Latest / International Flavor: Where the Truth Tastes Better / War Funding, Musk Leverage & the Cold Math Behind America’s Rising Debt Constraints

Transcript

War Funding, Musk Leverage & the Cold Math Behind America’s Rising Debt Constraints · International Flavor: Where the Truth Tastes Better

• 0:00
  Hello, good morning, welcome.
• 0:03
  You are listening to International Flavor here on
• 0:08
  DAM Radio, on the largest, the greatest, the
• 0:13
  most sensational day in radio history.
• 0:19
  Of course, it occurs every single week on
• 0:21
  Wednesday at DAM Radio.
• 0:24
  We have a lot of shows lined up
• 0:25
  for today.
• 0:30
  I've been spending the week on O-analysis.
• 0:38
  Day one of this week, I talked to
• 0:40
  you a little bit mostly about news, mostly
• 0:42
  about stuff that was going on in the
• 0:46
  world.
• 0:46
  Yesterday, I talked about why the war needed
• 0:54
  to continue for a lot of reasons and
• 0:59
  why it's advantageous to a bunch of the
• 1:03
  people that are making sure that it continues,
• 1:09
  that talks fail, that peace never occurs.
• 1:13
  It's just not going to happen.
• 1:17
  It's, I don't know what, same old standard
• 1:22
  international horse crap.
• 1:25
  It's been going on for decades now, at
• 1:31
  least three, probably more, and it's entertaining, but
• 1:39
  it shouldn't be.
• 1:40
  The trouble is, when you look at it,
• 1:43
  it's more par for the course.
• 1:45
  It's more, well, what else do you expect?
• 1:47
  This is how it is in these worlds.
• 1:51
  Today, I woke up to some, and I
• 1:54
  had a whole show planned, because I told
• 1:57
  you yesterday, and I still intend to do
• 1:59
  this, is go back to why the finance
• 2:03
  part matters.
• 2:04
  We have a lot of things that we
• 2:06
  are going to talk about in this financial
• 2:10
  area part, and I had the show basically
• 2:18
  finished because I put it all together over
• 2:23
  Monday and Tuesday, and here I am on
• 2:28
  Wednesday, and I got punched in the face
• 2:31
  with some news this morning, and I thought
• 2:34
  about sharing the whole thing with you, but
• 2:36
  I want to remind you what we talked
• 2:38
  about in Davos several weeks ago.
• 2:42
  By the way, if you wish to call
• 2:44
  in, please do, 573-746-8020.
• 2:49
  I may even answer.
• 2:51
  That's possible.
• 2:53
  Not a reality, but it's a possibility that
• 2:56
  that could happen.
• 2:57
  It gives me time to drink my coffee
• 3:00
  while somebody else is chatting it up.
• 3:02
  You know what I mean?
• 3:07
  Ah, that's good coffee.
• 3:11
  Harrison Ford said that in the movie once
• 3:13
  and said, that's good coffee, but I don't
• 3:16
  remember the movie.
• 3:17
  I think it was one of the war
• 3:20
  ones when he was Jack Ryan or something,
• 3:22
  you know, some spy god flying in a
• 3:26
  helicopter.
• 3:27
  Remember when he bought a helicopter with CIA
• 3:29
  money and wrote a check?
• 3:32
  He was the director of something and wrote
• 3:34
  a check for it.
• 3:35
  Anyway, that's distracting me, the coffee, and all
• 3:39
  the TV screens with all the nonsense going
• 3:44
  on in the world, and so I'm going
• 3:46
  to try not to look at it.
• 3:47
  Maybe I'll shut them off and I don't
• 3:52
  like them blaring at me all day.
• 3:54
  Anyway, the news of the day, which I
• 3:59
  shared with you, whatever it was, three weeks
• 4:03
  ago or whatever, when Davos was occurring, and
• 4:07
  one of the first speeches I shared with
• 4:09
  you was Mark Carney, and I shared the
• 4:12
  entire speech with you.
• 4:14
  I was so struck by it because it
• 4:20
  isn't just an alarm bell.
• 4:23
  It's a fracture, and this fracture has been
• 4:27
  going on for a little bit.
• 4:30
  Canada got pissed off over the last couple
• 4:33
  of years in Florida, and Canadians have left
• 4:36
  Florida in large numbers, and I mean large
• 4:43
  numbers.
• 4:45
  They're choosing to go other places.
• 4:48
  They're buying in, I don't know where, Belize,
• 4:51
  Mexico, somewhere else besides Florida.
• 4:57
  There's other places down there.
• 4:58
  Bermuda is fantastic.
• 5:00
  It's expensive as hell, but it's fantastic, and
• 5:04
  Grand Cayman, same thing, but you can go
• 5:07
  to other places down there.
• 5:09
  It's no less expensive or no more expensive
• 5:12
  than Florida, so there are choices is all
• 5:15
  I'm saying, and the Mediterranean, in my humble
• 5:18
  opinion, is ten times better than the Caribbean.
• 5:23
  The Mediterranean is freaking fantastic, and the, I
• 5:31
  don't know.
• 5:32
  That's not the point of the talk today,
• 5:34
  but there are options out there, and so
• 5:36
  Davos was kind of a punch in the
• 5:38
  face for the western hegemony, and Carney was
• 5:45
  pretty damn blunt about it.
• 5:47
  He put some, I don't know what, realistic
• 5:55
  discussion.
• 5:56
  Remember the conversation about the sign in the
• 5:59
  window?
• 5:59
  He was talking about communism, but he also
• 6:02
  stuck a knife in the alleged rules-based
• 6:06
  order, which he knew never existed.
• 6:09
  We all know it's never existed.
• 6:11
  We claim it existed, but it's always twisted
• 6:15
  in the favor of those running the show.
• 6:18
  The U.S., if they want to change
• 6:20
  the rules, they do.
• 6:22
  If they want to apply them selectively, they
• 6:25
  do.
• 6:26
  That's bureaucracy 101 America, and it applies locally.
• 6:32
  It applies statewide.
• 6:34
  It applies nationally, and by the way, it
• 6:37
  applies tenfold internationally.
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  Rules-based order my ass.
• 6:44
  There are no rules.
• 6:47
  There are no rules that apply anyway to
• 6:50
  the United States.
• 6:51
  We choose to force other people, or we're
• 6:55
  very selective in who we enforce them against.
• 6:59
  If you want to talk about territorial integrity
• 7:05
  and you want to slam Russia for doing
• 7:09
  what it feels is right in Ukraine, you
• 7:12
  still can't say a word about Venezuela, or
• 7:18
  you're the problem.
• 7:21
  There's no slam on just Venezuela.
• 7:24
  I'm slamming on 50 years more of this
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  crap, regime change, all that stuff.
• 7:31
  We don't take care of our own, but
• 7:33
  we're certainly willing to take care of the
• 7:36
  rest of the world as long as they
• 7:39
  follow our rules.
• 7:41
  There are reports overnight that if it's accurate,
• 7:50
  and I believe it is.
• 7:51
  It's been in several places already that it
• 7:54
  is accurate, but I want to give a
• 7:57
  disclaimer.
• 7:58
  There's been a couple of narratives, and I
• 8:01
  almost thought I'd share one with you.
• 8:05
  The context, you know, I thought about playing
• 8:09
  Davos again.
• 8:10
  It was that good, but two or three
• 8:12
  weeks ago, what I played in full was
• 8:14
  the manifesto for what he called middle power.
• 8:17
  He said we need to take the sign
• 8:19
  out of the window.
• 8:20
  He talked about Václav Havel's living with a
• 8:24
  lie metaphor, where in communism, and he was
• 8:27
  specific about communism, although the communist, what would
• 8:33
  you call it, the communist concepts really are
• 8:38
  noble.
• 8:39
  You just can't do it, because over time,
• 8:42
  people always act in their own best interest
• 8:45
  and not in the interest of the collective.
• 8:47
  That's just how it works.
• 8:50
  It's unfortunate.
• 8:50
  Everybody starts acting for themselves, but it's the
• 8:54
  exact same analysis when you're talking about a
• 8:59
  hegemon, the United States, doing what it feels
• 9:03
  is right in the form of Donald Trump,
• 9:05
  by the way.
• 9:07
  As long as we all can stop pretending
• 9:10
  that this old rules-based order actually ever
• 9:14
  really did exist, I'm happy.
• 9:17
  Reality is reality.
• 9:19
  I think Carney said it in Davos.
• 9:22
  We in Canada, we're living with the world
• 9:24
  we're presented, not the world we would like
• 9:27
  it to be, or words similar is what
• 9:29
  he said.
• 9:30
  He said we're going to quit doing the
• 9:32
  ritual.
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  We're going to quit genuflecting in front of
• 9:35
  the hegemon.
• 9:36
  That's what we're going to do.
• 9:37
  They had secured trade deals.
• 9:39
  He talked about 12 of them in six
• 9:41
  months, or 10 of them in six months,
• 9:43
  something like that, since his group took power.
• 9:46
  He was very positive about what had just
• 9:51
  happened for the first time, a visit to
• 9:54
  China and working with China.
• 9:57
  The U.S. is pissed off about it.
• 9:59
  There was a story last night about the
• 10:01
  bridge between Ottawa, and this I probably will
• 10:06
  provide the whole story for you because it's
• 10:09
  that important.
• 10:10
  That's what, when I woke up to, it
• 10:12
  wasn't the bridge story, which I already intended
• 10:14
  to share with you.
• 10:15
  It was the increased fracture that I'm telling
• 10:22
  you about here.
• 10:24
  Overnight, we get this story.
• 10:26
  Carney in Washington, cameras supposedly staged, and he
• 10:29
  doesn't show up.
• 10:30
  The script was that he's demanding better terms
• 10:34
  and not control.
• 10:37
  There's a sunset mechanism in an agreement called
• 10:42
  the structure.
• 10:46
  This is a narrative that describes leaks, a
• 10:51
  redline memo, and a blow-by-blow of
• 10:55
  supposed scene at the White House.
• 10:56
  It's not the same thing as an official
• 10:59
  Canadian statement.
• 11:01
  These are commentators, but a bunch of them
• 11:03
  talking about it all right now.
• 11:05
  So whether I've been sucked in, which I
• 11:08
  don't believe so, into commenting on the same
• 11:10
  stuff that they're talking about, it's important anyway.
• 11:17
  So what I'm going to do is I'm
• 11:19
  going to tell you what's being claimed, what's
• 11:22
  verifiable about the structure of the USMCA, United
• 11:26
  States-Mexico-Canada agreement that took over for
• 11:29
  NAFTA several years ago.
• 11:31
  And then what we should watch for in
• 11:34
  the next 24 to 48 hours to confirm
• 11:37
  whether it's real, exaggerated, or just propaganda.
• 11:40
  Hopefully, I'll know something for tomorrow, but right
• 11:42
  now, it's a little bit up in the
• 11:44
  air.
• 11:44
  But first, let's talk about context.
• 11:47
  It's the Carney-Davos speech two, three weeks
• 11:49
  ago, and I played it to you.
• 11:51
  Basically, it's a manifesto for what he talked
• 11:53
  about, middle power.
• 11:55
  Now we get this overnight story that cameras
• 11:59
  were supposedly there, and he didn't show up.
• 12:02
  He said it wasn't, you know, it's all
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  about control.
• 12:05
  The sunset mechanism for the USMCA, Mexico-Canada
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  trade agreement, and he said that this has
• 12:18
  to be canceled.
• 12:20
  The trade framework used to be every six
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  years.
• 12:23
  Now, one, Trump allegedly that Carney got something
• 12:31
  slid across that says you're going to agree
• 12:33
  to these things.
• 12:34
  One, US controls, we have unilateral control over
• 12:39
  the USMCA, and you will re-agree to
• 12:42
  our terms each and every year instead of
• 12:44
  every six years.
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  That's number one.
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  Number two, total access to Canada's Arctic waters.
• 12:51
  This is what people are putting out.
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  Okay.
• 12:53
  And three, the domestic sector pressure.
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  Dismantle Canada's dairy supply management quickly and ties
• 13:01
  to Section 232 national security tools on as
• 13:06
  far as aluminum.
• 13:07
  If those things were really put on paper
• 13:10
  as a US ultimatum, that's not renegotiation, that's
• 13:16
  Trump domination.
• 13:17
  Now, people allege and tell me all the
• 13:20
  time that I misjudge or misread Trump or
• 13:25
  I'm too harsh on him for his posturing
• 13:31
  tactics, that most of the time he's just
• 13:34
  posturing.
• 13:35
  Okay.
• 13:35
  Well, he can only posture so much and
• 13:39
  people call bullshit, you know, and allegedly that's
• 13:42
  what Carney did.
• 13:44
  But if those were really put in there,
• 13:46
  we're talking dominance.
• 13:47
  Now, what we can verify is that USMCA
• 13:51
  contains a built-in review mechanism at every
• 13:54
  six years.
• 13:55
  This is July 2026.
• 13:58
  It's unusual trade agreement standards, but it's not
• 14:04
  an annual obedience tax, you know.
• 14:07
  It's a joint review process tied to whether
• 14:10
  the parties extend the agreement out toward its
• 14:14
  longer term.
• 14:14
  And that's the baseline architecture of it.
• 14:18
  So this is what it means.
• 14:19
  If there are talks every single year instead
• 14:23
  of every six, there is zero stability and
• 14:27
  Trump gets to jack with these guys every
• 14:30
  year allegedly.
• 14:32
  Now, if this is really what was the
• 14:35
  claim.
• 14:35
  Well, so what this would mean is if
• 14:38
  there's talk of every single year, we can
• 14:41
  cancel it unless you behave, Mark Carney.
• 14:45
  That's not describing an existing treaty.
• 14:47
  It's describing an alleged US negotiation style a
• 14:52
  la Donald Trump on top of that.
• 14:55
  So that's claim number one, okay, that this
• 14:57
  document was slid across and Carney walked out
• 15:03
  and said, screw you.
• 15:04
  We're not sticking around and left and said,
• 15:07
  you know, all right, have fun on this
• 15:09
  agreement yourself.
• 15:10
  But there are other people talking about it.
• 15:12
  So perhaps there's an element of truth to
• 15:16
  it.
• 15:16
  Okay, so the next claim tariff.
• 15:19
  The story says that Trump threatened universal 25
• 15:25
  percent tariffs on Canadian products starting on Monday
• 15:28
  unless Carney signed.
• 15:31
  Is that plausible as a threat?
• 15:33
  Sure, Trump is Trump for sure.
• 15:37
  It is.
• 15:37
  I mean, that's that's his standard.
• 15:40
  There was another show that he was on
• 15:42
  beaten up on Switzerland of all places.
• 15:46
  Screw them.
• 15:48
  Somebody called.
• 15:49
  I said, well, screw it.
• 15:50
  You know, you want us to lower the
• 15:52
  tariffs?
• 15:52
  Well, I just raised him.
• 15:54
  I went from 30 up to 39.
• 15:55
  And that he said himself.
• 15:57
  I listened to it.
• 15:58
  And then he said and then somebody called
• 15:59
  and begged me.
• 16:00
  So I worked out some other deal.
• 16:01
  But we never heard what the deal was.
• 16:03
  So that's Trump 101 once again.
• 16:07
  So is it plausible that he said that?
• 16:10
  Sure.
• 16:11
  He leverages tariffs all the time as a
• 16:14
  means to whatever end he thinks he's getting
• 16:17
  global dominance return to the U.S.-based dominance
• 16:24
  of the world or whatever.
• 16:26
  Does it mean it actually happened that way?
• 16:28
  Well, I can't prove it from what I've
• 16:30
  read this morning, but it's possible.
• 16:33
  So then there's the actual quote that the
• 16:36
  part that I wanted to read out in
• 16:38
  allegedly a Fox News anchor on the way
• 16:43
  out.
• 16:43
  But I haven't been able to.
• 16:44
  I literally just heard this like seven o
• 16:48
  'clock this morning.
• 16:49
  I haven't had time to look it up.
• 16:51
  So I'm not even going to make an
• 16:53
  effort to look because I can't do two
• 16:54
  things at once.
• 16:55
  And I'll start babbling on the radio worse
• 16:58
  than I already do.
• 17:00
  But allegedly a Fox News question as Carney
• 17:04
  was leaving was, are you worried about the
• 17:08
  president's wrath?
• 17:11
  You know, when if you just leave, if
• 17:13
  you don't just agree to his dominating posturing,
• 17:21
  positioning, whatever you want to call it.
• 17:23
  And allegedly Carney had a nice quote to
• 17:29
  throw that I haven't looked for even.
• 17:31
  But I will see if I can find
• 17:33
  it because it would be cool to see
• 17:35
  if he really did say this.
• 17:39
  And what he allegedly said was, you can't
• 17:43
  tariff gravity and you can't sanction geography.
• 17:50
  We, Canada, aren't going anywhere, but we aren't
• 17:55
  taking orders any more.
• 17:58
  That's allegedly what was said, but I haven't
• 18:01
  been able to hear it myself.
• 18:03
  So it's not poetic, but it could be
• 18:06
  the core reality of a continental supply chain.
• 18:10
  You know, you can hear people clicking on
• 18:13
  their Twitter feeds right now, but you can't
• 18:16
  tweet away physics.
• 18:18
  It's not going to happen.
• 18:20
  So here's what you can't sanction.
• 18:23
  Geography means in practical terms for listeners who
• 18:27
  don't understand or don't live in trade policy.
• 18:30
  The modern North American car is not made
• 18:34
  in one country.
• 18:36
  It's assembled from a supply chain that crosses
• 18:39
  the border repeatedly.
• 18:41
  Components, subassemblies, metals, electronics, transmissions, stuff coming
• 18:46
  between Michigan and Ottawa, right?
• 18:50
  Moving back and forth and like a choreography
• 18:53
  that's been going on for decades and for
• 18:56
  a long time.
• 18:57
  And it's built on speed.
• 18:59
  And the other article that I listened to
• 19:01
  was an interview with whatever he's called, the
• 19:05
  governor of Ottawa, where Trump and his secretary
• 19:09
  yesterday, the press secretary allegedly said something incorrect.
• 19:15
  And he was beaten up on that.
• 19:17
  That I may play the whole thing for
• 19:19
  you later on, because that's a big deal.
• 19:23
  If Ottawa and Michigan or Ottawa and Trump
• 19:27
  in this case can't figure out what to
• 19:31
  do with this massive bridge that is either
• 19:35
  finished or very near to it, and they
• 19:37
  block what's going on there, and the trucking
• 19:41
  goes to a crawl between the two, whether
• 19:44
  under the U.S.-Canada-Mexico agreement or otherwise,
• 19:50
  or just through ICE inspections or in the
• 19:54
  reverse, Canada inspecting the trucks.
• 19:57
  If they slow that to a crawl, trust
• 20:00
  me, it's going to be a huge effect
• 20:03
  on U.S. markets.
• 20:05
  So when you jam the border, you don't
• 20:09
  just punish Canada.
• 20:10
  You're shutting down American assembly lines too.
• 20:13
  That's not ideology.
• 20:15
  That's what I bitch about all the time.
• 20:19
  Infrastructure, logistics, stuff that we're weak in for
• 20:23
  the most part.
• 20:24
  You know, that the rest of the world
• 20:26
  is building between countries.
• 20:28
  China mostly is funding it all, but what
• 20:31
  are we doing?
• 20:32
  We can't build a rail system.
• 20:34
  We suck when it comes to creating it,
• 20:37
  because every state's all for themselves, and everybody
• 20:40
  has to grease the palms of whatever senator
• 20:42
  or whatever financier is involved, and nothing gets
• 20:47
  accomplished under our system.
• 20:48
  You can argue about communism, but I tell
• 20:51
  you what, they did have the ability to
• 20:52
  work together on infrastructure projects because it's controlled
• 20:56
  at the top, and you don't have to
• 20:58
  like it.
• 20:59
  I'm not saying I like it, but China
• 21:01
  gets shit done, don't they?
• 21:03
  And they have excess capacity.
• 21:05
  It's all about the individual and the individual
• 21:09
  dollar, and I'm not against that.
• 21:11
  I'm a capitalist.
• 21:12
  I understand it, but you need to understand
• 21:14
  the differences.
• 21:15
  We have certain disadvantages, and that means the
• 21:20
  large-scale projects, which we'll get into with
• 21:22
  Elon Musk later, too.
• 21:25
  You know, hopefully we have time to get
• 21:27
  to it today.
• 21:27
  I'm already babbling too much, and I might
• 21:30
  not have time to get through the entire
• 21:32
  show, but energy, it's the same deal.
• 21:34
  Canada is the major supplier of crude and
• 21:37
  refined inputs to the U.S. system.
• 21:39
  If you weaponize that relationship, you absolutely trigger
• 21:43
  a price shock and a production shock that
• 21:46
  hits U.S. consumers.
• 21:47
  Again, gravity, geography, infrastructure.
• 21:51
  So if the story is accurate, what's Carney's
• 21:54
  strategy?
• 21:55
  Go back to Davos and check it out.
• 21:58
  Diversify.
• 21:59
  Quit pretending that there's only one show in
• 22:02
  town because it isn't true.
• 22:03
  A whole bunch of middle-of-the-roaders,
• 22:06
  Europe, Canada, pick it.
• 22:09
  Europe, Canada, Turkey, find them.
• 22:12
  Smaller, middle-of-the-road countries starting to
• 22:15
  work together, making alternative structures so they don't
• 22:21
  have to— the stability of the U.S.
• 22:24
  does not exist anymore in the minds of
• 22:27
  many, including Carney, and he was dead straight
• 22:30
  about it in the part that if you
• 22:32
  didn't listen to it, you should probably go
• 22:34
  back and listen to Mark Carney's speech at
• 22:36
  Davos.
• 22:37
  The whole thing is out there.
• 22:39
  There are two versions of it.
• 22:41
  Listen to the 30-minute one, the whole
• 22:43
  thing.
• 22:44
  Introduce him as a hockey player, blah, blah,
• 22:46
  blah, but you get the full amount.
• 22:47
  He starts it in French and then turns
• 22:49
  into the English a minute or two later,
• 22:53
  so he does his greeting in French.
• 22:56
  But anyway, if the story is accurate, what
• 22:58
  is the strategy?
• 23:00
  This transcript, there are a couple of them,
• 23:03
  and including Jeffrey Sachs, frames it as a
• 23:08
  strategic decoupling.
• 23:10
  Canada is building Plan Bs everywhere.
• 23:13
  Mineral deals, new trade corridors, rerouting, opening windows
• 23:18
  while Washington is slamming doors everywhere.
• 23:20
  If the door is slammed on America in
• 23:23
  the Arctic because we're trying to force— you
• 23:26
  can't steal Greenland, and I suppose you could,
• 23:30
  but you're not going to make a lot
• 23:32
  of friends that way.
• 23:35
  We haven't made a lot of friends with
• 23:37
  the way we're approaching it.
• 23:40
  It's not anything positive.
• 23:43
  I don't want to be too dramatic about
• 23:45
  it, but I don't want to be the
• 23:46
  guy who's going to read a dramatic script
• 23:48
  and call it confirmed.
• 23:50
  Here on the verification checklist, we can say
• 23:56
  that, number one, do we have an official
• 23:58
  statement from Canada's prime minister referencing withdrawal or
• 24:02
  refusal of the USMCA review context?
• 24:07
  Since it's not forced to be done, they're
• 24:10
  only in renegotiation phase right now, it comes
• 24:15
  up every July.
• 24:16
  We're a little early for that, but they
• 24:18
  should still be working on it.
• 24:19
  Do we have an on-the-record comment
• 24:21
  from US Trade or the White House confirming
• 24:25
  breakdown number three?
• 24:26
  Do we get credible outlets confirming a memo?
• 24:30
  Or is that a single leak?
• 24:32
  And do the markets actually react in a
• 24:35
  way consistent with the rupture?
• 24:38
  They say that the Canadian dollar overnight was
• 24:43
  stronger, not weaker.
• 24:45
  That's one of the things that they were
• 24:47
  showing.
• 24:49
  And do border and customs measures change in
• 24:52
  a measurable way?
• 24:54
  If these five things don't show up, the
• 24:56
  story is either premature, exaggerated, or just engineered
• 25:00
  for narrative.
• 25:01
  Now, I think there's some truth to it,
• 25:03
  because several people, including Jeffrey Sachs, who you
• 25:08
  should trust if you don't, have been pretty
• 25:12
  consistent in what is said.
• 25:13
  But I'm leading with this story anyway, even
• 25:17
  because our planned finance blocks that we were
• 25:20
  going to talk about anyway, but because the
• 25:25
  theme matches everything that I've been covering for
• 25:28
  weeks on this.
• 25:29
  Great powers using trade, finance, infrastructure as coercion.
• 25:34
  The US going into Venezuela and stealing.
• 25:38
  The US stealing or saying they're going to
• 25:41
  steal Greenland.
• 25:43
  The US now telling Canada allegedly that they're
• 25:47
  going to, you know, you will give us
• 25:49
  access to whatever we choose to have in
• 25:51
  the Arctic.
• 25:53
  And screw you if you don't, you know,
• 25:55
  we won't sign any of these agreements with
• 25:56
  you.
• 25:58
  And middle powers, as stated by Mark Carney
• 26:03
  in Davos, are they building alternatives?
• 26:06
  What's the war footing mindset?
• 26:09
  Governments treat everything as a security.
• 26:11
  Spill straight into trade policy, energy policy, and
• 26:15
  the market.
• 26:16
  So let's take this as a little bridge
• 26:19
  back to where I planned to go today
• 26:21
  anyway.
• 26:21
  If this Canada rupture is real, it's part
• 26:25
  of the same global pivot I've been tracking
• 26:28
  for a while.
• 26:29
  BRICS settlement.
• 26:32
  The change of the world on the yuan.
• 26:36
  The de-risk.
• 26:38
  Remember, in his speech, Carney spoke about risk
• 26:43
  management.
• 26:45
  He said this is risk management 101.
• 26:47
  You in this group understand risk management.
• 26:51
  Diversification lowers your risk, doesn't it?
• 26:54
  Of one person cocking up your plans.
• 26:57
  You know, what do you do if you've
• 26:58
  got a vacation that you're planning?
• 27:00
  And, you know, the price of the euro
• 27:05
  goes up and you can't afford Europe, you
• 27:07
  know.
• 27:08
  And your trade goes up.
• 27:10
  You have an alternative back up.
• 27:11
  Well, looks like Mexico again.
• 27:14
  You're Tom Cruise in risky business.
• 27:17
  Well, looks like University of Illinois instead of
• 27:21
  Princeton, right?
• 27:25
  So de-risk is a big deal.
• 27:27
  So I want to go to the financial
• 27:29
  plan that we talked about yesterday.
• 27:33
  Because yesterday we talked about why the war
• 27:36
  must continue from a lot of political personal.
• 27:40
  We talked about Zakharova, Alexei, what's his name?
• 27:47
  Erastovich, I mean, and Sergei Lavrov.
• 27:50
  And we went through a lot of the
• 27:52
  commentary from that part.
• 27:54
  We already know what we're doing here.
• 27:58
  And so we already know what we expect
• 28:04
  to happen in the world.
• 28:06
  You know, everybody has to bow down to
• 28:09
  Trump.
• 28:10
  And that's that.
• 28:12
  That's what a lot of people are cheering
• 28:14
  that kind of thing.
• 28:16
  I don't like that kind of power in
• 28:18
  one particular individual on the planet.
• 28:25
  And I dislike that kind of thing.
• 28:28
  I don't like treating people as less than
• 28:34
  just because they happen to be from a
• 28:37
  smaller country.
• 28:37
  It's offensive to me to hear Donald Trump
• 28:41
  talk about Switzerland in the way that he
• 28:45
  talked about them on the show that he
• 28:50
  was being interviewed by somebody.
• 28:53
  And it was offensive to me how he,
• 28:56
  everybody is lesser than him.
• 28:59
  That is about the only, well, except for
• 29:04
  his transactional nature, everything isn't a transaction.
• 29:07
  And his constant posturing.
• 29:11
  These are the things I don't like about
• 29:13
  him.
• 29:13
  Some of the results I like.
• 29:16
  Most of the results I like.
• 29:19
  But I disagree that this is the way
• 29:22
  to run a railroad.
• 29:24
  And people aren't going to put up with
• 29:27
  it forever.
• 29:28
  And if the Carney, and we've already seen
• 29:31
  the Carney, the rupturing that is going on
• 29:34
  between Canada and the United States.
• 29:37
  When I share with you the, hopefully the
• 29:39
  whole, it's only like eight minutes or something.
• 29:42
  I think I can share it with you.
• 29:44
  The whole discussion, you know, you'll get to
• 29:52
  make that determination for yourself.
• 29:54
  And yesterday we talked about Aristovich, Zakharova, and
• 29:58
  Lavrov, and we talked about battlefield and diplomacy.
• 30:02
  Today we're going underneath that because there's something
• 30:06
  that should be obvious but almost never gets
• 30:08
  said on television.
• 30:11
  War isn't about ideology.
• 30:13
  They claim it is.
• 30:14
  Oh, we're fighting for democracy.
• 30:15
  But it has nothing to do with that.
• 30:17
  War runs on money.
• 30:19
  And they never talk about that part.
• 30:22
  They always want to talk about right and
• 30:24
  wrong and who's wrong and who's right.
• 30:27
  And they never talk about the only reality
• 30:30
  check of it all is follow the money.
• 30:33
  That's what you do in a corruption scandal.
• 30:36
  Why don't you do it for war?
• 30:38
  Good question.
• 30:39
  But nobody seems to do that.
• 30:41
  They run on money.
• 30:42
  And if you don't understand the money, you
• 30:45
  don't understand why wars drag on in Afghanistan
• 30:48
  for 20 years.
• 30:51
  That you can go two, three times into
• 30:53
  Iraq all on the money, all based on
• 30:58
  a lie, by the way.
• 30:59
  You can go into Venezuela all based on
• 31:02
  a lie, by the way.
• 31:04
  And the only way you get to figure
• 31:06
  that out is by following the money.
• 31:09
  Right?
• 31:09
  So who can afford a delay is what
• 31:12
  we're talking about.
• 31:13
  Because that is the person who can afford
• 31:16
  or withstand or I don't know what can
• 31:23
  bear the delay better than the other side.
• 31:30
  Those are the people who eventually win a
• 31:34
  war.
• 31:34
  Isn't that right?
• 31:38
  I mean, think about it.
• 31:39
  It's whoever can.
• 31:42
  That's the real question.
• 31:44
  Lavrov spoke about sanctions and energy flow as
• 31:47
  instruments of geopolitical control.
• 31:49
  And they are.
• 31:50
  But Russia can withstand those geopolitical controls better
• 31:55
  than Ukraine.
• 31:58
  Better than the West.
• 31:59
  Better than Europe.
• 32:01
  Sakharova talked about Western financial coercion.
• 32:04
  And whether you agree with her or not,
• 32:06
  sanctions architecture is financial warfare.
• 32:10
  BRICS talking openly.
• 32:12
  China talking openly.
• 32:13
  Canada talking openly.
• 32:16
  Yesterday, China put a warning out yesterday, warning
• 32:22
  its banks not to invest further in U
• 32:27
  .S. bonds, U.S. debt.
• 32:30
  You think that's not a tectonic shift?
• 32:33
  That is huge.
• 32:35
  Now, they've been lowering their debt.
• 32:38
  I've talked about it here.
• 32:39
  Their buying of U.S. debt.
• 32:41
  And instead, they've been investing in global infrastructure
• 32:44
  because infrastructure will be around and create the
• 32:48
  path to more trade.
• 32:49
  Where?
• 32:50
  With China.
• 32:51
  U.S., what are we doing?
• 32:54
  Weaponizing finance.
• 32:56
  And weaponizing how?
• 33:00
  On the backs of huge debt.
• 33:03
  And if you can't sell your debt anymore,
• 33:07
  the system will collapse.
• 33:10
  China is saying this.
• 33:11
  This is not random.
• 33:12
  The financial realignment is under a wartime pressure.
• 33:16
  You cannot separate war in Ukraine from the
• 33:19
  war in finance.
• 33:20
  You cannot separate artillery from asset freezes.
• 33:25
  You can't separate missile strikes from bond auctions.
• 33:29
  Bond sell-offs and the price of gold
• 33:31
  dropping, silver dropping.
• 33:34
  And if you try, you will misunderstand the
• 33:36
  trajectory completely.
• 33:38
  But the core thesis is this.
• 33:40
  War is the headline, but financial gravity is
• 33:43
  the engine room.
• 33:45
  The financial gravity is starting to exert more
• 33:47
  and more force.
• 33:49
  When Lavrov talked about the U.S. wanting
• 33:51
  to control energy corridors, Nord Stream, Turk Stream,
• 33:54
  shipping lanes, sanction enforcement, he's not just talking
• 33:57
  about pipelines.
• 33:58
  He's talking about settlement currency.
• 34:01
  Energy is mostly priced in dollars.
• 34:04
  Energy contracts clear mostly through dollar systems.
• 34:09
  So sanctions weaponize dollar systems.
• 34:13
  So if BRICS countries want to insulate themselves
• 34:16
  from that leverage, they have to build financial
• 34:18
  alternatives.
• 34:20
  And that is a growing – it's snowballing.
• 34:25
  It's a structural response because once you begin
• 34:30
  to build alternatives to the reserve system and
• 34:33
  people see that it works, you change the
• 34:35
  incentives that sustain the reserve system.
• 34:39
  So when you aren't – so all we
• 34:40
  have are debt, international that's funded the U
• 34:45
  .S., and all of the overspending that we've
• 34:48
  done, that and more war.
• 34:52
  That's what we got, right?
• 34:53
  It was sanctions leverage, war, and we're the
• 34:59
  biggest, baddest a-hole on the planet.
• 35:03
  And most people really believe that.
• 35:05
  We're the biggest, baddest a-holes now.
• 35:08
  Used to be just big as bad as
• 35:09
  – and it was like Cardi said, well,
• 35:11
  rules-based.
• 35:12
  We just twisted the rules in our own
• 35:14
  favor and everybody looked the other way because,
• 35:17
  well, you know, we got to punish and
• 35:20
  we benefited from it.
• 35:21
  That's basically what he said.
• 35:23
  So the U.S. can fund an extended
• 35:26
  war posture in Europe and Asia, even globally,
• 35:29
  because global capital markets continue to treat U
• 35:32
  .S. debt as the safest collateral on earth,
• 35:36
  still.
• 35:37
  That's privilege.
• 35:39
  That's leverage.
• 35:40
  That is superpower, but it's not guaranteed forever.
• 35:44
  It depends on confidence.
• 35:46
  Why did I share Mark Carney with you
• 35:48
  this morning?
• 35:49
  Because they're not confident.
• 35:52
  They're pushing.
• 35:53
  They're pushing.
• 35:54
  Confidence in fiscal management.
• 35:56
  We don't have any fiscal management.
• 35:58
  It's embarrassing.
• 35:59
  We have more debt.
• 36:01
  Our kids can't pay it off.
• 36:03
  I had a bet with somebody – he
• 36:04
  may be listening, and I chose not to.
• 36:07
  I don't have that kind of money to
• 36:08
  bet, but I think he'd be the one
• 36:10
  paying me – that the debt will be
• 36:13
  gone by the time Trump leaves office.
• 36:14
  I don't believe that, not remotely, and I
• 36:18
  can't imagine that to be true.
• 36:20
  Based on what I am seeing, I don't
• 36:22
  believe it at all.
• 36:24
  It's good political commentary, wishful thinking, but confidence
• 36:31
  in political stability, confidence that the dollar will
• 36:36
  not arbitrarily be weaponized beyond what is predictable
• 36:40
  and you scare away Canada into the arms
• 36:43
  of China.
• 36:44
  What?
• 36:47
  When confidence erodes, it doesn't collapse, but it
• 36:51
  erodes, the cost of funding, continued wars, and
• 36:54
  continued borrowing increases.
• 36:57
  And when the cost of funding increases, war
• 36:59
  posture is more expensive, and that's the connection.
• 37:03
  Yesterday, we discussed the idea that peace is
• 37:05
  going to be politically inconvenient to a lot
• 37:08
  of people.
• 37:08
  Today, we're asking whether it's going to become
• 37:10
  fundamentally financially inconvenient to continue indefinitely.
• 37:16
  China trims its exposure to U.S. treasuries
• 37:19
  over the long arc, not dramatically, not theatrically,
• 37:24
  but gradually.
• 37:25
  And yesterday, for the first time, publicly said,
• 37:30
  do not buy U.S. debt.
• 37:32
  Don't do it.
• 37:34
  They're warning their partners, warning their banks, warning
• 37:37
  everyone.
• 37:38
  I believe they think they've reached critical mass,
• 37:40
  and now they can come out from behind
• 37:42
  it, that their actions, they're down to, I
• 37:46
  forget the number, but it's in this report
• 37:49
  somewhere.
• 37:50
  I'll share it with you here.
• 37:52
  Lowest level since 2007, 2008.
• 37:55
  And Japan yesterday, their yield issue, which I
• 38:00
  talked about a couple of weeks ago, the
• 38:02
  yield environment means they're shifting at the margins.
• 38:05
  They became the largest.
• 38:08
  China's number three now.
• 38:09
  I forget who it is.
• 38:11
  I want to say Japan and then England
• 38:15
  and then now China is what I want
• 38:17
  to say.
• 38:18
  But Japan yield environment means that they're all
• 38:20
  starting to bring their money home.
• 38:22
  They don't want to invest in U.S.
• 38:25
  debt, which used to be the default, okay?
• 38:28
  And so consumer credit in the United States
• 38:31
  is way elevated, way up.
• 38:35
  Interest payments on U.S. sovereign debt as
• 38:38
  a line item are going to be more
• 38:40
  than the GDP of the country very soon.
• 38:45
  These aren't isolated stories.
• 38:47
  It's stress.
• 38:48
  Stress signals matter most when geopolitical posture is
• 38:51
  too expensive to bear, as it is for
• 38:54
  America.
• 38:55
  And Lavrov made it clear that Moscow can
• 38:59
  withstand these sanctions better than America.
• 39:02
  They don't carry that debt load.
• 39:04
  Not remotely close to that debt load.
• 39:08
  The U.S. can steal all the tankers
• 39:10
  it wants to.
• 39:11
  It's not going to take away what they
• 39:14
  have underground.
• 39:15
  And people are building alternative structures.
• 39:19
  You know, BRICS meetings keep coming out on
• 39:22
  this.
• 39:23
  Marginal shrinking is what's changing.
• 39:26
  Marginal shrinking.
• 39:27
  The margins are tighter.
• 39:31
  And marginal shrinkage is what changes the price
• 39:35
  of conducting war.
• 39:36
  What changes the value of the dollar versus
• 39:40
  the Canadian dollar.
• 39:42
  Of U.S. debt.
• 39:44
  You don't need 50% of the world
• 39:46
  to abandon the dollar.
• 39:48
  All you need is 5, 10%.
• 39:51
  BRICS is higher than that, by the way.
• 39:54
  I mean, I've said this before, but I'll
• 39:57
  repeat it.
• 39:58
  BRICS is now the BRICS countries have a
• 40:02
  larger market share of the world economy than
• 40:06
  the G7.
• 40:08
  They're the fastest growing.
• 40:10
  They're the largest.
• 40:12
  And they are on the rise.
• 40:16
  Huge.
• 40:17
  The G7 is on the decline.
• 40:19
  And so the margins are definitely going in
• 40:23
  the other direction.
• 40:24
  That's how markets work.
• 40:25
  And I want to be careful.
• 40:26
  I don't want to say it's apocalyptic radio.
• 40:29
  You know, we're not here to say the
• 40:30
  U.S. is collapsing tomorrow.
• 40:33
  But the treasuries aren't going to go to
• 40:36
  zero.
• 40:36
  Don't go to the bank and pull out
• 40:38
  your money and, you know, go buy, I
• 40:41
  don't know, a gold chain to hang around
• 40:43
  your neck with a big gold medallion on
• 40:46
  it.
• 40:47
  A clock maybe.
• 40:48
  Be like, well, who was that, Flava Flav?
• 40:51
  You could get something like that and put
• 40:53
  all your money in a chain to hang
• 40:54
  around your neck.
• 40:55
  What I'm talking about is directional stress that's
• 40:59
  going to accumulate, shift behavior, and risk premiums
• 41:02
  forever.
• 41:05
  You know, it's changing.
• 41:06
  And risk premiums determine borrowing cost, which is
• 41:10
  going to go up.
• 41:11
  Borrowing cost determines how comfortably a government can
• 41:14
  continue to project power it can afford.
• 41:17
  So let's bring that back to Ukraine.
• 41:19
  If the U.S. continues to fund Ukraine,
• 41:21
  even if it's only $400 million a year
• 41:23
  instead of several billion, whether directly or through
• 41:29
  backfilling European purchases of American weapons, that money
• 41:33
  clears through U.S. dollars.
• 41:37
  Okay.
• 41:37
  Europe has pledged billions to that process.
• 41:40
  The U.S. has pledged billions.
• 41:42
  Even the little $400 million line item that
• 41:44
  got quietly approved when nobody was looking and
• 41:47
  nobody really wants to give them any money,
• 41:50
  those are still there.
• 41:53
  And that helps the dollar.
• 41:55
  When you add defense modernization in Asia, when
• 41:57
  you add industrial policy subsidies, when you add
• 42:00
  domestic entitlement obligations, you are stacking commitments on
• 42:06
  top of rising interest, which is going to
• 42:09
  be a silent killer of fiscal flexibility.
• 42:13
  Our flexibility is disappearing.
• 42:15
  So this is where the war and the
• 42:16
  bond market intersect.
• 42:18
  And if China reduces marginal purchasing of treasuries
• 42:21
  and warns everybody not to buy them, which
• 42:23
  they did yesterday, that is provable.
• 42:27
  And their banks put out an announcement saying
• 42:30
  don't buy U.S. debt.
• 42:31
  And if Japan's yield dynamics, this is also
• 42:34
  true, reduce the appetite to carry trade in
• 42:37
  U.S. debt, if BRICS continues to grow
• 42:40
  because it's mature enough to siphon 15%, 20
• 42:45
  % of global energy trade away from the
• 42:48
  dollar, then the U.S. must fund itself
• 42:51
  increasingly through domestic absorption through us, friends and
• 42:56
  neighbors, instead of the rest of the world,
• 42:58
  or they have to give a higher yield.
• 43:00
  What does it mean to get a higher
• 43:01
  yield?
• 43:02
  It means higher interest rates.
• 43:04
  Higher interest expense means less discretionary flexibility.
• 43:09
  Less discretionary flexibility means hard political choices.
• 43:14
  And hard political choices are often avoided until
• 43:18
  they can no longer be avoided.
• 43:21
  And then you get a collapse of some
• 43:23
  sort.
• 43:24
  That is financial gravity.
• 43:26
  And if Carney's statement on gravity was accurate,
• 43:30
  well, you can't dictate gravity.
• 43:34
  Gravity is gravity.
• 43:36
  It doesn't explode.
• 43:37
  It pulls slowly, relentlessly, and eventually it forces
• 43:42
  adjustment.
• 43:44
  And Lavrov talks about energy routes.
• 43:48
  Zakharova talks about sanctions as coercion.
• 43:51
  BRICS is talking about alternative rails.
• 43:53
  So is Canada now.
• 43:56
  The West speaks about defending democracy.
• 44:00
  Well, I don't think Trump has ever said
• 44:02
  that.
• 44:02
  He's not defending democracy in Venezuela or certainly
• 44:06
  in Greenland.
• 44:08
  And we all know nobody's defending democracy in
• 44:11
  Ukraine.
• 44:11
  So all of that rhetoric layered over a
• 44:14
  financial system, it's got to balance out somehow.
• 44:18
  And I don't think it is.
• 44:19
  If the system tightens, so's the postures.
• 44:22
  They have to tighten.
• 44:24
  You have to get increasingly vocal.
• 44:26
  And the uncomfortable truth is the longer a
• 44:28
  war drags on, the longer or the more
• 44:32
  it exposes a financial structure that is supposedly
• 44:37
  built to support it.
• 44:39
  You can't mask that.
• 44:42
  Even though you can mask battlefield fatigue.
• 44:45
  You can manage the headlines all you want.
• 44:48
  But you can't indefinitely mask rising interest rates
• 44:53
  and the cost of debt.
• 44:55
  And it's going up big time.
• 45:00
  So that's why I want to shift from
• 45:02
  missiles and maps to bonds and balance sheets.
• 45:05
  Because yesterday we discussed who wants the delay,
• 45:09
  who wants it for their own political survival.
• 45:11
  Today we can discuss who can actually afford
• 45:14
  that delay.
• 45:15
  It's not a moral question.
• 45:16
  It's a capital market question.
• 45:18
  This morning we're going to talk about China's
• 45:20
  steady trimming of debt, Japan's liquidation, many other
• 45:24
  issues.
• 45:25
  Okay?
• 45:26
  And there are plenty of them to get
• 45:28
  us here.
• 45:30
  So the PPP especially, the G7, China is
• 45:36
  the largest purchase power parity GDP on the
• 45:42
  planet.
• 45:43
  They just are.
• 45:44
  They have exceeded us.
• 45:46
  They have exceeded the United States with what
• 45:49
  your money actually buys.
• 45:52
  Right?
• 45:52
  So, you know, I'm interested in, you know,
• 45:59
  I don't want to talk about overreacting and
• 46:01
  underreacting to China.
• 46:03
  I'm not interested in either one of those.
• 46:05
  I'm interested in the trajectory, you know, where
• 46:08
  we're headed.
• 46:09
  And China has been headed away from U
• 46:13
  .S. Treasury for a very long time.
• 46:16
  Does that mean China's exiting the dollar or
• 46:19
  dumping America?
• 46:20
  Nope.
• 46:21
  But it means China isn't expanding its dependence
• 46:24
  on U.S. sovereign debt like it used
• 46:26
  to.
• 46:27
  It's putting it into infrastructure.
• 46:31
  And the U.S. has massive amounts of
• 46:33
  debt that they were going to continue to
• 46:36
  get.
• 46:37
  Why?
• 46:37
  Because of defense posture, entitlement, industrial subsidies, aid
• 46:42
  packages, energy strategy, and the fact that we
• 46:46
  have to be in 750-plus military bases
• 46:51
  worldwide.
• 46:52
  We've got to have those.
• 46:55
  Historically, foreign banks, including China, were major absorbers
• 46:59
  of our debt and financed our debt.
• 47:03
  But that's not going to happen.
• 47:04
  It's going to rebalance.
• 47:06
  And the rebalancing is going to cost.
• 47:08
  And it's going to cost a lot eventually.
• 47:13
  And foreign official demands decline at the margins.
• 47:17
  The buyers shift toward domestic institutions, primary dealers,
• 47:21
  money market, higher yield inducements like what?
• 47:27
  Japan.
• 47:28
  And their higher yield is there.
• 47:30
  They're pulling their money home.
• 47:31
  That's a reality, folks.
• 47:33
  And nobody's debating society.
• 47:36
  You know, what we're talking about is BRICS
• 47:38
  collectively surpasses all kinds of things.
• 47:42
  More population, more commodity throughputs necessary, more manufacturing
• 47:47
  share.
• 47:49
  That's important.
• 47:50
  More energy consumption and more infrastructure growth.
• 47:55
  That isn't trivial.
• 47:56
  That's happening.
• 47:57
  And now add the expansion, more countries that
• 48:00
  want to join.
• 48:02
  That's coming.
• 48:02
  These are things that are coming.
• 48:04
  And Washington is trying to change, you know,
• 48:08
  with the freeze of foreign assets, putting sanctions
• 48:11
  out.
• 48:12
  Trump saying right after he got elected, oh,
• 48:14
  geez, we're going to penalize anybody in BRICS.
• 48:18
  That's all he's got anymore.
• 48:20
  All he's been talking about for years.
• 48:23
  Well, we're going to tariff the hell out
• 48:24
  of them.
• 48:26
  That's fodder for the, I don't know what,
• 48:32
  the yeah, go Trump types, right?
• 48:34
  And I'm not a non-go Trump type.
• 48:38
  Nationally.
• 48:39
  Internationally, this is foolish.
• 48:41
  Financial policy, foolish.
• 48:43
  I don't believe this is going to get
• 48:44
  rid of the debt in three years.
• 48:47
  Not remotely.
• 48:49
  I believe the opposite is going to occur.
• 48:51
  I think we're going to build even more
• 48:54
  debt.
• 48:55
  You go out to usdebt.org or whatever
• 48:58
  it's called, nationaldebt.org.
• 49:00
  You can watch it in real time growing.
• 49:04
  And so that is important to understand.
• 49:09
  And so let's talk about this.
• 49:13
  Japan, I've mentioned them a little bit.
• 49:16
  China trimming the treasury, we get that.
• 49:18
  Japan adjusting the yield policy is a liquidity
• 49:22
  shock, and it's a big one.
• 49:25
  Because liquidity, especially from the largest holder of
• 49:29
  U.S. debt, they were under their ultra
• 49:31
  -low interest rate regime, near zero rates in
• 49:35
  Japan.
• 49:36
  Aggressive bond purchases, U.S. bonds.
• 49:40
  The Bank of Japan was pinning domestic yield
• 49:42
  to the floor.
• 49:44
  But it didn't just affect Japan.
• 49:46
  It fed global capital, particularly in the United
• 49:50
  States.
• 49:51
  Japanese institutions, insurers, pension funds, banks, they hunted
• 49:55
  yield abroad because they had cheap money they
• 49:58
  could borrow there and put it in the
• 50:00
  U.S. and get even low rate.
• 50:04
  They're making big money, right?
• 50:06
  So that's safe, too.
• 50:08
  It's completely safe.
• 50:10
  You never lose, allegedly never.
• 50:12
  And so it supported asset purchases all over.
• 50:16
  But they called it, you know, yen-carrying
• 50:20
  trade.
• 50:21
  Borrow cheap, invest in high-yield assets elsewhere,
• 50:25
  and pocket the spread.
• 50:26
  They've been doing it for years.
• 50:28
  But when Japan is allowing their yields to
• 50:30
  rise in Japan, the entire calculus is shifting
• 50:35
  worldwide.
• 50:37
  If Japanese 10-year bond yields more than
• 50:39
  it did before, Japanese institutions have less reason
• 50:42
  to hold U.S. debt.
• 50:45
  And capital is, what do you call it,
• 50:48
  repatriating back home.
• 50:52
  That's happening.
• 50:54
  Cryptocurrency, silver, gold, highly volatile.
• 50:58
  But you bring your money home, that's secure.
• 51:04
  And a lot of people are driving that.
• 51:06
  A lot of people, a lot of countries
• 51:08
  are bringing it back to that.
• 51:10
  If the U.S. has to issue large
• 51:12
  volumes of treasuries to fund, which we do,
• 51:15
  we have to issue large volumes every year
• 51:18
  of treasury, of debt.
• 51:21
  Somebody's got to buy that debt.
• 51:23
  If nobody's buying it, we got a problem.
• 51:25
  And we use it to fund defense commitments,
• 51:28
  foreign aid all over the planet, domestic obligations
• 51:32
  that we can't afford, and interest payments.
• 51:36
  Interest payments.
• 51:38
  I forget what the number is, 25%
• 51:41
  or something?
• 51:42
  25% of the money we borrow is
• 51:45
  to pay interest.
• 51:47
  Try that at your house and see if
• 51:49
  you ever get out of debt.
• 51:51
  And the same time, foreign margin buyers, they're
• 51:54
  not buying anymore.
• 51:55
  Then the treasury market has to clear at
• 51:58
  a higher yield.
• 51:59
  Higher yield increases federal interest expense.
• 52:02
  Higher interest expense increases the deficit.
• 52:05
  Deficit require more issuance of the same circle.
• 52:10
  You have to issue more debt in order
• 52:12
  to cover the interest that you can no
• 52:14
  longer afford.
• 52:15
  Everybody gets this.
• 52:17
  This isn't rocket science.
• 52:19
  It's a signal of stress.
• 52:21
  And the money can't hold up to it
• 52:24
  forever.
• 52:25
  It just can't.
• 52:27
  Balance sheets don't lie.
• 52:29
  Now let's get to Elon Musk.
• 52:31
  Now Elon Musk I got a little bit
• 52:34
  of an issue with as well.
• 52:36
  This is uncomfortable.
• 52:39
  It's one thing to talk about sovereign debt,
• 52:42
  central bank, BRICS, liquidity, blah, blah, blah.
• 52:44
  It's quite another thing to talk about a
• 52:46
  private individual that straddles defense.
• 52:50
  He's at the junction of space infrastructure, defense
• 52:55
  communication, satellite dominance, all privately owned by the
• 53:02
  way, AI, electric vehicles, and geopolitical leverage of
• 53:07
  a massive amount.
• 53:11
  Elon Musk isn't simply a businessman.
• 53:14
  When he was in bed with Trump for
• 53:15
  months while he was getting elected, I smelled
• 53:19
  a rat then.
• 53:20
  Although I like Elon Musk, and I like
• 53:23
  listening to him, and I think he's a
• 53:25
  damn genius no matter how you slice it.
• 53:27
  But I don't like seeing one man control,
• 53:30
  because structurally he's important whether we like it
• 53:35
  or not.
• 53:35
  And let's begin with what we know.
• 53:37
  Starlink, SpaceX's satellite internet constellation system, became
• 53:42
  operationally essential for U.S. defense, for Ukraine
• 53:49
  shortly after the war began.
• 53:51
  And he gave them free Starlink.
• 53:54
  They're losing anyway, but he gave them free
• 53:57
  Starlink.
• 53:59
  When terrestrial communications are disrupted, because they always
• 54:02
  are, Starlink terminals provided connectivity to military commanders
• 54:07
  on the ground, military coordination, drone operations, command
• 54:10
  and control.
• 54:11
  That isn't any sort of conspiracy, that's documented
• 54:14
  fact.
• 54:14
  And Ukraine's battlefield effectiveness in multiple domains relies
• 54:20
  heavily upon satellite connectivity.
• 54:23
  And Starlink is the primary Western provider of
• 54:27
  low Earth orbit system capability, delivering that at
• 54:32
  a huge scale.
• 54:33
  So here's where this matters, because from the
• 54:36
  beginning, Starlink was authorized for Ukrainian use.
• 54:40
  It was not officially provided to Russian forces.
• 54:43
  And there's defense contracts from the West, paying
• 54:52
  Elon Musk to protect Ukraine.
• 54:58
  And you could say, oh, that's just capitalism.
• 55:01
  That's the same as Lockheed Martin.
• 55:04
  Pick anybody else, any defense contractor.
• 55:08
  Don't think that Elon Musk, who bitched about
• 55:10
  military-industrial complex, isn't part of it, because
• 55:13
  he is.
• 55:15
  A huge part.
• 55:17
  Military intelligence wouldn't occur if it wasn't for
• 55:19
  him.
• 55:20
  Now, are there U.S.-based satellite systems?
• 55:23
  Yes.
• 55:23
  They're much higher.
• 55:24
  They're geolocated.
• 55:25
  They circle with the Earth as they go.
• 55:28
  And that's the problem that Russia's having.
• 55:30
  They're not low Earth orbit.
• 55:32
  Russia and China are trying to catch up
• 55:35
  with some sort of competitor.
• 55:37
  I forget the names of them.
• 55:38
  I don't recall the two names that are
• 55:41
  coming up that are trying to create.
• 55:43
  And so what's happened in Ukraine is this.
• 55:50
  Starlink was authorized for Ukraine, but it wasn't
• 55:53
  officially provided to Russia.
• 55:55
  There's been claims over the last year that
• 55:58
  Russian units were accessing Starlink terminals through gray
• 56:02
  market and intermediaries.
• 56:04
  Reports suggest that terminals could have been purchased
• 56:07
  via third countries, used near the front lines,
• 56:11
  but these were not official distributions, right?
• 56:15
  Russia doesn't operate Starlink domestically in a sanctioned
• 56:19
  or authorized capacity.
• 56:21
  You can't use Starlink inside of Russia.
• 56:24
  And if you do, geolocations by Starlink cut
• 56:27
  it off.
• 56:28
  You can't take your one that you buy
• 56:30
  here in the United States, put it on
• 56:31
  top of your camper trailer and drive through
• 56:34
  the redwood forests and use it, take the
• 56:39
  same little thing, plug it in in Russia
• 56:41
  and have it work because geolocation matters, right?
• 56:45
  But there's been persistent claims over the last
• 56:47
  year that Russian units had Starlink terminals too,
• 56:51
  but they were not official distribution.
• 56:53
  Russia inside Starlink can be available, but it's
• 56:58
  generally not.
• 56:59
  So when claims surfaced that Russia was cut
• 57:02
  off in the last couple of weeks from
• 57:05
  Starlink in Zaporizhia, in the Donbass, on the
• 57:09
  front and the east, and that Ukraine is
• 57:12
  able to start a few counteroffenses that have
• 57:16
  been minor or marginally successful, I was skeptical.
• 57:21
  I was like, well, Russia never had Starlink
• 57:24
  in the first place.
• 57:25
  But they did.
• 57:26
  They had third-party stuff.
• 57:30
  Starlink definitely uses geolocation control.
• 57:33
  That means the service can be turned off
• 57:35
  regionally.
• 57:36
  But the complexity is geofencing isn't politically neutral.
• 57:41
  If you disable connectivity in a contested territory,
• 57:45
  you could be shutting off Ukrainian units as
• 57:48
  well.
• 57:48
  They're tactical, and that's a problem.
• 57:51
  So if the Russians steal a Ukrainian Earthlink
• 57:56
  station and use it, eventually they'll be found
• 58:00
  out.
• 58:01
  But they've been using some, to be fair,
• 58:03
  defense contractors have always influenced war, stuff like
• 58:07
  that.
• 58:08
  But Starlink, I think, is a little different.
• 58:10
  If a privately owned, continuously operated communication infrastructure
• 58:15
  can be switched off, and a private individual
• 58:20
  gets to pick one party over the other,
• 58:23
  I just don't like that.
• 58:25
  That's offensive to me.
• 58:26
  And if Musk chooses to pick one side
• 58:30
  over the other, I don't like that.
• 58:33
  I just don't like it.
• 58:34
  I wouldn't like it if he picked Russia
• 58:36
  over Ukraine, and I certainly don't like the
• 58:39
  reverse.
• 58:40
  I don't like it.
• 58:42
  Whether he's in Trump's pocket or not, I
• 58:45
  don't think he is anymore.
• 58:46
  But however that went, battlefield dynamics change based
• 58:52
  on political structure, but what if it's dictated
• 58:54
  by a private individual?
• 58:57
  I don't know.
• 58:58
  He proposed ceasefire frameworks himself, remember that, that
• 59:02
  were criticized by Ukrainian officials.
• 59:04
  He stated repeatedly that he doesn't want Starlink
• 59:07
  used to escalate the conflict or enable offensive
• 59:10
  operations inside of Russia.
• 59:13
  That's not pro-Russia.
• 59:14
  That's his own risk management.
• 59:16
  He does some of the same things I'm
• 59:18
  talking about.
• 59:19
  His tolerance level is different than mine.
• 59:22
  That's his own risk management.
• 59:25
  Musk's companies depend on what?
• 59:28
  U.S. government contracts.
• 59:30
  SpaceX launches national security payloads all the time.
• 59:35
  Tesla operates globally.
• 59:37
  He cannot afford to become an openly partisan
• 59:41
  geopolitical actor, but he also can't pretend to
• 59:44
  be neutral when his infrastructure is central to
• 59:48
  the war.
• 59:49
  So critics accuse him of enabling Ukraine.
• 59:53
  Others accuse him of restricting Ukraine by not
• 59:55
  giving them unbridled access.
• 59:59
  Some call him a war profiteer.
• 1:00:01
  Others call him indispensable.
• 1:00:04
  Truth is what you decide it is.
• 1:00:07
  But he's built something that no state has
• 1:00:10
  built fast enough.
• 1:00:12
  Low Earth orbit satellite dominance.
• 1:00:16
  China and Russia, like I said, are developing
• 1:00:19
  alternatives.
• 1:00:20
  China's Guowang Constellation Project is building large-scale
• 1:00:25
  LEO networks, and Russia is talking about Sphera
• 1:00:28
  and other domestic satellite initiatives, but they're not
• 1:00:32
  available at Starlink's deployment scale.
• 1:00:36
  Starlink has thousands of satellites.
• 1:00:39
  And that density of satellites matters for redundancy,
• 1:00:44
  coverage.
• 1:00:45
  China's accelerating.
• 1:00:46
  Russia's accelerating and experimenting.
• 1:00:49
  But Musk is far, far ahead.
• 1:00:52
  So a valid question says, is Musk effectively
• 1:00:57
  a military industrial god?
• 1:01:00
  Functionally, yeah.
• 1:01:03
  But he's not because he's designed himself to
• 1:01:06
  be that, but because communication infrastructure in wartime
• 1:01:11
  is military infrastructure.
• 1:01:14
  Makes me wonder if that's part of the
• 1:01:16
  reason for the fallout, you know what I
• 1:01:19
  mean, between Trump and company and Musk and
• 1:01:22
  company, you know?
• 1:01:27
  So if a satellite link enables drone targeting,
• 1:01:30
  that link is part of a kill chain,
• 1:01:32
  whether the operator intends it or not.
• 1:01:35
  That's modern war.
• 1:01:37
  So put in the finance on this.
• 1:01:39
  SpaceX is privately held.
• 1:01:41
  Its valuation is immense.
• 1:01:45
  I mean, they're talking about building a city
• 1:01:47
  on the moon.
• 1:01:48
  That's part of the discussion he was having
• 1:01:51
  in the last little bit.
• 1:01:53
  That's an interesting, it was an hour-long
• 1:01:56
  interview.
• 1:01:56
  You should go out and watch it.
• 1:01:58
  It was just in the last week or
• 1:01:59
  so.
• 1:02:01
  And it was a decent interview.
• 1:02:04
  None of this profiteering, none of this communication,
• 1:02:08
  none of this SpaceX make Musk evil.
• 1:02:12
  He's certainly slanted.
• 1:02:14
  He's certainly deeply embedded in the defense ecosystem.
• 1:02:19
  But the tension is when a private individual
• 1:02:22
  influences battlefield capability and shaping public opinion on
• 1:02:27
  geopolitical strategy like he does, that's an uncomfortable
• 1:02:32
  reality.
• 1:02:34
  And I'm not comfortable with it.
• 1:02:35
  I don't like private actors weighing in on
• 1:02:39
  one side or the other.
• 1:02:41
  I don't like it when you're picking one
• 1:02:44
  country over another.
• 1:02:46
  I just don't like it.
• 1:02:50
  For me, there are right and wrong issues.
• 1:02:54
  I don't know because I'm generally a pretty
• 1:02:57
  liberal little person.
• 1:03:00
  So the claims that Russia was cut off
• 1:03:02
  and Ukrainian gains in Cyprus followed.
• 1:03:05
  There was a little bit of Cyprus counteroffensive
• 1:03:09
  that have limited verifiable evidence that Ukraine is
• 1:03:15
  actually taking.
• 1:03:18
  They lost Pokrovsk and Mirnagrad a couple of
• 1:03:23
  months ago.
• 1:03:24
  They aren't going to get them back just
• 1:03:26
  because they got Starlink back.
• 1:03:28
  But drone warfare is multichannel.
• 1:03:31
  There are fiber optic drones that Russia uses
• 1:03:34
  that are fiber optic, the line of sight,
• 1:03:36
  pre-programmed strike paths.
• 1:03:38
  Starlink only enhances that coordination.
• 1:03:41
  It doesn't determine outcomes generally.
• 1:03:44
  So when a headline suggests that Russia lost
• 1:03:47
  Starlink and Ukraine has advanced, that's pretty simplistic.
• 1:03:51
  War isn't that binary.
• 1:03:53
  But if the U.S. maintains low Earth
• 1:03:57
  orbit superiority through a private enterprise, that does
• 1:04:01
  strengthen technological leadership.
• 1:04:07
  But if slash when China builds a parallel
• 1:04:11
  LEO grid and integrates it with a Yuan
• 1:04:15
  settlement digital currency and BRICS coordination, multipolar infrastructure
• 1:04:20
  once again emerges.
• 1:04:25
  Now, just like Musk and company, Musk is
• 1:04:30
  on your side right now, West Ukraine.
• 1:04:34
  And is that assured?
• 1:04:37
  No.
• 1:04:38
  And the dominance of the infrastructure that you
• 1:04:42
  didn't build, that one guy was able to
• 1:04:46
  build on his own, and not one guy
• 1:04:48
  had a huge team helping him, and he
• 1:04:50
  did it with a lot of military industrial
• 1:04:55
  complex money, but that doesn't mean other people
• 1:04:59
  aren't going to catch up.
• 1:05:00
  And it also doesn't mean that's an example
• 1:05:04
  of what I talk about constantly, is that
• 1:05:06
  infrastructure, infrastructure, infrastructure is tomorrow's currency.
• 1:05:15
  It's tomorrow's reality.
• 1:05:17
  You build the infrastructure, you control the world.
• 1:05:22
  You control the pipeline.
• 1:05:24
  You control winners and losers.
• 1:05:25
  You control how people get their goods and
• 1:05:29
  services.
• 1:05:29
  That's why Donald Trump wants to secure, force
• 1:05:34
  Canada to give him unfettered access in the
• 1:05:40
  Arctic, along their borders.
• 1:05:42
  That's why he wants to take Ukraine.
• 1:05:44
  That's why he did steal Venezuela.
• 1:05:47
  It's oil.
• 1:05:49
  Keep it away from China.
• 1:05:52
  That's the goal.
• 1:05:53
  Take that oil and steal 50 million barrels.
• 1:05:58
  Oh, they're giving us 50, yeah.
• 1:06:01
  They're giving us 50 million barrels.
• 1:06:04
  That's just round one.
• 1:06:07
  So let's talk about Musk's broader financial commentary
• 1:06:11
  that he made.
• 1:06:11
  It was a long interview that I encourage
• 1:06:14
  you to go back and listen to, and
• 1:06:16
  he talks about the unsustained government spending.
• 1:06:21
  He's got his problems, and he noted that
• 1:06:24
  it's not going down any in the Trump
• 1:06:27
  era, and he highlighted rising interest expenses.
• 1:06:31
  He warned of long-term fiscal arithmetic, same
• 1:06:34
  stuff that I'm talking to you about, and
• 1:06:36
  aligning, and he isn't wrong about debt trajectory
• 1:06:39
  math.
• 1:06:41
  Interest expense is rising rapidly.
• 1:06:44
  Debt servicing is consuming ever larger budget share,
• 1:06:49
  and Musk understands this compounding.
• 1:06:52
  He built businesses on it.
• 1:06:54
  He knows what he's talking about.
• 1:06:56
  And fiscal unsustainability.
• 1:06:59
  He's not performing in some kind of a
• 1:07:01
  theater.
• 1:07:01
  He's reading a spreadsheet.
• 1:07:04
  But Musk benefits also from government subsidies and
• 1:07:08
  contracts, and so he's also benefiting from tax
• 1:07:13
  credits, federal launches at SpaceX, taking over NASA.
• 1:07:18
  So when he critiques government spending, it's a
• 1:07:21
  little bit ironic.
• 1:07:22
  He's both the beneficiary and a critic, so
• 1:07:26
  this analysis is a little bit uncomfortable because
• 1:07:30
  is he positioning himself as a reformist while
• 1:07:33
  benefiting from business as usual?
• 1:07:37
  I suppose it's possible, and if he's genuinely
• 1:07:39
  concerned about sovereign arithmetic, I don't know, I
• 1:07:43
  suppose that's possible too.
• 1:07:44
  Those two can coexist, but let's talk about
• 1:07:47
  China and Russia building alternatives.
• 1:07:51
  China's ambitions are tied to digital infrastructure expansion.
• 1:07:56
  China's integrating telecom, Digital One experimentation, and space
• 1:08:01
  -based systems into its own state planning, and
• 1:08:05
  Russia is trying to work with them on
• 1:08:07
  that to get around, once again, the hegemonic
• 1:08:12
  dictation of sanctions and things of that nature.
• 1:08:17
  They're not going to match Starlink immediately, but
• 1:08:20
  everybody knows how to do it now, and
• 1:08:23
  they have captive infrastructure mechanisms, state-controlled prioritization,
• 1:08:32
  state-controlled.
• 1:08:34
  They don't have to wait for a musk
• 1:08:36
  to come along and build something that NASA
• 1:08:38
  couldn't have built in a billion years.
• 1:08:41
  You know, it would have never happened.
• 1:08:43
  We can't build a short rail system in
• 1:08:46
  California.
• 1:08:48
  It ain't going to happen, and states fight
• 1:08:51
  over it.
• 1:08:52
  Senators fight over what slides through into their
• 1:08:55
  families' pockets, and this all has financial implication
• 1:08:59
  because communication infrastructure also underpins trade settlement
• 1:09:05
  coordination.
• 1:09:07
  So I'm not saying anything anti-musk here.
• 1:09:10
  This is a reality check.
• 1:09:11
  This is structural realism.
• 1:09:14
  Private actors with sovereign scale capability complicate geopolitical
• 1:09:20
  calculus.
• 1:09:21
  Nobody else could keep that up.
• 1:09:23
  You know, some guy in France can't just
• 1:09:26
  go build himself a low-Earth orbit satellite
• 1:09:31
  system to compete with Starlink.
• 1:09:33
  It's not going to happen.
• 1:09:33
  China and Russia, with India and BRICS and
• 1:09:37
  other nations joining in so they're not dominated
• 1:09:41
  by Elon Musk and company, that's a possibility
• 1:09:44
  because those countries are doing infrastructure-sized projects
• 1:09:50
  with each other and creating stuff.
• 1:09:53
  What's the talk about in Iran?
• 1:09:55
  It's about Russia and China funding what's going
• 1:09:58
  on in Iran to help them out, or
• 1:10:00
  partnerships.
• 1:10:01
  India has one of the largest ports that
• 1:10:04
  they manage in Iran.
• 1:10:07
  And remember that.
• 1:10:09
  You know, Musk is not a hero or
• 1:10:11
  a villain.
• 1:10:12
  He's a leverage point, and he's a leverage
• 1:10:15
  point that gives America some form of dominance,
• 1:10:20
  at least in decision-making because right now
• 1:10:23
  he's on our side.
• 1:10:24
  So when you talk financially, you know, what
• 1:10:28
  are we illustrating here?
• 1:10:30
  You know, so Musk, infrastructure, communications, competition that
• 1:10:37
  comes up around it.
• 1:10:39
  Let's talk about the long cycle and debt
• 1:10:45
  war inflection points because you cannot understand what's
• 1:10:48
  happening in China's treasury position, Japan's yield normalization,
• 1:10:55
  Musk's infrastructure leverage, or BRICS settlement architecture unless
• 1:11:03
  you put it inside a long arc.
• 1:11:06
  And it's the arc that we're talking about.
• 1:11:09
  Nothing's collapsing tomorrow.
• 1:11:10
  Guy named Ray Dalio, who many people follow,
• 1:11:15
  has spent decades studying long-term debt cycles.
• 1:11:21
  You don't have to treat him as a
• 1:11:22
  prophet to take his frameworks as serious.
• 1:11:25
  His analysis isn't ideological.
• 1:11:28
  It's arithmetic, and it's historic.
• 1:11:32
  His thesis is simply structural.
• 1:11:37
  Every major reserve currency system eventually reaches a
• 1:11:42
  point where debt accumulation outproduces productive growth or
• 1:11:50
  outpaces.
• 1:11:51
  And when that happens, central banks have three
• 1:11:54
  options.
• 1:11:55
  Raise taxes.
• 1:11:57
  Central banks, we're talking about governments.
• 1:12:01
  This is never going to happen in the
• 1:12:03
  U.S. We have zero capacity to do
• 1:12:05
  any of these three things.
• 1:12:08
  Raise taxes or cut spending.
• 1:12:09
  That's politically painful.
• 1:12:12
  Monetize the debt.
• 1:12:13
  Inflate away their obligations.
• 1:12:16
  Restructure the system, which would be accompanied by
• 1:12:19
  conflict or institutional reset.
• 1:12:22
  Dalio calls this the big cycle.
• 1:12:25
  It includes rising power phase, peak dominance phase,
• 1:12:30
  overextension phase, internal divisions phase, external competition phase,
• 1:12:37
  then the reset.
• 1:12:38
  Six steps.
• 1:12:40
  He compares modern America's fiscal and geopolitical posture
• 1:12:43
  with historical examples.
• 1:12:45
  Dutch, British, others.
• 1:12:47
  Now, let's be careful.
• 1:12:48
  The U.S. isn't collapsing.
• 1:12:49
  I don't believe that.
• 1:12:50
  But it's carrying historically high debt level relative
• 1:12:55
  to GDP.
• 1:12:57
  I think it's $38 trillion.
• 1:13:01
  Interest expense is at a level that's almost
• 1:13:04
  the same as defense spending.
• 1:13:06
  That matters.
• 1:13:07
  Because interest isn't discretionary.
• 1:13:11
  It has to be paid.
• 1:13:13
  And when interest consumes large parts of revenue,
• 1:13:18
  you don't have any flexibility.
• 1:13:20
  And Dalio says that long cycles turn when
• 1:13:24
  three pressures converge into a point.
• 1:13:29
  High debt, internal political fragmentation, and external geopolitical
• 1:13:35
  rivalry.
• 1:13:37
  Look around, friends and neighbors.
• 1:13:40
  Take a look around you.
• 1:13:42
  What do you see?
• 1:13:43
  We're in the movie Fallout right here.
• 1:13:46
  Or the miniseries Fallout.
• 1:13:49
  High debt?
• 1:13:50
  Absolutely.
• 1:13:51
  Internal fragmentation?
• 1:13:53
  Oh, no doubt.
• 1:13:55
  External rivalry?
• 1:13:57
  Everywhere.
• 1:13:58
  China, Russia, emerging multipolar blocs, Canada, for God's
• 1:14:03
  sake.
• 1:14:04
  This doesn't guarantee a collapse, but it signals
• 1:14:07
  a transition risk.
• 1:14:10
  Transition risk makes everything cost more.
• 1:14:15
  Let's connect this to the war funding, because
• 1:14:19
  war accelerates fiscal strain.
• 1:14:21
  Modern warfare is capital intensive.
• 1:14:24
  You can't fund it without Elon Musk, right?
• 1:14:28
  Modern warfare with missiles is expensive.
• 1:14:33
  Logistics are incredibly expensive.
• 1:14:36
  Cyber infrastructure, expensive.
• 1:14:39
  Sanctions enforcement, expensive.
• 1:14:41
  Proxy wars in no small amount are expensive.
• 1:14:48
  Unlike World War II, today's Western industrial base
• 1:14:54
  isn't mobilized in a unified national effort.
• 1:14:59
  By the way, Russia's is.
• 1:15:01
  But in the West, it's outsourced, fragmentized, and
• 1:15:05
  globalized.
• 1:15:06
  So Dalio's framework says that when debt is
• 1:15:09
  high and external rivalry rises, countries increase spending
• 1:15:13
  rather than reduce it.
• 1:15:15
  Why?
• 1:15:16
  Because cutting back during a perceived strategic competition
• 1:15:20
  phase would show weakness.
• 1:15:23
  So what's Donald Trump doing?
• 1:15:24
  He's not showing weakness at all.
• 1:15:26
  He's showing dominance.
• 1:15:28
  He's taking over the planet.
• 1:15:30
  That's what he's doing.
• 1:15:32
  Screw Canada.
• 1:15:33
  I'll put those jokers in line.
• 1:15:36
  That's what he's doing.
• 1:15:37
  They finance through more borrowing.
• 1:15:40
  The borrowing depends on trust in the currency
• 1:15:43
  stability.
• 1:15:44
  So if you bring China back into it,
• 1:15:47
  China has been reducing treasury exposure while expanding
• 1:15:51
  yuan-based trade by building infrastructure everywhere because
• 1:15:57
  that aligns trade back to them.
• 1:16:01
  And it's one of the key reasons Donald
• 1:16:03
  Trump needed to steal Venezuela from China because
• 1:16:09
  China had 100 billion in there.
• 1:16:11
  So that's part of this assessment.
• 1:16:16
  The stress is that reserve currency transactions are
• 1:16:19
  gradual until they just aren't.
• 1:16:22
  The pound didn't appear overnight.
• 1:16:25
  It lost its trade share.
• 1:16:26
  It slowly lost its settlement share.
• 1:16:29
  It slowly lost geopolitical primacy.
• 1:16:34
  Who buys the British pound anymore?
• 1:16:37
  And when the dollar replaced it, it was
• 1:16:40
  because the underlying industrial and financial dominance shifted
• 1:16:45
  to the U.S., wartime footing.
• 1:16:48
  Who's got the greatest industrial and infrastructure capacity
• 1:16:52
  on the planet?
• 1:16:54
  It's not us.
• 1:16:56
  Not the U.S., let's say.
• 1:16:58
  BRICS nations collectively represent a larger share of
• 1:17:02
  global population, a very significant portion of GDP,
• 1:17:09
  larger than the G7.
• 1:17:11
  More importantly, they represent commodity leverage, raw materials,
• 1:17:17
  energy producers, food exporters, Brazil, manufacturing scale.
• 1:17:22
  If those nations increasingly trade among themselves in
• 1:17:26
  non-dollar currency, the dollar's marginal dominance shrinks.
• 1:17:31
  Not collapses, shrinks.
• 1:17:33
  Just like the pound.
• 1:17:36
  And shrink at the margin is what affects
• 1:17:38
  treasury demand over time.
• 1:17:40
  And Dalio warns about this explicitly.
• 1:17:42
  He says that when debt rises faster than
• 1:17:45
  income, which is definitely the case in the
• 1:17:48
  United States, and when foreign holders begin diversifying,
• 1:17:51
  which is also definitely happening, funding costs rise.
• 1:17:56
  When these funding costs are going up, what
• 1:17:59
  are you going to do?
• 1:18:01
  Difficult choices.
• 1:18:03
  Do you raise taxes?
• 1:18:04
  Do you cut entitlements?
• 1:18:06
  Do you reduce defense?
• 1:18:07
  Do you inflate the currency?
• 1:18:09
  None of them are politically easy.
• 1:18:11
  I hope that the person I'm having these
• 1:18:15
  financial conversations with is correct and that I'm
• 1:18:21
  dead wrong, that Trump will get rid of
• 1:18:23
  the debt in three years.
• 1:18:24
  Not through nationalizing, not through tariffing it away,
• 1:18:28
  because that ain't going to happen, but through
• 1:18:32
  real policy.
• 1:18:36
  And not just nationalizing the debt.
• 1:18:39
  Not inflating.
• 1:18:41
  If he inflates it away, okay, but that
• 1:18:43
  inflation has to show some positivity in the
• 1:18:50
  income of the average American, not just the
• 1:18:56
  upper 3%, or 1%, because they'll always make
• 1:19:02
  money.
• 1:19:02
  Win or lose, they always make money.
• 1:19:05
  So I'd love to see the debt go
• 1:19:08
  away, because I think it's a large problem,
• 1:19:11
  but I think it's only one cog in
• 1:19:17
  the wheel.
• 1:19:18
  What's also there is the fact that on
• 1:19:24
  the margins, which is why Dalio's discussions are
• 1:19:27
  so important here, on the margins the world
• 1:19:30
  is changing.
• 1:19:31
  This is a long cycle, and what did
• 1:19:37
  I hear Carney say in his Davos thing?
• 1:19:42
  He said that Canada is doubling its military
• 1:19:47
  spending by the end of this decade, by
• 1:19:51
  2030.
• 1:19:52
  They're doubling their expenses on the military.
• 1:19:56
  They're no longer going to rely only upon
• 1:20:01
  U.S. protecting.
• 1:20:03
  Canada hasn't had to spend any money on
• 1:20:05
  defense.
• 1:20:06
  They could always presume that it's us.
• 1:20:09
  You tell me that's not a shift, that
• 1:20:12
  there's not a chink in the armor nationwide?
• 1:20:15
  We have all kinds of stuff going on
• 1:20:20
  that indicate these interconnected world problems.
• 1:20:29
  It suggests, according to Dalio, these sorts of
• 1:20:33
  things and these frameworks show exactly, it's the
• 1:20:37
  timing of it all, is what he says.
• 1:20:39
  The world is hedging against hegemony.
• 1:20:43
  It's recalibrating for multipolarity, and liquidity is no
• 1:20:49
  longer infinite.
• 1:20:50
  We have rising geopolitical friction, rising internal fragmentation,
• 1:20:54
  rising protectionism.
• 1:20:57
  Trump's the god of protectionism with tariffs and
• 1:21:01
  all that stuff, and rising financial volatility as
• 1:21:04
  a result.
• 1:21:05
  We have all four of the things that
• 1:21:07
  Dalio says are there.
• 1:21:10
  So the responsible analysis is not to panic.
• 1:21:14
  It's to prepare.
• 1:21:16
  Understanding that funding extended confrontations while managing high
• 1:21:21
  debt, that's a strategic discipline that you have
• 1:21:26
  to have.
• 1:21:27
  A lot of people don't think strategically.
• 1:21:29
  They think of next week.
• 1:21:31
  They don't think of next year.
• 1:21:32
  And discipline has not always been the defining
• 1:21:36
  feature of our government, because it's not.
• 1:21:39
  It's spend today.
• 1:21:41
  Spend today, spend, spend, spend.
• 1:21:43
  And the final of that is you've got
• 1:21:46
  to synthesize something.
• 1:21:49
  How do we bring everything to a positive
• 1:21:54
  part of this?
• 1:21:55
  It's the preparation part, right?
• 1:21:57
  I don't want to be doom and gloom
• 1:22:03
  and chicken little, the sky is falling.
• 1:22:07
  I really don't want to do that.
• 1:22:09
  I want to better prepare myself.
• 1:22:13
  My actions are different than they would have
• 1:22:18
  been before.
• 1:22:20
  Lowering expectations, things like that.
• 1:22:25
  I don't mean this is a hard line
• 1:22:28
  warning.
• 1:22:29
  This is unsustainable and Washington is pretending otherwise,
• 1:22:33
  although there's certainly some truth to that.
• 1:22:36
  I'm much more along the lines of there
• 1:22:40
  needs to be some kind of unemotional recalibration
• 1:22:48
  of some sort.
• 1:22:50
  I'm not trying to accuse anyone of everything.
• 1:22:53
  It's just arithmetic.
• 1:22:54
  It's just economics.
• 1:22:55
  It's just restructure or thinking clearly
• 1:23:05
  about cold, hard, mathematical facts.
• 1:23:12
  Deficits, interest, funding reality without emotion.
• 1:23:18
  No ideology, just numbers.
• 1:23:21
  The U.S. federal government is currently running
• 1:23:25
  annual deficits, a deficit, a budget deficit of
• 1:23:32
  $1.5 trillion.
• 1:23:36
  Some projections say it's closer to $2 trillion
• 1:23:40
  because our idiots in charge cannot reduce it.
• 1:23:46
  The total federal debt is $35 trillion, something
• 1:23:52
  like that.
• 1:23:53
  I got to pull up the U.S.
• 1:23:56
  debt clock, see if I can get it
• 1:23:58
  to you right now.
• 1:24:01
  U.S. I can't type and talk at
• 1:24:05
  the same time, can I?
• 1:24:08
  U.S. debtclock.org, right?
• 1:24:12
  U.S. debtclock.org is what it is,
• 1:24:16
  the national debt clock in real time.
• 1:24:20
  Let's see if it's gone down since I
• 1:24:22
  had that conversation.
• 1:24:24
  Nope.
• 1:24:25
  In fact, the U.S. national debt as
• 1:24:27
  of this very moment, I thought maybe it
• 1:24:30
  had gone down and my friend was correct
• 1:24:32
  in this and that it went from $38
• 1:24:34
  down to $35 because I saw some that
• 1:24:37
  say it's only $35.
• 1:24:38
  But nope, it's almost $39.
• 1:24:41
  Well, $38.6 trillion.
• 1:24:46
  That is where we are.
• 1:24:49
  And the federal budget deficit, official, is $1
• 1:24:53
  .7 trillion.
• 1:24:57
  Now, you could argue that all of these
• 1:25:00
  tariffs are bringing things down.
• 1:25:02
  They brought in $373 billion, okay?
• 1:25:10
  How many billions are in a trillion?
• 1:25:15
  A thousand, right?
• 1:25:18
  So there you have it.
• 1:25:21
  That's not much when you have $38 trillion
• 1:25:26
  and only $373 billion in revenue.
• 1:25:31
  That ain't going to change anything anytime soon.
• 1:25:36
  So the starting point.
• 1:25:39
  Now, here's the part that matters the most
• 1:25:41
  is interest.
• 1:25:43
  For years, low interest rates masked the cost
• 1:25:47
  of debt.
• 1:25:48
  When rates were near zero, servicing large principal
• 1:25:52
  balances was manageable.
• 1:25:54
  But that environment has changed.
• 1:25:58
  The Federal Reserve has raised rates aggressively to
• 1:26:00
  fight inflation.
• 1:26:02
  Treasury yields followed that.
• 1:26:04
  The average rate for new treasury issuance is
• 1:26:09
  higher than it was three years ago.
• 1:26:10
  This means that as older, low interest bonds
• 1:26:14
  mature and are refinanced, they are replaced with
• 1:26:18
  higher interest bonds.
• 1:26:20
  And it's a mechanical process.
• 1:26:22
  Not political.
• 1:26:24
  It's just a rollover.
• 1:26:26
  So if you owe $34 trillion, we owe
• 1:26:29
  out $38 actually, and your average interest rate
• 1:26:32
  moves from 1% to 2% to
• 1:26:34
  4% to 5%, the interest bill is
• 1:26:37
  dramatically expanding.
• 1:26:41
  Every percentage point increase in average borrowing translates
• 1:26:45
  into hundreds of billions in additional annual interest
• 1:26:51
  expense.
• 1:26:53
  Interest expense is already approaching $1 trillion annually.
• 1:26:59
  That's not a projection.
• 1:27:00
  That's trajectory.
• 1:27:03
  And compare that with other major spending categories.
• 1:27:07
  What is defense going to be?
• 1:27:09
  A trillion and a half.
• 1:27:11
  Interest, similar.
• 1:27:13
  Social Security, larger.
• 1:27:15
  Medicare, large.
• 1:27:17
  But here's the distinction.
• 1:27:19
  Interest isn't negotiable.
• 1:27:21
  You got to pay it.
• 1:27:22
  You can't vote it down.
• 1:27:23
  You can't delay it.
• 1:27:25
  You can't no budget.
• 1:27:29
  What do they call that?
• 1:27:30
  Shut down.
• 1:27:31
  You can't government shut down it.
• 1:27:33
  Interest is still growing while these assholes can't
• 1:27:36
  get their heads out of their collective rear
• 1:27:38
  ends and figure out how to make a
• 1:27:42
  budget because each one of them is looking
• 1:27:45
  for his share of the $1.8 trillion
• 1:27:50
  deficit.
• 1:27:53
  Every one of them is to blame for
• 1:27:55
  that because they can't spend within their means.
• 1:28:01
  So who absorbs it?
• 1:28:02
  Domestic institution, foreign banks, pension funds, insurance companies,
• 1:28:07
  private investors, and sometimes the Federal Reserve.
• 1:28:11
  Now combine this with what we talked about
• 1:28:12
  earlier.
• 1:28:15
  If China reduces Treasury purchases, if Japan reallocates
• 1:28:19
  capital, if BRICS nations grow, then marginal demand
• 1:28:23
  for U.S. debt is also going to
• 1:28:25
  shift.
• 1:28:26
  Not disappear, but shift.
• 1:28:29
  And that is the point.
• 1:28:32
  You can't afford the wars that we are
• 1:28:34
  doing, and something is going to have to
• 1:28:38
  give.
• 1:28:38
  One way or the other, it's going to
• 1:28:40
  give.
• 1:28:41
  Might take a little bit of time.
• 1:28:43
  And that's all we have time for today
• 1:28:45
  here on International Flavor.
• 1:28:49
  Very glad you participated.
• 1:28:51
  Very glad you were here.
• 1:28:53
  Thanks for joining me on this big radio
• 1:28:56
  day.
• 1:28:57
  And tomorrow I will be here again for
• 1:29:00
  the last day of the week.
• 1:29:01
  For me, on Friday, we're going to start
• 1:29:04
  with our Civic Outlaws show Friday morning.
• 1:29:08
  And it should be rather entertaining.
• 1:29:10
  I hope you all have a very good
• 1:29:12
  day listening to damn radio.
• 1:29:17
  Lots of shows coming up.
• 1:29:18
  And coming up right now is a damn
• 1:29:20
  schwag.
• 1:29:22
  Thanks for joining us.