stop them doing this and that. One of the bills basically was called the Anti China Drone Act. And essentially what it was was a law that has been passed or a bill that's been passed into law that made it illegal for a company called DJI to sell their drones into the US DJI is not just the largest and it's, I'm telling you, it is an amazing company, an absolutely amazing company. But here's the funny part. The bill was jokingly referred to as the skydio bill because skydio is a California company that makes drones. It was getting its ass kicked. So, you know, let's go with a little regulatory capture, which is the flavor of the day in the United States, right? And they were like, this is great. Two weeks later, skydio was still sourcing all of the batteries for their drones from China. And guess what happened? The battery supply got cut off. So skydio literally had to go with their point of sale documents to their buyers and say, look, we going to sell you the drone, but you need to go on Amazon to buy the battery. Like, okay, that is a microcosm of the cancer, quite frankly, that is, you know, just all through the United States. When it comes to sourcing, it's not sourcing just of end goods. You've got inputs that need to go into manufacturing in the United States. It's again, like I said, it was the Faustian bargain that to this day, Tim Cook, as another example, I'm sure he lays awake at night going, why did I make this deal 15 years ago?
- [30:16]
Marty
Well, I think that's the big question on many Americans minds is how I think it's become very clear to many Americans that we have made this Faustian bargain and we have become wholly beholden to the Chinese supply chain just due to the way we've built our economy over the last five decades, more acutely, the last three decades specifically. And how do we fix that problem? And how. Not only how do we fix that problem, and obviously the, the answer from the Trump administration. So let's reshore as much as possible, but how do you do that in the least disruptive way while maintaining sort of good relationships with China? Maybe not even maintaining, building back good relationships with China, because at the end of the day, as an American, I was talking about this with Mel yesterday too. Like, I don't want to be an empire. I don't want to be in all these parts of the world. I think I'm maga in the sense of, like, I think we have a lot of problems here at home. We should fix our problems here. I am very aligned with George Washington and the Founding Fathers, and let's not be interventionist. Let's just build a strong country, a strong economy, and engage in free trade. And I'm a true believer in the Austrian view of free market economics. If you have free trade and peace and you sort of leave everybody to do their own thing and then engage in trade when it makes sense, that's the optimal outcome. I don't think we need to be the world police or have this hegemonic control over the world, which is massive and filled with cultures that are truly different and as we're really digging into, are completely misunderstood and it just seems impractical. And from a systems perspective, it, we've learned time and time again throughout history, it just doesn't scale. It can't scale. You can't coordinate at that scale.
- [32:16]
Peter
No, no. And, and again, here's the kicker. China actually gets that. And people will always ask me, because there's this, this projection by the sort of the, the power base in Washington that because we are a hegemonic power, China wants to replace us. Ergo, China wants to be a hegemonic power. In my humble opinion, I don't see that there's. Look at all the hegemons over the last, I don't know, 200 years. Right. Hasn't really turned out well for any of them. In the end, there's been a period of like, okay, this was great. China wants regional hegemony in Asia. They want to be able to say, this is our sphere of influence. Look, the United States, you want to go with your Monero doctrine, you want north and South America, we get it. You know, let's let Europe do what Europe's going to do. But ultimately their attitude is just let us have Asia and Even for the United States. I think that that is a, that's non negotiable for whatever reason. I can understand that they want to maintain the power projection that they have as the United States hegemon. But that's kind of where I think things are heading at this point in time. But China has, in again my opinion, has no desire to be a hegemon. They don't want allies. Think of it this way. They don't want allies, they want counterparties. They want to be able to just build and sell and make money and prosper economically. And that is a very, both unpopular and very minority held opinion.
- [33:55]
Marty
Yeah, well, let's get into this like diving into what China actually wants and how our policies being enacted. Because you're saying China wants this regional hegemony, but then we have like the Belt and Road initiative where they have inroads in Africa, in Latin America. I think a big topic in pretty niche circles in the US right now is the Chinese shipping boats going around the world and really cleaning up the oceans of all the fish. And I believe right now they're off the coast of Ecuador. So how does the Belt and Road compute with that idea that Asia, or excuse me, China just wants Asian hegemony?
- [34:38]
Peter
There's a couple of answers to it. Number one is dollar diversification. Let's call it that. If you look at when what was originally called the One Belt, One Road program, now BRI, this was really launched in, in earnest around 2012. And if you look at a lot of the, the events that sort of transpired in the 2012, 2014 period, you know, you started to see China begin to limit the amount of US Treasuries it was going to take on to its foreign currency reserves. You started to have a little bit of dabbling in other areas as well with regard to foreign currency. But One Belt, One Road or bri, this was the perfect way to deploy foreign capital dollars in a way that was going to be able to secure hard resources, be able to provide. You know, there's a, there's a joke. You know, when the Americans, or before them, the British would go to some developing nation, they would always come with a lecture, right? And the Chinese come with a hospital or a road. Now don't get me wrong, they're not doing this out of the goodness of their heart. They're doing it for two reasons. One, there's typically loans involved. So there is this issue of how much is China sort of creating this indentured servitude situation by other nations. But above all else, it's about the resources they want to be able to build, the roads they want to have, the energy that's necessary, all of that to extract minerals, gold, oil, energy, whatever the case might be. So it has clearly been positioned in a way that it is China's attempt to try to strong arm other nations into its orbit. But I think, as I mentioned to you in, in the email I sent to you, for me, this is the, this is the Marshall Plan in a different guise. When the United States in their benevolent wisdom, came in to help save the world, both the Marshall and the Dodge Plan, in fact, two things people tend to leave out of that. Again, benevolent strategy, which was the United States gave loans in US Dollars, which helped to push the US dollars into the global system. And at the same time they were loans. And those loans had to be used to hire Caterpillar and all of these American companies to come in. And that's where the first expats post World War II sort of went around the world, all through Asia. So, you know, it was also in the United States interest to be able to push forward with the margin dosh, the Marshall and the Dodge Plan. China basically saw this as being something similar and said, this is a great way for us to diversify and move out. Plus we're going to be able to extract a ton of different resources to help us back at home. So I don't think really this has much at all to do with hegemony. And I would say the, the interesting footnote to this whole point is how many bases, military bases, does the. Do the Chinese have one? And it's in Djibouti in Africa. Now granted, it's near the Red Sea, I believe, or not the Red Sea, I can't remember, maybe the Red Sea, but you know, that's it. So, you know, they're not looking in any way to try to project their military power in this regard. Suffer.
- [38:15]
Marty
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- [40:45]
Peter
And.
- [40:48]
Marty
How would you describe the land? Like going back to the newsletter and comments on Rabbit Hole recap. Yesterday, both the gold that is on warrant. It seems like they've been building up this gold inventory for the better part of two decades now. By putting in on warrant, registering it with the Shanghai Gold Exchange, that's a signal to me like, hey, we do have this gold, and we're putting it on war. We're willing to use it in international trade whenever we want to optionality by doing that. And then you have this military parade and this sort of fading of the Western hegemony. Hegemony by keeping them out of the guest list, keeping them off the guest list. And it just seems like very overt, explicit geopolitical posturing on the stage. Sort of a chess move. Two chess moves there with the gold and this military parade. What is. What is this? Well, what are these moves in your mind?
- [41:47]
Peter
Well, first of all, and I think you guys talked about it on Rabbit Hole recap. Look, I'm never a believer in coincidences. Like the. The Chinese have a tendency of. I find them. And it's funny because I've seen a lot more people talking about this. They are the consummate trolls. They know how to use what they have and be able to sort of just, hey, whoa, what are you talking about? They're just brilliant at playing this game. So a couple things. I'll start with the SEO meeting at the beginning of the week, and then the. The military parade, and then I'll jump into the gold issue. First and foremost, I mean, let's. We do have to be mindful that this parade was planned months in advance, and the. The guest list was planned months in advance. So it really wasn't, in terms of the parade and the attendees, it wasn't all that much of a surprise. Now, that's not to say that there was coordination that was going on behind the scenes, and there were separate meetings that were taking place with regard to. Call it the broader global financial system. But the only, I think, real fly in the ointment was the moody participation in the SEO on the weekend. And you would have seen all the pictures, holding hands with Putin, the whole lot. You know, look, I've been watching, you know, Donald Trump, the man and his sort of approach to. If you want to call it an approach to sort of geopolitics. And it's, you know, a degree of buffoonery that is even surprising to me. This is on a whole different level. The antagonizing of India. I just don't get it. There's no. There's no material upside to it. And then he doubles down on it, not but a day after the SCO meeting saying, oh, it's a one sided relationship, what have you. And look, China and India are, they're no close bedfellows. They've had issues for years. In fact, Russia and China have had issues for years. The way that I've sort of tried to describe this to various groups that I've spoken to is, and I wrote this to you as well. The enemy of my enemy theory, you know, how long can that center hold? Well, it's going to hold as long as the United States continues to be belligerent on the global stage. But I, I'll just quickly say with regard to the military parade, you know, been there, done that, I, I think that was my, I don't know. They do one every 10 years for this anniversary, but then they also do one every 10 years for their anniversary of the, the Chinese Communist Party. So I've seen more than my fair share. It's, it's very staged and it's interesting to see what kind of toys they put out. But on the gold issue, I've, this has been something that I've been focused on for years. And the most interesting element is the Shanghai Gold Exchange, which I think you highlighted. They have sort of a subsidiary called the Shanghai International Gold Exchange, which was created in 2014. And that was the first time they opened up the, the local market to offshore participation to be able to trade and to be able to settle. Going all the way back to 2014, you did have physical settlement if needed, with different counterparties. Now for the first number of years, there wasn't a lot of volume or activity at that point, but I find it fascinating because 2014 you're talking about was like a year or so after Iran got sanctioned and kicked off the swift system. It was the year in which Russia essentially went in and annexed Crimea. It was also just so happened, the year that I think Chinese treasury holdings peaked. So you look at sort of the trend over the last decade and it's very clear that there has been a progression. Very slow, no pun intended, but a little bit Chinese water torture to be able to move this forward. And I think this is the important part, and this is perhaps where I'll have a disagreement with you on some sort of impending development. Is China's trying to work at the margins to undermine the American geopolitical position, but not in such a blatant way that it causes an overreaction. And I think we can both agree that American foreign policy has a tendency to overreact I mean there were a lot of rumors that Gaddafi got taken out because he wanted to start pricing oil in euros. So China has been at the margins selling a, or I should say buying a truck ton of energy using renminbi. So you've had an increase in volume. And I think more importantly, just I want to say last month the Chinese went and opened up a new gold vault in Hong Kong. Because I think that there is increasing demand. And I think this is where your issue that you raised with regard to the warrants is there's probably more demand coming in that you had all of this gold that was probably sitting privately in bank of China, most likely that was then moved to the gold exchange with the warrants being issued. What in my opinion China has been doing and will continue to do is demarcate between a foreign, foreign currency asset and a foreign currency. Meaning they don't want to replace the dollar, you want to use the dollar, knock yourself out. But they want the optionality to be able to say we're going to go to different counterparties and they're going to use the renminbi. But again, as you both rightly pointed out on your weekly show, nobody wants to hold the renminbi. And the Chinese don't want people holding renminbi in their bond market either. They like their closed capital account. So what you do is you create the ability over a period of time that if you want, you can settle in gold. And I'm aware of numerous events where settlement has taken place and some of it stays here, as you guys pointed out, but some of it does get transported elsewhere. And that is undermining the pure bedrock of the reserve asset, the U.S. treasury. Because the U.S. treasury has only been really a requirement, if you will, if you have excess savings, if you will, from your trade surplus. The Chinese, where do the Chinese have a trade surplus? Predominantly from those exporters of energy and minerals and other inputs, if you will, food, potash, you name it. And those countries are like, look, we'll take your renminbi and we know that we can come in and we can just settle in gold, we're fine with that. And that's going to continue to move on. Taking that next step to create a gold backed BRICS or a gold backed Yuan. I personally think that would be viewed as an act of war by the US government, honestly. And the Chinese know that there's no reason for them to take that. What would be viewed as a natural step forward if they already get 90% of the benefits of just allowing for Settlement in gold sufferings.
- [49:27]
Marty
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- [50:52]
Peter
And China has all the gold right now. I mean, yeah, this is, this is, this is the reason of my opinion why they have been so aggressive in buying as much gold as they've had is because they want to be able to demonstrate that they're able to settle for anybody on any trade surplus that might exist.
- [51:10]
Marty
And just quickly can we touch on this because I'm sure there's a number of listeners who were sort of using yuan and ren NIMBY interchangeably. Can you describe the dynamics of like the onshore offshore and how these two currencies actually work?
- [51:30]
Peter
Well, so there's, first of all, the yuan is sort of like say the, the buck, right? The US dollar, the equivalent in China is the renminbi, the people's currency. So they're interchangeable. But there is an offshore renminbi or yuan that's traded in Hong Kong. To be honest with you, it's more about the Chinese sort of trying to create this dual system of we have both our onshore market and our offshore market. And what I've always found fascinating. And I'll ask you this question because I think it's, it can be quite enlightening if I were to ask you from the Chinese perspective, From Beijing's perspective, is Hong Kong foreign or domestic?
- [52:19]
Marty
I would, I would say they think it's domestic.
- [52:24]
Peter
And the right answer is both. When I go to the airport in Shanghai and I'm traveling anywhere and I go, I have to fly through the international terminal to get to Hong Kong. And it says in Chinese, international, Hong Kong, Taiwan, Macau. So what China's been able to, to brilliantly do is they've had their cake and eat it, too. With regard to Hong Kong, they're able to say, oh, this is an international city, so we can do things differently down there. But if we want to, we can come down and, you know, we can bring the hammer of Thor on to Hong Kong as well and say, no, you're actually ours as well. So whatever the sort of flavor of the day might be in terms of what's going on in Beijing, they can basically just go and say it's one or the other. But in terms of the financial service industry, I mean, look at the crypto space, right? I mean, if it was domestic, they wouldn't be having some massive conference or letting Bitcoin ETFs or anything else trade. It's just the ability to say we're going to do it down here because it's not really China, but deep down, everybody knows it is China.
- [53:31]
Marty
That makes sense. Yeah. I'm trying to think of like an analog. I was going to say like the Virgin Islands of Puerto Rico, but they're not really financial hubs or powerhouses. But.
- [53:42]
Peter
Well, I mean, it's, it's, it's essentially what Hong Kong was under British rule for 150 years. The same kind of thing.
- [53:49]
Marty
Yeah, that whole. I mean, we don't have to dive down that rabbit hole, but the fact that Hong Kong was leased to the British Empire for 100 years is, is insane to me. But let's, let's reorient this back to the current day and the sort of US China relationship, particularly Trump and Xi. You have it in, in the email that you sent that Trump is being outplayed. You mentioned it earlier, but you think the scent understands the lack of leverage the US has in these negotiations and this sort of chess match that we find ourselves in.
- [54:27]
Peter
Yeah, well, let me, let me give you, Let me give you the perfect sort of, sort of evidence of how things have changed. You've had three meetings over the course of this year. There was one in Geneva, big one in the uk I forget where they were, but you had the Geneva meeting happen and there was kind of this armistice. Okay. Everything's fine. And then all of a sudden you had rare earths come into the equation and you had, I know the US Was talking about jet parts, a whole bunch of different things. And for the first time, finally, Xi Jinping gets on the phone, talks to Trump and they all agree. We're going to meet in Stockholm, we're going to iron the South. Okay, A couple things. Number one, that call would happen supposedly on a Friday, and it was agreed that the parties would meet on a Monday. Okay? And then they met on a Monday and then they came to what? And I still can't believe this is being debated throughout the United States. This was a quid pro quo trade. China was like, look, we know you need the rare earths. You're still playing. You guys are being dicks. So we'll give you the rare earths and access to all of this, but you have to give us the H20. That's what we want. You've got to stop. You weaponize trade first. We're just reciprocating. That deal was essentially agreed to in a matter of a day and a half. Now what's with the recap? In the entire time I've been here, number one, no meeting happens in 48 hours from the time some senior official says we should get this done. There's going to be talks and what are we going to do it and it gets dragged out. The Chinese love the delay aspect of negotiations and they know that the Americans, not even if they really are up against the wall. But Americans have had a tendency, from my experience of being extremely impatient to do things. And the Chinese use that to their advantage. And then you have a deal that is agreed to in 72 hours, essentially 48 hours, maybe that never happens, except when the Chinese get everything they want, the Chinese will typically walk away and just see how things go. So as soon as that meeting was over, I laughed and I thought, I think I even put something up on Noster where I said, yeah, I know how this is going to play out. You know, he had no cards and in fact they wrote the, the US Side wrote in there communique and we will deliver what we promised to deliver with no details of what that was. They said the Chinese were going to deliver rare earths and the, the batteries and all that, but they didn't say what they were going to deliver. And then lo and behold, I think it was Siemens and somebody else was able to start selling their chip related equipment back into China. And then next, you know, it was the H20. And everybody in Washington lost their collective shit, right? It was all about, oh, Trump is selling national security. Here's the thing, the amount of rare earths required for the defense industry in the United States never gets discussed. This was as much, if not more about national security because of the limited access to rare earths than it was about giving China the age 20. And nobody talks about that. So it's, you know, that's just one example. And this is why, you know, India exports, imports less oil from, from Russia than China does. China's still on the sidelines. Like, all of this just demonstrates that Besset sitting there going, I need to keep the wheels on this bus. And the last thing that I need to do is have something in the supply chain go off the rails.
- [58:23]
Marty
Well, and again, I don't think it bears repeating. I don't think you can repeat it too much. We are wholly dependent on this supply chain. Rare earths for the defense industry, antibiotics, consumer goods.
- [58:41]
Peter
I'll give you the classic example. So everybody's talking about AI chips. We control AI chips. You know, we. China doesn't have access. Nobody asks what is the primary ingredient or ingredients that go into high end AI chips. Polysilicon. It's like the, the, the most purest silicon out there. It's sourced from China. The majority of it is sourced from China. So, you know, I try and say to people that, look, Nvidia doesn't make chips. TSMC makes chips. Apple doesn't make iPhones. Foxconn makes iPhones. You have all of this focus on ip, and I think the IP is great, but if you don't control or have a dominant position in how that supply chain is actually going to work, what do you actually have and what is the actual solution to this? I mean, this is what people aren't really asking because, okay, here's another anecdote, this one. So the Biden administration, I think it was, is able to convince Taiwan Semi to come and build in Arizona, right? Fantastic. Give him a bunch of money. And it's supposed to be a fantastic, fantastic facility. Great. Three months ago, Taiwan Semi gets served a class action suit for discrimination. Because a whole bunch of people that came in for job interviews who were nowhere near qualified basically were like, oh, they, they didn't want to hire us because we're Americans and they want to just bring in all of the, all of their own Taiwanese to do the jobs. And the courts took it. They didn't say, okay, we're going to dismiss this. They're like, okay, we should look into this. How are you going to build anything if you're not able to? I mean we can go down the rabbit hole that is, are there enough people to do the jobs that need to be done in this whole, this whole ecosystem. But here we have something that is desperately needed. And you have the litigious nature of the American society going to TSMC and saying, yeah, we're just going to talk, we're going to target you because we didn't get a job.
- [61:00]
Marty
Yeah. And if I remember correctly too, there were some DEI influence on that litigiousness as well. And everything goes in, whether it's polysilicone being the raw input of the chips and then the TSMC Arizona foundry question, like the intellectual capital that goes into building the. Building the foundry that makes the chips. That's raw input doesn't exist over here either because we hollow out a manufacturing base and deprioritize that education. And it is, it is extremely disheartening that America has let itself. And that's, I think that what I'd really like to get out of this conversation too is like, what is the best path forward? Because to your point, we don't have a lot of leverage. I think it's pretty obvious we are completely beholden to this Chinese supply chain right now. It is clear that the administration and many Americans, myself included, would like to de risk that, that dependency by building, building our own manufacturing base here in the United States, building up the industrial base as best that we can, while maintaining, I would like, I'll speak for myself, while maintaining an amicable relationship with our trade counterparts around the world that we are sort of diversifying away from. And so what I'd love to get out of this conversation is your mind like, what is the best path forward to make this happen? What needs to happen from a posturing perspective, a blocking and tackling policy decision making perspective. And how can we sort of get on the playing field and like, hey, let's put the cards on the table. We understand that we're beholden to you to a certain degree. We know the reserve system is out of favor. We want to rebuild our manufacturing base. What can we do to work together to make this happen?
- [63:04]
Peter
So there's really two complementary solutions that solve it. And here's the thing, you take a page out of the Chinese playbook. I tell people all the time, the Chinese playbook is pretty thin. There's not a lot of plays in there, but they're masterful at how they apply them. So you just do this massive deregulation and joint ventures. You basically say to the Chinese, look, byd, we love your cars. Your cars are great. We want you to come here and we're going to do a 5149 joint venture. We're going to have a bunch of rights and waivers. You're going to be able to run it and we're going to put our own people in there and you're going to train them up and you're going to be able to sell your cars into our market or you got, you know, DJI, let them do the same thing. I mean, all of the goods that are needed. Now, you can't go across the board, but you can be very smart about how you do this. But you have to have the deregulation element involved as well because you cannot continue to get bogged down with all of the issues on, you know, I don't know, OSHA or the, you know, liability and discrimination and all of this. And I'm sure that sounds extremely heartless. Hey, we're in this situation. We need to come up with solutions. You need the Chinese to invest, you need to lower the regulation and then you'll train up a ton of people. That's how the Chinese got trained. The Chinese got trained through all of these joint ventures that got set up over the last 30 years. So ultimately that is probably the best way forward. But I think the first step that would need to be taken by the United States would be for there to be some big coming together with the Chinese president and a sit down where the United States says, we recognize that our two countries are equals. And I think that that's going to be a very difficult ask of the United States government. And that's really what the Chinese want, is just give us, give us the face, give us the means, tell us that we're equals and we're good to go. And I think that that would work.
- [65:15]
Marty
And we've been running. Another thing I want to touch on. We've been running under the assumption that we have zero leverage. I think the manufacturer. What leverage do we have? I find it hard to believe that it's exactly zero. Like, what leverage do we have? Is it our consumer base? Is it?
- [65:32]
Peter
Yeah, I mean, the entrepreneurial spirit. Oh, okay, now you're talking about something different. Now we're talking about DNA. I mean, there's a couple of things. Like number one, what, what leverage like right now does the United States have? And very simply would be the market. Even though China has very meticulously reduced its dependency on exports to the United States over the last six years. I mean, as a quick aside, I think one of the biggest tactical mistakes that Donald Trump made in his first term was very loudly proclaiming all of the various target vectors that were present in China, talking about, oh, they need us for our capital markets, they need us for our market, so on and so forth. And the Chinese, kind of. From the conversations I had, the Chinese were like, he's not wrong. And once he was out of office, they spent four or five years addressing the vast majority of those issues, which put them in a much stronger position going into Trump 2.0. But the market, if there was a significant reduction in access to the United States market, it would have a tremendous, tremendous negative, effect on the Chinese economy, no question. It would also, though, leave so many shelves empty in the United States. So it becomes this battle of attrition. Who can suffer the pain the most? But the market's still, I think, super important. I mean, leverage wise. The United States has the biggest military the United States has access to. I mean, to financial markets. I mean, there are what I refer to as nuclear options. And I don't think Bessant wants to go down that route, but I would argue geopolitically the most leverage. And I put this in the email because this is going to. People's heads are going to explode later this year when this comes out. Is Taiwan like a bit, a bit of history? Just bear with me for a second. In 1999, the United States accidentally bombed the Chinese embassy in Belgrade. It was Mother's Day, 1999. I'll never forget it. And it was a bit dodgy here. There was a lot of, a lot of anger. And Bill Clinton. Oh, no, I'm sorry, I take that back. I won't go into the details. Long story short, Bill Clinton owed Jiang Zemin, President of China, a favorite. He had. Johnson had done something for Bill Clinton in terms of making sure he could get reelected so he wasn't causing problems in the East China Sea. Bill Clinton came out here in 1998 and he has this infamous three no's speech. And the three nos were basically President Clinton reaffirming essentially the American one China policy of saying there's only one China. Taiwan and China are both the same one China and the United States does not support independence. And that was it. The Chinese were super happy. They were like, okay, we're good to go. Just verbal. And I think when President Trump comes out here, part of the negotiations, he's going to do something similar and the quid pro quo that he wants from this, and I kid you not, TikTok, he wants tick tock. And he's gonna, he's gonna say, I'll come out and talk about how there's only one China and you're gonna give me tick tock. And then, you know, this is a, this is a little bit for us on the, on this call. Tick tock, once Trump owns it or his buddies own it, becomes essentially a poison chalice. How many people in the United States are gonna want to use TikTok if Trump's buddies own it? Right. So where are they gonna go? Well, some of them are gonna come here and they're gonna go to RedNote, but most likely a lot of people are going to all of a sudden learn about Nostra real quick.
- [69:33]
Marty
Yeah.
- [69:36]
Peter
And so there's, so that's, that's, that's. I think the Taiwan issue is really where the most leverage lies.
- [69:43]
Marty
And you have it in the email, too. The, if you look at the map, the US Had China cut off across the east from Japan to South Korea to the Philippines in Australia. And so there's this perception that China is really close, but it seems like the, the US has allies in the region that, that create this sort of stalemate in terms of preventing China from trying to take it over. And the whole meme of China trying to take it over and literally having a kinetic war around Taiwan just makes no sense considering the strategic importance of the foundries that, that are housed there.
- [70:21]
Peter
So let me just bear with me. I know it's a bit off topic, but I think it's important maybe for you, but also for your audience. Allow me to sort of state with a pretty emphatic level of confidence. China's not going to be invading Taiwan anytime in the near future. No matter what you read or hear on social media or elsewhere, China's going to invade by 2027 because Xi Jinping said so. No, he didn't. He said for the military to be prepared for, you know, what needs to be done. Jiang Zemin said that. Hu Jintao said that. They've all said this. It's the same thing. But, okay, let's ignore what these communist leaders say. They're politicians. We don't listen to politicians. Here's an interesting fun fact. China never really wins wars. If you look over the last seven, 800 years, better part of a thousand years, China was taken over first by the Manchurian, no, the Mongolians, and then by the Manchurians. And this is when you get The Yuan Dynasty, then the Ming Dynasty came in and was like, okay, we're going to be Han Chinese again. And then you had the, the Manchurians come in and it was the last dynasty, the Qing Dynasty. The reason I bring that up is China has learned that the way in which they exert control as the ethnic han Chinese, which 95% of all Chinese are, is through what I refer to politely and diplomatically as assimilation. Meaning you over time, over generations, through marriage and family and whatnot, you end up all becoming Han Chinese again. And it's like, okay, we lost the war. We're not going to try to have this resistance or anything else. We're just going to, you know, we're going to intermarry and whatnot and you know, give us a couple hundred years and we'll be back in power. The reason I bring that up is this is what happened in Hong Kong. And it's Hong Kong that I think is extremely important as a, as a case for what is going to be, what is going on with regard to Taiwan. And when I first came to China and the first time I went to Hong Kong was in 1994, and Hong Kong was British, everybody spoke Cantonese, completely British. Over the course of 20 odd years, Hong Kong became nothing but another Chinese city. The majority of people who were living in Hong Kong were from the mainland. So when China decided, and by the way, I should mention in terms of all the things that China has done, this was, I think, the dumbest geopolitical mistake under Xi Jinping since he's been here was taking over Hong Kong in the way that he did, basically, you know, putting the stamp on it, saying we're going to make this a real province, if you will. But the reason it was so relatively successful with limited violence. There was violence, but nowhere near to the extent of say, Tiananmen Square was because everybody down there was already Chinese. And they were like, yeah, we're used to this, okay, whatever. Compare that example with Taiwan. Even if China was able to go in, they wouldn't be able to so called win the peace. There's no assimilation. Everybody in Taiwan are essentially Taiwanese. And the Taiwanese, because they are Han Chinese and they understand this. It's the reason why they have been so reluctant to allow for any mainland Chinese to, to come and reside in Thailand, in Taiwan, because they know that this is how you can play. You just, it's. What's it called? The, the, the fifth. I don't know, something about fifth column. Thank you. It's the fifth column approach. And The Chinese have been brilliant at that. So because there's an inability to win the peace and especially there's no assimilation, China's not going to risk doing anything at this stage. They're just going to play for time. And this I just continue to see, not being addressed anywhere. People just want to focus on the United States. We're going to be there. They're going to attack by 2020. So what happens when 2027 comes and go? You're just going to move the goalposts?
- [74:37]
Marty
Yeah, probably. I mean, that's.
- [74:39]
Peter
It's the.
- [74:41]
Marty
That's the modus operandi for politics, at least here.
- [74:45]
Peter
Sorry about that. Sorry about that. I went rogue. I'm not sure if you want to talk.
- [74:49]
Marty
No, I think that. I think that assimilation context is very important as. Especially as it pertains to Taiwan. I was completely unaware of that context. And it makes sense, again, as in this. I think it's important that I want to serve as many of these fundamental misunderstandings as possible, because again, going back to. And Matt alluded to, he's like, be careful. Like, this guy's very pro China. And I don't want anybody here to think that I'm pro China. I've had Balaggio and he. He's put a very pro China, bullish China, bearish future of the United States thesis out there. And as an American, as somebody who wants to get to the truth of things, truth for the commoner is what. This company is called tftc. And I think we should explore both sides of the argument and try to better understand with the intent of getting to a point where if you have better understanding, you can actually get things done to that point. I worry that we're spending years with all this jockeying and moving pieces on the chessboard with fundamental misunderstandings that don't actually allow us to get to a point where we can have productive outcomes. And so how much time are we wasting? What is the opportunity cost of doing all this posturing and sable rattling from a position of misunderstanding that just forces us down a path of delayed productive outcomes?
- [76:27]
Peter
Yeah. And I'm in agreement. And I do want to circle back to a point you made, which is, look, I want, like, I'm a child of the Reagan revolution. Like, my most formative years were from 1980 to 1988. And, you know, as someone who's lived out of the country, travels back a couple times a year, you know, just the snapshots each year when I go, I'm. I'm. I'm just shocked at how, you know, the stripping away of freedom. You know, as I wrote today, it's like the sovereignty of it all, like the independence, like, go out and make it happen for yourself. And there are just so many gatekeepers across the board all over the place. And it just seems as though there's this, this, this element of fear that exists throughout the United States of. You know, I don't want to sound, like, all hokey, right? Like the scarcity mentality. The United States is still the greatest, easily greatest country on earth. All of it. It just needs to go back to what it used to be. And I don't mean, you know, the 1950s and all that horrible stuff that was. I'm just talking about, hey, let's get on. Get on with the business of doing business, and let's get regulatory capture. For me, it just drives me insane. Like that. That has got to be. You saw that picture, all the tech titans having dinner with Trump. I mean, that's about as Chinese as China gets.
- [77:56]
Marty
Yeah. And it's become like a thing, particularly with the Trump administration where it is. There's a lot of sycophants who just want to be seen next to them. The lead up to the election was like, we've got the tech. The tech, right. The tech people are all right. Now they. They're absolving themselves of the sins of DEI and woke politics and bending the knee to the progressive left. And now it's cool to be conservative and free market oriented, but it's all. It's all about who can be seen in a picture with Trump, which, like, literally, they're. I got invited to meetings with Trump or. So you pay 100 grand to get a picture with them when they were leading up to the campaign. It's like, it's. It's a lot of. A lot of sizzle, no steak in terms of substance. It's. It's really. It's really like a social posturing and sort of hierarchy game that's being played where it's like, let's actually get some shit done here. And with that being said, like, I much prefer Trump in office than Kamala, but, like, going back to. There's so many just idiotic mistakes, like, in our space, like launching World Liberty Financial, launching the Trump meme Coin. Like, just idiot. Like, no. Like, no reason to do it, but idiotic mistake.
- [79:27]
Peter
Right. And you bring up a really good point. I think there's a couple of points where I think, you know, if you look at biology, I think it's. I always Find him fascinating because it's like, okay, dude, number one, enough with the slideshows. We get it right. China produces everything. But what he never really addresses, and I think this is an important point, is China right now is attempting to traverse from one economic model to the next. They're trying to move from growth model that was driven by real estate, infrastructure, a little bit of exports, if you will, to one that is going to be high end manufacturing, more consumption, still exports, but on the higher end. And I'll be honest with you, I have no idea if it's going to work. Nobody does. Because you also have, on top of all of this, gobs of debt. I mean, the local governments are just absolutely getting themselves, you know, they can't pay bills. So you can look at all of the, oh, look, they're building this, they're building that. And I think that's fantastic. I think there has been an enormous amount of positive momentum there. But much like the G7, you have tremendous, tremendous debt. What I will say, and as I commented to you, my catchphrase has been Keynes is dead in China. And what I mean by that is you would have seen a lot of headlines saying, oh, look, China's issuing tons and tons of bonds. They have, but the majority of those bonds are actually being used to go restructure local government debt in a way that is more transparent. Now, left pocket, right pocket, it's still a mound of debt. And you're trying to move to a whole new economic model. I will certainly give the Chinese credit for rolling the dice, but you're talking 1.4 billion people. Property values are still underwater, stock market's finally starting to catch up. There's been a bit of a renaissance in terms of settlement over the course of the last six or seven months. But this is, this is not a foregone conclusion, but China is going to have to. I mean, there's a lot of luck involved. If the United States didn't go to war for 20 years, would China be where it is? Probably not. You know, if China, if the United States didn't focus on, you know, a lot more of these social issues that were nonsense, DEI and what have you, would China have been able to progress as far as they have? Probably not. You know, what's the, what's the joke, Marty? When you're digging a hole and you're trying to get out, the first thing you need to do is stop digging. The United States needs to stop digging.
- [82:13]
Marty
What would be the first step to stop digging in your mind? The first thing to do.
- [82:20]
Peter
It's a sit down in Beijing between Trump and Xi where they say, okay, we're going to figure this out and we want to make sure that we're working together that were peers. We're going to try to figure out a way that we can share the sphere of influence throughout Asia. I don't think China would even ask for, let alone with the Trump administration, even say things like, you know, Japan, Jews, Korea is there, what have you. It's just, look, we respect you. We want to try to find ways to work together. We've had 30 years, 30 years of collaboration that has led to prosperity and to peace. Now, granted that prosperity has not been all that well received by lower income levels throughout the United States, the working class. That's something the United States is going to have to try to figure out whether it's UBI or whatever they're going to try to do. But the very first step is to just sit down and say, okay, the world is big enough for these two nations to be able to get along. And again, the, the degree of. And I hate this word, so please, I apologize. I just, it's the only one I think about the synergy that exists between these two nations. Economically, there's a reason why it worked so well for so long. It just needs to be adjusted to come up with a way that all of the identified problems, let's say the United States has with regard to manufacturing can get addressed. That's where I was talking about joint ventures and the like. Let China invest in the United States. Stop freaking out about farmland. I mean, you're just. Guys like you're, you're making a big deal over something that might have an issue. But the Chinese are just looking to figure out a way how can we take our hard currency, get it out of the country and put it somewhere in. The United States is still the best place in town.
- [84:11]
Marty
Yeah, I mean, that's a very controversial one. And one, I'll admit, that does give me pause, particularly if they're buying around military bases. I mean, that was a big, big thing in Texas specifically. I think Texas outlawed it outright last year.
- [84:28]
Peter
And I think that's, I think if there are strategic areas that you shouldn't. Absolutely, that makes sense. United States has got a lot of farmland. You don't have to buy it right next to, you know, Fort Bragg.
- [84:39]
Marty
Yeah, well, that's the other thing I, I wonder about. Maybe I'm extremely naive, idealistic, but to me, I mean, we saw there was the two Chinese researchers in Michigan, who were arrested for bringing in that fungus that could kill crops. We've seen, obviously, the. The whole Covid thing with the Wuhan lab, but there was some internment, like NIH was funding the lab and the Chinese were running it. And so there is this. There is this sort of. You do have to have your guards up to a certain.
- [85:16]
Peter
Point.
- [85:16]
Marty
Maybe I'm naive, maybe I'm idealist, but I think if you can get to a point where the relationship is on good footing and you have free, equal, fair trade between the countries, it's a good deal. Like, the incentive to play these war games and these spy games, if you will, is decreased a bit. And the incentive is to cooperate and not try to sabotage each other.
- [85:45]
Peter
Yeah. And again, I think this is a good point, and I will stress this. China is a. An absolute lover of the word asymmetry. It's all they're looking for is how can they do little things that have bigger impacts. So do I think that, you know, you've got people coming into the United States that are trying to find ways to be able to undermine systems, you know, the electrical grid and everything else. I absolutely do. I mean, when you're. What did I write to you? Right. If you go for the king, you better not miss. And so there's going to be a lot of things that are going to be going on that we don't. We're not aware of a lot of nefarious actions. I wouldn't put it past the Chinese to do it. This is kind of their modus operandi, but at the same time is, you know, you know, sometimes a cigar is just a cigar. So, you know, you. You have to find a way, I think, to be a little bit judicious in how you go and target it. And by the way, if you want. If you want my sort of. My point of view on Covid, because Covet here was. Well, that's a whole different story. I guarantee you this. This was literally somebody was somewhere dropped something and it escaped. Like, it's as simple as that. Now, the Chinese are not going to admit that. Like, that's a huge loss of face, right? So what do they do? Like, oh, I came from the United States. Come on, man. Nobody believes that. I mean, I know there's some supposed incredible theories coming out, but as I see it, they took the SAR, the original SARS from 2003, where I was here, and they were funking around with it, getting some funding from the United States. God knows what reason. Some guys having lunch one day and he's handling a petri dish in trips. Like, I've seen things like this happen. Not to that extent, I might, mind you, but I've seen big things happen over very trivial catalysts.
- [87:41]
Marty
Yeah, no, and then like two other things. I want to talk about the. Again. It seems to me that China thinks in centuries, not quarters, which is very important for Westerners to understand. And that was brought up in the discussion yesterday, like, how much the, how much of, like the outcome of the Opium wars and the, the century between like 19, 18, 50 and 1950 is seeped in the psyche of the Chinese to the, to the extent where they have it internally. Like, we never want that to happen again. We don't want to get owned by, by foreigners to that extent ever again.
- [88:29]
Peter
No, the. I mean, it's called the 200 Years of Humiliation, 100 Years of Humiliation, whatever it's called. Yeah, that's, that is front and center. And I mean, it's taught in schools. You know, the, the, the whole drug culture here, zero tolerance, man. Like, do not get caught with drugs in China, full stop. I mean, there's zero tolerance for dwi. You get caught drinking and driving here, you're in jail for 10 days, no questions asked. So that's definitely in the back of their minds. But it's not what I would consider to be a driving motivation. I mean, the driving motivation is chaos. Meaning what transpired during that hundred years is you had warlords, you had civil war. I mean, it was. I mean, it was pure chaos. And over that 5,000 years, if you go through the Chinese history, you find that typically this is when there's always a turnover in dynasties, is. Things get so chaotic and the country breaks apart that you have to have somebody as a new strongman come in and try to keep it together. So that is a number one priority, is making sure that there is stability as best as possible throughout the system. Now, the Opium wars and being owned by any. I mean, even being owned on a diplomatic level is viewed as being like, you know, the Opium wars, you know, you want to make sure that you're being viewed as an equal. And right now, I keep coming back to this. Most of the countries around the world will sort of tacitly view China as an equal. The large G7 nations, the US is the only one that does not. So, yeah, I, I think it's, it's stability more than anything else.
- [90:26]
Marty
Yeah, no, that's another big topic here. Like, is the fentanyl crisis a reverse Opium War tactic to destabilize what's happening here in the United. Yeah.
- [90:39]
Peter
Oh, I think so. Yeah. I mean, it's. Again, it goes back to my issue about asymmetry. And I think the way in which the Chinese are doing it, I think, is, again, it goes to the brilliance. I mean, I don't mean to sound callous with regard to the outcome, but, you know, they can. They can honestly say, hey, look, we're doing what we can. We're not actually sending the fentanyl, we're just sending the precursors. And those precursors can be used for a whole bunch of different things. Just so happens that it's being sold to Mexico, but the Chinese will also look at it and say, hey, you need to close your borders and you need to get this drug issue under control. And as much as I think that there is a driving element with regard to the Chinese using asymmetry in their tactics to be able to exploit this, no doubt, I also think that it should be within the power of the American government to stop it. It's a supply and demand issue. I'm not saying, oh, the war on drugs and. But, you know, I think there's a lot of money being made by a lot of groups across the whole border. So if you were to stop the demand issue of it, I think there would be, you know, China be like, all right, we're out here, we're gonna figure something else out. But, yeah, I'm not gonna sit here and say, oh, no, it's just a coincidence. It's not. It's not a coincidence.
- [91:54]
Marty
No, no, there was just a book written. Apparently there's US Military personnel that were. That we're working with the cartels to move all this stuff. And it is. Are you optimistic or worried about this, the future state of the relationship between the United States and China? Do you think that Trump, probably via the behest of Scott Besant and the advice of Scott Besant, can come to recognize the. This sort of way, the best way to do business with the Chinese and swallow his pride a bit and actually get something productive done? Or do you think we're destined to continue down this sort of saber rattling, sort of very. What's the word I'm looking for? Confrontational relationship. Yeah.
- [92:57]
Peter
So in my own DNA, I'm a raging optimist, probably much to my. And probably not too healthy. But I, I just, I. I'll always have an optimistic perspective on things and on the point of the relationship between China and the United States. I am too grateful that Trump has assumed power and it wasn't a redo of the Biden administration because I think there were very clear signs in that sort of side of the political party that, you know, let's try to push the buttons. Like Nancy Pelosi flew out to Taiwan. There was a lot of events that, again, that's why I said the degree of restraint out of China I don't think really gets appreciated. But Trump came in, and my immediate reaction was, oh, this is not going to be good. Because if you looked across, as, you know, Hegseth Rubio, I mean, guys in Congress, I mean, China is the most bipartisan issue where there's agreement, like, we all hate China. Great. Like, how's that gonna help? And Trump has been able to keep that whole sort of group in check so far. So that allows me, that provides me with an enormous amount of comfort. How it goes forward, I think is going to be open to things like the midterms. I mean, China understands, by the way, how the American political system operates. They learned this the hard way back in 96. So, you know, they're, they're just sitting there saying, look, we're just going to kick the can until November 26th. Because in November 26th, everybody in the United States turns the brain off. It's Thanksgiving. They go to the end of the year. Next thing you know, it's January 4th, and what is it? It's midterms. Everybody's talking about midterms. Everybody's energy is either on trying to maintain power or trying to reassume power. So the political capital and the ability to sort of have the bandwidth to deal with China is going to be very minimal. And I think the next two months are going to be very telling because they've got a lot of wood to chop between now and call it the middle of November. If there are issues, they'll probably pop up Q1 of next year. But like you and like many people on this who are viewing or listening to this podcast, it's quite possible over that period of time that the United States may have a few houses that are burning that they need to focus on. China's not going to be the priority. So, you know, the, the financial situation, as I called it. The United States is absolutely, unquestionably, fiscally boxed in. Everybody knows it. It's the world's worst kept secret. Nobody talks about it outside of this echo chamber. Right. And how are they going to square the circle? I just don't see how they're going to be able to do it. So we'll have to wait and see. But I think for the time being, I think I'm overly positive that we're not going to go into anything that's going to be overly nasty. But that could change by the Q1 of next year.
- [96:06]
Marty
You bring up an interesting point, too. Maybe a controversial thought experiment, but is the nature of the US Political system, particularly elections, completely hamstring us in terms of being able to actually get stuff done? Because people talk about four year cycles, but it's really what we're highlighting here. Two year cycles, you have a presidential election, then two years later you have midterms. And many would argue they're equally as important. And so you have people for the presidential election. It's a year and a half of bandwidth, mental bandwidth, talking about and focusing on midterms, to your point, maybe half that or three quarters of that. Eight months, Eight, nine months. January to.
- [96:53]
Peter
Right. And again, I mean, you can, you can see it. I mean, you're gonna, I mean, look, you're a family man now. You got three kids, you and your wife are insane. And once, once Thanksgiving comes, you're mentally going to be checked out until the beginning of January. You're going to be family and everything. And you are representative of so many people throughout the country. So, you know, China will use that to its advantage and say, look, okay, we'll just wait for the next guy to come in maybe, or we'll see.
- [97:24]
Marty
Well, and I've learned this through the mining industry too, because you have the US Holiday system that rolls right at the Chinese New Year, where everything shuts down for a month in China and.
- [97:35]
Peter
Yep.
- [97:35]
Marty
So it's like you have even an even smaller window to actually be productive, to get stuff done.
- [97:41]
Peter
Tell me about it.
- [97:45]
Marty
And that's, that's typically when in January through February.
- [97:48]
Peter
Anywhere. Yeah, anywhere from the end of January to early February.
- [97:53]
Marty
Yeah, it's, it's funny, we always have to prep for Chinese New Year in the mining industry. It's like, okay, if you want to get anything done with the Chinese counterparts, make sure you get it done before the new year.
- [98:09]
Peter
Yeah, it's with anything. It's with anything.
- [98:15]
Marty
Well, here, this has been incredibly illuminating. What final thoughts or their words of wisdom advice would you give anybody listening to this? Yeah, we do have some policymakers to listen to this, I'm pretty sure.
- [98:34]
Peter
So, okay, okay. Number one, if you have not been to China, I implore everybody to get on a plane and come out. It's actually, you can get, you don't have to get a visa Anymore. You can do transit visas as Americans. It's pretty easy. Come and see for yourself. Now, here may be the more controversial. Do not go to Beijing. I would even argue. I can't believe I'm saying this. Don't even come to Shanghai. If you can land in Shanghai a day, you want to go to Shenzhen, you want to go to Hangzhou and Chongqing. These cities are just. I mean, this is where the excitement is. This is where the energy is. You're seeing real Chinese entrepreneurial spirit. People out having. Just people living their daily lives, get on a plane, come out and spend some time. Every person that I have sort of been with that has done this over the last 18 months to the man, to the woman, they've said to me, this is not at all what I expected. And I just really encourage people to do that. The other. The other point that I would make to you is whatever you see, or. And I would implore you to be very careful when you go about, you know, indulging in certain content that's like, China's gonna collapse. It could. It very well could. I'm not gonna say it can't. But again, I've been hearing this for two decades. So when you. When you're hearing input from people talking about China, the first question you should ask yourself is, has this person ever been to China? The. The amount of second sourcing of information of late is frightening. Meaning that people are talking to people who have agendas, who are then translating it and saying, oh, this meets my confirmed bias. So I'm going to put this out there. And then finally, and this one is probably. I don't know, we'll see how it goes. Anybody that wants to have a deeper conversation about any of this stuff, hit me up on Noster. I will talk to anybody as open as possible. As I said to you in the email, Marty, I'm in Shanghai, I'm in China. I'm talking about Fentanyl. No one's coming in the door and they could black bag me. Right. So a lot of the. I have a BPM, as I said, my DPN's from China Telecom. They just want the money. Like all of these stories that. Oh, sorry, you got me going. There's no social credit score. None. I'm done with all this stuff. So be mindful of the messages you get out and just make sure to question who's saying it, what agendas they have, including myself. I'm glad Matt called me out. Good. Again. Yeah, just reach out again. Love, Nostra. I'M still shocked that you guys are talking about it. I'm like, oh, wow, that's pretty cool.
- [101:29]
Marty
Talking about what? Talking about me. Oh, then you're coming on here.
- [101:33]
Peter
Yeah.
- [101:35]
Marty
I mean, no, I'm not trying to blow smoke up your ass either. I was really happy that you responded to that newsletter. And I'll hand up, I'm probably guilty of hearing information about China from people with an agenda and taking it at face value and sharing it, like, oh, like. And I didn't because I've fallen for it before. Like, Peter's Peter Zion, like, the whole demographics problem. Another one, Kyle Bass, Hong Kong dealer, is gonna, gonna fail, and China's gonna kind of try to take over America. Like, I've definitely fallen for those theses, but they've been around for at least I've been paying attention to them from those two individuals for the better part of a decade. And it's like, it hasn't come true. So what's actually happening here?
- [102:25]
Peter
So here, here. Just a, just a quick editorial note on these guys and there's a host of others. Have the opinion, Keep the opinion. That's fine, right? If you, if you change your, your points, that, that should be fine. But when you go on traditional media like CNBC or CNN and you're, you're pitching essentially the same storyline that you've been wrong about for 15 years or 10 years, I would think it would be in the, the fiduciary duty, let's say, of the anchor to say, okay, we appreciate this perspective you have on China. You've been wrong for a long time. Why should we listen to you now? What's changed? And, and yet because of the nature of how media is and everything else, I get it. That's me being naive, but I think that's more my bigger gripe because these same people are on all the time.
- [103:14]
Marty
Yeah, no, we see it. I mean, it's funny. It happens in the bitcoin space too. There's like a carousel of people, many who are good, but many are like, you've been particularly in the crypto sphere. You've been consistently wrong for better part of a decade, and you're still getting trotted out and enabled to shill your wares to the retail public. It's very disheartening. And that's why I love having this podcast and being able to have. We just spoke for an hour and 40 minutes and really diving deep into these topics that I'm curious about. And I will admit I've probably spoken out a line on the topic in the past, but do earnestly want to learn and try to get to the truth. And I think someone like yourself who's lived in China for 30 years and definitely has a better perspective than myself and likely others who haven't but are speaking confidently on the subject is important, right?
- [104:10]
Peter
No, and again, as I said, I'm not going anywhere and I'm super ecstatic to be able to talk to anybody and be challenged. I mean I don't have all the answers, that's for sure.
- [104:21]
Marty
Well, hopefully this is the first of many. I'm sure the, the US Chinese relationship is not. Not going to be boring anytime soon. So as things develop, I'll make sure that our conversation is running behind the scenes and if we feel that it's important to get on air again, have a conversation to update the freaks about what's going on, we should definitely do it.
- [104:48]
Peter
Yeah. And, and I'll be, I'll be here and I'll keep, I'll keep doing my, my China morning missives or whatever I keep calling them. I have a good time with those and the engagement's been great. I mean and I am by the way, Noster only. Yeah.
- [105:00]
Marty
I was looking for you on on X. I couldn't find you so it was very impressive to see that you're Noster only.
- [105:05]
Peter
I haven't yet. I. It's hard when you have the engagement but for, for me it was, you know, look, at the end of the day I am a. I'm someone who really doesn't like centralized power. So ironically that I live in China. Right. But that's why I think Noster it was so funny. I remember in the very beginning been on two and a half years saying, sending a. A note to Jack and I was like I'll tell you two things. The next election meeting, 2028, it's going to be only two topics. Bitcoin and China. And he wrote back and he was like probably.
- [105:46]
Marty
And that's what it was. That's what it was on the border. The border was a big one. But Peter, I know it's getting late where you are. Appreciate you spending your Friday night with me. I feel very fortunate that you were willing to do that. And until next time, I can't wait to do it again.
- [106:04]
Peter
Always going to be around Marty. I appreciate the invite. And you be well with your family.
- [106:09]
Marty
You as well. Peace and love, freaks. If you've made it this far, I want to thank you for listening and ask you for a couple things. Can you subscribe on the platform that you're listening to. Maybe give us a rating in a review. That helps the show quite a bit whether you're listening on Spotify, Apple, or Fountain. Speaking of Fountain, that is my favorite podcasting app. If you go over to Fountain, you can subscribe to the show. Become a paid subscriber to support the show and receive these episodes ad free and a day early. Let's go find Fountain or go to Fountain fm. Become a paid subscriber.