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Enhancing the Chinese economy may have long-term consequences for us. It is crucial to minimize our investment and gradually reduce our dependence on Chinese trade. However, finding the right approach to achieve this is challenging.

At the end of World War II Asia and Europe were devastated, and the United States emerged as the last man standing, profiting hugely from the war. They ended up, due to isolation, the strongest economy in the world with more than half the world’s gold and half the world’s GDP, with standing industries that could shift from making tanks to making cars and trucks. They did extraordinarily well for a few decades, but then, as described, they began to financialize, and it became more profitable to speculate in investments than to actually invest. In recent years, companies with money often pursue share buybacks rather than expanding research and development or industrial capacity. We are in a stage where the underlying basis for markets is questionable: what are markets for, are they accurate at price discovery, and do they predict productive investment and returns on capital? We are in a transition phase where we’re not sure anymore. There is a huge bubble, and corporations creating these bubbles, with banks that loan money relying on the state because they are too big to fail. Bailouts have totaled trillions since 2008, as the US Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan pumped trillions of dollars, with help from Gulf Cooperation Council countries to bail out banks in Britain, the United States, and Europe. It’s fascinating because China, since the financial crisis, has also created about 17 to 18 trillion dollars. China has actually been leading in creation of money, while investing that money in building 50,000 kilometers of high-speed rail, a space program, massive industries, and the Belt and Road initiative—real investment and so on. The enormous difference between the two is notable, but how far can states—the United States, Britain, the EU, and Japan—borrow and pump money into the market to keep this bubble going? We don’t know. Bubbles are hard to gauge in terms of expansion and when they break, which is why they can be sustained so long; the bursting of a bubble is painful, and no policymaker wants responsibility. China is interesting and is the only case in history of a property bubble being deflated without collapsing the real economy, deflating its property bubble over five or six years while the economy continued to grow—not at 8% but at 5%—and continued to expand. That is worth studying because other countries let property bubbles run until they burst, causing wider harm and deflation. Japan, for example, has had thirty years of zero growth since it began quantitative easing three decades ago, a growth killer because it protected existing companies, banks, and properties and never really recovered. Europe has had zero growth for about fifteen years since 2007. The United States sustains growth largely by buying it from the rest of the world—acquiring profitable companies or getting them to list on NASDAQ and then earning rents from profitable companies wherever they are—while the US economy has been largely hollowed out. It’s an interesting time to watch monetary dynamics, because this doesn’t go on forever.

There is a pool of $50,000,000 in subprime loans. The market for insuring mortgage bonds is 20 times bigger than actual mortgages. If the mortgage bonds were the match, CDOs were kerosene soaked rags, then synthetic CDOs were the atomic bomb. Mark Baum realized the world economy might collapse at that moment in a restaurant.

Wealth manager Zhangji Enterprise filed for bankruptcy. "$64,000,000,000 in liabilities is what the company has flagged already." Zhangji says the liquidity is dried up, but the the amount that could be recovered from these asset disposals is expected to be low. And this is a little bit of a surprise for investors because they thought going back a few months, there was a government inquiry into this. They thought, well, maybe we'd be able to avoid liquidation, and, there would just be a little livestream put out to the company. But, no, bankruptcy is the case, and it looks like the investors in the company, the equity holders, are gonna lose about 75% of their cash.

Sean Rein, author and founder/managing director of the China Market Research Group, discusses China’s current dynamics, opportunities, and global context with Glenn. Rein argues that China in 2026 is fundamentally different from China in 2016, with real estate, consumer confidence, and demographics as central challenges, but also with strong opportunities driven by indigenous innovation and a rapid reorientation toward self-reliance. On current challenges, Rein highlights real estate weakness as the primary concern: housing prices in top cities have fallen 30–40%, with slower property turnover and anemic transaction volumes. He distinguishes China’s situation from a US-style financial crisis, noting most homeowners have substantial mortgage equity (50–100% down) so there is no systemic panic selling. The result is stagnation rather than collapse, with consumer anxiety suppressing spending and delaying entrepreneurship. This consumer reticence, compounded by a large household savings stock (~$20 trillion) and a shrinking willingness to spend, threatens longer-term demographic goals (lower birth rates, delayed or avoided marriage) and complicates future growth. On opportunities, Rein emphasizes China’s shift toward indigenous innovation and self-reliance, a pivot that began under the Trump era’s sanctions regime and has intensified since. He argues that Chinese companies are now prioritizing technology—AI, semiconductors, NEVs, and broader green tech—alongside agriculture and food supply diversification (beef, soybeans, blueberries) to reduce exposure to Western import controls. He notes that Western observers often misread China’s trajectory due to outdated information from observers who left China years ago. He cites strong performance in Chinese equities (second-best global performance after Korea, up ~30% in a recent period) and asserts that Chinese tech firms (e.g., Alibaba, Baidu) are rapidly advancing, challenging passive stereotypes of China as merely a copycat. Rein also contends that China’s universities and talent pools are rising in global rankings, and that China’s approach to innovation now blends capital, government support, engineering talent, and an ecosystem that can outpace Western models that rely more on venture capital dynamics. On geopolitics and global leadership, Rein argues China is a natural partner with the United States, more so than with Russia, and that Western framing of China as an adversary is outdated. He contends that China’s strategy includes self-reliance in critical tech and a diversified supply chain—reducing vulnerability to sanction regimes by building internal capabilities and alternate sources. In energy and resources, China remains dependent on imports for oil (notably Iran as a major supplier) and is actively expanding renewables (wind, solar) and nuclear power, while securing strategic reserves to stabilize prices. He notes Europe as a potential beneficiary if it pursues reciprocity and deeper integration with Chinese markets, suggesting joint ventures and non-tariff barriers to ensure fair access for European firms, and criticizing European policymakers for hampering Chinese investment and technology transfer. On the US-China trade war, Rein calls tariffs a total failure overall, citing sectoral shifts in sourcing (China-plus-one strategies) but noting that costs often remain lower with Chinese imports due to tariff carve-outs and exceptions. He emphasizes that global supply chains have adapted to diversify away from single sources (China, the US, Brazil, Argentina, Taiwan, Vietnam), but asserts China still holds disproportionate leverage in critical areas like rare earths, refining, and certain energy and mineral markets. He argues that America’s coercive tools have backfired in many respects, and that Europe’s leverage lies in pragmatic, reciprocal relationships with both powers. Near-term outlook, Rein expects China to continue focusing on raising the quality of life for the large middle and lower-middle class, expanding access to health care and education, and creating a moderately prosperous society. He suggests that true wealth creation in China will come from within the middle 80–90% of the population, while a comparatively smaller elite may see gains in education and health services. He also notes that for individuals seeking the most dramatic financial upside, the United States (e.g., Austin, Silicon Valley) remains a more fertile landscape. As for his personal work, Rein promotes his book, The Finding the Opportunities in China and the New World Order, and mentions active presence on Twitter and LinkedIn, with possible future podcasting.

The Evergrande crisis in China is predicted to cause a chain reaction, leading to the collapse of domestic and international stock markets, financial institutions, and the entire financial system. The speaker suggests that the Chinese Communist Party (CCP) may resort to destructive measures, such as imprisoning people in their homes or causing harm. Additionally, they warn of a potential global virus outbreak. It is advised to be cautious and prepared.

Mario interviews Professor Yasheng Huang about the evolving US-China trade frictions, the rare-earth pivot, Taiwan considerations, and broader questions about China’s economy and governance. Key points and insights - Rare earths as a bargaining tool: China’s rare-earth processing and export controls would require anyone using Chinese-processed rare earths to submit applications, with civilian uses supposedly allowed but defense uses scrutinized. Huang notes the distinction between civilian and defense usage is unclear, and the policy, if fully implemented, would shock global supply chains because rare earths underpin magnets used in phones, computers, missiles, defense systems, and many other electronics. He stresses that the rule would have a broad, not narrowly targeted, impact on the US and global markets. - Timeline and sequence of tensions: The discussion traces a string of moves beginning with US tariffs on China (and globally) in 2018–2019, a Geneva truce in 2019, and May/June 2019 actions around nanometer-scale chip controls. In August, the US relaxed some restrictions on seven-nanometer chips to China with revenue caps on certain suppliers. In mid–September (the period of this interview), China imposed docking fees on US ships and reportedly added a rare-earth export-control angle. Huang highlights that this combination—docking fees plus a sweeping rare-earth export control—appears to be an escalatory step, potentially timed to influence a forthcoming Xi-Trump summit. He argues China may have overplayed its hand and notes the export-control move is not tightly targeted, suggesting a broader bargaining chip rather than a precise lever against a single demand. - Motives and strategic logic: Huang suggests several motives for China’s move: signaling before a potential summit in South Korea; leveraging weaknesses in US agricultural exports (notably soybeans) during a harvest season; and accelerating a broader shift toward domestic processing capacity for rare earths by other countries. He argues the rare-earth move could spur other nations (Japan, Europe, etc.) to build their own refining and processing capacity, reducing long-run Chinese leverage. Still, in the short term, China holds substantial bargaining weight, given the global reliance on Chinese processing. - Short-term vs. long-term implications: Huang emphasizes the distinction between short-run leverage and long-run consequences. While China can tighten rare-earth supply now, the long-run effect is to incentivize diversification away from Chinese processing. He compares the situation to Apple diversifying production away from China after zero-COVID policies in 2022; it took time to reconfigure supply chains, and some dependence remains. In the long run, this shift could erode China’s near-term advantages in processing and export-driven growth, even as it remains powerful today. - Global role of hard vs. soft assets: The conversation contrasts hard assets (gold, crypto) with soft assets (the dollar, reserve currency status). Huang notes that moving away from the dollar is more feasible for countries in the near term than substituting rare-earth refining and processing. The move away from rare earths would require new refining capacity and supply chains that take years to establish. - China’s economy and productivity: The panel discusses whether China’s growth is sustainable under increasing debt and slowing productivity. Huang explains that while aggregate GDP has grown dramatically, total factor productivity in China has been weaker, and the incremental capital required to generate each additional percentage point of growth has risen. He points to overbuilding—empty housing and excess capacity—as evidence of inefficiencies that add to debt without commensurate output gains. In contrast, he notes that some regions with looser central control performed better historically, and that Deng Xiaoping’s era of opening correlated with stronger personal income growth, even if the overall economy remained autocratic. - Democracy, autocracy, and development: The discussion turns to governance models. Huang argues that examining democracy in the abstract can be misleading; the US system has significant institutional inefficiencies (gerrymandering, the electoral college). He asserts that autocracy is not inherently the driver of China’s growth; rather, China’s earlier phases benefited from partial openness and more open autocracy, with current autocracy not guaranteeing sustained momentum. He cites evidence that in China, personal income growth rose most when political openings were greater in the 1980s, suggesting that more open practices during development correlated with better living standards for individuals, though China remains not a democracy. - Trump, strategy, and global realignments: Huang views Trump as a transactional leader whose approach has elevated autocratic figures’ legitimacy internationally. He notes that Europe and China could move closer if China moderates its Ukraine stance, though rare-earth moves complicate such alignment. He suggests that allies may tolerate Trump’s demands for short-term gains while aiming to protect longer-term economic interests, and that the political landscape in the US could shift with a new president, potentially altering trajectories. - Taiwan and the risk of conflict: The interview underscores that a full-scale invasion of Taiwan would, in Huang’s view, mark the end of China’s current growth model, given the wartime economy transition and the displacement of reliance on outward exports and consumption. He stresses the importance of delaying conflict as a strategic objective and maintains concern about both sides’ leadership approaches to Taiwan. - Taiwan, energy security, and strategic dependencies: The conversation touches on China’s energy imports—especially oil through crucial chokepoints like the Malacca Strait—and the potential vulnerabilities if regional dynamics shift following any escalation on Taiwan. Huang reiterates that a Taiwan invasion would upend China’s economy and government priorities, given the high debt burden and the transition toward a wartime economy. Overall, the dialogue centers on the complex interplay of China’s use of rare-earth leverage, the short- and long-term economic and strategic consequences for the United States and its allies, and the broader questions around governance models, productivity, debt, and geopolitical risk in a shifting global order.

Western financial institutions have invested heavily in China's real estate market, relying on fake data. The CCP's influence in Australia's economy through corrupt businesses poses a threat. The CCP controls the world financially, manipulating countries and individuals to serve its interests. China's economic collapse could lead to the downfall of the CCP and expose its wrongdoings.

We can't track $2.3 trillion in transactions. That's two trillion, three hundred billion dollars.

China's property bubble has claimed its biggest casualty yet. Evergrande has been delisted from the Hong Kong Stock Exchange. It used to be the country's largest developer. Evergrande was buried under more than $300,000,000,000 of debt. It promised homes to millions of buyers but left behind empty towers and unfinished projects. It shattered confidence in China's property sector, and now the company is being liquidated. Evergrande's creditors face huge losses, and China's economy faces deeper troubles. The Hong Kong court had already ordered its liquidation last year. Evergrande was once China's largest developer. It is now the world's biggest property failure.

Speaker 0 questions systemic risk in the Chinese economy, referencing the 2008 financial crisis and the domino effect if a large bank fails. Speaker 1 says: 'the total amount of, the debt to the nonfinancial sector in China. It's about 370,000,000,000,000.' The shadow banking sector 'account for about 77% of it,' while 'The commercial bank themselves account for 65 percent' and are 'the backbone of the Chinese financial system.' Consequently, risk and losses may fall back to commercial banks as they are 'the lender to those shadow bank through those shadow bank to the to the developer child property developer and to the local government financing vehicle and also to some of those private enterprises with less than credit.' He adds that the 'market proport proport of the shuttle banking system to the formal banking system' signals risk; the Chinese government is 'unlikely to pay them out,' but will 'broker some of those SSLs and so on in restructuring.'

Evergrande, the world's largest property developer, has gone bankrupt, causing an 8% drop in indexes. This is part of a larger issue in China, where all public or listed property developers are facing default bankruptcy. China's economy heavily relied on real estate for growth, but now the sector is collapsing after an unregulated climb. The situation is comparable to the US financial crisis, but with three and a half times more banking leverage. China's regulators are trying to protect individuals from short sellers, but the situation is expected to worsen.

Speaker 0 argues that despite claims that the United States kidnapped Maduro in Venezuela to seize oil resources, the true motive was to counter China. China, according to the speaker, has tools and weapons that could destabilize the U.S. dollar, which would impact civil markets. At the start of the year, China announced it would restrict exports of its silver, and since China dominates the silver market, this caused the price of silver to surge. The speaker asserts that if the United States embargoed China's oil, China could dump its U.S. Treasuries and cause financial havoc, potentially destroying both nations. A central metaphor is presented: a ladder over an abyss, with both China and the United States attempting to climb it together. The United States supposedly insists on remaining higher than China; if the U.S. goes too far and falls behind, the latter destabilizes and both fall into the abyss. Conversely, if China overtakes and climbs too far, they both fall. The speaker contends that the American financial industry currently lacks the capacity to self-correct, and a market collapse could pull the entire economy down. Another major problem cited is over-financialization. Regarding silver, the speaker asserts that China needs silver, but in the United States it is used for speculation, describing silver as “really just paper silver.” They claim that some companies, such as JPMorgan, are significantly overleveraged—“300 to one”—so every ounce of silver they hold is promised 300 on paper. The speaker then shifts to a geopolitical forecast: “This war will be settled in Odessa.” NATO, they claim, will commit to defending Odessa; Russia will encircle and blockade, and NATO will be unable to hold on. Europeans would be forced to be conscripted to fight in Odessa, would refuse, and civil war would ensue across Europe. The timeframe is given as five to ten years, with a note that it would be a slow death for Europe, and that some aspects are expected to unfold “this year.”

According to estimates, an enormous amount of $2.3 trillion in transactions cannot be tracked. This staggering figure highlights the difficulty in monitoring such a vast sum of money.

We have been working with China on coordinating responses to potential bank failures and assessing sector exposure to climate risks. These discussions are crucial as financial issues in one country can affect others. It's important to engage with major economies like China to address these potential risks.

The speakers discuss the economic situation in China, suggesting that it is not as good as it appears. They mention issues with the stock market and real estate, claiming that everything is failing. They also mention rumors about the government and its control over the economy. The conversation touches on corruption and how the government takes money from private businesses. The speakers conclude that the Chinese government can hold individuals accountable at any time, regardless of their social status.

US banks are facing significant losses due to the decrease in value of securities and loans caused by rising interest rates. Estimates suggest that the overall losses for the US banking system could reach $1.8 trillion, making many smaller banks insolvent. The higher rate regime is considered a major threat due to the current high levels of debt, which were not present during previous periods of high interest rates. The combination of negative supply shocks, reduced growth, and inflation, along with high debt ratios, creates an unstable economic and financial environment. Central banks' attempts to achieve both price stability and financial stability are challenged by the systemic risks and potential insolvency faced by banks. This situation is expected to lead to a credit crunch, tightening of credit standards, and a significant impact on the real economy.

Banks like Santander, Deutsche Bank, and Royal Bank of Scotland are broke due to fractional reserve banking, allowing them to lend money they don't possess. This practice is a criminal scandal that has been ongoing for too long.

This isn't a recession. This isn't even a crisis in the traditional sense. What we're witnessing is the complete unraveling of the economic model that powered the world's second largest economy for four decades. And the West, we're completely unprepared for what comes next. For forty years, China's growth seemed unstoppable. Double digit GDP increases, gleaming cities rising from farmland, a manufacturing powerhouse that became the world's factory. Western corporations moved their supply chains there. Emerging markets tied their futures to Chinese demand. Everyone believed the twenty first century would belong to Beijing. But beneath the surface, something was fundamentally broken. The property sector that once drove 30% of China's economy has imploded. Evergrande, with its 300,000,000,000 in liabilities, was just the first domino. Country Garden followed, then China, South City. Now even state backed developers are failing.

Shadow banks are simply lenders that are not banks. And in China, they take the form of trust or wealth management products. Many of them are sponsored by banks even though the banks themselves don't lend the money. The wealth management products take money from investors by promising them higher yields than they could get in a bank, then they lend the money out to businesses that are either too small or too risky for the big banks. One big risk is the loans go bad, and the question there is who takes the loss.

Mario and Jeff discuss what the current geopolitical and monetary environment means for gold, the US dollar, and the broader system that underpins global finance. - Gold and asset roles - Gold is a portfolio asset that does not compete with the dollar; it competes with the stock market and tends to rise when people are concerned about risky assets. It is a “safe haven store value” rather than a monetary instrument aimed at replacing the dollar. - Historically, gold did not reliably hedge inflation in 2021–2022 when the economy seemed to be recovering; in downturns, gold becomes more attractive as a store of value. Recent moves up in gold price over the last two months are viewed as pricing in multiple factors, including potential economic downturn and questionable macro conditions. - The dollar and de-dollarization - The eurodollar system is a vast, largely ledger-based network of US-dollar balances held offshore, allowing near-instantaneous movement of funds. It is not simply “the euro,” and it predates and outlived any single country’s policy. Replacing it would be like recreating the Internet from scratch. - De-dollarization discussions are driven more by political narratives than monetary mechanics. Central banks selling dollar assets during shortages is a liquidity management response, not a repudiation of the dollar. - The dollar’s dominance remains intact because there is no ready substitute meeting all its functions. Replacing the dollar would require replacing the entire set of dollar functions across global settlement, payments, and liquidity provisioning. - Bank reserves, reserves composition, and the size of the eurodollar market - The share of US dollars in foreign reserves has declined, but this is not seen as a meaningful signal about the system’s functionality or dominance; the real issue is the level of settlement and liquidity, which remains heavily dollar-based. - The eurodollar market is enormous and largely offshore, with little public reporting. It is described as a “black hole” that drives movements in the system and is extremely hard to measure precisely. - Current dynamics: debt, safety, and liquidity - The debt ceiling and growing US debt are acknowledged as concerns, but the view presented is that debt dynamics do not destabilize the Treasury market as long as demand for safety and liquidity remains high. In a depression-like environment, US Treasuries are still viewed as the safest and most liquid form of debt, which sustains their price and keeps yields relatively contained. - Gold is safe but not highly liquid as collateral; Treasuries provide liquidity. Central banks use gold to diversify reserves and stabilize currencies (e.g., yuan), but Treasuries remain central to collateral needs in a broad financial system. - China, the US, and global growth - China’s economy faces deflationary pressures, with ten consecutive quarters of deflation in the Chinese GDP deflator, raising questions about domestic demand. Attempts to stimulate have had limited success; overproduction and rebalancing efforts aim to reduce supply to match demand, potentially increasing unemployment and lowering investment. - The US faces a weakening labor market; recent job shedding and rising delinquencies in consumer and corporate credit markets heighten uncertainty about the credit system. This underpins gold’s appeal as a store of value. - China remains heavily dependent on the US consumer; despite decoupling rhetoric, demand for Chinese goods and the global supply chain ties keep the US-China relationship central to global dynamics. The prospect of a Chinese-led fourth industrial revolution (AI, quantum computing) is viewed skeptically as unlikely to overcome structural inefficiencies of a centralized planning model. - Gold, Bitcoin, and alternative systems - Bitcoin is described as a Nasdaq-stock-like store of value tied to tech equities; it is not seen as a robust currency or a wide-scale payment system based on liquidity. It could, in theory, be a superior version of gold someday, but today it behaves like other speculative assets. - The conversation weighs the potential for a shift away from the eurodollar toward private digital currencies or a mix of public-private digital currencies. The idea that a completely decentralized system could replace the eurodollar is acknowledged as a long-term possibility, but currently, stablecoins are evolving toward stand-alone viability rather than a wholesale replacement. - The broader arc and forecast - The trade war is seen as a redistribution of productive capacity rather than a definitive win for either side; macroeconomic outcomes in the 2020s are shaped by monetary conditions and the eurodollar system’s functioning more than by policy interventions alone. - The speakers foresee a future with multipolarity and a gradually evolving monetary regime, possibly moving from the eurodollar toward a suite of digital currencies—some private, some public—while gold remains a key store of value in times of systemic risk. - Argentina, Russia, and Europe - Argentina’s crisis is framed as an outcome of eurodollar malfunctioning; IMF interventions offer only temporary stabilization in the face of ongoing liquidity and deflationary pressures. - Russia remains integrated with global finance through channels like the eurodollar system, even after sanctions; the resilience of energy sectors and external support from partners like China helps it endure. - Europe is acknowledged as facing a difficult, depressing outlook, reinforcing the broader narrative of a challenging global macro environment. Overall, gold is framed as a prudent hedge within a complex, interconnected, and evolving eurodollar system, with no imminent replacement of the dollar in sight, while the path toward a multi-currency or digital-currency future remains uncertain and gradual.