>> BTO beyond the obvious the economy podcast with Dr. Daniel Stelter featured by Handelsblatt. Hello and herzlich willkommen zu neuesten Ausgabe meines Podcast. Ich freue mich sehr, >> >> dass sie auch in dieser erneut turbulenten Woche wieder mit dabei sind. Der Krieg mit Iran scheint länger zu gehen, als wir gehofft haben und vor allem mehren sich die Meldungen über Schäden bei Infrastruktur bzw. Auch an Schiffen, die sich in der Straße von Hormuz aufhalten. Damit wachsen die Risiken für die Weltwirtschaft. Und das führt sich zu der Frage, war das Donald Trump bewusst, dass dieses Risiko eingeht? Hat er gedacht, ach, es wird schon so einfach werden wie in Venezuela oder hat er gesagt, das Risiko ist da, aber ich muss es tun, einfach deshalb, weil es Bestandteil einer großen Strategie ist. Jetzt werden Sie sagen, Donald Trump und große Strategie, das kann doch gar nicht sein. Ich habe heute aber einen Gesprächspartner, der sagt, na ja, wenn man auf den Konflikt blickt zwischen den USA und China, dann gibt es schon so etwas wie eine große Strategie. Diese große Strategie setzt voraus, dass man zum einen die US-Wirtschaft grundlegend umbaut, weg von einer durch und durch finanziellisierten Konsumgesellschaft hin zu einer Gesellschaft, die wieder mehr investiert und auch produziert. Stichwort auch gerade Waffen. Und zugleich eine Strategie, die sagt, wir müssen China eindämmen. Ich fand das Ganze hochrelevant, es ist hochaktuell, es ist im Prinzip Geoökonomie in der Praxis und genau deshalb schauen wir uns das in der heutigen Ausgabe genauer an. Ich hoffe, Sie finden es genauso BTO, beyond the obvious, featured by Handelsblatt. >> >> This episode is presented by Depop. We all have pieces in our closet that deserve a second life. That jacket you loved for a season, someone out there is literally searching for it. And that's why I love Depop. It's a fashion resale app where your personal taste actually has value. Selling is quick, simple, and genuinely worth it. You can list an item in just a few taps on Depop. Just snap a photo and their AI-powered listings fill in the details. Plus, make money easily with no selling fees on Depop. No seller fees means what you earn is yours. Even selling one item is a win. So, if you've been thinking about clearing out your closet, this is your sign. Download the Depop app and list your first item today. in and today is it and the phone he is and to next time economic policy economic statecraft clar gemacht that you obviously even niche does she >> Er sagt economic policy Er kontrastiert diese economic policy mit economic statecraft. Da sagt er, geht es eben nicht darum, einfach den Wohlstand zu erhöhen, sondern man nutzt wirtschaftliche Instrumente, nicht um wirtschaftliche Ziele zu erreichen, sondern um geopolitische und nationale Sicherheitsziele zu unterstützen. Das ist ein ganz wichtiger Unterschied. Einfacheres Wachstum und Thema Wohlstand oder wirtschaftliche Stärke als geopolitische Waffe. Deshalb spricht er auch eben von economic statecraft. Und er dann erklärt wie sich der Blickwinkel ändert. Blickt man nur auf Wirtschaftswachstum und Wohlstand kommt man bei ganz wichtigen Fragestellungen zu ganz anderen Antworten, als wenn man eben sagt, die Wirtschaft dient der geopolitischen Stärke, der economic statecraft. Er hat dazu eine Art Tabelle erstellt, wo er nacheinander die typischen Dinge durchgeht. Schauen wir uns die einzelnen Kriterien einmal an. Freihandelsabkommen. Für Ökonomen unstrittig eine gute Idee, denn sie führen zu mehr Wachstum und zu mehr Wohlstand. Jene, die eher geopolitisch denken, sehen das anders. Sie würden Freihandelsabkommen nur taktisch einsetzen und eigentlich nur dann, wenn es einen direkten ökonomischen Nutzen gibt, im Sinne von man stärkt die eigene Wirtschaft im geopolitischen Wettbewerb mit anderen Regionen. Zölle z.B. würde natürlich Ökonomen sagen ganz schlecht sind aus Sicht derjenigen die an die Staatskraft sozusagen denken was anderes sie sagen Zölle können durchaus dazu dienen die nationale Sicherheit zu erhöhen Stichwort mehr Produktion im Lande das gilt auch für Subventionen wer den Staat stark machen möchte um in einer geopolitischen Auseinandersetzung erfolgreich zu sein sieht Subvention nicht kritisch Ökonomen durchaus schon Ökonomen würden sagen Kapitalkontrollen gehen gar nicht jene die eher an die Staatskunst denken an die staatliche Kraft sagen warum nicht Kapitalkontrollen können uns helfen unsere Interessen durchzusetzen und auch bei der Fiskalpolitik ist es so Ökonomen haben am liebsten Regeln diejenigen die an den Staat denken sagen wir brauchen so viel Freiraum wie möglich das heißt es gibt eine ganz andere Sichtweise auf das gleiche Problem und Avery macht den Punkt und sagt wenn in den USA ist es so die haben erkannt es geht nicht mehr um Economic Policy sondern es geht darum eben die Wirtschaft so umzubauen dass sie unseren geopolitischen Zielen dient das war die Kern seiner Aussagen im Herbst 2024 und er macht klar dass es eben diesen Konflikt gibt es gibt staatliche Eingriffe die Ökonomen schlecht finden die aber eben die Staatskünstler diejenigen die den Staat aufbauen wollen als ein notwendiges Instrument sehen ein Jahr später nachdem er die Thesen geschrieben hat im Herbst 2025 hat er überprüft was die USA denn tatsächlich gemacht haben offensichtlich scheint vieles dafür zu sprechen dass die USA dem Skript folgen der Titel des Papers im Herbst 2025 war übrigens durchaus interessant. Er sprach von reverse perestroika. Trump als umgekehrter Gorbatschow. Wir erinnern uns. Gorbatschow ist ja nicht angetreten, um die Sowjetunion abzuschaffen. Er wollte sie umbauen. Er wollte sie umbauen von einer Wirtschaft, die ausschließlich auf Verteidigung, auf Rüstung, auf Industrie konzentriert war, zu einer Wirtschaft, die eben auch die Konsumwünsche der Bevölkerung erfüllt. Bekanntlich ist der Umbau damals ziemlich schief gegangen, weil eben am Anfang die Wirtschaft kollabierte, es Inflation gab und eine entsprechende Verarmung der Bevölkerung. Die Sowjetunion war nicht mehr Lage, ihr Imperium zu unterstützen und brach in der Folge zusammen. Trump, so Michael Every, versucht heute das Gegenteil. Er möchte eine übermäßig finanzialisierte Gesellschaft, die vor allem konsumorientiert ist, in die Richtung produktiver Investitionen, vor allem auch für die militärische Produktion umbauen. Das heißt, damals Russland, viel Verteidigung, viel Industrie, wenig Konsum. Heute USA, viel Konsum, vor allem viel Konsum auf Kredit, wenig Produktion. Im Prinzip zwei Gegenpunkte, man will sich annähern. Und Trumps Ziel ist deshalb, laut Every, nichts anderes als ein capitalism with a national security face. Hat den Markt Wir haben zwar den Kapitalismus noch, aber wir greifen ein, um eben die Wirtschaftsordnung so umzubauen, dass sie auch in der Lage sind, zukünftig im Wettbewerb mit China und zwar im geopolitischen Wettbewerb mit China zu bestehen. Deshalb wundert sich Every nicht darüber, dass es Neomerkantilismus gibt mit Zöllen und Exportkontrollen. Er würde auch sagen, dass es im Interesse der USA wäre eine Art Warschauer Pakt mit wirtschaftlich verbündeten Staaten zu schließen. Es könnte natürlich sagen, bis jetzt ist es ja so, dass die Europäer eher nicht so richtig als Verbündete wahrgenommen werden. Every würde aber sagen, na ja, die Wahrheit ist, die Europäer werden eigentlich in die amerikanische Ordnung hineingezwungen. Deshalb ist auch die Diskussion zum Thema Kapitalverkehrskontrollen in Form dieses Reverse Marshall Plans bzw. Mar-a-Lago Accord, wir haben darüber schon hier gesprochen vor einigen Monaten, durchaus nicht von der Hand zu weisen. Wie gesagt, nicht so richtig offiziell, aber Versuche den freien Fluss und Kapital zu eigenen Gunsten zu beeinflussen, gibt es von US-Seite durchaus. In die Kategorie der Instrumente zu dem Thema fallen übrigens auch die Dollar Stablecoins, aber darauf kommen wir gleich noch. Ebenso wichtig ist eine zunehmende staatliche Rolle in wichtigen Schlüssel-Sektoren. Wir erinnern uns, Donald Trump hat begonnen, sich sogar an Unternehmen zu beteiligen, quasi als staatlicher Investor, wenn er glaubte, es wäre im Interesse der USA. Every beschreibt das Ganze so: In diesem Sinne scheint Trump das Ziel eines Kapitalismus mit nationaler Sicherheitsfassade zu verfolgen, das Folgendes beinhaltet: Eine Verschmelzung von nationaler und wirtschaftlicher Sicherheitsstrategie, ein finanzpolitisches System mit der untergeordneten Fed, neomerkantilistischen Handel, das heißt Zölle, nichttarifäre Handelshemmnisse und Exportkontrollen, ein faktisch fragmentiertes Dollarsystem durch Dollar Stablecoins und Bitcoin, die Schaffung eines in Anführungsstrichen Warschauer Pakts ideologisch ausgerichteter integrierter Volkswirtschaften, eine neue Wirtschafts-Entwicklungsstrategie für andere Volkswirtschaften, Kapitalverkehrskontrollen für Kapitalabflüsse und darüber hinaus auch für Kapitalzuflüsse, weiche Budgetbeschränkungen für Schlüssel-Sektoren und Sparmaßnahmen für andere eine staatliche Rolle in Schlüssel Sektoren und freie Märkte, die von der finanzial hin zu produktiven Investitionen gelenkt werden Preiskontrollen und Deregulierung zur Beseitigung struktureller Wachstumshemmnisse freie Arbeitsmärkte weiterhin mit einem kleinen sozialen Sicherheitsnetz, aber größerem Fokus auf Bezahlbarkeit statt Sozialleistungen, während gleichzeitig die Nettozuwanderung umgekehrt wird, um die Löhne zu erhöhen. Es geht also um einen grundlegenden Umbau der US-Wirtschaft. Und dann kommen die Stable Coins ins Spiel. Dazu schreibt Avery etwas sehr Bemerkenswertes. Wenn ein ausländisches Unternehmen einen Dollar Stablecoin halten möchte, erhält ein US-amerikanischer Stablecoin Emittent die Devisen des betreffenden Landes, verkauft sie an die zuständige Zentralbank gegen Dollar, leitet die Dollar an das US-Finanzministerium weiter und tauscht sie gegen eine Schatzanweisung ein. Anschließend gibt er dem Unternehmen einen Stablecoin aus. Das Ergebnis: Dollar fließen in die USA, während die USA ihr Haushaltsdefizit mit Schatzanweisungen zu niedrigeren Zinssätzen finanzieren. Es verlassen keine Dollar die USA, sondern lediglich Token und die ausländischen Bestände an US-Staatsschulden erhöhen sich nicht. Stablecoins sind also ein Instrument, um das Triffin-Dilemma zu umgehen. Triffin-Dilemma, zur Erinnerung, das ist die Situation, dass das Land, welches die Weltreservewährung stellt, immer Handelsdefizite erfahren muss, um quasi Welt mit ausreichender Liquidität, im konkreten Fall mit US-Dollar-Liquidität, zu versorgen. Das war ein Grund dafür, warum Bretton Woods nicht funktioniert hat. Und so gesehen ist es quasi ein Ansatz zu sagen, wir behalten US-Dollar-Dominanz, aber eben ohne die Nachteile des Triffin-Dilemmas zu haben. Stichwort: Handelsdefizite, Stichwort: Deindustrialisierung. Die USA erhalten also die Vorteile der Dollar-Hegemonie, are heightened as the fortune of dollar hegemony or in nach Thailand. Kein Wunder, dass die EZB darüber alarmiert ist. Die hat durchaus verstanden, was es bedeutet und schreibt einen Blogbeitrag mit dem Titel vom Hype zur Gefahr, was Stablecoins für Europa bedeuten folgendes. Sollten US-Dollar Stablecoins im Euroraum weit verbreitet sein, sei es für Zahlungen, Sparen oder die Abwicklung von Transaktionen, könnte die Kontrolle der EZB über die Geldpolitik geschwächt werden. Diese, wenn auch schleichende Entwicklung, könnte Muster widerspiegeln, die in dollarisierten Volkswirtschaften beobachtet wurden. Angesichts des Netzwerkcharakters von Stablecoins und der damit verbundenen Skaleneffekte wären solche Entwicklungen schwer umzukehren. Je größer ihre Reichweite, desto schwieriger wäre es, diese wieder abzubauen. Eine solche Dominanz des US-Dollars würde den USA strategische und wirtschaftliche Vorteile verschaffen, da sie es ihnen ermöglichen würde, ihre Schulden günstiger zu finanzieren und gleichzeitig globalen Einfluss auszuüben. Ich glaube nicht, dass stand heute US-Dollar Stablecoins zu Zahlungen innerhalb des Euroraums verwendet werden. Aber perspektivisch kann ich ein Problem sein, wenn zunehmend auf diese Art und Weise Kapital eben USA angelegt wird und nicht mehr in Europa. Ohnehin ist die Frage, was Europa gegen die Stablecoins tun könnte. Bis jetzt musste Europa immer nachgeben, wie Avery darlegt. Europa hat gesagt, es würde nicht 5% des BIP für die NATO ausgeben. Bis auf ein, zwei Ausnahmen tut es das jetzt. Europa hat gesagt, es würde kein unfaires Handelsabkommen mit den USA abschließen, hat es aber getan. Das ist die Realität. Wenn Europa versucht, Dollar Stablecoins zu blockieren, wird es Ärger geben. Stichwort NATO, Handelsbeschränkungen, Ukraine Waffenlieferungen, Lieferung von Energie und auch bezüglich der The should assume this is just a temporary >> >> The deep-rooted long-standing of neo-mercantilism must again be defeated which is difficult. The open question is of course whether Donald really has such a strategy. And if so, can it work? The risks are considerable, but we should not rule out that he has a strategy, that he is pursuing and that it may also work And to understand that better, I have arranged to speak with Michael if your customer service never If your team suddenly over speaks fluently knows by heart and thousands of inquiries with real emotional intelligence. What used to sound like science fiction is for the customers of ElevenLabs today for efficient growth. ElevenLabs is considered the European one of the fastest growing companies proves that high-tech are at home here. While elsewhere is still discussing these AI agents are already solving for customers of empathetic, and in real time. Therefore, the technology highest security compliance and ISO 27001 certification. These agents can not only qualify but work directly in the existing systems. They check orders, maintain CRM data, and switch to >> This episode is presented by Depop. We all have pieces in our closet that deserve a second life. That jacket you loved for a season, someone out there is literally searching for it. And that's why I love Depop. It's a fashion resale app where your personal taste actually has value. Selling is quick, simple, and genuinely worth it. You can list an item in just a few taps on Depop. Just snap a photo and their AI-powered listings fill in the details. Plus, make money easily with no selling fees on Depop. No seller fees means what you earn is yours. Even selling one item is a win. So, if you've been thinking about clearing out your closet, this is your sign. Download the Depop app and list your first item today. Bevor wir zu meinem Gespräch mit Michael Avery kommen, noch ein Hinweis für Hörer und Hörer, die zu den Themen Wirtschaft, Politik und Finanzen rund um die Uhr auf dem Laufenden sein möchten und noch kein Handelsblatt Abonnement haben. Unter dem Link handelsblatt.com/mehrperspektiven finden Sie zurzeit ein H-Plus-Vorteilsangebot. Für nur 1 Euro können Sie 4 Wochen lang auf alle Inhalte zugreifen und sich so von der Qualität des Handelsblatts überzeugen. Den Link zum Angebot finden Sie wie immer auch in den Shownotes zu dieser Ausgabe. Doch nun zu meinem Gespräch mit Michael Avery. >> >> Michael Avery is senior global strategist >> >> Grand macro strategy net >> >> Economic statecraft is a much older, much more comprehensive way of looking at And nowadays what we have far too often are people just chasing GDP, chasing the stock market, chasing a CPI target, chasing a fiscal deficit target. To what end? >> So, there you go. That's something that you can But this is something that Germany, to be honest, has been staggeringly slow. Trump's grand strategy, Trump's grand strategy That then of course tips the scales towards them eventually becoming the global hegemon. In effect, the all of the Middle East comes under a Pax Americana. So, effectively >> missed the fact that this might be a US strategy to create chaos in Hormuz. It could at its worst look like 1973 and the COVID crisis and the Ukraine crisis all at once. The superior Europeans continually walk into the room saying how this man has no strategy and walk away without wearing their shirt. And I wonder how in European cultural terms. Europe says, "We cannot let Ukraine fall." And I think there's a great deal of geopolitical sense in that. Equally, Europe isn't prepared to let Ukraine win. and stuff the military >> Or is there a better deal to be struck saying okay, this is a North Korea South Korea frozen conflict at least we can rearm without actually fighting. Which is what North Korea and South Korea do. If you're in a financial crisis or you're facing a crisis in the Strait of Hormuz and you have to ration energy usage, should you really be letting the free market decide whether someone wants to the the good stuff benefits, the bad stuff benefits and traditionally everybody buys more assets. But you are stuck with them. >> globally. Now, Germany used to do that via what I joke was neo-Merkelism, where you know, Germany claimed that it was a great free trader when it wasn't. Germany's never been a free trader, ever. There is no period and you use fiscal policy over there as a lever to make sure that you keep running that surplus. I mean, German politicians have said this openly in the past. If you were to say objectively, what's society for? And you would say, "Well, to push asset prices up so a certain percentage of the population get very rich and the rest don't." An alien looking down at you would say, "Oh, "Hold my beer. Because this is when it gets real. Now, wait for the stable coins to happen to happen in the next couple of months. They will be the ones best placed, and I wish everyone well. This episode is presented by Depop. We all have pieces in our closet that deserve a second life. That jacket you loved for a season, someone out there is literally searching for it. And that's why I love Depop. It's a fashion resale app where your personal taste actually has value. Selling is quick, simple, and genuinely worth it. You can list an item in just a few taps on Depop. Just snap a photo, and their AI-powered listings fill in the details. Plus, make money easily with no selling fees on Depop. No seller fees means what you earn is yours. Even selling one item is a win. So, if you've been thinking about clearing out your closet, this is your sign. Download the Depop app and list your first item today. >> >> Yeah. Emery >> >> Das ist >> >> von Friedrich List bis zum Euro der als strukturell unterbewertete immer haben wir darauf gesetzt, große Exporte zu erzielen. Die Rüstungsdebatte passt Emery ebenso sachlich zusammen. Kriege gewinnt man mit Munition, nicht mit Rendite. Und dass die Rüstungsaktien auch in Deutschland Rekordhöhen erreicht haben, ist zwar schön, ist aber kein Ausweis dafür, dass die europäische Verteidigungsfähigkeit wirklich zugenommen hat. Nach vier Jahren Krieg muss man da, das wissen wir aus anderen Podcast, durchaus skeptisch sein. Ich finde es auch spannend, die Rolle von Dollar Stablecoins. Wenn Michael Emery jetzt zeigt, wie sie genutzt werden können, um die amerikanische Hegemonie auf eine neue Stufe zu heben, das ist durchaus ein ernst zu nehmendes Szenario. Wir alle könnten Dollar Stablecoins nutzen, um außerhalb des lokalen Bankensystems Geld anzulegen. Es ist kein Aufruf zur Steuerhinterziehung, Gottes Willen, aber Michael Emery hat ja erklärt, dass es durchaus auch so genutzt werden könnte. Für Europa sieht Emery vier Szenarien. Entweder wir handeln geschlossen, oder eine kleine Kerngruppe geht voran, wir kennen es ja schon, quasi die Koalition der Willigen, oder aber Europa fragmentiert komplett. Das vierte Szenario ist die Unterordnung Europas unter Amerika. Drei Szenarien bedeuten aus seiner Sicht das Ende der strategischen >> >> Dear Michael, it's a great pleasure welcome you to my podcast. Thank you very much. It's a great pleasure to be here. Michael, follow your thoughts already for many years and I'm actually very glad to have you on my show particularly in these days. You know, we are talking Monday so the war in Iran is now 9 days old. It's escalating. Many people were hoping it's going to be short and brief but now we see also implications for financial markets. I think we should also discuss not only currently what's going on in Iran but overall what's going on on the world stage because you've always the past argued that we should not talk so much about economic policy but we should talk about economic statecraft because you, at least in my understanding, always saw it as a broader picture of a conflict between the West and I would say China and its allies. So how does all this fit into what's going on in Iran in your view? Well, thank you for the question. There are so many different ways to answer that. First of all, let me start for those who aren't familiar with it just by reiterating again what the difference is between economic policy and economic statecraft. And economic policy, I don't think I need to explain at all. Everyone should be familiar with it whether it's fiscal policy, monetary policy, trade policy, transport policy, etc. etc. Economic statecraft is a much older, much more comprehensive way of looking at the world and attempts to answer the question what is GDP for. Now there are many different ways you can answer that at many different times in history but you need to have that as a goal or a mission statement. For example, if if you look back at the British during their heyday, they had a very clear mission statement, you know, Britannia rules the waves commercially, which means they had to have the world's largest navy to allow them to dominate in commercial terms. You maintain dominance of India which you leverage up to give yourself a much bigger position on the world stage and you never allow anyone force to dominate in mainland Europe. Those were three mission statements. That's what GDP was for and within that everything else was flexible but had to work together towards those common strategic national interest goals. And nowadays what we have far too often are people just chasing GDP, chasing the stock market, chasing a CPI target, chasing a fiscal deficit target. To what end? And they never have one. And the countries that are doing that are the ones that are finding themselves now in the biggest problems and the deepest mess. Well, I would have said, you know, in Germany for example, our GDP is only looked for to have more social welfare. Well, there you go. That's something that you can say is national interest if you want. You can say that's what GDP is for and then you have to consider what other people's GDP is for and if the country next to you is using GDP to arm at the fastest pace since World War II or to build an economy which can coerce you and strip away your manufacturing and eventually reduce your standard of living to the point where you can no longer afford your welfare state, perhaps you need to think again. But this is something that Germany, to be honest, has been staggeringly slow to come around to. It still hasn't accepted it now despite the fact that the rest of the world can see it in front of Germany. But let's pivot to Iran cuz that's the question you asked me. Why is Iran happening? There are lots and lots of different ways you can unpack that depending on how you see things. If you think in terms of economic policy, you will say because Trump is mad, because he's a warmonger, because of American imperialism, because of oil, which is partly the case. You know, very, very simplistic, rather Eurocentric answers which can be emotionally satisfying but don't really tell you anything about why it happened now and they don't tell you anything about what will happen next. If you look at it from an economic statecraft or a broad statecraft perspective because to be clear, statecraft has three arms or three legs. Economic, which I'm primarily going to be discussing with you today, political, and military. And you need all three. You cannot do statecraft based on only one, otherwise you are, you know, unable to sit on that stool. The three-legged stool doesn't doesn't hold you. So, why now? Well, because Trump's grand strategy, or or I call it grand macro strategy because it falls within the world of markets and macroeconomics, too. Since he came back into office, it's very clear. China, yes, absolutely is the focus. The Chinese economy is much more powerful in industrial terms than the US economy. They are able to produce something like 200 times the shipbuilding capacity of the US, which means that on a 5-to-10-year time frame, their commercial navy, which is already much, much larger than the US, will be matched by their military navy. So, the PLA-N, as we call it, will be more powerful than the US in 10 years on on the current glide path. That then, of course, tips the scales towards them eventually becoming the global hegemon. So, the US has been cognizant of this for a while. It attempted to deal with it in the first Trump presidency in a start-stop manner, hindered all the way by the opposition. And here it is now very aggressively attempting to reorder the global economy and financial markets in order to change itself and to change itself in order to reorder the global economy and global financial markets. Now, last year everyone got very excited about tariffs, which we correctly predicted at Rabobank. And I was saying all the way along, yes, these are important. Yes, these are historic economic statecraft that the US has used since the first days of its existence, as Germany did, too, in the in the distant past, by the way. Germany would not have created itself as the modern German state without tariffs, and everyone forgets that, but it's true. But that was only going to be part of what they were doing. And indeed Trump has been shaking the box and changing everything. Everything in terms of potential exchange rate policy, what form the US dollar might take via stable coins, looking at leaning on the Fed or restructuring how the Fed works and the banking system works, the state taking a much larger role in the economy, 10% stakes in some companies, golden shares in others, using the office of strategic capital, leveraging things up 200 times to try and rebuild parts of the military industrial complex, basically restructuring everything around it. But a key part of what I expected to see in 2026, and I flagged it at the end of last year, was that we would see the US recognize that a Chinese economy, which has complete control of downstream production in terms of manufactured goods, and has critical chokeholds over the US in midstream production, which is processing of rare earths, without which industry cannot proceed, including the military, can only be matched by the US alongside tariffs, alongside all of the statecraft I'm describing, if the US leveraged the economic and military power it can project abroad for now, which China cannot for now, to take control of upstream supply chains, to ensure that if China says to the US, "We withhold rare earths," the US says, "We withhold food and raw materials and oil." Now, Venezuela was the first proof of that. Actually, Panama, even but even beforehand. The Panama Canal was the first proof of concept. Then Venezuela, which again we could see coming a long way off and we flagged would happen, and everyone said, "Well, that's crazy." And we said, "No, because if you control Venezuelan or crude in the far distant future, that's great for the US. Right now, it's very bad for China. So, a loss for China is a win for the US. It's a zero-sum game. And Iran was always always there in the background, particularly since October the 7th, 2023, when it started, of course, the landslide of events in the Middle East. That Israel would want revenge for that and to try to take it out of the picture. And the US would leverage that opportunity to try and make sure that again, oil does not flow to China easily. Now, China can still buy from Russia. Russia's hand is strengthened by this. But again, that can be part of the US strategy. A stronger Russia against China actually gives Russia more opportunity to change course in the future. A weaker Russia, which is absorbed by China, has no such opportunity. So, that is why we see Iran happening. And to be absolutely crystal clear, everything now revolves around Iran. If the US succeeds here, from a European perspective, Trumpanomics wins. All of the empty rhetoric about strategic autonomy that you're hearing from Europe, all of this shuffling around between Canada and Australia, and and India, etc., etc., will account for nothing. Because realpolitik will make it very, very clear that the US would control energy from itself, on which Europe relies, and would control energy from the Middle East, on which Europe relies. So, above and beyond anything else, Europe would have no strategic choice other than buying oil and gas from Russia again. Which would mean, of course, it would have to sign up with China, abandon Ukraine, and forget about all the rhetoric, and absorb itself into a a greater Eurasia, which would not be consistent with any of the plans that the European Commission has. So, that would not be a platform it can proceed from. But if Trump fails here, if Iran can resist the American military effort in the same way that Hamas is still clinging on in Gaza, Or if Trump is militarily defeated, or if markets force Trump to to retreat completely, then effectively the US has hit a brick wall. Trump can still try and become extremely aggressive in different areas and on different fronts, but the global scheme that he has starts to unravel. So, this is actually the biggest gamble not just of his second term, not just of his presidency, of his entire life. And in fact, it's the biggest gamble that the US has taken for generations. So, that's also, by the way, very, very bad for Europe if it fails. Because we do not enter a peaceful world where the rules-based order makes a comeback because Trump is humbled. We enter a world in which the US goes home and is perhaps only interested in the Latin American sphere and the North American sphere and says the rest of the world can do whatever it wants, which is what it did, of course, during the late 1920s and early 1930s. And if that were to happen, Europe's situation becomes absolutely dire in just the same way. So, Iran matters critically and there is no good scenario for Europe. Um Michael, I think we have to dive deeper into it to make it clearer to our audience about the scenarios, but first of all, it sounds like, you know, for European ears, talking about Trump having a strategy, of course, sounds a bit strange because most people would say this guy doesn't have a strategy. Of course, as you laid out, the issues concerning production capacity, that's why Trump tries to re-industrialize the US. I think to build up more industrial capacity, also to build up more capability to produce weapons, which is important. And we know that without China, as you pointed out, without Chinese material, without Chinese deliveries, the US cannot basically not be defend itself. That's not talking about Europe. If you now look at the war, for example, in in Iran, we all already see the issues that it's much cheaper for Iran to fight this war than for the West. Let's think about the cost of, you know, stopping drones and so on. So, do you see the risk that he basically just stumbled here in this scenario where he cannot win because it's a case he's just proving that the US has to do something about its abilities. So, basically he should have had first reindustrialized and then try to do this fight. Well, let me start with the last part of the question and then work back to the strategy. In an ideal world, we'd always do everything at the correct pace that suits us best. That's very rarely the case in international relations. You can make an argument, the White House makes that argument. I don't know if it's true or not, but they actually now because there was a genuine imminent nuclear threat. So, let's leave that on the table. That if that were true, that would already again mean they couldn't do it at the pace they wanted. They also couldn't do it at that pace if China was able to coerce them with raw uh sorry, rare earth elements uh and critical minerals during the process of that reindustrialization. And if China were to arm Iran aggressively so that it was bristling like a porcupine, which they had signed contracts to do, by the way, then that means that America would no longer in the future be in a position to do it. So, you don't get to pick your timing. You have to work with the world you're in, not the ideal world. And reindustrialization will take time, unfortunately. In terms of the economics of it, what you're talking to correctly in terms of the cost of a cheap drone, a Shahed drone, versus a uh Patriot interceptor, for example, that's correct. That's part of the American dilemma that they've built beautiful, expensive systems which don't work against far cheaper alternatives from the enemy. But, things are changing. Ukraine actually have cheaper interceptors than Shahed drones, and America will pivot towards that Ukrainian technology. They already have. The Israelis have now laser technology, which I believe Germany's interested in buying, where you can shoot down drones and missiles for about 10 or 20 euro cents. Now, of course, the platform is expensive, but once it's there, all you need is electricity, which is of course controversial in Europe, too. But, you know, provided you have electricity, that itself provides some benefit. So, the economics can keep shifting. This is not fixed. And in strategy, just as in competition in business, you have to stay ahead of the curve. But, let me just answer briefly on that strategy. I I've had this conversation many times working for a European bank. Being British, living in Asia, having lived in mainland Europe myself, I'm not a typical Brit. Ich kann ein bisschen Deutsch sprechen. Je parle un petit peu français. >> That's very good. Yeah. Okay. So, I speak a few European languages badly. I'm not your typical monolingual Brit. I understand where the view of Trump comes from in Europe. I find it highly ironic because I'm constantly surrounded by people who are far better qualified than Trump on paper, in a technocratic sense, far more worldly, far more cultured, who continually either go into meetings with him or are involved in negotiations and come away having lost their shirt. And this happens with the Americans again and again and again. So, the superior Europeans continually walk into the room saying how this man has no strategy and walk away without wearing their shirt. And I wonder how many times this has to happen before Europe starts realizing that just potentially he's either the luckiest man in the world or, as America has always been able to do to the Europeans, is quite capable of surprising them again and again and again whilst displaying, in European cultural terms, very little sophistication. So, I have to say that, and it may disgruntle your audience, but I'm trying to do it with a good heart in that it's important to recognize differences in culture and and see that, for example, if someone speaks very bad English which you don't, that doesn't mean they lack intelligence. No, but you know I don't worry about my audience my audience is used to hearing controversial stuff on my as you call controversial quote unquote stuff on my podcast. But let's dive deeper into two scenarios. So scenario one US and Israel are successful. Now we have to define what does success mean? Does it mean like Venezuela and aligned new regime or what does it be? But success clearly economically would mean to get China out of Iran. I think that thing that's what most probably success would mean if we talk about economic statecraft. So then is this end that the US moves on to the Pacific in order to make sure that Taiwan doesn't happen? So we should talk about this and then I would also like to better understand what you mean what this really means and implications for Europe because it sounded very interesting. Both scenarios are interesting we should go deeper there. So let's start with this scenario. Sure. So if we start with the scenario of success and as you said that's ambiguous but it has to mean in effect that all of the Middle East comes under a Pax Americana. So effectively it's it's a US US protectorate the entire territory rather than buying American toys which they don't use. For example, the GCC countries have a lot of fighter jets they're not flying. They have a lot of military vessels which could be in the Strait of Hormuz keeping it open right now. They're not doing it. So they buy them they don't use them. But to actually have something where they may still not use them but they are genuinely understanding that they only work for America or with America. There's no one else who they can wink at or do another deal when America is falling asleep in the afternoon after a heavy lunch. That would be success. If that's the case then together with Venezuela America starts to not just starts it moves aggressively ahead with a template which will expand to the rest of Latin America. Brazil would probably be next along with Colombia from a food perspective. North America would see Mexico and Canada really firmly locked into a USMCA where the US sets the external tariff which would effectively be the equivalent of Germany running the Eurozone which, you know, some people joke darkly they actually do. And the other two countries just being part of it but effectively America being the one with sovereign full sovereignty. And then, once you've done that Europe effectively starts to fall into place which is cuz at the moment Europe is scrambling around. We'll come back to that in a moment. Africa, of course, is still a battleground but most of what the US needs to then be able to say to China, "Look, you can either become a hermit kingdom with Russia. Russia, we can actually extend a hand to and say, "Would you like to have a larger global platform?" Um Russia is already making noises saying they would like to come back into the US dollar system potentially. Which is interesting. What if Europe keeps its sanctions on and America takes them off? Well, that splits the Western alliance again. But it then says to China, "If you are going to try and escalate from here much of the world is against you and we can make life very, very uncomfortable for you for the next five or 10 years upstream which is what I was saying earlier. So, you're relying, for example, if you can't buy soybeans from America, you can buy them from Argentina or Brazil. What if you can't buy them from any of them? And if you can't buy them from any of them, you don't eat much meat. So, that, to my mind, is a threat, obviously. China has their own threats. It's economic warfare being threatened but that's infinitely preferable to physical warfare. Infinitely preferable. To make it clear to people, this would be very, very uncomfortable if you did do that. So, ideally everyone, of course, just gets along. That's what we would all aim for. If we can't have that, this is what I believe the American strategy is, and it allows them to then rearm at pace, and again peace through strength, to try and find a new modus vivendi with China, which I genuinely believe is what they're looking for, a modus vivendi, but one where both sides understand the other has a degree of economic mutually assured destruction, which is what we had with nuclear weapons vis-a-vis the Soviet Union. That's if it works. If it doesn't, as I said, the Middle East falls into chaos. Absolute chaos. Because if Iran is destabilized, where you have an Afghanistan or an Iraq again disrupting the Strait of Hormuz, which is absolutely chaotic for everybody in the world. America less so, and I'll come back to that in a moment, but it's still very bad news for everybody, including the Middle East. It's not good news for China, either. On that note, I have to just throw something in which you didn't raise, but I think it's very important to bring up. Now, I'd already mentioned that my 2026 outlook said America will disrupt upstream commodity supply chains as a counterbalance to Chinese coercion in downstream supply chains and midstream. There are views out there which are certainly they they tessellate well with what I'm saying. And they argue this, "Don't dismiss the fact that this might be a US strategy to create chaos in Hormuz." Because while it looks ridiculous given that the scale of economic destruction which is about to roll over us if this is not sorted out within a week, it could at its worst look like 1973 and the COVID crisis and the Ukraine crisis all at once. That's just incredible to contemplate. At its worst, it could look like that. America could, hypothetically, rely on some of the Venezuelan oil, which has already been stockpiling, try and pump the output there up, stop exporting crude itself and just use it at home, and actually, while taking some pain, absolutely, emerge maybe with one or two fingers missing, but the rest of the world loses an arm and a leg. At which point, in relative terms, were this to be the case, if this is strategy, America has effectively, in relative terms, reinforced its position for the 21st century, while everyone else would be saying Trump gambled and got it wrong and this is chaos. And maybe that would be the public meme, but America could be far more insulated in terms of fertilizer, in terms of energy, in terms of food, in terms of helium, which is needed, by the way, in order to create semiconductor chips. And everyone else who has very intricate strategies, to go back to Europe, which has strategy after strategy after strategy, none of which ever work, would be sitting there with lots of very interesting PowerPoint slides and acronyms, and very little energy, and very little fertilizer, and much less food, and no semiconductors, and therefore no military. Professor Quick, isn't at this stage in a year, China is well prepared, isn't it? China already has huge reserves on oil, and China in the past, as we know, has done everything to increase its domestic energy production. So, they use coal, they use wind, solar, nuclear. So, isn't actually China well prepared for such a scenario, and of course we are not prepared? Yes and no. China is very well prepared. China has always used economic statecraft for its entire existence, going back thousands of years. So, this is just an example of how one has to recognize the game the one is playing. China has always used economic statecraft. That's why it's so well prepared, but it does still have weak spots. No one can completely be immune to a downturn in the rest of the world. For example, if China if there's a global recession now, plus American tariffs, plus more protectionism, who's China going to export to? Uh if they're not able to export to everybody, then they need to be doing much more domestically, and that starts to destabilize parts of their domestic regime. Okay, so that's it's a one-way street or it's it's a it's a very comfortable journey towards a brick wall in its own way, but what China is hoping on that front is that the rest of the world acquiesces to its model to avoid anything disruptive happening before it hits that brick wall. So that's one. The other one of course for those who understand agri systems, they know that China is not food secure. It's much more food secure than it used to be, but its animal feed still requires vast inputs of soybeans in particular from North and South America. And if that flow dries up, then the Chinese diet would have to change dramatically. Now maybe that's something China can live with. Maybe politically they can say to the population, this is the price one has to pay to fight American imperialism. Yeah, I would never rule that out, but it's certainly it changes the dynamic, should we say at the at the very least. But to pivot back to Europe, Europe is incredibly poorly placed. In fact, if we talk about uh you know, stocks, as you know well, this is the time of year when Europe should be stocking up on gas ahead of winter. And already stocks are incredibly low and prices are about to go through the roof. And were this Hormuz scenario to roll on and on, and I'm not forecasting what will happen, but the dynamics look very bad today as we speak, then Europe would either be buying that gas at a staggering price just as Asia is being forced to step in and outbid you for cargo after cargo, which we saw during 2022, or Europe would not fill the gas tanks ahead of winter. Or Europe will buy from Russia again. So the number of geopolitical choices and strategic choices is limited and they're all extremely unpalatable. And again, this comes down to the fact that Europe talks a lot about grand macro strategy, doesn't act. And that's partly the problem that Europe of course, has so many different voices. There are 27 grand macro strategies within Europe. Ergo, there aren't any. We have to talk about Germany because we have as you know, one of the speakers as Chancellor who also talks of is very powerful without making the means we can go down to this. But Russia, you mentioned Russia and the side is that okay, Russia benefits from higher oil prices because you know, they sell to China and is is going to help China and Russia to get a bit more weight compared to China because currently I think Russia has to do whatever China wants. On the other side, we have the war in Ukraine going on and you know, the discussion over years and you know, the discussion is always like you know, if if you don't stop Putin now, he's going to invade all of Europe. Um so what's your view concerning the future role of Russia in this economic statecraft scenario between China and the US and well, how do you see the European position towards the war or should we just accept reality? Well, first of all, I would advise everybody, not just Europe, to accept reality. I could I could never give any advice other than that to the entire world. In fact, it's when one doesn't accept reality, the problems start. And I think that's >> Yeah, but I think the struggle accepting reality is to be honest. Oh, no, look, I wouldn't disagree. We we all do, but definitely Europe is no exception to that. I think talking geopolitically, and I'm not trying to criticize because this is such an emotional issue and it's such a principles-based issue. But what you see again and again happening with Europe vis-à-vis Ukraine is Europe says, we cannot let Ukraine fall and I think there's a great deal of geopolitical sense in that. Equally, Europe isn't prepared to let Ukraine win. Because if Ukraine were to genuinely start pushing Russia back, if it genuinely started to threaten to retake the territories that Russia now says are Russian, Crimea above all, it's not my call to make, but much more serious military-minded figures than myself start talking about tactical nuclear weapons and you know, the worst-case scenarios. It's a very, very high-risk, high-return strategy. And every time Europe contemplates that, it backs off. So, effectively, what Europe is saying is we don't want Ukraine to fall. Absolutely, tick that box. We can't allow Ukraine to win. At which point, what is Europe trying to do? Just fight Russia statically over a fixed line at terrible cost in blood and treasure to Ukraine, first and foremost, and then to Russia. And who benefits from that? And I don't mean that in a cynical sense, like does Europe really benefit from that given what the what the cost will be to that? Does Ukraine? Does Russia? If no one can move forward World War I style, or is there a better deal to be struck saying, "Okay, this is a North Korea-South Korea frozen conflict. At least we can rearm without actually fighting." Which is what North Korea and South Korea do. And is that not what Trump is trying to achieve? I don't know. But is that Some would say it is. Some would say it isn't. But from Trump's perspective, at least his supporters would say it is, because then that allows the US to start focusing on other regions. As soon as they've moved away from Ukraine, they've been able to pivot first of all to Venezuela, now to Iran. Then then after that, as I said, they can start looking at Asia. Although they don't want to fight in Asia. The whole point is not to fight in Asia. And Europe, meanwhile, Germany is spending real money on weapons now. It It It It genuinely is. But as I say to people all the time who tell me, "Well, look. Look at the price of defense stocks. That's a clear indicator that Germany's rearming." And I say, "It's the complete opposite. It's the complete opposite. It doesn't have to be, but it can be. If you produce not very many goods and you sell them at a higher and higher price because there's a flood of money coming your way, your share price will go up." You're no more able to defend yourself than you were before. Here's a catchphrase of mine I've been using for a while, and America sees this, too, which is why Trump is screaming at his defense firms to cut executive bonuses. And he's been telling them he may use the the defense Production Act to force them to increase output. You win wars with bullets, not profits. Europe is attempting to rearm using a large fiscal stimulus in some countries and a small one in others without nationalizing the companies. And as a result, the companies not 100% certain if the money will suddenly change because of a change of the political weather, they're not building as many factories as they should be. They're still making a nice profit margin on these piece, which is why their shares continue to go up. And while I'm no military expert, military experts who I speak to, cuz one should always go to the source, tell me that while yes, there is an improvement in some areas, which is good, definitely, overall, Europe is no more able to really defend itself today than it was 4 years ago. So, 4 years, which is nearly as long as World War II, not a lot of progress. Because also we have the issue and we mentioned the social welfare state before, we have the issue that we talk about reality check that we have issues. So, we have issue one is we struggle with an aging society. We have massively increased the social welfare state after the fall of the Berlin Wall. We have followed an energy policy. I I know your comment like me, which has been I would say probably also lacking a bit of reality checks. And we have not accepted yet to do some changes here. In addition, and I think this also applies to China and to the US, I would guess, we have the issue that we have racked up huge public debt levels and so in some countries also private debt levels unheard of in peacetime. And now we have face issue of, you know, spending money on defense and reindustrialization, at the same time dealing with huge debt, and dealing with the issue of hidden liabilities for the aging society. And you mentioned in the first few minutes of our conversation, Trump and the Fed. And I would like to come to the point around, you know, aren't we in a world where basically uh we also will see a very different financial system just in order to basically get rid of the huge debt levels. Yes, I think we will. But there's a huge amount of disagreement over what it will be. So, for example, there's one school of thought which I have a lot of sympathy for and I think has a lot of intellectual credibility, which argues that we have created such a mess through decades of fiat money, you know, profligate fiscal policy, and you can add from that school of thought overregulation, etc., etc., government intervention in the wrong parts of the economy, that the only way out is a hard reset and to go back to gold, for example. Now, I'm not an advocate for that for a couple of reasons, although I can completely understand the the intellectual case that's made for it. I don't dismiss it lightly and I travel a lot of the same way with the people making that argument. Uh where we disagree is that they tend to think that regardless of what happens now, countries who would do that are still completely eclipsed by China anyway. It's game over. And yeah, I make the case after having, you know, lived in greater China and studied it, etc., etc., and studied Soviet economics in the past, China has not done anything that the gold team would argue as being what one should do in order to win. China runs the most incredibly profligate fiscal policy. China runs massive, massive off-book debt via state banks and state corporations. But what it does do is with its fiat fiscal policy, it runs neo-mercantilist policy. And neo-mercantilism is to deliberately make sure that you control as much of the supply chain as possible, capture value add, and run a trade surplus with others. Now, Germany used to do that via what I joke was neo-Merkel-cantalism. Where, you know, Germany claimed that it was a great free trader when it wasn't. Germany's never been a free trader, ever. There is no period in German history where it's been a free trader. You are allergic to trade deficits. No, no, I because also we like economic understanding because you know that running trade surplus is fine, but we also exporting our capital in the world, and we are one of the most stupid investors globally. So, it's not necessarily value creating. That's a separate but valid issue. The point being, if you're a free trader, you should be able to say, "Hey, we run a trade deficit for the last 5 years. That's great." And then maybe the next 5 years we're on a surplus. It actually doesn't matter whether you're on a trade surplus or a trade deficit cuz we're free traders. You know as well as I do that will never happen and has never happened in Germany. Ergo, you are not free traders. You are Merkel-cantalists. You tell yourself you're free traders, but you're not. And you use fiscal policy over there as a lever to make sure that you keep running that surplus. I mean, German politicians have said this openly in the past. >> And the euro and the euro, of course, helped a lot. Our euro our euro was >> Naturally. Naturally. was giving Germany an unfair advantage, but in the end we shot ourselves in our own foot because of the fact that the euro was so weak. We basically stopped becoming more efficient and effective in my view. So, it was a short-term benefit, but it's it's one of the reasons why currently the German economy is not in such a good position. >> Well, a good debate can be had about that, but I'm not a specifically German economist, so I'm not going to go there, okay? I'll leave those words with you. But the gold argument, China didn't follow anything that the gold people would do. It used fiscal fiat neo-mercantilism to dominate supply chains. Economic statecraft is what worked. And my argument has been for years that the US will do the same to try and reverse the mess that it's in now. So, I fully expect to see a very different looking Fed going forward. And I'll unpack that in a moment. I expect to see the Treasury being dominant over the Fed rather than the other way around. I expect to see a much larger state role in the economy. We already expected to see much larger tariffs. And then effectively, we will see a lot more of the policy that China is using, which is actually policy that Germany and the US have both used successfully in the past in order to develop, in order to get it back there. But in But in terms of the Fed, there are so many things one can unpack. So many things. But I want to again bring it down to very basic questions, cuz I think if you get the basic questions right, you get the answers right. What point is there in having one interest rate? For example, if you have Fed funds Fed funds at 5% and you raise it to 6% because there's inflation, you smash the useless parts of the economy, and there are many useless parts of the economy. If we're thinking what is GDP for? So, you mean basically credit for financial speculation or credit for buying existing assets. Well, that's one way of looking at it. Credit for buying existing assets or credit credit for new productive investment. So, whether it's a new bank loan going into new capital stock or whether it's credit for consumption or credit for pushing up existing assets. That would be one taxonomy. But you can even look at it across sectors. For example, I could put new loans into capital stock for a new business, which would be a pet groomer's, for example, or or a or a pet psychologist. They have them in California, you know, my dog is depressed, my my cat's feeling a little bit like it's having a midlife crisis. Is that useful during a war? Now, we have a free market economy. Everyone's free to, you know, take their own choice, etc. and say I'll I'll have a risk I'll I'll take a risk on that. I think people will like it. I'll make some money on it." That's capitalism. If you're in an existential crisis or you're facing a crisis in the Strait of Hormuz and you have to ration energy usage, should you really be letting the free market decide whether someone wants to open a bright, glowing, brilliantly lit, you know, air-conned or heated pet therapist when they could be opening a factory to make ammunition? This is where political choices have to be made. So, if you put the interest rate from five to six, everybody suffers. If you lower the interest rate from five to two, everybody benefits. The good stuff benefits, the bad stuff benefits, and traditionally, everybody buys more assets. Everybody leverages up. Everybody buys existing assets. People buy bonds because, you know, pricing yield are are inverted, obviously. People then say, "Well, if the interest rate is now low and the yield is low, therefore, of course, the stock dividend should be higher, and therefore, proportionally, I'm going to go and buy assets there." Doesn't mean the company is making a single more product. There's not one more bullet being made. So, everyone feels richer. Everyone then imports more from countries who are actually their rivals, who are trying to deindustrialize them. And the Indian circus goes round and round. So, the point I'm making is if you think in terms of economic statecraft, whether it's the Fed or whether it's Europe, logically, I cannot see how you can make the case or anyone can make the case that the way that the monetary system and monetary policy now works is functional. It's not fit for purpose. You need to have the dynamism of the private sector, but the private sector does not seem to be capable of making the correct choices over what is necessary in an economic statecraft or existential environment. Ergo, one would imagine we will go back to where we used to be prior to the 1980s, where you have hypothecated capital in different sectors or differential interest rates, which are fixed in certain sectors through having limited pools of funds. For example, 5 billion for mortgages, 10 million for industry, 3 billion for agriculture, and the interest rate is bid up within that sector. Now, that's a complete anathema to how our markets work today. There's I don't think there's anyone alive in markets who still knows how that system works. Maybe the very elderly. I remember. I know, I never worked in it, but I remember it existing when I was young. But that's absolutely where we may logically have to go back to, and not just in the US. And that's exactly again how China works, by the way. Would you say it's a taxonomy in Europe, you know, as this which is basically also an intervention by the as the European politicians around, you know, capital requirements for banks. So, does this already point us in this direction, or is it more an example for, you know, having the wrong priorities? Well, it can do. For example, if you look at some of the tools that were used in the past, like TLTROs. Now, I'm not a Euro bank specialist at all, but some of my colleagues are, some of the finest minds I've ever worked with, by the way. And they point out that yeah, there are tools in the toolbox, and TLTROs are the ones they point to in particular, where you can offer differential rates of borrowing to try and achieve certain things. But, in this example, they would have to be very sharply differentiated, and you would have to have, unfortunately, either very, very willing market participants who understand the gravity of the situation, or you'd have to have very tight regulation to make sure that people don't then borrow for one purpose and use it for another. Which is, you know, which is human nature. But, problematic as that is, for all kinds of reasons within our current architecture, I will repeat again, I don't understand how that architecture is fit for purpose if it has to be at least competitive, and at most combative versus a different system. And and let me give you one more example of that, if I may. I was at a conference in Singapore last year with two senior ex-military figures. And they were doing the round of of private investors, saying that you need to put money into defense stocks. That's where the future will be. And by the way, I look, I I agree. This is a sector that would be incredibly important. But I asked them, if you people are expecting to make a 20 or a 30% return, how do you expect to achieve economies of scale that can match what Russia is doing or what China is doing if they're prepared to operate at a loss, which they are. And you insist we have to scoop 30% off the top, which isn't a bullet, so that someone lives very well to drive a nice car and have a nice holiday. I don't understand conceptually how Western liberal democracy can't get his head around this. But obviously, as I say, it's very hard to get someone to understand something when their job depends on them not understanding it. It comes down to shift from consumption towards production. It comes down to shift towards, you know, whatever, you know, really scaling up in certain areas like defense. How can it be done because probably you don't know the answer yourself either because I just struggle if you look at the just elections in Germany and regional elections and when I see at the results, I can just say, you know, it's a complete denial of reality is what we're having in the political discussion and in the voting behavior. Well, let me come back to the politics of it in just one moment. Each country with a different starting position faces very similar problems with a few a few differences, but has a relatively similar template for where they need to go, albeit at different speeds because of those problems. So, let's take the US for example. You would have to use the legacy US military power to start to control the physical economy again. I already described that. If you physically control choke points around the world, you physically control the supply of minerals and energy, you're in the position to tell people in financial markets what they should and shouldn't do. You know, so again, well-paid people on trading floors can scream at each other all they want. If one other person controls whether you do or don't eat that night, you will listen to them. It's incredibly rude truth and you know, red in tooth and claw as we say, but that's a reality. Equally, the fiscal deficit needs to be spent on the right things, not the wrong things. Yes, so you need to cut down on fraud, corruption, etc. etc. Spending on consumption, but you need to make sure that you invest in areas where the market won't do it or you need to lever the market into doing it, which Trump is doing. He's telling people you will invest here, here and here. For example, very controversially within Europe, the trade deal you've signed with the US but haven't ratified, not only imposes a tariff on on Europe, it also imposes I believe a 550 billion investment package going into Europe or 600 billion. Now, that is effectively a capital control. It's also coerced capital because instead of you exporting to the US, getting dollars and then buying US treasuries or stocks or whatever you want with them, which is how capitalism works, the US is telling you you will export to us. First of all, we're going to scoop 15% for the tariff, which we will invest where we want, largely in military supply chains. Secondly, that money you you've done earned from us, we are going to tell you where to invest it. We're going to dictate the return and it's going to be in building a bridge here, linking two strategic points. It's going to be invested in a factory making bullets there. It's going to be in a production facility to refine rare earths over there. Because the market will not do it itself. So, that's part of what's going to have to happen. On top of that, you have to have a Federal Reserve which understands this, that is part of that plan, which fights inflation because inflation is bad but understands that financialization is also bad rather than the good thing, which is what the Fed is for now. The Fed is all about financial markets, not the physical economy. They They don't have any experts on agriculture sitting around the Fed table. Experts on financial markets as if as if you can eat assets. You can't. And you need tariffs. You must have tariffs because you are dealing with an economy which has the lowest cost of production possible, continues to push it lower, and will ensure that you can never develop those supply chains to allow you to industrialize in the same way Germany didn't allow others to do it within Europe prior to the Eurozone crisis. In the same way that the British, when they ruled the waves, never allowed anyone else to industrialize because they had the gunships and they were cheaper than everyone else by controlling supply chains. China uses markets to achieve the same thing now. But if I put that to you in Europe, that would mean the ECB remit changing completely. That would mean a European-wide tariff. That would mean a change in energy policy to try and use as much domestic stuff first of all as possible alongside green cuz you must do green, too. That would mean a change in defense policy to restructure everything so you have one unified defense policy so you don't duplicate things across 27 different economies. That would mean one foreign policy, etc., etc. You can see how staggeringly difficult some of this is going to be to achieve. And so either Europe has to logically move together and say we move as one at one speed, or Europe has to coalesce into clusters where a large enough body of Europe's is six of us do this, the rest of you can come along, which is a fragmentation of Europe, or Europe fragments completely, or Europe says we'll go with America and America will effectively run the statecraft play for us and we are a very secondary fiddle to America and we don't really have sovereignty, but we work well within that system. And logically, I cannot see any other outcomes. I heard other conversations with you and so one of your points is that the American Trump administration's push towards, or I say supporting certain political parties in Europe, fits into the last category. Basically, ensuring that Europe is aligned. Because, you know, we have a different migration policy, whatever, in the American camp. Probably you want to make a comment on this, and then also, looking at the time, I would really like to understand how stable coins are part of this play as well. Sure. So, very quickly on the politics. We didn't talk about the electoral politics of it, and obviously that's a mess everywhere. It's very hard for democracies to get anyone to stick to a plan that will hurt for a while, and you have vested interests. And the worse our political and economic polarization becomes, the more the parties are elected who actually won't play along at all. And so, society starts to fragment, and we are seeing that in more and more democracies. So, the time is short for this to happen. The The sand in the hourglass is running out, I fear, everywhere. But, in terms of the American attitude, America obviously today is anti-European Union. Because they don't like pan-national structures. They're abundantly clear in their national security strategy. They basically want sovereignty to go back to the nation-state. It's a very Brexit-style attitude. That doesn't mean, of course, they then don't mind subsuming other economies under theirs. So, for example, if America takes Mexican and Canadian economic sovereignty in setting an external tariff, they don't have any problem with that. But, this is the realpolitik of it. I think America wouldn't have a problem with the European Commission if it was echoing every American policy. So, if you if if von der Leyen said, "Whatever you're doing, we love it." I think they'd find that's more efficient. Given that's very unlikely to happen, America again openly openly says in the national defense strategy that they will support NGOs and political parties in European countries who are more pro-American. Which, by the way, to be completely fair and transparent, Europe does with the Democrat Party, and Europe does in every other economy around the world where there is a pro-Europe or pro-markets or pro-rules-based order political backdrop or or or or group or NGO. They finance them in very, very lavishly. So, this is just how realpolitik is played. Europe isn't used to seeing itself as a country or a block where that is happening. It sees itself as someone that does it, rather than having it done to it. But, on on to stablecoins. These are a much overlooked and potentially pivotal part of the strategy, because effectively they are a revolution whereby the US is talking about creating private money, digital private money, very similar in kind to what we used to call sterling bills of exchange prior to World War when sterling was on gold, and arguably the most useful international trade currency at that time was not the British pound. It was a bill of exchange denominated in sterling, not issued by the British government, but by two third parties between each other internationally, around the world. So, that private money supported British power backed by gold. America is attempting to digitally create a stablecoin backed by T-bills, primarily. So, that two things can happen. First of all, individuals, largely in emerging markets, but potentially even in Europe, depending on where interest rates are set, can say, "I would like to hold American dollars functionally, even though they are not dollars, they are a digital token collateralized by a US T-bill. I want to hold them on an app on my phone, not in the bank where the taxman can't see it. Now, the Americans can see it. Ha, maybe they will or won't tax it, but the European taxman can't see it if it's outside the banking system. And I can still order things online. I can still do business on a network internationally and domestically, because everyone else will be on it, too, and no one can touch it. Now, is that is that tax evasion? Well, yeah, but it is, but it's no different in a way than saying I'm putting all my money into vouchers from a particular company. They become money monetized to a degree. And in emerging markets, the demand for them will be extraordinary, I believe. Because for all the question marks over the US and over the dollar, they're much much larger over the local currency, particularly with high taxation rates in many emerging markets. So, that would see a huge bid for T-bills, pushing down the cost of borrowing in America, helping them fund the Pentagon, helping them control physical supply chains, giving them real control of the real economy, and then financial markets flow back from there. So, that's one way it can happen. The other way, of course, is that they can pay people who are exporting to them. So, for example, Europe can say, "Right, we're going to send you, you know, 10,000 euro widgets. There you go." And America says, "We're not paying you in dollars. We're going to pay you in these stable coins." Now, they're not money. They're a token backed by a T-bill. You don't own the T-bill. The T-bill stays in America, in American hands. All you have is a digital certificate, effectively. It's on the blockchain. It's transparent. You can see who had it before you. You can see where it's going next. You can choose not to pay tax on it if you keep it outside the banking system, etc., etc. You can use it in an international network if, for example, Qatar, after this war is over, says, "We only want to be paid for LNG in stable coins." You've created a network for them immediately. That's how the eurodollar also works. But you are stuck with them. And America effectively still has a trade deficit with the rest of the world, but it doesn't build up its debts with the rest of the world. The T-bill exists, but the interest rate is low, and it's held domestically within the US. All the rest of the world has is a digital IOU. So, you actually break the balance sheet connection between the current account and the capital account by just creating something which isn't actually money. So, that's two ways that they can be used, and they are transformative if they are adopted at scale. And America has carrots to make that happen, and sticks, and I don't think anyone else can create an equivalent globally. Because you know, the Europeans won't be happy because you know, we discussed it and you already also read the FT for example, they say we have to keep more capital in Europe for European investment and you know, because you have the trade surplus, you also have a capital export as you know. So this discussion so Europe won't like it, but I have two questions as this regard. One point is are stable coins a risk to the banking system? Because if you know, in within the US for example, more people put money in the stable coins instead of the banks, the banks lose part of their business and this might have some people fear it might be destabilizing. And secondly, what does it mean to the global role of the US dollar? Okay. On the banking system, potentially yes, for the reason you did describe, potentially also of course if they are misused and as currencies or money type tokens can be, you know, if if bubbles occur in them. But in terms of the banking argument, that's why the the clarity bill as a subsidiary to the genius act hasn't passed yet to determine whether they can pay fees as opposed to a yield. That hasn't passed yet. Trump actually tweeted just the other day, the banks can't hold this up anymore because if this piece of legislation doesn't pass, I will let them just set fees anyway, at which point it's not in legislation, but I'll just let them do it. Now, my argument there is what are banks for? If we're asking what is what is GDP for, and I've asked what is the Fed for, what are central banks for, what are banks for? Well, we've already discussed, you said it, they should be for making new loans into productive capital. That doesn't happen in America. 80% of loans are for consumption or for buying existing assets. So were banks to have a problem, were you to see a banking crisis, were a political Fed to say, "Okay, there you go, we'll swallow you all up." What do you do if you use a much more hardcore way of dealing with banks than in the than in the past where instead of bailing everyone out one-to-one, you do what Sweden did in their crisis you know many decades ago and you say, "Okay, you're all wiped out. Here's base capital, start again. Oh, by the way, this bank only lends into the physical economy now. We don't lend for assets. We don't lend for consumption. We lend into the physical economy. It's a way to remake the entire banking sector rapidly. I'm not saying it is the case, but I'm saying don't rule out the fact that the crisis and the chaos is actually part of the solution in the same way that it could be with Hormuz that you change the banking sector by having to remove the ones that don't do anything useful. Now, in terms of the second part of the question, if this is done right and I'm not saying it will be. If it is, the US dollar's role in a different form, in a much more segmented form, in a much less free market form, even though it has more of a private sector component to it in terms of the stablecoin, I believe is is absolutely cemented for the next couple of decades if not the rest of the first half of this century. So, all the talk about it being on the way out and the euro being, you know, set to eclipse it, I think is nonsense. You know, the euro isn't going to go away. I'm not saying anything like that. But you you alluded a moment ago that Europe wants to keep money within it while it runs a trade surplus. How do you do that when the as you said the mirror of a trade surplus is a capital account outflow. So, already that's nonsensical. You just need to start working out what where where where are you investing money? What's the correct thing to be investing it in and what's not? It's you need to be moving away that from the traditional rigid neoliberal parameters that Europe was actually built on. Europe sees itself as being, you know, very socially liberal and it is, but it's also very neoliberal. And I'm not saying that's a good thing or a bad thing. I'm not making any value judgments. I am merely saying economic statecraft, if it is to be adopted and everyone else is adopting it, has to have much more freedom of action. Listening to you, I said, "Okay, I understand. I follow this. I understand this. I see the logic." Of course, we don't know how it's going to play out. We don't know how the war is going to end in Iran or whatsoever. But, coming down to the essence is we get into a new world. We have been in a world where for decades asset prices have gone up much faster than the size of the economies or relative to GDP asset prices have gone up. Listening to you, I just have one takeaway. Doesn't matter which asset I own, asset prices have to come down relative to GDP. Well, I think some do. They won't come down uniformly. And some things can still arguably outperform, but even there, I would agree with you in that people say to me, "Well, Michael, you're saying for example commodities are going to boom." And I will say, "Well, yes, but not too much." Because there is no sector in which you are allowed to make that much money. The whole point is you can't just sit there and say, "Well, I have X and no one else does. Therefore, I'm richer than than God or richer than Croesus." That's just not the way it's going to work. You have to maintain social stability. And to bring it back to brass tacks, within Europe, within America, within emerging markets, we don't really have a great deal of social stability now. I think we can agree that society is fragile and is showing different stresses in different ways. And if you were to say objectively, "What's society for?" And you would say, "Well, to push asset prices up so a certain percentage of the population get very rich and the rest don't." An alien looking down at you would say, "Oh, really? Have you not tried that for four and a half decades and it's failed spectacularly?" You'd say, "Yeah, but clearly what we need to do is more of it right now. But unfortunately, that seems to be the human condition. The as I said, it's very difficult to get people to understand something when their job or their income depends on them not understanding it. Michael, you're based in Singapore. Are you based in Singapore because you think it's the best place to be placed in such a world? I'm based in Singapore cuz it's a fantastic place. I didn't choose to move here ahead of any particular policy. Singapore is a country obviously with very limited natural resources, and as a result has always played the economic statecraft game exceedingly well. I believe it will continue to do so. Obviously, it's going to face challenges as everyone else is, and moving from an a period of globalization which suited it very well to one of much more realpolitik will it require some pivots, but in the past it's done very well in that environment, and I think as I said, it will continue to do so. And I hope I hope everyone can do. That's a message I want to get across here. I'm not keeping this It's not a formula I don't share with people. It's a drum I've been banging to try and warn people. I said it the day Trump was reelected, this is what it will mean. And, you know, people found it interesting, but patted me on the head as if it was a rather wild exaggeration. 2025 then proved me right, and I said for 2026, this year will say to 2025 and panic over tariffs, hold my beer. Because this is when it gets real. Now, wait for the stable coins to to happen in the next couple of months, and you are right, it will be transformative. And those who understand it, either as individuals with their own, you know, their own businesses, their own lives, their own portfolios, or countries who understand how they need to find new models and and new systems, they will be the ones best placed, and I wish everyone well. I hope so as well, Michael. I think you very much for your time as well. It was very broad discussion, and I can just tell you I would be very happy and glad if you could sometimes talk in the future again maybe with new developments, but for today thank you very much. It was really interesting. You're very welcome. 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