Shownotes Transcript
We have before us the opportunity to forge for ourselves and for future generations a new world order. This is Multipolarity, charting the rise of the new multipolar world order. Coming up this week.
Gold is going to the moon! Fantastic news for gold bugs, until somebody works out that this is a short against America, and the Wall Street types celebrating are effectively blowing the kazoo for the end of their own industry. After all, if gold remains on the moon, pretty soon they'll have to figure out whether they still need financial services consultants in space.
Meanwhile, it's a day ending in a Y, so someone in the Pentagon must be plotting attack on Iran. It seems incredibly illogical and stupid, which makes it all the more probable by Pentagon standards. Finally, China has raised tariffs on American goods to 125%, restricted the supply of rare earth metals, stopped investment into US private equity, and cut off its natural gas terminals.
"Tit has given way to tat. We'll be weighing up who has cut off more of their nose to spite their face." "But first..." "Moon age daydream." Gold 3500. Gold has never hit 3500 before. I think it hit it on the day of recording, and it's come down a little bit more. By all accounts, gold is just going to the moon, as they used to say for Bitcoin, which is tanking.
We could make a whole episode on the gold-Bitcoin correlation, but it's now negative, is the short answer. Coin did not end up replacing the precious metal, apparently. Anyway, gold keeps marching up on an inflation-adjusted basis and everything. It's just reaching height after height. There doesn't seem to be any stopping it, really. The main driver is pretty obvious. It's all the chaos.
in the markets. I mean, just before we were talking before the show, just about coming up with the ideas this week, and it's becoming increasingly hard because every newspaper headline is about some variant of tariff fever and financial meltdown. Gold is very much so tied into that. People are very nervous, so they're investing in gold. I had a debate today with a friend of mine about whether we'd got to the taxi driver advice to
to pile into gold yet. This is kind of a metric, as it were, that some financial people use. They say that when the taxi driver tells you to buy something, it's usually kind of reached its investment peak. Both of our senses are that the taxi driver is not actually investing in gold. In fact, I think the hedge funds are only starting to seriously pile in in the past week.
But I don't really want to make it out as if it's some sort of financial bubble. I think there are actually real underlying drivers for the price of gold at the moment. We don't give investment advice on the show, but I expect that gold has a lot more to rally. And basically, it's related to something that usually when the equity market falls and you go into a quote-unquote risk-off moment and people get very nervous about financial markets, you see the dollar rally happen.
And you see U.S. Treasuries rally as well because these are seen as safe haven assets that you pile into out of equities, out of riskier assets, and into the safe haven currency or financial instruments in the case of bonds. But of course, at the moment, the dollar is selling off like crazy. I mean, the dollar is...
I won't say it's in free fall yet because we have to see it fall a bit more. But certainly the rate of change on a weekly basis, I think, is one of the worst. I think it's the worst since 2015 or something like that. Treasury bonds are selling off as well. There's complicated reasons for why that is. But really, to call a spade a spade, it's because people are nervous about these dollar assets and they're nervous about the dollar. So what everyone's piling into is gold.
Gold has become the de facto safe haven asset. And so when you see gold rally after becoming the safe haven asset, it's really hard to actually say that there's a bubble of any sort because it appears at least that gold is becoming kind of the anchoring assets for all markets. We can talk a bit more about that as we go on. But the one thing I'd highlight that I've been saying to friends of mine for quite some time is if you've ever kind of followed
more articulate gold bugs in the market that have been around for years. They became quite popular after 2008 in the QE period and so on. I'm thinking of Jim Rogers, Peter Schiff, these guys. And they got really big during the QE period and they promised that the money printing so-called was going to drive up inflation, destroy the dollar, and so you should invest in gold and so on. And all of their arguments were kind of premised on that.
And to call a spade a spade, I mean, they weren't taken very seriously in financial circles. Their analysis was logically coherent, you might say. If the dollar goes to pot, then the case for gold is very bullish. If gold starts rising enormously, it's over, dot JPEG, for the US dollar hegemony, for the US bond market, and so on. Even though their arguments were logical, they were all premised on this one thing, that confidence in the dollar would collapse and people would flee for gold.
Well, I was saying to a friend of mine today that the moment that that actual thing happens, then their narrative starts to make sense. And all the stuff that they say about the stock market reverting to a certain gold price equilibrium, dollar, everything like that, has a lot more credibility to it.
So I think the kind of short version of what's happening right now, there's loads of things happening in the financial markets all over the place and they're all related, but you can look through it through various prisms as it were. And if you looked at it through the prism of gold, what's happening is that we're finally reverting to
to that world that the gold bugs have been warning us about since 2008, really since the paper currency started in 1971, but particularly aggressively since 2008. They're finally getting it right. Their moment is coming and all the other markets seem to be falling while gold rises. It's kind of remarkable. Yeah, I mean, gold is increasing in price. It's gone through record. It's really been doing this since 2008.
Certainly the global financial crisis and probably even longer than that, probably since the mid-2000s maybe, between the dot-com bubble and the global financial crisis. That's when the price of gold really started increasing in value and you started getting it moving over $1,000 and then almost touching $2,000 before falling back a little bit.
Now we're kind of passing 3,500. And I think the first thing to say here is that some of the increase over the last 18 months, two years, has been related to inflation. You know, when you see your prices go up in the shops, people who mine gold also see their prices go up. Wages are higher. The cost of raw materials and transportation is higher.
It's not cheap to dig out gold. It needs a lot of petrol or gasoline or diesel or whatever it is that makes those huge trucks run. Not all of this can be accounted for by inflation. And I think a really big chunk is simply due to economic uncertainty. And you're 100% correct in saying that.
As investors are shaky about the US dollar and US treasuries, which have traditionally been the global safe haven asset, in fact, the global zero risk asset, as they're increasingly shaky about that, there's only one last refuge to go into, and that's gold, essentially. So why are they so shaky about this? Well...
The first thing I would say is, yes, it is related to the tariffs, probably, and a little bit of market fears about what that will mean for the global economy and global relationships. But I really think the main thing is, at the moment, markets are concerned about whether Trump's going to go against the Supreme Court in a kind of heads-up battle, about whether he's going to kind of, in inverted commas, usurp.
certain powers to the presidency from other agencies or branches of government. And I think they're concerned about the nature of the administration and what form it's going to take. And in that context,
within that whether it's also going to take over the Federal Reserve and if he does take over the Federal Reserve or put a hand-picked person in charge of the Federal Reserve who can be Politically pressured then how safe ultimately our US assets can can political domination and kind of fiscal dominance take control and make these assets Worthless and I think that's what's really shaking markets and driving up the price of gold at the moment is that
Just fear and concern. I'm not sure whether that fear or concern is unfounded or ridiculous even, but that's the impression I get from reading Bloomberg and the rest of the financial press at the moment. Is that how you feel, Philip?
I mean, the stuff I'm reading in the financial press right now is more extreme than anything I've ever seen before. I saw on the front page... Yeah, so I mean, they could be like gold in the markets, right? I'm sorry to interrupt, but I mean, like, you know, the Financial Times, Wall Street Journal, Bloomberg, they're all pretty, you know, anti-Trump politically from the beginning, right? So it doesn't take much for them to imply that he's going to, you know, usurp the Supreme Court and the Federal Reserve and
run a one-man dictatorship and US treasuries are only going to be worth Trump's mood on any given day. And, you know, people might panic in that sort of situation, no? I think it's worse than that. I saw a Bloomberg story this morning saying that the real Trump trade is sell America. And I think we're getting a real...
Well, I mean, there might be some truth to it because of the amount of chaos that's going on in the markets. But that chaos, in some senses, is self-fulfilling. I mean, we did a whole show last week on Twitter Spaces about, or X Spaces, I should say, about the dynamics that are behind a lot of this market meltdown. And look, a lot of it's real. I mean, if they want to rebalance trade in such a violent way, it's going to destroy Wall Street, right? But
The issue, I think, with a headline like that from an outlet like Bloomberg, remember, that's kind of really tied more than anything else, even more than the Wall Street Journal to Wall Street. It's a direct part of Wall Street. Bloomberg terminals, if you've ever worked in the city or on Wall Street, are where you go to get all your real time market information. And that's been the case, I think, since the 80s.
So Bloomberg is a company inherently tied up with Wall Street. And of course, Michael Bloomberg was mayor of New York famously. When you start talking like that, I start to realize how bad political instability can get because there's a certain amount of nihilism to that. Like if you want to try, even when we said that there was a very good chance that the markets might turn around or people in the markets might turn around and try and trust Trump.
We were saying this for months. And I don't think we were wrong, but I think that Trump, in a sense, kind of trusts himself with the most extreme tariff package imaginable. And so I think the people who were actually intending on talking down the economy and even potentially trying to create a bond crisis to screw up the Trump administration, I think they were so taken aback with how dramatic the administration's approach was that they still are kind of reeling from it and they're only starting to find their feet at the moment.
But the mode that they're switching into is to basically use the financial press to communicate that you should quote-unquote sell America. I'm not saying that it's propaganda, you know, there's a major potential financial crisis brewing. But if you're Bloomberg or the analysts being quoted in this article, the investment bankers and so on,
You're in America, guys. You're standing in America. So you're kind of sawing off the branch that you're sitting on.
And usually financial markets people are pretty savvy to that. I'm not saying that you'll never find negative coverage. Financial markets are almost like a battle game or something like that. There's always this back and forth and everyone gets a weird pleasure when a bank blows up in financial markets. People who look at it from the outside think it's a bit weird and it is a bit weird in a way but
People who go into financial markets, especially at a trading level and so on, they find them exciting. And when something exciting happens, they get a bit of a thrill out of it. But I've never really seen such excitement being taken away
to what is effectively the gravestone of their own industry. I mean, like, you know, I'd certainly have come across before a somewhat jaded analyst at a bank that's collapsing who kind of gets a bit of a thrill out of the bank finally collapsing because he'd been warning about bad exposures for years. Oh, I've seen that before. But that guy probably thinks that he can jump ship and go and work at a bank that hasn't collapsed. And he's probably right about that.
The people who are currently saying things like sell America, well, guys, if everyone sells America, you're not going to have jobs at the end of it. And it's not really clear that you have skill sets to go into other sectors. Or at least there's definitely not enough jobs in other sectors to absorb your skill set. So it's a very, very odd moment where...
A very extreme economic policy is being imposed on an economy that has gotten extremely actually weak structurally with the dollar reserve currency and so on. So all these weaknesses have built up almost to a crescendo. There's a very, very harsh economic policy coming in and putting its stamp on top of that. And then the people who are kind of creating the narrative, who themselves are reliant on this whole financial markets game,
are going into this bizarre nihilistic meltdown where they're where they kind of remind me of like the end scene and fight club where they just blow up all the credit card companies it's like this final act of nihilism and that's how it feels and look the flip side of that is that is the gold is is rising past 3500 the real question i think next is
does gold actually start to very naturally replace the dollar? It already seems to be replacing it as a safe haven asset, as I said earlier. But there's also a chance that it could start, they could start using it, you know, various countries could start using it to sell whole transactions, etc.
They could build up their major reserve positions in gold and so on. This is what David P. Goldman's been predicting, and he thinks that gold goes to about $10,000, and then it can fulfill that role. Well, we're about a third of the way there. I'm sure listeners are going to be keeping a careful eye on the financial markets over the next few weeks, but one of the key indicators that I'm paying attention to definitely is just how high
how high that gold price can go. The higher it goes, the more damage the dollar has taken. But to be honest, at this stage, I really do question whether you could re-establish dollar reserve currency status, even if you wanted to. Iran so far away.
So this week on Tucker Carlson's podcast, which is fast becoming a must listen, not just if you agree or disagree with Tucker, but it seems increasingly that news is breaking on Tucker's podcast quite often actually now. And it's becoming as essential a media source as standard journalistic press. But
Tucker had a guy on called Dan Caldwell, who was just involved in one of these minor pseudo scandals or whatever in the US government. Basically, he's been fired from the Pentagon, from the Defense Department, nominally because he was leaking stuff to journalists or something like that. I didn't follow the actual story closely, but I fully believed that he was probably kind of stitched up or something like that, or at the very least,
He had some minor infraction that everybody was doing and it was used to expel him from the Pentagon. Anyway, Tucker was advertising Caldwell as basically being one of the main Iran doves at Pentagon. And I'd heard this independently prior to him being fired. Actually, when Caldwell was appointed, it was highlighted to me by some friends of mine in D.C. And they said Caldwell is going to be one of the main doves on military issues in the Middle East.
Caldwell himself is a veteran. I think he served in Iraq. Watching the interview with Tucker, I think you said the same, Andrew. You can see the scars of Iraq on the guy and you can see that he's part of that generation that was sent off to what they consider a completely pointless war and has been kind of forever changed by it. These people are becoming a major influence in American politics. Just look at the vice president, same background.
There are a lot of people now entering U.S. politics because they're our age, effectively. They're our age now, and they're starting to run things. But what was really interesting to me about the interview, I think it's worth going and listening to for our listeners. But the one thing I want to focus on, it's not the only thing about the interview, but it's the thing that stood out to me, was that listening to Caldwell, you get two related pieces of information, as it were.
First of all, you get a very strong sense of the current trajectory of Middle Eastern policy in the Trump administration, specifically policy around the potential for, at the least, some sort of bombing campaign on Iran, and at the worst, a war with Iran, and one may lead to another, inevitably. You get a sense of that. You get a sense of what the chatter is in D.C., but you also get a sense of the position of
that the dovish elements within the Trump administration are taking on this issue. Now Caldwell did actually say at one point in the interview that for now at least the White House is actually on the side of the more dovish elements. So while they may not be the most powerful people in government, they are currently aligned with the White House on not creating another Middle Eastern war
If the claims are true that it was partly due to disagreements on foreign policy, then this could set a precedent. A couple of things stood out to me about what we might call the dove position in D.C. on Iran. The broadest point that I'd make about it is everything they say seems premised on Iran being in an extremely weakened state.
That is what everybody is saying in Western media, effectively. Iran is in a beat up, weakened state after the conflict that we've seen so far since the October 7th attacks on Israel in the Middle East.
This is a very similar narrative to what people said about Russia. Russia doves used to say that Russia was, you know, pretty weak and that it wasn't a threat and that it had a pretty insignificant army and so on. Well, two things about that. First of all, it didn't turn out to be true. Russia's not weak. Clearly, it's able to beat NATO proxy army pretty handily.
And secondly, it didn't really prevent the conflict. So it wasn't even good rhetorically. I'm not really, if you're trying to not have a war with Iran, I don't think that's a particularly strong rhetorical talking point, saying that the country is weak.
But also from a factual basis, I didn't get the sense from the Caldwell interview that it was just kind of a rhetorical talking point, although it definitely has been deployed for that. Just from a tangible basis, the analysis is very, very off to me on this week around narrative, because what it seems to revolve around is.
is that Iranian proxies have been vastly weakened by the war in the Middle East. First of all, there's a question about whether they actually have or not. Recent Israeli reports put the figures for Hamas at about 30,000, which is around the same as where they were when the Israelis first launched the Gaza operation. Some of that's just because bombing campaigns in Gaza create potential Hamas recruits, and that's exactly what the Israeli press is saying.
So it's not really clear to me how you can, on the one hand, say that Hamas has been completely demolished and then say that they're pretty much at their original strength. You may be able to say something about leadership or something like that, but...
I think there's kind of people talking at two sides of their mates about Hamas. In terms of Hezbollah, it's a whole rabbit hole to go into. I mean, I guess the claim is that the leadership were wiped out or whatever. But the fact of the matter is that Israel did intend on going to the south bank of the Litani River. That was the stated goal of their operation, and they didn't.
We don't really know much about what happened there. There's a lot of fog of war. There's recent reports that Hezbollah have handed over positions in south of the Litani River to the Lebanese army, but these are just anonymous reports. I don't really know what to make of them. So it's all a bit of a black box, certainly in terms of Hezbollah and Hamas. We're just hearing...
things are two sides of the same mouth in a sense. But even beyond the question of whether the proxies have actually been diminished in any way, it doesn't make any difference to the Iran situation, right? Saying that Iran's proxies have been diminished, oh, and by the way, we can throw the Houthis in there, they clearly have not been diminished because the Americas just launched a whole new bombing campaign against them because they're still attacking ships. But even if you say the Iranian proxies have been weakened, right?
it doesn't matter because it doesn't actually mean anything for an actual conflict with Iran. In fact, the only real Iranian proxies that would matter in such a conflict are the Iranian proxies among the Iraqi militias. And nobody's saying that they've been weakened because they basically haven't been touched. Those are the guys that will actually attack American military bases in Iraq if anything kicks off. I guess the other kind of talking point of the Iranian weakness is that their air defense systems have been wiped out.
This is by that very quiet Israeli airstrike on Iran that took place after the missile barrage on Israel by Iran.
So I'm not going to go into what we actually know about that strike, which is very little, but I'm just going to point out a really simple, a couple of logical steps in that direction. The first is that the air defense that Iran were rumored to have was Russian air defense, probably an S-300 or an S-400 system, maybe multiple S-300 and S-400 systems. There was also rumors that they were getting electronic warfare systems.
These rumors make sense. They're defensive weaponry. I think Russia could stomach giving them over to a country like Iran. Russia announced a strategic partnership with Iran. So all the boxes are ticked here that they had these air defense systems. Well, what we definitely know about these air defense systems is that they're pretty hard to eliminate. On both sides of the Russian-Ukraine conflict, these types of air defense systems, together with Patriot air defense systems, have been used.
And you can wipe out air defense, but it's a very, very long process. I've been watching the Russians do it on the Ukrainians, and it's...
You have to locate these things, you have to then get some sort of munitions up in the air probably, and usually by the time you're even getting the operation underway, you can just pack these things up and drive them to another location. So what that actually means is that the air defense systems have been very hard to hunt and shoot. Now, the Russians have eventually pretty much wiped out Ukrainian air defense. I think that's pretty much widely known. It's
that air defense took ages to hunt and kill. It took a long time for a variety of reasons. And so...
To believe the story that Iran's air defense systems have been knocked out by this one super strike means that the Israelis and the Americans basically cracked a code that neither the Russians or the Ukrainians or the people backing the Ukrainians managed to crack for like three years. So it all cashes out that Iran is not weaker than it was pre-October 7th. Maybe some of its proxies have taken a beating, although the evidence on that is actually pretty unclear.
And Iran itself is just as defensible as it always was. And in fact, the only thing that's really changed since the beginning of the crisis that October 7th attack sparked is that Iran has entered into this security arrangement with Russia. That's the big change in the region. And that obviously makes Iran a lot stronger.
So all this kind of raises a lot of questions. If the doves in D.C. are basically taking the Iran is weak line, I don't think they're actually properly informing people about what this would mean. I don't want to go take up the entire show, but I'll finish with this because I found the interview so fascinating. The main concern that Caldwell seemed to put out there about a potential conflict is
is the proxy damage it could do to American forces and American people, just people working in the Middle East, presumably through Iranian missile strikes and so on. And that risk is there. What I'm seeing is that the policymakers in D.C. are basically being told the main risk is you suffer some pretty nasty losses at these bases, maybe some American civilians and so on.
Well, if you don't accept the Iran is weakened narrative, that's not the worst case scenario. The worst case scenario scales right up to losing a war. The worst case scenario is an aircraft carrier being hit with an anti-shipping missile. The worst case scenario is multiple US high-end jets get shot down by a Russian air defense system. These are whole... These are like...
tangible losses. These aren't collateral damage of a war that you're fighting. This could be like a big loss for the US that could massively lose it, prestige and so on in the world. It could massively damage its credibility in terms of...
potential illusion, you might say, that it has these completely perfect systems that can overcome everyone else in the world. It would have such implications. So I do worry, listening to that Caldwell interview, that even the people arguing against this war are doing so in a way that doesn't actually convey the reality of the potential outcomes of that war to the decision makers. And in that regard, it reminds me a lot of the Ukraine war at the start.
Yeah, and I think it would be as disastrous, and I'll explain why. First, though, I just want to say, Iranian influence has been weakened in the region. Hamas, in terms of the number of recruits that they have now, might be back to their original levels or a little bit below, but in all wars, like any army that fights a war, gets attrited. They come out of that war in the immediate aftermath weaker. Usually, they went in just through...
the process of attrition and exhaustion,
And I see no reason to imagine that wouldn't be the case with an organization like Hamas, who, as far as I've seen, have taken pretty significant casualties. Although the Israeli bombing campaign has obviously been a tremendous recruitment trumpet, if you like, or clarion call for people who might want to join Hamas. In terms of Hezbollah, you know, I think Hezbollah have been weakened as well, because when Nasrallah was assassinated...
or killed, or bombed. They lost a tremendously charismatic, and long-standing, and well-respected leader. So I think they've been weakened to a certain degree as well. But these are all, of course, temporary setbacks. They're not, it's not the permanent destruction of either Hamas or Hezbollah. It's just a temporary respite from their original power, which they will indeed regain. And even if they didn't, even if they were destroyed, some other organization would spring up
and regain that power because simply what is causing them is the issue with Israel in the region. Now I'm not taking sides, I think I'm the only person in the world who literally has no opinion on this matter, but the bottom line is that that's the root cause of all of these issues. The other way that Iran has been weakened is that Syria is no longer a ward of Iran, it's now a ward of Turkey and Israel and to a lesser degree the US.
but certainly not a ward of Iran. And why that's pertinent for any potential Israeli or even US attack on Iran is it would allow Israeli fighter bombers to overfly Syria very easily. And then, of course, they could go across Iraq, the airspace of which is controlled by the US Air Force, and from there attack Iran. I think that's why people think that Iran is slightly weakened at the moment.
I would say, though, in terms of their influence in the region, although Hezbollah and Hamas have been temporarily weakened, Iran has enjoyed quite significant compensation in the shape of the Houthis.
The Houthis have proved themselves to be a really significant strategic force. And in fact, in global strategic terms, I think the Houthis have proved more powerful than Hamas and Hezbollah ever were. Hezbollah, at their peak during the Syrian civil war, were an extremely potent regional force, a regional proxy force that had seriously effective infantry fighting powers.
Whereas the Houthis, on the other hand, are able to clog up a waterway that, you know, until a couple of years ago was responsible for 12% of global maritime trade. Or maybe global trade full stop. I mean, that's really serious global geopolitical heft that you've got there, right? So, Iran has enjoyed compensation. Look, you know, insofar as an attack on Iran is concerned...
The reason I think that people might be talking about Iraq being weakened isn't necessarily because they think that Hamas losing 10,000 troops or 20,000 troops is going to make bombing Tehran easier. I think it's because they think that maybe, maybe after the humiliation of, you know,
Gaza being smashed and there was nothing the Iranians could do about it and Hezbollah didn't invade from the north as suggested they might and Iran didn't come to their support maybe a successful attack on Iran would be just sort of final humiliation to push the Iranian government into regime change essentially maybe that's what they're talking about I don't know but insofar as an attack on Iran is concerned
You know, I think I can say this. I think it would be, first of all, the beginning of the end of the Trump administration if this happened. And secondly, I think it would be the end of any effort or any ability the U.S. had to hold the line in the Western Pacific region.
and stop China becoming a regional hegemon in the Western Pacific. It would be the end of that. So it would end the Trump administration and it would end any ability to hold the line in the Pacific. Why do I say that? Well, first of all, Trump was elected. Trump was elected based on a popularity drawn from opposing these neoconservative wars of choice.
He opposed the Iraq war. That was one of the things that gave him great credibility. The first time round, people forget this now, but his longstanding opposition to the war in Iraq was one of the catalysts that made him so popular in the first place and gave him a lot of his national wave of support.
And he's maintained that the whole time, that criticism, up to and including criticism of U.S. policy in Ukraine. So starting just such a war would seem to be some sort of...
I don't know, like, wouldn't stay through the heart of his presidency, like, through the raison d'etre of his presidency. It would be... You know, it's like when somebody gets elected as a technocrat and proves themselves to be incompetent. It's just not something that works. It's like Silicon Valley...
You know, this freewheeling, free market capitalist, libertarian organization begging for a banking bailout because they'd invested in the bonds of this bank. You know, it's like a stake through the heart of their raison d'etre. The second thing is, it would be costly to attack Iran. Like, what are you trying to do here? What are you trying to do? Let's say you drop a few missiles. Let's say you drop 100 missiles on Tehran and Qom and a few other cities.
Well, so what? What comes next? Like, what then? Like, the Ayatollahs are still in Iran. You've whipped up all kinds of patriotic Iranian fervor. What then?
What comes next? What have you achieved exactly? Okay, so you attack their nuclear facilities, which is, as far as anybody understands, are extremely well protected. Extremely well protected both underground and by anti-air assets. Okay, so maybe you destroy that. Maybe you do, but...
How long is it going to take them to say, look, enough of this. We just need to go on a crash program. We'll follow the Pakistani example where they said, you know, our people will eat grass until we get nuclear weapons and we'll get them right quick. Like, are you going to force that? Because if you back a country like Iran into a corner, you know, they'll have a choice, like roll over and die.
use everything that they've got at their disposal to, you know, one last throw of the dice, or get the bomb. Those are the three options that they would have if you backed them in a corner. Get the bomb, throw everything that they have in the last roll of the dice to try and turn the tables or roll over and die. That's the best case scenario, is that you put Tehran in exactly that position. The worst case scenario is, first of all, you start losing aeroplanes and bombers everywhere.
to Iranian air defenses as they're attacking Iran. Like, that's pretty bad. Iran activates all of their proxy forces across the region and wreaks havoc on U.S. bases, U.S. assets, oil processing facilities, oil wells, U.S. embassies, British embassies, consular services, like everything across the region. And maybe not even restricted to the region. Like,
Like, does anybody think that Iran might have people in places like London and New York and Washington who they could wake up? I don't know. But maybe this isn't necessarily restricted to the Middle East. Like, who knows? I mean, this could get really nasty, really nasty indeed. And nobody denies that Iran still has a huge number of missiles, a huge number of missiles that it can fire, like, and a variety of them as well.
Maybe they're not, you know, super high-tech kind of 21st century stuff. But, you know, 1980s and 1990s tech cruise missiles and ballistic missiles can wreak a whole variety of damage. Okay? So this is an absolute fool's errand. It would be the stupidest thing to do. I actually think...
Trump attacking Iran would be stupider than George W. Bush attacking Iraq, invading Iraq. I think it's like even more foolish than that. Like the best case scenario is like, okay, you drop like 100 pounds.
bombs on us now now what are you going to do that's kind of the best case scenario the worst case scenario is you lose like bombers airplanes as you're doing it you don't really achieve much iran starts activating its assets over the region it starts counter-attacks you have to then go in you have to then go and attack those those airfields from which counter-attacks were launched you're into a longer term campaign you
You use up so much materiel and you're already down on materiel because of all that you've given to Israel and all that you've given to Ukraine that you lose all ability to hold the line in the South China Sea or the first island chain in the Western Pacific. You've ceded that area of the world to China. Maybe you wanted to do that anyway, but this basically ends the conversation and your presidency is ruined because you've destroyed your image as somebody who was against these wars of choices to begin with.
And this would be monstrously foolish. I don't think it's going to happen. Like Trump has taken a far more pragmatic line this time on negotiating with Iran. Last time he had Mike Pompeo in charge who didn't just tell Iran that they had to get rid of their nuclear plan. He wanted them to get rid of their nuclear plan and stop their support for Hamas and stop their support for Hezbollah and stop their support for the Iraqi militias.
Trump isn't doing any of that this time. He's been much more pragmatic. I sincerely hope the dubs went out. And yes, you're 100% right. Caldwell came across at least as a very likable person on that Tucker Carlson podcast. He came across as a patriot, someone who left university to go fight in a war with his friend.
in the US Marine Corps at the thick end as an infantryman. That's phenomenally brave, far braver than I am, Philip Pilkington. He's come back. He's worked with Veteran Affairs. He's tried to improve the life of veterans. He's been an advocate. Now he's gone into government to serve his country again. So I think he was a very likeable man. Maybe he's a frightful schweinhund behind closed doors and he's just a very clever public relations man. But he did come across as a nice, good man in the Carlson conversation.
I think there's obviously a debate between the realists and the doves in the Trump administration and those who are kind of very strongly pro-Israel about what to do with Iran. I hope the angels of Donald Trump's better grace win out in this case. I think his instincts are probably right.
be pragmatic, do a deal, don't go to war. It would be the stupidest thing ever. This is another thing that Caldwell's comments spook me a little bit. And by the way, I agree with you on Caldwell. I'm not trying to beat the guy up. I'm just saying that this guy gave us a very good comprehensive view of the debates taking place in DC. And these are very important to understand because these are the things driving decision-making. What he said about oil was that if the Strait of Hormuz was closed,
the oil price would spike, but it would eventually come back down because it would incentivize US producers to increase production. I come across this all the time in foreign policy circles. They don't understand the fundamentals of global energy markets.
It is true that if the Australia of Hormuz was closed, it would activate what I call gunk oil, like kind of quasi-oil, tarry stuff that's in the ground. Companies in the US would start extracting that to prevent there from being shortages.
But the extraction will be at a much higher price. And that higher price will become the oil price. So what you'd actually see is a spike, maybe up to, I don't know, $300 a barrel or something if the Strait of Hormuz was closed. And then it would come down to like $200 and it would stay there. And that equilibrium price would be the price of extracting very, very low quality material out of the ground and trying to refine it into oil products.
I always use the example when I'm trying to explain this to people that at the end of the Second World War, the Nazis in Germany used a process to extract diesel fuel from coal because they had no access to oil and so on. They had limited access to oil as the Eastern and Western fronts were closing in on them, but they had plenty of coal. And so they converted the coal into diesel fuel. These technologies are always there. The question is always what cost?
And of course, the cost of converting coal into diesel fuel is enormously high and has remained enormously high because it's only really a basic chemical process. It doesn't really change. The economics of something like that don't change. You don't get better technology. It's the same problem with very tarry oil deposits.
like you'd see activated in the case of an actual oil shortage, there aren't really ways you can bring the costs down to that. If you could extract that stuff at the same price as you can currently extract a barrel for whatever at 60 or even at 120 when we were back at 120, the technology would have already been deployed.
So this idea that you'd see a spike in prices in a Middle Eastern crisis and then it would come down to normal levels is simply untrue. The equilibrium price of the gunk energy that would be being extracted would be absolutely enormous and you'd have a major economic crisis on top of the already massive problems that we highlighted in the first part of the show. The Empire Strikes Back
Not quite covered enough, I think, has been China's response to Trump's imposition of tariffs. We all know that China has imposed tariffs of its own on US goods and services. But it's also taken some other steps as well. First, it has banned the purchase of liquefied natural gas, LNG, from the United States.
Secondly, it has refused the delivery and any further purchases of Boeing passenger airlines, passenger aircraft.
Apparently one 737 had to fly back across to the US after the Chinese refused to take delivery. They've also further tightened their restrictions on the supply of rare earth metals to the US. China, of course, is something of a monopolist when it comes to the supply of refined rare earth metals, especially the rare earth magnets, which seem to be used a lot in high tech industries.
goods. And the final thing is that's stopped investment in US private equity. Apparently, there was a lot of Chinese investment ongoing in US private equity deals or a lot on the table. And it's kind of pulled out of those things now. I think overall, Philip Pilkington, this is not a kind of shock and awe response. This isn't something that is going to bring the US economy to its knees. And in fact,
I would imagine that the effect of the tariffs that the US has imposed itself on the US economy will be greater, probably, than the effect of the Chinese response. I mean, as long as the Chinese goods don't go via Vietnam or Mexico or anywhere like that. But in general, look,
Let's take these one by one. First of all, LNG at the moment, that LNG that the Chinese aren't going to buy is just going to be redirected to Europe or even to other Southeast Asian countries, but probably to Europe. There might be a small hit on the price of that. I think long term, I think in, you know, in over the next, say, two or three years, if the Chinese want to continue going down this line, then it will hurt US LNG producers significantly.
Because there are several LNG projects coming online. I mean, you've got to remember that. To actually produce LNG and sell it internationally, you need these kind of terminals where basically you pipe normal natural gas into these terminals. And then it's cooled down to kind of deep space levels where it becomes liquid.
And then you pump it into these fantastically expensive specialist ships of which there are very few in the world. Then you send it all the way around, I don't know, from Qatar to Europe or from the US to Europe or from Russia to Europe or wherever. And then once it gets there, you kind of like expand the liquid. You kind of bring it back up to room temperature, so to speak.
So it's an expensive process and, you know, it takes time to build the facilities. But Qatar are bringing new facilities online. Russia is bringing new facilities online. The Canadians are building terminals that are looking out toward the Pacific. I think there are some new American terminals coming online. So it may well be that the liquefied natural gas market goes into something that looks far more like a surplus...
And the price comes down. And in that sense, the Chinese might do quite well because they'll have plenty to choose from. And the U.S. will have to look for other customers. And, of course, China itself is one of the biggest, maybe the biggest energy consumer in the world. So, you know, I think that's something that's potentially important in the long term. But right now, I think it's quite underwhelming. It's no big deal for the Americans.
I think the same is also true for the Boeings. I mean, everyone talks about Boeing being in trouble, and obviously they're not going to be helped by not being able to sell to China, which is the biggest passenger air market in the world. But both Boeing and Airbus have like decades-long backlogs worth of orders.
There is no competition there, really, because these guys can't fulfill the orders that they have. It's really difficult for an airline company like that to expand the capacity to respond to the market. So, you know, what's going to happen is China is going to buy more from Airbus and it's going to develop its own national champion for building passenger airplanes. That's what it's trying to do.
And I think this was going to happen anyway. It was going to buy less from Boeing and Airbus because it wanted to buy from its own domestic producer of passenger jets. So again, I don't see this as being a big deal.
The third thing is private equity. You know, China's going to pull out. But if you want to balance, if you want to rebalance trade, if you want to rebalance trade between China and the US, you're also going to have to rebalance the capital account as well. Like, as the trade balance narrows, so will the capital account balance. The capital balance can narrow as well. So, you know, the...
The flip side of America's trade deficit is a capital surplus, i.e. they have more capital coming into the country than they have going out.
So, you know, to withdraw from private equity, China's going to have to withdraw from everything. They're not going to be accumulating masses of American assets. They're not going to be accumulating masses of U.S. treasuries, masses of U.S. equities, masses of U.S. private equity, masses of real estate. It's not going to happen anymore. But isn't that what America wanted? You know, I don't think that's a big deal.
I think that in general, the rare earth metals thing could actually be a big deal. It can raise the price at the margin and it can do so quite significantly of a range of things in the high tech sphere, in the electronics sphere, and especially in the defense sphere that the US wouldn't like to have the price increased for, right? Like it really needs to be able to produce its own missiles. And if they cost...
10% more because of these rare earth restrictions and although rare earths rare earth materials aren't actually rare the processing facilities will take like a decade to spool up in the US so they could hurt but it's going to be an incremental pain at the margin and I think the overall point at the moment Philip is that the Chinese response hasn't been shock and awe it hasn't been crippling it's it's
I don't know. It hasn't been much of anything at all, I would say, at the moment.
On the airplane issue, I think something slightly different might be going on here. I think the Chinese and the Russians are going to work on airplanes together. China never really cracked the domestic airliner. Russia did, obviously. It has its own airlines. If you marry the capacity to produce jet engines and so on, on a commercial basis that Russia has, with China's just general engineering prowess to build impressive hunks of metal, in a sense,
they could end up with the world leading industry in passenger airlines. And I think this is a big strategic deal. If they did that, it would massively increase their global power. And I think that cutting off the Boeings is very strategic in that regard.
Does it end America as we know it? No, but it's a massive acceleration of American decline if what I just said happens. It's also a big partnership maybe between Russia and China. I think you're right that they haven't kind of gone Trump level big. But I mean, you just read what the Chinese are saying. And basically, their idea is to just gradually stop.
strangle the American economy until it just gives out like a tree spreading roots all over the place until it just kind of you know kills all the plants around it
cutting off access to these core components that America can't source elsewhere in either the short or the medium term will pretty much kill any industry that it touches. It's not just a question of increasing the price or anything like that. The end product is probably going to be in some way defective. So if you want to maintain an industry that's just been starved of actual raw materials,
you have to really force people to consume slop in a sense. You have to say, no, you're consuming this really substandard product. I mean, think what they used to do in communism or something like that. You'll use the kind of cardboard toilet paper because you're just literally not allowed to have any of the other stuff.
even though you know it's barely functional or whatever. That's the kind of direction that things could go in America if these kind of sanctions policies start to bite. And the restrictions that I've seen are very extensive and they're not designed to cause absolute chaos. They're just designed to completely crush the kind of internal organs of the American economy. And I think they'll be quite effective at that actually.
So we'll see what happens over time. But my guess is it'll take a few years for the effects of that to come June. The issue with a policy like that is it's very insidious because it doesn't actually give you an opportunity to respond. By the time
you've figured out how badly you need access to these minerals or whatever, your industry is already dead and you can't rebuild it. You have to then take off all the restrictions on China, get access to the rare earth stuff again, and then start an industry from scratch.
But of course, at that point, your industry's dead and the other guy's industry's still alive. And so it just overtakes all your markets. So actually, I agree with you in one sense that the Chinese haven't gone kind of like throwing down the thunderbolts. But actually, I think what they've done is a lot more insidious. And in the long term, it's much more damaging in a sense, because it...
As I said, it crushes the internal organs of the opponent's economy. And by the time that they realize they're nearly dead and they need dialysis, there's no going back at that point. Your organs are wrecked.
And the other guy is running around fit as a fiddle, you know. So I'm less unconcerned than you. But I definitely agree that it's unlikely that we'll see major fireworks out of the Chinese side. Sadly, we'll see plenty of fireworks because of the consequences of the American side. But of course, we're watching them in financial markets right now. Look, I don't deny that the rare earth metals restrictions are going to be the most consequential thing.
in terms of the US when it comes to China's retaliation, or in terms of the US economy when it comes to China's retaliation. I just don't see this as the death knell of those industries that use it. I don't see it at all. First of all, like, you know, we saw what happened when the Europeans tried to restrict Russian oil. You know, it was just rerouted through a variety of means. Or when the Europeans tried to restrict the sale of certain, you know, items to Russia, I mean...
we've spoken about it on this show, like the Azerbaijan car market has gone through the roof, hasn't it? Like it's, you know, suddenly they have this massive demand that they never had before for luxury and premium class cars. You know, the market will find a way to get rare earth metals to the US. There is a major difference here. China is effectively the monopoly supplier of these goods, right?
If they say they want to restrict the global supply, they can. With Russia, it was us trying to prevent ourselves from buying it, and it was in the Russian interest to send the oil. You see what I mean? If you are the monopoly supplier, you can cut it off. Think about the Saudi restrictions on oil in the 1970s in response to the Yom Kippur War. If you're the monopoly supplier, you can crush it off. And what will happen in that scenario is...
If China cut down the amount of rare earths minerals or whatever else that they're supplying, yes, of course, you can set up a company in Germany and Germany can allow itself to reroute those metals. Problem is, German industry is not going to get them then. What you're doing is you're creating massive artificial shortages. And if another country wants to act as a rerouting hub, they're going to be the ones starved of that mineral.
Right. I understand. But has China actually done that? Like, have they said, look, Vietnam, you bought X number of grams of, you know, this rare earth metal. So that's how much you're going to get in the future. We're just doing this so that we make sure that you're not going to send any to the US. I think they are doing supply targets on them. I think that's their plan.
Right. I mean, there's so little reporting on this, unfortunately, that I don't know that. I did see an article about six months ago that U.S. companies had seen an increase in prices, but I've seen absolutely nothing that suggests that that's catastrophic. And now that Trump's in office rather than Biden...
The press is going to be more than happy to report on any of this happening, and I don't see evidence of that yet. My guess is that it's going to lead to more expensive rare earths, but that's not going to absolutely destroy those US industries that use it. It's just going to make life a bit more expensive for them. That's the impression that I get, but I might be proved wrong. The Chinese might act as a boa constrictor on the world market of rare earths,
And if that's the case, then the US, you know, a lot of US industries will be in serious trouble if that's the case. I've just seen no evidence that they're doing that at present. At the moment, it feels like we're in a bit of a phony war. Like both sides have kind of swung a few haymakers and they're both still standing and they're both staring at each other across the ring. And now we've got this kind of circling process and it'll be interesting to see what comes next. You know, China has responded
restricted the sale of passenger jets it's restricted rare earths going the other way it's restricted the purchase of LNG and it's starting to pull out of private equity and US financial related investments I think this could go a lot further it's got a lot more room to escalate and just a few jabs have been landed that's my basic view but obviously we're going to have to follow it