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: The British ride is starting to fracture on the Ukraine issue, where once they would reliably be called upon to paint themselves blue and yellow and raise a whip round down the dog and dock for more manpads. Now, as the endgame approaches, a group of the plugged in are leaving the big tent.
The civil war that follows may be its own Donbass. Meanwhile, further evidence is in that US firms are quietly reorienting their capital expenditure away from data centers and chips and toward efficiency gains. Some say this is down to the deep-seek effect. So will the hardware-light business model this implies...
end up driving a slow puncture into Silicon Valley. Finally, have you heard of the Trump putt? A backstop against the crazy risks the Trump regime might be running. One that relies entirely on assuming that at some point the government intervenes to arrest a Wall Street bloodbath. It worked in the Greenspan era, but is this a bungee cord without a tether?
But first, punching right. Yeah, so there's a very interesting political divide taking place in Britain right now that I think is going to have extremely important ramifications down the road, which we might go into. I picked this up from a new Statesman article, obviously not a fan of the right or the far right as they probably think it, the Farage reform crowd.
And they kind of say triumphantly in a headline, Trump's spell has been broken. The US president is hurting rather than helping his ideological allies, such as Nigel Farage. The interesting point in this article...
is a poll that the New Statesman cite. I'll just read it out. Even among Farage's base, disapproval of the president is surging, largely due to Trump's treatment of Zelensky. Over half of reform supporters, 53%, view Trump unfavorably, an increase of 25 points in two weeks. So unfavorability ratings of Trump among reform supporters have doubled from a quarter of them to half of them.
Only 26% of the public now have a positive view of him. So in addition to this, Farage's own approval ratings have fallen, with 26% of the public having a positive view. So what's happened here is that Trump has been mean to Zelensky. This is the kind of White House blow-up, I suppose, although...
I don't think that was really Trump's fault, but whatever. That's how it's been portrayed, I guess, in Britain. And this has created a diplomatic spot and a bunch of reform voters, like apparently a quarter of reform voters, because we start with a quarter not liking Trump anyway. And then there was a quarter of like swing Trump likers, I suppose, who really like Zelensky and Ukraine or whatever. And now they're, you know, jumping on the I don't like Trump bandwagon either.
And this is feeding back into lower approval ratings for Farage himself. Now, the latter I don't think is a huge problem. Farage can probably maneuver politically, domestically, domestic politics pretty easily. That's probably part of this. That's up to Farage, and he can figure that out. He's a pretty good politician.
But what's really interesting, and the new statesman kind of obsessing over that, is kind of victory dance on the right or whatever. And I don't think that's that relevant. What is relevant, though, is this cleavage opening up between the American right and the British right over Ukraine. I didn't think it would take this sort of a shape. I didn't think it would be this dramatic.
But I've been thinking this would probably happen for a very long time. And the reason for that is quite simple, that if you know anyone in the American conservative movement, especially in the MAGA movement or whatever, any populist conservative, any new conservative in general, not even kind of MAGA anti-immigrant types, I'm thinking like post-liberals or libertarians or anybody really,
really, in the kind of, you know, the people behind Doge, the people behind kind of the raw populists, and then the kind of post-liberal intellectual types who kind of like J.D. Vance and so on. All of them really don't like the Ukraine war.
It's pretty much a consensus view that the Ukraine war has been terrible on the American right. And that's not just some primitive, you know, pro-Russian, pro-Putler stuff that you'll hear about. It's because the right have a very realistic assessment of what the Ukraine's done, the Ukraine war's done to American power. J.D. Vance has spoken about this openly. He said that it's diminished American power greatly. And they all know that because
Whatever you think about the MAGA right, the people that form the intellectual glue of the whole thing are pretty well educated and they're pretty well read up on the world, whether you disagree with them or agree with them.
It doesn't really matter. They kind of get what's going on in a way that I think even we found quite surprising. The American right are quite advanced on what's going on, not just in terms of Ukraine itself, but on terms of like the multipolar developments, what Rubio is saying, etc. This is a pretty sophisticated foreign policy bunch. They've put a lot of the money and effort behind the Ukraine war and so on. Obviously, they've been paying for a great deal of it. It's kind of their war. Europe kind of just tagged along by the coattails as they usually do.
In Britain, it couldn't be more different. There's very little room to criticize the Ukraine war in Britain. I know most of our listeners are British and they'll know this. They'll know exactly what I'm talking about. But for those who don't really know this,
It's very censorious in Britain, not in a hard sense about Ukraine, although I think there's a little bit of hard censorship going on about Ukraine as well, but in a kind of a soft social pressure sensitive way. People kind of keep their opinions to themselves about it. There's quite a few people in Britain who get what's going on, even quite prominent people sometimes. I think Farage is actually probably one of them. But the social pressure is such that they're strongly encouraged to keep it to themselves.
And so if Trump goes out and attacks Zelensky or tries to shut down the war or whatever, Farage can just keep mum about it. He can just shut up, not say anything about it, and then kind of quietly know that, like, he sort of agrees, but it's not good for a British audience.
Not so much if a quarter of his voters are really spun up on this issue. Then it becomes a serious problem because that quarter of voters are basically reading the British mainstream press. They're watching the BBC and they're getting this hoorah patriotic stuff and how great Ukraine is and how they need to save it and everything like that.
And this is bleeding over into British politics in a really profound way. We can talk about what that means more broadly, but I just highlight the thing that I guess is of most interest to me.
This could very well provoke a split between the American new conservative movement, you might call it, or whatever you want to call it, the populist right, and the British. And by the way, it will also create a split between the continental right-wing movement and the British movement, because the continental right-wing or conservative movement is pretty much in Trump's camp as well.
pretty much all of them. I can't think of a right-wing party, a real right-wing party, like, you get Maloney and stuff. Go and look what she said before she was elected and she was, you know, took the standard populist line. But it looks to me like the British right might end up extremely isolated on this question.
And the reason it's so profound is because there's already a strong suspicion on the part of the American conservative movement and the American right about the British conservative movement. And it's on this issue. I've had a million Americans tell me they come over to London for conferences or anything like that, and they detect that you have a dissident view or whatever on the Ukraine war. And they quietly say to you over a drink or over coffee, everyone's in favor of the war. What's going on in this country?
And you kind of say, yeah, it's kind of like that. And they go, oh, that's weird. I don't like that. The people who are very supportive of the war and very uncritical of it and really into Zelensky and they hate Putler and all this stuff, those people never hear that. They're not aware of it. So they don't understand that the Americans are viewing them very negatively because the Americans are too polite to say it to them.
So this is going to be a real one to watch. I think it's going to have extremely profound consequences for Britain and Britain's place in the world. Yeah, you're absolutely right in terms of the cause of this, Philip. There's hardly any, and when I say hardly any, I really mean kind of close to zero, just to give our American listeners an idea about this. There's close to zero evidence
disagreement or debate on the Ukraine issue within Britain. With the exception of maybe somebody like Peter Hitchens, who is a columnist for the Mail on Sunday and gets the occasional appearance on a talk radio program, for example. But within Parliament itself... Also George Galloway, we must highlight George Galloway. George Galloway is kind of very popular on what I would call the old-fashioned...
left within Britain that kind of pre Tony Blair hard socialist left who Were very skeptical of American power as they sword American imperialism after the war So that's hardly surprising and then you have Peter Hitchens the only avatar of what Americans would call a paleo conservative view of foreign policy the sort of foreign policy that somebody like Pat Buchanan would have espoused and
But there's no J.D. Vance in the British Parliament. J.D. Vance was nominated as vice president. He was a senator, and he was a prominent voice against America's policy in Ukraine. You know, there's nobody like that within Parliament on either bench. There might be...
you know, one or two old-fashioned socialists like Jeremy Corbyn who sit, you know, along, you know, who sit very close to George Galloway politically. But they're entirely ignored. They've been entirely isolated. And within the mainstream media, there's almost no debate whatsoever. Now, Nigel Farage or the Reform Party, which is the insurgent populist right party that is led by Nigel Farage,
They are what I would call Thatcherite. I think what Peter Hitchens calls actually Thatcherites in exile. They're basically adherents to Margaret Thatcher's political ideas. And they disagree enough with the Conservative Party to have kind of broken off, essentially.
So, you know, all of these guys read the Telegraph. And the Telegraph is very jingoistic about the Ukraine war. You know, it has a very specific view on the Ukraine war. And then, of course, you have the BBC. You have maybe other right-wing papers like the Daily Mail and the kind of the establishment paper, the Times. They all have essentially the same view. There's very little debate, even about details. You know, it's like...
When I debate with people on Twitter on this matter, you bring up certain details to them about the history of this conflict. And there's a lot of ignorance and you get this kind of angry response, you know, when you raise a point about, say, the Budapest Memorandum.
When you raise a point about that, there's this kind of like anger, like real anger, because you've raised something that they just haven't heard before, for example, or they haven't considered before. And they think it's somehow outrageous. It's this response that people get when you question their religion. And I think it's very important that Americans understand that. There's much less debate on the Ukraine issue than there was about the lockdown issue in Britain.
And in Britain, there was much less debate about lockdowns than there was in the United States, for example. So that gives people an idea. And I think, just to zoom out and look at the bigger picture a little bit, because I do think this is pertinent, I think this really comes back to Britain's post-1956 strategy. So after we tried to maintain some kind of strategic sovereignty, some strategic room for manoeuvre,
in keeping the Suez Canal out of a Soviet-sympathizing, socialist, nationalist, Egyptian leader in 1956. And the Americans basically brought down the big clunking fist on us and said, if you don't stop this, we're going to crash your economy. And if you still don't stop it, we might blast the Royal Navy out of the Mediterranean. The British establishment followed essentially two strategies. The first was very much,
to stick as closely as possible to Washington on security matters. And the other was to implant ourselves in Brussels and try to join the European Union, as it was then the European Community. And, you know, by doing that, attach ourselves to a big economic bloc. So you have this kind of big security bloc and the big economic bloc. But it also gave it some influence in these quite powerful global centres of influence.
What that meant is we very much had to design our national policies within quite tight parameters to fit with the rules in Brussels economically and to fit with what Washington wanted in security terms. It left quite a small amount of room for maneuver, and it meant that the debates within Britain had to be in very tightly confined spaces
narrowly defined areas, you know, the Overton window for political debate, because of this strategy, had to be quite small. And I think simply because of that, politics has mattered less in Britain than it has in the US. And I think that's especially been the case since the advent of the single market, the European Union single market, which really puts very tight rules in place in terms of what can and can't be done economically.
And also the treaties that Britain adheres to, the US simply doesn't. Like the WTO and the UN Convention on the Rights of Refugees, etc, etc. And this might be a long-winded way of saying things, but it's just that because of all of these international obligations and because of this strategy to really just follow the US on security matters and follow Brussels on economic matters...
It really means that debate has had to take place within this very tightly defined window of manoeuvre. And it's demanded a great deal of consensus, while at the same time atrophying those kind of political muscles that you need to make real decisions. Guys are just used to their debates not mattering so much or their disagreements not mattering so much because there's not much room for manoeuvre.
They're used to just following Washington. Tied into this whole kind of global system because that's simply been the strategy.
And it means that you get this, what I would call, poor, or let me put this way, it's kind of like a nutrient-poor political debate. Does that make sense? Like when you just get this, I don't know, like a packet of instant ramen noodles. It's food, and maybe it has some things that are attractive to the taste buds, but it's nutrient, it doesn't have guts. It's not like, you know, a steak and some broccoli. You know, that has real nutrients. That has like real gusto. That has real guts.
And our political debate is very much like the former. It's that kind of packet of instant ramen. We get to Farage himself. And what I will say about Farage is he's almost like a walking political mirage. I don't want to criticize Farage too heavily. I don't think too highly of him as a thinker, at least, or as a politician even.
But that's not quite the point I'm making here. It's like he's a walking mirage because he is a fantastic media operator. And I think in many ways he's the equal to Trump in terms of how good he is at working the media. And that says something because Trump is superb at that. But the difference between Farage and Trump is this.
Farage's instinct, as I say, is as a Thatcherite, kind of like neoliberal economics or kind of libertarian economics and actually quite socially liberal policy as well. And also on foreign policy, a certain amount of liberalism. You know, Thatcher, for good or bad, was a foreign policy liberal. And that's his instinct. Trump's instinct, though, is something else. Trump is an instinctive nationalist.
And it's that nationalism that has propelled him to power. His instinct as a kind of a populist nationalist has fitted perfectly with the time. And his brilliance as a media operator has propelled him to power, despite, I think it's reasonable to say, and probably Donald Trump would admit this himself, a certain amount of ignorance when it comes to public policy and the policy minutiae. Farage, on the other side, has been propelled...
to notoriety. He's been propelled to popular recognition because of his superb media operations. But his political instincts fit the zeitgeist of something between like 1979 and 1985. He doesn't necessarily fit that political, you know, the coming wave of right-wing populism in the same way that Trump does. So, you know, I think
You're 100% right. There's a very clear moment here where there's going to be a split between the American populist right led by the MAGA movement and Trump and Vance. Although the MAGA movement is a kind of coalition itself, you've got the kind of Silicon Valley tech bros guys, and you've got the kind of the J.D. Vance slash Steve Bannon wing, which is more left-wing economically. But anyway, there's going to be a split between that
and the Farage kind of populism, which is really, it's just the Thatcher Conservative Party, basically. It's essentially the current Conservative Party, but with a few popular slogans slapped over the top. It's a very different beast, and on an issue like Ukraine, where there's very little debate in Parliament, very little debate in the media, and therefore most of Farage's voters...
will be informed by a media and political debate that is just entirely one-sided and shamefully so. I mean, it's truly shameful, the quality of debate on the Ukraine matter in Britain. Like, as a nation, we should be ashamed. Like, I sometimes feel sickened by the stuff that comes out in the media and that is said in Parliament. It's such a horrendous fantasy bubble and it's so poor.
So, you know, you have a voter base informed on that. And then Farage himself, when you look at Farage, he, you know, he's basically like a Thatcherite. He's not going to take a more interesting view on Ukraine in the same way that, say, J.D. Vance always did. And you notice that J.D. Vance always has. Whereas you'll notice that Farage kind of swings this way and that with political fashion. He doesn't have J.D. Vance's serious intellectual thought.
So the ingredients are there very much for a foreign policy split between the populist right in Britain and the populist right in the US, and even potentially the populist right in Britain and the populist right in Europe.
Now, you know, that might not be strong with, say, Maloney and Farage, but it definitely would be between Farage and the IFD in Germany. And it probably would be with Farage and Marine Le Pen in France. So Britain could find itself, you know, very isolated here because it has not a single party. I mean, the party I'm a member of, the Social Democratic Party, is more in line with the sort of thing that Trump would want in foreign policy terms.
But the SDP, the Social Democratic Party in Britain, is tiny. It doesn't have a big media profile. So, you know, there's no real party of size and scale that could fit, potentially, with the world that's being created at the moment. And that's a problem for Britain. Because Britain could find itself completely out on its own, playing by rules that no longer exist, dealing with a world that absolutely no longer exists.
and therefore it could find itself or it could push itself actually into a weaker and weaker position through its poor assessment of reality and through its policies that
that follow rules that simply are no longer relevant. It's a big problem, Philip. Yeah, just to give some sense of if you're a non-British listener and you want to get a sense of what Andrew's saying about the insanely low quality of knowledge about the conflict, go and watch the interview or exchange between Piers Morgan and Tucker Carlson. And you'll see it. Piers Morgan has absolutely no idea what he's talking about. He keeps referring to his brother-in-law who's in the military. You see this a lot in Britain.
like somebody has a family member in the military or something and they give them the real goods on what's going on in Ukraine and it's just MOD propaganda it's awful stuff it's really lowbrow
I'll push back slightly and defend Farage. At the beginning of the war and about a year into it, Farage was pretty critical of it. I think his instincts on the war are pretty accurate. I think he actually knows more about it than he lets on to. It's his base and the rest of his party and his surroundings that are constraining him. I've talked to some people who know Farage and they've confirmed that to me.
But it doesn't matter at the end of the day. He has to try and get elected by the people who vote for reform. And so he has to reflect their messaging in some way. So he's boxed in. It doesn't really matter what he thinks.
The fact that Reform are basically a kind of Thatcherite party and that increasingly British politics is trapped in amber, as you say, is another key problem here. Because this is another point of tension between the American and the European populist, I don't even like the term populism, call it new conservatism, and Britain and British conservatism. And here's the reason that it's such a problem.
Back in the 80s, when Thatcherism and Reaganism came along, Britain actually led on the intellectual movement. Now you can think what you want of Thatcherism, of the neoliberal, the kind of hardcore neoliberal policies or whatever. You can think what you want about that. The fact of the matter is Britain was a serious player in the formation of that intellectual program.
Friedrich von Hayek was based in London, famously. The Institute for Economic Affairs was there, coming up with many of the monetarist doctrines. The monetarist experiments, the real ones, took place in the Bank of England, and they were kind of sheepishly copied by the Federal Reserve under Paul Volcker, who was never even a monetarist.
The ideology of Thatcherism was much more purified in Britain and it was much more intellectually refined by these ideological liberals or libertarians than it was in the United States. And the United States always looked over to Britain for guidance in that. The old Reaganist movement always really respected British input on that.
And if you were a British Conservative back in the 80s or even in the 90s, you could land in America. You can probably think of videos that you've seen from that period of British Conservative intellectuals going over there and just being really respected by American Conservatives.
that world no longer exists. The Americans view British conservatism as largely backward anyway. They don't see much ideological development there. It's very much, as you've put it, Andrew, it's trapped in amber in 1985. The intellectual model of it, and I don't mean this by the way everyone in Britain, this is absolutely not the case, but I'm saying at the quasi-popular level, at the political level,
It is kind of trapped, and I'm Amber. There was a little bit of flirtation with national conservatism, as you might call it, but I was there for it. It never really took hold. There was still this really strong 1980s vibe that you allude to.
And the Americans have always found that hard anyway. I think the basic operating principle that they've had until now is that Britain will catch up eventually. We'll just be patient, work with the relevant parties, and eventually they'll stop talking about these ideas that are 40 years old.
they'll see the light. And just to give one example in that direction, I think the debate around family policy in Britain has actually been quite good. It's not a libertarian debate. It's got some good supporters. It's got some articulate people. It's got public attention. I was kind of part of it. That's fine. And so the idea was, well, we'll just kind of drag them along and eventually they'll see the light.
If this Ukraine issue kicks off, that's not going to be the case. That's absolutely not going to be the case. The American right are going to turn on the British right because they feel like they've been dragging them along anyway. They feel like they're a little bit of a dead weight. I don't want to be mean about it, but that is how it's perceived.
And if that dead weight starts kind of kicking and screaming and saying, you're terrible for not supporting Zelensky and Trump is a barbarian. Okay, the Americans are going to tolerate that for about five minutes and then they're not going to turn up at your conference anymore. And then you're going to realize the Europeans aren't going to turn up at your conference anymore. And it's just going to be a conference of you and a couple other people in Britain and
the down of power talking about ideas that were passed around in 1983. And this is the last thing I'll say about this because some of our listeners aren't new conservatives or conservatives of any stripe. Why is this important to them? Because whether you like it or not,
The conservative movement, new conservative movement, is the most florid, shall we say, the most vibrant political intellectual movement around at the moment. That may change. There may be a rejuvenation of the left in five years, in ten years. We see some interesting things around Sarah Vagan Connect and so on, nationalist leftists or something like that. I'm open-minded about that. I'm just saying it's not there right now. So the intellectual political movement right now is on the new right.
And if Britain see themselves frozen out of that box, or they see themselves isolated in that box, British politics itself is going to start to wither. There won't be a replacement of it on the left. So when the new statesman thinks that they're dancing on the grave here of Farage or of Trump or someone like that, not that, you're just dancing on the grave of Britain. School of Hardware Knocks.
David Goldman, the intellectual and Asia Times columnist, posted an interesting chart, I think today or yesterday, as we're recording this, it's Tuesday, and it showed that the Hang Seng Index, which is the main stock market index in Hong Kong,
which itself is the place where essentially international investors, you know, go and invest in Chinese stocks because it's much more difficult to do so in Shanghai. So the Hang Seng, which is like the FTSE 100 in the UK or the S&P 500 in, you know, in the US, it's that equivalent. So the Hang Seng is, you know, has actually gained around 20% this year. It's in quite a big bull market, a bull run at the moment.
Now, why is this? Well, it could be because the Chinese look as if they're going to announce some quite serious fiscal stimulus. And usually that's always very good for stock markets. There's a whole range of things that they're looking to do with regard to debt relief within the regions, etc., etc. And as I say, investors usually look at that favorably and start investing money in equities and stocks. It could also be because, as far as I understand, investors are looking...
kind of more benignly at the potential for Trump and Xi to reach some kind of modus vivendi, which doesn't involve a trade war and doesn't involve kind of spiraling toward an actual hot war. You know, it seems that the word on the street is that Trump will impose some tariffs, but they won't be so huge as to compel the Chinese to respond. But I think a far more interesting explanation is
is one of our running themes here on multipolarity. And that's the deep-seek effect. And in fact, David Goldman posted a chart which shows that the Hang Seng tech index, which is their equivalent of the NASDAQ, has actually increased by 45% this year. So that suggests that this kind of growth and the overall Hang Seng has been driven to a good degree
by tech stocks. And there seems to be a growing recognition among investors of something that we've been saying for about six months. And that's namely that the Chinese are far closer to the US, even in the areas that the US thought it had a decisive advantage, namely in artificial intelligence and the production of chips. I think what's really interesting about this is that...
It's been clear since deep seek arrived that China had caught up in the prime category that the US was hoping to defend its lead in. You know, a lot of US sanctions and trade restrictions on China were focused on either artificial intelligence itself.
or on the hardware required for artificial intelligence, the semiconductors, the microchips, the GPUs, the data centers, all of that kind of stuff. But it appears now that the Chinese have caught up. And the picture that's emerging is that actually the Chinese have developed a series of mutually supporting and overlapping tech ecosystems.
So that's in like semiconductors, artificial intelligence, electric vehicles, battery technology, you know, like solar tech, automation and so on and so forth.
And what happens is each advance in each one of those ecosystems helps the others. For instance, if they make an advance on battery technology, for example, and they are now undisputedly the world leaders both in the volume of battery production and in the advances that they're making with new forms of lithium-ion batteries that can store more energy and are more efficient, etc. So if they make an advance in that battery sector, that helps their electric vehicle sector.
And as they dominate the electric vehicle sector, they can gather more data, which helps them on things like self-driving algorithms and software.
And that also helps with things like the development of LiDAR, right? And those two things can help with the development of artificial intelligence. And because they've got that artificial intelligence, then they can, you know, they have this big market for their homegrown graphical production systems and so on and so forth. So all of these tech areas that they've done, all these ecosystems that they've developed are mutually supportive of each other. And each step in one helps, you know, each leap forward in one helps the other.
And I think this is a really important story, you know, not just for China, but especially for the United States. Because as we've said for a while on this program, you know, the U.S. has pinned its hopes very much on the tech sector and, you know, artificial intelligence and some of the Elon Musk whiz-bangery in areas like electric vehicles and rockets and all the rest of it.
And they've essentially said, like, you know, look, we've lost our manufacturing sector or we still have significant manufacturing sector. They're not the manufacturing powerhouse that they were in the 1950s and 60s. And they're not the manufacturing powerhouse that China is. But we still have these great human resources that can produce these fabulous ideas that will give us an edge in certain areas of tech.
And it's this kind of AI and these GPUs and semiconductors where we either control the tech or we control key bottlenecks in the logistics chain of that tech that can basically give us an advantage in the 21st century economy. That gap has now disappeared. The other problem that I think the Hang Seng and the Hang Seng tech index rising so rapidly this year, going into a real bull market this year, the other problem is that...
You know you've mentioned before Philip that the that the depth of the market for foreign investors in US Treasury bonds is Not what it was you know from memory and you can explain this better than me but from memory you said that this kind of started during the 2008 credit crisis when you know, you know, it's felt that you know foreign investors probably felt that they'd taken quite hefty losses and
on US assets so perhaps it wasn't necessarily the best place for them to dump their money anymore and they had to you know of course they're still going to put some there by necessity but not as keenly or as kind of slavishly or completely as they once did and
But obviously that was made worse by the freezing of Russian assets and the freezing of Russia out of the Swift system, which basically said, if ever you have any problems with the US and foreign policy terms, then your national, your sovereign investments and the investments of your rich and, you know, your rich citizens are not safe in the United States.
And this has laid out the margin to fewer international foreign buyers for US treasuries. Well, what's taken the place? What's allowed the US...
to still, you know, what's funded a massive U S trade deficit, what's funded the U S living a lifestyle much higher than its levels of production would ordinarily allow for. Well, what's done that is this massive surge in the U S tech sector, like the magnificent seven, the fangs, whatever you want to call them these days. Now,
If they're not so attractive anymore, and certainly if you look at the P.E. levels, you're looking at, I think I'm right in saying it's, you know, the P.E. of the Nasdaq is still like 25 or like 25x. And if you compare that to the Hang Seng, it's like 12x. So it's like, you know, more than twice as valued in price over equity terms. And if suddenly, you know, China looks like a more interesting bet, or even if it looks like,
good enough tech bet so that at the margin people move across, people float from New York to Hong Kong in terms of their investments, then I think that could actually pose quite a problem for the US financial system, the US economic position, right? It's not necessarily just the fact that they have competitors in this area that they thought they would have a decisive advantage that was defendable.
But it's the fact that now investors are realizing it as well. Yeah, couldn't agree more. This is what struck me, and I think you probably too, when the DeepSeek thing happened. If basically it ran something like this, if DeepSeek is what it advertises to be, that is, I don't just mean the product itself, but the fact that China's basically catching up with Silicon Valley, as you said, there's not really a very clear cutting edge business model for the United States of America.
And after Deep Seat came out, there's been, I don't know how closely you follow this or how closely other people have followed this, but there's been a very strange reaction. It's been like a split reaction. Some people call it schizophrenic, but it's a misuse of the term. But there's a split personality, you might call it, reaction to this, where...
The markets, and I'll refer to some of what's going on there in a minute, but the markets are actually taking it quite seriously. Nvidia stock is not doing very well at the moment. Now, it's not falling as fast as Tesla, but it's not doing great. So the markets are, I don't think they're factoring in the extent of the changes yet, but they're at least directionally factoring it in. They're moving there.
Meanwhile, if you read the press, it's as if Deep Seek barely happened at all. It got about a week's coverage, if even. And then it's only now discussed in page four articles on very specific issues. But all the hype around it has gone. And what I think this is, because I've looked into it quite a bit,
is a pretty basic public relations campaign on the part of Silicon Valley. I think I've said this in the podcast before. They've gone into PR mode because they're trying to put up moats, as they say in finance. They're trying to defend the Ford here.
They don't really have a technological response to this because the nature of the technology is to level the entire thing. A creatively destructive act, in a sense. It's saying, well, the old thing's garbage. Okay, well, are you replacing it with a new hyper-profitable model? No, we're commoditizing the whole thing. Oh no, how will you make money? Oh, we build things in China. That's how we make money. And then, you know, there's nowhere really left for the American tech sector to go at that point. They're boxed in. They have to compete with a commodified product.
It's a bit like, if you want to put it this way, it's a bit like forcing the big pharmaceutical companies to compete with generic drug producers. You take away their IP and they can't compete because a drug is worth a dollar or something. It's worth 50 cents or something like that. It's only the IP that's worth something. Now, the tech sector worked a little bit different to that, but the effect that DeepSeek has had is pretty much equivalent to that.
I think you're absolutely right about the fact that Silicon Valley, in a sense, was kind of propping up the American model. It's actually David Goldman, who you referred to at the start, that's pointed this out. He pointed it out to me. I didn't realize it, actually. David's a very good economist. I miss things that he doesn't. He pointed out to me that a decent part, I think it's more than half, of current external borrowing by the United States is no longer with U.S. government debt. It's with equities.
You can borrow with equities. We won't get into how the trade account works, but you can on the capital account.
And we've seen that before. We saw that in the dot-com bubble, but it's a very unstable situation. And as you say, we're no longer post-2000, the dot-com bubble. We're not post-2008. We're first of all been through, the foreign investors, as you've said, have been through 2008. And so if they experience anything like that again, they might not come back to chew at the cud a second time.
And the second point is what we've just been referring to. Maybe this whole tax sector is kind of on its last legs.
So let me just talk about a report that I saw, I think, today, this morning in Bloomberg. Again, this is kind of buried on the fourth page, but it's the most interesting thing I read in the financial press all week. And I quote,
those are government-sized spending expenditures, on data centers and computing resources for AI in 2025, a 44% increase from the year prior, according to a report published on Monday. That amount is set to rise to $525 billion by 2032, growing at a faster clip than Bloomberg Intelligence expected before the viral success of DeepSeek.
Until recently, this is the key part, much of the investment in artificial intelligence has gone to data centers and chips that are used to train or develop massive new AI models. Now, tech firms are expected to move more spending to inference, or the process of running those systems, after they've been trained.
What they are admitting is that they're moving away from data centers and chips, that is physical things, buildings, data centers, chips, physical chip products, and they're moving to inference. And whatever, if inference even means anything, the point is they're moving from hardware to software.
And that's exactly what DeepSeek did. It disrupted the hardware market. It disrupted the fundamentals of this industry by drastically improving the efficiency of the software. Now Silicon Valley are responding. But by responding, what they're admitting to is that there's a new game in town. And that old hardware, the data centers, the chips, they don't say it directly there. They still insist that they're spending $371 billion or some wacky number. I don't really believe that. But
What they are admitting to is that spending on computer chips and on data centers is going to be less. Well, that's propping up a good deal of the NASDAQ industry of the index right now. So NVIDIA is the company that sells those chips. The market's starting to factor this in. It's not, it's a trickle rather than the flood right now, but it could turn into a flood.
What we're getting over time is a weird kind of almost censorship of the deep-seek story, an unwillingness to talk about it. And any time it is talked about, a little tiny little leak will come out which points you in the direction that there's a storm coming. And that storm could wipe out a decent portion of Silicon Valley. That's my feeling, anyway. Put away.
Actually, related story to the last story that very closely related with separate stories are the emergence of the so-called Trump pot.
The Trump put is here with us. Now, what is a Trump put? Is it like a shot put? No, not quite. It takes its name from the Fed put. This is the old practice by Alan Greenspan that whenever the stock market looked like it was going floppy in the late 90s and early 2000s, Greenspan would make noises that the Fed was going to ease policies and juice the stock market.
It's called a putt because a putt is the way you buy an option to bet on a stock or on the stock market in general. Kind of a silly term. Finance people love these silly terms. But anyway, the Greenspan putt was there to kind of backstop the market, as it were. Now, it works until it doesn't. You always do eventually if you do these things.
The Greenspan put was there to support the market. So what's the Trump put? Well, it's the idea that if the Trump administration is doing crazy stuff with trade policy or really risky economic policy or whatever, that at a certain point they'll realize that the markets are responding negatively because the markets aren't doing so well right now, and they'll come in with a Trump put and reassure the market.
Now what this really is, is kind of blackmail by the markets. It's saying we expect a Trump putt from the Trump administration and they're trying to put a little bug in the ear of Scott Besson, the Treasury Secretary there, to go and whisper to Trump, it's time to do the Trump putt, sir.
This is what's going on, okay? And there may even be the beginning signs of trustification here. I'm not saying wholly consciously, but there may be kind of the groundwork being laid for all that, and it's worth watching. But we won't go into that because we've talked about it. I think we talked about that last week, but it still holds here.
The reality here is very, very different because look at what we just talked about in the previous section about these developments around the AI market, about the fact that Tesla is going through the floor, that Nvidia isn't doing so well. Does this have anything to do with tariffs? No, it doesn't have anything to do with tariffs.
What they're saying is that the tariffs might create a recession. Tariffs don't create recessions, okay? They may create inflation. True. That's not a recession. In fact, tariffs should boost the profits of American companies. And it's the American stock markets that are going down right now.
now. So none of this narrative makes any sense. What's actually happening is what we referred to in the previous segment. There's a bit of a washout going on on Wall Street, mainly due to the tensions around DeepSeek and so on. Also Tesla, which is having problems of its own that go back even further than that. There's a bunch of companies with problems, companies that were around Silicon Valley, the Nasdaq and so on. You know, Tesla's ultimately a spin-off of Silicon Valley in a way. These are troubled companies.
that are coming up against foreign competition from China. That's one of the main driving forces here in both the EV market and also in the AI market and the software market that we were talking about previously. And the market is getting jitters and it's heading down. And what's happening is the media is trying to put this, trying to pin this on the Trump administration and their talk about trade and so on.
Now, the problem with this is that it can become a self-fulfilling prophecy. I don't think these market jitters have anything to do with the Trump administration or anything like that. But what tends to happen if you have a major bear market or a stock market decline, you only get to live through these a couple of times in your life. What happens when that happens, if that happens, I'm not guaranteeing it will, but if that happens, is what happens is usually something fundamental changes at the beginning.
That's what we're talking about here. A real technological development with DeepSeek, real competition between the EV producers in China with their cheap, high-quality vehicles, and Tesla, which until now, pretty much, or until recently, dominated global EV markets. Everybody in India and Brazil, anyone who could afford it, was buying a Tesla, right?
These are real processes. And those real processes will take a bite out of the market. And you'll start to see the market go down. Now, the majority of people want a coherent narrative for why the market's going down. And if you go into some complex explanation that DeepSeek's done this and Tesla's having these problems and there's no real commonality, there's no link between the two of those except maybe China rising, right? But ultimately, the DeepSeek technology is different technology from the cheap Chinese EVs.
So all these things come together and start putting pressure on the stock market index. So they reach for something simple. And they reach for something that explains it all. And it's usually something that's in the news a lot. And bonus points if you can put a face on it. And Trump's the perfect face to put on this. The problem with it is that when you've got to that moment where you have a unifying narrative around the beginning of a bear market, it can become self-fulfilling.
Because at that point, people start saying, oh, Trump was out on Friday talking about tariffs. Better sell the S&P on Monday. And then it starts becoming a self-perpetuating spiral. So my concern is that this talk about a Trump put
Number one, not a concern. This is just reality. The Trump putt is a message by markets that something like the gangster coming to your shop and saying, "Nice store here. It would be a pity if somebody were to burn it down." That's what that talk's all about, first of all. But second of all, even though it's kind of rubbish in my opinion,
It could well become a self-fulfilling prophecy. And I think there's a very real risk here that we go into a serious bear market and we could see a major stock market decline, which could create a recession, could be chaos for the Trump administration. It might even be soft landing like the 2000s tech bubble, which ended up just petering out and didn't cause much of a recession.
It could happen. So definitely one to watch. And I think the narrative is basically going to be around this Trump put.