1189: Edward Fishman | Why the Dollar Is America's Most Potent Weapon

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Coming up next on the Jordan Harbinger Show.

Sanctions, economic warfare take a lot of heat.

People are like, wouldn't we be better off through development assistance and peace rather than economic war?

But like the reality is the alternative to economic war often isn't peace.

It's actually a real nuclear crisis.

It's actually real war.

We should be willing to risk quite a bit to make economic warfare succeed against the likes of Russia and Iran because the alternative is worse.

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Remember, when crippling an adversary meant blockading its ports and shelling its cities?

Today, a single press release or even a tweet from Washington can wipe billions off a rival's balance sheet before lunchtime.

On this episode of the show today, I'm joined by former State Department sanctions architect Eddie Fishman, author of Chokepoints, American Power in the Age of Economic Warfare.

Fishman pulls back the curtain on the quiet arsenal that the U.S.

now wields, leveraging the dollar, advanced microchips, even the plumbing of the global oil trade to squeeze enemies without firing a shot.

But the game is changing fast.

A second Trump term could supercharge tariffs.

We're already seeing that now.

Could fracture supply chains and potentially shove Europe or other countries towards China's waiting embrace.

Meanwhile, Beijing, Moscow, and a motley crew of BRICS nations are racing to build their own economic weapons, everything from central bank digital currencies to rare earth mineral monopolies.

So in the next bit here, we'll explore why friend shoring might make the next shooting war more likely, not less, how a 60%, for example, tariff on Chinese imports could inflate the price of your next phone or even a gallon of milk, and which hidden choke points in AI and semiconductor supply could decide who wins the 21st century power game.

So if you want to understand the forces that'll hit your portfolio, your paycheck, maybe even your peace of mind in the years ahead, stay tuned.

Fishman doesn't just sound the alarm.

He shows us the blueprint and even a sliver of hope for navigating the coming age of economic warfare.

So here we go with Eddie Fishman.

Thanks for joining me today, man.

I appreciate it.

Jordan, great to be here.

So your book, Choke Points, sadly not a book about jiu-jitsu nor BDSM.

It was interesting nonetheless.

It's a big book, man.

I think it's like close to 600 600 pages, which one, you researched, but two, what I'm trying to convey here is there's a lot of different elements of power.

The U.S.

has sort of been known as a military and economic powerhouse, but you're taking a more maybe holistic look at power and different levers of power instead of just military and maybe, I don't know, the dollar itself, which we'll get into.

Yeah, no, that's totally right.

What I'm looking at here in the book is America's asymmetric leverage in the global economy.

The book title is choke points.

Historically speaking, when you think about a choke point, you're thinking about geographic features like the Bosphorus, which is this narrow strait that runs through the center of Istanbul, connects the Black Sea to the Sea of Marmora and the Mediterranean beyond.

In the news recently is the Strait of Hormuz, where you got 20% of global oil flows going through it every single day.

And ever since the beginning of time, you know, countries, empires that control these choke points have immense leverage because they can cut off their adversaries from them.

Or if you want to unseat an empire, cutting off their access to a choke point is a good way to do it.

What's happened in the wake of hyper-globalization in the 1990s, when you have deep integration of financial markets, supply chains, it created these invisible choke points like the dollar-based financial system, like semiconductor value chains, like energy supply chains, where in some cases, one country has a dominant position.

and there are few, if any, substitutes at all.

And what that has done is without having to go out and blockade the Strait of Hormuz, the U.S.

government can actually just cut off countries from access to the dollar or maritime insurance and impose just as much economic harm on them.

What you've seen really in the last couple decades since the origination of these invisible choke points is the threshold for deploying really hard-hitting economic pain on other countries has gone way down.

You don't need to deploy naval force to do it, but the impact of economic warfare has at the same time gone significantly up.

Yeah, so it sounds like, hey, good news.

We don't need a navy to do this blockade anymore.

But it's also like, well, is that good news?

Because if the U.S.

is the one with the Navy, let's say in this case, maybe we want the bar to be pretty high for someone to blockade something.

But Iran can just say, yeah, we're just going to drop a bunch of sea mines in the Strait of Hormuz.

Good luck transiting your oil and your products through there now.

You're not going to get insurance to drive a big tanker ship through a mined strait.

So this asymmetric warfare is...

dangerous for the big guys, which is us, essentially.

Yeah, look, it's like any other revolution in the use of power.

One thing I'd probably compare the current age of economic warfare to and how economic warfare has changed since the beginning of the 21st century is the advent of air power on military force, right?

Before you had airplanes, if you wanted to actually do harm to an enemy's cities, you had to actually put troops in harm's way.

You were going to risk blood and treasure to do really anything significant.

But then when you have an airplane, you can just fly over another country's cities or their industrial plant and bomb them and potentially inflict dramatic damage without really suffering anything yourself.

And I think in some ways it's a moral hazard, right?

And it makes it easier to use military force.

Because of these invisible choke points that really are created in the wake of hyperglobalization, you now have the same almost moral hazard with respect to economic warfare.

And that's why, despite all the talk of Trump with unprecedented tariffs and everything, if you look at every single president, U.S.

president in the 21st century, from Bush to Obama to Trump, his first term to Biden, now to Trump again, you've seen the imposition of sanctions and other weapons of economic warfare double with each administration.

And so there's clearly this structural trend that's happening.

It's because it's become almost irresistible.

And what I'd also say is that other countries do, as you mentioned, have similar power.

And we saw this recently when China, just by virtue of cutting off American companies from rare earth minerals, was able effectively to win the first chapter of the Trump-China trade war in the second term.

Yeah, I want to talk about rare earth metals in a moment because it was like, these are a huge deal.

Ah, they're not a big deal.

Ah, we have our own.

Ah, but you can't mine them.

I mean, it just really got confusing really fast.

These levers of power are interesting, but some people are going to say, hey, last I checked, we're still bombing bunkers in Iran with explosives.

So why are we still using those levers when we have other easier, cheaper, safer levers that we can pull?

Yeah, look, in some ways, the military action that Israel and the U.S.

took against Iran in recent weeks is a result of a failed bet by Donald Trump in 2018, because we had actually successfully got a nuclear deal with Iran, right?

So between sort of the beginning, earlier years of George W.

Bush's second term and 2015 in Obama's second term, the U.S.

had successfully deployed really substantial economic leverage on Iran, leading to the rise of an Iranian government led by Hassan Rouhani in 2013 that explicitly wanted to negotiate away the nuclear program in exchange for economic relief.

And there was a deal struck in 2015 that prevented Iran from having any high-end rich uranium.

So right now we're talking about these fears that there are 400 kilograms of Iranian high-end high-enrich uranium, where we don't even know where it is, despite the fact that there have been these strikes.

As of 2015, because of the JCPOA, the Iran nuclear deal, Iran had no high-enrich uranium, zero kilograms, right?

What Trump gambled in 2018 was that if he pulled out of the deal, he could impose what he called maximum pressure sanctions, basically even stronger sanctions than Bush and Obama had done.

to get an even better nuclear deal, right?

That was Trump's bet that he made in 2018.

And by virtue of Israel's unilateral decision, I might add, to attack Iran's nuclear strikes in recent weeks that the U.S.

eventually joined in on, that marked the final failure of that bet.

I still posit that we would have been better off had we stayed in that nuclear deal and never pulled out of it.

This restriction on Iran having high-in-rich uranium wouldn't have expired until 2030.

We would have had many more years to potentially get this thing right.

But look, I think what it shows is that economic warfare is powerful, but it's not a cure-all.

You're not going to achieve maximalist objectives through sanctions alone.

That makes sense to to me.

I don't know the ins and outs of that deals.

I really don't know the finer points of that.

So I'm going to stay out of that quagmire while people are angrily typing the comments.

So you guys can delete that and just continue to listen.

But you're a former top State Department sanctions official, right?

So I'm curious, what do you think when people say things?

So, well, sanctions against Iran didn't work.

They're building a nuke.

You covered that.

But what about sanctions against Russia?

Those didn't work either.

They're doing okay right now.

The war effort is still going strong in Ukraine.

They're in a wartime economy.

Maybe sanctions don't work against Russia either.

What do you think about that?

Sanctions and economic warfare overall, they're just a form of coercive statecraft, right?

They're a way to try to build pressure on a foreign government to try to force them to do something that they otherwise wouldn't want to do.

Generally speaking, this is true in life, just as it's true in diplomacy.

Coercion is really challenging.

And it's particularly challenging when you're going up against a foreign leader who's got control of a very powerful state.

And it's interesting because in addition to working at the State Department and Treasury on sanctions, I did a stint at the Pentagon too, where I worked for the chairman of the Joint Chiefs.

And never once during my whole time at the Pentagon did I hear anyone say, well, does a bomb work?

Obviously, a bomb works to blow things up, but it's pretty challenging to translate that damage into a political outcome that you seek.

I think the same is true of economic warfare.

Because of the choke points we talked about earlier, the U.S.

does have really incredible power.

Single-handedly, we drove Iran's economy into a grievous recession in 2012, 2013 by virtue of our sanctions that largely were unilateral, right?

And even in 2014, the first Russia sanctions, which weren't nearly as strong as the 2022 sanctions, where in 2014 we cut Russia off from capital markets.

Basically, we prevented their big companies from raising debt on U.S.

markets.

That did force Russia into a dramatic economic crisis in the winter of 2014-2015.

And I think unfortunately, even though we had Russia on the ropes, it was leaders like Angela Merkel in Germany who were nervous about pushing Russia too far that then sought this Minsk agreement in February of 2015.

I think prematurely backed away without trying to actually get Russia fully out of the Donbass.

And that wound up being a big mistake in retrospect.

So I think oftentimes we don't push economic warfare far enough, really, to get the outcomes that we want.

That's interesting.

You think the sanctions don't go far enough?

I mean, I think a lot of Americans probably who pay attention to this stuff agree with that.

It's definitely really tough when you see the Europeans going soft on Russia, but they're also dependent on Russian oil because of poor leadership and obviously failure to see the obvious future that even teenage me saw, or almost slightly past teenage me saw coming down the pipe and thought, oh, well, what do I know?

I'm a college freshman.

This sounds like a bad idea, but I'll leave it to the experts.

Well, here we are.

Good job, experts.

But the United States holds the most critical choke points today, right?

Would you say that's accurate?

We got the dollar as a reserve currency.

We got the military power.

We've got maybe semiconductor supremacy, I would say.

Yes, we work with Taiwan and Israel and those other countries countries on those things, but I would imagine China is racing to close the gap there.

I don't think Russia is going to come up with a semiconductor industry anytime soon, but I know China is actually contention to close the gap on a lot of these.

What choke points are there right now that you're chiefly concerned about?

We got military power.

We're maybe not talking about that particularly.

What's first in your mind as a choke point that we should be paying attention to?

Yeah, so by far the most important choke point in the global economy today is the dollar.

The dollar is this essential part of just the entire global economy.

Sometimes we talk about the dollar as the world's reserve currency.

60% of all foreign exchange reserves are in dollars.

That's the money that central banks hold around the world.

But I think even more importantly is looking at the dollar as the default medium of exchange for all global commerce.

90% of all foreign exchange transactions use the dollar, which is just remarkable because you have literally, just for scale, this is pretty wild.

$7 trillion of foreign exchange transactions every single day.

It's by far the biggest financial market because even when two countries are trading with each other that are not the U.S., like India and Saudi Arabia trading with each other, there's going to be multiple foreign exchange transactions to enable that trade to happen.

And almost always the dollar is going to be part of it.

So it'll be the Indians taking their rupees and converting them to dollars and then taking those dollars and converting them to Saudi reals to pay the Saudis, right?

Or vice versa.

Because banks around the world, it's too complicated for them to hold large stocks of every currency they might encounter.

They're only going to have their home currency as well as the dollar, which is sort of this like neutral way station.

And because of the dollar's essential role, that's what gives the U.S.

government the ability to interdict transactions that seemingly have nothing to do with the United States.

We talked about Iran, right?

The key sanctions on Iran that drove them into a big recession in 2012, 2013, that led to the election of Irhani and ultimately the Iran nuclear deal.

They were unilateral U.S.

sanctions that prevented China from buying as much Iranian oil as they wanted and prevented India from buying as much Iranian oil as they wanted.

And also, even more importantly, channeled payments from China to Iran into these escrow accounts.

And the thing that's remarkable is we did that just by going to Chinese banks and threatening their access to the dollar, saying, if you don't comply with this, you will be cut off from the dollar.

Wow.

Yeah.

That is quite potent.

I mean, just the threat of it.

I know we did something similar to North Korea a while back where they were moving money around.

And I can't remember the exact bank that it was, but basically somebody in the U.S.

government was like, hey, we know you're handling millions of dollars or tens of millions of dollars in North Korean money.

If you keep doing that, you can't use the dollar anymore.

So, pick who your friend is: North Korea, which has an economy the size of, I don't know, Dayton, Ohio, or something like that, or the entire free world.

And the Chinese bank was basically like, the jig is up.

Give the no-cos their money back and pretend we've been following the rules this whole time.

Get your ass in line.

Does that ring any bells?

Does that sound familiar to you?

Yeah, no, I'm glad you brought this up because I think it helps illustrate, in some ways, what was the foundational realization that enabled America to weaponize the dollar.

It happens in 2005, September of 2005.

The Treasury Department under this new division called the Office of Terrorism and Financial Intelligence, led by a lawyer named Stuart Levy, basically comes up with this novel idea, which is maybe we can lead the global economy to de-risk from North Korea.

They basically persuade banks of their own volition to cut ties with North Korea.

All they did was they found one bank in Macau, a Chinese province, that was managing something like $25 million of North Korean money.

It's not very much money, but that's what they were doing.

And we declared them what's called a primary money laundering concern.

This happened in September of 2005.

And we assumed in the U.S.

government that this might lead to this one bank really being isolated, maybe going under.

And it did, by the way, this Bank of Delta Asia did effectively go out of business very quickly.

It had to be rescued by the Chinese government.

But even more importantly, it did lead to this cascading effect where even Chinese banks and other banks in the region started saying, wow, if I'm doing business with North Korea, maybe I'm going to be declared a primary money laundering concern by the U.S.

government.

Maybe I will be cut off from the dollar.

And so, what this sort of aha moment that officials like Stuart Levy and others in the U.S.

government had is you could almost use the private sector's own risk calculus, their risk-benefit analysis that they're making.

as a weapon.

If you could change that calculus and make it seem, wow, it is really not worth the risk of touching any North Korean money because I might lose access to the dollar, which is effectively like a circulatory system for the entire international financial order.

I'm not going to even risk being in business with North Korea in the first place.

This is definitely a weapon of warfare because if you try to do something like that in the business environment inside the United States, for example, it's against the law in most cases to do that.

I can't say, hey, I have a big show, but if you go on this other show, I am going to make sure that every other podcast never has you on.

It's dodgy to do that.

I could probably tell you that privately and you'd believe me, but if I wrote that down, you'd have a case for tortious interference, I would say.

That might not be the best example, but.

No, I think it is.

But look, go back to ancient Greece.

The biggest penalty you had in ancient Greece was ostracism.

You know, it was like being shunned by society.

I do think like when you can use corporate self-interest to effectively ostracize entire foreign countries.

And that's what initially was done to North Korea and then even more effectively done to Iran in the lead up to the nuclear deal.

What about semiconductors?

We mentioned this earlier.

China's trying to develop theirs.

We're constantly sanctioning the pieces and the equipment and all the materials they need for that.

But I don't fully understand why is this a choke point if no one else has it other than the United States and potentially China?

Yeah, totally.

So look.

It's hard mathematically to define what a choke point is, but one way I do it in a crude back of the envelope way is the United States is 25% of global GDP.

So if you look at any sector, you'd assume that they'd all average up if you added them all up to right around American market share is 25%.

I just got over telling you that in the financial sector, the dollar is 90% of foreign exchange transactions.

It's 60% of central bank reserves.

It's in basically any metric you look at in the financial industry, the dollar is more than twice that baseline of 25% of global GDP, right?

Semiconductors, if you look at that industry, the value chain, so this is all the value, all the profits in the entire semiconductor industry.

40%

are generated by U.S.

companies.

That's like NVIDIA, Applied Materials, AMD, Micron, which is interesting.

Because a lot of times when you think about semiconductors, a lot of people think about Taiwan, right?

Because 90% of the fabrication is being done by this company, TSMC, in Taiwan.

But in terms of value generation, it's most of it is coming from U.S.

companies.

It's the key designs, the tools, the software you actually need to make advanced semiconductors.

China is below 10%.

The value is something like 5% that all Chinese companies are providing.

So, this is a choke point.

I'd say it's not as important of a choke point as the dollar, right?

Just mentioned we had 90% of foreign exchange transactions.

It's 40% of the semiconductor value chain, but still well above this baseline of 25% of global GDP.

What's happening right now is because the U.S.

has weaponized advanced semiconductors, our role specifically in designing advanced semiconductors vis-à-vis China, you've created an incentive in China to pour hundreds of billions of dollars into creating homegrown alternatives.

The key one right now is Huawei, right?

Where Huawei has been stood up as this domestic chip champion that may be able to challenge NVIDIA down the road.

It's going to be hard.

It's going to take some time.

Will they get there?

Possibly, but it's going to be very challenging.

And I think at least over the next five to 10 years, this will be a significant source of leverage the U.S.

has over China.

Interesting.

Yeah.

This one kind of scares me a little bit, just because semiconductors are in everything and they can be used to make smart weapons and things like that.

And of course, you need them for AI, which is, I assume, also a choke point.

I don't want to get to that just now because probably people are salivating for that one.

But you mentioned oil services.

And this is one I think most people just never think about because you go, Saudi has oil, Iran has oil, the U.S.

has oil, Russia has oil.

Okay.

But you're not talking about oil.

You're talking about oil-petroleum-related services.

This is different.

Totally.

Exactly.

So when you think about oil, there's oil that's in the ground, and that's random.

You're lucky if it's on your territory, right?

Then what does it actually take to extract oil?

You need exploration and production, right?

You need companies that can actually explore for it.

Those are companies like ExxonMobil or Total, the French company.

And then when you're actually trying to get as much oil as you possibly can out of the ground, oftentimes you need these oil field services companies.

Some people have heard of SLB or the company that was formerly known as Schlumberger or Halliburton that some people may remember because of Dick Cheney's association with it.

Baker Hughes.

These are companies basically that in every major oil field in the world are providing these proprietary tools and technologies to ensure that you can actually extract the oil from the ground.

And then beyond that, once you actually have the oil, you have to get it to the marketplace.

And so you need tankers, right?

The tanker fleet is largely concentrated in southern Europe.

Many people have heard of Greek shipping magnates, right?

Greece has been, ever since ancient times, they've been a maritime power.

They've got a big percentage of the maritime tanker fleet.

Even more important, you need maritime insurance, right?

You're shipping billions of dollars of oil on these tankers.

If these tankers get in an oil spill, they could create even more damage.

And who's going to pay that out?

So maritime insurance is an important sector.

And that is almost entirely concentrated in the UK.

London is the home of something like 95% of all maritime insurance.

Yeah, this is Lloyd's or whatever.

Yeah, the P ⁇ I Club, the International P ⁇ I Club.

But Lloyds is sort of one of the original members of that.

If you look across the oil supply chain, much of the world's oil might be in Venezuela and Iran and Saudi Arabia.

But really, if you actually want to get that oil out of the ground into the market, you need Western companies.

And so that does wind up being a choke point.

This to me is interesting.

I just don't understand how Russia, which has nuclear weapons and a bunch of oil, also needs Western companies to come drill for that oil.

Like you guys have one massive economic driver.

You think you would get a handle on this, right?

Like, how is it that they aren't the the masters of oil drilling and shipping?

Part of it really, I mean, it does go back to this 1990s, hyper-globalization, right?

It's a period when we didn't view geopolitical competition as a relevant factor.

We thought that economic interdependence was good because it brought efficiency.

So if you were Russia relying on ExxonMobil or Schlumberger, it didn't seem like a sense of vulnerability.

You weren't fearing that one day the U.S.

was going to tell ExxonMobil, you got to get out of Russia.

And someone like Rex Tillerson, who some people may remember, CEO of ExxonMobil, who then becomes the Secretary of State in the first Trump administration, he basically makes his career doing business with Russia.

By the way, the same is true of U.S.

companies.

They're U.S.

companies who become entirely reliant on China for a variety of different things.

So it's not just a one-way street.

I think what has happened is we embraced deep and thorough economic interdependence in this sort of halcyon period of the 90s when we didn't view geopolitical competition as a relevant factor.

But today we have intense geopolitical competition.

And so all of a sudden, these pieces of our economic reality that we just embraced because of efficiency's sake seem like vulnerabilities.

And so could Russia develop best-in-class oil field services and a tanker fleet and maritime insurance?

Yeah, perhaps.

Is it going to take a decade or more?

And in that period, between now and 10 or 20 years from now, there's a lot of pain that Russia could suffer from if they're cut off from Western services.

And they're also, they seem to be focused on other things at the moment.

You'd have to hire an army of consultants to come in and help you develop that, all of which you probably can't do when you're sanctioned into oblivion.

Because if you can't work with Exxon, what you need to do is poach as many employees and experts from Exxon as you can.

And none of those people want to move to Russia right now.

And many of them probably can't even take the deposit on their services legally.

Okay, that's interesting.

I always wondered that because I thought, how are you not like, hey, this is really important.

We should get a handle on this.

But you're right.

It seems almost like Russia fell into the same trap as Europe, right?

Europe said, We're going to be dependent on Russian oil.

What could go wrong?

And Russia said, We're going to be dependent on Western oil drilling companies.

What could go wrong?

And now that there's global competition, everyone's scratching their heads.

But how is this not totally predictable at some level?

This must just be the 2020 hindsight bias.

I think it is.

You know, look, I try to be empathetic to people who were making decisions in the 90s.

And I think if you go back to that period, it really did feel like a world historical opportunity.

Soviet Union just dissolved, right?

You had our rival superpower, the key authoritarian rival to the democratic America, who just commits suicide.

We're no longer playing the game anymore.

And in fact, we want to be your friend, right?

And China was saying, we want to be your friend.

And so I think it was a reasonable bet for leaders in the 90s to see if it was possible to actually globalize what had been a democratic international order that had only existed amongst advanced industrialized economies.

I think what where we erred was we didn't see that this wasn't working as soon as it became obvious, right?

You can go back to 2008.

I know, Jordan, you've covered a lot of Russia issues over the years.

2008, Russia invades Georgia.

They use the military force to recognize two breakaway republics in Georgia.

In 2014, Russia invades Ukraine, annexes Crimea, right?

There are clues along the way that this isn't working vis-a-vis Russia.

We don't really fully decouple from Russia until 2022.

It takes a while.

And then with China, the writing is on the wall by the 2010s, where you have just a series of cyber attacks on the U.S., you have the militarization of the South China Sea, an increasingly aggressive Chinese policy under Xi Jinping.

But I think not only is it challenging for us to sort of accept that, you know, maybe our policy of integration with China isn't working, but there's also then these very powerful vested business interests that say we don't want to decouple from China.

We rely on China.

And so I think we didn't reverse course soon enough as we should, but I do understand we at least made that gamble in the 90s.

Yeah, that makes sense.

You're right.

It's hard to put yourself in the mind of somebody in 1993 being like, this is the new world.

We could always go back to the way things.

No, that's not going to happen.

I mean, it is tough, but I still can't help but think if you have one economic driver, you should really have a handle on all of the things in the supply chain for that particular driver, especially if you are a country like Russia.

But different world, man.

So let's talk about artificial intelligence because it seems like this either will be be a new choke point or it's a bunch of hype and it's basically glorified Google and not really going to do anything yet.

But certainly in 10 or 20 years, this could be the new choke point, which maybe breeds other choke points because it's so smart and innovative.

I don't know.

What do you think?

I think so.

Look, one quick thing before I dive into AI about choke points is they're not immutable, right?

They come and go, right?

I just mentioned that Russia is building their own ecosystem of energy services.

They have amassed a shadow fleet to ship their oil without reliance on creek tankers.

They provided maritime insurance through sovereign guarantees.

They are gradually developing independence in the oil sector.

So that choke point may be less salient five to 10 years from now.

The same way that maybe the dollar winds up being a less salient choke point 10 years from now.

But that doesn't mean there won't be choke points.

New industries are created where there will be fresh choke points.

We already see it in clean tech.

In clean technology, whether it's solar panels or batteries or electric vehicles or rare earth minerals that are going into all these things, China is dominating.

China holds all the choke points across that industry.

In artificial intelligence, right now, if you had to bet, there will be very significant pieces of economic leverage, choke points, if you will, and most of them will be under American control because you have companies like OpenAI and Google who have just such a giant lead in this space.

You also critically have the computing power that's going into creating these artificial intelligence algorithms and then running them in friends that are largely based on NVIDIA chips, a company that is based not too far from where you're sitting right now, George.

Down the road.

Yes.

Exactly.

So look, I think that there will be new choke points in the AI space.

We're not exactly sure where they'll be.

We're relatively confident that computing power will continue to be one unless you just have total parity between the U.S.

and China, which again, I think is unlikely.

I think that there could be some in the models themselves, whether it's OpenAI just builds super intelligence first and they control it and OpenAI is a U.S.

company, in which case America wins the AI race.

And I think part of the reason right now you are seeing the weaponization of semiconductors vis-a-vis China is there is this concern in the U.S.

government that we may be in an existential race with China and that the first one between the U.S.

and China to artificial general intelligence to the super intelligence will have an insurmountable lead and basically be the superpower of the future.

If that's true, even getting a six-month lead on China by virtue of cutting them off from NVIDIA chips is probably worth it.

We're talking economic warfare because apparently, choking is not just for date night anymore.

We'll be back after these tasteful distractions.

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Now, back to Eddie Fishman.

The argument is, if you get to AGI artificial general intelligence first, that intelligence is smart enough to go, hey, you know, I'd be a hundred times smarter if I had this and this.

And then you can build that for it, or it can build it itself.

And it can say, I'm going to recode myself to be 10 times faster.

I'm going to write a new programming language that humans can't read that makes this thing so much faster.

I'm going to add a bunch of nodes.

Hey, by the way, here's how you do quantum computing.

So we go and build that with its help.

And now it's a thousand times faster.

And then we say, hey, we just want to make sure that China doesn't get this.

And it says, no problem.

Anytime they're close, I'm going to put something in there that ruins it.

And it's going to take them a year to figure it out.

And it's just going to do that forever.

And then until it can't, and it's going to say, if you blast this thing, they're going to be set back by three months.

This is where they're working on all this stuff.

I can tell by the internet traffic.

And no one's ever going to be able to do anything without the permission from this AGI basically ever again.

And it's going to be constantly evolving to make itself smarter, better, and faster every minute of the day, most likely.

So that's the sort of terrifying potential conclusion here.

Dot, dot, dot.

We all get made into paperclips or whatever the horror story is.

But we want to get there first because theoretically, arguably, debatably, if the free world gets there first, we can harness it for the power of good, as we always do with all of our technology, folks.

But if Big Bad China gets it, we're all going to be enslaved.

I kind of personally think some of that might be true, but I think largely, again, we're all getting made into paperclips.

So what do you think?

I don't know.

Where are you with this?

Yeah, yeah, no.

I'm glad you brought this up because I think some people ask me, like, is it a good thing that we are cutting off China from advanced chips?

Because all it is is encouraging them to create an alternative, right?

If we weren't cutting them off from NVIDIA chips, they would all be using NVIDIA chips.

You wouldn't have this incentive to pour hundreds of billions of dollars into Huawei to create an alternative to NVIDIA.

And in fact, Jensen Wong, the CEO of NVIDIA, that's his argument.

He says, we're foregoing a $50 billion a year revenue opportunity because we're not selling to China.

He's trying to get Trump right now to lift the export control so that we can sell NVIDIA chips to China.

The reason I think it's important to like bring this up and to have humility is if we aren't in a race to AGI, if artificial intelligence is just like any other technology where there's not going to be like an end point and we're going to incrementally get better and it's going to maybe change our economy quite a bit, but it's not actually going to be super intelligence.

then probably Jensen Huang's argument is correct.

We'd be better off just allowing this technology to diffuse in China, to make them dependent on it, and not to worry too much about whether we have a six month or 12 month lead.

However, if this sort of more doomsday scenario that you put on the table is correct, and there are people who are very deep in the AI space who believe that we actually are moving toward AGI, then having even a one-month lead on China is worth it, right?

Because if we get there first, then we win.

We get the brass ring.

So it's one of these policies where it's almost impossible to know whether it's the right thing to do.

You just have to play out the worst case scenario.

And I think if it is true that we're in a race to AGI, the consequences of China winning that race are so bad that it's worth it for us to do these export controls.

So generally speaking, I support the export controls, even though I'm somewhat agnostic on the question of whether or not we actually are in this like existential race with China.

I'm not enough of an AI expert to really know about this.

I just know what a lot of experts say to do, but they don't all agree with each other.

So it's like, okay, fine.

I'll let the adults in in the room handle that one.

You're right, though.

There is probably a balance where it's like, we can let NVIDIA sell them the five nanometer chips, but we can't let them have the three nanometer or the one nanometer.

So they're going to invest a little, but the pressure for the market is really off because they can still make smartphones, toys, gadgets, computers, and everything else.

And they can invest in the national security cutting edge part, but we're never making that money back because NVIDIA is just going to innovate something else.

So if we can keep them like permanently six months or one year behind us, just on the super ultra high end stuff, maybe that's how we keep them in tow.

And then we create AGI and we're like, all right, screw it.

Now it's, now it's a different game entirely.

But that's something that I just don't know how you juggle that.

You can use choke points.

You don't have to completely choke everybody off using this.

You can let in, just like you could through the Bosphorus.

You can let in what you want and you can keep out what you don't.

That seems like a really delicate dance that really smart people are working on.

I know that's something that you have worked on with the different sanctions deals and things on your your bio here.

Russia's not going to close the gap on semiconductors anytime soon, I assume.

They don't make anything like that, correct?

Yeah, Russia is totally out of the game.

And they have been, by the way, forever.

This is another thing that's interesting.

The Soviets, the Russians after them, they have this great legacy of science, right?

But for whatever reason, this is an area where they just haven't been able to keep up.

Yeah, that's probably a separate book about just all the things that need to be in place in an economy in order to do something like this.

But it's interesting because you would think all of those things had to be in place to launch Sputnik and get it to the moon.

Like this national drive where everybody, air quotes, everybody is on the same page scientifically.

Semiconductors are kind of like the space race in that way.

And the Soviets were the first ones to go to space.

They did a lot of the first things in space.

And then when semiconductors came around, they were just like, we got Tetris and we're tapping out.

All right, thank you.

I remember vaguely in the 90s, they tried to copy a computer that I think was was made by Tandy.

It came out and it was just three years behind everything when it came out and was like super expensive and not good for the time.

And that was kind of their only sort of wheezing attempt at making anything like that.

And that was the end.

I don't know.

Very strange.

I guess it just shows you the decay that happens when a government like that is too corrupt to really get their shit together, I guess.

I don't know.

Speaking of getting your shit together, what do we think about the U.S.

and Europe maybe standing apart from one another?

Because we've always kind of been, well, since World War II, with Western Europe, right?

This is, these were our, our guys.

We were together.

We were rowing in the same direction.

Now it seems like under the Trump administration, we're split.

There's China, Russia, the authoritarian-led bloc.

And then we have the United States and Europe, but it's kind of just now the United States and then also Europe.

Yeah.

Look, I think that this is something that has been in the works now for quite some time.

During most of the Cold War period, we've been talking about the Soviets.

You look at the original purpose of NATO, right?

It was to keep the Soviets out, the Americans in, and the Germans down, right?

And part of that will help explain to you why we have this sort of legacy situation in NATO where the Europeans are fully dependent on the United States.

We wanted America to have military hegemony in Europe, right?

We didn't want Germany and France and all these countries to rearm the way that they were after World War II.

It's the same with Japan.

The original sort of bargain was, we're going to take care of defense.

You guys focus on the welfare state.

But what's happened over time is we no longer like that bargain here in the United States.

We want Europe to arm itself.

So there's a desire in the U.S., as you saw with the recent NATO summit, to get the Europeans to shoulder more of the burden when it comes to military force.

In Europe, I think at the same time, especially after Trump was re-elected, they're concerned that in a serious scenario where Russia were to threaten them militarily, that the U.S.

may not come to their aid, right?

If Russia were to invade Lithuania or something like that, are we really going to risk New York City on account of Vilnius?

Maybe not.

And so that uncertainty in Europe right now, I think, is causing real political movements, especially in frontline states, to start investing significantly more resources in defense.

And even in Germany now, the current chancellor, Friedrich Meritz, is very committed to investing in defense equipment.

When it comes to economic warfare, one of the big challenges is that when the U.S.

is acting alone on economic warfare, when we're just imposing sanctions or tariffs by ourselves, it can have quite a bit of impact.

But what it does is it creates this generalized incentive to hedge.

And when you can find an alternative to the dollar by just going to the Euro, it's actually not that painful, right?

Because the Euro is an convertible currency.

It is quite useful.

You can use the Euro for a lot of different things.

You're not worried about your investments in Europe being expropriated.

The same way if you were investing in China, you might be worried about getting your money out of China.

And so what we've seen so far in the last few months as the Trump administration has taken a more unilateral approach to economic warfare, imposing sanctions and tariffs just by ourselves, we have actually seen this interesting strengthening and rise of the Euro.

And so I think from just a sheer American interest standpoint, we're better off, generally speaking, applying economic warfare, fighting economic wars with coalitions, specifically with the Europeans, the Japanese, the Brits, issuers of other major reserve currencies.

Because if we don't, if we act alone, we really do wind up weakening our own choke point leverage that we have around the world.

I see.

Because if the Europeans are like, you can just use the Euro, all right, sure, or the yen, fine.

But if you can't use the yen, you can't use the euro, and you can't use the dollar, well, okay.

The alternatives are not looking so good.

We'll get to the Bricks thing in a moment here.

But I'm curious, you wrote in the book, and I'm paraphrasing here, onshoring, friend shoring, and moves towards economic self-sufficiency will bring benefits, but also increase the risk of armed conflict.

First of all, what is friend shoring?

I don't think I've ever heard that before.

I just copied it from the book.

Yeah, sure, no problem.

So maybe just quickly onshoring would be, okay, instead of getting our widgets from China, we're going to start getting our widgets from Alabama.

We're going to take jobs that had been outsourced, that had been offshored, and then onshore them, bring them home to the United States.

Friend shoring would be, okay, we're comfortable having other countries involved in our supply chain, but only if they're our friends.

We're cool relying on oil from Canada, but we're not necessarily cool relying on rare earth minerals from China.

It's basically having a more alliance-based approach to economic activity.

This is what we had, by the way, during the Cold War.

That's what I was going to say.

Yeah.

Europe wasn't buying a bunch of Russian oil because, geez, those are kind of the bad guys.

We're not going to get mixed up in that.

We don't want to give them billions of dollars a week.

So, why does this increase the risk of armed conflict?

Is that because with dependence, we can afford to be bombing each other, but if we're making it all at home, it's just one less thing to worry about?

My own view is that if we truly were to invest in friendshoring, this idea of truly building a new economic order that didn't have as much dependence on China, had virtually no dependence on Russia or countries like Iran that are very clearly our adversaries, I think we actually could get to a place where the world is more stable because we wouldn't feel super vulnerable to China because the only way they would be able to threaten us would be really through military force.

It wouldn't be through cutting off our access to key minerals or resources or batteries.

The area where I'm more concerned about the risk of armed conflict is if we do exclusively focus on onshoring, if we move towards something like autarky, because there are voices in our political system today who say, we can't rely on Canada either.

We can't rely on Europe.

We don't want our automobiles to be made with any European or Mexican parts or Canadian parts.

We want every single part that goes into the Ford F-150 from the steel to the valves to the engine, every single piece to be made in the United States.

That kind of view of autarky, first of all, I think is very challenging and hard to do.

I think it would be very expensive.

But the thing I worry about most as someone who appreciates history, that view of autarky is historically something that leads to imperialism and conquest.

Because you just think about it, if you don't feel confident that you can secure the resources you need through trade, through buying them, if you don't think you can get the minerals you need from Greenland by just like buying them from Greenland or cutting a trade deal with Denmark, then you might want to go seize those resources.

You might want to go plant the American flag in those icebergs and take those minerals.

It's funny you should mention Greenland because it's exactly where I was going.

I was going to say, so does it turn out that we do need Greenland's mineral resources?

Because when I heard that, I was like, why are we even talking about this?

It's just out of left field.

By the way, you think the Greenland thing is coming back once the dust around Israel and Iran and whatever settles?

You think he's going to pop that thing back into the news cycle?

I don't think it's going away.

Yeah.

I mean, I think, look, autarky is a mentality, right?

If your mentality is, we don't have access to this unless we own it.

And by the way, this cuts through Trump's approach to Canada, too, where he says, you want free trade with us?

You could become the 51st state, right?

You can become part of the United States.

This is a view that has recurred throughout history, whereas you can't trust anybody.

And by the way, This type of mentality might work in certain business sectors.

Maybe in the cutthroat world of New York real estate, maybe this helps you.

I don't know.

But I think that view, at least historically, does incentivize imperialism and conquest.

And probably the best illustration of it, and the most infamous leader who had this view, was Hitler, where his view was you needed all of the resources of Central and Eastern Europe under German domination.

You had to actually control Ukraine and parts of the Soviet Union.

You had to control Czechoslovakia to have the Skoda works, you know, their big military production facilities.

That if you didn't control them, you couldn't rely on the materials from there.

That was the whole idea of Leibensrau.

I'm sympathetic to the argument that you need more space to do more things.

It's the whole murdering millions of people part that I didn't really get behind with the World War II thing.

Yeah, Labens Realm, but also

the whole mass murder thing didn't sit right with me and still doesn't.

I get it though.

I mean, it's scary because you're giving the example of Hitler, which is usually like, okay, once you're starting to talk about Nazis, you're way off the out of the park.

But it's kind of a good example, which is a little scary when it's actually fitting.

It worries me that we are going down this road potentially.

Like maybe it starts with Greenland, but then it's not going to stop with Greenland.

Not that it's okay to take Greenland either, by the way, YouTube commenters.

Yeah, look.

And again, I'm not necessarily even worried that this is something that's going to happen next year under Trump.

I'm saying that autarky as an organizing principle, if that's something that we believe in the United States and that China believes and Russia believes, that does incentivize imperialism and conquest.

You could even argue that's potentially a negative externality of some of our export controls on China to loop the conversation back.

We have effectively, the U.S.

government pressured TSMC, the Taiwanese semiconductor manufacturing company, and told them that they cannot sell high-end chips to China.

The chips themselves are made in Taiwan.

And we've said, if you sell those chips to Huawei, we are going to cut you off from the tools that you need to run your fabs in Taiwan, right?

Maybe.

That could wind up incentivizing China to seize Taiwan.

There are negative externalities to our actions too, right?

And Hitler, the Nazis don't have to be your example.

It could be imperial Japan.

The U.S.

cut Japan off from various commodities, including oil, which incentivized Japanese imperialism, incentivized them to seize oil fields throughout Southeast Asia.

It incentivized them to attack the United States at Pearl Harbor.

So you have to be worried when you're engaging in this kind of high-end economic warfare, when you're creating an incentive for autarky, that it could bleed into military force.

Economic warfare, kinkier than your browser history and turning entire countries off faster faster than your ex.

More from Eddie Fishman after these shameless plugs.

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Now, for the rest of my conversation with Eddie Fishman,

why, if we are trying to get Russia's economy dented even more during this conflict, why don't we just encourage the Saudis to dump oil into the market like crazy?

And why don't we dump?

I mean, the U.S.

produces a ton of oil.

Am I just not able to do the math?

Can't the U.S., Saudi Arabia, and other allies of the United States just dump oil onto the market ridiculously cheap and totally screw Russia?

Because their economy is oil-dependent.

What am I missing?

Yeah, so the U.S.

doesn't quite have that capability because we don't have really any spare capacity.

We're producing as much oil as we possibly can.

Saudi Arabia and some of the other OPEC member states, but mainly Saudi, has significant spare capacity where they could actually pump a lot more oil just based on a political decision.

The Saudis, and this is the whole point of the OPEC cartel, they restrain the amount of oil that they pump because they don't want oil prices to crash.

They prefer to produce a little bit less oil, but make more money per barrel.

But let's say, you know, Trump was successful in getting the Saudis to pump more oil.

And by the way, No president has ever been successful at that.

Like we've tried, the Obama administration tried to get the Saudis to pump more oil to try to punish Iran's economy because the Iranians were also dependent on oil sales.

And even though the Saudis at the time wanted regime change in Iran, I think the Saudi king said, please cut off the head of the snake, they weren't willing to pump more oil.

They're very resistant to these geopolitical purposes of their oil sales.

But so far, during the second Trump administration, Trump has actually seen some success in getting the Saudis to pump more.

And the Saudis have gradually ramped up their oil sales.

But yeah, I mean, theoretically, if the Saudis were game to like really crash Russia's economy, they could do it.

I think the problem we would have here in the United States, let's say oil went to $20 a barrel.

Right now it's in the mid-60s, which is actually quite remarkable given that we're just fresh off an active war in Iran, threats to close the strait of Hormuz, and mid-60s is pretty low.

Let's say oil crashed to this $20 or $20 or $30 a barrel, extremely low level.

It would completely bankrupt Russia, right?

It would be terrible for Russia.

And Iran.

Isn't this the most epic win ever for Saudi Arabia?

Yeah.

At the same time, though, it would also bankrupt American shale producers.

And so you'd have bankruptcies throughout the Gulf Coast and Louisiana and Texas, my home state of Pennsylvania.

In some ways, because now the U.S.

is a net oil exporter, we don't want oil prices to be that low because it would actually put out of business some of the very oil producers that we rely on right now.

Yeah, it seems like there could be some kind of solution to that somehow, but it would be extremely expensive.

You'd basically have to float.

the shale producers in the United States for however much time it took to bankrupt Iran and or just to make a big dent in Iran and Russia.

Although, man, if that's what we have to do instead of having a nuclear standoff, I'm here for it, man.

Oh, me too.

I'm game.

And look, I think this is something that's super important because sanctions, economic warfare take a lot of heat.

People are like, wouldn't we be better off through development assistance and peace rather than economic war?

But like the reality is the alternative to economic war often isn't peace.

It's actually real war.

And that's what we've seen right now with Iran.

Like we tried, or Trump tried from 2018 to try to use maximum pressure sanctions sanctions to try to get a better nuclear deal than we got in 2015.

That failed.

And then the result is actual war, a real nuclear crisis with Iran.

So my own view is we should be willing to risk quite a bit to make economic warfare succeed against the likes of Russia and Iran because the alternative is worse.

With Russia, I think the way you could plausibly do it, instead of just getting the Saudis to pump 2 million more barrels of oil and tanking oil prices.

What I would do is I think you could gradually start taking Russian oil off the market.

So let's say you remove 20, 30, 40% of Russian oil sales from the market with the use of sanctions, basically threatening buyers of Russian oil, like the Indian refineries or the traders in Dubai and saying, if you're buying Russian oil, we're going to cut you off from the dollar.

Most of them then would stop buying Russian oil.

So you take 20, 30, 40%.

You take supply off the marketplace, price goes up.

What happens when price goes up?

The shale producers in the U.S.

all of a sudden have an incentive to pump more.

And so they invest more and more in production.

And the Saudis all of a sudden have an incentive to produce, allow some of their spare capacity on the market to take advantage of those higher prices.

So my own view is the way that this would work is for a few months, you would get higher oil prices, but quickly the supply would rise to meet demand and the supply would be coming from the Gulf Coast and from Saudi instead of from Russia.

So I think that's the best way is you basically close the walls on Russia, be willing to take some short-term pain and realize that it's going to be American producers and other Gulf producers that are going to take the share away from Russia.

Any guesses why we haven't done that yet, Just because of the short-term pain?

Or do you think we're deliberately bleeding Russia out in the fields of Ukraine?

It's sheer political fear, first by President Biden and now by President Trump about higher oil prices.

You're petrified, especially Biden.

In 2022, you go back to the beginning of the war, the big war in Ukraine, you had oil prices over $100 a barrel, so way higher than they are now.

And you had inflation at a four-decade high, highest that it had been since the 1970s.

It was something like 7%.

Biden was petrified that even a short-term spike in oil prices would worsen inflation, would rise prices at the pump, and would kill the Democrats' political support.

And now, by the way, Trump is worried.

Trump's tariffs, by the way, have an inflationary impact, right?

Because tariffs are a tax on imports.

So everything's going to be more expensive.

Trump has been trying to mitigate that by lowering oil prices.

So if oil prices go up and then you just have runaway inflation, Trump's worried that his popularity will evaporate.

In America, we've basically shown that we just don't have tolerance politically for higher oil prices.

What about China's weapons?

We talked a lot about American choke points and the levers we have, but it seems like China has either deliberately or just through the fact that we make everything there created its own arsenal of what appear to be potent economic weapons and they seem prepared to use them in retaliation.

But what are those weapons that China can use against us?

Well, I think you're 100% right.

Like in 2018, when Trump started the first trade war against China with the original tariffs and export controls on ZTE, the telecommunications equipment maker, and eventually on Huawei.

China was totally caught unaware.

They did not think that this was going to happen.

So they didn't have an economic arsenal.

They hadn't figured out what choke points they could weaponize against the U.S.

or any other country.

But that was seven years ago.

And they have now built this fulsome economic arsenal that actually looks quite a bit like the U.S.

In some cases, it's almost humorous.

In the U.S., our export control list is the entity list.

In China, they have the unreliable entity list.

It's like they effectively copy-pasted like a variety of our tools.

The actual choke points they have at their disposal, the most important ones really run across rare earth minerals that are used in everything from these high-performance magnets that you need for automobiles in the U.S., critical minerals that you need in everything from batteries to ammunition and missiles and fighter planes that we use in the U.S., and then across the clean energy supply chain.

So batteries themselves, China completely dominates.

And one of the best examples here, the leading drone company in the U.S., a company called Skydio, which is is also based in Silicon Valley, was sanctioned by China a few months ago.

And all of a sudden, just after those sanctions, they told all of their customers that every customer only got one battery per drone.

So if you think about it, you're using a drone for an industrial use case, or the Ukrainians are using these drones to document war crimes or surveill Russian positions, and you got one battery.

it really decreases the utility, right?

So this shows that the chokehold China has over that space.

And then even electric vehicles themselves.

China now is by far the world's leading auto producer, by far the leader in electric vehicles.

And literally companies like BYD, the leading Chinese automaker, making cars that are more efficient, better than a Tesla, and way cheaper.

We were worried, the U.S.

during the Biden years, that if these cars were allowed in the U.S.

market, they would just completely put Tesla, GM, et cetera, out of business.

And so the Biden administration actually imposed 100% tariffs on Chinese electric vehicles to keep them out.

of the American market.

So China does have these choke points.

They have the legal machinery now to use them by sort of copy copy-pasting a lot of the laws that we had in the U.S.

And just a few months ago, during that trade war where Trump had 145% tariffs on China for a few weeks, China got the U.S.

to back down.

They got Trump to capitulate by virtue of imposing export controls on those rare earths, by cutting off U.S.

access to those rare earths.

And all of a sudden, you had Scott Besson, the Treasury Secretary, go to Switzerland and agree to basically back down.

Yeah, the rare earth thing, it's quite frightening because apparently, even though we have them, we can't really get them out of the ground.

And it would take 15 years or something to develop that capacity.

And even that might be optimistic.

And other people will say, oh, no, it's not that.

It's that they, you have to pollute the crap out of everything around it in order to get these out, right?

You basically have to totally destroy the area.

I don't know which part of that is true, but basically we're not willing to do this.

And we're also partially not able to do this in the United States in a way that's clean and sustainable and quick.

Yeah.

I mean, the thing that's interesting about rare earths, and I think it helps to actually elucidate this concept of choke points, is is like the entire rare earths industry globally is quite small.

It's unlike the hundreds of millions or single-digit billions.

It's like nothing.

It's like a rounding error.

But the reason it's so potent is because China controls 99% of the supply of various ones.

They're refining 99% of some of these key rare earth minerals.

And so even if it's not that much when it comes to revenue, If you're relying on one of these rare earth minerals from China to build your car in Detroit and you're cut off and you can't make your car without that mineral, even if it's not a big expense for you, you still can't make your car.

And they could shut down industries in the U.S.

What it shows is that choke points isn't just about like economic weight, right?

It's not just like, we're so strong, we're huge, we can hurt you.

It's about asymmetric leverage.

It's about areas where there's really one country has this dominant position and there are very few substitutes.

Look, over time, anything can be substituted, right?

You could invest money and time and resources and be willing to pollute parts of the United States to develop our own supply chain.

You could use, I think, more intelligently, friendshoring, right?

Developing supplies in places like Ukraine or Greenland or Australia and buying those minerals from more reliable sources than China, right?

Or it could be a diversity of countries.

Any of those solutions is going to take time, right?

At the very least, a number of years.

And so the Chinese have realized that they have this sort of Damocles that hangs over big parts of American industry.

And to be sure, they are going to leverage that time and time again in the years to come.

I want to, before we wrap, I want to talk about the BRICS idea of this alternative block.

We hear a lot about it.

People online talk about it constantly.

Oh, BRICS is coming.

You guys are screwed.

But I had Juan Zarate on the show, episode 863, former deputy national security advisor under, I believe it was George Bush.

And he was basically like, there's no stinking chance that this works out for various reasons.

The countries involved can't really agree on much.

Their values aren't aligned.

Many of them manipulate their currency or have just trash economies like South Africa is not really exactly a global power.

Mostly there's just a whole basket of reasons why it's not possible.

But I don't know.

Never is a long time.

What do you think?

Look, I think the BRICS as a coalition has always been tenuous.

And you even see it now.

I mean, the BRICS are getting ready for their annual summit that's happening in Brazil this year.

Xi Jinping has said he's not attending.

So the key member is not attending.

And then Putin came out and said he's not attending because he's worried that Brazil might follow through on this International Criminal Court arrest warrant and actually arrest Putin if he goes to Brazil.

So that just goes to show there are key geopolitical differences between the likes of China and Brazil or even China and India, right, are deep rivals and they're both in the BRICS.

At the same time, there is one thing I think that all of the members of the BRICS agree on, and that is that they do not want to be dependent on the dollar.

They do not want America to have this choke point, which is the financial system, that it can weaponize against them.

And so I think the one area of cooperation where I do think the BRICS are going to make headway in the next five to 10 years is on building workarounds to the dollar-based financial system.

China, by the way, already has.

They have this mechanism called Enbridge, which effectively enables clearing cross-border payments using central bank digital currencies.

They pioneered it with the central banks of Thailand and the UAE and Saudi Arabia.

And it wouldn't surprise me if the rest of the BRICS come in and join that in the years to come.

And that poses a real threat to the main choke point that the U.S.

uses for economic warfare.

But that replaces, replaces, what, the SWIFT system for banking?

It doesn't replace the dollar as a reserve currency, right?

Or am I not getting it?

Yeah.

So look, I think one of the challenges about currencies is they play various functions, right?

The three key functions that any currency plays is a store of value.

So it's a place for you to invest your money, et cetera.

A unit of account.

It's like the prices are set in this currency.

And a medium of exchange.

When I buy something from you, I'm paying you in a specific currency.

In terms of the dollar as a store of value, it's going to be really hard to unseat that in any sort of reasonable timeframe just because the best companies are in the US, the best investments are in the US, we've got the biggest bond market, we've got the biggest equity market.

But when it comes to medium of exchange, this is just payments.

That is almost like infrastructure.

Who cares what currency you're using?

You just want it to work.

You just want it to be predictable.

And that is actually the function that the US has used for economic warfare.

It's being able to say, India and Saudi Arabia, you cannot do business with each other because you have to use the dollar and we can actually just say, we don't want you to do that transaction.

That's what we did to stop China from buying Iranian oil or stop India from paying Iran for its oil.

We threatened their access to the dollar.

I think when it comes to medium of exchange, this payment function, I do think there's going to be a disruption, a technological disruption that occurs over the next five to 10 years, which leverages things like central bank digital currencies and stablecoins to evade the current correspondent banking system, which is this New York-based foreign exchange system that is used to clear cross-border payments today.

Interesting.

Do you think, and I'm going rapid fire here because we're coming close to the time, but do you think the United States is going to back off their NATO commitments?

It seems like Europe could start to distance itself from the U.S.

militarily.

Are we seeing this play out?

Or this could also change tomorrow because that's how this has been working lately.

But what do you think?

I do think that Europe is going to play a more independent role in its own security.

In an ideal way, this would be done through the EU, where you'd actually have like significant unified defense.

At the same time, very few people have won bets by saying the EU is going to like get their act together in recent years.

So I think the likeliest outcome is a coalition of European states like Poland, the Baltic states, ideally Germany, Sweden, and Finland and Norway, countries that feel very exposed to Russian aggression will spend a lot more on defense, will integrate their defenses more.

And I think what that'll do is it won't necessarily force the Americans out of Europe.

It'll just reduce America's footprint on the European continent.

Do you think that we are going to continue to slam tariffs on key EU countries like Germany?

Because I could see that forcing the EU to split into an independent political or geopolitical bloc or economic bloc.

That wouldn't be great either.

So long as Trump is in the White House, yes.

I think that we are never getting past peak tariff.

This is actually something I think that...

the market is misreading now.

I think they're all breathing a sigh of relief saying, oh, the worst of the tariffs is over.

We backed down against China.

The EU may or may not get tariffed.

I think that Trump loves tariffs the same way that I love Radiohead.

I decided they were my favorite band in high school and they're still my favorite band 25 years later or whatever.

That's how it works for Trump.

He loves tariffs and he's going to keep using these tariffs.

And he also, by the way, doesn't view the Europeans as owing any sort of special relationship with the U.S.

So I do think he's going to keep slamming them with tariffs.

And I think it is going to both incentivize the Europeans to do more defense, but I think on the more negative side of the ledger, it'll also encourage the Europeans to hedge against the U.S.

and build closer relationships with China and other countries that we don't want them to build relationships with.

Yeah, so we might be pushing them towards China as well.

Yep.

That's the karma police coming for us on this one, I guess.

Good reference.

That's probably the only Radiohead song I could probably name, actually.

You've said tariffs are a slow burn.

What does that mean in terms of long-term pricing?

What are we not seeing now that you think might become obvious later?

Yeah, I think that the biggest problem with respect to Trump's tariffs is that he's ascribed so many different goals for them.

He wants them to raise government revenue.

He wants them to incentivize onshoring, protect strategic industries.

He also wants to use them as this like all-purpose weapon of economic warfare, where he can use tariffs to like get Mexico to like beef up its border security, right?

Or get China to crack down on fentanyl or whatever.

And I think the challenge is when you're using tariffs as a tool of economic warfare, they're inherently temporary.

You have to say, okay, well, you've now acceded to my demands and I'm going to lift those tariffs, right?

But if you're trying to use tariffs to incentivize onshore, they've got to be permanent.

Businesses are not going to onshore, spend the money to onshore their supply chains if they think that the policy is going to be reversed a year from now.

Because they got to build a whole factory and a whole supply chain.

Yeah.

So I think the biggest downsides of Trump's tariffs is just the uncertainty that they cause for businesses and they have this paralysis effect.

And so I think what is effectively going to happen is you're just going to have slower economic growth, less investment.

And I don't know if we're necessarily going to fall into a recession this year, but I think growth will be significantly slower than it is otherwise.

What sectors of the economy do you think are most vulnerable to long-term, is the term inflation from these tariffs, even if the average person maybe doesn't feel it yet?

Yeah, I mean, I think the average person will feel.

I mean, inflation inherently is about prices.

People will feel it.

It's any supply chain where it's heavily exposed to international inputs, right?

So things like the auto supply chain, right?

Where that's where the U.S.

really was at risk of potentially almost coming to a halt if China didn't pull back its export controls on rare earth minerals, which I'll say, by virtue of the agreement they came to with the U.S.

a few months ago, they only agreed to issue licenses for six months.

So this issue is coming back toward the end of this year.

So I think you'll see various prices go up.

But I think the real concern, like I said, is a lack of investment, which then slows hiring.

And maybe you get either unemployment or at least people who are attrition unemployment, which can be just as bad.

There's a narrative that tariffs help protect American jobs.

Is there truth to that or is that economic smoke and mirrors?

Yeah, I mean, look, I think that tariffs can play a role in protecting strategic sectors, right?

So I mentioned that the U.S.

imposed a 100% tariff on Chinese electric vehicles because there was a fear that if they entered the market, they would wipe out Tesla and GM and Ford.

And by the way, I kind of support that because I think that it's probably important for us to have our own electric vehicle manufacturing.

I think the challenge is when you start doing tariffs on areas that aren't as sophisticated, even just commodities like steel, right?

You put a tariff on steel.

So maybe you have some more steel production in the U.S., but then the automakers in the U.S.

who are reliant on steel have to pay a higher price.

And so it's bad for them.

And maybe you wind up.

hurting downstream manufacturers who actually you know have better paying jobs have more strategic industries so i think you have to be very targeted um another area where i think tariffs actually do play a good role potentially is pharmaceuticals, right?

Where we have become way too dependent on active pharmaceutical ingredients from places like China.

That is just not a secure position for us to be in.

So I think that having some level of tariff, plus I think critically industrial policy where you're channeling investment into things like generic drug manufacturing in the United States is a very wise policy.

We can get to that.

Yeah, that's scary.

I didn't even think about the pharmaceuticals.

thing.

That's a tough one.

That's an icky one as well, because not having medication is

scary to think about.

It's kind of like not having oil.

It's really up there with that or semiconductors.

Yikes, I didn't even think about that.

I know we're running out of time.

This is really interesting, man.

I really appreciate it.

I rarely read something where I hope that most of the things in the book never happen, but here we are.

No, but give us a reason to be hopeful and optimistic if you can, because the book is not all doom and gloom.

That's right.

Look, I think economic warfare, when done correctly, is an alternative to military force.

It's a way to solve the hardest global problems without putting American lives on the line, without risking Armageddon.

And so one of the things I hope people take away from this book, and a real reason why I wrote the book in the first place, is we are living in an age of economic warfare.

Sanctions, tariffs, export controls, they are just the primary way that great powers compete today, and they will be for a long time to come.

And so it's essential for us in the United States and around the world to up our game, to learn more about these topics, to be able to weigh in productively in the democratic process.

Because if we're not fighting and winning economic wars we're going to be drawn into shooting wars and i'd rather be fighting economic wars than being in shooting wars yeah that's a really good and unique takeaway that i had not thought of so next time you see somebody with an end the sanctions sign you tell them yeah end the sanctions i'd rather be bombing the crap out of these people instead and see how they react because that's probably not what they're thinking but that's the alternative in many ways it's really interesting i'd never thought about that eddie fishman thank you so much for coming on man i appreciate it jordan it was my pleasure

what

I got a bunch of data from a pedophile website.

I left where I was at and I went home and I didn't know exactly what I was going to do.

Obviously, I just knew that I needed to do something.

After I did some digging and I found my way way into their server, I installed a few back doors and I'm going to take the identifying details, which includes their emails and usernames and more.

It took, I guess, going viral a couple times for people to take me seriously, but law enforcement is involved now and things are being taken care of.

I'm not going to stop until I make as much impact as possible.

I have a skill set that I can use for good.

There's many ways for me to figure out who you are with just the tiniest detail.

This is not just the team chats.

This is Instagram, Facebook, TikTok, Snapchat, Xbox, Roblox, Minecraft.

I could go on for hours.

You'll be blown away at how quick it happens.

So it's important for your kids to know it's okay to come to you about this stuff.

It's just important to make sure you know what your kids are doing and not just taking their word for it.

I don't believe it's stoppable, but I believe that if you just let it go rampant and hope for the best, it's just going to continue to get worse.

I don't have the answer to pedophiles or human trafficking.

I do know that I can offer abilities and my network to do something about it on a large scale.

You know, if I can help one kid, it's worth it.

This is my goal right now to not only run my companies, which is a separate thing, but in the time that I do have available, focusing it all on this.

If you are a member of one of those sites, I guess you have every reason in the world to be scared.

To learn more about hacker hierarchy, wild exploits, and why doing the right thing in cybersecurity can still mean living in the shadows, check out episode 851 of the Jordan Harbinger Show.

Fascinating stuff.

I really like this topic, even though it's a little dark sometimes.

For China, a renewed economic war with the U.S.

is going to bring some major risk.

Its economy is fragile, but it's also going to bring opportunities.

Trump could undermine U.S.

alliances, give China a chance here.

We'll see what happens with Europe and being dragged into China's orbit.

I'm not so sure that the EU learned its lesson depending on Russian oil.

I guess we'll see what happens and how this plays out.

There was a lot more in the book.

The book is quite detailed.

There's a lot we didn't even have time for here with respect to each of these choke points, current events, tariffs, and things like that.

So if you're interested in this topic, definitely way more in the book for you.

And as always, all things Eddie Fishman will be in the show notes on the website.

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Now for the rest of my conversation with Eddie Fishman.