1 00:00:02,240 --> 00:00:09,880 So Trump is in China. This happened about 30 minutes 2 00:00:09,880 --> 00:00:16,079 ago, an hour South of us. So Trump came in last night and 3 00:00:16,079 --> 00:00:19,640 this morning he met with President Xi at the Great Hall 4 00:00:19,840 --> 00:00:21,640 of the People. And let's just have a quick 5 00:00:21,640 --> 00:00:25,240 look. This is him getting out of his 6 00:00:25,240 --> 00:00:27,000 limousine. This was brought in from the 7 00:00:27,000 --> 00:00:30,000 United States by a military transport. 8 00:00:30,960 --> 00:00:35,720 He brought his entire cabinet, including Marco Rubio, the 9 00:00:36,200 --> 00:00:42,120 Secretary of State, as well as Peter Heckstev, who is the 10 00:00:42,880 --> 00:00:54,340 Secretary of War. The last time an American 11 00:00:54,340 --> 00:00:59,580 president visited was nine years ago, November 2017. 12 00:01:00,840 --> 00:01:03,840 So this is a very historical meeting. 13 00:01:04,200 --> 00:01:15,200 And as you may remember, after Trump visited Beijing, they 14 00:01:15,200 --> 00:01:18,960 start the trade war and we've been in a trade war ever since. 15 00:01:19,720 --> 00:01:25,400 I think that this meeting is very optimistic for US China 16 00:01:25,400 --> 00:01:29,040 relations. A lot has to do with who came 17 00:01:29,440 --> 00:01:33,560 with Trump. So this is from Weibo, the 18 00:01:33,560 --> 00:01:38,000 Chinese Twitter. And what Chinese are focusing on 19 00:01:38,040 --> 00:01:41,560 is who came with Trump. So many of his family members 20 00:01:41,560 --> 00:01:45,560 came with Trump, including his son Eric, his start in law, 21 00:01:45,640 --> 00:01:49,880 Lara, and they were excited about coming to China. 22 00:01:49,880 --> 00:01:51,800 Team China guys. OK. 23 00:01:52,200 --> 00:01:56,840 Much more important is the number of business executives 24 00:01:56,920 --> 00:02:01,640 who came with Trump. So you have Elon Musk of Tesla, 25 00:02:02,000 --> 00:02:03,920 and of course, he does a lot of business in China. 26 00:02:04,240 --> 00:02:08,400 Tim Cook of Apple also does a lot of business in China. 27 00:02:08,600 --> 00:02:15,800 Boeing is trying to secure a $50 billion sale to Chinese 28 00:02:15,800 --> 00:02:19,480 airlines. And so these are are three very 29 00:02:19,480 --> 00:02:23,280 important business people. And then you have some of the 30 00:02:23,280 --> 00:02:27,360 leading financial people in America, including Larry Fink of 31 00:02:27,360 --> 00:02:33,000 BlackRock, Steven Schwartzman of Blackstone, Derek Solomon of 32 00:02:33,000 --> 00:02:36,680 Goldman Sachs, You have Citigroup, you have MasterCard 33 00:02:36,960 --> 00:02:40,320 and Visa, OK. And these are the leading 34 00:02:40,320 --> 00:02:47,760 financial companies in America. And all together these business 35 00:02:47,760 --> 00:02:51,400 executives, if you put all their net, the company's net worth 36 00:02:51,400 --> 00:02:56,160 together, their companies are worth over $12 trillion. 37 00:02:56,600 --> 00:03:00,640 That's a lot of money. And these are very busy people. 38 00:03:01,480 --> 00:03:04,640 And quite honestly, I've worked in business negotiations. 39 00:03:05,160 --> 00:03:10,520 You do not bring these people together one room unless you 40 00:03:10,520 --> 00:03:13,000 have a mega deal to announce to the world. 41 00:03:13,960 --> 00:03:20,400 OK, so my prediction is that by tomorrow we should have the 42 00:03:20,400 --> 00:03:25,960 broad contours of AUS China grand bargain where the two 43 00:03:25,960 --> 00:03:29,840 nations reconcile their differences and they start a new 44 00:03:29,840 --> 00:03:34,840 chapter in world history where they work together to stabilize 45 00:03:35,000 --> 00:03:37,960 the global economy. So what I want to do today is 46 00:03:37,960 --> 00:03:44,920 discuss how we got here, why a Greg bargain will happen, and 47 00:03:44,920 --> 00:03:46,520 what does Greg bargain will look like. 48 00:03:47,040 --> 00:03:48,200 OK. All right. 49 00:03:49,280 --> 00:03:55,440 So let's discuss some of the events that led to this meeting 50 00:03:55,440 --> 00:03:58,240 between XI and Trump. This is David Lee from Twitter. 51 00:03:58,240 --> 00:03:59,840 OK. And he's he's talked about like 52 00:03:59,840 --> 00:04:02,200 the past month. What happened? 53 00:04:02,200 --> 00:04:05,080 So the first thing that happened is that China blocked Menace. 54 00:04:05,480 --> 00:04:11,400 Menace is an AI company that Mark Zuckerberg tried to buy and 55 00:04:11,400 --> 00:04:17,399 Menace was incubated in China. And if you're an air company, 56 00:04:18,360 --> 00:04:22,640 you get become very successful. You want to go United States 57 00:04:22,640 --> 00:04:24,280 because that's where all the money is, that's where all the 58 00:04:24,280 --> 00:04:25,640 talent is. That's how you become really, 59 00:04:25,640 --> 00:04:29,080 really big. But because it was it was 60 00:04:29,120 --> 00:04:33,480 incubated in China, China said no, you can't go to United 61 00:04:33,480 --> 00:04:35,240 States because this was set a bad president. 62 00:04:35,280 --> 00:04:37,560 China is trying to grow its own talent. 63 00:04:37,960 --> 00:04:44,440 So this shows the AI war being fought between China and the 64 00:04:44,440 --> 00:04:46,120 United States. OK, So that's one thing that 65 00:04:46,120 --> 00:04:48,000 happened. Another thing that happened is 66 00:04:48,000 --> 00:04:52,680 that the US imposed sanctions on Chinese companies that do 67 00:04:52,680 --> 00:04:57,800 business with Iran, including satellite companies that sell 68 00:04:57,880 --> 00:05:04,080 commercial intelligence to Iran on where US bases are, teapot 69 00:05:04,080 --> 00:05:10,160 refineries which take Iranian oil and then convert it into 70 00:05:10,160 --> 00:05:12,840 energy that China can use. OK. 71 00:05:13,680 --> 00:05:18,840 And in response, China said, no, you cannot impose sanctions on 72 00:05:18,840 --> 00:05:21,120 us if you impose sanctions on us. 73 00:05:21,120 --> 00:05:25,280 And if people comply with these sanctions, then we, the Chinese 74 00:05:25,280 --> 00:05:27,440 government, will sanction these people as well. 75 00:05:27,800 --> 00:05:31,400 And this is something called the blocking order. 76 00:05:33,440 --> 00:05:39,280 And this also seems like an escalation in the US China trade 77 00:05:39,280 --> 00:05:44,240 war, where previously Chinese institutions, banks, individuals 78 00:05:44,520 --> 00:05:47,880 complied with U.S. sanctions. And this is the first time the 79 00:05:47,880 --> 00:05:50,880 Chinese government said to Chinese people, if you're a 80 00:05:50,880 --> 00:05:54,320 Chinese citizen and you comply with U.S. sanctions, then we 81 00:05:54,320 --> 00:05:56,360 will sanction you. OK? 82 00:05:56,360 --> 00:06:01,360 So this is a very big deal. NVIDIA was not able to sell 83 00:06:01,520 --> 00:06:06,640 chips into China and this is going to affect Nvidia's bottom 84 00:06:06,640 --> 00:06:09,440 line, OK? Nvidia's is right now the 85 00:06:09,440 --> 00:06:12,400 world's the world's most valuable company, primarily 86 00:06:12,400 --> 00:06:15,040 because AI depends on their chips. 87 00:06:15,560 --> 00:06:21,280 OK China invited Iranian Foreign Minister Arachi to Beijing 88 00:06:21,760 --> 00:06:25,960 because China is very interested in the outcome of this war 89 00:06:25,960 --> 00:06:31,240 between United States and Iran. Right now, Iran is blocking of 90 00:06:31,240 --> 00:06:36,760 Hormuz and China depends on 50 to 60% of its energy needs from 91 00:06:36,800 --> 00:06:42,480 the Middle East. OK, Jezhen Huang was not on the 92 00:06:42,480 --> 00:06:46,840 China list. OK, So before Trump took off, it 93 00:06:46,840 --> 00:06:51,400 was announced that Jezhen Huang, who is the head of NVIDIA, would 94 00:06:51,400 --> 00:06:54,960 not come to China. And it's a very big deal because 95 00:06:55,160 --> 00:06:59,080 in this grand bargain, what China would want is access to 96 00:06:59,400 --> 00:07:04,960 NVIDIA chips, semiconductors in order to fuel its AI. 97 00:07:05,480 --> 00:07:11,840 OK, the United States and six, seven nations had a war game in 98 00:07:11,840 --> 00:07:14,360 the Philippines and the China sent 28 warships, OK? 99 00:07:15,480 --> 00:07:22,360 Trump sent Iran an MOU, Iran make modifications and Trump 100 00:07:22,360 --> 00:07:25,000 said no. OK, So it seems like the war 101 00:07:25,280 --> 00:07:30,640 will only increase in the Middle East after Iran had responded 102 00:07:30,640 --> 00:07:32,840 trying to announce Trump's state of visit. 103 00:07:34,760 --> 00:07:43,880 And then yesterday and the day before, Holy Fung, who is The 104 00:07:44,200 --> 00:07:46,440 Who is a vice premier in China, and Scott Benson, who's the 105 00:07:46,440 --> 00:07:53,000 church secretary, met in South Korea to try to negotiate a 106 00:07:53,440 --> 00:07:54,520 deal. OK. 107 00:07:54,960 --> 00:07:58,880 And then what's going to happen is that Putin will visit China 108 00:07:58,880 --> 00:08:01,600 after Trump leaves. So if you just look at what's 109 00:08:01,600 --> 00:08:05,480 happening, it seems as though there's still a lot of friction 110 00:08:05,680 --> 00:08:09,160 between the United States and China. 111 00:08:09,600 --> 00:08:12,880 What I want to show you today is that all of this you can just 112 00:08:12,880 --> 00:08:15,800 ignore, OK? This is all that's happening 113 00:08:16,320 --> 00:08:18,760 right now. But if we use game theory, if we 114 00:08:18,760 --> 00:08:23,720 just look at the broad contours of what's happening, we would 115 00:08:23,720 --> 00:08:26,960 make much better predictions as to what will happen. 116 00:08:27,040 --> 00:08:33,360 OK, so all this, I think it's just theater, all right? 117 00:08:34,360 --> 00:08:37,080 China and United States are not actually fighting AI war. 118 00:08:37,080 --> 00:08:38,640 It's all theater. They're actually working 119 00:08:38,640 --> 00:08:44,080 together to promote AI. These sanctions are happening, 120 00:08:44,360 --> 00:08:49,360 but eventually the US and China will come to a grand bargain and 121 00:08:49,360 --> 00:08:51,240 they will become much more economic, integrated. 122 00:08:51,960 --> 00:08:54,200 And Iran. China doesn't really care about 123 00:08:54,200 --> 00:08:55,600 Iran. OK. 124 00:08:55,640 --> 00:09:00,040 China cares first and foremost about the relationship with 125 00:09:00,040 --> 00:09:01,920 United States. And one piece of evidence for 126 00:09:01,920 --> 00:09:06,960 that is that when Foreign Minister Arachi went to Moscow, 127 00:09:07,240 --> 00:09:11,920 Putin met with him for 90 minutes and Putin expressed his 128 00:09:11,920 --> 00:09:13,960 sympathy and support to Iranian people. 129 00:09:14,880 --> 00:09:18,960 When Iraqi came to Beijing, he only met with his counterpart, 130 00:09:19,280 --> 00:09:23,560 the foreign Minister, Wang Yi. OK, All right. 131 00:09:24,840 --> 00:09:29,640 Another important thing is that Scott doesn't is the one who is 132 00:09:29,760 --> 00:09:34,600 leading the US team in China. Scott Doesn't is the Treasury 133 00:09:34,600 --> 00:09:38,840 Secretary. This goes against protocol 134 00:09:39,040 --> 00:09:44,000 because it's usually the Secretary of State, Marco Rubio, 135 00:09:44,000 --> 00:09:47,120 and the national security advisor, who also happens to be 136 00:09:47,120 --> 00:09:51,280 Marco Rubio. This team is the one that sets 137 00:09:51,680 --> 00:09:58,600 the agenda for the US China visit because it's God pleasant. 138 00:09:58,840 --> 00:10:02,680 We can probably guess that this is probably going to be an 139 00:10:02,680 --> 00:10:06,720 economic negotiation and the focus is on we're going to 140 00:10:06,720 --> 00:10:09,680 finance. Basically what America wants is 141 00:10:09,680 --> 00:10:12,400 for trying to open up its financial sector for companies 142 00:10:12,400 --> 00:10:15,280 like BlackRock and blacks sort of come in to sell financial 143 00:10:15,280 --> 00:10:19,560 instruments to Chinese people. OK, That that's what America 144 00:10:19,560 --> 00:10:22,880 wants and we'll talk about this as we go along. 145 00:10:22,880 --> 00:10:29,880 All right, let's continue. OK, so in the geopol landscape, 146 00:10:31,040 --> 00:10:35,960 it seems as though America is trying to contain China. 147 00:10:36,360 --> 00:10:42,880 So this is Tehran and this is what China's trying to do. 148 00:10:42,880 --> 00:10:47,360 China's trying to build a high speed rail network from Beijing 149 00:10:47,360 --> 00:10:52,160 all the way across Central Asia and into Europe, OK. 150 00:10:52,160 --> 00:10:54,680 This is a land route that Beijing wants to take in order 151 00:10:54,680 --> 00:10:58,920 to maintain trade with Europe. As you can tell from this map, 152 00:10:59,280 --> 00:11:06,640 Tehran is the pivot or the hub of this trade network, OK, It 153 00:11:06,640 --> 00:11:10,240 well, Tehran, Beijing could not access Europe. 154 00:11:12,360 --> 00:11:16,520 And then Moscow also sees Tehran as very important as well for 155 00:11:16,520 --> 00:11:21,480 its NS trade axis. Without Tehran, Beijing is 156 00:11:21,480 --> 00:11:25,680 completely reliant on Russia. Beijing does not want to become 157 00:11:25,680 --> 00:11:29,840 reliant on Russia. Beijing sees itself as the third 158 00:11:29,840 --> 00:11:32,440 axis of power in the world. All right. 159 00:11:32,440 --> 00:11:34,280 You have the ninth stage, you have Russia, and then you have 160 00:11:34,280 --> 00:11:37,240 China. From a geopolitical perspective, 161 00:11:38,440 --> 00:11:43,280 China doesn't want to become partners with either the United 162 00:11:43,280 --> 00:11:47,160 States or or, or Russia. It wants to become independent. 163 00:11:47,160 --> 00:11:49,240 It wants to create its own spirit of influence. 164 00:11:49,600 --> 00:11:51,520 OK. And that's why Iran is very, 165 00:11:51,840 --> 00:11:55,400 very important. So a lot of geopolitical 166 00:11:55,560 --> 00:12:01,520 analysts believe that Beijing is forced to support Iran in this 167 00:12:01,520 --> 00:12:03,640 war. And what I want to show you is 168 00:12:03,680 --> 00:12:06,200 that's not actually the case. All right. 169 00:12:06,800 --> 00:12:10,680 China's China's may want to become independent of the United 170 00:12:10,680 --> 00:12:12,640 States and Russia, but it cannot actually. 171 00:12:14,040 --> 00:12:20,280 All right. Now, there's a rumor a couple of 172 00:12:20,280 --> 00:12:27,040 days ago that one deal that Trump and XI was signed in 173 00:12:27,040 --> 00:12:36,200 Beijing is Xi Jinping will commit $1 trillion, $1 trillion 174 00:12:36,440 --> 00:12:40,520 investment into America, primarily factories that 175 00:12:40,520 --> 00:12:45,840 manufacture EV cars. This is a huge deal, OK? 176 00:12:46,600 --> 00:12:51,520 And Laura, Laura Ingraham, who works at Fox News, she thinks 177 00:12:51,520 --> 00:12:54,440 it's a bad thing. She thinks that this is about 178 00:12:55,440 --> 00:12:59,760 China coming in and trying to buy out the United States. 179 00:12:59,760 --> 00:13:02,400 As I'll show you later, this is retarded, OK? 180 00:13:02,400 --> 00:13:07,760 I think this deal will happen, but this is a deal that shows 181 00:13:07,760 --> 00:13:11,840 that China is is ultimately dependent on America as opposed 182 00:13:11,840 --> 00:13:14,520 to China wants to take over America. 183 00:13:15,080 --> 00:13:21,160 OK, All right. So how can we understand the 184 00:13:21,160 --> 00:13:24,040 Trump visit? Well, again, in this class, what 185 00:13:24,040 --> 00:13:28,200 I want to show you is that historical analogies is a really 186 00:13:28,200 --> 00:13:30,720 powerful way to understand the present. 187 00:13:31,400 --> 00:13:39,280 So the Trump visit today is analogous to Nixon's visit in 188 00:13:39,280 --> 00:13:45,320 1972. OK, so you don't know this, but 189 00:13:45,320 --> 00:13:53,560 before 1972 America was hostile towards China primarily because 190 00:13:53,560 --> 00:13:57,040 of Taiwan, where during the Chinese Civil War the Americans 191 00:13:57,040 --> 00:14:01,280 were supportive of Chiang Kai shed and the KMT. 192 00:14:01,560 --> 00:14:06,080 They lost, they went to Taiwan. And when that happened, America 193 00:14:06,080 --> 00:14:09,760 said that, first of all, we will only recognize Taiwan as the 194 00:14:09,760 --> 00:14:15,920 official government of China. Second of all, we will refuse to 195 00:14:15,920 --> 00:14:22,680 do any business with the PRC. And third of all, we will help 196 00:14:22,680 --> 00:14:30,160 Taiwan eventually try to take over China. 1972, when Nixon 197 00:14:30,160 --> 00:14:39,000 visited, this marked a radical departure from 20 years of 198 00:14:40,080 --> 00:14:42,880 American foreign policy. OK. 199 00:14:43,400 --> 00:14:45,880 And the question then is, why would he do that? 200 00:14:46,160 --> 00:14:50,760 And the answer is in 1971, the Nixon shock. 201 00:14:51,760 --> 00:14:55,000 So we talked to historians, they'll give you lots and lots 202 00:14:55,000 --> 00:15:00,640 of different reasons as to why Nixon visited China. 203 00:15:00,760 --> 00:15:06,840 The main reason in their from that perspective is that Henry 204 00:15:06,840 --> 00:15:10,920 Kissinger, who is national secret advisor to Richard Nixon, 205 00:15:11,080 --> 00:15:17,040 he was trying to triangulate between China and specific 206 00:15:17,040 --> 00:15:18,520 union, right? He was trying to get China on 207 00:15:18,520 --> 00:15:23,080 the side of the United States in order to defeat the Soviet 208 00:15:23,080 --> 00:15:24,200 Union. That's not true. 209 00:15:24,480 --> 00:15:25,840 That is something that historians made-up. 210 00:15:26,160 --> 00:15:32,880 The real reason is in 1971, Nixon removed the US dollar from 211 00:15:32,880 --> 00:15:38,280 the gold standard, and now the US dollar is worth nothing. 212 00:15:38,440 --> 00:15:40,800 Before, you could take the US dollar and change it for gold. 213 00:15:41,120 --> 00:15:44,280 Now it's worth nothing. If it's worth nothing, what to 214 00:15:44,280 --> 00:15:45,960 do now is create a demand for it. 215 00:15:45,960 --> 00:15:47,640 You basically have to create a Ponzi scheme. 216 00:15:51,800 --> 00:15:55,760 And so Nixon did two things to resolve this issue and create 217 00:15:55,920 --> 00:16:00,440 the US dollar Ponzi scheme. The first thing he did was 218 00:16:00,440 --> 00:16:01,760 create something called the Petro dollar. 219 00:16:05,600 --> 00:16:11,640 OK, The Petro dollar is where Saudi Arabia and other Middle 220 00:16:11,640 --> 00:16:19,240 East countries like Qatar, UAE, they only sell their oil in U.S. 221 00:16:19,240 --> 00:16:23,360 dollars. So now, before the value of U.S. 222 00:16:23,360 --> 00:16:26,120 dollars was tied to gold, the gold standard. 223 00:16:26,600 --> 00:16:32,120 Now the value of U.S. dollars is tied to oil, OK, If you want to 224 00:16:32,120 --> 00:16:35,280 buy oil and everyone's buy oil, you need U.S. dollars. 225 00:16:35,280 --> 00:16:38,080 And there's something called the petrodollar, OK, That's the 226 00:16:38,080 --> 00:16:40,560 first thing. Second thing which is relevant 227 00:16:40,560 --> 00:16:49,960 to us is China. OK, opening the strategy is to 228 00:16:50,400 --> 00:16:56,200 turn China into a manufacturing base for the global economy, 229 00:16:57,360 --> 00:17:03,120 right? So the Middle East sells oil to 230 00:17:03,120 --> 00:17:07,640 the world, but China now will sell manufactured goods to the 231 00:17:07,640 --> 00:17:12,599 world, and China will also do so using U.S. dollars. 232 00:17:13,359 --> 00:17:19,040 And these two things together create the current global 233 00:17:19,040 --> 00:17:22,880 economy. All right, OK, so. 234 00:17:23,480 --> 00:17:29,800 What I'm going to do now is I'm going to explain to you why 235 00:17:29,800 --> 00:17:33,160 America did this, OK, this, I'm going to call it Shanghai 236 00:17:33,160 --> 00:17:41,960 Communique. This is published in 1972 and 237 00:17:41,960 --> 00:17:48,360 this basically spells out the basic premise framework for all 238 00:17:48,360 --> 00:17:52,240 future US China cooperation and dialogue. 239 00:17:53,040 --> 00:17:56,000 And the SHINE framework basically resolves the Taiwan 240 00:17:56,000 --> 00:18:03,240 question. And with regard to Taiwan 241 00:18:03,240 --> 00:18:07,720 question, America practicing call strategic ambiguity, 242 00:18:09,960 --> 00:18:17,280 meaning the United States will not be clear about the issue of 243 00:18:17,280 --> 00:18:22,280 Taiwan with regard to China. So what the United States has 244 00:18:22,280 --> 00:18:28,120 been saying for a long time is we do not support Taiwan 245 00:18:28,120 --> 00:18:31,320 independence, OK, that's our strategic ambiguity. 246 00:18:31,720 --> 00:18:39,360 China would prefer the United States to say we oppose Taiwan 247 00:18:39,360 --> 00:18:42,920 independence, in which case the United States is obligated now 248 00:18:43,000 --> 00:18:45,640 to prevent Taiwan from becoming independent. 249 00:18:46,440 --> 00:18:47,960 OK, that's what China would prefer. 250 00:18:47,960 --> 00:18:51,640 But the United States practices strategic ambiguity, saying we 251 00:18:51,800 --> 00:18:56,160 do not support. I wouldn't be surprised if over 252 00:18:56,160 --> 00:19:02,440 the next few months, Trump rapidly changes this attitude 253 00:19:02,600 --> 00:19:07,800 and declares that the United States is opposed to Taiwan 254 00:19:07,800 --> 00:19:10,400 independence. In fact, the United States 255 00:19:10,600 --> 00:19:14,880 supports the unification of China and Taiwan. 256 00:19:15,560 --> 00:19:17,680 OK? This would be a radical C shift 257 00:19:17,880 --> 00:19:22,080 from previous administrations, and I'll explain why later on, 258 00:19:22,080 --> 00:19:25,880 why Trump would do this, and also why it's actually very 259 00:19:25,880 --> 00:19:30,800 strategic and smart for the United States to want to support 260 00:19:31,560 --> 00:19:33,760 Taiwan and China reinvocation, OK? 261 00:19:34,720 --> 00:19:41,920 All right, So let me explain now what the China US relationship 262 00:19:41,920 --> 00:19:45,800 really is, using the theories that we've learned in this 263 00:19:45,800 --> 00:19:48,360 class, OK? There's something that you will 264 00:19:48,360 --> 00:19:50,960 never learn that you will not learn anywhere else. 265 00:19:51,560 --> 00:19:53,880 And this is speculation on my part. 266 00:19:54,160 --> 00:19:55,760 Please take it. We're going to salt. 267 00:19:56,040 --> 00:19:58,320 Please question me. Please debate me. 268 00:19:58,320 --> 00:20:03,720 OK, But this is my theory of how the US and China work together. 269 00:20:04,360 --> 00:20:07,400 And once you understand this theory, you can then go on to 270 00:20:07,400 --> 00:20:10,920 make certain predictions about how the United States and China 271 00:20:10,920 --> 00:20:14,240 will behave moving forward. And based on whether these 272 00:20:14,240 --> 00:20:17,320 predictions are correct or not, you can then figure out if this 273 00:20:17,360 --> 00:20:18,600 theory is correct or not. OK. 274 00:20:18,960 --> 00:20:19,960 All right. So. 275 00:20:20,600 --> 00:20:23,040 The first thing to understand, and something I've been teaching 276 00:20:23,040 --> 00:20:28,240 a lot in this class, is that reality is a hallucination. 277 00:20:30,440 --> 00:20:35,200 It is something that we collectively imagine together. 278 00:20:35,680 --> 00:20:39,240 And again, the analogy, the metaphor I use is Plato's 279 00:20:39,280 --> 00:20:42,920 allegory of The Cave, where you imagine about a million people 280 00:20:44,320 --> 00:20:47,680 change together and they're all looking at a wall. 281 00:20:47,760 --> 00:20:51,000 OK, There's walls empty behind the wall. 282 00:20:51,280 --> 00:20:56,240 Behind the people is this great fire where the elite, OK, we 283 00:20:56,240 --> 00:21:02,240 don't know who they are, OK, but they project shadows onto the 284 00:21:02,240 --> 00:21:07,720 wall. And then the people who are 285 00:21:07,720 --> 00:21:11,000 chained don't know what's going on behind the scenes. 286 00:21:11,080 --> 00:21:13,240 They only see what's in front of them, which is the wall. 287 00:21:13,360 --> 00:21:17,440 They see these shadows and they start to create a reality around 288 00:21:17,440 --> 00:21:18,920 these shadows. They think these shadows are 289 00:21:18,920 --> 00:21:26,040 real and they think and they create mythology, religion, an 290 00:21:26,040 --> 00:21:28,120 entire framework around these shadows, OK. 291 00:21:28,120 --> 00:21:31,880 And that's what we call reality. All right, So the main message 292 00:21:31,880 --> 00:21:37,200 here is that true wealth is our attention. 293 00:21:37,920 --> 00:21:44,320 That OK, our consciousness is what's true wealth. 294 00:21:44,480 --> 00:21:47,320 In fact, our consciousness is what's real. 295 00:21:47,400 --> 00:21:49,200 Everything else is as an illusion. 296 00:21:49,280 --> 00:21:53,840 Everything else is is a shadow. Your body is a shadow, OK? 297 00:21:54,040 --> 00:21:55,400 The person in front of you is a shadow. 298 00:21:56,600 --> 00:22:00,800 This blackboard is a shadow. What's real is the thing inside 299 00:22:01,040 --> 00:22:03,240 your head. Your conscience is what's real. 300 00:22:03,600 --> 00:22:10,520 Now, what power is, is the capacity to direct and control 301 00:22:10,880 --> 00:22:14,880 this attention. OK, How is your power over you? 302 00:22:15,320 --> 00:22:20,200 Is by making you think the way I want you to think. 303 00:22:20,720 --> 00:22:24,360 By making you see what I want you to see, OK? 304 00:22:24,400 --> 00:22:26,440 So I can make you see the shadows and make you think it's 305 00:22:26,440 --> 00:22:28,560 real. And that's what true power is. 306 00:22:30,000 --> 00:22:34,080 And this idea, once you understand it, explains the 307 00:22:34,080 --> 00:22:35,560 reality that we live in. OK? 308 00:22:35,560 --> 00:22:38,760 So I'm going to take this idea and apply it to reality and show 309 00:22:38,760 --> 00:22:45,280 you how it works. So at the very basis of reality 310 00:22:45,360 --> 00:22:51,520 is the Empire, OK, and it's the American Empire that's able to 311 00:22:51,720 --> 00:22:53,920 force you to sit down and look at the wall. 312 00:22:55,480 --> 00:22:59,120 Then the people manipulating a fire, casting shadows are the 313 00:22:59,120 --> 00:23:02,240 game masters. And these are the financial 314 00:23:02,240 --> 00:23:07,280 elite, OK, including the bank, financial settlements, the 315 00:23:07,280 --> 00:23:16,760 Federal Reserve, Wall Street, City of London, basically 316 00:23:16,760 --> 00:23:18,400 private capital. OK. 317 00:23:20,840 --> 00:23:26,760 They together create the conditions for this game. 318 00:23:27,160 --> 00:23:31,400 They're able to direct our attention, OK. 319 00:23:31,400 --> 00:23:35,720 And the mechanism they do this with is of course with capital, 320 00:23:36,160 --> 00:23:43,640 OK, or U.S. dollars. And then from, and then again we 321 00:23:43,640 --> 00:23:45,440 create something called the global economy, of course, 322 00:23:45,440 --> 00:23:53,040 right, the global economy. But in order for this game to 323 00:23:53,040 --> 00:23:56,600 work, it has to, the game masters have to disguise the 324 00:23:56,600 --> 00:23:57,960 fact that they're really in charge. 325 00:23:58,200 --> 00:24:03,280 So they create institutions that pretend to be objective, 326 00:24:03,680 --> 00:24:08,200 international and impartial in fair but out of fact control by 327 00:24:08,200 --> 00:24:10,720 the game masters. These are include, of course, 328 00:24:11,000 --> 00:24:18,400 the UN, the WTO, the EU, the World Bank, OK, lots and lots of 329 00:24:18,400 --> 00:24:22,280 these organizations. And then in order to justify and 330 00:24:22,280 --> 00:24:24,880 legitimize this system, in order to make you think these shutters 331 00:24:24,880 --> 00:24:36,920 are real, they media, education and culture brainwash you, 332 00:24:36,920 --> 00:24:40,520 indoctrinate you into doing this system is real when it's all 333 00:24:40,520 --> 00:24:44,560 just a hallucination, OK. And then from this, of course, 334 00:24:44,560 --> 00:24:49,920 you have the legal system to enforce the system as well as 335 00:24:49,920 --> 00:24:54,480 customs and habits, values and norms, OK? 336 00:24:54,480 --> 00:24:57,040 So this is an enforcement mechanism to force you to 337 00:24:57,040 --> 00:24:59,320 believe that the system is real, OK? 338 00:25:00,040 --> 00:25:03,440 Media, education, culture brainwashes you to believe the 339 00:25:03,440 --> 00:25:06,480 system is real. And then you yourself want to 340 00:25:06,480 --> 00:25:13,440 enforce the system on others through customs and norms. 341 00:25:13,640 --> 00:25:21,200 OK, now this is a very fragile system because it's all just a 342 00:25:21,840 --> 00:25:24,400 hallucination. So there are enforcement 343 00:25:24,400 --> 00:25:28,560 mechanisms, OK, that make sure this system is stable. 344 00:25:28,920 --> 00:25:33,840 And these enforcement mechanisms are crime, intelligence, spies, 345 00:25:33,840 --> 00:25:39,040 basically spy networks and science, OK? 346 00:25:39,280 --> 00:25:43,320 And they, these three mechanisms are controlled by the true 347 00:25:43,320 --> 00:25:47,880 powers of this world. And they include transnational 348 00:25:47,880 --> 00:25:53,640 capital, basically private capital, civil societies and 349 00:25:53,640 --> 00:25:58,640 elite families. And what binds them together. 350 00:25:58,800 --> 00:26:01,680 They're basically software. The operating system is what we 351 00:26:01,680 --> 00:26:03,160 call the occult. OK. 352 00:26:03,160 --> 00:26:05,360 And we're saying about the occult later on. 353 00:26:06,200 --> 00:26:06,960 All right. OK. 354 00:26:06,960 --> 00:26:09,240 So this is how the world is designed. 355 00:26:09,760 --> 00:26:12,280 Again, this is all hallucination. 356 00:26:13,360 --> 00:26:16,640 One thing that you don't appreciate of the system is that 357 00:26:16,880 --> 00:26:21,000 from this hallucination, I can actually project myself onto 358 00:26:21,000 --> 00:26:24,760 another force and create another hallucination, OK? 359 00:26:24,760 --> 00:26:28,120 And that's what Richard Nixon did from this system in order to 360 00:26:28,120 --> 00:26:30,880 maintain the empire, in order to maintain the supremacy of the US 361 00:26:30,880 --> 00:26:36,480 dollar, OK? He created 2 new hallucinations 362 00:26:37,480 --> 00:26:45,840 and they are the GCC and China. OK, GCC and China. 363 00:26:45,840 --> 00:26:52,000 All right, So what underpinned this system before was gold, the 364 00:26:52,000 --> 00:26:53,960 fact that U.S. dollar could always be exchanged for gold. 365 00:26:54,120 --> 00:26:57,240 Once that's gone, then you need to create new 2 new 366 00:26:57,240 --> 00:27:03,080 hallucinations in order to disguise the the hallucination. 367 00:27:03,080 --> 00:27:10,080 OK, So what happened was that over the next few decades, this 368 00:27:10,080 --> 00:27:14,880 system will transport itself and impose itself on the GCC and 369 00:27:14,880 --> 00:27:20,360 China, OK? This system here will impose 370 00:27:20,360 --> 00:27:26,040 itself into the GCC as well as China. 371 00:27:26,640 --> 00:27:28,520 In other words, and it's really important for you guys to 372 00:27:28,520 --> 00:27:32,680 understand, China is a hallucination of a 373 00:27:32,680 --> 00:27:34,760 hallucination. It's not real. 374 00:27:35,840 --> 00:27:36,840 OK? I'll explain more about this 375 00:27:36,840 --> 00:27:39,040 later on, OK? All right. 376 00:27:40,040 --> 00:27:44,880 So. Once this illusion is imposed 377 00:27:45,120 --> 00:27:50,920 onto the GCC in China, this creates demand for the US 378 00:27:50,920 --> 00:27:55,240 dollar, OK, And this creates certain stability for the US 379 00:27:55,240 --> 00:27:57,960 dollar. And it made China very, very 380 00:27:57,960 --> 00:27:59,720 wealthy. OK. 381 00:28:04,040 --> 00:28:07,800 But it's all just an illusion. It's all just a mirage. 382 00:28:08,080 --> 00:28:10,440 There's some problems with this system. 383 00:28:10,760 --> 00:28:17,000 First of all, China doesn't have any creativity, OK? 384 00:28:17,360 --> 00:28:18,320 Why? Because if you're a 385 00:28:18,320 --> 00:28:20,720 hallucination of a hallucination, there's nothing 386 00:28:20,720 --> 00:28:24,800 for you to base yourself on, OK? You're a shadow of a shadow. 387 00:28:24,920 --> 00:28:31,320 That's the first problem. Second problem is wealth 388 00:28:32,800 --> 00:28:35,920 extraction, OK? The idea here is that whatever 389 00:28:35,920 --> 00:28:43,480 wealth trying to create has to return to the source because the 390 00:28:43,480 --> 00:28:50,600 people inside China appreciate that the rimming B, its entire 391 00:28:50,600 --> 00:28:54,480 value is based on the US dollar. So you're going to have rimming 392 00:28:54,480 --> 00:28:58,880 B or U.S. dollar. Of course you want U.S. dollar. 393 00:28:59,720 --> 00:29:04,760 OK. And the third problem is the 394 00:29:04,760 --> 00:29:11,440 fragility of this system, OK? Meaning that if this system, the 395 00:29:11,600 --> 00:29:17,000 hallucination, is unstable, then China is even more unstable 396 00:29:17,080 --> 00:29:20,840 because it's a hallucination of a hallucination, OK? 397 00:29:20,840 --> 00:29:24,960 Do you understand? OK, so once we understand this, 398 00:29:25,560 --> 00:29:29,480 then we begin to re reassess what happened these past 10 399 00:29:29,480 --> 00:29:33,240 years, why the United States and China fight this trade war. 400 00:29:34,080 --> 00:29:38,640 The reason why is that China believed that it could be 401 00:29:38,640 --> 00:29:41,400 independent of this hallucination. 402 00:29:41,400 --> 00:29:44,960 In fact, it could create its own hallucination in the United 403 00:29:44,960 --> 00:29:48,920 States says no, no, no guys, no, no, no, you're going to be 404 00:29:48,920 --> 00:29:50,960 dependent on us. So then they sort of fight this 405 00:29:50,960 --> 00:29:52,960 trade war. Once this trade war happened, 406 00:29:52,960 --> 00:29:55,600 what happened? A lot of money and people start 407 00:29:55,600 --> 00:30:00,280 to flee China and move back to United States, OK. 408 00:30:02,760 --> 00:30:06,920 And now what China has recognized is, OK, first of all, 409 00:30:07,640 --> 00:30:10,800 we can't actually leave this hallucination because if this 410 00:30:11,000 --> 00:30:13,440 hallucination would collapse, we collapse as well. 411 00:30:13,440 --> 00:30:20,480 So one of the things we can do is actually to recouple, OK, to 412 00:30:20,480 --> 00:30:23,000 buy ourselves even greater to the system. 413 00:30:23,520 --> 00:30:27,800 Now we're saying this is that the US, the global economy is 414 00:30:27,800 --> 00:30:30,920 under a large strain. There are two main beneficiaries 415 00:30:30,920 --> 00:30:34,080 of the global economy, the United States and China. 416 00:30:35,160 --> 00:30:39,400 So both are heavily invested in maintaining the illusion, the 417 00:30:39,400 --> 00:30:41,520 hallucination that is the global economy. 418 00:30:42,240 --> 00:30:45,920 OK. And to appreciate how fragile 419 00:30:46,000 --> 00:30:53,960 all this is, think of the UAE. OK, The UAE, The UAE seemed as 420 00:30:53,960 --> 00:30:59,640 though it was a very prosperous place, right? 421 00:30:59,640 --> 00:31:04,480 It had universities from America like Georgetown, Cornell. 422 00:31:05,560 --> 00:31:08,840 It had people, the wealthiest people flocking to Dubai. 423 00:31:09,480 --> 00:31:13,520 It seemed invincible. But the moment you attack the 424 00:31:13,520 --> 00:31:17,840 UAE, like Iran has lost a missile at UAE, but the illusion 425 00:31:17,920 --> 00:31:21,760 shatters, and now the UAE is gone, You understand? 426 00:31:22,440 --> 00:31:25,120 That's how precarious these hallucinations are. 427 00:31:25,840 --> 00:31:29,920 One hit at the right spot, the entire illusion is shattered. 428 00:31:30,080 --> 00:31:34,080 You can never bring it back, OK. And so that's what China's 429 00:31:34,080 --> 00:31:38,800 afraid of now. So that's why China and United 430 00:31:38,800 --> 00:31:42,120 States have to work together, because what's important is to 431 00:31:42,120 --> 00:31:44,800 maintain the nature of reality itself. 432 00:31:45,480 --> 00:31:47,920 The worst thing that can happen is if people wake up from the 433 00:31:47,920 --> 00:31:49,400 stream. Because people wake up from the 434 00:31:49,400 --> 00:31:51,600 stream, everything collapses all at once. 435 00:31:53,560 --> 00:31:54,760 OK. Does that make sense, guys? 436 00:31:54,840 --> 00:31:57,680 Any questions so far? Are we clear about this? 437 00:31:57,960 --> 00:32:01,640 OK, All right, so how how now that with this theory, let's 438 00:32:01,640 --> 00:32:03,880 talk about this idea concretely, OK? 439 00:32:04,800 --> 00:32:06,760 All right. So. 440 00:32:07,680 --> 00:32:12,520 The United States used to be the world's most powerful 441 00:32:12,520 --> 00:32:16,360 manufacturing country. OK, So before it was the UK, 442 00:32:16,720 --> 00:32:19,760 then you have the United States. OK, And the United States is in 443 00:32:19,760 --> 00:32:24,920 the blue, right? And then it and then China 444 00:32:24,920 --> 00:32:28,440 surpassed it. It's intentional, OK. 445 00:32:28,720 --> 00:32:34,160 The intention is to use manufacturing to extract the 446 00:32:34,160 --> 00:32:37,760 wealth of China and transfer it to America. 447 00:32:38,320 --> 00:32:43,560 OK, so now China is the world's most powerful manufacturing 448 00:32:43,960 --> 00:32:44,720 country. OK. 449 00:32:45,720 --> 00:32:48,440 And this is a map that shows it better. 450 00:32:49,160 --> 00:32:52,480 OK. Where China is now #1 United 451 00:32:52,480 --> 00:32:57,400 States has moved on #2 Japan and Germany are pretty flat. 452 00:32:57,800 --> 00:33:02,400 This is intentional. The intention is to bind China 453 00:33:02,640 --> 00:33:06,120 to the global economy, become dependent on the global economy, 454 00:33:06,160 --> 00:33:09,200 and therefore save the global economy when it's under strain. 455 00:33:10,000 --> 00:33:19,200 OK, One major consequence of this of China's rise is the 456 00:33:19,200 --> 00:33:26,920 trade deficit between America and China, OK? 457 00:33:27,520 --> 00:33:31,600 Unfortunately, this trade deficit is a natural consequence 458 00:33:32,560 --> 00:33:38,800 of China's manufacturing ascent, OK? 459 00:33:38,960 --> 00:33:41,680 Why? Because the purpose is to force 460 00:33:41,680 --> 00:33:47,360 China to buy more U.S. dollars, OK, in order to support the 461 00:33:47,360 --> 00:33:49,000 Pontius scheme. So this is a system that 462 00:33:49,000 --> 00:33:52,480 benefits the Americans. When Trump came into power 2016, 463 00:33:52,480 --> 00:33:56,120 he said no, no, no, no. It shows that China is taking 464 00:33:56,120 --> 00:34:00,040 advantage of us. And Trump doesn't really, really 465 00:34:00,040 --> 00:34:02,640 appreciate that. No, it was designed this way. 466 00:34:02,920 --> 00:34:05,040 You, you need to create demand for U.S. dollars. 467 00:34:05,360 --> 00:34:07,440 If China is fighting a lot of U.S. dollars, that's a good 468 00:34:07,440 --> 00:34:10,600 thing, right? China's trading real assets, the 469 00:34:10,600 --> 00:34:14,840 energy of its people, for fake assets, which is just U.S. 470 00:34:14,840 --> 00:34:16,600 dollars. OK, So it's a great deal for 471 00:34:16,600 --> 00:34:18,719 America. But Trump said no, this is a bad 472 00:34:18,719 --> 00:34:21,400 deal. And this and this was what led 473 00:34:21,400 --> 00:34:26,440 to the trade war. OK, So what led to the trade war 474 00:34:26,679 --> 00:34:32,239 is the WTO. So in 1999, China negotiated to 475 00:34:32,239 --> 00:34:34,520 join the WTO, the World Trade Organization. 476 00:34:35,480 --> 00:34:38,360 And this is this is what's going to make China rich and the 477 00:34:38,360 --> 00:34:40,400 largest manufacturing power in the world. 478 00:34:40,960 --> 00:34:46,440 But in order to join WTO, China had to agree to a lot of 479 00:34:46,440 --> 00:34:48,880 conditions. The two most important 480 00:34:48,880 --> 00:34:56,360 conditions was protect IP, OK, you have to protect other 481 00:34:56,360 --> 00:34:59,480 nations intellectual property and you didn't force it. 482 00:34:59,480 --> 00:35:04,600 And the other thing was open the financial sector. 483 00:35:06,560 --> 00:35:12,520 The goal is USD women be convertibility. 484 00:35:13,920 --> 00:35:17,160 OK, So these are the two things America wanted from China. 485 00:35:17,200 --> 00:35:22,480 First of all, to ensure that all USIP would be protected in China 486 00:35:22,600 --> 00:35:26,000 rigorously. Second thing is to allow any 487 00:35:26,000 --> 00:35:30,200 Chinese to convert their money into U.S. dollars. 488 00:35:31,400 --> 00:35:35,960 As you'd appreciate, these two demands are actually bad for 489 00:35:35,960 --> 00:35:39,720 China. OK, so China was not very 490 00:35:39,720 --> 00:35:42,480 stringent about protecting IP. This is what led to the rise of 491 00:35:42,480 --> 00:35:47,560 Huawei. Basically, Huawei can take Apple 492 00:35:47,600 --> 00:35:50,520 IP and make these great computers. 493 00:35:50,640 --> 00:35:56,520 So in the year 2016, when Trump first came into power, hallway 494 00:35:56,520 --> 00:35:58,800 computers are actually better than Apple computers because 495 00:35:58,840 --> 00:36:01,520 Huawei was constantly innovating and they were trying to make 496 00:36:01,560 --> 00:36:04,080 their computers as cheap as possible, whereas Apple was 497 00:36:04,080 --> 00:36:09,120 essentially a monopoly, OK. And this led to United States 498 00:36:09,120 --> 00:36:12,760 imposing trade sanctions on Hallway because it was too 499 00:36:12,760 --> 00:36:18,440 competitive against Apple. The second problem is even worse 500 00:36:18,720 --> 00:36:22,000 because you think about it, if you just open up your financial 501 00:36:22,000 --> 00:36:26,720 sector, all the money in China runs off the United States 502 00:36:26,720 --> 00:36:30,680 because Chinese appreciate that we are a hallucination of a of a 503 00:36:30,880 --> 00:36:33,080 hallucination. U.S. dollars is more valuable. 504 00:36:33,200 --> 00:36:35,280 I mean, it's based on U.S. dollars, so it wouldn't make 505 00:36:35,280 --> 00:36:37,840 more sense just convert OMB into U.S. dollars. 506 00:36:38,520 --> 00:36:42,000 But then of this would of course 'cause the collapse of the 507 00:36:42,000 --> 00:36:46,440 Chinese economy, right? So. 508 00:36:46,600 --> 00:36:50,360 The the transcript would refuse to open the finance sector. 509 00:36:50,560 --> 00:36:53,520 And that's what started the trade war in 2016. 510 00:36:53,560 --> 00:36:57,040 I'm sorry, not 2016 in 2018. OK, 2018 is when the war 511 00:36:57,040 --> 00:37:01,400 actually started up to today. So for the last eight years, 512 00:37:01,520 --> 00:37:04,400 this war has been going on because America is trying to 513 00:37:04,400 --> 00:37:07,960 protect its IP and and because America was trying to open up 514 00:37:07,960 --> 00:37:14,560 its financial sector. The reason why Trump has come to 515 00:37:14,560 --> 00:37:17,720 China, the reason why he's brought so many executives, is 516 00:37:17,800 --> 00:37:22,760 because China has essentially agreed to open up its financial 517 00:37:22,760 --> 00:37:24,920 sector. OK, I'll I'll discuss this later 518 00:37:24,920 --> 00:37:29,440 on, but you have to appreciate how this war started and why and 519 00:37:29,440 --> 00:37:32,480 why it's going to end. All right. 520 00:37:33,240 --> 00:37:37,040 Now, the thing about this war is that for the past eight years, 521 00:37:37,600 --> 00:37:40,240 China, United States have been attacking each other. 522 00:37:40,520 --> 00:37:42,840 There are two. There are two main mechanisms in 523 00:37:42,840 --> 00:37:45,000 which China attacked the United States. 524 00:37:45,160 --> 00:37:51,360 The first mechanism is by restricting the supply of rare 525 00:37:51,360 --> 00:37:54,120 earth minerals to the United States, because as as you can 526 00:37:54,120 --> 00:37:59,440 see from this chart, China actually produces most of the 527 00:37:59,440 --> 00:38:02,400 rare earth minerals. Now you may not know this, but 528 00:38:02,400 --> 00:38:04,560 actually rare herbs aren't that rare. 529 00:38:05,000 --> 00:38:07,280 The problem is in the extraction. 530 00:38:07,480 --> 00:38:11,440 It is very expensive. It is very rememberly costly. 531 00:38:11,800 --> 00:38:13,560 China is going to pay these costs. 532 00:38:13,600 --> 00:38:15,840 The rest of the world isn't. That's why China has essentially 533 00:38:15,840 --> 00:38:20,360 a monopoly over lithium, cobalt, graphate and other rare earths 534 00:38:20,520 --> 00:38:23,760 that the EV industry, the solar industry, the semiconductor 535 00:38:23,760 --> 00:38:25,280 industry are heavily dependent on. 536 00:38:25,760 --> 00:38:28,160 OK, that's the first attack vector. 537 00:38:28,200 --> 00:38:32,760 Second attack vector is the China appreciates that China's 538 00:38:32,760 --> 00:38:36,320 value to the global economy is that it purchases a lot of U.S. 539 00:38:36,320 --> 00:38:38,600 dollars. So then China start to buy more 540 00:38:38,600 --> 00:38:41,440 gold. OK, So you can see how the US 541 00:38:41,640 --> 00:38:47,000 Treasuries went down, but then gold went way up, OK. 542 00:38:47,920 --> 00:38:51,080 And so this is the way that China is trying to exert 543 00:38:51,080 --> 00:38:56,120 pressure on the United States. The problem is that China is 544 00:38:56,120 --> 00:38:58,920 much more vulnerable to attack than the United States. 545 00:38:59,440 --> 00:39:03,240 OK, the United States is a hallucination, but China is a 546 00:39:03,240 --> 00:39:05,800 hallucination of a hallucination. 547 00:39:06,160 --> 00:39:11,760 The first thing to appreciate is that China's energy dependence 548 00:39:11,800 --> 00:39:14,560 is huge. China waste. 549 00:39:14,640 --> 00:39:17,120 Sorry. China uses twice as much energy 550 00:39:17,120 --> 00:39:20,440 as America for its manufacturing sector in order to create 551 00:39:20,440 --> 00:39:24,040 exports. Therefore, China is vulnerable 552 00:39:24,320 --> 00:39:27,040 to embargoes and sanctions. OK. 553 00:39:27,280 --> 00:39:29,720 And So what America is doing right now with this war in the 554 00:39:29,720 --> 00:39:34,120 middle in the Middle East by kidnapping Mandarin, Venezuela 555 00:39:34,200 --> 00:39:37,400 especially choking China off from its energy, energy supply. 556 00:39:38,240 --> 00:39:42,640 OK, that's one problem. Second problem is that China is 557 00:39:42,640 --> 00:39:46,720 very export orientated, OK? So the entire economy is just 558 00:39:46,720 --> 00:39:50,800 basically on exporting manufactured goods cheaply to 559 00:39:50,880 --> 00:39:54,680 the rest of the world. And you can tell because most of 560 00:39:54,680 --> 00:39:58,320 the world's business ports are actually based in China, OK? 561 00:39:58,440 --> 00:40:03,840 The business is Shanghai, followed by Singapore, Ningbo, 562 00:40:03,960 --> 00:40:10,520 Shenzhen, Qingdao, Guangzhou. OK, SO44, sorry, five of the 563 00:40:10,520 --> 00:40:15,160 world's top 6 export hubs are based in China. 564 00:40:15,160 --> 00:40:18,960 That shows you China's dependence on exports. 565 00:40:19,200 --> 00:40:23,120 But if if America's controlling the seas and controlling 2 566 00:40:23,120 --> 00:40:27,920 points like the show of Malacca and the show of Hormuz and sort 567 00:40:27,920 --> 00:40:32,480 of tribaltar pan of canal, this creates a huge problem for 568 00:40:32,480 --> 00:40:33,480 China. OK. 569 00:40:34,040 --> 00:40:38,880 And the third thing is how much resources China uses. 570 00:40:39,320 --> 00:40:47,720 China in only three years time, OK from 2011 to 2013 used more 571 00:40:47,720 --> 00:40:52,200 cement than America did in 100 years. 572 00:40:53,520 --> 00:40:58,520 That's crazy to think about. All right. 573 00:41:01,880 --> 00:41:05,800 So this shows you how dependent China is on the global economy. 574 00:41:06,640 --> 00:41:12,320 It also shows you how dependent China is on the USD. 575 00:41:12,720 --> 00:41:16,520 OK, it's only because the women B can be exchanged for the USD 576 00:41:16,840 --> 00:41:21,160 that allows China to purchase so many resources from abroad. 577 00:41:22,360 --> 00:41:28,760 All right. The reality is that China is too 578 00:41:28,760 --> 00:41:31,000 dependent on America. This is something that Chinese 579 00:41:31,000 --> 00:41:34,440 policy makers have been trying to change for the past 10 years. 580 00:41:34,480 --> 00:41:38,240 It doesn't work because what Chinese policy makers don't 581 00:41:38,240 --> 00:41:40,680 understand is that you're the hallucination of a 582 00:41:40,680 --> 00:41:44,320 hallucination, OK? You only exist because America 583 00:41:44,320 --> 00:41:45,640 created you. All right? 584 00:41:45,640 --> 00:41:49,920 So this is consumer confidence, you can see. 585 00:41:50,920 --> 00:41:54,920 So 2018 is when the trade war started, OK. 586 00:41:55,880 --> 00:42:00,960 And at this time, people are still OK. 587 00:42:01,280 --> 00:42:02,680 They're still bearing the brunt of it. 588 00:42:02,880 --> 00:42:05,400 But then COVID happened, right? And then you saw this massive 589 00:42:05,400 --> 00:42:09,000 drop and they never really recovered, guys, right? 590 00:42:09,440 --> 00:42:11,760 They never really recovered. Consumer confidence. 591 00:42:13,640 --> 00:42:16,960 People don't believe the economy is doing well. 592 00:42:17,080 --> 00:42:19,320 People are not willing to buy things. 593 00:42:19,960 --> 00:42:23,480 People aren't working. People are losing income. 594 00:42:24,920 --> 00:42:28,960 Right. The economy is not doing well. 595 00:42:29,200 --> 00:42:32,120 At the same time. This is really interesting. 596 00:42:32,120 --> 00:42:35,920 More and more Chinese students are choosing to study abroad 597 00:42:36,120 --> 00:42:40,520 even as the economy is failing, even as though there are less 598 00:42:40,520 --> 00:42:43,520 and less less opportunities to do well in China. 599 00:42:43,520 --> 00:42:46,920 More and more Chinese are going to America to study. 600 00:42:47,000 --> 00:42:50,360 And guess what? Not the very best are not 601 00:42:50,360 --> 00:42:52,880 cleaned back. OK, There's a gap of about a 602 00:42:52,880 --> 00:42:58,520 million students who stay in the West, and these are often the 603 00:42:58,520 --> 00:43:03,160 very best students. All right, so I'd hate to say 604 00:43:03,160 --> 00:43:06,120 this, but if you're hallucination, hallucination, 605 00:43:06,200 --> 00:43:10,000 you're anxious, you want to go back to the source, right? 606 00:43:10,320 --> 00:43:12,880 So you know there will be a space on U.S. dollars if you can 607 00:43:12,880 --> 00:43:15,400 change, you mean for your dollars, you will do so. 608 00:43:16,400 --> 00:43:20,320 If you can flee the country, immigrate abroad, you will do so 609 00:43:20,320 --> 00:43:22,320 all. Right. 610 00:43:23,080 --> 00:43:32,520 This is a pretty stark data. OK, so this shows you the 611 00:43:32,520 --> 00:43:34,480 current account balance. Current account. 612 00:43:35,760 --> 00:43:39,880 Current account just basically means how much Chinese have in 613 00:43:39,880 --> 00:43:48,760 the bank due to trade. This is the trade account. 614 00:43:49,400 --> 00:43:56,800 OK, how much Chinese actually traded the the blue tracks the 615 00:43:56,800 --> 00:44:00,080 current account OK, how much Chinese have in the bank because 616 00:44:00,080 --> 00:44:05,480 of the trade? The red tracks, the actual 617 00:44:05,480 --> 00:44:12,080 trade, OK, as you can see for most of Chinese history up 618 00:44:12,080 --> 00:44:19,520 until, you know, 2022, it tracks pretty closely. 619 00:44:20,320 --> 00:44:25,760 But starting in 2022, there's this divergent, a huge 620 00:44:25,760 --> 00:44:28,320 divergent, you know, about $500 billion a year. 621 00:44:28,320 --> 00:44:34,040 Guys, why is this happening? Capital flight, money 622 00:44:34,040 --> 00:44:37,760 laundering. People are using exports in 623 00:44:37,760 --> 00:44:41,240 order to move their money out of the country. 624 00:44:41,360 --> 00:44:48,480 It's a very, it's a very simple thing where, OK, maybe I buy a 625 00:44:48,480 --> 00:44:51,240 refrigerator from you, right? It should be $500. 626 00:44:51,240 --> 00:44:54,400 We're good for $500.00, but you charge me $1000. 627 00:44:55,040 --> 00:44:57,320 Why? Basically you take a $500 and 628 00:44:57,320 --> 00:45:01,640 you put that money on my behalf into AUS real estate. 629 00:45:01,920 --> 00:45:03,360 You buy property or buy stocks from you. 630 00:45:03,360 --> 00:45:05,800 OK, Does that make sense? It's all just money laundering. 631 00:45:07,040 --> 00:45:11,840 So in other words, what's really driving China's export mania? 632 00:45:12,560 --> 00:45:14,000 A lot of it is just money laundering. 633 00:45:14,760 --> 00:45:16,240 That's people trying to flee the country. 634 00:45:17,560 --> 00:45:19,800 OK, so this is not good for China. 635 00:45:23,400 --> 00:45:31,520 All right, Another major problem in China is the household 636 00:45:31,520 --> 00:45:34,960 savings rate, where it's the highest in the world. 637 00:45:35,520 --> 00:45:41,880 OK, The highest in the world. Why is why are Chinese savers? 638 00:45:42,040 --> 00:45:44,560 Why are they saving 40% of their income? 639 00:45:44,840 --> 00:45:48,800 Well, a lot of reason is because Chinese aren't that wealthy. 640 00:45:49,000 --> 00:45:52,800 OK, so even though the Chinese economy has boomed these past 641 00:45:52,800 --> 00:45:58,280 30-40 years, the Chinese individual has not seen a huge 642 00:45:58,280 --> 00:46:03,240 improvement in his sense of living. 643 00:46:03,360 --> 00:46:09,760 OK. And so there is not a great 644 00:46:09,760 --> 00:46:13,560 confidence in the future and that's why Chinese save a lot of 645 00:46:13,560 --> 00:46:16,760 their money. And there are that many actual 646 00:46:16,920 --> 00:46:19,040 that that many investment vehicles as well. 647 00:46:19,600 --> 00:46:23,280 So from AUS perspective, this is a great opportunity, right? 648 00:46:25,680 --> 00:46:29,720 If Chinese are saving all this money, if you're a financier, if 649 00:46:29,720 --> 00:46:32,000 you're like blacks on a block, you're like, why don't you give 650 00:46:32,000 --> 00:46:34,200 it to me and I'll invest the money for you and give you 651 00:46:34,560 --> 00:46:38,160 bigger returns, right? This is why they're here in 652 00:46:38,160 --> 00:46:42,000 China, because they want this. They want all that capital 653 00:46:42,080 --> 00:46:45,320 stored in Chinese banks not doing anything they like. 654 00:46:45,320 --> 00:46:49,120 Give it to us and we'll make you more money, OK? 655 00:46:50,760 --> 00:46:54,400 All right. So. 656 00:46:55,560 --> 00:46:58,160 This shows you the capital account. 657 00:46:58,720 --> 00:47:03,160 All this is saying is that you can't actually convert your Room 658 00:47:03,160 --> 00:47:13,240 B into other currencies. So most countries have full open 659 00:47:13,320 --> 00:47:20,520 capital accounts, OK? The black is most countries, the 660 00:47:21,640 --> 00:47:27,880 bottom quarter of nations have closed accounts and China is 661 00:47:28,280 --> 00:47:34,360 part of the quarter that have closed accounts, OK? 662 00:47:34,960 --> 00:47:36,920 So Chinese can actually take their money and leave the 663 00:47:36,920 --> 00:47:41,960 country, OK. So. 664 00:47:44,080 --> 00:47:47,160 The other thing that I want you guys to understand is from AUS 665 00:47:47,160 --> 00:47:51,800 perspective, there's still a lot of potential in China. 666 00:47:52,080 --> 00:47:55,320 And the reason why is China still has a lot of debt 667 00:47:55,320 --> 00:47:59,800 capacity. Debt capacity just means your 668 00:47:59,800 --> 00:48:02,200 ability to carry debt. Why? 669 00:48:02,440 --> 00:48:04,960 Because China doesn't have much debt relative to other nations. 670 00:48:05,240 --> 00:48:10,960 Look at this OK, China in terms of like assets and liabilities 671 00:48:11,280 --> 00:48:12,720 don't have much investment abroad. 672 00:48:12,840 --> 00:48:15,360 You can do that with like other countries like Japan, United 673 00:48:15,360 --> 00:48:18,640 States, Germany, United Kingdom, they have a lot invested abroad. 674 00:48:20,160 --> 00:48:22,480 China doesn't have that much investment abroad. 675 00:48:22,760 --> 00:48:25,960 So in theory, you can encroach the Chinese to buy more things 676 00:48:25,960 --> 00:48:31,640 abroad, which would which would help the global economy, right? 677 00:48:31,920 --> 00:48:34,880 In theory. Now what's interesting is that 678 00:48:34,960 --> 00:48:38,880 China doesn't invest much abroad relative to other rich nations, 679 00:48:39,120 --> 00:48:43,440 but China doesn't invest much abroad relative to all nations. 680 00:48:43,440 --> 00:48:46,840 OK, so this is China. It's not the same as India, 681 00:48:46,840 --> 00:48:48,520 which doesn't have that much capital. 682 00:48:48,960 --> 00:48:53,320 Like if Indonesia, Turkey, Mexico actually invests more 683 00:48:53,320 --> 00:49:00,200 abroad than China does, Brazil, Russia, Saudi Arabia invests a 684 00:49:00,200 --> 00:49:04,280 lot, South Africa invests a lot more than China, OK. 685 00:49:04,400 --> 00:49:10,160 So again, from my U.S. financial perspective, China is a last 686 00:49:10,160 --> 00:49:14,280 grade opportunity in the world. That's why they're coming here, 687 00:49:15,040 --> 00:49:18,200 OK? They want to string a deal where 688 00:49:18,360 --> 00:49:22,840 they can financialize the China, the Chinese economy basically 689 00:49:22,840 --> 00:49:26,920 use now the Chinese account has collateral to engage in 690 00:49:26,920 --> 00:49:28,920 financial speculation everywhere in the world. 691 00:49:29,360 --> 00:49:31,360 OK, so let me explain how they're going to do so all. 692 00:49:31,960 --> 00:49:34,160 Right. So. 693 00:49:34,360 --> 00:49:40,200 China has a closed capital account. 694 00:49:46,440 --> 00:49:48,240 Why do you have a closed capital account? 695 00:49:48,400 --> 00:49:52,200 Because you know for a fact that if you open it Chinese take the 696 00:49:52,200 --> 00:49:56,000 room B and convert it all into U.S. dollars, All right? 697 00:49:56,600 --> 00:49:59,720 And that causes the economy to collapse, your bank system to 698 00:49:59,720 --> 00:50:01,120 collapse. So. 699 00:50:02,760 --> 00:50:06,080 So what's the solution here? OK, first of all, what we need 700 00:50:06,080 --> 00:50:08,000 to understand something, and this is like really important 701 00:50:08,000 --> 00:50:15,560 for you guys to appreciate. Banks create money out of thin 702 00:50:15,560 --> 00:50:19,120 air, OK? Money's just an illusion. 703 00:50:19,920 --> 00:50:25,480 So the example is, let's just say you're a depositor and you 704 00:50:25,480 --> 00:50:31,040 put $1,000,000 into a bank, OK? And the way the bank makes makes 705 00:50:31,040 --> 00:50:33,280 money is by letting it to entrepreneurs, right? 706 00:50:33,680 --> 00:50:39,040 So you then as a bank you give $1,000,000 a loan to an to a 707 00:50:39,320 --> 00:50:40,600 restaurant entrepreneur. OK. 708 00:50:41,200 --> 00:50:42,920 And. This is how banks work. 709 00:50:43,800 --> 00:50:47,800 And you think that, OK, well, if the possible $1,000,000 in the 710 00:50:47,800 --> 00:50:51,440 bank and the bank then loans it to the to the restaurant 711 00:50:51,440 --> 00:50:56,960 entrepreneur, then in theory the bank should have zero in the 712 00:50:56,960 --> 00:51:00,840 bag, right? No, the bank now has $2,000,000. 713 00:51:03,800 --> 00:51:08,240 OK. The banks are allowed, according 714 00:51:08,240 --> 00:51:12,040 to accounting, they're allowed to create money every time they 715 00:51:12,040 --> 00:51:17,480 issue a loan so that only they keep that $1,000,000 from the 716 00:51:17,480 --> 00:51:22,480 depositor, but they also are able to print $1,000,000 to give 717 00:51:22,480 --> 00:51:24,960 to the restaurant entrepreneur. Does that make sense to you 718 00:51:24,960 --> 00:51:28,760 guys? OK, do you guys want to know why 719 00:51:28,760 --> 00:51:32,640 this is the case? OK, I'll tell you anyway. 720 00:51:32,640 --> 00:51:34,040 OK. All right. 721 00:51:34,280 --> 00:51:36,160 OK. So. 722 00:51:36,400 --> 00:51:39,480 Before what were what were banks? 723 00:51:39,640 --> 00:51:42,800 Banks were just merchants. OK, a merchant alliance. 724 00:51:44,840 --> 00:51:46,840 Why? Because merchants needed capital 725 00:51:46,840 --> 00:51:49,280 in order to trade, so they came together to create their own 726 00:51:49,280 --> 00:51:51,040 bank. So they were an alliance. 727 00:51:51,440 --> 00:51:54,720 And So what merchants would do is basically deposit their gold 728 00:51:55,520 --> 00:51:59,880 into this alliance so that they can be distributed elsewhere. 729 00:52:00,400 --> 00:52:05,000 OK, Now the problem with gold is that it's heavy, it's hard to 730 00:52:05,000 --> 00:52:06,960 transport. It's also dangerous because 731 00:52:06,960 --> 00:52:11,000 they're pirates, OK, So the way that they use the way that they 732 00:52:11,000 --> 00:52:15,040 use gold in order to create an exchanges in order to create 733 00:52:15,040 --> 00:52:21,920 business is they use receipts, receipts or contracts. 734 00:52:23,400 --> 00:52:25,520 So rather than me give you the gold physically, I just give you 735 00:52:25,520 --> 00:52:29,080 a piece of paper saying that I guarantee that this paper can be 736 00:52:29,080 --> 00:52:31,800 redeemed for gold at my bank. OK, does that make sense? 737 00:52:32,480 --> 00:52:34,760 All right. And then you have to keep track 738 00:52:35,200 --> 00:52:40,560 of these exchanges. So the person call double entry 739 00:52:40,560 --> 00:52:49,520 bookkeeping, which is basically assets and liabilities, OK, and 740 00:52:49,520 --> 00:52:52,240 that's double entry book bookkeeping, something that we 741 00:52:52,240 --> 00:52:55,640 still use today. So let's just say I have 742 00:52:55,640 --> 00:52:59,640 $1,000,000 of gold. OK, well that's easy. 743 00:53:00,120 --> 00:53:02,520 I just put it into assets, right? 744 00:53:05,080 --> 00:53:06,960 OK. Then someone comes and says I 745 00:53:06,960 --> 00:53:08,920 need I need to borrow $1,000,000 of gold. 746 00:53:08,960 --> 00:53:10,520 I'm like, fine, I'll give you a receipt for it. 747 00:53:11,080 --> 00:53:13,200 Not a problem. My problem is do I put the 748 00:53:13,200 --> 00:53:15,440 receipt in liabilities or assets? 749 00:53:17,320 --> 00:53:21,480 Assets, of course, Right. And that's how the system works. 750 00:53:23,200 --> 00:53:25,560 And so this isn't, this isn't we still use today. 751 00:53:26,080 --> 00:53:28,440 That's why banks are allowed to create money out of thin air 752 00:53:28,880 --> 00:53:30,400 because of double entry bookkeeping. 753 00:53:30,840 --> 00:53:32,400 OK Are you guys clear about this? 754 00:53:35,200 --> 00:53:40,680 Yeah. Is it because that the banks 755 00:53:40,680 --> 00:53:46,840 have powers to print money when they make loans or because I 756 00:53:46,920 --> 00:53:51,120 think like if some people deposit their money into the 757 00:53:51,120 --> 00:53:56,680 bank and the bank need to give it back, it might be light into 758 00:53:56,680 --> 00:53:59,920 the liability? OK, all right. 759 00:53:59,920 --> 00:54:01,360 You don't you don't understand what's going on. 760 00:54:01,360 --> 00:54:04,320 OK? All right, listen, it's not that 761 00:54:04,320 --> 00:54:06,600 hard, OK? I have gold. 762 00:54:07,280 --> 00:54:11,280 I put the gold into the bank. People come to borrow the gold, 763 00:54:11,280 --> 00:54:14,640 right? Then I give a paper saying this 764 00:54:14,640 --> 00:54:16,960 is gold. Basically, it's money, OK? 765 00:54:17,160 --> 00:54:23,840 Money, OK. Is this money a debt or a 766 00:54:23,840 --> 00:54:26,280 liability? It doesn't make sense. 767 00:54:26,800 --> 00:54:30,200 It doesn't make sense as a liability because I don't owe 768 00:54:30,200 --> 00:54:33,520 that thing, OK? And the fact that I can use this 769 00:54:33,520 --> 00:54:37,640 money in order to create more money creates means it's an 770 00:54:37,640 --> 00:54:39,680 asset. Does that make sense? 771 00:54:40,040 --> 00:54:42,760 All right. So, so now this becomes a basis 772 00:54:43,120 --> 00:54:47,240 of the global banking system. All right, so let me show you 773 00:54:47,240 --> 00:54:50,440 how. All right, So what happens is 774 00:54:50,440 --> 00:54:58,720 this, you have these banks in America, in the world, they're 775 00:54:58,720 --> 00:55:01,040 private banks. They're run by private people 776 00:55:01,120 --> 00:55:02,720 who put all the money in the banks, OK? 777 00:55:03,800 --> 00:55:11,280 You have the US government. You have the government, OK? 778 00:55:12,520 --> 00:55:15,840 U.S. government does not have any money. the US government 779 00:55:15,840 --> 00:55:19,120 wants to borrow money. The question then is like, how 780 00:55:19,120 --> 00:55:22,040 do you borrow money? If you borrow money from these 781 00:55:22,040 --> 00:55:24,000 banks individually, that's too hard. 782 00:55:24,000 --> 00:55:33,560 OK, So what happens is this what happens is 1913, the banks got 783 00:55:33,560 --> 00:55:40,720 together and crazy, I'm called the Federal Reserve, All right? 784 00:55:40,800 --> 00:55:43,000 Federal Reserve, it's at the heart. 785 00:55:43,040 --> 00:55:46,640 It's just a cartel of private banks in America. 786 00:55:47,640 --> 00:55:49,880 OK, Do you understand now they're just going to make it 787 00:55:49,880 --> 00:55:52,160 just work the Federal Reserve and borrow money directly from 788 00:55:52,160 --> 00:55:54,400 the Federal Reserve, which represents all the banks in 789 00:55:54,400 --> 00:55:57,480 America. OK, So how does a curious 790 00:55:57,480 --> 00:56:00,480 government set like, borrow money from from the Federal 791 00:56:00,480 --> 00:56:02,800 Reserve? It issues bonds. 792 00:56:03,280 --> 00:56:04,520 That's called U.S. Treasuries. 793 00:56:08,880 --> 00:56:12,480 OK, so a Federal Reserve can print money to buy U.S. 794 00:56:12,480 --> 00:56:17,600 Treasuries, and then this money goes to U.S. government and the 795 00:56:17,640 --> 00:56:21,640 US government can then pay for expenses. 796 00:56:22,040 --> 00:56:23,880 OK, Doesn't make sense. All right. 797 00:56:24,400 --> 00:56:29,120 Now, this system is fine. The problem is that the US 798 00:56:29,120 --> 00:56:31,080 government spends a lot of money. 799 00:56:31,120 --> 00:56:33,600 It fights wars. It wants to send man to the 800 00:56:33,600 --> 00:56:35,680 moon. It wants people to have a good 801 00:56:35,680 --> 00:56:39,240 life. OK, so today America has $39 802 00:56:39,240 --> 00:56:45,680 trillion in debt, and you're like, well, who cares? 803 00:56:45,880 --> 00:56:49,840 Well, the problem is this. The problem is the interest 804 00:56:49,840 --> 00:56:55,640 rate, which is about 5%, OK to because in order to get the 805 00:56:55,640 --> 00:56:59,160 Federal Reserve, these private banks to lend you the money, you 806 00:56:59,160 --> 00:57:01,560 have to give them an interest rate. 807 00:57:01,840 --> 00:57:03,560 Otherwise, why would they? Why would they lend you the 808 00:57:03,560 --> 00:57:08,520 money, Right. OK, so in other words, 5% means 809 00:57:08,520 --> 00:57:12,840 that the US government has to pay the Federal Reserve about $2 810 00:57:12,840 --> 00:57:18,600 trillion a year, wasting that $2 trillion a year. 811 00:57:18,600 --> 00:57:20,560 It has to borrow more money from the Federal Reserve. 812 00:57:22,200 --> 00:57:25,200 All right, So this system is really, really unstable. 813 00:57:26,000 --> 00:57:29,520 So now your problem is like, how do I solve this problem? 814 00:57:30,320 --> 00:57:36,560 You solve this problem by getting more people to buy U.S. 815 00:57:36,560 --> 00:57:39,280 Treasuries. OK, Does that make sense? 816 00:57:39,840 --> 00:57:41,240 All right. So you can get. 817 00:57:42,400 --> 00:57:48,160 Governments to buy U.S. Treasuries, including the 818 00:57:48,160 --> 00:57:50,840 Chinese government, the Japanese government, the the UK 819 00:57:50,840 --> 00:57:52,200 government, OK. And that's what and that's 820 00:57:52,240 --> 00:57:57,240 what's been happening. The problem is they only have a 821 00:57:57,240 --> 00:57:59,600 certain amount of money they can borrow. 822 00:58:00,560 --> 00:58:01,840 So how do you get rid of this problem? 823 00:58:02,120 --> 00:58:04,840 You get you get rid of this problem by getting more people 824 00:58:04,840 --> 00:58:08,720 to buy U.S. Treasuries. 825 00:58:09,200 --> 00:58:14,280 And who are these people? Everyone in the world, You, me, 826 00:58:14,400 --> 00:58:18,200 everyone in the world, OK, is what we call retail. 827 00:58:20,800 --> 00:58:23,000 So previously it was only institutions that want to buy 828 00:58:23,000 --> 00:58:27,000 your treasuries. And what the strategy now is you 829 00:58:27,000 --> 00:58:35,120 get everyone to buy your treasuries, how you create a new 830 00:58:35,280 --> 00:58:39,000 financial mechanism called stable coins. 831 00:58:39,760 --> 00:58:48,040 OK, Stable coins. And the two most popular stable 832 00:58:48,040 --> 00:58:52,400 coins are something called Tether and Circle. 833 00:58:52,800 --> 00:58:56,960 OK, And the idea is very simple. The idea is stable coins are 834 00:58:57,600 --> 00:59:02,680 backed by U.S. Treasuries, meaning Tether and 835 00:59:02,680 --> 00:59:08,240 Circle have to buy U.S. Treasuries in order to sell 836 00:59:08,240 --> 00:59:10,600 stable coins. And then you can sell stable 837 00:59:10,600 --> 00:59:21,400 coins to anyone and everyone, OK, including in China which has 838 00:59:21,560 --> 00:59:32,040 40% savings rate. How Foo institutions like Apple, 839 00:59:33,480 --> 00:59:38,080 BlackRock, Visa, OK, does this make sense? 840 00:59:38,840 --> 00:59:42,360 Now you get around a problem of the closed capital account. 841 00:59:42,960 --> 00:59:47,640 close capital account means you cannot use Ruben B to buy U.S. 842 00:59:47,640 --> 00:59:50,880 dollars, but with stable coins you can use now use Ruben B to 843 00:59:50,880 --> 00:59:54,280 buy Tether or Circle. Do you understand? 844 00:59:57,080 --> 00:59:59,440 OK, So now what the US government is going to do is 845 00:59:59,520 --> 01:00:06,480 they're going to transfer that debt onto the Chinese people, 846 01:00:08,640 --> 01:00:15,560 OK? OK, And so you're like, OK, 847 01:00:15,560 --> 01:00:20,960 wait, wait a minute here, $3920 is a lot of money, man. 848 01:00:21,520 --> 01:00:25,600 Chinese people don't have 3921 dollars. 849 01:00:25,640 --> 01:00:29,000 America will never, ever get rid of this debt, OK? 850 01:00:29,360 --> 01:00:33,200 But there's a mechanism American can use to control this debt and 851 01:00:33,440 --> 01:00:36,560 this debt, and this is called financial repression. 852 01:00:43,440 --> 01:00:45,960 How's this work? Very simple, OK. 853 01:00:46,720 --> 01:00:51,600 So. Your treasuries are at 5%, 854 01:00:51,600 --> 01:00:54,840 right? Really simple. 855 01:00:54,840 --> 01:00:59,800 I'm going to make this 0%, guys. And you're like, wait a minute 856 01:00:59,800 --> 01:01:01,440 here. No, no, no, I don't understand 857 01:01:01,440 --> 01:01:03,640 this. If it's at 0%, I'm going to buy 858 01:01:03,640 --> 01:01:07,800 your treasuries. The answer, the solution is I'll 859 01:01:07,800 --> 01:01:12,000 make you buy it, guys. OK, I force you to buy it. 860 01:01:15,600 --> 01:01:18,080 How do I force you to buy it? By passing laws called the 861 01:01:18,080 --> 01:01:27,240 Genius Act and the Clarity Act, which compels stable coins to 862 01:01:27,240 --> 01:01:30,920 use U.S. Treasuries as the basis of their 863 01:01:30,920 --> 01:01:33,840 digital currency. And again, remember, if you're 864 01:01:33,840 --> 01:01:38,360 Chinese, if you can keep them be at 5% a year or U.S. dollar at 865 01:01:38,360 --> 01:01:42,720 0% a year, what do you choose? You choose the US dollar at 0% a 866 01:01:42,720 --> 01:01:44,120 year. Does that make sense, guys? 867 01:01:45,160 --> 01:01:47,840 OK, so that's the solution, financial repression where I 868 01:01:47,840 --> 01:01:52,120 drop the interest rate of U.S. Treasuries to nothing, in which 869 01:01:52,120 --> 01:02:00,160 case inflation will destroy the debt over 50 years and I force 870 01:02:00,160 --> 01:02:05,520 people to buy it by passing laws that force companies to back the 871 01:02:05,520 --> 01:02:08,480 digital currency with U.S. Treasuries. 872 01:02:09,720 --> 01:02:12,400 Forcing them by U.S. Treasuries doesn't make sense, 873 01:02:12,400 --> 01:02:14,320 guys. OK, And why? 874 01:02:14,400 --> 01:02:15,440 And why do they do want to do this? 875 01:02:15,480 --> 01:02:20,040 Because now they can access a Chinese consumer, they can sell 876 01:02:20,200 --> 01:02:22,680 digital currency to Chinese consumers. 877 01:02:22,840 --> 01:02:26,760 That's a grand plan. OK, And you're like, OK, wait a 878 01:02:26,760 --> 01:02:32,160 minute here. Why would China agree to such a 879 01:02:32,160 --> 01:02:34,280 stupid deal? Well, there are actually lots of 880 01:02:34,280 --> 01:02:36,160 reasons, OK? The first major reason is 881 01:02:36,160 --> 01:02:42,880 Taiwan. OK, So again, United States 882 01:02:42,880 --> 01:02:46,840 doesn't really need Taiwan. Taiwan is over here. 883 01:02:47,480 --> 01:02:51,760 And what Taiwan does that's very important for United States 884 01:02:51,760 --> 01:02:57,680 strategically is it blocks China from the Pacific, OK, Something 885 01:02:57,680 --> 01:02:59,800 called the first island chain, it's part of the first island 886 01:02:59,800 --> 01:03:05,320 chain that's in the blue. So that's why Chinese American 887 01:03:05,320 --> 01:03:07,080 policymakers think Taiwan is important. 888 01:03:07,400 --> 01:03:09,960 But you think about it, OK, if you're American, you're like, 889 01:03:10,560 --> 01:03:14,280 wait a minute here, OK, let's just say I lose Taiwan. 890 01:03:14,520 --> 01:03:19,640 Let's say I save to China. I want Taiwan to return to the 891 01:03:19,640 --> 01:03:21,320 motherland. OK, What happens now? 892 01:03:22,320 --> 01:03:31,240 Well, now you create a problem because Taiwan now can block 893 01:03:32,280 --> 01:03:36,280 this area, OK? It can separate Southeast Asia 894 01:03:36,360 --> 01:03:38,920 into two parts. South Korea and Japan on one 895 01:03:38,920 --> 01:03:42,880 part, the Philippines, Southeast Asia, Singapore another part. 896 01:03:42,880 --> 01:03:46,720 OK, do you guys see this map? You can now divide Southeast 897 01:03:46,720 --> 01:03:49,200 Asia into two. This is important. 898 01:03:49,200 --> 01:03:52,240 Why? Because guess what, Japan, South 899 01:03:52,240 --> 01:03:55,800 Korea gets most of their energy for the share of Malacca. 900 01:03:56,280 --> 01:04:01,200 You basically block off South Korea and Japan from a lot of 901 01:04:01,200 --> 01:04:05,480 the global economy. In which case there's absolutely 902 01:04:05,600 --> 01:04:11,680 no way in how South Korea and Japan agree to let Taiwan return 903 01:04:11,880 --> 01:04:16,200 to China doesn't make sense. So by saying by, let's say, 904 01:04:16,200 --> 01:04:21,040 saying, hey, I want China and Taiwan to marry again, what 905 01:04:21,040 --> 01:04:24,840 you've done is you've now transferred the power problem 906 01:04:24,840 --> 01:04:27,520 from you, the United States, to South Korea and Japan. 907 01:04:28,600 --> 01:04:31,480 You understand? That's why, strategically, it 908 01:04:31,480 --> 01:04:35,600 makes perfect sense for Chalk to say Taiwan belongs to China. 909 01:04:38,160 --> 01:04:43,960 OK. OK, so Taiwan issue problem is 910 01:04:43,960 --> 01:04:47,320 solved. Now there's another there's 911 01:04:47,320 --> 01:04:51,160 another issue in that China as we discussed is very dependent 912 01:04:51,280 --> 01:04:55,480 on energy and food from South America. 913 01:04:55,480 --> 01:04:59,960 OK, So you can see this is South America and you can see all 914 01:04:59,960 --> 01:05:04,400 these projects in the yellow that China is building, OK? 915 01:05:04,400 --> 01:05:07,680 So the pink is something that's already built or under 916 01:05:07,720 --> 01:05:10,000 construction. The yellow or plant it's these 917 01:05:10,000 --> 01:05:15,480 are huge projects OK So what America has done is basically 918 01:05:15,960 --> 01:05:24,720 taking over Venezuela and Trump announced this like I think 2 919 01:05:24,720 --> 01:05:28,080 days ago we're going to make Venezuela the 51st state. 920 01:05:28,080 --> 01:05:30,600 Well why would he want to do that? 921 01:05:30,800 --> 01:05:34,800 Because now he blocks China from South America and if you look at 922 01:05:34,800 --> 01:05:39,440 this map, this tells you energy supply OK, so if you. 923 01:05:39,520 --> 01:05:43,160 So this is war in the Middle East, which means that the 924 01:05:43,160 --> 01:05:46,080 Middle East, you can forget about South China now can get 925 01:05:46,080 --> 01:05:49,360 energy from Russia or the Western Hemisphere. 926 01:05:49,960 --> 01:05:52,040 China doesn't want to depend entirely on Russia. 927 01:05:52,240 --> 01:05:55,280 China will buy more Russian oil, but it does not want to become 928 01:05:55,280 --> 01:05:58,400 entirely dependent on Russia. Also, Russia cannot actually 929 01:05:58,520 --> 01:06:00,040 meet all of China's energy needs. 930 01:06:00,040 --> 01:06:05,800 OK, so now China is forced to negotiate the United States to 931 01:06:05,800 --> 01:06:09,520 have access to the to the Western Hemisphere that's trying 932 01:06:09,520 --> 01:06:10,960 to care. The answer is no. 933 01:06:11,680 --> 01:06:15,160 China only cares about stability and price, stability and cost. 934 01:06:16,320 --> 01:06:21,640 I wanted things at a fair price and I want this to be a stable 935 01:06:21,640 --> 01:06:25,880 and principal relationship. If I'm trying to, I would prefer 936 01:06:26,000 --> 01:06:28,840 if America control the entire Western human sphere because now 937 01:06:28,840 --> 01:06:31,960 I can, I can just negotiate with one government as opposed to 938 01:06:31,960 --> 01:06:34,520 like all these other governments, many of whom are 939 01:06:34,520 --> 01:06:36,840 corrupt. Does that make sense, guys? 940 01:06:37,640 --> 01:06:38,920 So we're trying to agree to this? 941 01:06:39,040 --> 01:06:41,960 Absolutely. China has actually no problem 942 01:06:42,200 --> 01:06:44,880 with America controlling the Western Hemisphere if it means 943 01:06:45,000 --> 01:06:48,080 stability and cost are controlled. 944 01:06:49,320 --> 01:06:52,080 OK. Does it make sense to you guys? 945 01:06:52,560 --> 01:06:58,640 OK, Yeah. But does China holds attitude 946 01:06:58,880 --> 01:07:04,960 like about America controlling Venezuela because like using 947 01:07:04,960 --> 01:07:07,000 morals like this that they can't? 948 01:07:07,000 --> 01:07:09,440 No, no, no, no, no, no, no. But will they do this? 949 01:07:09,600 --> 01:07:12,120 China doesn't care. I don't. 950 01:07:12,760 --> 01:07:16,800 Guys don't talk about sovereignty, rights, morality in 951 01:07:16,800 --> 01:07:18,480 this class, OK? It's all game theory. 952 01:07:19,120 --> 01:07:24,640 I don't care about these things. Game theory is people are going 953 01:07:24,640 --> 01:07:26,080 to behave in their best interest. 954 01:07:26,320 --> 01:07:28,920 It's that simple. OK, No morality, no human 955 01:07:28,920 --> 01:07:31,240 rights, no sovereignty. All right. 956 01:07:31,560 --> 01:07:35,600 OK, so China doesn't care who controls Venezuela as long as 957 01:07:35,600 --> 01:07:38,640 it's a stable place where China can get cheap oil. 958 01:07:39,480 --> 01:07:43,400 Hey, does that make sense? OK, All right. 959 01:07:43,600 --> 01:07:52,640 The last thing is AI. OK. 960 01:07:53,400 --> 01:07:55,480 All right. So as you can see, the United 961 01:07:55,480 --> 01:07:58,680 States is the world's leader in I simply because it has the most 962 01:07:58,680 --> 01:08:01,040 data centers. In fact, America plans to build 963 01:08:01,120 --> 01:08:04,640 more and more data centers. China is trying to compete, but 964 01:08:04,640 --> 01:08:07,560 it's data center development is constrained by the fact that it 965 01:08:07,560 --> 01:08:11,880 has limited access to semiconductors, to chips. 966 01:08:13,200 --> 01:08:21,000 And so China wants more chips from the United States, and the 967 01:08:21,000 --> 01:08:24,240 United States can say yes, but you're like, no, no, no, wait, 968 01:08:24,240 --> 01:08:25,120 wait, wait. No, no, no. 969 01:08:25,439 --> 01:08:30,319 Doesn't that mean that China could one day overtake the 970 01:08:30,319 --> 01:08:35,960 United States, could try to just reverse engineer and steal the 971 01:08:35,960 --> 01:08:39,600 IP for these semiconductors? No, that's not how 972 01:08:39,600 --> 01:08:42,279 semiconductors work. Semiconductors are so 973 01:08:42,279 --> 01:08:46,760 sophisticated that it's an entire global supply chain. 974 01:08:47,080 --> 01:08:48,520 OK. These semiconductors are 975 01:08:48,520 --> 01:08:55,160 designed in California, then they are sent to Taiwan to be 976 01:08:55,160 --> 01:09:01,560 manufactured, then they're sent onto the Philippines to be value 977 01:09:01,560 --> 01:09:05,040 added, they're sent to China to be added to components, then 978 01:09:05,040 --> 01:09:08,720 they're sold to Europe. And all while you have to 979 01:09:09,040 --> 01:09:13,160 extract resources from Africa, from South America in order to 980 01:09:13,760 --> 01:09:15,720 feed the semiconductors. Do you understand? 981 01:09:15,800 --> 01:09:18,520 So in other words, there's actually no way that one nation, 982 01:09:18,520 --> 01:09:21,840 only one nation can control the entire supply chain. 983 01:09:22,800 --> 01:09:27,080 So as long as America can control the trade network, 984 01:09:27,319 --> 01:09:30,160 America will always have the advantage in semiconductors. 985 01:09:31,120 --> 01:09:33,080 OK. There's actually no way China 986 01:09:33,080 --> 01:09:37,240 can reverse the production of the semiconductors because it's 987 01:09:37,240 --> 01:09:39,080 too sophisticated, it's too expensive. 988 01:09:40,439 --> 01:09:44,200 Only one country can specialize, only one field. 989 01:09:45,319 --> 01:09:51,560 OK, Doesn't make sense. OK, So that's why this guy is 990 01:09:51,560 --> 01:09:53,439 important. OK. 991 01:09:53,439 --> 01:09:59,480 Jensen Huang, NVIDIA before he was not supposed to come to 992 01:09:59,480 --> 01:10:01,640 China. OK? 993 01:10:01,640 --> 01:10:03,040 It was announced he was not coming to China. 994 01:10:04,560 --> 01:10:09,520 Then as Trump was flying to Alaska to refuel, he got on 995 01:10:09,520 --> 01:10:12,120 board in Alaska. It was a last minute addition. 996 01:10:12,360 --> 01:10:16,160 But not only that, but there were two business people that 997 01:10:16,160 --> 01:10:20,440 were with Trump on his plane, Elon Musk and Jensen Huang. 998 01:10:21,120 --> 01:10:23,960 OK, So what happened? So I work in business 999 01:10:23,960 --> 01:10:25,440 negotiations. That's exactly what happened. 1000 01:10:25,520 --> 01:10:30,240 What happened was that Scott Besant and Hu Li Fang, they were 1001 01:10:30,240 --> 01:10:33,400 negotiating this grand bargain, just the contours of this grand 1002 01:10:33,400 --> 01:10:36,520 bargain in South Korea. China wants first and foremost 1003 01:10:36,520 --> 01:10:39,640 NVIDIA chips. Scott Besson wants first and 1004 01:10:39,640 --> 01:10:43,040 foremost access to the Chinese financial market. 1005 01:10:43,680 --> 01:10:45,920 OK. There was there was impasse. 1006 01:10:46,280 --> 01:10:48,520 So Trump just basically said, I'm not, I'm not going to bring 1007 01:10:48,520 --> 01:10:51,360 this guy, OK. And then as Trump was going to 1008 01:10:51,360 --> 01:10:54,520 come to China, there was a breakthrough. 1009 01:10:55,400 --> 01:10:58,320 And Trump's like, OK, as a sound of goodwill, I will now bring 1010 01:10:58,320 --> 01:11:01,720 him, OK, That this is how business negotiations work. 1011 01:11:02,120 --> 01:11:05,400 This is confusing for people because usually we don't want 1012 01:11:05,400 --> 01:11:09,560 business people to run politics, to run diplomacy because they 1013 01:11:09,560 --> 01:11:12,800 are unpredictable, OK? But this is how business 1014 01:11:12,800 --> 01:11:15,600 negotiations work. All right. 1015 01:11:16,240 --> 01:11:20,280 So. This is just the basic framework 1016 01:11:20,280 --> 01:11:23,280 for how the US Grand Bargain will turn out, in my opinion. 1017 01:11:24,080 --> 01:11:29,280 OK, so to summarize, what China wants is access to cheap energy 1018 01:11:29,280 --> 01:11:33,360 of the Western Hemisphere. It wants NVIDIA chips to fuel 1019 01:11:33,360 --> 01:11:43,280 its AI, and it wants access to the US market. 1020 01:11:43,280 --> 01:11:45,120 OK, Those are three things that China wants. 1021 01:11:45,920 --> 01:11:50,760 America wants access to Chinese financial markets. 1022 01:11:50,840 --> 01:11:53,760 Basically, it wants Chinese consumers to buy stable coins in 1023 01:11:53,760 --> 01:11:59,360 order to finance the US debt. It wants to better control 1024 01:11:59,600 --> 01:12:01,480 China's AI development. Why? 1025 01:12:01,840 --> 01:12:06,520 Because with AI, China and America are not competitive to 1026 01:12:06,520 --> 01:12:08,680 their partners. Because as I told you last 1027 01:12:08,680 --> 01:12:11,520 class, the entire entire port of AI is to create a surveillance 1028 01:12:11,520 --> 01:12:15,240 state. OK, now America has technology, 1029 01:12:15,320 --> 01:12:18,320 but China has a lot of people and there's no piracy here. 1030 01:12:18,480 --> 01:12:21,320 So in other words, what what America can do is use China as a 1031 01:12:21,320 --> 01:12:25,440 lab in order to test out surveillance technology that it 1032 01:12:25,440 --> 01:12:32,040 could not test out in America. OK, so America wants access to 1033 01:12:32,600 --> 01:12:39,400 China's AI market. And the third thing that America 1034 01:12:39,400 --> 01:12:43,160 wants is Chinese manufacturing. Why? 1035 01:12:43,400 --> 01:12:45,400 Because Chinese manufacturing is the best in the world. 1036 01:12:45,880 --> 01:12:49,520 So not only does America want China to continue manufacturing 1037 01:12:50,240 --> 01:12:53,040 in order to buy U.S. dollars, but also wants to import 1038 01:12:53,360 --> 01:12:56,560 manufacturing, Chinese manufacturing into America and 1039 01:12:56,560 --> 01:12:59,680 to Venezuela as well, right? Because Venezuela has all these 1040 01:13:00,240 --> 01:13:03,920 resources that can be extracted and into manufactured goods. 1041 01:13:03,920 --> 01:13:05,920 Americans don't want to do it because it's too expensive, it's 1042 01:13:05,920 --> 01:13:07,760 too hard work. But the Chinese will do this. 1043 01:13:08,360 --> 01:13:12,280 OK, so this is what the grand bargain will look like. 1044 01:13:13,880 --> 01:13:18,040 Any questions? OK, so these are predictions. 1045 01:13:18,040 --> 01:13:20,280 This is the way I see. I see the situation and we'll 1046 01:13:20,280 --> 01:13:23,200 know in a couple days if I'm right or wrong. 1047 01:13:23,320 --> 01:13:24,840 OK, so we'll talk next week.