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PDB Situation Report | January 4th, 2025: Terrorism Hits Home & Beijing’s Strategy for 2025
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A
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B
Welcome to the PDP Situation Report and welcome to a brand new year. It's 2025. I'm Mike Baker, your eyes and ears on the world stage. All right, let's get briefed. We'll start today's show with a deadly New Year's Day where two incidents over 1700 miles apart have shot the nation and sparked new concerns about terrorism on US Soil. Retired FBI senior agent Kurt Peipel joins us to provide insight into these attacks and the ongoing investigations. Later in the show, we'll examine Xi Jinping's New Year's message. Did you catch that? Where he laid out China's economic challenges and renewed his hardline stance on Taiwan. Author and China expert and friend of the show Gordon Chang was join us to break down what this means for Beijing's agenda in 2025. But first, our situation report. Spotlight. Two major incidents shocked the nation on New Year's Day. First in New Orleans where 42 year old Shamsa Dinjabar drove a rented pickup truck into a crowd of revelers on Bourbon street, killing at least 15 people and injuring over 30. Now Jabbar, an Army veteran, was was fatally shot by police at the scene. The FBI has revealed that the suspect had pledged allegiance to the Islamic State and is investigating the attack as an act of terrorism. Just hours later in Las Vegas, a Tesla cybertruck exploded outside the Trump International Hotel, killing the driver, 37 year old Matthew Livelsberger, and injuring seven bystanders. The vehicle was packed with fireworks and gas canisters, turning what initially appeared to be an accident into a deliberate act. Investigators have since discovered that both vehicles were rented through the same peer to peer app, raising questions about whether these attacks were coordinated. So what do these incidents tell us about the threats that we face in 2025 and how might authorities respond to those threats? Well, here to share his insight is Kurt Pepel, a recently retired FBI Senior agent with 20 years of experience and and full disclosure, now working for Portman Square Group, our company that's an intelligence and security and risk mitigation firm. Kurt, thanks very much for joining Us here on the Situation Report.
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A
Thanks, Mike. Thanks for having me.
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B
Yeah, of course, man, of course. And look, honestly, you didn't need to get dressed up for, for your, the Situation Report. So but, but thank you. Thank you for making the effort. I appreciate it. So let's, let's, let's kind of start at the 30,000 foot level with New Orleans. We'll start with New Orleans first. Can you walk us through how does an investigation like this unfold? The attack occurs and then maybe, I mean, I don't mean for you to get too far into the weeds, but just kind of lead our audience through how this investigation unfolds.
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A
I'm going to assume that after the attack the scene secure, you know, police are on scene, they've made that safe. What's going to really happen? You know, the bureau is going to probably bring in some experts, bomb techs along with the police, bomb bomb techs, and then the evidence response teams and maybe other special agents depending on the needs of, you know, the division at the time. But they're going to immediately start trying to identify and I think you saw it really in both incidents. But and for certainly New Orleans, they identified the attack are pretty, pretty fast. And so they're going to identify that subject as fast as they can because they're going to want to go interview co conspiracy or determine if there's any other threats, you know, out there like co conspirators or anything like that. They're going to do interview all the witnesses. They're going to ask for video, you know, either locally or by cell phone. That's going to be a lot of work just to go through all that. But they have identified the rolling subject and you know, initially bureau, the FBI and the police had said that there was other pro conspirators. Now they've come out and said he acted alone, which is interesting. I found the FBI has said that they're trying to be more transparent and therefore they're releasing information as it comes, which in an investigation that can change quickly. So now they're saying originally they said there was co conspirators, now they're saying they're not.
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B
Let me ask you this because I mean again, part of the problem, I think in today's world it's a problem, but there's also an upside to it, obviously. But a lot of this plays out in the open right in real time now because of social media and everybody in a sense, you know, the media is playing beat the clock against everybody who's got a smartphone Right. So information is flowing, and what that means also is a lot of misinformation, a lot of, you know, theories, a lot of conspiracy ideas. Everything's flowing out there, and, and it's, and it's happening very quickly now. Much was made about a statement from an FBI spokesperson on scene in the immediate aftermath of the attack. When she came out and said that it's, it's not an act of terrorism, it's not a terrorist act. Yet there was an ISIS flag on the truck. It was, you know, they, they knew at the time. I guess what I'm saying is, why would somebody make that statement when it's so obvious that it may be an incorrect statement?
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A
It certainly is interesting. Let's, let's say that, that I, I don't know why someone would say that. Usually we, you know, in my experience, we usually didn't weigh in that early on, stuff like that, because you, you just don't know. Right. The answer is we don't know what this was. The, like, when I grew up in the Bureau, the default was like, almost every bomb is a terrorist, you know, is a terrorist event until we were proven otherwise. So I think in that specific instance, I don't understand why it was said, but someone clearly thought that it wasn't an incident. And then when they pulled out the ISIS flagged almost immediately, it was an issue. Right. Like they had to come back and say, yes, it is. You know, so, and I think now they're finding his social media and, you know, he posted videos, you know, an hour and a half, up to 10 minutes before he committed the event. So where he's declaring himself for ISIS and all that. So I think clearly this in New Orleans, it clearly is a terrorist event.
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B
I think the flag on the back of his pickup truck, I think the explosive devices, I think, is video stating an allegiance to isis. I think his, his family, ex wife, talking about his radicalization and, and sort of the, the process of, of turning to Islam. All of those things, I guess, could be considered clues to, to motivation. So. Yeah, so I, I just wanted, I wanted to ask a question because it was such an odd thing for someone to say, and I, I think, you know, law enforcement has an extremely difficult job. I think everybody can agree on that. And, you know, it's also extremely difficult to try to prevent an attack like this. You know, if it turns out to be a lone wolf, someone who's got motivation, it's not particularly sophisticated. So it's a very tough job. I think it just sometimes is made Tougher by, you know, missteps or misstatements that probably are better kept to themselves before they have all the facts in, in place. Something else it was, I'm just, I guess I'm just cycling through some of the bizarreness of, of social media. Something else that was picked up on immediately was how quickly they covered up the ISIS flag and on, on the pickup truck. Again, it's one of those things that you think, well, it probably means nothing, but I, I worry sometimes that, that law enforcement hasn't caught up to how social media works and what the optics are and how they, they really need to, if they want to damp down sort of some of the, the conspiracy theories, they need to think about that a little bit more. Every time there's unfortunately an incident. It's a part and parcel of the investigation nowadays is, you know, how do we deal with public perception? Anyway, that's all that's. I'm going to climb off my soapbox now, Kurt, you turn it back over to you. Talk to me about the process of looking for associates, sort of that forensic work that's involved in saying, is he acting alone? Is he not?
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A
I mentioned before, obviously we've talked about the video post, we've talked about, you know, they're going through all his social media, they're going to look at phones, you know, his contacts, not just domestically, but your world too. Your old world is, you know, overseas. Did he have overseas contacts? You know, they're going to try to go through, really scour everything that this individual financial, everything that this person has done their whole entire life. They're going to try to go through every bit of it to see who he is at contact with. You know, where does, where does those line up with other things? They're going to talk to people. It's a big humid endeavor or human intelligence endeavor. Now they're, they're probably talking to a ton of individuals, witnesses, like I mentioned before, that is going to be a big lift right now to try to figure out if there were co conspirators. And I will tell you that obviously they've come out and said they don't think, they think that this person acted alone. So they went through it pretty quickly to determine that he wasn't or he didn't have other people involved.
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B
So there's, there, there's so much here to try to unpack. But the, the, the security that was present for the New Year's Eve celebration. And look, the authorities, everybody knows how busy the French Quarter is in New Orleans during The course of a New Year's Eve.
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C
Right.
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B
And then the Sugar bowl college football playoff game was scheduled for, you know, New Year's Day. So in the immediate aftermath of New Year's Eve, you had these two major large scale public events. The police superintendent in New Orleans, again, you know, I don't mean to be playing armchair quarterback, but it's, it's a security situation. And so, you know, you need to do a hot wash on these things and understand where there may have been breakdowns. The security. The chief of police stated that the security barrier system that normally would have been in place was essentially out for repair in preparation for the super bowl, which is in February. So I guess, you know, my question is, what's your perception of their preparedness in advance of, of New Year's Eve? They obviously were just working off of a temporary plan to have police cars and other barricades take the place of what sounds to be or seems to be their, their tier one option for security.
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A
I haven't seen this site, but I, I suspect that they will be doing a hot wash, at least I hope they would, to figure out what if there is some exchange. What I, I imagine with this area is that if they, if they put in more secure, you know, concrete Ballards or something like that, that emergency vehicles probably couldn't get down the road. And so they maybe have a, may have a, a conflict internally of like, hey, we have to have emergency vehicles get in, but you know, where the car, police cars could move quickly, those Ballards, probably the electric ones drop. And so if they had an emergency, they can get in there. And I'm going to guess that's kind of the tension that they're playing with. Um, Interesting. You meant about like, you know, you meant, I think possibly with this too. And I, this is pure speculation on my half is this individual rented an electric vehicle, which I don't know if that was intentional, but electric vehicles are pretty quiet. So a lot of the same noise that you would hear in a car revving up or, you know, especially if you were in the crowd, you would hear all these things like really loud engine noise and you, you. All these cues that police and other people have are not there. So I don't know if this individual thought about that or not, but if he was revving up to get by the police, they may not have had a normal indication of, hey, this, someone's coming at us. You know what I mean?
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B
It is a little disconcerting, right? I mean obviously they look, they. Again, law enforcement has a very, very difficult job. But you, you have to, to tear these things apart after an incident like this to understand what needs to change and what needs to be improved. They're going to play the Sugar bowl today. In fact, it's, I believe it's already underway as we are talking. Is that concerning to you that they pushed it off by a day, but do you think that that's enough of a, of a delay in the aftermath of this attack, both from a security perspective and also from any other optic that you may consider?
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A
I don't know the people involved, but I suspect the people involved, they've done their full assessment of it. And if they've cleared all the IEDs and they've cleared this individual. Now, again, no one has a crystal ball to see what could happen. But I think that they, they wouldn't opened it if they thought there was an additional threat. And I'm sure the police presence down there has grown quite a bit since the incident. So they probably, you know, there's probably a lot of presence, possibly other SWAT teams, things like that that are a more robust presence than what was there a few nights ago. So I would imagine that, yes, it's probably fairly secure down there.
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B
Kurt, if you stay right where you are. We have to take a quick break and then we'll be right back with Kurt Peipel, a retired senior FBI agent talking about both New Orleans and coming up, we'll be talking about the Tesla cybertruck explosion in Vegas. Stick around.
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D
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B
Welcome back to the PDB Situation Report. Joining us once again is retired FBI Special Agent Kurt Bipol. Kurt, we were talking about the New Orleans Terror attack that took place early in the morning of New Year's Day on the same day. Then we had another incident and this one's still being investigated in terms of is it a terror attack, is it not? And that is the Tesla cybertruck that exploded just outside of the entrance to the Trump International Hotel in Las Vegas. Talk to me about that. There's a lot of complexity in this one and I think it's always a little bit dangerous to speculate about a perpetrator's mindset or mental health. This individual, again, like with New Orleans, there's some similarities, right? This individual and the attacker in New Orleans, both with military experience and in fact the, the Las Vegas incident. He was an active member of the military with the Special Forces. They both actually served at Fort Bragg, although there's no indication that they served at the same time, knew each other, etc. They both were in Afghanistan in 2009, I believe. Again, no indication that they knew each other at that point. But talk to me about what you know of the, of the incident in Las Vegas.
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A
Certainly. So what they're reporting, yeah, he was a Green Beret, highly, I mean, decorated Green Beret, which are, you know, a counter terror terrorism, you know, unit, along with a lot of other things that they do. This person drove from Colorado Springs, ran into Tesla or into Tesla cybertruck and brought it down. I, it just came out. I think that he actually shot himself in the head for the, the before the bomb exploded. So there was a, which is, you know, again, more of a suicide. But I don't know the statement if there was, you know, obviously Elon Musk cybertruck, Trump Tower, there was a statement to be made. They were pretty lucky in that cybertruck directed the blast at least is what I'm understanding. It blasted up. So even the, the, the glass didn't break, which is pretty fortunate for the people probably around there or inside the, the hotel. But I, right now they have no speculation on the individual. You know, right now, no motive. Why we don't like New Orleans. We have a pretty good picture right now compared to, you know, this one where all we know is he was active duty military and, and now is shown up here.
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B
Does it seem. I mean, I suppose it has to be taken into account. It's, it's an, a factor in trying to determine motivation. But as, as an individual who was, he was a Green Beret, significant period of time in the military and yet the, the setup, right. The way that he had orchestrated this seemed very unsophisticated not, I mean, it was just, you know, some fireworks, not even commercial grade, just, just available out, you know, to, to anybody, some fuel canisters. Nothing, Nothing. Nothing particularly sophisticated about what he was doing. Almost as if there wasn't really a lot either a lot of thought or intent to do a lot of, of collateral damage. Yeah, I mean, I assume that this is just one of those elements that goes into, again, the investigation and trying to determine motivation.
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A
Yeah. And I think access to a knowledge, you know, if you talk to like bomb techs and the FBI, they're like, you know, people that don't know what they're doing usually kill them. Like they get blown up or they'll blow off a limb or something. So there's a lot of technical stuff there. You know, the easy thing is throw some gas, throw some fireworks, light it, you know, or have some mechanism to light it and then kill yourself and then it just does its thing. So I don't know why he did it. It's interesting that he chose a cyber truck because it's enclosed, although you could have had any truck, you know, back cover for it, but that, that specifically cybertruck is enclosed, you know, so why he chose that, maybe he thought the battery would do more damage than, you know, it really did. It's unknown, but I assume that's law enforcement right now is chasing all those avenues to figure out. Especially, you know, I know they just executed a search warrant at his home. I think they just said that. And that's going to be, you know, maybe there's some obviously computer stuff, a computer forensics that they can go through to see what the individual has done or wanted to do.
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B
Yeah, I, I, I assume that that's again, there's, there's this process that you have to step through which, which kind of works against kind of the, the people's, you know, desire to get answers immediately. Right. Which then fuels a variety of conversations, you know, particularly in social media. And, and it's very tough when you say things like, look, you've got to let the investigation play out right then that's very frustrating for people because we've become used to getting answers or, you know, thinking we can get answers immediately. And whether it's because we can just Google search something, or people are used to watching police dramas on TV and everything gets wrapped up in short order. So it is, we do live in difficult times and I think that makes it even more difficult on, on law enforcement. It makes it more incumbent upon them, I think, to be More transparent, as we were talking about earlier, to be more proactive in explaining the stages of the investigation. So I assume that with the, with the, the Las Vegas incident that, you know, one of the first things they do because of the situation in New Orleans is to try to draw any connections. Are there any. Is anything related here? You know, could there be a support mechanism that was fueling both efforts?
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A
And what was interesting about the Vegas one versus New Orleans, like I said, New Orleans, they pretty much identified the individual and then released this one. They identified and then back, for whatever reason, they determined at the time that they wanted to have. They wanted to know the name, but they didn't want the public to know the name. I'm sure there's a law enforcement investigative reason for that. So maybe they were chasing down those connections. Now they have come back and said there are no connections other than military and a few overlaps. You know, Fort Liberty or Bragg is a, is a very big base. So, you know, it's hard to, like, just because you served there doesn't mean you knew each other and certainly different fields. One was a Green Beret, one was an IT guy. So I'm, I'm certain that they are drawing all those conclusions. And then they're hoping again, once you get into computer forensics and all that, and the telephones, did they have. Did they have calls? Did they have emails? Did they have, you know, was there any other connection? But I think they said it right now, it's, it's. As of right now, they're saying there's absolutely no connection, which is interesting. That's a coincidence.
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B
Well, and I'm sure they're also looking, obviously, trying to determine a state of mind, looking to see whether there are issues, mental health concerns, any. Any conflicts within his family. I mean, all these things come into play, whether it's the New Orleans attack or whether it's this incident in Vegas. How do you mitigate this risk? You know, from your perspective, how do you try. Not that you can ever prevent everything, but how do you try to prevent the next one?
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A
Obviously, I know law enforcement's working on the prevention side. You know, there's a lot of investigation that goes on regardless of that. But how would, how, if you're Trump Tower, what do you do? I mean, you look overseas, you know, they've been dealing with these types of threats a lot longer than us, especially in the Middle east. You look at 2008 Islamabad Marriott bombing. I mean, there was a pushback that wasn't far enough, but there was A pushback. And I don't know if, you know, we talked to security and convenience and I don't know if Vegas is ready for that. Hey, we can't have cars right up front. You know, there's going to have to be a pushback where cars are there, maybe there's shuttles. You know, I don't know if Americans are ready for that type of inconvenience, especially in Las Vegas, where you have to harden your security or exterior first before those cars can come in. And I'm sure you've been to Vegas recently. There's no, you can drive up almost anywhere.
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B
You know, it's one thing if you're talking about a government facility, right, where if you, you know, you've got more control, you've got more ability to do that. If you're talking about the, the Vegas strip with that, how do you stop.
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A
A car from parking in front of a hotel? That's really the threat, right? Like, how do you stop a car from parking in front of the hotel? And if you don't stop the car out, then there is no, there's nothing. You know, I don't think there's a technological solution right now or, or a human guard that's going to be able to figure that out really quickly. A car stops and no one gets out for 15 seconds. Like, how is that weird, you know, in a hotel?
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B
Well, and then. But I think, you know, there's, there's good questions, important questions to be asked here, particularly with, I mean, you've got two distinct incidents, right? The Vegas situation, I think, is going to prove to be significantly different than what happened in New Orleans. The New Orleans incident has precedent, right? I mean, and an extremely recent precedent. We had the, the, a similar situation at a Christmas market a couple hours west of Berlin, right? It's same thing. We've had this, the same thing during a Christmas parade here in the US Just a handful of years ago. We know that this is a tactic that can be used, whether it's from an organized terror group or whether it's from a lone wolf who's just radicalized. So I think the concern, I think on the, on into for some of the general public is are we learning lessons and are we doing what's necessary to prevent these types of scenarios?
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A
I think those, those things need to be taken into account more. I think people get, I don't want to say complacent. They get, hey, it hasn't happened here, were a low threat. Now, I would argue Bourbon street clearly is Packed all the time and a car going down the strip, you know, like that's an easy one to figure out. And clearly they knew it. And again, I haven't seen the situation where how, how tight that, you know, that curb was or the sidewalk that he jumped over, was it, you know, someone look at that, they're like, there's no way, you know, we can stop them before they get here. Maybe it's because they didn't hear him. Or again, three in the morning, you know, people are clearing out. I, there's a lot of questions that they need to ask. But I think when you look at crowds, I think that, I think cities and city police leaching is going to have to change a little bit to say we have got to look at like, and we say low tech. But hey, if it works, why would you go any higher? You know, if you get a car and run people over, it's just as effective as almost anything. So I think they'd have to look at it.
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B
Yeah, no, absolutely. Listen, there's a lot more we could be talking about here, Kurt, but being mindful of your time, we, you know, hopefully we'll have you back. I appreciate you jumping on like this. Kurt Bible, former senior FBI agent and, and of course now running cyber investigations for Portman Square Group. Had to, had to put that in there, you know. Yeah, yeah, very self serving on our part, wasn't it, Kurt? Uh, anyway, listen, thank you very much, Matt, and a happy New Year to you. It's off to a bit of a sad and worrisome start, obviously with these incidents, but, but I appreciate your time very much.
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A
Yeah, thank you. Appreciate it.
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B
Coming up after the break, we'll unpack what Xi Jinping's New Year's message says about China's economic and geopolitical ambitions for 2025. Did you catch Xi's New Year's message? It was scintillating. Gordon Chang, author of Plan Red, China's Project to Destroy America, will join us to break it all down. We'll be right back. Welcome Back to the PDB situation report. As we ring in 2025, Chinese President Xi Jinping delivered his New Year's address, setting the tone for the year ahead. He acknowledged, interestingly, the economic challenges facing China and pledged more policies to stimulate growth in the face of what he called external uncertainties. Xi doubled down on this push for technological self reliance, highlighting advancements in high tech manufacturing as a point of pride. But perhaps the most striking part of his message was his assertion that reunification, as he calls it with Taiwan is, quote, inevitable. His words signal Beijing's continued hardline stance on the issue, raising concerns about what that might mean for cross strait relations and regional stability in the coming year. So what does Xi Jinping's New Year's message reveal about his priorities and its strategies for 2025? Well, I'm glad you asked. Here to give his insight is Gordon Chang, author of a great book, Plan China's Project to Destroy America and a very good friend of the Situation Report. You can follow him on X ordeng Chang. Gordon, thanks very much for coming back on the Situation Report. Pretty soon I'm just going to have to start calling as a situation report with Gordon Chang.
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C
You can thank Xi Jinping for that because he's causing problems across the board. And you mentioned it, 2025, New Year's message. And there's so much in there to talk about because it reveals, I think, a regime which knows its problems, especially starting with the economy, because clearly he says, well, I've got a lot of confidence we'll meet our 5% target. And then talks about a lot of, or at least hints at reasons why he's not going to make target.
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B
Yeah, he mentioned, he used a phrase, I think it was in talking about some of the economic challenges. I think his phrase was external issues, external vulnerabilities, as if he's, he's, he's not taking actual responsibility for the economy, saying maybe there's outside forces at play here.
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C
Yes, he's not going to take responsibility. But the problem is that he's a neo malistic and he has a vision for the Chinese economy which certainly fits in with the 1950s, but is not really taking into account the reality of what's occurring in China right now. What he's doing is he's turned his back on consumption as the fundamental basis for the Chinese economy. Consumption contributes somewhere like 40% of China's GDP. Most countries 60 to 65 US over 70. But that means that Xi Jinping has only one way to solve a very difficult situation and that is to export more to the world. That means he's put his fate in our hands. And that also means that we can shut out him from the United States and other people can do that with their countries as well. So he's really very difficult position right now and he's subject to external concerns like no other Chinese leader before.
- [30:31]
B
But is that, is that something that practically is feasible when you talk about the US Shutting out China, is that, I mean, in your mind, is that, is that an actual potential thing. It just sounds like we've talked about in the past. We've got to onshore, you know, our ability to manufacture. We've got to, we've got to be less reliant on, on Chinese production. It never really seems to happen that way.
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C
Yes, because we don't have political will. You know, just think about it, Mike. We're not protecting ourselves against Chinese cyber attacks. We've known these going on for decades. We've got the means to stop it. We don't stop it. And so, you know, you can make the argument that the United States is one of the weakest countries in the world because we're just not defending ourselves from a known threat. Same thing with tariffs. But if we wanted to, if we had to, yes, we could start shutting the Chinese out from our markets. But you know, think about this. We are financing the buildup of the Chinese military which is configured to kill Americans. And you know, future generations are going to look at our leaders, they're going to look at us and they say, who were these people?
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B
If you, if you look at the economy, I want to do this. A lot to go through here. As you pointed out, we could spend the better part of the day talking about is New Year's message. But let's, let's look at the economy. To start with, from Xi's perspective, how do you assess the, the top line concerns or problems that he's facing with the economy? How would you lay them out? How would you list them?
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C
Well, from his perspective, things aren't that bad because he's putting China on a war footing. He's manufacturing, he's making sure that China is self sufficient. He's doing all sorts of things. And from his perspective, I think he probably likes it. Problem is that from a point of view of economics, he's driving China into the ground. And that means that if he doesn't go to war soon, he's going to lose the ability to go to war. And that is something that means he can take us by surprise because I'm sure at some point he's going to see a closing window of opportunity driving.
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B
It into the ground. How? And I know you know that I'm a brilliant economist, but talk to me like I'm not. Use smaller words.
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C
Okay. First of all, what he's doing is he's incurring a lot of debt. China has a total country GDP to total country debt to total country GDP ratio of I think about 350%. You know, you're in the danger point where you're getting to 200%. So China's in a very difficult position. He's got to have a debt crisis and he can't really resolve it. His position is he's going to try to increase investment, in other words, factories, high speed rail lines, all those other things. The problem is that he's driving prices down in China by this excessive production. When you drive prices down, you have deflation. Things get cheaper. The reason, and Xi Jinping is quoted by the Wall Street Journal as saying, don't the Chinese people like it when things get cheaper? Well, of course, as consumers, we do. But the problem is when you're a consumer, you don't buy things when things get cheaper because you're going to wait six months or a year until prices are lower. And so what we're seeing is a large portion of the Chinese economy, consumption is now, I think, shrinking, and China is now in a debt deflation sort of cycle. We should know about this because that happened to us in the 1930s. So the, the way to put it to Mike Baker, the economist, is China is looking at the Great Depression.
- [34:31]
B
Is there a legitimate middle class that exists in China?
- [34:37]
C
Yeah, it's, it's big. It is very big. And it has a lot of money. It's not spending, it's. And the other thing about the middle class, it's getting poorer. About 70% of the wealth of the Chinese middle class is property. Property prices are plunging because there's too much of it. Give you an example of how much is too much or how far they're in it. Last September, September of 2023, a former senior statistics official in China said that there were enough vacant apartments to house the entire Chinese population of 1.4 billion people. Although this official said there are other estimates that show that there are enough vacant apartments to house 3 billion people. Now, the law of supply and demand doesn't work exactly in the same way as a command economy like China's, but it does apply. And that means property prices are growing, going down, which means that 70% of the wealth of the Chinese people is shrinking. And a lot of Chinese people are not very happy about the situation right now, which is the reason. And here this is for Michael Baker, the economist. That's why we're seeing record amounts of both legal and illegal capital flight from China. That doesn't happen when you're growing at 5%, as Xi Jinping claims, which is his target. It happens when your economy is about zero, which is where China is right now because of the deflation, and you got the debt overhang. So this is a pretty grim situation. It's not insoluble, but it is insoluble. If it's countries led by a Maoist, and that's where China is right now.
- [36:25]
B
Is there a primary recipient? I mean, where is most of that capital flight going?
- [36:30]
C
A lot of it is. Well, that's a lot of. It's going out to Hong Kong, which is part of the People's Republic, but it's outside of China's currency walls. And then from there, it goes all over the world. It goes into the United States, goes into Europe, goes into Southeast Asia. But money is leaving in really big numbers. Wall Street Journal did a story not too long ago in October which said that by their estimation, and these numbers are very rough because China doesn't tell us the truth, but the Wall Street Journal said that the amount of illegal capital flight in the four quarters ending in June of 2024 was $256 billion. That's a pretty big number because that's in addition to the legal capital flight. So we're seeing money leave China, which is a real indication, and we're seeing all sorts of very strange phenomena in the Chinese financial markets right now. So this is a problem that is getting worse by the week. And as I said, it's not insoluble, but it is when you have someone who is ruthlessly determined to pursue misguided policies.
- [37:47]
B
This may sound like a simplistic question, but. Well, those are my favorite kind of questions.
- [37:53]
C
Those are great questions.
- [37:54]
B
In a place like. In the place like the US or other countries that have democratic elections.
- [38:02]
C
Yeah.
- [38:03]
B
If the economy is heading south or if people are feeling it in their pocketbook, there's a recourse. Right? I mean, you go to the polls and you vote the bombs out, you bring in a new administration. In an environment like China right now, if there is a certain sense that the economy is getting worse, if people are feeling it in their pocketbooks, what's their recourse, if any?
- [38:29]
C
That's a really important question. And there are a couple of things they can do. One of them is they leave. We have an unprecedented number of Chinese migrants from both our northern and southern borders. Some of those people are dangerous elements, but most of them are just people who are desperate to live in a free society. The other thing that you do is you keep money offshore, and there are a number of illegal but simple ways to do that. The other thing is you buy gold. Gold is basically capital flight for the poor, because they can't get their money out, but they can get their money out of renminbi, denominated assets, local currency assets. So you buy gold and because gold has an international value, I mean it's prices set by global markets, not by inside China. So there are those things that you can do, but the other thing you can do is, and this is really fascinating, you just opt out of society. You got a lot of young middle class Chinese who are really privileged who have just said, I'm out of this country and can't leave, many of them, but what they do is they retire. That's the phrase that's being used now. They retire to the countryside and they become farmers or they just do nothing. They just sit in their rooms and opt out of society. So that's, those are the ways that people are reacting. There is unprecedented gloom in Chinese society and the one place we can see this plummeting birth rates because their people are so pessimistic, they do not want to raise a child in China.
- [40:15]
B
That is, that is really interesting, Gordon. We got a lot more to cover here, but if you'll, if you'll stay put, don't go anywhere. We're going to take a quick break and then we'll be right back on the Situation Report with Gordon Chang. Welcome back to the PDB Situation Report. Joining me once again is Gordon Chang. Gordon, we've been talking about sort of the, the top line issues that were highlighted in Xi Jinping's New Year's address. You raised some really interesting points about, about current society in China. And, and I, I, one question that popped up when you, you mentioned that some folks are just kind of exiting society in one way or another. They're just, they're saying, I'm done with it, maybe they can't leave, but they're, they're just sort of going off the grid. It leads me to wonder where is, where is Xi Jinping's primary support coming from? Is it, is it the rural population, is it the elite? You know, where does this, where is his strongest support?
- [41:18]
C
He probably doesn't have that much support, but he is able to coerce people. And in the absence of love and adulation and all the rest of it, that's where he's right now. No one wants to take him on, but we are seeing some really interesting phenomena, for instance, in the Chinese military. So Chinese military propaganda is sort of like a, normally it doesn't say very much, but now we are seeing all of these pieces that praise, quote, unquote collective leadership, in other words, not one man rule, which is associated with Xi Jinping. We were also not seeing something in Chinese military propaganda, and that is we're not seeing as much of Xi Jinping as you normally do. And that leads some people to believe that maybe Xi doesn't have as much support in the Chinese military as he once did. And that's important because the Communist. The People's Liberation army is the biggest power bloc in the Communist Party now. There have been, especially since the middle of last. Middle of 2023, there have been extraordinary number of purges and suicides among senior officers, especially in the rocket force. And everybody has sort of assumed that this was Xi Jinping purging people that he had previously picked. Well, that's one explanation, and maybe that's the most. Certainly it's the most prevalent explanation you hear. But the other explanation is that people who are Xi Jinping's opponents are purging Xi Jinping's people. And there's evidence for that conclusion as well. The bottom line, Mike, we don't know. But the point is we are seeing things that clearly show instability and intense infighting at the top of the Communist Party, including the Chinese military, which, by the way, is a party organization. So things are just uncertain and they're unstable.
- [43:23]
B
How would you assess his. His relationship with the party elders? I mean, I recall at one point during a meeting, I'm probably going to get this wrong, but I think it was in the past couple of years he did get a fair amount of pushback from senior and some retired party elders during some. Some meetings, which I thought was extremely interesting. But how would you assess the relationship now that he has with those at the top of the party?
- [43:52]
C
I think party elders, and these are former leaders, they haven't fared so well. So, for instance, if we go to October 2022, Communist Party's 20th National Congress, you see Hu Jintao, who is Xi Jinping's predecessor, being escorted out of the meeting. And Hu Jintao was only seen in public once since then. That was at the funeral ceremony, memorial service for Jiang Zemin, who was Hu Jintao's predecessor. But there are reports that Hu Jintao and his family have been detained. And I think that those reports are credible. So it hasn't gone very well for people who have expressed opposition to Xi Jinping. As I said, nobody really likes him because, you know, among other things, he is denied opportunities for other people, you know, under the Communist Party's system. Before Xi Jinping took over, he was Going to have a 10 year term at the top and then somebody else would step in. Well, by getting an unprecedented third term, what he's done is he's prevented a whole slew of leaders from coming to the foreign. They don't like that, of course, but they don't feel that they're in a position to actually oppose Xi Jinping. It's only the guys with the guns, People's Liberation army, that actually feel that they can say what they want. So this is fascinating situation.
- [45:19]
B
Now, if we pivot in looking at his New Year's address to his comments about Taiwan. Talk to me about that. How do you read what he said during his address about Taiwan and reunification?
- [45:32]
C
Yeah, well, he called it reunification, which is incorrect because the People's Republic has never ruled Taiwan. And in fact, throughout all of history, no Chinese regime has ever held indisputable sovereignty to Taiwan. That's. I can, I can go and wonk out on you on that if you want, and I love to do that, but let me just put that to the side for a moment. The problem for Xi Jinping is not only does he get his terms wrong, but he's wrong when he says that the unification, reunification of Taiwan and the mainland is a trend of history and no one can stop it. Because as time in fact goes on, Taiwan and China are diverging. And you can see this most clearly in self identification surveys. In the last big survey, which was done by the Pew Research Group, this was from the middle of 2023, the results were 67% of the people in Taiwan viewed themselves as primarily Taiwanese. Only 3% viewed themselves as primarily Chinese. And it's really the really bad news in all of this, because it gets worse for him, is that in the younger age cohort, those 18 to 34, the numbers are 83% Taiwanese, 1% Chinese. So if Xi Jinping wants to annex Taiwan, he's not going to be able to do it voluntarily. He's going to be able to do it by force. Because the people in Taiwan, although they of course they want good relations with China, they don't believe that they are Chinese. So when Xi jinping in his 2025 New Year's message says, oh, we are all one family, which is the term he used, well, I don't think so. There are a lot of people who don't think they're part of that family.
- [47:23]
B
Is there a sense within the Chinese population on the mainland that this is an important issue? I mean, just the person walking the streets of Shanghai or Beijing, do they do. They, you know, think about Taiwan and say, you know, it'll be good to unify with Taiwan. I mean, is it something that matters in a sense to the general population, or is this just something that sits with Xi Jinping and his view of his legacy?
- [47:51]
C
On a controversial topic like this, we really don't have precise views of the way the Chinese people think, because you can't actually say what you think and no one's going to ask. But let me put it this way. I don't think the people in China think about this issue all the time. If you were to ask them, you would probably get an answer something like this. 95% would say, yes, Taiwan should be part of the People's Republic. But if you were to ask them, would I give my only son or daughter to go across the Taiwan Strait to kill Taiwanese to an exit? You're down in the single digits. And the reason is there's a couple of reasons. First of all, although we just went through this, people in Taiwan don't think they're Chinese. The people in China, because of relentless indoctrination, think they're Chinese. And the Chinese people in the mainland will tell you this. Officials or common folk will say, chinese do not kill Chinese. So, you know, if Xi Jinping is thinking of launching an invasion of the main island of Taiwan, it's just not going to get a lot of people. This would be really, really unpopular. That's in general, it's worse now because of the economy, because of the gloom in society. The last thing that people in China want right now is a war. What they want is to go back to the old times of always increasing prosperity, property prices going to the sky every month. They want to go back to where they were like 10 years ago. So they don't want a war, and they certainly don't want to kill people for that. So I think it would be really unpopular. Now, there are on the Chinese Internet, as there would be in every country, they're hotheads. But they are a very and I think decreasing proportion of the Chinese population right now.
- [49:57]
B
Well, I mean, given what you've said about the economy, it's unlikely that they're going to return to an age of prosperity and property prices skyrocketing and all those things. So where is this heading? Where are we going in your estimation? Let's say in the short term, in 2025. What do you anticipate? And I'm not going to hold you to it. Well, maybe I will next time we get together on the show. But what do you anticipate during the course of this year?
- [50:25]
C
I think this is this year and next year, and Maybe going to 2027 is the period of maximum vulnerability for a couple of reasons. One of them is I don't think Xi Jinping is going to start a war because he wants to rally the Chinese people. I think even he knows that that would be unpopular. But he might go to war to prevent other senior Communist Party leaders from deposing him. That's a real risk, because if you're a Xi Jinping, you've built up this incredible military, and you know that the economy is not going to support it. So you're either. You're in a use it or lose it situation. And as I said, I think that he is very concerned about what other senior Communist Party leaders might do to him. So this. This is what his hero, his. He reveres Mao Zedong, the founder of the People's Republic. Mao did this exactly so many times. I mean, for instance, he started the Cultural Revolution to prevent other senior leaders from getting rid of him. And I think Xi Jinping is going to do the same thing. So I don't know what's going to happen. I can give you a lot of reasons why he will or won't do something. But the point is that I think that he is going to realize he's got to move. Remember, he's got the. He is the most ambitious aggressor in history. He not only believes that China is the world's only sovereign state, he believes that the moon and Mars should be considered sovereign Chinese territory. And if you have that expansive view of the world, then you realize you're going to lose it because your country's falling apart underneath you. Well, you are very tempted to go out and accomplish your objectives.
- [52:20]
B
We're being mindful of your time, Gordon, and we're just about out of time. But I've got to ask this question. If that's the case, if we're in a very short window essentially, when Xi may act related to Taiwan, you would have to assume that his assessment is that should he do that, that the west will not engage in a shooting match with him. What do you think the West's response will be if he moves on Taiwan?
- [52:51]
C
You have to ask someone whose name is Donald John Trump that question. I don't know what Trent would do. I can tell you what Trump has said. He said, basically, I'm not going to tell you. I can tell you what I think Trump should do, but that's really hard to predict. But this is not just a question of Trump. This is also a question of Xi Jinping. I think that if he goes to war, that Taiwan will not be his initial objective. And let me just sort of scope it out for you. We're Xi Jinping to start hostilities by launching an invasion of the main island of Taiwan. He's got to give some general or admiral almost complete control over the Chinese military because that's a combined airland sea operation. That makes that general or admiral the most powerful figure in China in the best of times. Mike, Xi Jinping doesn't trust anybody with stars on their shoulders. But now is certainly not the best in time. And you've got a military which I think doesn't want to fight for various reasons. They like to huff and puff and they like to intimidate, but I don't think they really want to go and have a major operation. They'll go pick on the Philippines as they're doing right now. But I don't think they would start hostilities with an invasion of the main island in Taiwan. Now, they might do something in the Philippines. I think that they do. That spreads. That spreads Taiwan. Taiwan is involved in a war. United States gets involved in a war. Because these are our treaty allies, all sorts of things occur. But this is like war spreading very fast. But if you're talking about invasion of the main island of Taiwan as the way of starting hostilities, my sense is the chance of that is pretty low.
- [54:47]
B
Right now. I know all our viewers are going, oh, my God, I can't believe we're talking about this a couple of days into 2025. But it's important, and I don't know anyone better to help us understand what's happening in this part of the world than you. Gordon, I really, really appreciate your insight and love having you on the show. Gordon Chang. If you haven't picked up his book Plan Red China's Project to Destroy America, I don't know what you're doing with your time. You gotta get out there and get it. If you have a bookstore nearby, do they still have bookstores? You should go get it. If not, I'm sure you can find it. Plan Red China's Project to Destroy America. Gordon, thank you so much for your insight and your time. Really appreciate it.
- [55:29]
C
Well, thanks, Mike. And have not only a happy but a safe new year.
- [55:34]
B
Absolutely, man. And to you, too, and your family. All right, well, on that cheery note, look at that. Starting the new year out with terrorist incidents and talk of potential war in East Asia. Okay, that's all the time we have for the PDB Situation Report. Next time, maybe next, next weekend, we'll do a musical or something to lift your spirits. If you have any questions or comments or humorous anecdotes or limericks or whatever you'd like to send us, please reach out to me at pdb@the first tv.com as you know, we take those questions, we take those comments, and every month we pull a bunch of them out of the mailbag, smush them together in an episode that we call Ask Me Anything. And we've got another one in production right now. We're going to push that out here in the very near future to listen to the podcast of the show ad free. It's very, very simple. Just become a premium member of the President's Daily brief by visiting BDB premium.com See? I told you it was simple. I'm Mike Baker. Until next time. Well, you know the drill. Stay informed. Stay safe. Stay cool.
- [56:57]
E
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