Stephen K. Banff, VP of Strategy at the MHA Institute and author of The Rise and Fall, joins us to talk about his new book, The World's Worst Bet, written by David J. Lynch.
00:03:29.000Xi Jinping proved kind of prickly on some key issues.
00:03:34.000And it struck me at the time that this was not at all the kind of harmonious environment that the architects of U.S.-led globalization had anticipated back at the end of the Cold War.
00:03:47.000Remember the so-called end of history by Francis Fukuyama, the idea that democracy and free markets were spreading around the world as sort of the natural end state almost of human evolution.
00:04:00.000And, you know, I lived through that, as you did.
00:04:03.000And I'll confess I was kind of part and parcel of that conventional wisdom.
00:04:10.000You know, anybody who lived through the collapse of the Berlin Wall, the dissolution of the Soviet Union on Christmas Day, of all things, in 1991.
00:04:21.000It was easy to think that, you know, happy days were here again.
00:04:25.000And we were going to end up with more and more globalization, more and more trade liberalization.
00:04:31.000And the result would be widespread shared prosperity here at home, but also a more peaceful world abroad as authoritarian nations like Russia and China opened up their political systems and joined a U.S.-led international order.
00:04:49.000And, of course, that's not where we've ended up.
00:04:52.000And I try to tell that story through the eyes of a half a dozen or so representative Americans, you know, a worker, a venture capitalist, a couple of presidents.
00:05:02.000And I think it is the economic story of our time.
00:05:06.000I think it's important to understand what's worked and what hasn't worked over the last 30 years so that we're better positioned for what comes next.
00:05:15.000Let's go back to that time in the 90s because you had a guy I worked for and I didn't work directly for him.
00:05:23.000He kind of ran the trading side of the firm.
00:05:25.000Steve Friedman ran the investment banking side and Bob Rubin ran the trading side.
00:05:28.000But when I was at Goldman Sachs in the 80s, you had Bob Rubin and Bill Clinton.
00:05:32.000There, because that kind of is the initial, the point of initial, initiates this.
00:05:37.000The Clinton, their concept of globalization and particularly this bet that everybody had that liberal democracy and free market capitalism had actually won.
00:05:51.000And that these other cultures and societies and everybody would just do it because Wall Street and the global corporate community thought it made sense.
00:06:01.000I mean, when I was at Harvard in the 80s, like I said, you got, that was West Point Camp.
00:06:16.000And here's how you perfect it with supply chains and, you know, labor that can go everywhere, capital that's borderless, et cetera.
00:06:23.000So walk us, take us back into the book in this concept of the decade of the 90s and the personalities that really were the initiating event.
00:06:34.000And, you know, you go back now and you read what some of the main policymakers of the era were saying from both parties.
00:06:42.000And, you know, many of the quotes have not aged well.
00:06:47.000And I think of Bill Clinton as sort of the godfather of U.S.-led globalization.
00:06:51.000And I think he understood the pros and potential cons better than anybody, certainly articulated it better than just about any other American politician I can think of.
00:07:04.000And he always warned at the time we said a couple of things.
00:07:07.000He said, you know, globalization is a fact, not a choice.
00:07:11.000And I think he was referring there largely to the impact of technology.
00:07:15.000But he said, you know, this is going to be a good thing.
00:07:18.000It's going to make the society wealthier and more prosperous overall, which it did.
00:07:24.000But there are going to be distributional effects.
00:07:27.000There's going to be so-called winners and losers.
00:07:29.000And that's OK, because the winners are going to do so well that some of their gains can go to help the quote unquote losers, the folks who otherwise might be left behind.
00:07:41.000And we're going to make sure they get all the assistance they need, retraining, relocation, whatever sort of support might equip a basic factory worker to fully participate in this brave new age.
00:07:55.000We're going to make sure they get that help.
00:07:58.000And as I say in the book, it was an attractive theory.
00:08:01.000And for a while it looked like it might even be true.
00:08:04.000But the problem was it never happened.
00:08:06.000It never happened under multiple administrations.
00:08:14.000I don't want to bury the lead you said about both political parties.
00:08:17.000If you read this, and that's why I think the book's very powerful now for people to go back and understand how we got here and how we where this goes, because we're hardcore economic nationalists and populists here in the war room.
00:08:41.000I mean, there were cultural issues, but on this basic central fact of the modern industrial economy, both parties essentially had the same outlook.
00:08:52.000Maybe on the margins, they had some differences, but the same essential.
00:09:37.000I don't think I can quote it all from memory, but the paraphrase is something like economic freedom.
00:09:43.000And he was talking here in terms of the opening to China, bringing China into the global trading system.
00:09:48.000Economic freedom, he said, creates habits of liberty and habits of liberty will create pressure for democratic change.
00:09:57.000There was a very strong rhetorical narrative at the time.
00:10:03.000Not that China would necessarily become a Jeffersonian democracy or that that was even a formal objective of US policy.
00:10:12.000But there was a clear sense in both parties that expanded trade by making China more prosperous would create a burgeoning middle class.
00:10:23.000The Chinese middle class inevitably would would demand more of a say in their governance.
00:10:30.000And that would lead over time to a more pluralistic China.
00:10:35.000And I think what happened there was we just we collectively, the American policymakers, underestimated the extent to which the Chinese leadership, the leadership of the Chinese Communist Party was not stupid.
00:10:48.000They knew that was what folks in the West thought.
00:10:51.000Jiang Zemin, the then president of China, gave a speech to party officials and and explained it and said the Western powers think that by bringing us into this trading system, they're going to lay the seeds for our demise.
00:11:08.000But we're not going to let that happen.
00:11:10.000And we underestimated the extent to which the Chinese leadership was intent on preserving not just its authoritarian political system, but also its non-market economy.
00:11:22.000And that's another key part of the story.
00:11:26.000What I want to go back to your initial theory that, hey, the winners are going to do the winning is going to be so big that the losers will get taken care of.
00:11:38.000What one explain to the audience, when did that become pretty evident that that was not that was not going to happen?
00:11:45.000That part of the deal was not going to be fulfilled, sir.
00:11:52.000Within a few years of China joining the WTO, it was clear that the amount of Chinese imports was far exceeding what the U.S. government estimates had been.
00:12:07.000There was a study by the International Trade Commission as the U.S. was taking up the legislation that facilitated China's joining the WTO that estimated that after that happened, after China joined, imports of Chinese goods into the U.S. would increase by 7% in the first year.
00:12:31.000And over three years, they rose by 50%.
00:12:34.000And a lot of those products had an impact on factory towns across the midsection of the United States.
00:12:46.000Even as we were all benefiting from cheaper Chinese goods, from lower interest rates, thanks to all the capital that was flowing into the country as the flip side of the trade deficit, that spread benefits across the economy almost like frosting on a cake.
00:13:02.680But the problem was the costs of this transformation were laid on the backs of folks in our society with the least amount of education, the fewest skills in basic manufacturing.
00:13:16.680They took the brunt of it, and what was left behind was almost the equivalent of economic tumors in some of these communities.
00:13:24.680But within, you know, by 2005, 2006, in the Bush administration, Treasury Secretary Hank Paulson was pushing for the administration to do more to address the needs of the workers who were hurt by this.
00:13:40.360And I remember interviewing George Bush in 2006 or 2007, I think it was, and I put this question to him and asked whether more wasn't needed, whether the system shouldn't be more robust.
00:13:54.960He thought the existing program, which is called Trade Adjustment Assistance, always terribly inadequate, poorly funded, he thought that was sufficient.
00:14:41.380Also, the viceroy, Mike Davis, as we await the president of Turkey to arrive to the White House for a meeting with the president of the United States.
00:14:50.760This July, there is a global summit of BRICS nations in Rio de Janeiro, the bloc of emerging superpowers,
00:15:06.700including China, Russia, India, and Persia, are meeting with the goal of displacing the United States dollar as the global currency.
00:15:15.160They're calling this the Rio reset as BRICS nations push forward with their plans.
00:15:21.280Global demand for U.S. dollars will decrease, bringing down the value of the dollar in your savings.
00:15:26.760While this transition won't not happen overnight, but trust me, it's going to start in Rio.
00:15:33.440The Rio reset in July marks a pivotal moment when BRICS objectives move decisively from a theoretical possibility towards inevitable reality.
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00:16:57.000So, folks, instead of me just screaming about it all the time, you now get to read about it in a really terrific book, The World's Worst Bet, The Rise and Fall of Globalization.
00:17:12.800I want to get you back when we've got more time because I want to talk about kind of where we are now, where we go.
00:17:18.980But a question I've always had to myself is because President Trump is not a politician.
00:17:24.220When he got into this, he's a business guy.
00:17:26.740But he has these kind of innate instincts, right?
00:17:29.280How did the Clintons, as savvy as they are in understanding Bill Clinton, you know, Bob Rubin, these guys were kind of the architects in the 90s.
00:17:37.220How did Hillary Clinton, who, you know, is kind of our arch nemesis here, but I've always said, hey, brilliant, and particularly they have great political instincts.
00:17:47.980How did they miss the importance of this story to the American people and how the American people out in particularly the heartland of this country.
00:17:55.160And this is how we pierced the blue – when I got into the thing, I said, we're going to go after the blue wall.
00:17:59.380We're going to go after Pennsylvania and Michigan and Wisconsin and Iowa and Ohio, which weren't in our camps at the time.
00:18:06.340Because this is the heart of where the destruction was, and Clinton can't stand up, and she never – in fact, she doubled – she kind of doubled and tripled down.
00:18:17.120You know, I remember interviewing her during the 2008 campaign, primary campaign, when she was running against Barack Obama.
00:18:24.200And the white working class was sort of her last stand in places like Pennsylvania.
00:18:30.180And I remember interviewing her in a high school gym in that state, and she was saying things about the need to adjust our approach to globalization, use more industrial policy, the kind of things that really didn't come to fruition, certainly in the Democratic Party, until Joe Biden was elected in 2020.
00:18:50.140So I think, to some degree, they saw this, but they didn't act on it.
00:18:56.600And, you know, by the time we get to the 2016 election, a lot of these communities, these so-called China-shock communities that have just taken in the chops from the rise of China, they get hit again by the global financial crisis in 2008.
00:19:13.600And that's made worse by global capital flows.
00:19:17.880And then you have the weakest recovery in the post-war era.
00:19:22.640So by the time 2016 rolls around, these people have been battered and bruised, and they're desperate for anything other than the establishment approach.
00:19:31.600And, you know, they didn't have much of a choice seen through that lens in 2012.
00:19:38.600But by 2016, you've got a pretty clear choice between an establishment, well-regarded establishment figure, former Secretary of State Hillary Clinton, or this very disruptive, very unorthodox populist figure, Donald Trump, who is basically saying, we're going to throw all this stuff out and do it 180 degrees different.
00:20:02.260David, whenever I get the book, we're going to have you back very quickly.
00:20:08.080Where do people go to, if you're giving any talks or book visits, any interviews, where do people go to get up to that on your social media and where do they go find the book?
00:20:18.380Well, they can find me on social media, David J. Lynch, both on X, Blue Sky.
00:20:54.180It's a very powerful narrative history.
00:20:56.180It's got a lot of economics in it, but it's accessible to folks to kind of understand what sometimes seems like you need a Harvard MBA to understand.
00:21:26.960Play this clip, and then I'll jump in.
00:21:28.420The breaking news of the night is that federal prosecutors have written and submitted a memo explaining why charges should not be brought against former FBI Director James Comey.
00:21:41.020That news comes a day after a day of intense speculation that Donald Trump's new acting U.S. attorney in the Eastern District of Virginia, adjacent to Washington, D.C., will seek an indictment of James Comey, possibly for lying to Congress before Tuesday of next week.
00:21:57.700Because the five-year statute of limitations on that charge will expire on Tuesday.
00:22:05.180That goes a couple more minutes, but Ken Delanian, who is kind of the comms department for the permanent Justice Department, not Trump's Justice Department, leaked – got a leak last night at 10 o'clock at night that three career prosecutors are writing a memo that's saying Comey can't be charged, shouldn't be charged, you can't win in court.
00:22:34.540Well, let's just step back and tell the audience what happened here.
00:22:38.080Five years ago, just short of five years ago, we had James Comey go before the Senate Judiciary Committee on a congressional investigation about Crossfire Hurricane, where it's very clear now that the Democrat operatives in the Obama White House, Biden, Obama, Hillary, Comey, Clapper, Brennan, so many others.
00:23:03.500They politicized and weaponized intel agencies and law enforcement before the 2016 election to take out then-candidate Donald Trump and help Hillary Clinton to cover up her foreign corruption that we've talked about on this show for the last three years.
00:23:19.940Comey was called to testify before the Senate Judiciary Committee.
00:23:23.320He was under oath, and Senator Ted Cruz asked him if he had discussions with the media about Crossfire Hurricane, and there's evidence he clearly lied.
00:23:33.940He clearly perjured himself, and Andrew McCabe, his deputy, has evidence that Comey did talk to the media.
00:23:47.200The statute of limitations for most federal felonies, like perjury, obstruction of Congress, or it's actually obstruction of a congressional investigation, but obstruction of Congress for short, is five years.
00:24:01.560And so the grand jury would have to indict Comey by September 30th.
00:24:06.660And so that's what President Trump's new U.S. attorney in the Eastern District of Virginia, according to these press reports, is going to do.
00:24:15.340And remember, with a grand jury indictment, you have to go to a grand jury of your peers.
00:24:19.960They look at the evidence, and they determine whether there's probable cause to move forward with criminal charges.
00:24:27.320And so that's, according to the news reports, that's what's going to happen.
00:24:31.460Now, you have these apparently three assistant U.S. attorneys in the Eastern District of Virginia or wherever the hell they are who are writing a memo saying that there's not evidence and that not only is that bad, they're leaking this memo to friendly reporters.
00:24:48.140And by doing that, they are violating, clearly violating their attorney obligations, their obligations to their client-client confidentiality, the Department of Justice rules as it applies to attorneys, particularly federal prosecutors.
00:25:07.720It's illegal that these prosecutors are leaking this memo to their friends in the liberal media.
00:25:14.940And you have to ask, why are they doing this?
00:25:16.720They're doing this because they're trying to protect James Comey.
00:25:20.760They're trying to protect these lawfare Democrats like they've been trying to protect them for the last eight years.
00:25:26.840And so that's for the grand jury to decide whether there is evidence that James Comey committed perjury and obstruction of a congressional investigation.
00:25:38.260I would also say this, that remember, in addition to perjury and an obstruction of a congressional investigation,
00:25:45.100there's also the charge of conspiracy.
00:28:37.000He's our wise man, a former CIA, Pentagon, and White House advisor with an unmatched grasp of geopolitics and capital markets.
00:28:45.220Jim predicted Trump's Electoral College victory exactly 312 to 226, down to the actual number itself.
00:28:54.600Now he's issuing a dire warning about April 11th, a moment that could define Trump's presidency in your financial future.
00:29:01.640His latest book, Money GPT, exposes how AI is setting the stage for financial chaos, bank runs at lightning speeds, algorithm-driven crashes, and even threats to national security.
00:29:13.860Right now, war room members get a free copy of Money GPT when they sign up for Strategic Intelligence.
00:29:20.020This is Jim's flagship financial newsletter, Strategic Intelligence.
00:29:53.020Criminals forge your signature on one document, use a fake notary stamp, pay a small fee with your county, and boom, your home title has been transferred out of your name.
00:30:03.920Then they take out loans using your equity or even sell your property.
00:30:07.980You won't even know it's happened until you get a collection or foreclosure notice.
00:30:15.300So let me ask you, when was the last time you personally checked your home title?
00:30:21.000If you're like me, the answer is never, and that's exactly what scammers are counting on.
00:32:27.120And you have these Democrats, politicians cheering on this violence, and it's unacceptable.
00:32:33.960So what needs to happen is the Secretary of State, in consultation with the Attorney General and the Treasury Secretary, in addition to designating Antifa as a domestic terrorist organization,
00:32:46.720they need to designate Antifa as a foreign terrorist organization and start charging people who support Antifa with material support to terrorism.
00:32:55.740You need to expel all aliens, legal and illegal, who are associated with Antifa, and you need to cut off their funding.
00:33:04.720You also need to use our federal laws to go after everyone who attacks federal law enforcement for assaults on federal law enforcement and attack federal property.
00:33:15.240You need to charge them with those crimes, and they also need to charge conspiracy,
00:33:20.140which you can either do a RICO conspiracy, a racketeering conspiracy that we've used to take out the Klan and the mob,
00:33:27.800or you can use the general conspiracy charge, and you can get a lot of these bad actors with conspiracy charges.
00:33:35.560And so it is time to take off the kid gloves and go after these violent left-wing terrorists.