Michael Every: The Global System Is Coming Apart

Everything pretty much in terms of how we understand the global system, whether it be the security architecture, the geopolitical architecture, the geoeconomic architecture, or the gefinancial architecture, is coming apart at the seams. And to some extent, it's unplanned and unforced, and in other areas, it's very deliberate and being either ripped or snipped, but it's happening. We have to deal with it. There's not a lot of individuals we can do about it. That's the Western disease. That's what we've been through for 40 odd years. It's all about the quick buck, financialisation, and the massive margin. And that doesn't work against a system that we are now rubbing up against. If it comes down to one kind of war where it's purely military, it's going to be the one that's got the best cheapest technology that can produce it the highest volume. But I'm not for a second saying that the East goes to war with the West. I'm saying that we are preparing for a world in which there is much more confrontation, resilience, quote-unquote, the need for self-reliance, and preparedness, which, of course, looks like you are going to do. Welcome to the macroscopic podcast. My name is Alex Hager and I'm your host. And today, I have the pleasure of welcoming back. Michael, every welcome back, Michael. Thank you very much. And it's nice to be here without any stomach trouble this time. Yes, that's true. So I had a conversation with John also a week ago and we were just saying that obviously this conversation hits a bit different. I mean, it's great to see you virtually, but it was obviously a different format. In South Africa, with a bit of more backdrop and sunburn, I could say. But we'll do with this. And yeah, today is the Thursday, 27th of August. I always like to give the dates in my interviews because, well, things happen in a very fast pace, especially when we talk about geopolitics, financial markets, things change on an hourly basis. So today's conversation is obviously a follow-up based on a lot of what we've talked about already in March. There was a few months ago and I would like to pick your brain on. What do you think were the most notable developments that happened since then? Well, where do we start? When we were talking last in person, of course, the war against Iran that only really just got started. I remember I was flying out to South Africa to meet you on the day of again, which was an interesting time to be in the airport. Obviously, that has dominated headlines all around the world since then. But so has, to a greater or lesser degree, a cascading, logically cascading, series of related and/or conflating stories, which all point to the same underlying dynamic, which we did discuss in March, but which is now accelerating. Like a snowball, you know, becoming larger and larger as it comes down a mountain. Which is that everything pretty much in terms of how we understand the global system, whether it be the security architecture, the geopolitical architecture, the geoeconomic architecture, or the geofinancial architecture, is coming apart at the seams. And to some extent, it's unplanned and unforced. And in other areas, it's very deliberate and being either ripped or snipped. But it's happening. There's obviously a lot of fires as well that we can see that are, let's say, places of confrontation in one level or another if it's about military or if it's about financial or economic. And the US has simultaneously been trying to deal with the Iran war since then. It has had repercussions on the bond markets. We have had obviously the dead situation and the fiscal strain in Japan, which was maybe triggering what we've seen now and accelerates the distress in the bond market in the US. Then we still have the Russia and Ukraine war ongoing. We have talks about NATO security. Taiwan is also on the table. It's something that has not been getting a lot of spotlight lately. But it's still ongoing in, let's say, more hidden way. And there's obviously the economic confrontation with China. So if we tie this all together and we look at it now from a US perspective, has the US overstretch on multiple fronts without being able to handle them accordingly? Or how is your view about that? Well, before I answer that, and I will info, we've also had two other headlines one last week. Not a new one, but getting some attention last week. And the other one today, as we're speaking, the one last week was there were very serious conversations being had in the Middle East about the potential for genuine military clashes between Turkey and Israel, which is something that not a lot of people who don't know the region would have had on their cards. But that was something really worth paying attention to. And then the other one today is we've got even likes a Bloomberg, you know, the go-to source for financial news, talking about the fact that A, there is more and more fear both within Russia and without it that you are going to see an escalation from Putin on multiple different fronts, which could potentially even include the use of a tactical nuclear weapon. I'm not saying if you will already won't, but the fact that that's in the press is pretty scary. And additionally, Bloomberg also saying today that something that I flagged years ago, which directly relates to what I'm about to say for the full answer, is coming to pass, which is that the US looks like it's going to bring back letters of Mark and letters of Mark are a hundreds of year old legal device by which if the state isn't capable of doing something, you effectively legalize piracy to allow you to do it. And in this case, it would be if you can seize Iranian oil anywhere in the world, you get to keep it as a prize, including the ship and all the oil in it. So effectively legalizing piracy because the Navy can't be everywhere doing it. So that leads me to the longer answer, which is when you look at the panoply of different pressure points building up, the different crises where the US would traditionally get much more involved than now can't or is struggling to maintain balance between two other forces, which individually is having trouble kind of dealing with. And the fact that they're now having to lean on letters of Mark, which is something I actually thought would happen years ago and flagged, then yes, the US is very, very clearly overstretched. It's still a giant compared to anyone else, but it's surrounded by a very large number of ever larger opponents who can hold around the ankles and the knees and bite his legs and bite his fingers and jump around his neck and his shoulders. And collectively they can really hold it down, short of really extreme measures, which I wouldn't rule out by the way, but which again take us further and further away from any kind of norms of behavior or of action. I would like to add to that as well, what we've seen also recently was something that was a bit coming as a surprise is Radcliffe's visit to Moscow. So the head of the CIA, the number one spy, is going to Russia and Pascal, even the spokesperson of the Kremlin, was officially also not to be notified or had any information about that. And there's obviously a lot of speculation about what's exactly the content of the stocks were, but it's very unusual because the last time this happened was when Burns, the former head of the CIA, came in the eve of the Russian invasion of Ukraine. What analysis do you have on that and how does this tie in and what we just talked about now about US overstretching and trying to handling all those crisis points? Sure. Well, there's a lot that I threw in there. So let me now try and slow it down and address your point and link it up and unpack it. So obviously the US is in a conflict with Iran and it's saying publicly that it doesn't intend to attack them physically at the moment because it's overstretched in terms of missile interceptors and precision ammunition. It doesn't need the precision ammunition. It can take a risk and use less precision ammunition, but it means you have to be closer and you can take casualties and the US is showing it doesn't want to do that. So it's overstretched in that respect. It's implementing an economic war against Iran, which I think is actually going to be effective. But to do that, you have to get everyone to comply. They're now talking about therefore literally ripping up the global system or blowing it up, as Basant said, to those who don't want to help and saying, well, we'll kick you off the US dollar, which will completely fracture the world system. That's their words. That's their threat. So obviously that means you have to look at countries as various as Turkey, who I just spoke about, who is still clearly trading with Iran, Qatar, various other countries in the Middle East, Russia, Pakistan, who's acting as a mediator, Central Asia, and China. And China has already come out and said that they won't help. So again, you go for one target, you end up with several. Iran, as it's being throttled, could easily see that the US still doesn't have missile interceptors in the right numbers yet and say, well, you're not going to attack us. We're not going to wait around until you've rearmed to do so in another a couple of months after the midterms, which is still something I think could happen. We'll attack you now while you're not ready. And if Iran is going to do that, even if it's on a limited scale, it can do a lot of damage within the Middle East to desalination plants, to LNG plants, to oil fields, et cetera. What a perfect time for Russia, which has backed Iran as much as it can do, just as Iran has backed Russia, to then escalate against Ukraine. Because Ukraine's also out of missile interceptors, it's carrying out very effective attacks on the Russian energy complex, which is having a global impact. Putin's increasingly frustrated, and we've had rumors for weeks now that he would mobilize after the September, I believe, 19th and 20th elections for the Duma. So from 21st onwards, he could mobilize and bring in another half a million men. We've had rumors that North Korea might send 50,000 men to fight on the front, which you know, Ukraine can't match. And at the same time now, that CIA visit is probably, and you have to look at the spectrum, related to the US spotting signals that that could be about to happen. The US also spotting that the EU, when they visited Ukraine for its independence day, just a few days ago, as we're speaking, and pledged significantly more military aid, including helping them build more and more weapons with European technology. In Ukraine, and the UK saying, and we will hand over the blueprints for advanced long-range missiles, which will allow you to strike Russia much harder than you already are. Russia might be saying, well, you know what? Maybe we have to escalate here to try and worry the Europeans, who seem to be thinking they can do more and more, but tend to back off when we bite back. So that the worst case scenario, as I've already alluded to, and this is on Bloomberg, it's not me just speculating, is that Russia can say, right, we'll move beyond ballistic attacks on Kiev, we'll actually miss our attacks, we'll actually set off a tactical nuke somewhere as a warning, just to prove how far we've prepared to go, which I don't think China would be in favor of, by the way, and would open a Pandora's box. But if they don't do that, the other risk is, and I think serious people are taking this seriously, that they make a token strike against NATO. So the Russians could say, right, we'll see a tiny amount of territory from one of the Baltic states, just a little cut, or we'll strike across the border deliberately, so it's fairly unambiguous that we did that. Is NATO going to go to war with Russia over that? And if the answer is yes, then whatever you're pricing in markets, you're wrong. Right now, unless you're pricing for that. And if you think, no, everyone will say, that's ridiculous, of course they won't. Well, then Russia has already established that that NATO article five doesn't hold up, that there is a level that you have to cross for them to actually do something. And everything below that, they can get away with, which is problematic, as you can imagine. And it wouldn't be illogical, it'd be very high risk, but it wouldn't be illogical for Russia to say, well, let's hope NATO retaliates to some degree, or rattles its sabers, because then we will roll out the tactical nuclear weapons, et cetera, et cetera, just to show them on the ground. And then we'll see if that gets us to the dialogue that we want to have, because what they want is a conversation with America over the heads of Europe about a new European strategic architecture where effectively they get most of Ukraine back. And Europe understands that Russia gets a seat at the table in a veto over everything. And they're not achieving that on the battlefield. Maybe they can achieve it with a massive escalation here. That's all within the realm of possibility. I'm not giving a forecast probability on any other, but after the ride we have had since 2022, anybody who wants to dismiss this and purely think that the monthly inflation data or payrolls numbers coming out of the US are the single most important thing you can be looking at right now. I'm afraid it is in the wrong job. I mean, those are definitely greater forces than financial market. And as we've talked about as well, they're intertwined. In general, there's always geopolitical factors and financial markets that have always an interplay. And now your thesis is that the geopolitical factor, the factor of power, brute force, cheer force is actually dwarfing the financial and economic dimension. On that front, that's also something then you could say the US has backpedaled in a way that it dealt with Iran because you just mentioned that they are running low on ammunitions, on missiles, on air defense, and missile defense systems on all kinds of things to protect their allies in the Middle East and to also strike targets in Iran. And we've also had the Navy that also has problems of being supplied because bases in the Gulf region have been struck by Iranian attacks in the past few months and makes this whole supply actually disruption. But now they are actually going into this operation of economic outcast type of direction, which is you would say then the opposite of what you claim would be the superior, let's say, approach of doing statecraft. Do you think that now if we talk about, more specifically about this operation, sanctioning more heavy sanctions on Iran and also threatening allies of Iran of decoupling them from the US global US dollar system if they actually do help them. Do you think that this is an effective approach and what would be the consequences if this goes through? - Well, let me rewind just for a moment, there are three different kinds of statecraft. Military, economic and political. And I've always argued that you need to use all of them. So I'm not saying one superior or inferior to the other, clearly the US is pivoting back to economic statecraft right now because the military avenue is not working. They couldn't topple Iran as easily as they thought they could like Venezuela. So they miscalculated on that front because as you rightly say, and as has been known for a long time to many people except apparently, those making decisions at a higher level in the US, they don't have the stocks and the supply chains and the flow of weapons and defensive goods to maintain a long war. They thought they did or some people deluded themselves, they simply don't. So they were always going to try and reshape their economy to a more military industrial footing. That's something I've been saying for a long time, many people agree about. Will it work to pivot back to economic warfare for now? I think it can have an extremely important effect on the Iranian economy. I think it really, really can make an impact. The problem is, as we've already alluded to, you have to get everyone to go along with you because it isn't only the US versus Iran. And if you have smuggling through the Middle East, smuggling through Central Asia, if Chinese planes hypothetically continue to land in Tehran full of dual use goods, et cetera, et cetera. If things can carry on as normal, then you have to extend those measures to others. So we will see whether the US is or isn't prepared to take on what is effectively a block. And I think there's been a slow realization of far too many parties, front to far too many parties. This isn't about the US as is any one country. Now, if they could have managed to topple Iran quickly, which is what I think they aim to do, that would have reshuffled the pack and given them a stronger hand versus China and the constellation of countries in their group versus Americas. Because that hasn't worked, I think for now in economic warfare, I think they will go back to physical warfare. And importantly, the paradigm continues to shift very dynamically. So for example, the Wall Street Journal run a story. I'm using this as a benchmark of information, of course, others may have far better insider sources. But there's a US startup operating in the UAE, which is now producing anti-drone drones, or drone defense interceptors, for $5,000 a pop using 3D printed parts, which are even cheaper than the Iranian kamikaze drones, which are themselves vastly cheaper than the interceptors that the US has been using up until now. So the US was caught flat-footed, its industrial network was caught flat-footed. As we knew would be the case, that doesn't mean it can't pivot and adapt. Now it's hard to do everything everywhere all at once, otherwise history would just change in a weekend, which is what financial markets like the price for, because they can. The physical world takes longer to react. But I think it's an effective tactic against Iran to a large degree. It won't be given that the block will stand up to it. Russia clearly looks like it's indicating that it's going to try and escalate. If China were to escalate above and beyond, just saying we won't help, things get infinitely worse again. So the US itself will then have to pivot. And as I said, if they can start pumping out what the report said in the Wall Street Journal, 15,000 drone interceptors a month from a small shop in the UAE using 3D printed parts, well, that can easily be 150,000 or 1.5 million if you scale up the same technology. So things will move rapidly. But what that means is for those of us looking at markets. It's above and beyond, I think, having to accept this thesis about the world now running by a state craft, whether it be political, whether it be military, whether it be economic, that the ways in which they conflate and then change, because of a technological breakthrough. Or a political argument or a political agreement, for example, the one between the US and Canada, which suddenly went from being handshake to, you know, to daggers drawn, makes everything pivot. Everything can change really dramatically. So it's an exhausting job trying to look at it, because you're looking at so many things at once, everywhere, and all of them are important in different ways. True, and apologies for the lack of distinction I made here in the question. It's absolutely a mix of all those factors. And we see this now as well with Scott Besson that now announces this D-Day, and prior to that, Trump saying that they will have ways to use the military. And he said military, to get this treasury market crisis under control with the higher, long part of the yield curve going higher and higher, and Scott Besson the Treasury trying to get control over it by selling the shorthand. What do you think Trump meant by that? Well, as is so often the case with Trump, take him seriously, but not literally, and I keep repeating that, and, you know, too many people fail to heed it. He's not talking amusing as it is, you know, in theory, about bombing bondholders. He's not going to bond Wall Street, he's not going to bomb Asian pension funds, et cetera, et cetera. Clearly, no. What he is alluding to, however, is the fact that the entire construct that financial markets sit on, believing that they are masters of the universe, and that where they want to go, they can go, they can trade 24/7 on their phone, you know, using 5G, high speed internet, et cetera, et cetera. It's a world that was created by American physical power. In Winnie World War II, in defeating fascism, winning the Cold War, in defeating communism, and then saying, okay, let's have globalism, and then rolling it out to everybody, which, you know, didn't work out well for America, which was predictable to some of us, and is now being reversed. But if that's reversed, the reverse policy is to explain to people, look, we can change the world, the drop of a bomb, the push of a button, and markets won't like it. Now, obviously, that doesn't mean you bomb individual people, although, you know, that's certainly happening around the margin, and it even did under previous US Presidents, and even during globalism. But it's making clear that the paradigm you operate within can, and we will be changed. If you think that we are going to, or this is their message, that we are going to let the long end of the bond market tell us, we can no longer get involved in a war in the Middle East. We will go, we're no longer a world power. You're wrong, that happened to France, and the UK, in the Suez crisis, which I drew a parallel to, when this war started, I think we said that to each other when we met. The US is not going to let that happen. So, what tricks will they use to get around it? Lots, many, various, all forms of stake raft, all mixed as one, but they're making it clear to anyone who understands, and some of us do, and many in markets who come from nice, peaceful, pacifist countries who put war behind a long time ago, in their minds, do not understand this, that will involve physical pressure. Absolutely, and one very simple way to explain that, for people who are listening, I'm thinking, what does he mean? You can use traditional market tricks, which percent clearly will, such as more tea bill issuance, taking maturity from far down the curve, where yields arising, moving it to short dated maturity. You can then take that and say, right, we're going to create an extra bid for tea bills by shifting people to using stable coins, which is something that I think will happen soon, they're just pending one or two little changes to legislation, then that can happen. That gives you lower interest rates, and the short end of the curve, which buys you fiscal space, and with that fiscal space, you incentivize this new military industrial economy to make sure you can pump out masses of drone interceptors and new weapon systems, and much lower cost, rather than seeing nice padding of invoices, which is what so many contractors have been doing on a cost plus basis for decades. And with that, you go and, you know, to use a crude term, explain it to people in regions like the Middle East, the key commodities and commodity inputs upstream, which ultimately flow downstream and either create inflation waves or deflation waves, are going to remain priced in US dollars at attractive prices for America and its group of friends. So that's a very, very old game, a very old game, and in fact, I just want to say one more thing than I shut up, and that's this, but at the very beginning, you said that, you know, markets are now being buffeted by all this, and they are absolutely. But if you look at the history of markets, and I mean hundreds of years of history, which we have, imprinted for, if not on your screen, markets always used to move primarily with war, crop failures, natural disasters, war. That was what it was nearly always about in its totality, and it's only in later years of the Cold War, and then the post Cold War period, where the West was so much more powerful than everybody else. And our debt levels were so much lower than everybody else, which they're not now, and we're not that powerful anymore relatively, and wars used to happen with professional armies rather than conscript armies, far away on the other side of the world, and we could forget about them after a weekend. But the market was able to say, "Wash more, where's my tax card, where's my rate card, where's my buy all the things?" Well, that world has now gone, and we are back to what it always used to be, crop failures, natural disasters, war. So we've come full circle in that regard, but so just to close off the US funding question, in your eyes, if I understand correctly, you think that the US and its administration at the moment will find creative ways to always prop up the funding, so it's more of a plumbing problem rather than a funding problem. Provided that the global architecture doesn't just suddenly break, and everyone walk away from the US, which is extremely unlikely, because they have no one to export to, and nobody wants mass unemployment overnight. Long ago, maybe, but not in the short term, the way that markets think it could happen. I think this is going to be a plumbing issue. We have seen an enormous number of episodes in the recent past, before geopolitics became a word that everyone was mentioning over and over again, in which we would have a crisis in a pocket or pockets of the financial market. And frankly, it was a very predictable drama. You'd have meeting after meeting, you know, worried note after worried note, and then a central banker somewhere would create a new acronym and everything went back to normal. Because it was always just a plumbing problem, and you could always print money one way or another or just in a create liquidity. Why can't that happen again now in different ways? The answer is, of course, it can, if it has to. But the important caveat here is that it's now about physical supply chains. You can print dollars, you can create liquidity, you can't create diesel, you can't print atoms. And so the plumbing can still be re-plummed, but it needs to be linked to the physical plumbing, not just the financial plumbing. They can do that. But then you are really getting involved in the physical economy too. And as a result, I think they will. And also, I mean, now I'm peddling back to also what I mentioned about Scott Besson, who said, in the press conference and journalists was asking him about the D-Day question analogy and the fact that in that sense we didn't prevent that we didn't give a heads up to the Germans and so on and so forth. Why they haven't done it yet? And he said, why would I want to blow up the global financial system? Do you think that this is something that would really be a possibility that if they really go for it? Well, if you think of it in principle, if the US were turned to town round and to say not just to Russia, which it has done to a degree already, but to China and to Pakistan and to Turkey and even to India, all really large countries with nuclear weapons and just say, all of you are off the dollar tomorrow. All your FX reserves are gone, finished, finito, everyone sanctioned. You can't import anything from anyone else anymore in dollars. I think we can comfortably say that the global economy and financial system would hit the wall. I think we can comfortably say that. Is that going to happen? I think that's extremely unlikely. On one level percent saying it, but they're not doing it, does it weak? Undeniably so. So does putting a nuclear weapon on display, physically. Does that look weak or strong? Where looks weak? Why haven't you blown the world up yet? Equally, you're hoping you don't have to, but you are testing madman theory to a degree. And I would say the more logical threat from the US is that someone is going to get blown up. Some people are going to be nailed to the wall. Not everybody, but some countries, some key firms, some wealthy individuals are going to suffer. And that's a more targeted and more effective way to do it. It's mafia soil. One of you will disappear over the weekend, but I'm not going to tell you which. But there's an up to you collectively whether you're going to change your behavior or not, but one of you might disappear if you don't. So I think that's the underlying way to see it. But again, there are a lot of people with a very financial market framework who don't understand real politics, who think it's bluff. Because there've never been in that kind of situation where things really are physically threatening to them. And that voice will be prevalent in the market too, genuinely. So then that does unfortunately lean towards the likelihood that the US will have to nail someone to the wall somewhere at some point to try and get that impact. And of course, if we flip it around the other way, because I'm doing this from the standpoint of the US achieves its goal, if it doesn't and everyone else says, well, you know, we are going to act so outrageously, we're going to force you to do this or back down. Then either the US is forced into torpedoing the entire global system ahead of its plans to alter it to its own benefit, which is what it wants to do. It wants to blow up some bridges, but to keep a lot of the infrastructure the way the way it is now. Either it'll be forced to blow all the bridges up or it'll be forced to just retreat entirely to give up lots and lots of geostrategic and geoeconomic and geothermal territory that it currently holds. And it's a really, really great game being played out, you know, with very, very, very high stakes. You know, I'm kind of doing your job for you here, a little bit of Lexi, but if that isn't an environment in which people who like assets like gold are rubbing their hands, I don't know what is. I'm not advocating for anything. You know that. I don't give financial advice on that. Certainly don't do that about buying or selling gold. But this is certainly the kind of topical conversation that whenever in the past I brought up, I've always generated a flood of interest from people who do talk about nothing but gold. So it's, you know, it's a very, very colorful, interesting backdrop to be describing. Oh, thanks for the promo, Michael. I appreciate it. I didn't give any advice. I'm really recognizing who I'm talking to. That's so you just talk in fact, I get it. So actually talking about gold, that's a good segue. We've seen as well like that. Well, now I'm entering really speculation territory and you tell me if it's getting a bit too wild here for your taste. But there's been some theories floating that for the the straight of Humus actually like the fact that China had a bit of an agreement with the US in terms of importing less oil during that time. So 40% less demand has been recorded in China. And that this theory that was floated by Chris Martinson saying that in the contrary, China would also get more imports of gold to prop up their gold reserves. Now obviously we need to differentiate facts from speculation here. It's something that I've never come across before. I've just saw it through an interview recently. Do you think that this in the end there might be those kind of incentives from like those global powers that's in the headlines are all having confrontation but in background are trying to actually stabilize the system by reaching such kind of agreements. Do you think it's plausible? Okay, let me answer that in stages. First of all, nobody knows what happened. These are the China and the US on Humus. And you'd have to be an ultimate insider to know. I think it's entirely plausible that some sidebar agreement was struck. And that of course would have generated a lot of goodwill towards China from the US. If that's the case, I think it's just as plausible that China flexed versus the US. And so hey, look, we've got a year's worth of reserves. And at the same time, we can get everyone using EVs. If you're going to try and play the Venezuela card against us via the Middle East too, because that's the US plan. Get the whole Middle East on their side. We can write that out for a year, which is a lot longer than you can survive without XYZ ADC, which we still produce and you rely on for now. I lean more towards the latter. And I'll tell you why because and I want to be completely clear here. As I said, I'm not taking a stance on gold per se either way. That's not what I'm doing. But when I look at things as a global strategist in terms of the architecture, where I talk to people who are big gold bugs, we get along, as we say in English, like a house on fire for the first couple of miles of the long walk, you know, we're on together. And then we take sharply divergent paths in that if you're presuming that the deal was trying to get more gold because of hormones, what's the end game? Because that only makes sense to me and everyone's entitled to have their own opinion. If the US believes, as you know, some friends of mine do, that a shift back to a global gold standard solves all the problems we have. And this is where I didn't think we were going to get to this point at all, or I'm certainly not this early if we did. This is where there's like just a big ideological conceptual difference between myself and gold as an entity or a thing. Because while I think it makes a lot of sense for individuals to look at all the historical reasons, et cetera, where we are right now from a global architectural perspective. I don't think that any asset, or anything neutral, et cetera, brings back what the US needs to get back from China in terms of supply chains. So what I'm saying is, say, for example, the price of gold goes through the roof, which is entirely possible. I'm not making a call on it either way. I don't believe that there is a price for gold or any asset at which China turns round and says, "Wow, we played a great game. The gig's up. You can have all your supply chains back. We're going to let you have all the rare earth mineral processing again now." Market forces rule, we're going to let you have it all back. We're not going to be in a closed loop in terms of intellectual property anymore and not let you have the technology we've developed after having previously leveraged your technology. We're going to share everything equally. We're going to change the entire structure of our industrial policy. We're not going to try an export. We're going to import much, much more because that's what we've always wanted to do, et cetera, et cetera. And fair do, you reindustrialize and we'll all live together in peace. Now, I think everyone wants to live together in peace. I'm not trying to talk about the war part. But I don't see there's any market mechanism, whatever the market is to get us out of what we're in now. That's why I have been advocating and predicting and explaining what economic statecraft is and statecraft in general, whether it's political, military or economic, and how it isn't market-based, how you use parts of markets like Hamster in a wheel or in a cage. Sorry, no, no wheel. That's right. So thing now, the Hamster is running and running. There's all the market energy. The poor little thing isn't getting anywhere. It's actually doing what you want it to do. It doesn't get to run free across the grass and enjoy yourself nibbling whatever it finds. That's how I think economic statecraft works. So if you've got that view, I do. I'm not saying you have to at all. Then I lean towards the flex argument on Hallmers, rather than the corporation one. But I will say that those who know know that within every major country, there are always parts of that body of state which are looking to collaborate with others. And there are always parts of state which are looking to Nika, the others. And that's just the way politics works. So both could be true at the same time. But I think one is more significant than the other. If we look at the situation also in China itself, the bond market is actually quite doing the opposite than what we're seeing in other, let's say, G7 countries where bond yields are rising, not just in the US, but across the board. China is also entering a bit of what we call deflationary period where the bonds, the 10 year, for example, is approaching the 1%. And in the meantime, they're also importing a lot of gold, not just the PBOC, but just the country as a whole. And this is a bit of a classic. relationship. Do you see this as China over using its deflationary weapon in a way of being driven by deflationary forces for those years and now having to deal with it in a more severe way or other analysis about this situation right now? Well, again, this depends where you start from because it does become partly ideological. You have a stance on how you think the world works whether something is a solution or it isn't and then you work back to there. Now, I'm really cynical. I don't think anything works in the long run as I've made clear. Different things can work in different ways in different countries for a while but there's no one rule for everyone that works everywhere all the time. I would say this, if China is importing a lot of gold, traditionally countries do that when they're worried about inflation and it can be an excellent inflation hedge. There's no denying that at all. I don't see the argument to say we're deep in deflation which they are because structurally we've pushed this net exporting model to an extreme never seen before in a major economy but we're stuck and we can't get out of it which they are. Therefore, we're going to bring in gold which is deflationary to compensate for the deflation that we already have. That makes very little sense to me. I also don't think it makes sense to presume they're bringing you in ready to inflate their way out of it. I don't think that's going to work either because if there's one thing that those who know China know is that China is terrified of inflation, they absolutely don't want inflation and I think they're right not to want it. Some deflation can actually be pretty healthy. I think a lot of people would like lower prices for things right now if you if you look around you right under the man on the street in the west. So their bond yields are going down because of this deflation where they are they aren't bringing gold. I think is unrelated to that. I think it comes again to this flex attitude which is look if we're seriously hearing the US threaten what we kind of always knew they were going to say which is at some point you might be kicked off the US dollar block as it were. We need to have something ready as an emergency mechanism and it's going to be very difficult to get this fully functioning global non-US digital currency up and running. They're trying to patch one together with others. Some people have a higher opinion a bit than I do. I question it's long run validity for a number of different reasons. No one's going to question gold as a stop gap within a cluster of countries for a certain degree of trade for certain things. So I can certainly see the logical answer for it being at the back of mind for some countries as a fallback but that's very different prospect from saying that it's the cure rule for all countries all international transactions which is what the dollar is doing now and I don't see it falling down. Do you see the continuity between the points I'm making? I do I do and it also brings them to the question about if we tie this all together with now the on one hand the weaponization of the dollar which is what sets gold to actually one of the biggest factors that the gold price appreciation has been benefited from is this trend and I think we all agree on that. And once I'm pushing it too much where it becomes a trap as well for the US by overusing it with scots best and reiterating hey if you do not comply with or tunes with or music we'll just take all the chairs off and that is a bit of a fine line and obviously it's a signal that most countries especially China, Russia and the opposing blocks of the US block are taking notes for years already. China has been dumping US treasuries for the last 10 years and it's preparing also alternative payment systems like the CPS but also now setting up SGE volts for convertibility of Yuan gold exchanges and so on so forth we talked about this also in our very heated discussions and not just heated in terms of intellectually but also literally. In South Africa which I recommend everyone to watch again even though sometimes some people talk of each other but it was I think very insightful and thereby then the question is China's ambition some say yeah it will not be able to replace US dollar but the question is does it needs to replace US dollar? I don't think it wants to whether it needs to or not. It doesn't have any intention of allowing a global Remimbi to replicate the function that the US dollar has, the financialized function which undermines industrial production. So given that China wants to maintain as much industry as possible the only way in which it would be using the Remimbi internationally more would be for you know for clearing your trade payments for certain strategic interactions and deals with certain countries they don't want to completely unrelated parties party A and party B on the other side of the world speculating on it and you know and bidding up asset prices with it to effectively inflate it and undermine China's real economy. So it's not just that whether they need it or not they don't want it they're aiming for something very different. Now to be fair one aspect of this which I alluded to just a little bit and I have to come back to I don't think that the US wants to keep the dollar the way it is either. I think they absolutely want to keep as much of the global reach of the dollar as possible but at least what my understanding is is they know that a financialized dollar is not good for them. They want an industrialized dollar again they want a dollar that people demand because the US makes things and is the center of a real economy nexus not a consumer nexus where you know everyone looks to America because you're going to buy stuff from them that you've made rather than buying stuff from them and paying you know in dollars with it. To get there is I think going to require a lot more financialization first there will be a lot more bank loans needing to be made there'll be a lot more borrowing that needs to be done as we see for example in AI which is part of that race for dominance because AI can be used for really frivolous purposes I've been making some wonderfully silly pictures with it today you know to use in a report but they're talking about this subject by the way but equally it can run a factory for you it can be running factories 24/7 and innovating on an iterative cycle to push productivity frontiers further and further forward and creating new technologies so all of that is going to take an awful lot of borrowing and lending which is inflationary and liquidity creating and I fully expect to see a lot more of the old mechanisms in play for one last burst to try and shift the American from one the American economy from one state to another if they fall short wow that's going to be interesting for the capital I if they succeed just as interesting in a very different way but that's that's what a lot of all of this comes back to the attempt to try and lock in all the supply chains all the coalition of countries that will work with you even when it hurts in the near term to achieve something very different and to be honest a lot more Chinese in some respects on the other side of it versus those who like the way everything was done up until now even though it didn't work and want to do a lot more of it I would like to also tie in with what you said the I would say the prioritization of off-state crafts I mean of the fact that a state with lack of funds is taking recourse to private entities to do the job for them right and and we see this in stablecoins and you've mentioned stablecoins before and we talked a lot about it with also Brent Johnson and the idea that companies are taking a such a pivotal role in the distribution and the creation of synthetic US dollars is also something that we see with with tether with with circle with other stablecoin providers and other question is will this internationalization succeed the the fact that countries would accept no yield no yielding US dollar assets right why would they forego with foreign currency their own sovereignty with a non yielding asset that will be I think one of the major questions that I would ask about adoption on a global level of such stablecoins well first of all it remains to be seen if they will be zero yielding they're not allowed to pay interest but if the clarity act which is one of the pieces of legislation I was referring to earlier on goes through in the form that it seems to be in now you will get paid rewards or incentives which in the same way that Islamic banking isn't allowed to pay interest but does by another name that would work in a similar way so you would get paid something for it in fact without getting to too technical about it, very, very briefly, if they balance the supply and the demand for stablecoins internationally, carefully, if they can, not saying they can, but if they can, you can have a very low interest rate in America because of the demand for T-bills. And you can have a very high interest rate for the US dollar as a stablecoin outside America. So you can have a twin interest rate or a dual interest rate. So I'm making it up now, but like, you know, four, five percent for a dollar or a synthetic dollar effectively abroad. And what, two percent in the US, I'm again, I'm making those numbers up, but you get the point. And again, that will involve problems. I'll have to be very careful to try and prevent that arbitrage, but that's not impossible. But your answer, I think, needs to look back to the real politique that I was discussing right away from, you know, when I started talking about Iran and Russia, Turkey and Israel and China, et cetera, et cetera, who's going to win these wars? If America emerges with victories, even if now, for example, if Iran were to crumble in the next couple of weeks, those who don't like Trump, all they would remember is the chaos of the last six months, rather than the fact that he defeated a regime that had been there for like, you know, 47 years. So you know, people will choose a side and stick to it. Allegiously, I think that's the way the world works now. But if America were to succeed in some of his foreign policy goals, and emerges stronger on the other side, that's an enormous incentive for people to say, well, when they tell me, I, you know, I can only get paid in stablecoins when I export to America, or when the Middle East and energy exporting countries who are still incredibly important, tell me they only want to be paid in American stablecoins, dollar stablecoins, for LNG or oil or diesel or jet fuel, I'd better pay attention to that rather than saying, you know, I'm outraged by this and I either want to go with China or, you know, and China and Russia, et cetera, or I want to try and get together with the Europeans and Canada and do my own thing. So it's going to come down to power projection and nothing succeeds like success, which is one of the reasons why America, I don't think, will stick to economic warfare against Iran forever. It will use it. And as I said, I think physical warfare will come back. So this physical warfare, as you mentioned, as well, war drive markets, and you've mentioned gold as, let's say, one of the, well, most, yeah, biggest beneficiary of, yeah, of such developments of what we see now, we're describing since the past hour, would there be other repercussions in terms of, let's say, more like assets, maybe commodities or other things that you would say would, would see an appreciation or like a big impact on this? Well, again, I've been making this point since Trump was reelected. It was a no-brainer that obviously equities were going to go up because, you know, the guy wants equities to go up and he's going to try and run the economy hard, but the equities themselves, of course, is a very different story. You have to very carefully pick through and see which sectors are kind of mega on which ones are, but an important overarching concept within that is that if you're shifting back to a physical economy, it's physical assets that are going to do best. His assets that no one wanted to hold a few years ago, mines, you know, the physical stuff, real physical production. The problem is that if you carry over the financialised mindset into this world of the physical, you think, well, I can buy a mine that can do something really useful and it's going to appreciate 10x, you know, like an obscure derivatives trade could. And then I can go and retire and end up in some parts or something. That's not going to be allowed to happen. You cannot take the financialisation mindset of prices can go to infinity because it's just a price on a screen and apply that to a physical good that you need financial security. The government will not allow that to happen by whatever means necessary at the, you know, the macro level, the micro level or the, you know, the meta level of geopolitics. They will make sure that doesn't happen. There will be, you know, there are price floors for some things in America already to try and get supply to come home. And there will be price ceilings for others together with, you know, export controls that you're just not allowed to sell it to anyone else. You can only sell it to me and the price can't even be that high. So there are real opportunities within this, but I believe that in the long run, they will be based around having skin in the game rather than in and out. And about volume as in I can produce 150,000 to 1.5 million of X at low margin, rather than 20 exquisite pieces at an incredible margin. And you know, then I go to get on my yacht. That's what we've been through for 40 or the years. It's all about a quick buck, financialisation and the massive margin. And that doesn't work against the system that we are now rubbing up against, which absolutely has had some of that speculation too, which is now really knuckled down to saying we need mass volume, low margin, and you know what, we'll even run it a loss for 5 years to make sure we get where we need to be in the long run. You know, we'll reassess 5 years from now. That our system will have to adapt to this one way or another. It's as simple as that or we don't have a system in the long run. It's a very niche and argument, but I fail to see the logical counterpoint at everything we just carry on the way it is now. I don't think so. So if I would resume it, there's the importance of having one, let's say, a self-reliance on energy, then the commodities would be the resources. It could be food, it could be critical resources. It could be anything that fuels industry. And then the third one would be the security, right? It would be the military force that just protects your borders and your interests. And in this constellation of things, now we've seen that this is the battle that we've been describing now with, let's say, the US block and the West versus the East. Where do you see, let's say, the block that is most likely to be well positioned for this type of conflict overall, if you would give a bit of a binary assessment here? Well, if you're saying, first of all, it depends where the boundaries of those blocks will lie. As you see, again, with the US and Canada, it's entirely unclear whether one block holds together or fractures. And that changes the dynamic hugely because of the multiplicative powers that you get if people do work together versus crashing heads, but they have to work together productively rather than saying we're working together, but actually undermining each other. It's more complex than just one side drawing the other ones, right? They've both got things to listen to from the other side there. But if it comes down to a one kind of war where it's purely military, it's going to be the one that's got the best cheapest technology that can produce the highest volume, that's obviously the way that other wars have always gone. By the way, I'm not saying we're going to war to be abundantly clear. You've phrased the question in that way, and I've kind of answered it intuitively, just as a logical response. I am saying that we are preparing for a world in which there is much more confrontation, resilience, quote, unquote, the need for self-reliance and preparedness, which of course looks like you are going to war. But that's not the same thing as actually going to war. Even Russia isn't planning to have an ongoing war with NATO. That's not something that's realistic, I would hope, right? But it's the one who produces more, better, cheaper, for longer, that does better. The west for now can do very well with anything tricky, involving financial markets and an economic state craft and financial state craft, but there's a limit to how long you can continue to squeeze blood out of that stone. That's why it's trying to pivot to look more like the other system. And the other system, I would imagine, is not going to pivot anywhere near as far in the same direction, towards trying to mimic what the west is doing, which is what some optimists would like, because they seem to think everything is a giant seesaw, and well, if we become more like them, they have to become more like us, and then they'll be the consumers, and it's all okay. It's like, well, don't think so. If you really were that easy then again, the answer would just be the giant magic seesaw solves everything for us, and I've already said I don't believe in giant magic seesaws. Because the last running off this interview if you have time, Michael, would be the European question. I mean, I'm here in the Netherlands, I'm myself a mix of many nationalities in Europe. And if I look at the future that Europe has in front of itself, it's not looking great, I may say. On one side we are dealing with one of the shakiest periods when we look at geopolitical blocks, where we squeeze between two giants, and Europe's post-war model, which was relying on expanding trades, mid-tech manufacturing, cheaper energy, and a rules-based order where it could actually find itself pretty well, backed by your security is now totally eroding, and now the question is, what will Europe become in your eyes? I kind of smiled when you asked the European question because it's starting to sound like one of those Very difficult to answer got a 19th century questions and To an extent I don't think there is an answer to the European question. What I will say is Perhaps the clearest voice on it has been former Italian prime minister and of course, you know ECB president draggy Who absolutely as we expected and we said six months before he did Produced a report which said that everything needs to change top to bottom left to right at staggering cost And if Europe doesn't do it it will suffer slow agony since which Europe has done almost none of it It talks expansively It comes out with acronyms people write nice reports batting themselves on the back about how much is being done The rest of the world runs faster in almost every Key metric So then draggy has just now formed a new think tank. I don't know if you were that called the rhyme group We're with some others and they just put out a new piece saying it's now existential We're worse off now than we were when we warned about slow agony So What is to be done as Lenin said? I can't tell you what will be done What I can see are some very very ambitious goals We're talking as far as I'm aware about I believe six countries Uh, using their capital markets over the next couple of months Although everything seems to have gone very quiet on that particular front That would be a very ambitious step if you genuinely get six major economies Thusing into one capital market. That's that's really something if you can be a chief Um, and equally I think to be blunt overly ambitious The headline today as I'm talking to you is that Canadian PM Karney who is of course Absolutely a log ahead's with Trump in a way which will be staggeringly damaging for the Canadian economy Is going to attend the EU's state of the union speech given by VDL So it genuinely seems is that there's some kind of underswell thinking that Canada is going to join the EU which is just lunatic Canada's not in Europe It's in North America I mean Europe is already talking about bringing in Georgia and Armenia And Ukraine and Moldova all of which are uh, former Soviet states And Montenegro which used to be very Russia-friendly that without one with Europe I'm not making a judgment call but I'm just saying that one with Europe much closer into the former Soviet space permanently so the frictions with Russia Would then escalate and just never go away on multiple fronts Doesn't mean he shouldn't be done. I'm not taking the stance. I'm just saying recognize what's involved And then to then say well, we're going to elude towards bringing in Canada Which we've caused power and friction with the US Unless all of that European blog is in perfect alignment with the US Which maybe where we end up you know from a different negotiating position, but if it isn't then you have incredible friction on that border A very large border Incredible friction on the other you've just stretched how How crushed you are how squeezed you are in different directions rather than Rather than contracting and from the Canadian perspective even though you asked me the European question I have to say while I can fully understand Canadian outrage and I get a lot of it shared with me over social media for example It is odd if again understandable given the rhetoric from the Americans The Canada is saying we desperately desperately are fighting for our sovereignty While saying we wanted deep an integration with Europe which as you know Requires sacrificing sovereignty You don't get to keep sovereignty when you join Europe you give up trade you give up You know all manner of different things you give up the currency at some point too So explain to me how that one Maybe you can say well because they're going to make it polite okay Let's put it like that, you know, we're willing to give up sovereignty provided it's an negotiated process committee like Where it's polite that's one thing, but we're not going to do it rudely, you know in a in a smoke field room We're the way the Americans want to do it that makes some sense, but it's not how it's being portrayed So it's not only Europe in this mess But Europe is getting involved in lots of other messes As I said understandable to a degree trying to find a way through it Nobody knows what the outcome is going to be but you know the stakes are high Time is short and we have a number of key elections coming up in Europe, which can really change things too We've got one I believe imminently in Germany where the AFD are likely to take control of the of a state for the first time Um, we have Spain next year we have Poland next year and we have France What happens if we have the election where the final presidential round is melanchon versus lapen? It's not a forecast But what's what what's the European answer to the European question if that's the French election So You tell me yeah, it's a lot of moving pieces. I mean it's obviously a deeper deeper What it requires deeper answers that we don't have time to cover here unfortunately But it kind of gives a bit of an idea of how fragmented We are and how fragmented the world is in general and And we've laid out the the key themes here, and I think it's maybe the most important takeaways for the viewers and listeners here Is that we're going back to the the real things right that the resources raw power raw resources Um, and the alportic so there's a r and all of those and um, it's um Maybe we could conclude it this way and and keep other topics then for follow up conversations But as always a pleasure to to talk to you Michael Likewise, look forward to seeing you in person some way soon And for the user listeners Um, Michael is is always to be read on on x you share there a lot of you've used Some of your also online foods with with trolls or or people who just don't agree with you. So it's always Interesting to to see the argumentation there Is there anywhere else you would like to direct the viewers and listeners To well certainly um if someone's a rabobank client you can find the full body of my work and my team's work at rabobank knowledge So please go and have a look there if you're not a rabobank client You can also find some of my stuff on LinkedIn I have some discussions there, but as you said I find the you know the The forum and the discussion is most invigorating shall we say and that's a Are you from this new world for it on x where I do share some of my thoughts and continue some of these discussions And I'm always came to hear from people right away across the spectrum because the more people you talk to from more different backgrounds The better your the view your view of the world gets and we all need to keep improving that all the time Totally Thanks a lot again Michael for your precious time and to the views and listeners if you haven't subscribed yet to our YouTube channel And want to see more quite with guests just like Michael today Uh, please give us a a subscribe. It helps us. It's it's got it's value. We value this immensely And hope that you can share it with others who also deem it valuable. You