How would you rate the US, particularly their handling of the economic side of things, the monetary side of things?

Well, I try not to give ratings per se, because that's kind of implicit in the underlying projections that I make, whether one side or another emerges battered and bruised as the victor or not.

I really do think it's in the balance in terms of how this works out.

But in general, I'll say I think the US has got a two in three chance of managing to put it off and a one in three chance of failing dramatically.

And, you know, the outcomes there are so staggeringly different that the spread that you have on any particular financial market asset cross that you're looking at or cross that you're looking at really bear considering, you know, this is not, maybe there'll be one rate hike or two and you're therefore looking at a few basis points in the Fed funds futures.

We're talking about entirely different futures.

But the problem is that everything they're trying to do, as I've made abundantly clear, and again, in that reverse perestroika piece, is every bit as challenging as what Gorbachev faced with the Soviet Union.

And I think that's the big unknown for many people who are just watching mainstream media in the US is what is actually happening in China and how much leverage do they have?

What analysis do you have on that and how does this tie in and what we just talked about now about US overstretching and trying to handling all those crisis points?

Sure.

Well, there's a lot that I threw in there.

So let me now try and slow it down and address your point and link it up and unpack it.

So obviously the US is in a conflict with Iran and it's saying publicly that it doesn't intend to attack them physically at the moment because it's overstretched in terms of missile interceptors and precision ammunition.

It doesn't need the precision ammunition.

It can take a risk and use less precision ammunition, but it means you have to be closer and you can take casualties.

What do you think Trump meant by that?

Right.

So that's where I think it will go.

That's above and beyond the fact that it will be linked to LNG.

It will be linked to NATO.

It will be linked to tariffs.

But let me just use my methodology that is how I see everything, or I try to see everything.

I look at these hypothetical ideas, and I project them forward to, you know, the logical endpoint, this direction or that direction.

All sorts of intervention, yep.

Will we ever see the end of either of them? Good afternoon, New Zealand time.

Good afternoon, New Zealand.

Well, let's break it down into two parts.

First of all, in terms of the tariffs, I think it's incredibly unlikely that we'll ever see a global economy without a U.S. tariff again.

And at the moment, I think that the next two years are going to see higher and higher tariffs.

And more importantly than that, the news over the weekend, which hasn't made the major financial market headlines yet, because A, it's August and everyone in the West is on holiday, pretty much, in the Northern Hemisphere, and B, it's so controversial people don't want to talk about it.

The actual underlying message from the White House over the last 48 hours has been, okay, we've reached the point now where it finally is time to pick a side.

That's a fair comment, isn't it, Michael?

managed to resist America.

If that happens, there are significant market impacts for everyone from America to Europe to Australia to the entire Western complex.

But it remains to be seen.

That could be one.

The second one is behind all the rhetoric, behind all the headline, Iran potentially could be having a perestroika moment where America says to it, look, if you reform, if you change, we're going to open every door that's been closed to you.

Even doors that Obama didn't open with the JCPOA.

And effectively, you can be flooded with capital.

The US military is backed by US industry,

On Ir- Iran after the midterms.

Uh, Iran after the midterms.

Yeah, absolutely.

I don't believe that's in any way done at all.

This isn't sorted, okay? So those are just some examples.

They're not the ones we really need to be worried about in that they're bad, but we're already coping with them in various different ways.

Now, if even Iran, if it comes back, I believe we'll cope with it differently because we're already putting in place alternatives, and it will take a bit longer to get them all in place and to, to get everything sorted, but it won't be quite the shock that it was when it first began.

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yes

i i don't believe from what i've seen they're in a position to actually enrich any much uranium at the moment that could take years could they get that back if everyone just walks away and say this is done well absolutely they could any country can eventually rebuild unless you take them completely to a different you know a different playing field in a form of violence that the US clearly doesn't want to at the moment when it's aiming to still try and achieve some kind of deal so that's the military one but the broader context again is like what's Iran actually achieving And how can we test the case that this genuinely is some kind of stage managed theatrics? Because there is a view out there, and I'm cognizant of that view, that actually Iran is on the other side of this going to be integrated into the region.

The US is going to look at a way to exit the middle east which certainly seems to be possible to a degree or to scale back its presence there and all of this is just stage managed to try and effectively come up with a narrative that allows iran to be normalized now again that can only happen if you have an element of the regime prepared to take out its own hardliners who have had 47 years of revolutionary theological rhetoric fed into them and then fed into the system and I don't see that now maybe you wouldn't see it that's the whole point maybe you don't see a Gorbachev coming right the way until the very end of the Cold War and Gorbachev of course you know dismantled the USSR without meaning to maybe that's happening but for me what I'm looking at as a key tell on this is what Iran is doing versus Hezbollah Because let's be honest, nobody, and again, this is a really polemic area, and I'm sure there will be at least someone watching who says, well, I take the opposite view, because thus is life, right? That's life.

Hezbollah is not popular in the region.

It's a radical, widely recognized terror group doing some of the most awful things to raise money.

This is not some brave anti-American group of university protesters.

These are very dangerous, desperate people doing lots of unpleasant things to keep their power base going to everyone around them.

Thoughts on what's going on there right

Mm-hmm

...

in, in English, or at least I, I'm, I'm pronouncing it that way with my British accent, um, who are basically saying that the deal is exactly the same one that Trump vociferously rejected when they flagged it a few weeks ago and ended up bombing them again.

So it seems extremely strange if that is the deal.

We don't have the text, but I do think that at best it is, as you described it, some kind of loose performance-based, you do this if we do that, but the sequencing is very tricky, and we'll move gradually over time towards addressing the fundamental core of this, which is the nuclear or uranium issue, where there is absolutely no guarantee whatsoever that anything will be achieved.

And in fact, we have already seen Trump in an interview with The New York Times, in a very fast-moving news environment, say, "Well, yes, if they don't, after 60 days of negotiations, agree to anything on the nuclear front, then of course I start bombing them again, and I may end, end up being the overseer of the Middle East's oil, for which I want a 20% cut."

How big of a deal would this be?

Oh, huge, because from that sta- starting point, even though Iran would then still be, in terms of what one understands this memorandum of understanding is pointing to, in a position to start selling oil again, so it gets income, to have sanctions removed, which means more money comes in, um, to, uh, normalize trade with many people, therefore get investment coming in, et cetera, et cetera.

Why do you think it's going to be closed for longer? And what else can you share?

Sure.

So If we think of it in terms of the art of the deal, which is very clearly what the US is approaching this from, they are trying to be tough and use the Trump playbook, but ultimately be logical.

The other side is being theological.

And those two twains are never going to meet, unfortunately.

It's very, very hard to strike a deal with a regime that is driven by what they call Mokowama, if I'm producing that correctly, which is just absolute religious refusal to give up, just complete defiance.

A parallel to this, and one that was a clear predictor of where this could have ended up, I mean, it wasn't a given that was going to end up here, but it was a warning sign, is what we've seen in the Gaza conflict with Hamas, which has clearly in military terms been just destroyed in a particular war and yet refuses to admit defeat.

Right.

Why do you think it's gonna be, uh, closed for longer, and, and what else, uh, can you share?

Sure.

So if we think of it in terms of the art of the deal, which is very clearly what the US is approaching this from, they are trying to be tough and, you know, use the Trump playbook, but ultimately be logical.

The other side is being theological, and those two twains are [chuckles] never going to meet, unfortunately.

It's very, very hard to strike a deal with a regime that is, uh, driven by what they call, uh, Mokawama, if I'm producing that correctly, which is just absolute religious refusal to give up, just complete defiance.

A parallel to this, uh, and one that was a clear predictor of where this could have ended up, um, and w- it wasn't a given that it was going to end up here, but it was a warning sign, uh, is what we've seen in the Gaza conflict with Hamas, which has clearly, in military terms, been just destroyed in a particular war and yet refuses to admit defeat.

It's still just sitting there in a pile of rubble, and nothing is happening in terms of rebuilding or reconstruction or a clear end to the war and a peace phase on the other side because they won't give up.

Does a crisis like this pull forward structural repricing, uh, that depletion was gonna ultimately deliver anyways? And if so, what does a decade of that feel like for, uh, the supply chains that, um, we became used to as opposed to a financial trading desk? What, what do you think that all looks like?

What do you think's on his mind long term? What do you think he and President Trump and Scott Bessent maybe are architecting in terms of a, a new central bank regime for the United States?

I think it is important to return to Iran, and I'm, I'm sure we'll do that in a few minutes.

But if we, if we kind of segue to that particular discussion, from my perspective, if you'll recall in many of the chats that we've had over the years, I've been underlining that I thought when Trump was reelected that he would shift from economic policy to economic statecraft.

That was the, you know, the, the, the line I was traveling with.

And the US is openly now saying publicly that economic statecraft is what it's pursuing, and that's absolutely part and parcel of the argument I was just making then about this energy crisis, because you cannot have an independent central bank which is trying to target 2% CPI and all the other paraphernalia that it claims to be targeting, and not have joined up thinking across every element of state and government towards the national security goals or the foreign policy goal that you're aiming for with economic statecraft, and not have the central bank as part of that.

I mean, the central bank is so important in all that we do.

It's just logically ridiculous to conceive of a Fed saying, "Well, we're not going to change.

What are they?

How long can it be not happening before this turns into a really big global crisis where you've got e-entire nations that have to shut down because they don't have any fuel and, you know, thing, things really grind to a halt? Is that something that's days away, weeks away, months away, years away? Uh, w-what would it mean if there is no improvement and it's just six ships a day that can go through the Strait of Hormuz, let's say for the next two months? W-what does that mean for the economy?

So the first thing is it depends on the economy you're talking about.

There's a big difference between them.

The second thing is it depends on the kind of fuel that they're relying on, because there's a big difference within the oil barrels themselves and what they're turned into.

And the last point is it becomes exponential rather than linear.

So to cut a long story short, if you were talking about, say, two months, and this is purely hypothetical, not any kind of forecast, you are going to see crippling shortages of diesel, of bunker fuel, of jet fuel, and that's going to start obviously in Asia, where it's already being reported.

I'm seeing signs of that around me physically in Asia.

How long does it take from a policy change until the system gets back to normal and recovers?

What would happen if all the countries get it?

Well, if all the countries get it simultaneously, you either have a kumbaya moment where everyone understands that there's only one planet, one humanity, we all need to understand this is silly, and fr- I don't believe for a second that'll happen, and just sit around the campfire and...

Well, it wouldn't be a campfire because that's probably not environmentally friendly.

But sit around some kind of environmentally friendly heat source and have some kind of environmentally friendly marshmallow together.

But, uh, that's simply not going to happen.

I think almost immediately what you will have instead is a, is a zero-sum scramble for, you know, the remaining resources to make sure that at least one policy or one civilization has the whip hand over the other, and that's, that's exactly what you see.

So y-you can decry it, but I think it's a very, very understandable reaction which anyone looking at history would have said is more, is more likely to occur.

Michael.

What would happen if all the countries get it?

Well, if all the countries get it simultaneously, you either have a kumbaya moment where everyone understands that there's only one planet, one humanity, we all need to understand this is silly, and fr- I don't believe for a second that'll happen, and just sit around the campfire and...

Well, it wouldn't be a campfire because that's probably not environmentally friendly.

But sit around some kind of environmentally friendly heat source and have some kind of environmentally friendly marshmallow together.

But, uh, that's simply not going to happen.

I think almost immediately what you will have instead is a, is a zero-sum scramble for, you know, the remaining resources to make sure that at least one policy or one civilization has the whip hand over the other, and that's, that's exactly what you see.

So y-you can decry it, but I think it's a very, very understandable reaction which anyone looking at history would have said is more, is more likely to occur.

Michael.

Can, can you help me sort out the geopolitics and what's going on?

Thank you very much for that hospital pass, as we say in, in British football.

Yes, I'm very happy to be back on the show and very happy to try and be some form of, of Trump whisperer there.

But what I would say, first of all is, A, welcome to twenty twenty-six, and B, welcome to President Trump, [chuckles] because these are, these are things we have to get used to when we're dealing with both of those, particularly, you know, conflated together.

Let's start with what you mentioned in terms of Kevin Warsh.

I've, I've mentioned already in writing that I really think that the market got things wrong in terms of portraying this as a hawk-dove decision.

Because first of all, let's get down to the brass tacks of it.

Well, I've noticed that, but they, they used to pretend that it wasn't.