Rabbit Season, Duck Season

0:00Hello listeners, welcome to the podcast. Hello listeners, welcome to another episode of the Jacob Shapiro podcast. Joining me today is Michael. Every Michael is a senior macro strategist at Rabobank. I've had a lot of requests to reach out to him, to talk to him. He and I were actually reflecting on this after we stopped recording. It's funny when you're in our business, I, in Marco and I have talked about this a lot too. I'm not to read other geostrategists because I find that it affects the way I think about the world and I want my thinking to be as original as it can be. I very rarely let myself indulge in conversations with other strategists. But so Michael and I were on other sides of a disagreement about Canada on X and there was some groundswell of there should be a conversation or maybe we'll even have him on cousins. But I reached out and he was willing to come on. Thanks Michael for making the time. This was recorded past 8 p.m. New Orleans time on Labor Day.

1:03I'm actually still feeling pretty good. So it was a great conversation. But just so you know, I was in the more relaxed phase of my of my brain than the usual coffee hyped version that you get when I'm recording in the morning. So Michael, thanks for coming on. Listeners, I hope you enjoy what reason disagreement about major things in the world look like. I also hope that you don't listen to this and try and figure out what is what are Jacob's political leanings or Michael's political leanings. We are two analysts who are trying to figure out how the world works and any sort of ideology that you're bringing to this conversation you're bringing yourself. It's not here in the conversation. If you have any questions, comments, concerns about anything you heard in the podcast. It's Jacob at JacobShipiro.com. Otherwise take care of the people that you love. Cheers and see you out there. Michael, it's really good to talk to you. It's Labor Day here in the United States. I assume it's just another I think you're in remind me where you are at Thailand. Am I getting it right?

2:03I'm speaking to you from Thailand right now, but I spend my time between Thailand and Singapore. That's a pretty good gig. How do I get back here? I'd rather spend my time between Thailand and Singapore. You spend a little time in air, pull it center around the world at the same time, trust me. And it's been a very long and winding journey to get there. Yeah, I'm sure. Well, listen, I thought we diverted in. I was listening to, I've been listening to you all day. I had your voice in my ears at the gym today when I was lifting and I was trying to prepare this podcast. And I don't know if you, if you, I was struck by every single interview that I listened to you at. And also I was listening to you at like 1.7 speed. So it's nice to talk to you in just 1.0 speed. But basically like every interviewer asked you to give your grand unified field theory of geopolitics and everything that's going on in the world. And I think I want to zag. I think we will get to that in the course of our conversation. I actually want to drive right at what got us on a call together, which is you were tweeting at Andrew Neal about how he was missing the geostrategic forest for the economic trees when we were talking about the US and Canada breakdown and negotiations between

3:07the two sides on tariffs. And I went at you and said, well, does it really matter what the geostrategic forest is if the actual tactics of chopping down the trees are so blindfully incompetent that like you're not even going to get any trees cut down like why are we talking about A versus B. And what seems to me to suffuse most of your thoughts so far and I'm almost jealous of it is you seem to think there is no chaos. You seem to think there is a plan that there's like for instance, that's got best has plan B and plan C. And maybe I just don't see it. I just don't see it, Michael. I see chaos. I see tweets about the moon belongs to America. I see every single possible trolling mechanism that you can throw out there. And I see fundamentally policies that are going to be ineffective. So my guess is that we are going to end in the sense that we see the world very similarly, but that you are still trying to bring reason to an administration that I think has no reason that has a logic of its own and which therefore will be buffeted by all the things that we're going to agree about anyway. But why don't we just start with Canada because I think it's a really operative place to get at this disagreement because I think I get what you're talking about with Fort

4:10Trist North America and US economic statecraft and I'm going to let you talk about all of that. But does any of it really matter if you have so pissed off the Canadians that they have discovered economic statecraft? Because this is not a one way street. If you want to do economic statecraft, others will do economic statecraft to you. And arguably there's an asymmetric vulnerability that Canada can push on when it's dealing with the United States. So that's my opening salvo and I can't wait to see where you take it from there. Sure. Well, first of all, great to be speaking to you. I obviously been listening to you too, although I wasn't lifting weights and I was doing it. So I'm, I hope that wasn't at a cold fury while you listening to it. I reached that point in my life where it's like I'm supposed to eat more protein and I'm trying to make sure that when my daughter is bringing homeboy friends, they're a little bit intimidated, just a little. So I know I got to start that path now. I'm with you every step of the way. Anyway. Let's just start with me saying I, yesterday, so your Labor Day might, you know, my day here,

5:16but has certainly been one of those, one of those testing ones when you look at the sheer variety of tweets coming out of the White House. The one that actually caught my eye, I don't know if you noticed, is Trump tweeting new Space Force uniforms, which he claims were inspired by Starship Troopers, which were of course inspired by the Third Reich. And it's like, I mean, they're pretty snazzy uniforms, but I was getting a deep essence of Grand Moth Tarkin, which is always slightly, slightly disconcerting when you're, when you're looking at that kind of thing. Anyway, it was basically copy and paste, Michael, like anybody who's seen Star Wars knows that this is, I mean, this is what Andor was all about. This is why Andor is the best TV show on television last 10 years. Anyway, yes, go on. Yeah. So anyway, that, that, I'm not denying from the moment that there aren't things thrown on a daily basis that lead one to react the way that you are reacting. I get that. But let's start with Canada before we, as you said, expand it out. I fully understand, again, that you and one in general can try and differentiate between

6:21strategy and the tactics. And I don't necessarily think that all the right tactics have been used from the US side. I'm not in any way trying to say everything that everyone's done, particularly Trump, you know, is the best possible way forward at any time. That's, I'm not a Trump splainer like that or a justifyer. The way that I invert it, however, is not to therefore try and look away from that at all. It's to focus more on the Canadian side, which is to say, well, Canada itself, as far as I'm concerned, from this same, you know, grand strategy perspective, which of course, you're completely, completely conversant with, is unable to recognize that the, even though it says it is, that the world around it has changed so dramatically, not just in terms of what America is doing, but in terms of what China has been doing before America, which is largely prompted what America is doing, what you're seeing, even in Europe, what you're seeing in Australia, what's seeing in the UK, at the margins, what you are seeing in every Western liberal democracy, and also in other economies, which are not Western

7:22and not liberal and not democracies, which is the return of neo-mechanicalism, as you said, economic statecraft, et cetera, et cetera. In that environment, the only logical and all-American response strategically is to work together, more closely, and yet Canada, and I'm not trying to be anti-Canadian or bash anyone or be party political, but I think very objectively, if you look at the actions taken within that strategic framework, Canada is on the complete opposite of almost every single turn. Now, the irony is, as you correctly point to, with Trump absolutely goading them and basically saying that you're going to be folded under the US umbrella, whether you like it or not, and I'd like to unpack that again more in a moment separately. They are now saying, okay, fine, we can do economic statecraft, but the lack of realism on their side, thinking that they can do economic statecraft to match someone who can do it much more aggressively at 13 times a scale, which is a non-linear process in terms of the economies of scale after that, south of the border.

8:25It is just, well, I don't know any other geostrategists, and I'm not trying to say, I'm not trying to pigeonhole your view. I don't know any geostrategists who take that seriously. In all seriousness, because if you look at that glide path, the more that Canada rattles its sabers, for example, the headline that went through a few hours ago, you've probably seen the start to defense talks with China again. Now, okay, that's perfunctory. The US has defense talks with China. Other countries do. That's purely a bureaucratic step. It doesn't mean anything. The symbolism is huge, absolutely huge, and it won't be lost on America. But without getting into fantasy scenarios or the kind of, you know, clickbait headlines and stuff that some love, I'm not going there. One of my working methodologies is to always take a dot and say, well, okay, is that two dots, yeah, okay, is it three dots? Yeah, let's exponentially project that, project that forward and not break the trend that

9:25I see. Now, it doesn't mean that is going to be the trend, because you get aberrations away from a trend always. But let's just continue that and see if it goes exponential. Where would that take you? Where would it take Canada if it goes into a defense relationship with China, which I'm not saying it will. I think the complete opposite is true. How does it stay in NATO? How does it kiss up to Europe? And this Europe is run by Germany, run by the AFD, which is pro Beijing, which we've you know, just seen recently. It can't happen. And if it were to happen, then the consequences of having a heavily militarized and increasingly, you know, aggressive US south of the border looking at that, you know, the geopolitical comparisons one can draw across geographies to other continents should be fairly clear. And so I don't see these are realistic strategies in terms of an end goal. And if they're not, why waste time trying to go there? Why not just accept that the fundamental concept that you can't have free trade and complete ability to do whatever you want in terms of FDI and trade and be deeply, deeply integrated

10:29without tariffs into an economy, which is trying to disentangle itself from others to national security reasons. That's just logically inculherent. Now, you could then argue about, okay, so what does the structure look like within in which the decisions are made on an external tariff? Then you're into EU territory, which ironically again, Canada is talking about embracing. They're saying, well, we want to look at the EU. Let's imagine Canada can join the EU, not just the Eurovision Song Contest, which they've now joined, which is probably not. No, no, no, that's probably not as far as you're going to get. I mean, that's a big win for Canada, right? Well, I don't know. I think that's the most realistic path for them, China, whatever. But for most of Canada's history, it was controlled or at least had a close association with a country in Europe. It defined itself an opposition to the United States as not being, I mean, I don't want to be too glib. But the American Revolution didn't come to Canada. The United States tried to bring it to Canada and Canada said, no, we're still going to stick with the British and stuck with it. So I don't, I think it's a real impulse in their strategic background. Okay.

11:30Let's tie that in with what we were just saying, because it all flows beautifully. So first of all, specifically, and legally, they can't join the European Union because the European Union's charter says you have to be in Europe. So that's pretty, pretty precise. And let's Canada is going to say, well, we speak English and French and that makes us European. I don't think any European creative interpretation of that, particularly at a moment when Europe itself is in turmoil with the German election result we've just seen with the French presidential election coming up with, you know, real structural stresses and strains right the way across the entire institutional architecture that they're going to say, right, let's reopen what we agreed back in the 1940s to allow others in as we're also looking at letting in Ukraine, Montenegro, Armenia, Georgia, which will put a staggers drawn with Russia. So this is, you know, again, I think it's a bridge too far. But even if Canada were able to do that, let's just stick in the hypothetical sphere immediately,

12:31you would find itself being told by Brussels, here are the trade relations you can have and here the ones you can't have. You have a common external tariff set by us and you cannot do any deal whatsoever that goes beyond this line. There's no sovereignty in that. No one in Europe has trade sovereignty, nobody. And increasingly they're moving away from losing FDI sovereignty. Brussels is trying to move towards saying for geostrategic reasons, we don't want these investments to happen. Now, that hasn't been achieved yet, but that's the direction of travel. So even if Canada were to affect that pivot, you just change one boss south of the border for another one over an ocean and which one do you think is actually going to understand your needs better. No, you can say that's up for the toss, right? But at least one's in your time zone. But the point you made about the Canadian history is a very, very good one. And it really speaks to the point I'm making here and it's really awkward and particularly for Canadians and I'm not trying to have a go at Canada at all. It's a universal point I'm making, but we're just using Canada as an example. Canada didn't even have proper sovereignty per se until the 1980s if you look at it constitutionally.

13:35It existed originally, as you said, the revolution didn't come because it was part of the British Empire. So it had the British military supporting it against America in the early days, right? Then post-World War II, normally it's still constitutionally very much within the British sphere in terms of what it could or couldn't decide and culturally was still very British at that point. But it's under the US slash NATO defensive umbrella at which point it couldn't have kissed up to Russia or the Soviet Union if it wanted to. It couldn't have said, right, let's make a deal with Mao. It wasn't able to do that. It had no freedom to do that. Only in the 1980s does it actually get proper sovereignty kind of released to it by the UK. A few years later the Cold War ends and then we have this lovely little bubble for our generation, which is, you know, as you know, what I think has already ended, but some people are having difficulty accepting and I get why this lovely bubble in which every country large or small could say, hey, we've got, you know, globalization, complete market-based

14:38independence to do whatever we want everywhere. And we will do whatever we want. We will strike deals with anyone wherever to our own advantage. Well, that's gone. And if you're in a world in which you no longer have the British Empire protecting you, which you don't, you don't have any international magical rule of law protecting you, which Mark Carney agrees doesn't exist. And you've got a massively militarized neo-mechanthalist south of the border saying, you know, you can come in and be a member of a winning team overall, but you know, you're just going to be on there. You're getting a back seat, but it's a luxury vehicle, or you can pretend you're still driving, but we'll just drive over you or we'll cut you out of the loop. And you know economically how catastrophic that would be for Canada. It would hurt the US. It would be a calamity for Canada. How in any way is that genuinely a situation in which you can say we can explore sovereignty? If your only other option is Europe and lose it there for Europe itself, which is unwankily to offer it and is struggling versus the US in the same way.

15:40And ironically Europe may end up pivoting back to America, so Canada would be brought back to America's front door kind of like in a new guy's. Or you look at Russia, well that's not going to happen obviously. Or you look at China at which point you open potential doors in history, which people I think would not want to open. So if those are the genuine, you know, dot projections going forward, then while I agree with you completely, completely way or on the same page that the tactics may be wrong, that's on both sides and both need to be looking at the strategy and understanding this is silly until we see where this leads. Yeah, so this is a really interesting place to start. The first I have a couple of things I want to some push back on, but it's interesting where I feel like I'm riffing with you and disagreeing with you at the same time. We'll pull them apart. Very jazz. The thing you said about any geostrategist would say that what they're doing is unrealistic. Maybe I think what actually strikes me and this is why and please listen or some of you

16:43are going after me saying that I support Karni, I don't have a dog in this fight. I'm not Canadian. I'm just trying to figure things out to the extent I have a dog in the fight. It's trying to get a sense of reality. But you have to admire the man because like as a geostrategist myself, I would put this on the table as a fairly out there option, but there would be a lot of risk and a lot of pain. And I wouldn't expect the guy whose seat is going to be on the fire in elections to go with it. And he's saying, no, screw the constraints. I think this is the path forward and I'm going to give it a whirl against the constraints. So I don't think it's completely unrealistic. I certainly think it is the much harder path. And to the last point that you said, yeah, sovereignty is hard. The acquisition of sovereignty sucks. It's sucked for the Americans when they start. It sucks for every single nation that claws its existence out of the international system. I'm sure if we had been podcasting in 1774, there's no way that George Washington and

17:44these idiots, no geostrategists are going to tell them they can do this. They have to make a deal with the British or maybe they can bounce the French off of them. It's a very hard thing that they're trying to do. And for me, it goes, it really predates Trump because I think it's, well, it doesn't predate Trump. It's a perfect to the first Trump administration. And it goes back to the way that the US was so heavy handed. Now we're all talking about AI. Does anybody remember 5G? Does anybody remember Huawei? Does anybody remember the Americans going to the Canadians and say arrest their CFO? And we don't really, yes, dress it up in the rule of law. But we want you to arrest the CFO because we've got a problem with Huawei because from market economic perspective, they're better than us and we need to cut them down to side. And the Canadian said, okay, sure, assuming that when they needed help with the two Michaels or when they needed help with Chinese tariffs against Canada and retaliation, that the United States would be there. And the United States said, eh, like you're kind of on your own. Thanks for delivering the CFO. Like we're going to go off and do our own thing. And I think that's the point at which this starts to infect the Canadian psyche where

18:45it's, do we really have any friendship here? What is this alliance worth if they're not going to sort of speak up for us? I also think when you're thinking about the realism of this and you said this also in sort of the last bit of your comment, is this realistic for Canada? I think it's realistic. It's going to be very hard and it's all going to come down to how much pain can they take and how long can Carnegie maintain the levels of support that he has right now while they incur that pain? I would guess that he's looking at the table and saying, you know what? I think I can deal with that pain and the Canadians will deal with that pain longer than the border states will keep Republicans in office at this point because yes, you are right. This is going to be far worse from Canada's economy from just an overall numbers point of view. If we were aliens coming to the earth and trying to figure out who's going to win this trade war, we was, of course, the United States is going to win this trade war. But if you get, you know, the Republicans losing seats in the Senate because they've lost Michigan and they've lost Alaska and they've lost Maine because, you know, the Trump administration

19:45is going after the Canadians and building up nationalism on one side while destroying state economies. Even if it's not the U.S. national economy because of all the damage that they're doing, okay, well, what's unrealistic? You would have said it's also unrealistic for a U.S. president to do this going into the midterms when President Trump is under as much pressure as he's under with all the energy problems that are there. So there's sort of an unrealism on both sides. And then the last thing that I would ask you to maybe opine about is I've been trying to poke around and figure out because there's a lot of reporting in the media. Did Lutnik come in at the last second and throw over the table and blah, blah, blah. But it does seem to me that this comes down to two major issues. Number one, that the Canadians were basically looking for some form of guarantees. If we do this, okay, we know what we're dealing with. We have a deal going forward. We can trust in your word at this point and that the American response was some version of, hey, we're going to move this around as we like, which wasn't very comfortable for a Canada that was already in this position. And yes, like, it has to be part of this broader framework that they actually have some

20:48say in because if they're not going to have any say in it, okay, like let's take all the Canadian pension fund money. Let's take all the Canadian FDI. Let's take all of it and let's make Canada an actual sovereign nation. And they don't have to join the EU. They can negotiate their own special deal with the EU. You'll like some of our things. We like some of your things. We'll call it the special Canadian EU relationship. We'll declare that some island between us is part of Canada Europe. I don't know. Like, I'm sure they can have some legal fiction that allows them to do something here. So anyway, like respond to any of that or all of it, however you want. Okay. I'm really enjoying this to be clear. This reminds me of one of my favorite ever cartoons. The one with rabbit season duck season, rabbit season duck season. And so I don't know which one I am. But now let's rip off the poster and it's a different season underneath. So again, while I agree with most of what you're saying, when you look at another layer up, let's take it specifically in terms of the pain. I'm just putting something together in the background underlining that the last time Canada was in a geostrategic environment that was this threatening.

21:51And I'm seeing how they now see it. Not just an expansionary Russia through the Arctic where they have nothing to protect it whatsoever. Not just China working with Russia through that region to really give Russia the muscle that they wouldn't otherwise have. Not just the US below them, but you know, an unstable world in general. If you look at what Canada is now talking about spending on GDP, having done absolute least nothing for a generation and then thinking like every good former central bank governor does that just because you say, well, 1% is going to move toward 2% that therefore this means something that it looks better on an Excel chart. The actual physical capabilities are the square root of nothing or the exponential of nothing. Okay. It's there's nothing there. If Canada actually wants to be able to say, right, we can seriously threaten the US. If they're going to come in, we can make it painful for them. If Russia is going to come in with, you know, with or without China at any point, we can make it painful for them. So we don't lose territory, slice by slice, etc.

22:52You are realistically talking about 5% to 6% of GDP on defense. That is absolutely unaffordable because even if they had the money to do it, which they don't, now they have low government debt, but that will involve massive borrowing for years, which will push up interest rates at a time when the housing markets already incrisis, etc, etc. I think if they did do that, what supply chain, so they're going to get this, this military equipment from, not from the US. They can't buy any US care and they'll be, you know, they'll be aged out of NATO. Will you say, okay, we'll get it from Europe? Well Europe hasn't got any. Are you going to buy, are they going to buy Russian gear? Are they going to buy Chinese? No, again, if you completely change geopolitical set, then you can have floods of cheaper weapons if you're suddenly going to go to your position direction. It takes, I feel like there are armed dealers in Sweden, France. Not Turkey and South Korea, who like work. Not anywhere near the scale of what you need if you're going to make a serious credible sovereignty statement, rather than, you know, we can march up and down and look at a little

23:52bit tougher. If you're going to be more like an North American Israel, but a massive scale and say, you know, we are able to do our own thing regardless, or the way that the Swiss used to be historically, you know, with a mounting climate, fitting a bit more, that's a massive permanent change in political economy and in the economy, into supply chains that don't exist. And at the same time, while that may save Canadian industry, which otherwise would be destroyed by losing the US market, which would leave it purely as an exporter of natural resources, which is not a developed economy in any way, shape or form in the long run. And I've made that point about many other countries. You know, you can't say we're Western with a Western standard of living, with an economy that looks like, you know, Sub-Saharan Africa, you actually genuinely need to have a diversified economy. At the same time, that permanently changes them. As I said, to some kind of like, Hermit Kingdom or Hermit Republic, you know, or Hermit Monarchy, trying to do that. Because if they think with the other route is we will work with Europe, as you said, do

24:56you really think? And again, speaking of someone in European politics reasonably well, that the French are going to say, great, let's have Canadian industrial goods. Let's buy French planes. We don't have too many of them already from Airbus, you know. Let's have Canadian defence equipment coming into Germany rather than German companies. When the nitty gritty of those trade negotiations, the negotiations come up, Canada will think America is actually the good guy. They are savage technocrats. And they are brilliant at it. Once you get into that, you know, let the technocrats decide what to do. America, going back to the point you raised about who is really responsible, it's entirely possible that Latinics stumbled in there like a clutz and, you know, and overturned the table. I wouldn't rule it out. I absolutely would not rule out that it's being done for Canadian domestic political reasons too, because Kani is extremely cynical as all good politicians are. And he had no chance whatsoever of becoming prime minister in all the polls until Trump started, as you said, you know, changing the tactics. The question then that becomes on the counterfactual, would a Canadian conservative, if they'd run and won instead of Kani, have been able to compromise in the same way that ultimately

25:59whichever Canadian leader has to do a deal with America and American terms, if that is the outcome, if that is, will they be able to sell it? And maybe Trump thought it's easier to get a, you know, a liberal to do that than it is to get a nationalist or a conservative. I don't know. But when I look at every report coming from the Canadian side, from the US side, from the US Democrat side, from the US Republican side, from the international side, I think they're probably all true. But I do genuinely think, and this is true again, Canada as an example of the world, that says a lot about how we see the world, which one of those narratives then gets amplified by us. So when I see someone take one and say, it was Lutnik, 100%, it's like, okay, but that does imply to me that you tend to see the world that way. And if you see someone say it was purely Kani and being cynical, okay, then you see the world that way. You know, it's always a combination of all of them. Yeah, you know, I, you don't have to be no stradamus to think that both can be true at the same time. Sure, I'm absolutely agree with you that Kani is cynical and was waiting for an opening

27:03and was probably looking at his watch, saying, any moment now Lutnik is going to do, like, I'm just waiting for the Lutnik thing to happen. But he kept the door a job for him. You know, like, just leave the door open so he can force his way in, yeah? Exactly. But there's something in what you said that allows us to start to broaden out because I find myself agreeing with most of what you said, but I think there's a assumption that is in there that I would push back against, which is that the Canadians need to worry about the Russians and that the Russians are going to come across Canadian real estate with the support of the Chinese and take what they want out of Canada. I don't know. That's basically I'm not making that as a forecast. I'm taking a long run, you know, if you're a military plan, what do you look at, right? But if you're a military, if you're a military planner and you're thinking about who is the bigger threat, is it that option or is it the United States and its current level of political flux that you can't predict where it's going to go from here? Because I think it's actually the latter. When you look at how geopolitics works, often yes, you would much rather have somebody tell you what to do who is in ocean away than somebody who is right on your board or telling

28:07you what to do. That's why the only reason the British gave up the Canadians because they could no longer support them after 1940 because they had bigger problems. And that's when the United States slides right in and basically assumes imperial control over Canada without calling it a such. And a lot of this is the President Trump is willing to call a spade a spade. The problem is it was a pleasant fiction. If you just keep up the fiction, then you get cheap Canadian energy and they don't build infrastructure anywhere else. And you get whatever you want out of them by by ruining the fiction, by saying you must do what I say and you must be the 51st state and you don't get all of these things unless you bow and kiss the ring and humiliate them. Well, then of course the Canadians are going to find themselves and say, okay, like fine, we're going to do this. The time that I have spent in Canada, this is anecdotal, but I've been in Canada a couple times over the course of this year. I have been shocked at the level of support from Carney from folks that I would not have suspected to support Carney. And it's all because for all of his, you know, inadequacies, when the bully came to punch

29:11him on the nose, he was cynical and brave enough to say, okay, I'll punch you back. But to your point, it's going to suck for the Canadians if they follow through on what he's talking about. It's going to be terrible. It's going to be years of economic pain and maybe they can't even do it. Maybe they end up in exactly the same place because the pain is too hard and it's not even about how many years you have to deal with it. Maybe it's just a physical impossibility because of the geography. But he's willing to take the punch and say, okay, I'm not going to humiliate myself. I mean, to go back to the Davos speech. It was, okay, like I'm taking the sign out of the window. Now I've been very cynical about him because he seems to put the sign back every once in a while when it suits him. Then he takes it back down when he gets pissed off again. So I'm not saying the man is perfect, but there is something, he has some kind of political currency there that I don't think the United States is recognizing and that, I mean, it's just so shortsight. Anyway, I ran but a lot. And the assumption I wanted to ask you about is the Russia assumption because it seems that the US is a far bigger threat than whatever the Russians are going to do with the Chinese going through the tundra. Like, good luck to them. I'd like to see them try.

30:12Well, I wouldn't push back on that too hard near term. Absolutely. But you're supposed to be, if you're taking a sovereign-tist approach and genuinely thinking about national security, then you have to look at both of them longer term, any genuine strategic plan or would. So if you address both of them by focusing south, first of all, that's absolutely fine. I just want to just, for one moment, rip off another rabbit, seasoned duck season she and just go back to one other point that you raised a moment ago saying about Kani, well, first of all, you said the end of the Kani is willing to stand up. He's willing to show that he's standing up. Like any good central banker, he can say one thing and mean another, right? So we'll see. And no one knows where that will go. But I do agree with you. And I can understand the popularity. Trust me. But when you said, OK, it's also going to be a thing that will hurt the US politically or the Republicans, et cetera, et cetera. I absolutely see that dynamic too. And I can see that short term tactic. And the midterms, I think, will be telling. OK, they are important. Let's never overlook that. But you have to also, then, as I said, rip off another sheet and see with rabbit duck,

31:12rabbit duck, until you get to Elmer season at the back of it by, and then both turn to look at Elmer, which is a superseding US dynamic, which is regardless of that pain between Republican Democrat, the national security organs within the US, independently, will never allow Canada to be conduit for Chinese goods into the US if that's the only way you can rebuild military industrial supply chains. If you start with the presumption, you have to re-industrialize the US to better build aircraft carriers, et cetera, et cetera, et cetera. Even if some of them are now going to be built in South Korea or Japan and kind of like grandfathered in as America, et cetera, et cetera. But if you're going to go that route, logically Mexico can't be conduit, logically the EU can't be conduit, logically the UK can't be conduit, twice as logically Canada cannot be conduit. So that's an absolute given. So while you can have that, OK, I'm getting two fingers cut off my left hand, that really hurts me from the US perspective,

32:14but you lose an arm and a leg from the Canadian perspective, which is far worse. If push comes to shove, and I hope it doesn't, to be abundantly clear, you know, I hope that comes through very, very strongly in everything I'm saying. I still think that the overriding US national security perspective is that, well, we'll lose those two fingers if necessary, if that's what it takes to make sure that the rest of the body politic, you know, and the military industrial complex is strong. And I don't think Canada is fully grasped that, because if everyone does what said, refocus on that, then I think you are correct. The US needs to pivot to make sure that the narrative and the polite fiction can somehow be returned. And I think that can be done in one meeting in a handshake and a talk about collaborative partnership and, you know, brothers in arms and World War II, et cetera, et cetera. And all those good feelings can come back. But just to wonder, one more time, because then we can expand whenever we want to go. We spend a long time on Canada, even though it is a big country. But if you join forward those dots and project them out, as I said,

33:18on one level, you know, we are talking about, you know, this home monarchy, which is pretty worrying. And on the other, you know, some conversations I've heard muttered to me, and you may have heard similar, which is, you know, well, we have a lot of guns in Canada. So if America came over the border, you know, we could resist from the hills and stuff. And it's like, are we really seriously contemplating a future as Afghanistan? Like, I mean, this is an example of like, when you project forward, is this what a grand strategy is? We can be Afghanistan or we can be, you know, sovereignty free in the EU on the other side of the world and hope that structure heads together or we can try and balance between the superpowers and think we won't be Finlandized by one or all of them. This is the highest stakes game possible, as you would agree. It happens absolutely is. And it needs to be played incredibly carefully by all sides. Yeah. And I don't know that it's been, being played carefully by either side. I agree. I agree. I completely agree.

34:21I think we are in agreement on a lot of things here. Yeah. One of the things that has been, one of the rejoinders, I think to my argument is, and this is from a, I think it's a UGov poll, I forget the exact poll, but maybe it was Gallup. It was the 38% of Republicans now have a negative opinion of Canada since all of this started. I was shocked by that number, because that's still relatively low. And you think about the broader electorate. It's still most Americans like Canadians. But now that needle is starting to move. You go back to 2014, 2015, for example, most young Americans had a positive view of China. And now they have a negative view of China. And I think most people like to think that they are immune to top down information flow and what the narrative is up top. But it's strange when you start to see how that narrative builds up. And if Trump really can capture the base and turn them into Canada, then there's something really wrong with my view. I think there was something what you said that allows us to start to zoom out, which is economic statecraft in general, because I don't think the United States is engaging in economic statecraft. I wish it was engaging in economic statecraft.

35:21I can make a wonderful argument for it. I don't see that. I see Willie Nile tariffs and I see kind of a Connecticut Yankee and King Arthur's court sort of approach to how things decisions are actually made at the top. And it doesn't look like the left hand knows what the right hand is doing. In this sense, Besson doesn't know what Navarro is doing and Navarro doesn't know what Lutnik is doing and they're all playing each other off of each other. And you mentioned to other countries that I think are worth bringing up here, which is Japan and South Korea. Japan has not gotten the same headlines because Japan is not border the United States. But the talk at each government is saying exactly the same things that the Karni government is saying, which is, okay, Japanese pension funds, time to repatriate capital, time to bring things back to Japan. We're going to make Japan powerful again. And yes, we're going to do what we need to do to get Besson to help us with the Yan and this, that and the other thing. But the writing is on the wall for us. We understand we need to defend ourselves fine. We will start selling US treasuries. We will start thinking about alternative ways to fund this here. South Korea, sure, totally on board. And then we went and said to them, hey, like you didn't help with denuclearization in the straight-up war moves.

36:22I think we're going to have a nice little summit with Kim Jong-un, maybe, and we're going to reduce some of our military exercises with you. South Koreans are way too polite and full of protocol to say this. My rejoinder would have been, hey, when you work on denuclearization of the Korean peninsula, we will work with you on denuclearization of the straight-up war moves. What's up? We got actual nukes right across the border. Are you going to do anything for us here? You haven't done anything. And to your point about things like ships, like the basic things you need to actually say, win a war against Iran, which the United States is not doing when you look at the objectives, we were going to rely on the South Koreans and the Japanese to build some of those ships because we don't build those ships in the United States right now. I have talked to folks in this industry who say, it would be, take a fraction of what the United States has spent on this war in Iran to actually build ships in America again and get some laws that incentivize people to build ships in America again. Okay, we can do it. But until you've got the laws through, and until you're actually going to put some incentives on doing these things, what are you talking about? You're not serious. You're going to pretend a South Korean ship is an American ship.

37:22What a joke. And when you're talking about trans shipment of goods, I mean, Vietnam is basically a front for China. India, all these other countries that we're importing from that folks are moving from. I mean, if we really want to get real, if you look in the second, interciary, and different orders of the supply chain, it's all coming from China. If you don't take things from China, you're not going to make things. If you are going to make things, they're going to be incredibly costly. So how do you, yeah, so help me understand the economic state craft, because I don't see it. Economic state craft, to me, would be tariffs plus operation warp speed for US manufacturing. Instead, what we have is tariffs, and the US government is going to buy some steaks and some companies, and we're going to kidnap some dictators to get some oil that we don't really need. And Scott Besson is going to do whatever jaw-burning he needs to do, to think he's going to prop up the market and win against the market, which is not going to work. Tell me where I'm wrong. Okay. So that was a drone swall of points. So I would attempt to try and deal with them intercepted by interceptor. So just give me a couple of minutes. Of course. So obviously I'm going to take the other position,

38:23because I think if you look at where the US is now, right now, with all the chaos, with all the, you know, space force uniform tweets, and where it was 15 years ago, that's not even even 10, no longer captures it, because that was, you know, 2016. So back in the mid 2010s, or the early, sorry, the early 2010s, it's night and day in many, many, many respects. If you look at a bigger picture transformation, when Trump was reelected, I put out a big piece at the time saying the world is now going to move back to something called economic state craft, which frankly at the moment, no one but a few dry academics that I read talks about. And everyone is going to use, understand the word neo-mechanthalist again, which again, only a few pockets of the discipline of economics understand at the moment, because they don't read their own history, etc., etc. And I said, and I am packed, point by point, I'm happy, I'll happily share it with you, that we are going to see this all unfold.

39:23And I said, it will even include the fact that, for example, infrastructure can be a, you know, a key area of state craft, and China has its belt and road initiative, and the country of Panama only exists, because the US broke it away from Colombia in the past, in order to get controlled, de facto, of the Panama Canal, which is key infrastructure, expect that one to be back in the headlines, and similarly, that was even before Trump took office again. And of course, that's now kicked out China from both ends, or a Hong Kong company from both ends of the poor infrastructure, right? That the canal infrastructure. So what I tried to do is say, look, let's look at historical examples of where economic state craft has been applied. Let's look at what, does it have an overriding principle? Because the US economic state craft used to be, you know, we run the world under a rules-based market system. The more of that, that happens, the more that everyone will be more like us. So China will become like us. Everyone will become like us. We open up our market to everyone else's goods. They become dependent on us, and at the same time, they become more like us, and we all live in peace forever.

40:25So that was the post-World War II post-Cold War at least, because they only changed after the Cold War, iteration of US grand strategy. And I said, that doesn't cut it anymore. Economic state craft will have to be far more protectionist. And I was predicting it years before, by the way. Far more protectionist, far more neo-mechanterist, far more about making things again, which I can hear your sympathetic to, and I think many Americans are, etc., etc. But I did make clear that when you've had decades worth of institutional architecture built, not to allow that to happen. When you have an army of experts and bureaucrats who run dozens and dozens and dozens of little pockets of resistance to these ideas, all of whom are, you know, commander-in-chief of their own little fiefdom, which get to decide with a one particular cog in the giant machine, moves or doesn't, it's going to be very hard to achieve. Now, that's absolutely what we see. It's difficult to get there, particularly on a very rapid timetable. This is not a dictatorship, but whatever anyone says about America,

41:26is still a very democratic country with distributed power, rather than completely centralized. But I did put out a thesis and I said, it's very clear what's going to be the case. The dollar itself is overextended, if you look at it. It's everywhere all around the world is the global currency, which gives America great power, but the quid pro quo of that is a huge trade deficit. That huge trade deficit means that it can't produce enough military industrial goods and civilian ones, which are dual use, to build aircraft carriers at speed, to build interceptors at speed, to build F-35s at speed, etc. Which means that people who are more about production and not financialisation will eventually see we're on the up, they're on the down, therefore the global order will collapse. And I was predicting this a long, long time ago. But I said to move away from that, America has to reverse it, and that will blankly involve tariffs. But there will be experimentation, because America hasn't used those muscles for a generation. Do they tariff everybody to try and regenerate revenue? Do they tariff just some people thinking the problem is there?

42:28Well, no, because of Transshipment, as you correctly said. Do they tariff just finished products and not raw materials? Well, no, because actually America needs to get its raw materials working again. They're not Japan. They have lots of raw materials, so you can't just have a mine in country X coming in and putting your mine out of business. So you actually need to tariff everything up, stream to downstream, but in a scientific way, to try and make sure that you get everything out, stream to downstream back in America. Does it make sense to get economies of scale to have countries without going back to it like Canada within the loop in certain sectors? Absolutely it does. If they don't allow Transshipment and they're geopolitically sympathetic, so they don't undermine you or work against you, or make sure that the project that you're in with them has suddenly got a Chinese sleeping partner, etc. So all of that strategy was there. I also threw in the fact that you were going to need more revenue, which tariffs do generate, so that's another incentive for them to use them. And up until the refunds, it was making a significant difference. And it will do again when the new ones kick in. I said, the Fed is going to have to change how that works.

43:29Well, we have war, an instituting war looks like a complete revolution of the Fed. And I said every other aspect of the US economy would have to change. And the political economy and treasury, and obviously this is before we knew it would be percent, treasury would end up moving primary to the Fed, or making sure they work hand in glove. Now, obviously this chaos along that path, obviously as I said, this experimentation. And obviously, and I think it's a positive to be honest, even it gets very overlooked by many people, rather than a master plan in finite detail, for every area of an economy as complex as the US, intersecting with so many others the way it does, what you are seeing is a grand macro strategy, as I dub it, to say we need to do XYZ generally. Let's press the red button and see if it starts to work. No, red button isn't working. Let's try the blue button. No, that doesn't work. Let's try the red button and the blue button together. Okay, that half works. So let's try that one and press the green button too. Oh, I stopped working again now, right? Okay, let's just do the green button. Okay, oh, the green button works by itself. We didn't need the red and the blue.

44:31So there's an element of that happening, and that can very correctly be seen by people who are used to a very efficient, what I call because markets, global system, which could do the stupidest of things at mass scale very efficiently. We are now seeing far more intelligent things being done very slowly and inefficiently, and that can seem very, very frustrating in the transition. And there will obviously be genuine examples, which are headscatchers. But you'll find those buttons tend to be switched back or pressed a different way or the flip is switched in the cockpit, if you will. You know, imagine you had to try and land a jet with all the buttons and switches. You would be flipping everything madly, as would I, trying to make sure you come in for that landing, right? So that's what I think is happening. And if you took that framework from the beginning, which I did, you would then turn around and say from a geopolitical perspective, obviously Europe is going to get bashed over the head. Obviously, there's going to be an imposition of high defense spending, which seemed fantasy. When I told people that Trump would push for 5%, I was laughed at.

45:34That's now accepted. That's now the global norm. You know, I said obviously, there will be outreach to some of the countries who he is normally in opposition to, because you're not in a position to take everybody on. You know how weak you are internally. So you project strength, but at the same time, you have to do short-term deals. Look at the Molotov-Rubin-Trop Pact. You know, there were a history that had replete with examples where you do short-term deals with people that you intend to reverse later. And it's Trump with me the first person to be doing that, if so. But the key point just to finish, because I don't want to ramble on too long, is I looked at things like Venezuela and I said, that's low hanging fruit. The oil there doesn't need to flow east. That can flow north. This is substitute for Canada. Low and behold, that happened. Iran, now that one was obviously going to happen after October 7th. That was a slow burn. That had been building up for a long time. On October 9th, because October 7th was a Saturday, on October 9th, I came into the office, I started writing a note. I can't remember if it was published on 9th or 10th.

46:34And I said, this will end up with war with Iran. The concentric circles will ultimately lead there, because Iran wants to dominate the Middle East, one country at a time, one proxy at a time, and then all the Middle East energy is no longer dollar-denominated and starts to shift to a different block. If the US can flip Iran, if it can, didn't say it would be easy, then effectively you have an enormous amount of material assets, which sit on the balance sheet, alongside the huge financial deaths. So effectively, you have physical stuff, not just financial power. Even if you don't control it directly, it's within your block. And it's not good for you to have it in the other block. Even if you don't necessarily want it, they can't have it. And if you look at that, and I'll just conclude here, almost everything strategically, because we are talking strategy here, that the US has done over the past two years, was predictable and was predicted. And I have it in writing saying, I think they would do XYZ ABC. You know, with fluid timetables, and it continues to predict what the next steps will be.

47:36But within that, yes, there's an awful, awful lot of what looks like chaos, if you're too close to it, rather than stepping back. So I hope I've done a decent defense there, and thanks for giving me the time. Oh, of course, that's the whole point. I hate people who ask people on their podcasts, and then don't let them actually give answers to the questions that they ask. Well, thank you for that. And I'm looking forward to hear about the next steps. I actually think, again, you and I are going to agree on 85%. It's, and the 15% that we disagree with is loud, but overall, we see things like basically the same. I mean, I think what you're talking about was in the water post-grade financial crisis. Obama started this. Obama was on who started tariffs on China. Obama was the one who started, and I mean, he has, he had the TPP, but he really had to drag that over the finish line, and he didn't bullet proof it in any meaningful way, so that he knew that it could be taken down. The deal with Iran was about ISIS. They had something they had to deal with in the moment, rather than thinking about long-term. They needed to have an Iranian ally to get rid of the guys who were chopping people's heads off, and then they could deal with Iran later on. I'm with you on Venezuela. I thought Venezuela was going to happen.

48:38And one of the ironies about this administration, to me is if they had just kept doing that sort of thing, we'd be in a very different world right now. If they had moved on, I expected Venezuela, and then I thought Cuba was going to be next. If they had done that, not only would I look brilliant, but I think their policy would have made a lot more sense. I mean, Cuba also has a lot of resources, makes much more sense if you're thinking about North America, and hemispheric dominance, and things like that. I confess, on the Iran issue, I didn't think Iran was going to happen, but I think that was more wishful thinking than anything else. And I think you're right to say it was going to happen either way. I mean, I was gobsmacked when Kamala Harris was giving her 60-minute disastrous interview, and she went on and on about Iran being the biggest national security threat to the United States, which told me, okay, I guess both sides of the aisle are just taking crazy pills, because this is not the greatest national security threat to the United States. And I don't know why, since in really 53, the United States is obsessed with this notion that Iran is the greatest threat, especially post-sale revolution. How you could think that, that there's kind of something else going on there.

49:38But the place where the rubber meets the road for me and what you're talking about is, yes, I can make sense to me to build things in the United States, but none of the buttons have worked to actually make things here again. The only buttons that have worked to one of your earlier points is, yeah, we have lots of raw materials. We can refine raw materials here again at higher cost. We got plenty of oil, and how we got even more, because we got Venezuelan, and all these other things. But can we actually make the radio switches that go in 5G telecoms towers? No, the company that the first Trump administration back to do that went out of business because they couldn't compete with the Europeans and couldn't compete with the Asians when it came to these things. What things are we making in the United States today that we're not going to have to import from China or from these other places? One of the, sometimes when I give speeches, I go through this litany of, when my daughter has an ear infection, the active pharmaceutical ingredient and the ibuprofen is coming from China or India, the contact lenses I'm wearing right now, manufactured in Ireland, the Invisalign that corrected my teeth, that's Mexico. When is all that coming back to the United States?

50:38Let alone the pipes and the fiber and the things that you're actually using to build out the data centers and things like that. There's no program for building these things in the United States, for making the market, build these things in the United States again. And most Americans who say they want to do things in the United States, okay, that's cool, but they don't want to be the ones in the factories. Who's some total of their life is that they get to make fiber or they get to make little widgets that go into the data centers. I don't know if you've had this experience, I've had some folks who have been coming at me sending me that Wall Street Journal article of how non-college graduates are getting jobs at a much higher rate. I saw that this morning. Yes. And I have mixed feelings about it. It's great and it's true. And I've actually been advising people, yeah, go to trade school if you don't know exactly what you want to do. Be an electrician, be a plumber. The flip side of that is, is the American dream to become a plumber or an electrician who builds the things in the data centers or further uber wealthy? Yes, you will graduate and you'll have a nicer life. But there's a ceiling on your social class now. You're not going any further because you're a plumber who's doing these things.

51:39Do I want that for my children? I mean, if my daughter loves plumbing, great. I want her to be a plumber. But I would like for her to be able to aspire to something more than being a plumber for the folks who need these things. Can I jump into that point? Please, jump in. There's a great joke. Look, things do shift. Paradigms do shift. At some point there's going to be Jewish family saying, why couldn't you go up? Be a good plumber. Right? So would it be too much to ask you to be an electrician? You know, obviously different cultural norms are going to rule. But things do change with paradigms. I think that article is important. And the point you make, absolutely. But let's just be clear. The operating framework within which which has to be in place for that shift to happen is profound across different disciplines. One of them is education. And you have seen the US just launched last week the Foundry schools where there are going to be eight universities now, basically with some prestige saying, hey, we're going to teach all the kind of stuff that we should be teaching again. Okay, so that's an important job. Double thumbs up from people or is that are there policies

52:39that I like from the Trump administration? Boom, there's number two. I like Trump accounts and boom. I like that. There you go. And by the way, one should always take that view on every administration. Is there things you like? Things you don't like. That's just that's being analytical rather than political. I'm not accusing you of that. But there's a lot of it. A lot of it out there, right? So from a macro perspective or a meta perspective, you're going to have to have tariffs. You can't have free trade and bring back industry. So we've already conceded the point that tariffs are normal. Then the question is, are they only around the US or around the US? Excuse me. And a few others. So then you're already talking about where is this boundary? Who's in? Who's out? On what basis? From the upstream to the downstream. And the technology pots that they're in. Are they in the Chinese bucket or the US bucket? So you're already starting to see, you know, where the stress points come in. Then you're going to have to have subsidies or some form. They're already there. Then you have to have a cultural change. And the cultural change is partly the kind of phone calls he's been making to CEOs and defense firms and saying, you can only pay yourself $5 million a year

53:42and no more until you produce more stuff rather than, well, I'm sitting pretty and it doesn't make any difference to me how many things we make. You have to shake up systems more generally to focus on the production and have higher volume. And you make your money through high volume low margin rather than low volume and high margin, which is how things are done now. You have to shift away from financialization back to production, which means taking on Wall Street. Because Wall Street couldn't care less about what America does or doesn't make. Wall Street makes money from money. Now, is that important? I work for a bank. Yes, you need a banking system. Of course, you need a banking system. But banks are supposed to provide capital to increase the capital stock. That's how every economic textbook, which you're all wrong, by the way, teach you the banks work. That's not what they do. Not in America, not at the moment. So you need to see institutional reform. Well, you now have a new Fed, which is part of that, which I think potentially, and we can unpack that maybe in a moment, can start gliding us towards that. You also need to change the international role of the dollar.

54:43Because if the US is a repository, slash deep repository, for everyone's excess dollars that they've earned by selling to the US and finding transshipment ways to still get goods into them or subsidize their own factories so they can get around the tariff and still dump their stuff on America. So they have that production nexus. When 40 years ago, they had nothing but rice farms. And now they have this cutting edge tech. And America is now apparently so bumbling that even with the best tech companies in the world, you can't manage to make things again, which is ludicrous when you think about it. All you need to do is change that framework too to say, OK, so this capital cannot be dumped in the US. And if the capital can't be dumped in the US, then you start to move back towards a more genuinely recording and trading system, which we don't have now. You don't have balanced trade between economies which is done efficiently by comparative advantage at the margin. You have it done geopolitically by countries that do and don't employ state craft to say we're going to maximize production of XYZ. Because when we control that, we control the world.

55:44We control rare earths. We can turn off the taps on everyone all around the world on what they do or don't have. That ain't Ricardian. There are lots of words for it. Ricardian is not one of them. So you need to change the financial system. You need to change the corporate structure. You need to change the Federal Reserve. You need to change the tariff system. You need to change the education system. You need to change the infrastructure system. Why is it not more use of the rivers in America? Why is everything taken by truck on the road, rather than using the natural canal and the river network that you have, which is fantastically efficient? Everything that America needs is there. It was never going to be done in one trump admin, even if they had a detailed plan, which they didn't, because no one's had to do this. For a pre-World War II was the last time America was genuinely thinking along these terms. So it's 100 years ago, effectively, 80 to 100 years ago. And it will take another couple of terms on the other side of it. But I do adamantly believe that with automation, automation is going to be key.

56:45And with AI into production, not AI into I can write my email better to then be, my email can be expanded to be more eloquent. So somebody else uses AI to contract it, to summarize it for them. And while I'm looking at AI pictures of cats that look like Hitler, right? So rather than wasting your compute power on that, actually having on factory floors, there's no reason to why over time America can't do that. And then to circle back, maybe just maybe everybody will want their daughter to marry a nice plumber. I have to start landing the plane. And so I'll let you have the last word on this. And I'll bring it back where we started, which is, I hear you. And it sounds to me that what Mark Carney wants to do with Canada is more realistic than that the United States is going to do all the things that you just talked about. The only precedent we have for the United States doing this is World War I, World War II, and maybe Sputnik on a lesser scale.

57:46And it's going to take that kind of, it's not going to, no president's going to be able to wave a magic wand or say something and create the type of shift that you're talking about. There's going to have to be a moment of real fear where Americans decide to stop squabbling about what bathroom they're going to and decide to make the changes that you're talking about so that they can secure their future in a future world. Which is why I'll ask you to just sort of, tell me about your next steps because it seems to me the only realistic path for what you're talking about actually happening. Because it makes too much sense. The only way it happens is if there is a, and it's not, maybe it's not World War III, but it has to be some kind of moment where Americans are drawn out of themselves and make these kind of wholesale changes. And that scares me a little bit because does then America become the instigator of that moment and once you start instigating moments like that, where does it go? Sometimes it's Sputnik and you have a race to the moon and then you get computers and everything else that happens out of that intellectual discovery. That's the, that's the nice version. The bad version is World War I

58:47and the monsters that were waiting for us at the end of that period. So tell me what the next steps are and why I shouldn't be as afraid as I am right now after I can speak. I, I, I, to quote the fly, one of my favorite movies, Be Afraid, Be Very Afraid. There are an awful number of bad futures out there and some good. And I think that's always been true over time. But, you know, America, again, very simply America, if you believe in Ricardian comparative advantage and that you think that's how the world works, which it isn't, it isn't. America will be a farm today because Britain was the workshop of the world and you would never have had to make anything and you would all be one giant bucolic farm. Obviously, that's not the case. You know, the things can change and will change. I'm more worried about the fact that if what I'm saying doesn't happen, then the logical implication is America can't escape. It's, you know, relatively low growth, bad demographic, financialized kind of sink that it's in. And obviously, we see what that's doing to American politics now and to American society and, you know, brazilification

59:48and wherever you want to define it. That, that accelerates, but to a country which still has a crumbling, but enormous military and the world's second largest nuclear arsenal. And, you know, we've seen from Russia that it isn't good or the Soviet Union to see great powers start to crumble internally. I'm not for second predicting it, but I've already explained my methodology, which is, I don't stay in the safe little two to three percent CPI band like a central banker. I'm like, no, we can have numbers like we saw a GDP in COVID, you know, when it's like negative 10 and plus 20 on the other side. That's the world I live in looking at how things can in risk parameters potentially operate. So that worries me far more, but that doesn't tell me that it can't happen because I think if you have what we already have now working more efficiently, if you have, which I expect to see soon and we need a whole other podcast on the introduction of stablecoins, dollar stablecoins to be a revolution in the global financial system, which internationally put new guardrails

1:00:48around the American system while defy inancializing it potentially. They can make it all worse if they're done wrong. Oh, yeah, they can be far worse. But if they're done right within America, you can actually see, right, we don't need to worry about going to a bank to try and get credit for this startup where I can make anti or drone interceptors, which are cheaper to produce 3D printed than the Iranian drones, which are themselves a fraction of the cost of a Patriot missile, okay? Or whatever the America is using against them specifically, which is already happening. You've probably seen the headline. It's an American firm in the UAE 3D printing drones as a startup and each one is cheaper than what Iran now produces. That's an American company just happens to be doing it on the ground there. But where do you get capital from when you go to Wall Street? And it's like, well, you know, we'll give you a gazillion dollars if you're gonna buy an existing asset and not just sweat it a little bit harder, right? But if you have an alternative financial system running alongside that where you can have crypto or stablecoin backed, tokenized lending and a micro-aconemy scale as a parallel system.

1:01:51And again, I'm fleshing now in very, very general terms. It needs much, much more attention in the future. But that's what some people are talking about. Effectively, you can unleash a lot more dynamism by just saying, right, the legacy systems, you're all dinosaurs like Diplodocus. You just sit there in your swamp, munching or whatever you munch on. You know, we're the mammals running around your feet, but the future belongs to us. So I do see bright points to look to there against very dark clouds, absolutely in the future. But I see lots of different dark clouds in different directions, rather than just maybe the one that a lot of people look at just right in front of them. And all I've done on the last point because we started with Canada to finish it. Scale matters. Scale matters. And I still don't see that even trying to unleash that system because Carnies adopted tariffs. Carnies adopted national security subsidies. Carnies adopted a stronger state. He's doing everything Trump is doing, but just on a much, much smaller scale with a more difficult starting position.

1:02:51But if you think it can be done in Canada, then scale still like you, so it can be done better in America. Okay. Well, if I wasn't careful, I could talk to you for another two hours, but I know exactly where to... I hope I haven't scared you away. I know exactly where to pick it up in the next time we have a chat. And Michael was really great. I hope you enjoyed this as much as I did. Oh, I really did. I really do hope we do it again. Thank you for listening to the Jacob Shapiro podcast. If you enjoyed today's conversation, you can find more episodes, essays, a link to our substack and tons more analysis at JacobShipiro.com. And if you ever want to reach out directly with questions, feedback, guest ideas, if you want to acquire about booking me for an event or any of my consulting services, you can email me at JacobAtJapiro.com. Also, if you found this episode valuable or interesting, please consider subscribing, leaving a review or a rating or sharing it with someone you think might appreciate it. Take good care of the people that you love, cheers, and we will see you out there.

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