The U.S. Capital is the Lifeline of the Chinese Communist Party: Roger Robinson Interview

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The U.S. Capital is the Lifeline of the Chinese Communist Party: Roger Robinson Interview

China is content for us to concentrate on the shiny object over here call trade can they handle a tariff war and so forth it’s painful but yeah they can they can play that game all day look at the evident see any panic and they just depreciate the currency or do something else to help offset the negative impact of tariffs and most folks know that and they also think that Trump himself president is constrained by our farmers and other aggrieved sectors of the economy who are going to pressure him and in other words they have this thing gamed out to the enth degree technology when we started to go after the high tech they liked that a lot less that was not so comfortable when hikvision and and ZTE and Huawei and others started to come into view as national security problems and human rights problems they didn’t they’re not go for that but they can live with that because CTE was reversed they’re planning to reverse hallway they’re trying to get even Meg V off of the entity list artificial intelligence so they they can work it I’ll tell you what they can’t afford to see the light of day the money the u.s. capital markets because that’s where they live or die the US is roughly one point nine trillion dollars invested in Chinese stocks in another trillion bombs these figures are roughly the size of China’s foreign reserve and could easily pay the bill for China’s belt and Road initiative however a large portion of these Chinese companies post national security concerns contribute to human rights abuses and engage in fraudulent practices what is this mean to America how significant is its impact what will happen if nothing is done about it my interview was Roger Robinson senior director of international economic affairs at the National Security Council during the Reagan administration who later served as chairman of the Congressional us-china economic and Security Review Commission he is the one who brought this issue to light I’m Simone Gao and you’re watching zooming in on November 18 2009 the Thrift Savings Plan sport reaffirmed a 2017 decision to follow the MSCI all country world X us investable market index beginning sometime in 2020 this decision allows his international fund to be invested in markets from not only what are considered developed countries such as those in Western Europe in North America but also in emerging markets in countries with growing economies such as China the TSP board has been receiving pressure from a bipartisan group of senators including Senator Marco Rubio who is written twice to the board to urge them to reverse their decision since Chinese companies do not meet transparency standards and many of their operations counter American interest the TSP Ward issued a statement afterwards claiming their decision is in the best interest of the participants and beneficiaries a current best practice and is widely recognized as a smart strategy in today’s market thank you very much mr. Robinson for being with us today a pleasure so the TSP board remained their position they said the ten largest US companies 401k plans are investing in emerging markets as do the ten largest federal contractor plans and many more so they are entitled to do the same what do you make of it well I’ve read that letter and they also use terms like prudent to take this step appropriate in the best interest of members you see that throughout the text they use the proliferation of the MSCI all country world x us index and it’s wide usage as in effect a justification for their doing so well the fact is that over the past 20 years there’s been no screening mechanism over the US capital markets there’s been no national security minded due diligence performed or human rights related diligence and as a consequence China has

felt in effect entitled they felt that the capital markets were not scrutinized that they weren’t on anybody’s mind they were never a subject of discussion in the Congress or the executive branch or even the media before March of this year you can’t find any remarks about this even in the NGO community so this was not on the radar screen so to speak and as a consequence Beijing saw an opportunity and not only they move in aggressively with their stocks and bonds pulling out what could be as much as three trillion dollars thus far from us investors both institutional and individual but that number could go up very considerably and they weren’t particularly prudent to use that term about what companies they sent into the United States markets companies that were on effect sanctions list or the entity list the so-called blacklist of the Department of Commerce advanced weapons manufacturers those companies responsible or enabling egregious human rights abuses like the surveillance cameras that are every few meters atop the walls of the concentration camps holding well over a million Weger this is a course hikvision for example which is in the MSCI all country world x us index as is ZTE as is Avik the chinese advanced weapons manufacturers jet engines ICBMs etc targeting American cities in other words we have a lot of bad actors of China in the United States capital markets today and these represent risks to American investors it’s not just that it’s rather shocking that we would permit PLA companies or those associated with acute human rights violations to be in our markets at all but if you put that aside these companies are subject to sanction as we’ve recently seen and as a consequence they represent a risk to the share value and corporate reputation of those Chinese companies and those American investors that take the plunge and invest in them so how does that equate with prudent how does that represent the best interests of 5.7 million federal employees how does how does working to fund the PLA and enable concentration camps serves the best interest of federal employees who some of whom many of whom have spent their whole careers trying to combat so you can see the very narrow view of the of the what I call the Thrift Savings Plan board which is more officially known as the federal retirement thrift Investment Board they’re looking at return on investment they’re looking at the fact that everybody does it they’re looking at their fiduciary duty with this very narrow mindset well what about material risk that’s a market condition that’s not that’s not some outside complaint like socially responsible investing for example it’s not a preference it’s a reality so they’re prepared to overlook this kind of thing and I think that they have missed fundamentals in this decision it’s a wrongheaded decision and I don’t believe it will stand so for that I have two questions number one from the US government point of view this shouldn’t happen right these Chinese companies are wrong sexual as frequently on sanction lists and some of them are even on the entity list how can they be included in the MSCI indexes what went wrong in the system I mean is it just that the government doesn’t have the oversight apparatus well that’s correct I mean when you have 20 years of utter neglect when you have the SEC that doesn’t regard these kinds of sanctioned entities to represent a material risk to the share value and corporate reputation of that company in the American investors that that are going to perhaps invest in them you can see the the flawed logic here and so of course it’s inconsistent indeed a glaring inconsistency if you’re not

allowed to do business with these designated companies by law but you can invest in them you can fund them you can give them all the prestige of being in the world’s deepest and most voluminous markets which you know that they use is the Good Housekeeping Seal of Approval to legitimate their stature around the world it’s a privilege to be in the US capital markets it’s not a right there.this got confused along the trail the Chinese and and Wall Street believe it’s a right it’s not you have to obey the rules Chinese companies are not compliant with federal securities laws they’re not submitting themselves to PCAOB audits like every American companies to do they’re not compliant with dodd-frank legislation sarbanes-oxley legislation you know that they don’t share their financials because they’re regarded as state secrets gee that’s convenient I wish I could say that to my bank and say well you know I want to see your you or financial condition before I give you a loan to add on to your house and I said well I’m sorry but that’s privileged information you know I’m not going to share that with you the bank will tell me bye-bye very quickly and this is the course what we should be doing as well so China is receiving privileged treatment over their American corporate counterparts I’d like to see somebody tell me that that’s not the case that is a fact and so here we are in this while the unbalanced situation you don’t have to worry about federal securities laws you don’t have to worry about material risk when it comes to national security and human rights abuses despite the fact that these are sanctionable offenses and often are and then when a company is sanctioned today our our attitude is oh well is it a good return on investment even long that a good return on investment you know almost all of these Chinese companies have two to three sets of accounting records well for internal use one for the tax Bureau and if a company is trying to go IPO it will have a third set for the IPO use so how can you trust these company’s records if you’re an institutional investor so when they say they only look at financial returns you only think this poses financial risks to our clients they’re willing to basically look the other way they see those three trillion dollars in Chinese reserves and they basically even though they might not say it openly are counting on the fact that the Chinese government is going to make these companies whole if they run into a fraudulent situation if it turns out that they’re a sino forest which was one famous case in the past had no forests in other words multi-billion dollar fraud is not unusual right and you you you know the Chinese mainland exchanges anyone will tell you is the Wild West you you’re at a casino you’re not an established solidly founded an anchored market you’re in the shifting sands when you’re in the Chinese exchanges and yet our index providers are happy to buy hundreds of companies at one time you know that the footsie Russell index it was reported they went to China in June of this year and they added 1097 Chinese companies to their index in a month how much diligence did they perform did they look at the subsidiaries of those companies did they ever look at the entity list or the sanctions list did they perform did they look at the fact that they’re advanced weapons manufacturers or human rights abusers of course they didn’t they think that that’s somebody else’s job that’s the exchange-traded fund sponsors job that’s the asset managers job who’s going to build a fund an investable fund around that index list they’re gonna say we just provide the list we want a full spectrum of companies that represent you know all different segments of the of the economy and sectors and and so forth they’ll give you a very elaborate technical explanation but at the end of the day they don’t care about material risk mm-hmm that’s somebody else’s

concern all of this is a pramana deluge after me it’s somebody else’s problems a good french expression to describe passing the buck so here we sit with the American people unwittingly holding companies that manufacture ICBMs targeting their cities that we have the uniform military investing in companies that are militarizing the illegal islands in the South China Sea or building hypersonic anti-ship missiles when they’re part of the American Navy this is why the US Secretary of the Navy Richard Spencer a great American came out and he’s not a former he’s the sitting Secretary of the Navy and he came out very forcefully and said what’s going on here these are my sailors I mean these are this is the uniform military that it with their own money when they seek international exposure which most diversified portfolios have in it or international companies there’s only going to be one choice and that’s built around and mirroring as they say the MSCI all country World Index there’s no second choice they imply that there is that the I fund will give you a few choices there are no choices there won’t be of course this hasn’t been implemented yet and that’s the best news of all they’ve made their decision they’ve reaffirmed that decision after kicking the can down the road during three other previous board meetings now they’re on the record saying ladies and gentlemen this is the way it’s going to be and we’re sticking with our guns we’ll see about that this this show is not over there’s legislation on this there’s bipartisanship on this and there’s the executive branch are we going to have the Trump administration sit by and watch this on their watch president Trump’s watch is he going to put them into pla companies and concentration camps there’s some hard questions that have to be asked of the executive branch and the Congress both but Congress has stepped up and they have said no no no don’t be don’t don’t don’t think you the board don’t think you’ve had the last word what about the president the executive branch what does he think about it I think they’re studying the problem I think that they’re aware of this concern I think there are meetings taking place on this matter I think there are a number of pockets in the White House and elsewhere like the secretary of Navy who are very concerned about what they’re seeing here they see this imminently coming down the pike where this transition is made from a developed country only fund with no emerging market companies – one that includes not only China and Russia and by the way in the Russia side there are five US sanctioned Russian companies in the MSCI all country world ex-us Index o FAC sanctioned the most severe form of sanctions we have oh that’s fine that’s somebody else’s problem see these are the kinds of things that are being presently considered and I’m cautiously optimistic that the Trump administration is going to come to a consensus on this that this is not on that they’re not actually going to sit by and have this take place on their watch because any any executive branch that has this late at their doorstep and said you saw this happening did you ever step in did you ever use your executive authority I worked for a president by the name of Ronald Wilson Reagan and I can’t necessarily speak a you know to the Trump administration and in its operations and but I can tell you that I know intimately having run it what the international economic and financial portfolio looked like for president Ragan and what kind of president he was

in this connection and we would not be having this debate and the federal thrift savings board wouldn’t be taking the arrogant attitude they are in the letter that you’ve just read and telling us to go peddle our papers because they would be up against an insuperable force talking about the Trump administration’s attitude on this I wonder what’s the relationship between Trump’s trade war and this because if Trump eventually wants to have a trade deal with China once the US and Chinese economy to still engage each other wouldn’t this effort be opposing that well you can be sure that behind closed doors the Chinese are making clear to the Trump administration that they should not even think about any action even if it’s merely enforcing existing laws and existing regulations nothing even new but if they even try to enforce existing rules of the game that they’ll be hell to pay including in the trade portfolio look at the NBA the Chinese are fairly well known for their extortionary practices shall we say and they don’t have or they’re not shy behind closed doors at least in telling you exactly what the consequences of your actions are going to be this is their mo as they say so I think they probably conveyed that message and there’s some that are listening to it and concerned about it because of course the politics and the substance of this trade deal in phase one and so forth are terribly important I’m like we get that on the other hand it can’t be an excuse for looking the other way on hundreds of billions of dollars potentially going for purposes from American investors into China for malevolent purposes to be used in effect if are not against us through military modernization and problematic activities in the political military sphere nation capture and too many other activities to name but also trampling American values stepping on individual liberties and freedoms of people we’re supposed to be in the freedom business we’re supposed to be the beacon of freedom why should we allow our people to be funding concentration camps and the use of facial recognition technology at Tibetan train stations so that we can round up those dissidents are we supposed to fund the social scoring operation of China or the surveillance state or digital totalitarianism or whatever term you’d like to use you know these are odious activities that are contravene American values and Wall Street can’t just erase that and pretend as though that’s not the case the wake up call has happened I don’t think you can put the proverbial genie back in the bottle you can’t unring this Bell there is a clarion call that’s gone out to the American people including on a bipartisan basis in the Congress and too many mainstream media pieces to name thank goodness all since June since we began publishing our research findings over a two to three year exhaustive effort which we started to release in March of this year before which you see exactly nothing now you’re going to see this issue building out and others are getting involved other experts who know a lot about the PCAOB auditing side who our experts on dodd-frank or understanding the consequences of what it means to consider financial disclosure state secrets so in other words we’re concentrating myself included are concentrating on the human rights national security side of this equation I’m a national security guy but I’ve also been heavily involved in human rights for many years so that’s one dimension but then there’s also the fiduciary side what happened to disclosure what happened to transparency

and risk management and protecting share value and corporate reputation what happened to caring about the rule of law for arbitration if no for no other reason in other words what about good corporate governance corporate governance is a priority in this country that community can be very tenacious and they bite at the heels of wall street all the time for the good where’s the corporate governance community on this utter silence you what about the sec what are they doing well they’re they’re certainly receiving a deluge of inquiries as to what’s going on here I think they’re going to have to react and I think that we shouldn’t accept less than national security abuses and human rights related abuses by Chinese enterprises enablers contributors to these to these odious problems these represent material risks to the share value and corporate reputation of those enterprises because of bad press which hurts show Val Kurtz share value because they can be sanctioned or end up on the entity list and then you’re gonna see that stock plunge right now that should be disclosed as a risk to the American people that’s not fair look the SEC founded I think in 1933 of my history’s right what is its central mission its central mission I think is to ensure that material risks to share value and corporate reputation are properly disclosed to prospective investors so that they can make informed better informed investment decisions right so if you go back to 1933 and read their mandate I think it says something roughly along those lines so I look at the SEC as one of the principal avenues of remedy but if you’re going to get if you’re going to be part of the solution then get on with it I mean why were they silent on the Thrift Savings Plan anything not a peep huh so you know this is this is this is a challenge now again I don’t want to be unfair this is a new issue it’s a it’s a massive issue its scale well we also contacted SCC for an interview they ignored us well I think they probably might have ignored you if you were CNBC in other words I III think that they’re not ready right would be my guess I hope it’s because they’re studying specific solution sets and they don’t want to preview new rules or new enforcement measures I mean if we wanted to take the most optimistic view on this and I think perhaps it’s warranted I certainly hope so this is a new issue as I say it’s a massive consequence and scale it and it implicates 40 60 trillion dollars of funds under management I mean the United States capital markets let’s remember has over 60 percent of the world’s liquidity it is the size of roughly speaking the the capital markets of the rest of the world combined so this is a huge issue and hopefully it’s that they’re taking the time to get their arms around this and understand where they can use enforcement measures of existing laws and regulations to step up and fix these horrendous and Val imbalances they did offer one excuse they said they’re short of manpower they’re short of means and they said for them to tackle this new problem it would be like using a ak-47 trying to shoot down a satellite something to that effect let me ask a question to the audience or yourself I mean why isn’t the intelligence community of the United States in touch with the SEC and used as a resource to better understand who

these Chinese and Russian companies are I mean yes a lot of this is in the open source and I work only on an open source research basis I don’t have clearance I have no access to privileged information which incidentally is fine with me I certainly have in the past but not not anytime recently and but for example if I were still senior director of international economic affairs at the National Security Council my former position I would create in a day a new liaison relationship between the intelligence community in the SEC so that when we screen companies Chinese and Russians coming into our market at all whether it’s even the over-the-counter market much less if it’s an initial public offering on the New York Stock Exchange is the other side of that spectrum but if that kind of things happening the American people deserve to understand who are these folks do they have a history of these kind of abuses are they have they been engaged in fraud in the past have they been are they known hackers have any of their employees been arrested for espionage are they again are they PLA affiliated and are the South China Sea Island builders are they contributing to the North Korean nuclear and missile programs or even just providing life support to Pyongyang and that and that abusive state particularly from a human rights perspective the American people are not fools they they they understand these things and they want their investment dollars I think for the most part to be consonant and consistent with their strongest held values and principles these for the most parts are patriots these are people with acute feelings about human rights abuses do we really believe that they if they knew that their investment dollars were going into the perpetrators of these abuses that are threatening the lives of not just their families but their communities their cities their states their country I think they’d be outraged now how many of them are there 150 million are holding bad actor Chinese stocks and bonds today millions and scores of millions more are holding Russian sanction companies and sovereign bonds sovereign bonds CalPERS owns four hundred and sixty million dollars I believe it is in Russian sovereign bonds well wait a minute what’s it what’s a sovereign bond it’s I you know I had the Russian government give you a piece of paper with a maturity date and an interest rate on it and you give me scores of millions of dollars or more so and what do I do with that money well it’s discretionary cash I could do anything I want with it I can undermine further eastern Ukraine I can build up my military presence in Syria I can fund that latest supersonic cruise missile nuclear-tipped I can build that new generation ballistic missile submarine you know we used to have something called Liberty Bonds that financed World War two what’s this what are we in the business of now anti Liberty Bonds that’s what I think of them as being anti Liberty Bonds hey let’s use the proceeds to crush Liberty now do you really that this issues gonna go away or can be put back in the can for another 20 years I don’t think so I think this goes right to the core of who we are as Americans and we’re not going to listen to a narrow view of what these folks think is their fiduciary duty which also happens

to give them you know an extra yacht in the Hamptons for the weekends in other words this is about greed to a large extent – let’s not try – yeah let’s not try to make it seem like these are altruistic you know wonderful folks that are only thinking of of the investor and not themselves let’s get let’s get that straight tell me why why they’re doing it for themselves well look I’m a thoroughly a thorough believer in capitalism and I have been a wall street international banker I started my career with Chase Manhattan which is about as blue chip as they come in that day so I have no problem about making money and being creative in doing so but the stakes here are different I mean there are ways to make money and ways not to do so I mean you know the Mafia likes to make money triads like to make money the point is we don’t want to MMM commingle are our values here and we don’t want to check those at the door when we’re coming to work and think that we don’t have to worry anymore about our country or national security and we don’t have to worry about concentration camps and human rights abuses in other words all dollars are the same color I don’t think so I think you need to have true governance I think you you want to stand for something you want to preserve your reputation and keep yourself pristine in terms of the ways you make money that’s my view and I think it’s the view of most Americans that’s what they expect you know folks that invest in an exchange-traded fund or so-called index fund or even their mutual funds and so forth they’re relying on that fund manager they’re not getting into the weeds and choosing those stocks which could be hundreds if not thousands of companies that’s not their business they’re trusting of their financial advisors their fund managers their asset managers of all stripe to do this ethically properly and with a very healthy regard for material risk not just return on investment that’s where the system has fallen down so in part is because China’s had this free lunch program for 20 years and they were they saw that we were so complacent whereby even their sanctioned companies had no penalty I mean even if they were on the entity list no penalty over here well what is over here trillions of dollars that they’re accessing the money you’re gonna tell me the trade is bigger than the money think again can you give me an estimate of the Chinese penetration into the US capital market I saw one estimate by a group that looks at these matters that was a better thing I mean is very hard to determine it’s a very hard number to get because particularly for the bonds because dollar denominated bonds our currency are issued in Frankfurt Hong Kong Singapore but they end up in the United States because American investment banks buy them overseas and bring them in in via the secondary market so it gets very complex believe me I’ve tried but I’ve seen a number of 1.9 trillion from the stock the equity or stock side alone and as much as another trillion in bonds now we spent 700 million a year 700 billion a year on defense imagine how that stacks up to 3 trillion yes and China’s entire foreign reserve is 3 trillion dollars and the gross investment for the belgian road initiative is 600 billion dollars how do these how do they have how do they seemingly have an unlimited checkbook for nation capture in the region Southeast Asia and so forth or or continent capture in the case of Africa or region capture in the parts of South Latin America how do they have the

unlimited money so it seems to become a near competitor with the United States militarily it’s ironic there’s no alternative to the Belgium Road initiative the US cannot afford about an Road initiative China can the word is trying to get its money I think we’ve talked about more than a hint of where they’re getting the money again people say well you know if the u.s. even enforces existing regulations and securities laws oh you better watch out China I’ll go elsewhere they’ll go to London they’ll go to Frankfurt they’ll go to Singapore they’ll go to Hong Kong and we’ll be the ones that have shot ourselves in the foot lark markets won’t be as competitive anymore we’re gonna lose all this business gratuitously to others there are no others we have the bulk of the investable capital in the world today they would use up a Frankfurt or a London or a Singapore in months not years they don’t have the depth they don’t have a liquidity to handle the excruciating sums the voracious Dollar appetite of China so just remember there is nowhere else to go so if this is cut off what do you think will happen to China well first I don’t think it’ll be cut off and you know I’m not advocating that it be cut off in the sense that this is the second largest economy in the world it needs to be represented in the markets just like our trade flows I don’t think many people realistically are asking for the cessation of all trade we are interested in free and fair trade and we are interested in trade that doesn’t doesn’t act to the detriment of our national security or trample our values such as our human rights priorities the same should be true in the capital markets you know if a bicycle manufacturer wants to raise funds in New York I’m not necessarily going to have a sleepless night if a PLA weapons advanced weapons manufacturer wants to do the same that’s a whole nother matter if we’re looking for return on investment let’s make sure that it’s funding things that are benign commercial and that we don’t have a problem with in terms of our feelings about our fundamental national security our feelings about our patriotism and the right thing to do and the feelings about our values and principles and moral compass why can’t all of these things work together I mean why can’t we be guided by these obvious milestones of our lives but any contraction of the unfettered access that China has to the American capital markets could lop another percent or two off the growth rate and if you think that China is struggling now just imagine then so China’s anxious for no change to the status quo and they will threaten anybody that tries to make such changes so this is not going to be easy it’s going to take some courage I think the administration has that courage president I hope so and he’s shown it on other occasions and so it’s a matter of just educating folks and having the scales drop from their eyes and seeing this in layman’s language like we’re having this conversation today this is not exotic this isn’t technical this is the kind of thing we could have over tea or beer you know it’s just and and every American needs to become their own activist they need to be going to their financial advisors and their fund managers and their pension plan systems and administrators and saying do I have China exposure do I have Russia exposure show me which Chinese companies I’m holding do you have a profile of who they are can I see what their subsidiaries do can you give me that list of their subsidiaries can can you tell me if they’ve ever engaged if they are been sanctioned or are they sanctioned now

have they ever have they ever been accused of human rights abuses or or hacking or corruption can you tell me a little bit about these companies that I’m holding in my portfolio you know what the Universal answer is gonna be what I have no idea I have no idea I’m not paid to do that wrong yes you are yes you are and I’ll go find somebody that will that’s the next line that’s where the average American can be empowered to take a stand go to the congressman go to the Senators go to the White House and the Department of Treasury and the SEC and ask why am i unprotected why is this swirl of controversy happening you know what’s this guy talking about in this interview is that right is is this true trade and the u.s. investments in Chinese companies which one is bigger China is content for us to concentrate on this shiny object over here call trade can they handle a tariff war and so forth it’s painful but yeah they can they can play that game all day look at the evidence all you know there you don’t see any panic and they just depreciate the currency or do something else to help offset the negative impact of tariffs and most folks know that and they also think that the Trump himself president is constrained by our farmers and other aggrieved sectors of the economy who are going to pressure him and in other words they have this thing gamed out to the enth degree technology when we started to go after the high tech they liked that a lot less that was not so comfortable when hikvision and and ZTE and Huawei and others started to come into view as national security problems and human rights problems they didn’t there no go for that but they could but they can live with that because CTE was reversed they’re planning to reverse hallway they’re trying to get even Meg V off of the entity list artificial intelligence so they can work it I’ll tell you what they can’t afford to see the light of day the money the US capital markets because that’s where they live or die you were the economic adviser to President Ronald Reagan and you were the core person behind the idea of the economic warfare that crushed the Soviet Union what’s the difference between Reagan’s time in now and can history repeat itself was China you know President Reagan had a Hollywood background just President Trump has a real estate background President Reagan had the advantage of being governor of America’s largest state for a number of years as we as you know and he has been seized with in my area foreign policy national security concerns for decades he used to write his own speeches for General Electric when he was the spokesman there in longhand that demonstrates that he was always worried about communism he was a ferocious anti-communist he had direct experience as being intimidated and threatened by them as president of the Screen Actors Guild during the years when communism was trying to communist we’re trying to penetrate Hollywood and he was a stop in the system and they went to his home and threatened to throw acid in his face and so forth in other words he would tell these stories so he had a first-hand experience and he was also very studied about this so he knew the character of communist and Colombian ISM and authoritarianism and so there’s a difference in background to be sure a president Trump has a number of attributes as well I mean to be sure and he’s taken the bold steps on trade he’s

taken bold steps on technology and denying militarily relevant technologies to China that other presidents didn’t didn’t take on in the past I mean he’s he’s willing to anger Beijing whereas most were always too cautious and they got away with whatever they wished including in the capital markets it’s why we’re in the mess in in a sense we are today because there was a kind of de-facto appeasement policy if you want to put it less generously some could say it was all about accommodation and hoping that they would come come around to a more pluralistic attitude and greater geopolitical cooperation as we build commercial bridges and so forth we had the same illusion on date on with the Soviet Union which was likewise smashed as this one has been so there’s so there’s courage been shown but with Reagan you had a reservoir a deep understanding within the man of good and evil he didn’t call him the evil empire for nothing he coined that phrase he saw this as a moral choice he was influenced tremendously by the values and principles and everything we hold dear and knowing that these communists authoritarians and dictators wanted to smash that for all of us and he was determined it wasn’t going to happen on his watch he wasn’t interested in complicating the life of the Soviet Union he wasn’t interested in rolling them back here and there he was interested in their total defeat and that’s exactly what he proceeded to do and we had an economic and financial strategy that I had the privilege of of structuring and was the architect of and we went after the hard currency cash flow and we went after the credit arrangements that were keeping them a going concern the life support that the West was providing them tell me about that one day when you sat down with President Reagan and decided that was what you wanted to do with the Soviet Union well I went up to the Oval Office with with his best friend and who was National Security Advisor William P Clark and I laid out a number of elements of a plan of how we could go after their heart currency cash flow including natural gas sales to Western Europe and trying to stop as much of the Siberian gas pipeline project and others as we could things that were going to make a huge difference that we’re going to double the hard currency income of Moscow and make Western Europe over 75% dependent on Soviet gas with a leverage a lever that they was almost surely used to divide and splintered NATO in other words it’s a complicated story but the remedies were laid out as to how we could handle this the Soviets were spending about 16 billion more than they made annually all of that amount was funded by Western governments and banks every year and that happened to equate to the hard currency cost of the external Soviet empire they do a lot in rubles they do a lot in trade but of the hard currency portion dollars yen you know so you know what a hard currency means so the long and short of it is that I basically said to him that we’re financing a hundred percent of the hard currency cost of the Soviet external empire every year not ten percent a hundred percent and we talked about how we could lower oil prices having the Saudis secretly pump two million barrels more of oil a day D controlling prices at the wellhead here in the United States dropping oil to $10 a barrel knowing that for every dollar drop in the price of a barrel of oil the Soviets would lose about a billion dollars they only made thirty two billion a year I mean well a billion for every dollar drop in the price of barrel oil yes I mean we we broke them into matchsticks in terms of the cash flow anyway I was

laying out a plan and and the president was asked by Judge Clark as he was called what do you want to do and he said I don’t care how you do it he was joking a little bit because he did care how they said just do it just do it that was it it was a secret plan it was a secret 12 13 people in America how long did it take for this maneuver to basically end the Soviet Union about 18 months two years that’s quick yeah I mean the pieces were put in place they fumbled they trundle along for another seven years the motive trying to muddle through and so forth but the point is that they were in their death throes but it was slow motion by design so that they wouldn’t feel that their back was up against the wall and things didn’t get very scary at a nuclear side of the equation and so forth we needed this to be a slow gradual crash so that days before the collapse of the Soviet Union they defaulted on ninety six billion dollars in Western debt and you can ask yourself gee might there be a connection there hmm there was a connection there look there were many elements there was the military buildup to stressed out their economy there was SDI that scared the hell out of them in terms of our technological capability there was the fact that we challenged them everywhere we could find them in the third world from Stinger missiles to the Mujahideen to mining the harbors of Nicaragua wherever they were we were there to counter them and to increase their costs we conducted a war of ideas in the United Nations and others by telling the world who they really are the ideological component we deployed Pershing’s and cruise missiles 6-minute flying time to Europe to demonstrate that they weren’t we weren’t going to accept the intimidation of their ss-20 missiles so there were a number of elements to the plan but at the end of the day the economic and financial piece was the most telling you know China’s economy is much bigger than that of the Soviets and now the US and Chinese economies are too much intertwined so do you think this lesson or tactic is still relevant today China has very little cushion if any cushion some would argue there in slowmotion economic implosion now under a 7% growth rate and they’re considerably under that more than they say obviously they have a real estate bubble that doesn’t quit they have a non-performing loan problem that doesn’t quit a bad debt they are very extended there they’re vulnerable they like to portray themselves as a huge juggernaut that is invincible and they love to show off their three trillion dollars in reserves and so forth some of which by the way is a liquid and in rolling stock in Africa and so forth it’s not sitting just cash as it should be but never mind that’s a debate for another day but they’re they’re vulnerable and no more so than visa vie the money they likewise don’t have a convertible currency they would love to de dólar eyes as they say just like the Russians but we are the reserve currency of the world for the foreseeable future and you just can’t wave a wand and said well I’m gonna I’m gonna stop using dollars because we’re the only show in town and I mean globally when I say in town so that’s the way it is so yes obviously this is one of the last great near monopolies the United States has in the world in the 21st century is the money once upon a time with the Soviets at you it was our oil and gas equipment and technology that was the only technology that could get through permafrost in Siberia you know we use that leverage

because we had a monopoly there it’s kind of a long story but these are the kinds of things that really count when you’re talking about rolling back a totalitarian juggernaut bent on trying to dominate your positions of primacy around the world so I’m optimistic that we uh turley dominate the economic and financial domain on the planet Earth I’m a believer bulk of the world’s liquidity I just think that we haven’t woken up that’s the question does the US have the motive I mean now the two economies are so intertwined their Chinese penetration into the US capital market is so deep so do you think it’s it’s too late to move the needle no I don’t I mean I think it’s a legitimate question and it’s a question of great concern because that has been the argument that’s prevailed to date and is prevailing as we sit here that arguments prevailing right now but there’s one missing ingredient that hasn’t yet surfaced which is the awareness of the American people the American people in my humble opinion are not on board this train they just don’t know the game that they’re in and they’re going to find out and at least I’m to do everything in my power to ensure that they have the facts not opinions empirical facts and when they see those I think I know something about my fellow Americans on both sides of the aisle from hard core national security advocates to champions of Human Rights wherever they are in the political spectrum they are being abused and I we can reach out and show them precisely how and when they find out it’s with their money not an abstraction their personal money guess what they’re gonna take it personally that’s exactly where I want them to go