Latest / UK Column Radio / The Petrodollar, China & Iran What the Media Does Not Tell You | Silk and Steel

Transcript

The Petrodollar, China & Iran What the Media Does Not Tell You | Silk and Steel · UK Column Radio

0:01
Speaker 1: Hello, and welcome to another episode of the Silk and
0:04
Speaker 1: Steal Podcast. I'm your host Carl Za. Today I welcome
0:08
Speaker 1: back the crowd's favorite, doctor Warwick Powell from Australia. Doctor Pow,
0:14
Speaker 1: we since we last talked, I think it was two
0:17
Speaker 1: weeks ago, a lot has happened in this world. Now
0:21
Speaker 1: the ceasefire is over with Iran. Iran has hit US
0:27
Speaker 1: flagships I think, including a warship, and now Trump is
0:33
Speaker 1: threatening to put a thousand percent there from China if
0:39
Speaker 1: China continued to do Disney suits yourrop. But US Treasury
0:44
Speaker 1: Department actually did place five five Chinese independent refiners under sanction,
0:52
Speaker 1: and China says no China. China already informed all the
0:56
Speaker 1: company operating in China do not abide by US sanction.
1:00
Speaker 1: You will continue to do business with a Henley Group.
1:04
Speaker 1: We do not recognize US lost extra territoriality in China.
1:09
Speaker 1: And at the same time, Scott Besson, I think it
1:13
Speaker 1: was yesterday, he just said we need China's help to
1:18
Speaker 1: open the Straight almost and at the same time he said,
1:23
Speaker 1: China is a sponsor of Uranian terrorism, but we want
1:28
Speaker 1: China's China to help to open the Trader home moves,
1:32
Speaker 1: So there's a whole bunch of crazy things happening. This
1:35
Speaker 1: all happened with expectation that Trump is supposed to visit
1:41
Speaker 1: Beijing next week. So I like to get your take.
1:45
Speaker 2: On all this. Well, it's a bit of a dog's breakfast,
1:49
Speaker 2: as I think you've described. And at this stage I
1:53
Speaker 2: think the Trump visit the Beijing is going ahead. The
1:57
Speaker 2: logistics have been put into place, the presidential motorcaide vehicles
2:02
Speaker 2: have landed in China, and the security work and the
2:08
Speaker 2: pre arrangements are all proceeding, which of course we'll make
2:12
Speaker 2: for next week very very interesting. Before next week is
2:16
Speaker 2: we have the Iranian Foreign minister visiting Beijing, in fact,
2:20
Speaker 2: I think landing on the sixth or the seventh, and
2:26
Speaker 2: after the visit of President Trump. From memory, I think
2:31
Speaker 2: we have pretty much straight after that a visit by
2:35
Speaker 2: President Putin of Russia to Beijing as well. So this
2:39
Speaker 2: next three weeks or so is quite clearly a pivotal
2:43
Speaker 2: week in many regards, not necessarily because there'll be significant
2:47
Speaker 2: decisions made, but often when there is no decision made,
2:50
Speaker 2: it is just as important because that tells us about
2:55
Speaker 2: the distance, if you will, between different parties and how
2:59
Speaker 2: they may ultimately the struggle to find common ground to
3:02
Speaker 2: move forward on. The situation in the Persian Gulf and
3:08
Speaker 2: the Strait of Hormuz is one in which I think
3:12
Speaker 2: quite clearly demonstrates that Iran has the military force to
3:20
Speaker 2: enforce the weapon of Hormoz. And we know this increasingly
3:26
Speaker 2: because all sorts of efforts to squeeze Iran, either through blockades,
3:35
Speaker 2: intensified sanctions and the rest in the hopes that somehow
3:39
Speaker 2: that will cause a change in position from the government
3:43
Speaker 2: in Tehran on the Strait of Hormones is not working.
3:47
Speaker 2: We've seen intensified rhetoric around how the Iranian oil system
3:53
Speaker 2: is somehow on the verge of explosion because it is
3:57
Speaker 2: running out of storage capacity. But if you actually have
4:01
Speaker 2: a look at the data over the course of the
4:03
Speaker 2: last ten years, we know very very clearly that the
4:07
Speaker 2: Iranian oil system, from production through to pipes, through to
4:12
Speaker 2: processing and storage, has gone through extended episodes of depressed
4:18
Speaker 2: production without ultimately causing major hiccups to being able to
4:23
Speaker 2: bring these facilities back online. And the most recent examples
4:29
Speaker 2: of all of that, incidentally, Carl, was after the JCPOA
4:33
Speaker 2: was torn up by Trump version one point zero, and
4:37
Speaker 2: the sanctions were imposed on Iran. And if you look
4:41
Speaker 2: at the data production data, which shows that our unproduction
4:45
Speaker 2: really felt very, very dramatically and most of its production
4:50
Speaker 2: was only for local consumption purposes. Then it picked up
4:54
Speaker 2: about four or five years later with China becoming the
4:58
Speaker 2: most significant export market for Iranian oil products. But it
5:03
Speaker 2: shows that the system is able to cope with extended
5:08
Speaker 2: periods of very very low production levels. So the retoric
5:12
Speaker 2: around how this was somehow going to be the tipping point,
5:17
Speaker 2: you know, the thirteen days, eighteen days, twenty one days,
5:21
Speaker 2: forty days, six or whatever. It was quite clearly, I
5:24
Speaker 2: think American intelligence was clueless and the politicians were clutching it.
5:28
Speaker 2: Just about anything that they could lay their hands on
5:31
Speaker 2: proved to be misplaced, and the Iranian capabilities to ride
5:37
Speaker 2: this through have been demonstrated. We then had Operation Freedom,
5:42
Speaker 2: which has really lasted no more than about forty eight hours.
5:50
Speaker 2: President Trump declared that Operation Freedom was to be suspended
5:55
Speaker 2: at the request, of course of others, not because it
5:58
Speaker 2: wasn't going anywhere, but once again out of American beneficence
6:03
Speaker 2: and regard for the welfare and attitudes of other countries,
6:09
Speaker 2: because that's what the United States does. It's got a
6:12
Speaker 2: long track record of taking into account what others think,
6:16
Speaker 2: so it's been suspended. Before it was suspended, we had
6:23
Speaker 2: some pushback, which is really right. White has been suspended.
6:29
Speaker 2: The attempts to push some vessels through were ultimately confronted
6:37
Speaker 2: by Iran. They were able to create sufficient risk for
6:44
Speaker 2: both military and commercial vessels that Operation Freedom are basically
6:49
Speaker 2: petered out to being not much more than a fizzer.
6:53
Speaker 2: And again, President Trump, I think and those folk in
6:57
Speaker 2: the White House and the Pentagon are left with I
7:00
Speaker 2: think some very very serious problems. Because the warnow, which
7:05
Speaker 2: what was March and April, so we've now gone two
7:09
Speaker 2: months and we're now into the third month, was expected
7:13
Speaker 2: to be over within three days with a decapitation. It
7:16
Speaker 2: was then expected to be over within maybe another week
7:20
Speaker 2: because the Iranian people would rise up in arms against
7:23
Speaker 2: their government. And none of that's come true. And the
7:27
Speaker 2: United States meanwhile expended an incredible amount of its arsenal
7:33
Speaker 2: to a point where there are widespread concerns that the
7:37
Speaker 2: arsenal is not in a position to be replenished for
7:41
Speaker 2: many years to come. And on top of all of that,
7:46
Speaker 2: we've seen reports now from CNN validating what many of
7:51
Speaker 2: us had observed through independent reporting, that Iran successfully attacked
7:57
Speaker 2: and destroyed or damaged severely every American base across the
8:02
Speaker 2: Middle East to a point where those bases cannot be
8:06
Speaker 2: occupied or used. Now, this is very significant because it
8:10
Speaker 2: has implications not only for what the United States may
8:14
Speaker 2: or may not be able to do in the event
8:17
Speaker 2: that this war is settled, but it also has ramifications
8:24
Speaker 2: for American deterrence posture in other parts of the world.
8:28
Speaker 2: It tells us that an American base within range of
8:32
Speaker 2: a short range or medium range ballistic missile, together with drones,
8:37
Speaker 2: is basically undefendable. And every American deterrence or force projection
8:45
Speaker 2: strategy premised on a network of bases around the world
8:48
Speaker 2: so long as those bases are within range literally means
8:52
Speaker 2: that those strategies are no longer viable. And anyone serious
8:59
Speaker 2: in the defense space will have observed that, and you know,
9:03
Speaker 2: noted that. So I think that that's where we're at.
9:06
Speaker 2: Trump's really stuck in a between a rock and a
9:08
Speaker 2: hard place. What's he going to do? Declare victory and
9:12
Speaker 2: back out? Well, the problem with that is that no one,
9:15
Speaker 2: no one else would believe there's been victory. That's problem
9:18
Speaker 2: number one. Number two is try to hold the hiatus
9:25
Speaker 2: in a sense, to try and buy time and try
9:27
Speaker 2: and find some other way of moving forward probable. You know,
9:31
Speaker 2: that's that's not a bad approach from Washington's point of view,
9:36
Speaker 2: to the extent you can hold the line, or alternatively
9:40
Speaker 2: with the pressures of the sort of millinery and lobby
9:47
Speaker 2: you know, the religious lobbies and the Greater Israel lobbies
9:50
Speaker 2: and others there is, and the neocons broadly speaking, who
9:54
Speaker 2: you know, are literally itching for more wars wherever they
9:57
Speaker 2: can fight a war. You know, there is the real
10:01
Speaker 2: prospects of a return to escalation. And so look, this
10:06
Speaker 2: next day or two is going to be I think
10:08
Speaker 2: quite interesting. But where does this leave the summit? Right?
10:11
Speaker 2: I mean you touched on China's pushback. This is really
10:15
Speaker 2: a very significant event, not because the Americans could somehow
10:20
Speaker 2: stop the Chinese refineries from transacting and doing business with
10:26
Speaker 2: Iranian exporters, because they weren't transacting on American rails anyway,
10:32
Speaker 2: but it was a global message actually, and that is
10:34
Speaker 2: that the Chinese will no longer voluntarily abide by American unilateralism,
10:41
Speaker 2: and it will not abide by American sanctions that are
10:46
Speaker 2: in breach of international law, namely that these sanctions do
10:50
Speaker 2: not have the clearance of the Security Council and therefore
10:55
Speaker 2: are treated, as far as Beijing is concerned, as illegal.
11:01
Speaker 2: So this is actually putting on notice not only the Americans,
11:07
Speaker 2: but also organizations around the world who have felt up
11:11
Speaker 2: until now pressure of complying with American sanctions that perhaps,
11:17
Speaker 2: if much of their business involves dealing with China and
11:20
Speaker 2: the China related world, that maybe it's time to also
11:25
Speaker 2: refuse to abide by America's illegal long arm jurisdiction.
11:32
Speaker 1: Yeah, given all that, why do you think Trump is
11:35
Speaker 1: going ahead with STRIP? Because he is essentially going to
11:40
Speaker 1: China in the midst of a war and when nothing
11:44
Speaker 1: has been settled and he has nothing to show for. Like,
11:49
Speaker 1: Trump will go to China was incredibly weak, Cant. The
11:53
Speaker 1: original gambit was, Okay, the United States grab Venezuela, grab
11:58
Speaker 1: you wrong, and and Trump can meet Chi Jin Pin
12:02
Speaker 1: and say, hey, we have your energy partner by the balls,
12:07
Speaker 1: and you've got to give us rare Earth. But now
12:10
Speaker 1: Trump doesn't really have anything he doesn't really have any leverage,
12:14
Speaker 1: So why is he going ahead with the summit? What
12:17
Speaker 1: does that? You know, what does that give Trump?
12:21
Speaker 2: Well, I think that there's a couple of issues there.
12:22
Speaker 2: Let's try and unpack them. The first one is the
12:24
Speaker 2: theory that the attacks was part of the broader containment
12:31
Speaker 2: or strangulation of China. That may well be the thinking
12:34
Speaker 2: in Washington, of course, because as we've discussed on many occasions,
12:38
Speaker 2: all things China seem to reside rent free inside the
12:41
Speaker 2: minds of everyone inside the Beltway. So China casts a
12:44
Speaker 2: shadow on just about every decision making process that takes
12:49
Speaker 2: place in Washington. So let's say that that was the ambition.
12:54
Speaker 2: The problem with that is that the ambition versus the
12:58
Speaker 2: reality of China's energy structure, the extent to which Iran
13:03
Speaker 2: played a role in that, the extent to which China
13:05
Speaker 2: has substitutes not only for Iran and oil, but the
13:09
Speaker 2: longer term structural transitions to reduce oil dependency, all point
13:14
Speaker 2: to the fact that that theory of strangling China's so
13:18
Speaker 2: called oil supply networks just doesn't apply in the way
13:22
Speaker 2: that it perhaps did twenty years ago. So that's the
13:25
Speaker 2: first thing. Now that doesn't surprise me, because in many ways,
13:29
Speaker 2: the way that Washington works, particularly the sort of quasi
13:33
Speaker 2: state institutions of the world of think tanks and others,
13:37
Speaker 2: is that it builds up a set of narratives that
13:40
Speaker 2: become part of the conceptual furniture, and those narratives ultimately
13:45
Speaker 2: frame the ideas that are treated as legitimate, and they
13:51
Speaker 2: become in many ways a deep accepted background knowledge this
13:57
Speaker 2: is how the world is, and therefore will just proceed
14:00
Speaker 2: on that basis, and it struggles to update its worldview
14:05
Speaker 2: based on changes in the external environment. In part, I
14:10
Speaker 2: think that's because there's a lot of intellectual inertia in
14:14
Speaker 2: these processes wrapped around careers, where these ideas ultimately make
14:20
Speaker 2: these careers possible. So I think that that's part of
14:23
Speaker 2: the reason for these kind of consistent miscalculations. And it's
14:27
Speaker 2: not just miscalculations incidentally about China. It's miscalculations about Russia,
14:33
Speaker 2: it's miscalculations about Iran, and plenty of other places to boot.
14:37
Speaker 2: So that I think is one of the issues that
14:41
Speaker 2: gets flushed out in this As for why President Trump
14:44
Speaker 2: is going ahead with this visit, I'm not entirely sure
14:48
Speaker 2: that he had much choice, given that he deferred the
14:52
Speaker 2: first visit. Had he deferred this visit, the risk was
14:56
Speaker 2: was that it would be seen to be a very
14:58
Speaker 2: significant recognition that the campaign against Iran was simply going
15:04
Speaker 2: off the rails and that the United States was in
15:07
Speaker 2: no position to engage with China. And I don't think
15:10
Speaker 2: that would have played particularly well on either the international
15:14
Speaker 2: stage or on the home front. So in part, you
15:18
Speaker 2: have to proceed even if the circumstances aren't ideal. The
15:23
Speaker 2: second thing I think, nonetheless, is that both Beijing and
15:28
Speaker 2: Trump do have a view that no matter how tenuous
15:34
Speaker 2: and how fractious these relationships are and how disrupted the
15:40
Speaker 2: global environment, is that there is nonetheless a sense, a
15:46
Speaker 2: good sense, that there is talks. So this is the
15:51
Speaker 2: idea that George or is better than World War right,
15:55
Speaker 2: And from Beijing's point of view, I would think, though
16:00
Speaker 2: obviously I don't have a line into the decision making
16:05
Speaker 2: processes inside Beijing, but I would think that the considerations
16:10
Speaker 2: revolve around whether or not to, in a sense, keep
16:14
Speaker 2: the Americans at the table, no matter what the circumstances are,
16:18
Speaker 2: because it's better to have them at the table than
16:21
Speaker 2: running around loose. As we know, there are views in
16:27
Speaker 2: China that this is not the time to be meeting
16:30
Speaker 2: with Trump. There's no reason to open the doors and
16:34
Speaker 2: roll out the red carpet to President Trump. But I
16:37
Speaker 2: think on balance, the view is that it's better to
16:40
Speaker 2: have President Trump at the table than not, even if
16:45
Speaker 2: no big outcomes are accomplished. Nonetheless, it enables an important
16:52
Speaker 2: amount of stability to at least be curated and maybe
16:57
Speaker 2: last for another six or twelve months. Let's not forget
17:00
Speaker 2: that Chinese and American leaders are likely to meet on
17:04
Speaker 2: what four occasions this year, this being I think the
17:07
Speaker 2: first of them. So you know, these are nonetheless just
17:10
Speaker 2: important things to have, even if you don't have high
17:14
Speaker 2: hopes that there'll be either grand bargains or anything else.
17:16
Speaker 2: I think also President Trump is looking for some kind
17:20
Speaker 2: of global circuit breaker, not necessary for the war in Iran,
17:23
Speaker 2: because I think that that's I don't think he's going
17:26
Speaker 2: to get much joy from Beijing on that. But the
17:29
Speaker 2: global circuit breaker is really a presentation issue for the
17:32
Speaker 2: domestic audience. The Republicans have got midterms coming up, well,
17:37
Speaker 2: they've all got midterms coming up, but the incumbents of course,
17:40
Speaker 2: are defending a situation where they're polling numbers appear to
17:45
Speaker 2: be poor. And one thing within electoral dynamics is if
17:51
Speaker 2: you can change the narratives and catalyze something else other
17:58
Speaker 2: than what's been happening today, it might give your side
18:02
Speaker 2: some breathing room to maybe pursue some recovery at an
18:08
Speaker 2: electoral level. So I suspect that there's a bit of
18:11
Speaker 2: that in the processes as well. It's impossible, I think,
18:15
Speaker 2: for President Trump to walk away from engagement with China anyway,
18:18
Speaker 2: car when China does feature prominently, if not permanently, in
18:25
Speaker 2: the minds of Washington. But the retric has been for
18:27
Speaker 2: many years that the large part of American woes have
18:31
Speaker 2: been to do with China, whether it's in manufacturing, whether
18:34
Speaker 2: it's in AI technology, you know, what have you. And
18:39
Speaker 2: if an American president does not have the capacity to
18:44
Speaker 2: sit down face to face with his Chinese counterpart, then
18:48
Speaker 2: given how China has been framed inside the Beltway, then
18:52
Speaker 2: in many ways, the American president is not doing justice
18:56
Speaker 2: to the office, let alone to the egos involved.
19:02
Speaker 1: Yeah, normally these leadership meeting and summits are just photoshop
19:09
Speaker 1: when the real work has already been done by bureaucrats
19:12
Speaker 1: on both sides to hammer out some kind of deal
19:15
Speaker 1: where you know, they users summit to make the announcement.
19:19
Speaker 1: Do you think there will be any kind of announcement
19:22
Speaker 1: of any kind of deals to summit.
19:26
Speaker 2: Look, I think we know that there has been quite
19:30
Speaker 2: a deal of frustrations from the China side about the
19:34
Speaker 2: state of preparedness of the administration in Washington. You know
19:38
Speaker 2: that they literally have been distracted by many other issues
19:42
Speaker 2: and that they've found them difficult to engage with on
19:45
Speaker 2: matters of substance right as opposed to the sort of
19:48
Speaker 2: rhetorical politicking. As a result of that, I get the
19:52
Speaker 2: sense that the issues are continually being narrowed so rather
19:57
Speaker 2: than a broad, open ended attempt to resolve men issues,
20:01
Speaker 2: given that this summit is going to take place or
20:04
Speaker 2: you know, ninety nine percent likely to take place, and
20:09
Speaker 2: neither side will want to have absolutely nothing to show
20:13
Speaker 2: for it, and by narrowing down the issues at least
20:16
Speaker 2: they may have something to show for it. I suspect
20:19
Speaker 2: that trade represents the easiest of all of these issues
20:23
Speaker 2: at the moment, in part because agreements have been arrived
20:28
Speaker 2: at over the course of the last twelve months not
20:31
Speaker 2: ideal for either side. I guess that's partly why these
20:35
Speaker 2: agreements get made. But that does provide a basis upon
20:39
Speaker 2: which either the arrangements that have been agreed to can
20:42
Speaker 2: be extended that could be painted as a successful outcome,
20:48
Speaker 2: and or they may be some additional elements around this
20:54
Speaker 2: summit that may at least create let's call them, some
20:57
Speaker 2: new announceables, and I'm thinking of creating platforms or forums
21:04
Speaker 2: in which this question of artificial intelligence might be addressed
21:08
Speaker 2: in a bilateral way. That's not to say that there
21:10
Speaker 2: will be agreements at all, other than that there's now
21:13
Speaker 2: that there could be an agreement that they will work
21:16
Speaker 2: together to address the issues, and that could be also presented.
21:22
Speaker 2: I think, as from President's Trump's point of view, a
21:24
Speaker 2: very important outcome, you know, a responsible one, given how
21:29
Speaker 2: important this AI question is both to American sense of
21:34
Speaker 2: you know, where the contest is at, but also at
21:37
Speaker 2: a global level where addressing AI and the risks and
21:40
Speaker 2: opportunities associated with this scene as for some an existential
21:44
Speaker 2: question as well. So this could elevate this discussions, even
21:48
Speaker 2: if there's not a lot of substance, So you know,
21:51
Speaker 2: the optimist in me. Actually, I'm not quite sure whether
21:53
Speaker 2: there is an optimist anyway. The optimist may be looking
21:59
Speaker 2: at these two arenas for some joy. I have colleagues
22:04
Speaker 2: who are hoping for something bigger, both from the American
22:07
Speaker 2: side and from the Chinese side, around things like major
22:10
Speaker 2: agreements on Chinese investments in American manufacturing and that sort
22:15
Speaker 2: of stuff. But I suspect that there are just simply
22:18
Speaker 2: too many issues on both sides for something like that
22:22
Speaker 2: to to to be pulled together, given the disarray that
22:28
Speaker 2: has been evident, particularly on the Washington side.
22:32
Speaker 1: Speaking of AI, you know, you know, there's just recently
22:37
Speaker 1: the US Congrus has come out basically citing with a
22:42
Speaker 1: with American AI company by accusing Chinese A companies like
22:47
Speaker 1: Deepseek of quote unquote stealing American AI AI intellectual property
22:56
Speaker 1: by distillation, you know what their culture still is. Now
23:00
Speaker 1: they accuse the Chinese AI company of posing questions to
23:07
Speaker 1: the American AI by getting by get by sort of
23:11
Speaker 1: data mining and then and then so they didn't have
23:15
Speaker 1: to spend the time and energy to train their own
23:18
Speaker 1: data the data for a data set for their own AI. Now,
23:21
Speaker 1: this is a common accusation by American uh Ai company
23:25
Speaker 1: level at the Chinese But this is the first time
23:27
Speaker 1: I saw the American government has publicly take a stance
23:32
Speaker 1: uh combining in combination with you know, the Treasury Department's
23:38
Speaker 1: sanctioning of of the five Chinese refiners in relationship to
23:45
Speaker 1: Iranian oil purchase. Why do you think all these happened
23:49
Speaker 1: just before Trump visit? Do you think that's related? Is
23:52
Speaker 1: this part of a you know, just Trump's hard bought
23:55
Speaker 1: negotiation tactic.
23:57
Speaker 2: Well, Trump's stybar wise is to correct things he can
24:00
Speaker 2: then negotiate around, right, so you know, create a problem
24:04
Speaker 2: so that you can take it away and claim that
24:06
Speaker 2: as as some kind of of a decisive victory or
24:11
Speaker 2: an active benevolence or what have you. The issue of
24:14
Speaker 2: AI and IP theft, of course, has been around forever
24:19
Speaker 2: and a day. The United States has got it in
24:23
Speaker 2: its head. And I mean by this, of course, the
24:25
Speaker 2: folk inside the Beltway in Washington that Chinese people and
24:31
Speaker 2: Chinese enterprises have zero capacity to innovate, and therefore anything
24:35
Speaker 2: that remotely appears to be technically innovative must be the
24:41
Speaker 2: result of theft. And this is so deeply ingrained in
24:46
Speaker 2: that sort of foundational layer of worldviews that it's an
24:50
Speaker 2: easy one to trot out to, in a sense, marshal
24:53
Speaker 2: the troops to show the American public that the government
24:58
Speaker 2: and the politicians standing up for, you know, what's good
25:02
Speaker 2: and right. But in the end it's largely politicking these days.
25:07
Speaker 2: And you'll notice that the Chinese side largely shrugs its
25:11
Speaker 2: shoulders and just moves on. You know, it no longer
25:15
Speaker 2: takes these accusations particularly seriously, in large part because over
25:20
Speaker 2: the course of the last ten to twenty years, there
25:25
Speaker 2: have been concerted efforts actually made by governments in China
25:30
Speaker 2: to improve this whole arena of intellectual property rights the
25:36
Speaker 2: protection of them, to a point where Chinese researchers are
25:43
Speaker 2: the most significant beneficiaries of the global intellectual rights regime
25:48
Speaker 2: intellectual property rights regime than anyone else. You know, if
25:52
Speaker 2: you look at patents submitted, publications made, clearly China has
25:57
Speaker 2: become a significant beneficiary of this entire agen and so
26:01
Speaker 2: has an interest in the integrity of the regime. But
26:05
Speaker 2: I think this AI question has some slightly broader ramifications. Came. Firstly,
26:12
Speaker 2: almost all of America's last twelve months or so of
26:17
Speaker 2: so called economic growth GDP growth has been a result
26:22
Speaker 2: of capital expenditure from the AI industry, mainly building out
26:27
Speaker 2: data centers, and without that, you'll recall earlier this year
26:31
Speaker 2: there were some reports that showed that without AI data centers,
26:36
Speaker 2: American GDP would be an emic, it would be less
26:39
Speaker 2: than half a percent. So keeping the AI engine going
26:45
Speaker 2: is actually quite an important part of the story about
26:49
Speaker 2: the American economy, particularly leading up the midterms. It's also
26:53
Speaker 2: incredibly important because the AI industry is actually facing some
26:58
Speaker 2: serious headwinds because people aren't clever, not because they're not
27:02
Speaker 2: able to develop more powerful models, but they're facing headwinds
27:08
Speaker 2: in I think a number of very specific ways. Firstly,
27:13
Speaker 2: there is a physical material constraints that is manifesting around
27:18
Speaker 2: the problems of electricity supply. AI is really just electricity, right,
27:27
Speaker 2: and without being able to resolve this question of electricity supply,
27:32
Speaker 2: the ability to keep punching forward with models becomes problematic.
27:37
Speaker 2: The electricity supply problems in the United States go to
27:41
Speaker 2: the shortages of firm capacity, which is generating capacity estimated
27:46
Speaker 2: by the Energy Secretary to be somewhere in the order
27:48
Speaker 2: of one hundred gigawatts over the next few years. But
27:52
Speaker 2: not only do you need to generate electricity, you also
27:54
Speaker 2: need to be able to distribute electricity from where it
27:56
Speaker 2: gets generated to where it gets used, and that requires
27:59
Speaker 2: poles and wires, it requires substations, converters, transmitters, and those
28:02
Speaker 2: sorts of tools equipment, and in all of those areas
28:07
Speaker 2: there are now supply constraints. There are also constraints in
28:11
Speaker 2: terms of available labor force people with the right skills
28:14
Speaker 2: to do the high powered work, meaning the high voltage
28:18
Speaker 2: related work, and so the ability to expand the American
28:24
Speaker 2: electricity supply industry is actually quite severely constrained, and that's
28:28
Speaker 2: led to a number of scheduled data center projects to
28:33
Speaker 2: be postponed or to be delayed, and some of them
28:37
Speaker 2: have actually been canceled in certain locations in part because
28:40
Speaker 2: there's been public reactions and they've been forced to look elsewhere.
28:44
Speaker 2: The public reactions emerge because data centers actually also create
28:49
Speaker 2: inadvertent or unintended consequences, which is to increase the cost
28:54
Speaker 2: of electricity for other users, and that of course means
28:57
Speaker 2: other industries and households. So that's the second part I
29:01
Speaker 2: guess of this data center or AI question. The third
29:05
Speaker 2: issue car is that given all of these issues, the
29:09
Speaker 2: American AI industry and the business models that underpinned its
29:14
Speaker 2: valuations and the money capital that it raised over the
29:17
Speaker 2: course of the last two years, which it is spending
29:20
Speaker 2: of course with Gay Abandon, is now also under stress
29:24
Speaker 2: because of the expanded rollout of high performance open source
29:30
Speaker 2: solutions from China, and that has fundamentally undermined the basic
29:35
Speaker 2: business model upon which American AI was originally premised. The
29:40
Speaker 2: idea that you could have motored general models that you
29:44
Speaker 2: could charge lots of money for was destroyed when Deep
29:48
Speaker 2: Seak came out with its models, and subsequently, of course
29:51
Speaker 2: there've been a number of other Chinese developers who've done
29:54
Speaker 2: the same. So the business model is under incredible stress.
29:57
Speaker 2: Research suggests that adoption of American AI remains well below
30:04
Speaker 2: the levels from a revenue point of view that would
30:06
Speaker 2: justify the valuations. And we also know that Chinese models
30:11
Speaker 2: such as Quinn and Kimmi finding their way in very
30:16
Speaker 2: very large market shareters into the developer space as well.
30:21
Speaker 2: So the American AI model is under stress and that
30:24
Speaker 2: matters because it feeds back to this issue of the
30:27
Speaker 2: share market valuations. Right, and I think heading into the midterms.
30:33
Speaker 2: The last thing that the administration can afford to see
30:36
Speaker 2: given all of the other challenges that it's facing, is
30:39
Speaker 2: the popping of the AI bubble. So it is going
30:42
Speaker 2: to be doing everything it can to boost market confidence
30:46
Speaker 2: that the American government has the back of the American
30:50
Speaker 2: AI industry, that it's going to fight Chinese thievery, you know,
30:55
Speaker 2: from top to bottom, that it will protect American AI,
31:00
Speaker 2: that it will provide lucrative contracts through the Pentagon and
31:05
Speaker 2: other agencies to to to substantiate the business models, but
31:10
Speaker 2: ultimately also to ensure that there's sufficient liquidity within the
31:14
Speaker 2: economic system at large to keep pouring, uh, you know,
31:20
Speaker 2: trading capital into these markets. So these are these are
31:23
Speaker 2: I think where the real issues are. So you touched
31:25
Speaker 2: on this issue of of you know, allegations of IP theft,
31:29
Speaker 2: but it's actually a symptom of these other problems.
31:33
Speaker 1: Yeah, this is where I actually don't understand because the
31:39
Speaker 1: as you mentioned, the the AI build out requires to
31:43
Speaker 1: build out electric grid and they require equipment like lad
31:50
Speaker 1: of the equipment will have to be imported from China.
31:53
Speaker 1: Yet Trump administration is putting on tariff those those Chinese
31:58
Speaker 1: equipments raising the costs, and and you like, right now
32:02
Speaker 1: the cheapest way to generate electricity is also solar, with
32:07
Speaker 1: the advancement in the in the in the solar panel
32:10
Speaker 1: production again mostly coming from China. Yet Trump has made
32:14
Speaker 1: a conscious effort to not support the solar rollout because
32:21
Speaker 1: he wants to concentrate on what he considered America's strengths
32:25
Speaker 1: with gas and oil jewel baby duel and and so
32:30
Speaker 1: you know it hines. So, okay, fine, America don't need
32:33
Speaker 1: solar because America have plenty of gas. But now with
32:36
Speaker 1: the yearng War, the gas price has salt even though
32:41
Speaker 1: America do produce gas. But because gas is a globally
32:45
Speaker 1: treated commodity, the gas, you know us people in the
32:49
Speaker 1: US who uh consume the gas, including you know, farmers
32:55
Speaker 1: who rely on fertilizers, which is you know, which is
32:59
Speaker 1: used natural gas to produce. And this AI company who
33:04
Speaker 1: is building data centers, who are building their own gas
33:07
Speaker 1: turbine powered grids, they are run into this increasing cost
33:14
Speaker 1: issue and everything is self inflicted by the Trump administration.
33:19
Speaker 1: I know, is that just because the lack expertise that
33:22
Speaker 1: the Trump administritan don't understand what it takes.
33:26
Speaker 2: Yeah, Look, I think that there are legitimate and serious
33:30
Speaker 2: questions now around this issue of competence. And you know,
33:36
Speaker 2: it's one thing to strip the public service for you know,
33:40
Speaker 2: whether it's for budgetary reasons or what have you. But
33:44
Speaker 2: the downside risk of doing these wholesale, you know, attenuations
33:50
Speaker 2: of public sector knowledge capabilities is that a whole bunch
33:54
Speaker 2: of people with institutional knowledge and experience ultimately leave the
33:59
Speaker 2: system them and it means that those making decisions ultimately
34:03
Speaker 2: are also making decisions both on the fly and largely
34:08
Speaker 2: blind to some of the complexities of the issues involved.
34:13
Speaker 2: The electricity system is a classic case in point, because
34:17
Speaker 2: the American electricity system, of course, is actually a state
34:20
Speaker 2: based system, and it is a patchwork. Some states are
34:24
Speaker 2: more renewable energy oriented than others. Interestingly, two of the
34:30
Speaker 2: most renewable energy and solar energy oriented in a sense
34:34
Speaker 2: at opposite ends of the spectrum. So you've got Texas
34:37
Speaker 2: which is rolling out a lot of solar power, but
34:41
Speaker 2: so did California.
34:42
Speaker 1: Right.
34:43
Speaker 2: But this gas situation, because as the systems became tight,
34:48
Speaker 2: some data centers turned to the idea of having dedicated
34:51
Speaker 2: gas turbines to fuel to generate the electricity needed for
34:56
Speaker 2: the data centers, and as you say, as gas prices,
35:00
Speaker 2: it drives up the cost of the data centers themselves,
35:05
Speaker 2: so they are very self inflicted. I increasingly think that
35:10
Speaker 2: there is a competence question that is not just a
35:15
Speaker 2: short term problem, but it's a longer term institutional problem
35:18
Speaker 2: that has been exacerbated by the kind of administration that
35:23
Speaker 2: this one clearly is one where it literally stripped out
35:28
Speaker 2: a whole bunch of capability. Now that's not to say
35:31
Speaker 2: that there might not have been reasons why there were
35:34
Speaker 2: parts of the public sector that weren't performing, that were
35:39
Speaker 2: no longer relevant, or what have You don't need to
35:42
Speaker 2: enter into that argument. Simply have to say that in
35:45
Speaker 2: the processes of cleaning that out, it would appear that
35:48
Speaker 2: a bunch of people who know about stuff got cleaned
35:52
Speaker 2: out as well. But on top of that, you've also
35:54
Speaker 2: got an administration that as a very how would we say,
36:02
Speaker 2: you know, a very fly by the seat of one's
36:05
Speaker 2: pants style. The president clearly has a view about decision
36:13
Speaker 2: making that revolves around his own particular ability to have
36:18
Speaker 2: insights into things, the instincts that he has, the know
36:22
Speaker 2: how that he brings to the table, etc. And therefore
36:26
Speaker 2: is able to make some of these decisions literally on
36:31
Speaker 2: the basis of the gut feelings that he has. And
36:34
Speaker 2: we know this because he said so about other decisions
36:37
Speaker 2: that he's made. And we've seen that in reports around
36:42
Speaker 2: in the New York Times, for example, of the meetings
36:45
Speaker 2: in the war room where the twenty eighth of February
36:50
Speaker 2: attack on Iran was discussed, and ultimately the decision came
36:54
Speaker 2: down to the president's instincts and his gut feelings. So
37:00
Speaker 2: there's a lot of fly by the seat of one's
37:02
Speaker 2: pants in the style of this administration. There is upside
37:07
Speaker 2: to that. You know, it can have moments of decisiveness,
37:10
Speaker 2: but the downside is on complex things, it often makes
37:15
Speaker 2: the wrong calls, and I think on infrastructure, on the
37:20
Speaker 2: way in which the American AI system can be developed.
37:24
Speaker 2: It has made some decisions that have but now at
37:28
Speaker 2: least shot itself in the foot I mean another classic
37:33
Speaker 2: and this is clearly not in certainly not in the
37:37
Speaker 2: interest of American shareholders, but the restrictions on the export
37:46
Speaker 2: and video chips to China has led to and video
37:51
Speaker 2: having zero footprint in China are but it's not just
37:55
Speaker 2: that it actually, as we now know, catalyzed this incredible
38:00
Speaker 2: effort in China to develop a domestic capability. Now, this
38:05
Speaker 2: domestic capability doesn't just mean that in Vidia loses China's
38:11
Speaker 2: market share. As we know, once Chinese industries developed a
38:16
Speaker 2: capability that satisfies the quality requirements, the performance requirements, and
38:21
Speaker 2: the scale requirements of Chinese industries, they rapidly move into
38:27
Speaker 2: global markets. And the last bit of the jigsaw puzzle,
38:31
Speaker 2: if you will, for the pressures that American AI is under,
38:35
Speaker 2: is that it's you know, I think four years ago
38:39
Speaker 2: it was the unquestioned global leader that was going to
38:45
Speaker 2: take over the world, so to speak, and even to
38:48
Speaker 2: a point, you know where Vice President Vance was in Europe,
38:53
Speaker 2: what eighteen months or so ago, pushing the Europeans to
38:55
Speaker 2: basically open the doors for American AI companies across the world,
39:02
Speaker 2: not only in the United States where they're using these models,
39:05
Speaker 2: as I've mentioned, across the global South. They're now facing
39:11
Speaker 2: options that only three years ago they didn't have. And
39:15
Speaker 2: those options are between a proprietary American system with all
39:20
Speaker 2: the things that come with that, including I think a
39:24
Speaker 2: growing awareness that there is an incredible amount of data surveillance,
39:28
Speaker 2: data weaponization, et cetera, et cetera. On the one hand,
39:32
Speaker 2: and then on the other hand, you've got this sort
39:34
Speaker 2: of Chinese infrastructure that enables what I've called in the
39:38
Speaker 2: past a kind of Digital West failure. You know, this
39:41
Speaker 2: idea that countries can adopt use of Chinese technologies full stack,
39:47
Speaker 2: from the energy level all the way through to applications level,
39:50
Speaker 2: but in a way that enhances energy and information sovereignty
39:55
Speaker 2: rather than concedes it to a small number of American
39:59
Speaker 2: big technolo lgy companies. So you know, you put all
40:02
Speaker 2: of that together, and you know, the United States has
40:05
Speaker 2: been kicking some very serious own goals.
40:11
Speaker 1: Yeah, but speaking of a competency issue, I don't think
40:16
Speaker 1: it's limited to this administration. I mean, the Biden administration
40:20
Speaker 1: wasn't doing such a great job either, So this is
40:25
Speaker 1: it's almost like America is experiencing a secular institutional decline.
40:32
Speaker 2: I think you're on. Yeah, for many look at it
40:35
Speaker 2: like this. As I mentioned, you've got essentially worldviews that
40:39
Speaker 2: have been baked into a whole bunch of institutions with
40:44
Speaker 2: assumptions that frankly are no longer applicable to today's world.
40:48
Speaker 2: So that's your first problem. So there's a generation of
40:51
Speaker 2: people in decision making roles that have baked in worldviews
40:54
Speaker 2: about all sorts of stuff that is no longer timely.
40:56
Speaker 2: The second problem you've gone is actually a system semic
41:00
Speaker 2: decline in literacy and numeracy standards, and that ultimately feeds
41:04
Speaker 2: through into all sorts of decision making levels, whether they're
41:08
Speaker 2: in corporations or in government. The literacy and numeracy data
41:13
Speaker 2: from the United States shows very clearly a secular decline
41:18
Speaker 2: in standards, and you don't turn that around with the
41:21
Speaker 2: click of a finger. This is a multi generational problem
41:25
Speaker 2: because the generation of Americans who are coming through the
41:29
Speaker 2: education system today or who have come out of the
41:32
Speaker 2: American system today macro terms, is actually less competent at
41:39
Speaker 2: basic mathematics and reading and writing than the previous generation.
41:45
Speaker 2: Now that from a competency point of view, would from
41:51
Speaker 2: my position, raise serious alarm bells. If I was an American,
41:55
Speaker 2: I would be concerned about it. If I'm not an American,
41:58
Speaker 2: I would also be concerned about it. Because a diminished
42:02
Speaker 2: competency in American elite decision making leads to a greater
42:07
Speaker 2: propensity for American decision making to be made on on fly,
42:13
Speaker 2: by the seat of your pants basis, which creates all
42:17
Speaker 2: sorts of risks for not only Americans but everyone else
42:21
Speaker 2: in the world. And you know, people should be concerned
42:25
Speaker 2: with an increasingly ratty American decision making system.
42:33
Speaker 1: But doctor Pow, it doesn't matter if the American people
42:38
Speaker 1: are growing dumber and dummer because we have AI. Now
42:41
Speaker 1: all those people can be replaced. We'll have AI that
42:45
Speaker 1: can like doing the works of thousands of PhDs. You know,
42:49
Speaker 1: once we achieve AGI, American dominance will stretch for another
42:54
Speaker 1: thousand years. That's that's the talking point of all these
42:58
Speaker 1: proponents of of AI investment right now.
43:02
Speaker 2: What do you say to that, Well, pigs will fly
43:06
Speaker 2: before that happens. And in terms of AGI, you know,
43:11
Speaker 2: that's a different discussion to have, I think. But the
43:14
Speaker 2: promises made around AGI, I think are premised on false foundations.
43:19
Speaker 2: The idea that AI can of course replace a whole
43:23
Speaker 2: bunch of work is true. It doesn't need to be
43:26
Speaker 2: AGI equivalent to be able to do that. And the
43:29
Speaker 2: kind of work it can clearly replace involves routine work,
43:33
Speaker 2: you know, whether it's routine work at a manual level
43:36
Speaker 2: where AI can support robotics, but also at a non
43:41
Speaker 2: manual level, paperwork, information systems, decisions and all of that.
43:45
Speaker 2: The risk, I guess when you start to do this
43:48
Speaker 2: is social disruptions and what that might mean. Sure, a
43:53
Speaker 2: lot of people could be made unemployed quite quickly. Will
43:57
Speaker 2: those people sit back and just accept their fate? Is
44:01
Speaker 2: this something that you know, displaced Americans and American communities
44:05
Speaker 2: will eventually say, yeah, Well, you know, here I am
44:11
Speaker 2: on an unemployed scrap heap, scratching around for you know,
44:17
Speaker 2: the meager crumbs of the tables of the techno oligarchs.
44:21
Speaker 2: But it's all okay, because really, you know, the American
44:24
Speaker 2: dream is still there, and I've just got to work
44:26
Speaker 2: hard and maybe, you know, I'll punch through the systemic ceiling. Well,
44:32
Speaker 2: you know, maybe at that point in time there will
44:35
Speaker 2: be you know, more people ultimately realizing that they've been
44:38
Speaker 2: sold apart in terms of the promises of technology, but
44:41
Speaker 2: also in terms of how the technology is institutionalized and government.
44:45
Speaker 2: By way of contrast, you might have noticed in the
44:47
Speaker 2: last week Chinese courts have made decisions about companies replacing
44:52
Speaker 2: workers with AI, and it's actually made that illegal. You
44:55
Speaker 2: can't simply dismiss people because you can use AI instead.
45:00
Speaker 2: Now that that's a statement of a philosophical nature as
45:05
Speaker 2: much as it is a statement about the concerns for
45:09
Speaker 2: you know, social stability, individual welfare. You know the role
45:14
Speaker 2: of work as part of a healthy society and a
45:19
Speaker 2: healthy person, right, you know that that sense of worth
45:23
Speaker 2: and contribution. So, you know, we are at lots of
45:27
Speaker 2: little inflection points that have path dependent consequences, and one
45:32
Speaker 2: of these is going to be around this issue of
45:34
Speaker 2: how do we articulate humans and human anchored processes to
45:42
Speaker 2: this world of artificial intelligence and artificial intelligence and abled computation.
45:49
Speaker 2: And maybe that's also a question that both Presidency and
45:55
Speaker 2: President Trump might have a discussion about. Again, you know,
46:00
Speaker 2: the optimist would hope that these sorts of issues, which
46:04
Speaker 2: are actually common issues, right, These are issues that affect
46:07
Speaker 2: societies universally need to be aired because I don't think
46:14
Speaker 2: anybody has the silver bullet answers, do they? You know,
46:17
Speaker 2: Americans certainly don't. The Chinese decision out of the courts
46:21
Speaker 2: is really you know, to block something is one thing,
46:25
Speaker 2: but it doesn't necessarily enable anything else. And so there
46:29
Speaker 2: needs to be more thorough, serious discussions about this stuff.
46:35
Speaker 2: And you know, there's no better place for some of
46:39
Speaker 2: these discussions that be had than at a leadership somewhere
46:42
Speaker 2: between the presidents of China and America, you know, the
46:44
Speaker 2: leading countries of AI. Will that happen? You know, again,
46:48
Speaker 2: a question of competence, and all of that raises at hand.
46:53
Speaker 1: I mean, it's more than competence. Now we have a
46:57
Speaker 1: selicunk textraal capture of the White House, you know, like
47:01
Speaker 1: you have you have the person of jd Vance, who
47:05
Speaker 1: is basically a creature backed by Peter Theo and the
47:08
Speaker 1: others sell a kunktechy lead. And then you have and
47:12
Speaker 1: speaking of AI replacing humans, you know, but Elil Musk said,
47:18
Speaker 1: we'll just give everybody universal basic income so people can
47:21
Speaker 1: all pursue their own interests and dreams while we'll let
47:24
Speaker 1: the robots and AI do all the actual work and
47:28
Speaker 1: the rest of you plubs can just enjoy life.
47:32
Speaker 2: Well, you know, I mean, these discussions around techno enabled
47:36
Speaker 2: utopia have been around for you know, a couple of
47:39
Speaker 2: hundred years, and they largely revolve around these kinds of themes.
47:44
Speaker 2: You know, in some ways, at the very least, they
47:47
Speaker 2: you know, put on the table this question around well,
47:51
Speaker 2: if machines do do a lot of the things that
47:53
Speaker 2: humans did, is that an opportunity or is it a threat?
47:56
Speaker 2: How do we make that an opportunity rather than simple
48:00
Speaker 2: viewing it as a threat? Is that whether U BEI
48:02
Speaker 2: is the way to go? Well, you know, there's clearly
48:05
Speaker 2: going to be debates around a whole around that. But
48:11
Speaker 2: the fact that these discussions are starting to be aired,
48:13
Speaker 2: I think are probably more important right now than the
48:17
Speaker 2: fact that we don't necessarily have, you know, the answer
48:21
Speaker 2: or that sort of suite of answers that different societies
48:24
Speaker 2: might want to examine and look at ways in which
48:29
Speaker 2: they can embed them into their institutions. But you know,
48:33
Speaker 2: you can't put your head in the sand with this stuff,
48:36
Speaker 2: and and you need to and in the interests really
48:42
Speaker 2: of people across the globe, given that this technology has
48:46
Speaker 2: the potential to obviously be global in nature, these are
48:50
Speaker 2: discussions that must be had and and you can't well
48:56
Speaker 2: here I am saying you can't. Well, of course it
48:58
Speaker 2: can happen, but I'd rather not a discussion that is
49:02
Speaker 2: hijacked by the tech bros, the oligarchs who kind of
49:08
Speaker 2: view technology and their control of technology is somehow this
49:13
Speaker 2: you know, benevolent cape capacity that they have to govern
49:17
Speaker 2: the plebs. And you know the Palenteer Manifesto for example,
49:23
Speaker 2: which you know, really goes down this path which I
49:26
Speaker 2: think is incredibly dark and and actually incredibly dangerous. You know,
49:31
Speaker 2: this idea that you that that there is a certain
49:34
Speaker 2: side on technology that's right and it must arm itself
49:38
Speaker 2: and people to beat the other side. Well, in many ways,
49:43
Speaker 2: of course, that's running the complete opposite of what this
49:45
Speaker 2: technology supposedly promises. But it's also clearly a very dangerous
49:52
Speaker 2: pathway where a small group of people who subscribe to
49:57
Speaker 2: some of these ideologies, you know, people or might want
50:00
Speaker 2: to search for dark enlightenment for example, which plays a
50:06
Speaker 2: not insubstantial role in the background for some of this
50:10
Speaker 2: thinking that comes out amongst the sort of techno oligarchs.
50:14
Speaker 2: It certainly has influenced Vice President Vance in the ways
50:18
Speaker 2: that he's sort of articulated views concerning technology, American technology,
50:25
Speaker 2: Chinese technology. But all of this I think is both
50:31
Speaker 2: dark and dangerous because it will lead to a world
50:38
Speaker 2: in which a very very small number of people, even
50:41
Speaker 2: smaller number of people than today, ultimately dictate all terms
50:47
Speaker 2: to everyone else,