← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
The Global World Order Is Collapsing- And It's Much Bigger Than Trump! | Impact Theory W/ Tom Bilyeu & Peter Zeihan
00:49:39
Tom Bilyeu sits down with geopolitical strategist Peter Zeihan to unravel America’s shifting role in the world, the collapse of globalization, and the game-changing impact of demographics on our economic future.
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- [00:01]
A
Hey, Sal.
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B
Hank. What's going on?
- [00:04]
A
We haven't worked a case in years.
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B
I just bought my car at Carvana.
- [00:07]
A
And it was so easy.
- [00:08]
B
Too easy. Think something's up?
- [00:10]
A
You tell me.
- [00:11]
B
They got thousands of options, found a.
- [00:14]
A
Great car at a great price, and it got delivered the next day. It sounds like Carvana just makes it easy to buy your car, Hank. Yeah, you're right. Case closed.
- [00:25]
B
Buy your car today on Carvana. Delivery fees may apply.
- [00:30]
C
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- [01:01]
A
Most people think what's happening right now in the world is because of Trump, but I've heard you say that we were always going to end up here. I would love to get an explanation on that. Like, what is here exactly?
- [01:13]
B
Yeah. Well, I mean, first, let's start by saying that the US President, whoever it happens to be, is the most powerful person in history and typically the most powerful person in the world. Trump, no exception to that. To say that he's not having an impact is not what I'm going for. But we had a couple of massive trends that have been playing out for the last several decades that are coming to an abrupt halt right now anyway. And Trump is manifesting how we evolve from those old systems to whatever comes next. So he is going to be one of, if not the most consequential American presidents in modern history simply because of the timing for when he is in the big chair. And he will have an imprint upon what it means to be American or what it means to be human on this planet decades to come. And those two big trends are trade and demographics. The whole concept of how we have managed the world since World War II was that the United States will take care of global security, make sure that anyone can ship anything anywhere at any time. The US Will keep their markets open if you allow us to write your security policies. And that's NATO, and that's the Japanese and the Korean and The Taiwanese alliances, that is the physical structure that makes it all possible. But for the Americans, it was always about security, not about trade. And so as a percentage of gdp, if you remove agriculture and energy, we only trade with the rest of the world for 5 or 6% of GDP. Once you factor out NAFTA, we're just not involved in it. That was the deal. If we had invested our economy into the world, it wouldn't have been a trade, it would have been an empire, and no one would have joined. So that's kind of he's won. And we've been moving away from that since 1992 because the cold War is over. Trump just happens to be the guy who is officiating the formal break so really fast.
- [03:08]
A
When we were talking about controlling people's security policy, it was just a question.
- [03:11]
B
Of Russia at the time. Yes. Keep in mind that if you go Back to the 80s and the 90s, China was an ally.
- [03:20]
A
That's interesting. Okay, so if our goal was we need to deal with Russia, we dealt with Russia. The USSR collapses. I've heard you talk about the first Bush presidency. H.W. bush tried to get us to have a conversation about what the new World Order was going to look like. One. Help me understand. So if this is trade is a huge part of the world order, if demographics are a huge part of the.
- [03:47]
B
World order.
- [03:49]
A
Other than safety, like what is the world order? When we say that, what do we mean?
- [03:56]
B
Well, from the American point of view, it means one thing. From everyone else's point of view, it means another. So from the American point of view, it was about containment or NEO containment, or whatever version of containment you want to call it.
- [04:06]
A
So stop anyone from getting too powerful to challenge us.
- [04:09]
B
Exactly. Wherever that happens to be, the Western hemisphere is very well insulated from the rest of the world. And North America is the best chunk of land on the planet in terms of its capital capacity and for developing an integrated nation state. And the greater Mississippi, the East coast, those two chunks, they don't exist anywhere else on the planet. And to have them both in the same political authority gives us massive flexibility. But that doesn't mean we can impose on the rest of the world. That requires a strategy that involves basing and allies. And so what we did with our post Cold War, excuse me, our Post World War II environment was incentivize all of the allies to participate in our security structures and use their land and their armies and their navies to impose a security regimen on the entire hemisphere. And so the French, the British, The Japanese, the Turks, all of the major powers of the last half century, excuse me, half millennia, became, from a certain point of view, proxy powers under American control. And according to our treaties with all of them, in the case of a hot war, we take command of their militaries. Something that a lot of people forget today when they're talking about the fact that these countries apparently owe us. So we created this structure where all of the powers of the past were functionally on the same side under our command, except the Russians. And that's why the Cold War ended the way it did. There was never a strategic or economic option for the Soviets to prevail. But the Cold War ended 30 years ago, and we have failed to update those strategies for the new reality. And so, lo and behold, whether you're on the left or the right in American politics, the rest of the world just seems less relevant to you. And we've been edging away from that system ever since. And now it's breaking.
- [06:05]
A
All right, Having grown up in the middle of felt awesome. So what I want to understand is what broke down. So regardless, like, okay, Russia, let's say, is the excuse, so we all have to band together. But what you described sounded like, to me, empire via cooperation instead of empire via force or having to pay for everything outright. So a quite incredible system. And speaking from experience as an American, anyway, it felt fantastic. So why without Russia, why did it begin to break down? Is it because that system was great for America but not other places? Or did say globalism hollowing out our manufacturing, creating a K shaped economy? Is that what ended up becoming intolerable, such that we were always going to end up here?
- [06:56]
B
To quote you, K shape is more recent. Let's put that to the side for now. The whole concept was that we pay you to be on our side. And when everyone agreed that nuclear annihilation was a problem, it was pretty easy to make that deal. But after 1992, no one, until relatively recently, 2022, the Ukraine war, thought of the Russians as a problem. They thought of them as just something that could be managed off to the side while they stew in their own juices and degrade. And they are still degrading. Go back to that if you want to. But the idea that we were under this nuclear Paul had faded. And so various countries, based on their politics, based on their internal demands, became less willing to sublimate their security policies to the United States, became less willing to follow Washington's lead on things like economic sanctions. And as the United States attention moved from the Russians to other things like say Iran, a lot of countries were like, this isn't what we signed up for. And so there became a lot more friction in the system that really accelerated in the George W. Bush administration with Iraq war, war. Because the Americans said, you know what, we hold up the ceiling here. Why are you not helping us with this conflict? And for the French and the Germans, it was like, because this isn't what the conflict is. That we agreed that we were all on the same side for this is something new. You're trying to repurpose this without negotiating with us. And so you can see how we saw a fissure in the alliance. At that point, you move on further into say, the 2010s and the war on terror. And the United States just became obsessed with things from the European and the Japanese point of view were ever more esoteric and they wanted economic opportunities that went different directions. So the Germans started getting the vast majority of their energy from the Russians. A lot of countries started integrating with China because they saw an economic advantage to doing that. And if it happened to hollow out the American industrial base or even some of their allies, that was fine because economics evolve. And so the United States saw problems with the structure because we were no longer being able to dictate the security environment. And everyone else saw problems with the economic structure because they saw the Americans in many ways becoming a barricade towards what they thought was perfectly natural activity. And the bilateral agreement between us and all the allies that had held for 40 years broke down bit by bit at pretty much every functional level until we get to Trump. It was always going to end now, this decade 2025 to 2035, for demographic reasons. The problem there is when we started to globalize back in the 40s and 50s, everyone moved off the farm and into the town. When you're on the farm, kids are free labor. You have a lot of them. You move into town, all of a sudden kids are expense. And so we went from on average in the Western world having something like four or five kids today to having only one to two. You do that for 80 years and eventually it's not that you run out of children. That happened in the 80s and 90s in most countries. We're now in the position in this next 10 year period where we're running out of working aged adults and there is no trade if there is no one to consumer produce. So we're looking at a collapse of the economic model. And the security model was based on the economic model. So we were always going to get to some version of where we are now. And now the economics have caught up to the politics and it's all breaking.
- [10:34]
A
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- [10:39]
D
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- [12:42]
A
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- [13:00]
D
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D
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A
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- [14:38]
B
I have one guess and I will not put any money on it. But the backdrop. Capitalism, communism, European style socialism, totalitarianism, fascist corporatism. Those are the four big models of the last 500 years. All of them are predicated on a balance between supply and demand and labor and capital. And each one of those four models values a different aspect of the process. So European socialism is a little bit more pro labor than pro capital, capitalism a little bit more capital than pro labor. And then the balance of supply and demand is basically a demographic question based on how many people you have that are under age 50 who are doing the consumption versus over age 50 who are generating the capital. That's how we've managed this system for the last 500 years. And all four of those models are based on the concept that the population gets a little bit bigger every year. And so they are all growth based models. But in this next 10 years that will no longer be true. We already have the bulk of the advanced world aging out to the point that they all have shrinking populations and most of the rest will flip in the next 10 years. And even the advanced industrializing countries, your Mexicos, your Indias, your Brazils are very, very rapidly moving into that position and they will be there 10 to 20 years from now. So all four of those economic models, the very basis of them doesn't work with where we're about to be, and we're going to have to come up with something new. Very little experimentation has gone up to this point. You're probably familiar with modern monetary theory, mmt, Aggressively, yeah. I'm not suggesting for a second that that is going to work, but it's one of the few examples out there of people experimenting with something new. And so as long as the experimentations don't happen where I have a bank account, I'm all for it, because, you know, even if it fails utterly, and I think it will fail utterly, we're probably going to learn a few things from that that will be useful down the road. The only other model that I'm seeing any experimentation with, and it really doesn't have a name yet, is what the Trump administration is doing, which is an artificial restriction on production by government policies that are chaotic.
- [16:57]
A
You're saying the chaos itself, whether intentional or accidental, restricts production?
- [17:02]
B
Absolutely. We've seen industrial production and employment drop for the last 11 months. That's not accident.
- [17:07]
A
And that you're going to put that in the zone of economic model.
- [17:12]
B
I don't want to overplay it because I doubt this is being done on purpose, but we've seen manufacturing construct. We're seeing agriculture contract, and because of tariffs, we're seeing consumption contract. On the other side, Trump very, very clearly has his favorites, and he's artificially restricting the demand of groups that he doesn't like. So a demand management model where you have an arbiter in the government who decides who can consume what, it's a combination of capitalism and fascism. I'm not saying it's going to work. I'm saying it's the only other experimentation I've seen out there so far.
- [17:51]
A
Wow. Okay. Looking at that as an economic model is utterly fascinating, Peter. I've never heard anybody else say that, and I've certainly never thought of it myself. This is horrific, to be clear.
- [18:02]
B
But it's an experimentation.
- [18:03]
A
You gave me the chills looking at it as an unintentional, a natural test of a new economic model, one that neither of us, it sounds like, would support or want. But the fact that it's happening means that we can look at it through a new lens. Okay, so.
- [18:17]
B
And it matches what's happening with demographics, which I find even more problematic.
- [18:23]
A
Okay, very interesting to understand this. I think the best question I could ask is the moment we're living in right now. What is the closest historical correlate?
- [18:35]
B
Black plague. That was the only other time in History where the population declined.
- [18:42]
A
Okay, what, what do we learn?
- [18:45]
B
Not a great comparison. I agree.
- [18:47]
A
Not, not a great comparison because it's horrible or not a great comparison because it's not accurate.
- [18:52]
B
Well, you're talking about not just a pre industrial society, you're talking a pre deep water navigation society. So it really was a very, very, very different economic structure by every way that you can imagine it. But it same example where not just the population was declining, but the bulk of the population decline happened in relatively young people. And so it roughly, very roughly mirrors where we are now, where we're running out of people under age 50.
- [19:18]
A
Okay, so knowing that we can't just map it one for one, what can we learn from that that might give us some directional information?
- [19:26]
B
Well, again, I'm not sure this is a plus or a minus, but after the black plague swept through Europe and killed a third to half of the population, what we saw was a change in labor mechanics because all of a sudden there were not enough people to maintain the feudal systems that had been the European norm throughout the dark ages, going back to Rome. What that meant is for the first time in human history, skilled labor had an economic incentive to expand. It used to be you had lots of masters of unskilled labor who lived on the farm, who paid their rents, who were controlled by the feudal lords. And then you had a thin sliver of skilled labor in the cities. All of a sudden that group off in the countryside collapsed, and there was a need to increase productivity in every possible way. So for the first time, we saw institutions form with the specific intent of expanding the skilled labor pool. And even in places where that didn't happen, like say northern Germany, you had a situ. It wasn't Germany at the time, Holy Roman Empire. You had a situation where just naturally the demand for goods and services required people being more productive than they had been before. So you had this alignment of institutions and economic and demographic factors that all encouraged everybody to be better at what they were doing. And the direct outcome of that was the Renaissance.
- [20:53]
A
Interesting. Okay, so it does feel like there's a slightly similar setup to what's happening right now, where we have demographic collapse in China, which is the most skilled manufacturer in the world.
- [21:06]
B
I wouldn't say skilled, but certainly the largest by output.
- [21:09]
A
Interesting.
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B
So who's the most skilled in terms of value added? You're going to have a constellation. Taiwan, Korea, Singapore, the United States, Germany, United Kingdom.
- [21:20]
A
Okay, so is there any protective mechanism from that being spread out?
- [21:26]
B
It's a skill issue. We in the Modern system and the globalized systems, we all specialize because we can. And if we go back to a world where we're all generalists, you're going to have a significant drop in the technological capabilities of the planet and of the individual economies. So we all do different things. The Germans do fourth generation precision manufacturing, but have managed to do it at some scale. The United States designs the systems and then marries it to close support merging with Tecnologia, which with more traditional tech like you would think of when you think of Silicon Valley, so that everything has a services component as well. The Singaporeans, they're great at precision measurement and then those tools are used in other systems. The Koreans, it's memory chips. We all are like Taiwan, Taiwan, Taiwan, TSMC, GPUs, all that. And that's true. But the Koreans are actually better. It's just a different kind of chip they focus on. So we're all very good at very specific things. And we take components from one of these systems and merge it with manufacturing and the others to make the products that we use. That doesn't mean that China is irrelevant. It just means that China is much further down in terms of value added. They're very good at assembly and they have scale to do a lot of things that other countries just can't pretend to do, but they don't actually add a lot of value to what they're doing.
- [22:47]
A
All right, you just put a finger on a very interesting problem. So we're in a world that for the last 80 ish years has been hyper globalized, everybody specialized. We were all getting along because of the world order that the US Put in place. From a trade and security perspective, that's all now beginning to fall apart for the reasons that you were saying before. It stopped being advantageous to the US because other people felt like they were not getting their opportunity to shine economically. They didn't want to fight the most recent war that the US Was asking them to fight. It was always meant to be about Russia. So we get these natural tensions. Now this hits a boiling point, partly because you have a unique figure in Trump, and partly because this is just where we were going to end up regardless. But now you have a world that's pulling away from each other, that's designed to have really easy transportation of highly specialized skills and the outputs from those skills. So as that breaks apart, what does the world start to look like? Because if everybody then has to become a generalist again at a moment where the population is declining. Yeah. How does that play out economically.
- [23:57]
B
Well, this is why Trump matters. It's because he's the guy in charge of making the decisions as this happens. If you dial back to George W. Bush, he was the last American president to negotiate and implement a meaningful trade deal. And at the end of his terms, we had nafta, we had free trade deals with Colombia and Chile, Japan, Korea, and reasonably good manufacturing integration with the European Union. We haven't changed it since then. Now, in my opinion, that cluster is exactly what we would have needed to generate mini globalization, or globalization 2.0, whatever you want to call it. The US was very well positioned to use that cluster of countries, maybe with a couple of others, in order to make a smaller version of the global structure where we wouldn't have to sacrifice the technological level we've become used to or the standard of living we've become used to. But Obama basically sat in the White House for eight years and did nothing. Trump has been a very disruptive force, and Biden was Biden. So we're now in a situation where all of those relationships are degrading. And if we can't resolidify the NAFTA accords next year when they're up, or this year when they're up for renegotiation, we're going to be in a situation where a lot of these pieces suddenly won't work anymore. From the American point of view, that means doing things more or less by ourselves, and that means four steps of the supply chain that are not the things that we excel at, like, say, assembly. We have to take someone who earns $75,000 a year, the average American income, and all of a sudden have them doing die cast and basic assembly jobs that you probably shouldn't be paid more than six or seven thousand dollars a year for. That manifests, among other things, as a vastly lower standard of living or massively inflationary. Those are basically our choices here for the rest of the world. Without the United States providing the freedom of the seas and the rule of law that allows intermediate products to shift around, no one can specialize anymore. And so you have a catastrophic reduction in what countries can do individually. Maybe they can cut deals regionally, like, say, Southeast Asia. Very bullish on Southeast Asia. But it means that they lose the strength of the whole. You no longer can export to a larger market market to earn income to then update your industrial basis. And that's the entirety of the Japanese, the Korean and the Chinese models to this point for the European Union. They've aged out. They have to export and if they can't, you're looking at them having to invent that new economic model in like five to 10 years instead of the, say 30 to 50 years that the United States has. So we're looking at, or at the dawn of it, at a best technological stagnation as we have to generalize versus specialize. And that's before you consider some of the financial outcomes that come from a rapidly aging demographic on a global basis.
- [26:59]
A
Okay, we'll get to that in a second. But I really want to push on this idea of we have maybe a narrow but closing window to have some sort of regional globalization where we find sort of, that the least number of unique countries and specialty skills that you need to continue the current way of life that we have will round it to nafta. And Trump is not showing the ability to bring them together. And so is an accelerant on the dissolution of that union. What should Trump be doing? Like, if, if you could advise him and he would listen to you, what would you be encouraging him to do? Yeah, very much a hypothetical.
- [27:44]
B
Yeah, I'm going to say let's start by saying that when Trump was out of power, he gutted the Republican Party of all its policy experts so that it is just a vehicle for his personality. So the Republican Party today, it's lost its national security arm, its business arm, its physical conservative, it's law and order, army armed. They're all gone. It's just him. So when he came in, he came in with the smallest team of any American president in history. And the first thing he did was got the federal government of the top 6,000 positions, so that policy cannot be implemented. So my advice to Trump would be to shoot Vance and leave and let's try this over with someone else because clearly he has designed the system so it cannot function on purpose. If I was talking to any other generic president, it's you need to look at what we can't do. Mexico is too skilled to assembly, so we need a relatively large ish population somewhere that is further down the value added scale that can fill that gap. The two best options are Colombia and Cuba. Colombia, we already have a free trade agreement with there. It's an infrastructure problem. Cuba, however you want to get Cuba on board. There are a wide variety of options. Go to town. It can be more than a tropical Vegas because you've got a workforce that is probably about one third as skilled as the Americans, but work for one tenth the cost. That's a great set of math to start from an assembly Point of view, those two combined probably would be enough for what we need. The other big problem is processing. One of the effects of globalization is we go broadly with the most reliable, lowest cost producer, and so China has lower environmental regulations. And processing is technology that was developed more than a century ago. So turning aluminum to bauxite, refining rare earth metals, getting the cobalt out of Congo with slave labor, and turn it into cobalt metal and intermediate media components that North America does not do well now because of the shale revolution. The US has the cheapest energy and electricity on the planet, but you still have to build out the basic infrastructure, and we really haven't started that yet. The Trump administration talks a good game there, but there's been no money really put behind building the actual infrastructure because the people who knew how to do that were all fired in the first week. So we have to build out some more government capacity in order to lead this effort, and this administration just hasn't been interested in that.
- [30:25]
A
Okay, very interesting take on the Trump administration. So if we were actually going to get the things moving, because to your point, Trump is talking about, hey, trillions of dollars of investment. People want to be here. America's the hottest country ever. He loves saying that. Yeah, the numbers that up, that, that would not be new for Trump.
- [30:47]
B
Yeah.
- [30:48]
A
To make a statement with absolutely no backing whatsoever. But, so we've got maybe interesting idea, build infrastructure, get people to invest in America. Maybe they're even willing to do it. However, they're going to run up against the people that are going to facilitate that on a political level have been wiped out. And so people come checkbook in hand. But it's like, I need certain regulations to be changed, not just Trump winking and nodding and saying, don't worry about the old regulations, you'll be fine. Just ignore them and build anyway. And anybody with a brain knows that Trump could be out of power effectively as soon as the midterms, potentially, but certainly within the next three years. Potentially not. It's way too early. But if you're a business guy being asked to invest $1 trillion, you're going to be like, well, I'm going to drag my feet. I need to see how this plays out. And if you don't have the policy experts to actually get this across the finish line, you've got a problem. Okay, so very interesting. On top of that, if we aren't going to bring this stuff in house, we've got to be willing to go somewhere else to do the refining to build that infrastructure that either already has it China and we can just establish a better relationship. I don't think that's going to happen with China for Thucydides trap reasons, but that's I'm not worried about.
- [32:06]
B
But it's still not going to happen.
- [32:07]
A
Yeah, that's on my list of things to talk about. So if we're telling Trump to shoot JD Vance and start over. So it would be getting the policy experts in place so that infrastructure can be built here, it's somehow some way getting a relationship with a nation that can accept that not only can accept lower wages than what we do, but that's just where they're at. So they'd be like, yeah, that's what a wage goes for. This is fantastic. So could be Cuba, very interesting. Could be Colombia. Sounds like we've got some beef there. So if you start really placing bets on how this plays out, what do you think is more likely? Are we going to Maduro, Cuba and we come in like we did with Venezuela and we just snatch up the leadership and make it work the way we want it to? Are we going to strike some sort of deal with Colombia or are we going to go entirely in the bring the policymakers in house?
- [33:09]
B
Well, let's start with Colombia because it's simpler. I think Colombia's limitation is infrastructure. The people live in the highland on the sides of mountains because if you go any lower, it's humid and tropical and it's just can't build infrastructure, maintain it. If you go higher, you're in tundra. Nobody can live there either. So it's an infrastructure issue of getting things by road and rail, up and down among the major cities and out to a port like say Cartagena that can, I love to say this, that's one of those things that can be solved with money. And money, at least from the American point of view, is not in limited supply if we don't want it to be. The second issue. Cuba is a little more complicated because Castro gutted the civil society. And now that the Castros are gone, you just have a cluster of 80 year old generals running the place. And they're about as dynamic as Biden and Trump are in terms of doing things for the country. So if you remove all of them, you're not left with a blank slate because there's millions of people there. But you're left with a system that doesn't have a logical next step and restructuring it politically so it can accept investment is going to be a challenge. And you can't do that without institutions like usaid, which are now gone. So we're going to have a really interesting case study in Venezuela right now because that's more or less what has happened in Venezuela. We remove the chief thug, the backup thug is now in charge and there's only about a dozen thugs around her and then there's nothing below it. So if, if, if by some magical experience then is Wayla doesn't collapse, then maybe we have a model, but the US doesn't have the tools to impose something else at the moment.
- [34:55]
A
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- [36:14]
D
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- [37:19]
A
Thanks for staying tuned. Now let's get back to it. When I Look at the Trump administration. I. I may be prescribing to them too much forethought, but I'll give you what I see happening and then poke holes in this. I have absolutely no interest in being right. I just want to update my mental model so I know literally where to invest. My. How do I need to be thinking about this? Who's going to own the next century? Like, those are the questions I care about. So, okay, when I look at the Trump administration, what I see, and obviously this speaks to my bias, because I am a business guy, but I see a business guy coming into the office trying to run a country like a business, which is a terrible idea, but nonetheless has high predictive validity. From where I'm sitting.
- [38:07]
B
Let me stop you right there. Trump's not a business guy. He's a marketer. That's different.
- [38:12]
A
Marketing is a part of the business. But let me. I'll make my best case. I'll disagree with that, But I'll give you the opportunity to swat the specifics down, because it'll all live in the details. So the reason I map him as a business guy is I'm leading with one of the primary things a business person has to understand is, where's your leverage? And so I look at Trump as somebody who. Who sees America as a melting ice cream cone, but he understands that we have a limited window where we really can still press our advantage from an economic and military standpoint. And the card that no president has played before him is force. And so whether that's economic force, and you're threatening Canada and you're threatening the eu, and you're talking all kinds of tariff madness, like tariffing everybody left, right, and center. What you're calling the controlling the demand, making it impossible for people to buy from places that he doesn't like. Utterly fascinating. So he's certainly doing that. And then the military advantage, thankfully, he has since removed the threat of force with Greenland. But we saw him deploy it against Venezuela. Right. We saw him deploy it against Venezuela. He certainly understands, even if it's only a bluff, that he has it as a thing that he can play as a bluff to find out where everybody's real, like, anger is going to be risen. I think he floated it with Greenland almost to see, like, what do people do? And then the backlash was so coordinated, so unified, that I think he realized, okay, this is a terrible idea. But he sees those two points of leverage. Now I see him moving with an urgency because I think he thinks that there's a narrow window where this is going to be useful. It could be he just knows he won't be in power for free very long and he believes he's the only one with the guts to do it. Or he could be. He could believe that it's just declining and so there's a narrow window where we're actually able to do it. But that read makes Trump make sense to me. Even in Iran. I don't read him as being somebody who's altruistic. I don't think he's doing Iran for any reason other than it makes an ally in Israel happy and it allows us to control more of China's cheap energy, basically. And if he sees us, as I believe he does, in a war for supremacy with China and he sees China attacking the dollar in terms of global trade with what BRICS is trying to do, from creating an alternate payment system to the dollar, all of that then makes sense. You go after Venezuela, a source of cheap oil for China, you go after Iran, a source of cheap oil for China, and it's like, okay, if this is a desire to quarantine or make more difficult life for your number one adversary and you're a guy who thinks in terms of leverage, it all makes sense. Where do you think that falls apart?
- [41:09]
B
Unfortunately, several places.
- [41:11]
A
Yeah, please. There's no unfortunate. I just want to know how to move through the world.
- [41:15]
B
Yeah. Let's start with the China situation. If the goal of the United States is to beat the Chinese, you don't need a war. You just need to put two or three destroyers in the general vicinity, vicinity of Singapore and stop the oil flow and it'll all be over. And by all, I mean Chinese civilization will all be over in two years. This is a country that is completely dependent on freedom of the seas to exist and on the American market to facilitate the flows of oil and raw materials into their system. That is very easy to disrupt without getting within shooting distance of the Chinese in any way. And if that is the goal, easily done, and if there is a hot war, it will be over. The United States could lose every single carrier it has in a straight up fight with China. It would be dumb, but it could happen. But again, two or three destroyers to stop the energy flows and the food flows and it's all over. They would be facing civilizational collapse. Half the population would be dead within two years. Whoa. Seven years ago, Chairman Xi knew that. It's also when he got rid of his last advisor and he's been eating nothing but propaganda since then. So I don't he still believes it, but he used to. And so when I look at things like Venezuela and Iran, I see something different. I see something much more mercurial. It's not that the United States has ever gotten along with these places under their current governments, but the volume that goes to China, it really isn't all that high. Total exports from all of Venezuela and all of Iran are now under 2 million barrels a day. That's less than 2% of global production. I don't mean to suggest that's nothing, but that's not enough to move the needle in any meaningful way. In addition to considering that the Chinese importing 14 or consuming 14 million, 15 million barrels a day. Now, I think it's not that it comes from these places, it's that it flows through a route that can only exist if the US Navy is keeping the sea safe for everyone. So if your goal is to break China, there are far simpler ways. And if that is your goal, the first thing you should do do is build out the industrial plant you need at home for success. Because when China breaks, things that we need will stop, and you best provide an alternative supply of those things first. And I'm not seeing that.
- [43:34]
A
Yeah, that's part of what makes me think that while he. While his advisors, I won't even give Trump that much credit, but while his advisors, however thin that pool may be.
- [43:44]
B
He has on foreign affairs and Foreign Economic affairs, he has one. And until September, he wouldn't even let him in the Oval Office.
- [43:53]
A
Who is it?
- [43:54]
B
Rubio. He's the only one. No one else on his team has any idea of how economics or foreign affairs works.
- [44:03]
A
I didn't realize he had at any point kept Rubio at arm's length.
- [44:06]
B
Oh, yeah. In the first few months of the administration, basically, you had Vance guiding him on. Everybody is evil, so we should kill everybody, including the Ukrainians. Vance is just a waste of genetic material.
- [44:19]
A
Damn.
- [44:19]
B
And then you had Tulsi Gabbard, who for all practical purposes is a Russian plant, who was shaping policies for the Russian Federation through the White House. And as part of that process, they gutted the State Department, they gutted the National Security Council. So all of the normal voices that funnel everything from the intelligence services and the military up to the president so he can make informed decisions, that was all deliberately dismantled. And it wasn't until, get this, Malenia, back in November was talking with her husband after Trump came back from a phone call with Putin about how wonderful everything was. And she's like, oh, yeah. And he Just bombed an orphanage. Here's some photos. And he wasn't until November, because of the first lady, that he started to realize that. That the Russians been pulling the wool over him every day for 10 months, and we're just making him look like a fool. That is roughly about the same time frame that Rubios came up with the Venezuela strategy and finally got back into Trump's good graces and actually could be in the room. And so we actually now have one. One person in the administration that is giving the President decent advice on what's going on in the world. And that's what also brought Jared Kushner back in. Kushner had decided to avoid the administration the second time because it was so much fun the first time. And so Trump had relied on Steve Witkoff, who was one of his buddies from his New York real estate days, who knew nothing about foreign affairs, celebrated the fact that he knew nothing about foreign affairs, and so would pick one side. In a conflict. Like for the Ukraine war, he would talk of the Russians, but not the Ukrainians. In the Iran conflict, he would talk to the Israelis, but not the Iranians, and he would just basically go there, absorb the propaganda, and then vomited it on the floor of the White House. And that made policy. So by November, because of millennia, he realized that maybe I need one more person, and he brought Kushner back. And so whenever you see Kushner go somewhere with anyone else, you know, there actually might be real talks. But if Witkoff. I'm sorry, I phrased that wrong. If you see Witkoff going anywhere with one other person, there might be real talks. But if Wyckoff goes alone, you know, it's just the opposing side's propaganda that's going to come back.
- [46:42]
A
That's very interesting. Okay, no real advisors.
- [46:47]
B
The team from the Republican Party is gone. And then the institutions have been damaged and gutted now.
- [46:55]
A
So I'll lay out my argument for why go after Iran and Venezuela if you really are trying to box in China in a second. But. So when you look at the way that Trump behaves, is it almost random, neurons firing and just entirely one guy's personality and like, hey, like, let's go after Iran today, because why not? And let's go after.
- [47:17]
B
It's not even that positive. So you remember back to April 2nd, tariff day with the big game show boards.
- [47:26]
A
Oh, yes.
- [47:26]
B
So I've got a contact in MAGA who's pretty up there. He doesn't like me. I don't like him. But we find one another useful and so he called me at 1:30pm Eastern Time after he had had lunch at the White House and said they haven't started talking internally about what the tariff levels are going to be. And the announcement was supposed to be at 4. I'm like, but this is supposed to be the set piece. This is going to be the basis for everything. Oh, Peter, Peter, Peter, Peter. There is no yesterday, there is no tomorrow. There is only the now. And that's our foreign policy.
- [48:11]
A
Okay, that's distressing to say the least. You can feel that. But you really don't think Trump has an agenda, Even if it's chaotic?
- [48:23]
B
He may have an agenda. It resets every morning.
- [48:27]
A
Interesting. Okay, well, that's clear. So I will, for the sake of me building a better mental map, let me confess, maybe it's the right word, the way that I see it. And then you can help me align how to navigate a world in which this may just be false. So when I look at. And we'll probably have to contend with the Thucydides trap thing because that drives a lot of my thinking. But I look at what Trump is doing and I say, okay, here's a guy, business guy, pressing the advantage. He has a desired outcome that he wants. That desired outcome is for America to win everything, anything. So America first, you can read it as America only or you can read it as like, I think the right way to read America first is America's going to take and do whatever it wants because it's advantageous to America. So if we want Greenland, we're going to take Greenland. If we want to snatch up a dictator in Venezuela, we're going to do it. If we want to drop bombs on Iran, we're going to do it. Like literally whatever Trump deems to be in America's best interest, he is going to do with no thought to second or third order consequences.
- [49:37]
B
Pure it, foreign policy. Got it.
- [49:40]
A
So well said. Perfect. That sums up exactly how I see it. Okay, now I go. Okay. But he understands that if you go after China in a head on collision, and you were, I had never thought of it, but let's say the very brilliant thing that you just laid out. You block their access to food and oil through a single shipping lane choke point, do that way easier. But that, that is a red line that obviously China is going to respond heavily against. And because we have not built in the things that we need on the American side, from a production standpoint, that would be shooting ourselves in the foot. So he's going to do a slower thing he's going to do something that's threatening, but that China can either ignore or respond to, but they don't have to treat it like an existential threat threat. And so he's doing the thing that doesn't quite back you into a corner, but slowly starts like constricting that threat.
- [50:39]
B
Period.
- [50:40]
A
So I guess chapter one now, now I want to know from a for you that I think the the box is going to be. I just don't put that belief that Trump is strategic in that fashion as a basis.
- [50:55]
B
I would certainly agree with that statement. Yeah.
- [50:59]
A
Okay. So it is almost my thing. My breakdown is it describes the world that we see. But you believe that. I'm off on the base assumption as to why Trump has done that.
- [51:13]
B
But again, if you're going to smash China, there's simple, more direct ways and the right.
- [51:18]
A
But contend, contend with the, the he wouldn't want to smash China in a way that felt existential.
- [51:25]
B
Fair enough. If you want a presidency that was preparing for a world where China loses, that would be the Biden administration. The Biden administration had plenty of flaws, but they actually did build some of the infrastructure that was necessary and built the alliance structure that was necessary to prepare for a post China world. A lot of that, of course, is now gone. But you know, I have a big problem with any strategy that doesn't plan for success and we're not seeing that today.
- [51:52]
A
Not planning for US Success or China success.
- [51:55]
B
US Success.
- [51:56]
A
Got it. Because he's too chaotic, because he's not thinking second and third order consequences, does not have the political positions filled that would see this stuff through to fruition.
- [52:06]
B
Well, just if the goal is to defeat slash, remove slash, cow China, whatever you want to do, there's certain things you're going to need the next day. And there's been no effort that I have seen in that direction until there is. It's really hard for me to ascribe anything to a strategy.
- [52:27]
D
That's it for part one. Make sure you are subscribed so you do not miss part two.
- [52:31]
A
Coming up soon.