Game Theory #27: Putin Enters the Chat – Professor Jiang (Transcript) 

The United States, Russia, and China. And we must ensure that these three nations who won World War II are still in charge, okay?

Okay, this is really important to understand. First of all, US, Russia, and China are allies, not enemies, right? Because right now a lot of people think that China and the United States are in competition to rule the world. And President Xi says, no, that’s not true. We’re allies, because we won World War II together, right?

Second, he sees the real enemies as those who are trying to overturn the World War II order. And those nations, of course, are Japan, Germany, and Israel.

And the last thing he will point out is that all unilateralism and hegemonism are bad, okay? If you act by yourself and you declare war against other nations, that’s bad. So all these things are bad. Obviously, the United States attacking Venezuela is bad. Obviously, the United States attacking Iran is bad. But what about Russia attacking Ukraine? Well, according to this framework, this is also bad, okay? According to this logic of what he said specifically, this is also bad.

So it seems as though China and Russia are best friends, and they will unify against the United States together. But this statement reveals that actually, things aren’t as simple as they seem.

Cracks in the China-Russia Partnership

All right. Also, what’s important for us to understand is that, yes, there are many areas where China and Russia can work together. But the cooperation is not going as smoothly as one would imagine, okay? So let’s look at some things to make some examples.

First of all, the economic cooperation between China and Russia, it is booming. What’s happening is that China needs a lot of energy and resources from Russia. So you would think that they would build infrastructure as soon as possible to make this trade as smooth as possible, right? Especially with this war going on in the Middle East blocking China’s access to the Middle East energy.

But, and the main pillar of this cooperation is something called the Power of Siberia II, okay? As you can see, it extends all the way from the north of Russia to Shanghai. It’s a huge project.

China-Russia Energy and Trade Dynamics

PROFESSOR JIANG: And everyone assumed that at this meeting, the first thing that they would accomplish is signing an MOU, an agreement, to build this pipeline. And they have not done so. And a lot of it is because China does not want to become too dependent on Russia. Because obviously if you build this pipeline, then you must buy a lot of energy from Russia. But they want to still negotiate over the price as well as the volume, okay? So that’s one area.

Russia and China’s Diverging Positions on Iran

Second area is Iran. As you can see, the Russians are absolutely supportive of the Iranians, right? So what Vladimir Putin says is, “This absolute unprovoked aggression of US bombing against Iran has no basis in notification whatsoever. For our part, we are making our efforts to assist the Iranian people,” okay? So this was last June, actually, when America bombed Iran.

The Chinese, on the other hand, are much more nuanced and much more diplomatic. So President Xi says, “Israel’s military operation against Iran has caused a sudden escalation of tensions in the Middle East. Military problems are not the solution of problems,” okay? So the Chinese are much more muted. And this shows us that whereas the Russians are much more clear about their regional alliances, China does not want to participate in disputes among different nations, okay?

Trade Routes: The Northern Sea Route and the Malacca Dilemma

All right, so one area of cooperation between Russia and China is trade routes, all right? So as we discussed previously in this class, what the Americans want to do is they want to block China from accessing global trade. And they can do that by closing off the Strait of Malacca, okay, and there’s something called the Malacca Dilemma for China, where if the Americans were to close off the Strait of Malacca, Chinese trade would collapse.

So the solution is for China to build another route to the north, called the Northern Sea Route of Russia, okay? But the problem with this is that now you’re completely dependent on the Russians, because you’re going through Russian territory, okay? So it’s not an advantage of China to say, “You know what, screw you, America, we’re going to work with the Russians.” They’re actually better off balancing Russia and China. That way, they keep both of these routes open, okay? This is the most economical, this is the most strategic way of accessing global trade, okay?

Tension Points in the Russia-China Relationship

But the further you look, there are certain tension points in the relationship between Russia and China. First of all, this relationship clearly favors China, okay? So this is a map, a chart of Russia exports to China. And as you can see, it’s mainly just energy, coal, LNG, crude oil, okay? That’s the extent of Russia’s exports to China.

And what does China export to Russia? Mainly vehicles, electronics, and machinery, okay? So basically what China does is it takes Russian resources, converts them into manufactured goods, machinery in its factories, and then exports it back to Russia. This is a very bad deal for Russia. It’s a good deal for China, but it’s a bad deal for Russia, okay? So that’s one point of tension.

Another point of tension is the dependence, okay? So basically, China and Russia may be best friends, but look at this, okay? So Russia’s share in Chinese imports is only 5%. And then Russia’s share in Chinese exports is only 3%. So economically, Russia and China are not that close.

The problem, though, is that Russia is highly dependent on its relationship with China because of all these economic sanctions imposed on it by the West, okay? So as you can see, what’s happened after February 2022, when Putin invaded Ukraine and the West imposed sanctions on Russia, the relationship, economic dependence on China has increased a lot, where in the beginning of the war, Russia didn’t have that much in renminbi. But now, renminbi accounts for over 40% of Russian imports, okay?

All right, another thing is that Chinese investors aren’t that interested in going to Russia and investing in Russia, okay? So before the war, this is the war, okay? This is the war. There was some, okay?

Why Chinese Investors Aren’t Flocking to Russia

But there weren’t that many. And as you can see, after the war, it dropped precipitously, okay? So why, and as you can see from this map, okay, maybe the Chinese are in the Russian Far East, and that makes sense because it’s close to China. But as you can see, the further you go out, okay, here, there’s really no real investments. Chinese aren’t that interested in investing in Russia.

Okay, and why is that? Well, there’s just different reasons. We can speculate, okay? The first reason, and this is really important, is that the Chinese are respecting Western sanctions on Russia. If you do business with the Russians, then the West can choose to debank you, remove you from the global financial system. And Chinese investors care more about their relationship with the West than they care about with Russia, okay? That’s point one.

Point two is that Russia is not that friendly to foreign investors. Russia is very much a closed system, and it’s very hard to do business in Russia. United States, and you put your money in the United States, you know you’ll be protected legally and contractually. If the British screws you over, you can go sue the person in a court of law, and you can probably win the case. Whereas in Russia, well, if you get screwed over, too bad, okay? Russia is still very much a mafia system.

Then the third reason, and this is actually something that is really problematic, is that Chinese are much more interested in USD than they are in the ruble, okay? They’re much more interested in accumulating US dollars than they are in ruble. This is the central dilemma of the Russia-China relationship where, yes, you can get Chinese to go visit Russia. You can announce a lot of cooperation, but at the end of the day, Chinese investors want USD and not ruble, okay?

People-to-People Ties: China’s Preference for the West

Here’s another chart where, yes, okay, as you can see, more and more Chinese are going to Russia, okay, all right? So right now you have about 50,000 Chinese studying in Russia, but this does not compare at all to the Americans where when Chinese have enough money to go study in America starting in 2008, you can see a huge boom, okay, right? There’s maybe 60,000 Chinese who are learning Russian in China while everyone else is learning English, okay? So at the end of the day, Chinese people are much more interested in the West than they are in Russia.

So in other words, the relationship between Russia and China seems to be top-down, where it’s mandated from the government. But the relationship between the United States and China seems to be bottom-up, where people are choosing to work with the Americans. And so this is not really an equal relationship.

Two Key Questions: Why and What Will Putin Do?

So what I want to look at today is why is this a case? Why is it that the Chinese want to go to America? And what can Putin do about it? And what will Putin do about it, okay? So these are the two questions that we’re going to look at. First of all, why is the relationship like this? Second of all, what is Putin’s strategy of dealing with this? Okay, all right.

Going Back to the End of World War II

So to answer this, we need to go back to World War II. So this is the end of World War II, and America has won the war, okay? So this is the United States, USA. This is Europe, and this is East Asia, okay? Japan, basically, but also Taiwan and Korea, okay? All right, so World War II has ended, and the United States has a problem. It’s got all these factories that produce tanks, machine guns, airplanes, and now the war is over. So what do you do with these factories? You can’t just tell everyone to go home and not work, okay? So they make a deal with the Europeans and these Asians. Basically, the deal is this.

The Bretton Woods System: America’s Post-War Economic Order

The Europeans will agree to buy manufactured goods from the Americans, television sets, radio, bicycles, cars, but then the Europeans and the Japanese are like, we don’t have any money, and the Americans are like, don’t worry, we’ll lend you the money, okay? Not only will we give you the goods, but we’ll lend you the money to buy the goods, okay?

And of course, the money is the U.S. dollar. So the U.S. dollar is basically a contract, right? And because the Americans are lending U.S. dollars to the Europeans and the Japanese and the Asians, they want the U.S. dollars to be actually worth something, right? So the U.S. dollar is pegged to gold, the gold standard, meaning the Americans can at any time force the Japanese and Europeans to give their gold in exchange for the U.S. dollars, okay? Does that make sense?

And so this is a really good deal for the Americans, and this is what we call the Bretton Woods system, okay? Bretton Woods, 1944, where the Americans would facilitate global trade in order to maintain their manufacturing power, and they would lend other nations the U.S. dollars to participate in this trade, and the U.S. dollars would be backed by gold, okay?

So from 1950 to 1970, this was a great deal for America, and this led to probably the greatest wealth creation in the world, where if you were just like an average white American male, you had the best life possible, okay? This led to tremendous prosperity in America, but with prosperity comes corruption and complacency, okay?

The Decline: From Creditor to Debtor Nation

So what happened was that the Americans started to work hard but then the Europeans and the Japanese were like, we need to work harder because we need to rebuild ourselves, and we need to pay off this American debt, okay? So Europe started to work really hard, the Japanese worked really hard, and then what happened was that the Europeans and the Japanese started to make products that were actually not only cheaper than the Americans could make, but also better, okay?

So then what started to happen was that instead of America lending money to the Europeans and the Japanese to buy things from them, they started to borrow money in order to purchase the European and Japanese manufactured goods, okay? So now this relationship goes backwards, all right? Now, USA went from a creditor nation to a debtor nation.

But not only that, but the Americans recognized that, you know what, we can print as much money as we want so we can spend as much money as we want, and so the Americans started to do stupid things, like start a war in Vietnam that they could not win, like send a man to the moon for no particular reason, and the Americans started to spend way too much money, and by 1970, the entire world recognized that, you know what, America owes us a lot of money, but they probably can’t pay it off with gold, okay?

And in 1971, Richard Nixon says, “You’re absolutely right, okay? We can’t pay you off with gold, so we’re going to move off the gold standard.”

The Petrodollar: A New Lifeline for the U.S. Dollar

Okay, so this was a problem now because everyone’s sitting on this U.S. dollar, and it’s actually worth nothing. So to solve this problem, what Nixon did was he brought into the system the GCC, Saudi Arabia basically, as well as China, to create more demand for the U.S. dollar, okay? So this created the petrodollar. Because from now on, Saudi Arabia would only sell its oil in U.S. dollars, okay? And so this kept the system going.

The thing to appreciate about this is the Americans did this not because it was strategic, not because it showed long-term thinking, but because the Americans, by now, had become addicted to the U.S. dollar. Do you understand this idea? This is really important for you guys to understand.

At this point in history, the U.S. dollar was the global reserve currency. The global reserve currency is unique in human history.

The U.S. Dollar as Global Reserve Currency: An Accident of History

We’ve never had the idea of global reserve currency where one currency could be the basis for a value of all other currencies, okay? Never has this happened before. Why did it happen? Because of an accident of World War II where the Americans won and can impose their system on everyone else, okay? And before it was tied to gold and they went off the gold standard. So this is a complete accident of history.

Why the Dollar System Is Terrible for America

And it’s terrible for America for many reasons, okay? The first reason is that it’s the guarantor of global trade. What does that mean, to be a guarantor of global trade? Well, first of all, it means you have to print a lot of U.S. dollars, okay? Access to liquidity. You have to print a lot of U.S. dollars so people can use U.S. dollars. And this causes inflation in your system. And it’s hard to manage, okay?

Second problem is something called an open capital account. What does an open capital account mean? I can change U.S. dollar anytime I want. So money can come in the country, but it can also flee the country, okay? And that’s really problematic if you’re trying to control a nation’s currency.

All right? And the third thing is financialization. Because there’s so much demand for U.S. dollars, because U.S. dollars is so complex to manage, your economy shifts from manufacturing to financialization. Financialization just means gambling, okay? So this has been terrible for America, the American economy.

Addiction to Easy Money and the Drive for War

The problem is that once you have easy money, it becomes addictive, okay? And so the way to protect the system is by expansion. War. You don’t care if expanding your system makes any sense. You don’t care if expanding your system is good for your nation. All you want to do is expand it in order to create more demand for U.S. dollars, because you’re so addicted to it, okay? And you have to go fight wars in order to protect the U.S. dollar, all right?

How the Dollar System Created China — and the War in Iran

So this is what leads us to China. So to create China, what America did was destroy its middle class and transfer its manufacturing sector to China, aka China technology, capital, as well as market access, okay? And the entire intention was to create more demand for the U.S. dollar, okay? And this also explains the war in Iran, where Iran is not part of the system, and so America wants to destroy Iran in order to make everyone else more dependent on the system.

Why China Agreed to Participate: Monetizing Power Through the Dollar

All right. Now, why did China agree to participate in the system? Because the U.S. dollar solved for China a huge problem. Huge problem is this. The U.S. dollar, I need you guys to appreciate this, it monetized power. So I’m the elite in China, and I control millions of people. But so what, who cares? What the U.S. dollar did was, it enabled me to monetize my power. Meaning now that I could take this power and store its value in the U.S. dollar, and then export it to the United States where it would be safe. Does that make sense to you guys? Okay, this is what it did. It monetized power in China. Now the elite could use their power of the people and get rich in America, okay?

So in other words, there were two major beneficiaries of this system that was created. Even though this system doesn’t really make any sense. The first of course is the American elite, the American financial elite. And second is the Chinese political elite, okay?

Why Russia-China Alliance Is So Difficult

And this explains why it’s so hard for Putin and for Russia to form an alliance with China. Because the elite, their mentality is to use their power and monetize it through the U.S. dollar. So what matters is the U.S. dollar, not the relationship with Russia, okay? Does that make sense? Any questions so far? Yeah?

AUDIENCE QUESTION: So I think it also aligns with the international education of Chinese, which the rich people and the elites that they send their kids to America but not Russia.

PROFESSOR JIANG: Yeah, that’s exactly right, okay?

China’s Dollar Strategy and Why Russia Can’t Break In

So if you think about it, the entire point of society in China right now is to generate as much US dollars as possible, okay? So sending a child to the United States in order to learn English, in order to get the American degree, in order to accommodate to American society is part of the strategy, okay? Do you understand? Because a living being by itself has no value. If you convert a living being into US dollars, that has value, okay? Does that make sense?

Okay, so that’s what explains the relationship between the United States and China and why it’s so hard for Russia to break into this relationship. There’s actually nothing that Russia can offer the Chinese elite, all right? In fact, the Chinese elite think Russia is a problem because of its militarism throughout the world, all right?

Putin’s Mission: Destroy the US Dollar

So Putin, if he wants to establish a new world order, what he needs to do is ultimately destroy the US dollar as the global reserve currency. Okay, that is his mission. That is his game. If he really wants to destroy the American empire, he needs to destroy the value of the US dollar, okay? And the way he does that is by destroying demand for the US dollar. Okay, does that make sense?

All right, so we’re going to go over Putin’s game, his grand plan to destroy the US dollar. Okay, actually, before I do that, one thing that I need to make clear to you guys is that not all Americans think this is a good thing, that the United States has a world reserve currency. In fact, most Americans, if you explain the system to them, they’ll be like, “Yeah, we don’t want to be the world reserve currency,” because one, it causes corruption. It causes all these corrupt people to come to our country. It causes all these illegal immigrants to come to our country. It causes us to go fight wars in Iran. It causes us to support Israel. So yeah, we don’t want to be the world reserve currency.

The problem, though, is that they’re addicted to it because it’s such easy money, okay? So this is a contradiction. On one hand, the Americans know that the world reserve currency is bad for them, but on the other hand, they’re addicted to it, okay? So America’s basically a drug addict.

And so what do you do? Well, the only thing you can do is something called a forced withdrawal, okay? A forced withdrawal. Which means that you just deny America’s capacity to print money, okay? And the way you do that is by destroying global demand for the US dollar. Does that make sense? This will cause a lot of pain in America in the short term, basically economic depression, civil war. In the long term, this may be the only solution to save America, okay?

Putin’s Grand Strategy: The Chess Player

All right, so let’s go over Putin’s grand strategy for destroying the US dollar. I’ll also point out that of all the world leaders in the world, I would say only Vladimir Putin seems to be strategic, okay? The guy actually is able to think long term and execute with very good timing. He’s a chess player, okay? And he’s really the only world leader that’s able to think so far ahead and plan so strategically.

So let’s go over his strategy. Basically, his strategy is very simple. There are lots of different nations that have been sanctioned by the Americans. How can I form a relationship with these nation states in order to create volatility in the world to destabilize global trade and therefore destabilize the US dollar, okay? Also, there are some nation states that participate in the system but who are not happy about the system. So how can I actually break them away from dependence on America, all right?

So these are nations that have been sanctioned by the Americans, including Russia. Iran, okay? North Korea. Venezuela, Syria, Belarus, Myanmar, okay? So Myanmar is a civil war, forget about them. Venezuela has been conquered by the Americans. Syria is destroyed, okay?

Russia, North Korea, and the New Axis

So basically, there are four countries left: Russia, Belarus, Iran, North Korea. So these four are going to work together in order to destabilize the global order, in order to destroy the American empire, okay?

All right, so the key is Iran and North Korea, okay? We’ve heard a lot about Iran, so today I want to talk more about North Korea. So right now, Russia and North Korea have become very, very close.

So last year, sorry, this is actually two years ago, June 2024, Putin visited North Korea and signed a mutual defense pact with North Korea. This is a very, very big deal because what a mutual defense pact means is that in the case that North Korea is attacked, Russia must militarily come to the defense of North Korea. If Russia is attacked, North Korea must come to the defense of Russia, okay?

This is a big deal because previously, North Korea had a mutual defense pact with China, signed in 1961 after the Korean War. And so you would think that North Korea doesn’t really need Russia because North Korea already has China to protect it. So why is Vladimir Putin signing a mutual defense pact with Kim Jong-un? This is very strange, okay? Well, I think if we wait a couple years, we’ll know the answer.

North Korea’s Role in Ukraine

All right, another thing to keep in mind is that Kim Jong-un has been very supportive of Russia’s war in Ukraine. In fact, he sent 10,000 troops to Ukraine. And the thing about the North Koreans is that at first, they’re not very well trained. They’re not very disciplined. But the thing about the North Koreans is they fight to the end, okay? They have a policy of not surrendering to the enemy. If you do surrender to the enemy, guess what happens to your family back in North Korea, okay?

So the thing about the North Koreans, remember, is that yes, they’re poor, they’re not technologically sophisticated, but their soldiers are willing to fight to the bitter end. And that’s actually the key to winning a war.

North Korea vs. South Korea: Wealth, War, and Cohesion

All right, so everyone makes fun of North Korea, okay? Because it’s a very poor place. So if you compare North Korea to South Korea, the GDP per person is only $771, okay? That’s it, that’s it. Whereas in South Korea, it’s over 33,000. It’s one of the highest in the world.

Look at this map, okay, of a satellite image of the Korean Peninsula at night. This is South Korea, okay? This is North Korea. Pretty big difference, guys. Huge difference, right? But in a war, this place would defeat this place. Why?

Because in this class what you’re taught is game theory. And if you look at how wars are fought, who wins wars, societies that win wars have three characteristics, okay? They have energy, they are open, and they have cohesion.

Now, what’s important for us to understand is that the poorer you are, the more likely you are to be energetic, open, and cohesive, okay? And you’re like, that’s retarded. South Korea is wealthy. That’s technology. It has a lot of weaponry. That’s American support. The problem with Western capitalistic societies is that they tend to be very individualistic, as well as complacent and unequal, okay?

You can tell because of the birth rate, right? Where in North Korea, the fertility rate is still 1.81. It’s not that great, but look at South Korea. It’s 0.81, okay? So in 50 years’ time, South Korea will lose 80% of its people. North Korea will also lose people, but just if there’s no war, if we just keep on going, eventually South Korea will go to zero, and North Korea will still be around, okay?

But the other difference is that when you’re poor, you’re not afraid to die, right? You’re not going to lose. Whereas if you’re rich, well, you want to live, okay? So all North Korea has to do is basically say, you know what, we have artillery. And this is Seoul, okay? You can see how close Seoul is to the border.

North Korea’s Strategic Leverage

So all North Korea has to do is tell the Koreans, “You either pay us a lot of money, or we’ll go attack you.” It’s that simple. And the South Koreans will be like, “We’ll give you money. Just please don’t attack us.”

And what this is going to do is create a lot of tension in Southeast Asia. It’s going to have to bring in Japan as well, as well as the United States. So now, Putin’s defense pact with North Korea makes a lot of sense. Because if North Korea just creates a problem in the Korean Peninsula, this is going to be a huge problem for Japan and the United States. And remember, the United States is already distracted in Iran. It doesn’t have the forces in order to defend South Korea. This is going to create a lot of instability.

Germany’s Economic Pain

All right, let’s move on. Germany. So after Russia invaded Ukraine, Europe and the United States responded by imposing sanctions on Russia. The problem is that Germany was dependent on cheap Russian energy to fuel its economy. And because you lost this Russian energy, you have no choice now but to buy American LNG at 50% more, 50% markup.

You can tell from this chart the impact on Europe’s economy, where in 2019, they wouldn’t buy that much from the Americans. But by 2025, they’re buying a lot from the Americans. And again, this is 50% more than Russian LNG. This has been terrible for especially the German economy.

So this is the red — the dark red are the Germans. And as you can see, the decline has been pretty steep, far steeper than the French, the Italians, the Spanish and the British. So the Germans are really hurting from this war.

Immigration, Identity, and the Rise of AFD

The other thing is that there’s been a lot of immigration to Europe. So in certain places of Europe, especially Scandinavia, the population of immigrants has gone as high as 20% in Sweden. Germany is also under a lot of stress.

So there are these two trends: more immigrants coming to Europe, which is threatening the local identity, as well as this war in Ukraine. So AFD, which opposes immigration and which opposes the war in Ukraine, they’ve seen a surge in popularity. And honestly, if there were fair elections in Germany, at one point, AFD is going to win.

Germany Moves Toward Militarization

So what this means is that the Germans are choosing instead to fight a war. So in 2016, you can see the German military expenditure wasn’t that great. But now, they’re going to invest a lot more in the military. Why? Because the plan is by 2029, the German send troops in Ukraine. Europe is moving towards total war, structuring the entire society for war against Russia.

Russia’s Military Spending in Context

Russia — everyone says that Russia is now under a lot of economic pressure, and it’s true that the Russians have, in fact, spent a great deal more money on the military. So you can see how after the war started, you have this huge bump in military spending in the Russian Federation. But the thing to keep in mind is that it’s still pretty low as part of its GDP.

So the green is Saudi Arabia. Saudi Arabia spends over 10% of its GDP on the military. The Chinese spend about 2–3%. The United States spends 5–4%. The Russians spend about the same. So in other words, the Russians still have a long way to go.

In fact, Putin still maintains that the war in Ukraine is a special military operation. It’s not a full-scale war. The moment that Putin declares war, the entire economy shifts to total war, and we can expect a complete surge in spending on the military. Russia hasn’t reached that point yet.

Russia’s Plan for Europe

Now, what is Russia’s plan for Europe? Putin doesn’t actually want to fight Europe because it’ll be disastrous for both Russia and for Europe.

Putin’s Strategy to Destabilize Europe

But he understands that there’s a civil war brewing in Europe where these right-wing parties like the AFD, they’re surging in popularity because they oppose war and because they oppose immigrants. So all Putin has to do is force Germany into a war and drag this war out, create a war of attrition. Why? Because as this war drags on, it’s going to create a lot of political tension back at home, especially if you’re drafting young men to fight this war, okay?

And if that were to happen, eventually, right-wing political parties like the AFD would come into power. And how does Putin know this? Because this has historically been true. This is what happened in Russia during World War I, when the Bolsheviks came to power. It almost happened in Germany, okay, when Communists almost came to power in Germany, all right? So war creates political tensions, and the longer the war drags on, the greater the tension is, okay?

So basically, what Putin wants to do is create a civil war in Europe, allow these right-wing pro-Russia parties to come into power, and then form an alliance between Europe, Germany, and Russia, okay? So part one of the plan is to create as much political tension in Southeast Asia as possible by using North Korea. Part two of this plan is to go to war with Europe in order to destabilize Europe politically, and allow these right-wing parties to come to power, and then form an alliance with them, okay?

Russia and the Global South

All right, now let’s go on to the Global South. Okay, so the thing about the Global South is that Russia has been very supportive of the Global South, especially countries in Africa, okay? After the war started, when Russia invaded Ukraine, support for Putin in the Global South increased dramatically, as this map tells you.

Now the question is, wait a minute here, Russia invaded Ukraine, so why would people around the world support Russia? And the answer is, because of narrative. From a western perspective, Ukraine is an innocent country and Russia is the aggressor, so clearly Russia is in the wrong. But if you are not part of the west, if you are part of the south, what you will appreciate is that the west is this imperial bully, and Russia is standing up for itself. NATO was expanding too far, Ukraine was being co-opted by the west. And so Russia was trying to defend itself, and thank God that Putin and Russia now can stand up against the Americans, because we in the south have been bullied by the Americans all this time.

So the support for the Russians is particularly high in Africa, which has been subject to western imperialism for the past 20 years. So this is a level of cooperation between Russia and African countries. As you can see, there is a lot of trade going on, but at the same time there’s also military cooperation, there’s nuclear power plant construction, there’s also oil exploration and nickel production. Also there are a lot of Russian mercenaries in Africa, and they’re usually fighting against US-backed groups in order to control the continent.

China is also heavily active in Africa. The thing about China is that it’s very much focused on economic development as opposed to military intervention. The Russians use a full-spectrum strategy in Africa, so they’re trying to win hearts and minds. And we know that because the Russians spend a lot of effort on propaganda. So the Russian flag is where they have propaganda efforts. As you can see, China is not that heavily invested in propaganda in Africa.

So what Putin is also trying to do is create a narrative that Russia is liberating the world from western imperialism. And this has particular strength in places like Africa, which has been a victim of western imperialism for a long, long time, okay?

India and Russia Draw Closer

All right, India. So India, for the longest time, has been neutral. So what’s been happening is that India and Russia have become very, very close. The impetus for their close relationship is, after the war in Ukraine, Russian oil became sanctioned.

Russia, Iran, and the New World Order

So the way to evade sanctions was for Russia to sell its oil to India, which would then sell its oil around the world. So what we’ll see is a very strong relationship between Russia and India develop over the next few years. What Russia wants from India are laborers. Why? Because of this war, Russia is now short of manpower. So it needs people to run its factories. Eventually, it’s going to win this war in Ukraine, and it’s going to need people to go build, rebuild Ukraine, okay? So we can expect that Russia and India will become very, very close these next 10 to 20 years. Primarily because Russia wants to invest in the relationship between Russia and India.

Iran is the key to Russia creating a new world order. Why? Because, first of all, as you can see, Iran is really the center of global trade. So if Russia wants to access Africa, it wants to access India, it wants to access Central Asia, Iran is very important strategically, okay? It’s also very easy for Russia to trade with Iran because of the Caspian Sea, okay? So basically, Russia understands that Iran is the key to Russia’s global trade with the world.

That’s why the Americans are actually attacking Iran, because by attacking Iran, the Americans can block Russia from global trade, or at least destabilize it, okay? That’s why one of the major battlefronts — this is actually probably one of the two major battlefronts in World War III. The first is, obviously, Ukraine, which will be fought between Europe and Russia. The second major battlefront will be in Iran, fought between Iran and the United States.

This is also why, by the way, Israel is so important, okay? Israel. Why is Israel so important? Because Israel is the fortress, okay, the American fortress in this area. It’s very possible that if Putin places his cards right, all these regions will fall into the Russian sphere of influence. So America’s guarantee against Russian influence is Israel. That’s why the Americans support Israel so much, because Israel is key to keeping Russia in check, okay? Make sense, guys?

Japan’s Strategic Dilemma

All right. The last thing I’ll talk about is Japan, okay? So the grand strategy of the Americans is to use Japan to balance China. The Japanese don’t like this idea, okay? Because for the longest time, the Japanese were a vassal to the Americans, and the Japanese made a lot of sacrifices to be the vassal state to America, okay? But now you create a situation where Japan has no choice but to remilitarize and rethink its national priorities.

The war in Iran is forcing Japan to rethink the global map, okay? So Japan is heavily dependent on energy imports, and for most of its history, most of its recent history, it was getting its energy from the Middle East, okay? But obviously, most of its energy is now gone. So now you have two options. You can either depend on Russia or the United States.

Now you would think, well, Japan will just buy oil from the United States. The United States certainly thinks so, but the last time this happened was before World War II, okay? Japan, before World War II, was getting [90%] of its oil from the United States. But Japan was becoming too powerful, and so the United States started to embargo Japan. And Japan had no choice but then to go invade Southeast Asia for its oil and attack the United States, okay? Does that make sense?

So Japan does not want to be put in a situation where it’s completely dependent on Americans for oil, because the last time this happened, it didn’t really work out well for Japan, okay? So Japan has no choice in this matter but to, yes, buy American LNG, but also to try to smooth things over with Russia, to start buying more oil from Russia, okay?

The other problem for the Japanese is that for the longest time, they’ve been buying U.S. treasuries, okay? So you can see how China, yes, China is addicted to U.S.

The Yen Carry Trade Explained

…dollar, but they recognize that the Americans aren’t that dependable, they’re putting too much money, they’re too much in debt, so the Chinese have been selling U.S. dollars, U.S. treasuries, but the Japanese have been increasing buying U.S. treasuries. Why is that? Why is it that U.S. treasuries aren’t worth as much money as before, but the Japanese continue to buy U.S. treasuries?

The answer is because it’s almost like a subsidy or a bribe to the Americans, okay? Because the Americans have a lot of soldiers in Japan, so Japan is a colony, and so what you do is you bribe the Americans to protect you, but also to just leave you alone, okay? And the way they do this is something called the yen carry trade, okay? And this is the silliest thing ever, okay? But let me explain to you what this is, okay?

So what the yen carry trade is this. Japanese banks will lend money to Japanese corporations at zero price, at 0%, basically free money. So if you’re a big Japanese corporation and you need money, you just go to the Japanese bank and they’ll give you money at 0% interest. What this means is, you can take this money and then go buy US treasuries, US treasuries at 5%. Does that make sense?

And so that’s what’s led to the surge of Japanese buying of US treasuries, because it’s free money. It’s literally free money. But the problem is that, as you can imagine, this is causing huge problems for the Japanese economy. And as the geopolitical situation gets worse and worse, Japan has no choice but to repatriate its money back from the United States, basically selling US treasuries.

America’s Debt Crisis and the Treasury Rate War

So what America needs to do is basically force these countries, like Japan, China, to continually buy US treasuries. And that’s why we have this war in Iran, to really control the world’s energy supply. And time is running out for America.

The reason why is that, as more and more people sell US dollars, as more and more people refuse to buy US treasuries, certain problems arise. First is the debt interest. So right now, the debt is at $39 trillion. Let’s assume the interest is 5%. That means that the Americans have to pay $2 trillion in interest payment alone. Does that make sense? Okay, that’s a huge problem.

Second problem is that, as people refuse to buy US treasuries, you need to give them a higher interest rate, okay? So right now, 5%, and it has moved up to 6%. This is a disaster for America, okay? So America needs to basically act now, okay? It needs to move down the treasury rate. The way you move down the treasury rate is by forcing people to buy US treasuries from you, okay?

So this is a war that’s going on between Russia and America, between Putin and Trump, where Putin is trying to get people to not buy US treasuries, and Trump is trying to force people to buy US treasuries, okay? And this is a war that’s being fought right now, okay? Any questions about what’s going on?

Q&A: What Will America Become?

AUDIENCE QUESTION: How will America become, or how will America end if the world and America is so addicted to US dollars?

PROFESSOR JIANG: Wait, wait, can you ask that question again?

AUDIENCE QUESTION: How will America end, or how will America be if the world and America are still addicted to US dollars? Because it is an addiction, okay? It’s free and easy money. Yeah, but what will America become if this trend continues? If this trend continues, with this addiction?

PROFESSOR JIANG: Okay. All right. So right now, if these trends continue, there are certain problems that arise. The first thing is that America will print more money. All right? So the debt, financial dollars, will continue to increase. And then the world’s going to think, you can’t actually pay this off, right? So then what happens is that people stop buying US treasuries. Then the interest rate goes up in order to get people to buy more US treasuries.

The Federal Reserve, Default, and the American People

PROFESSOR JIANG: Because if you don’t do that, if people don’t buy US treasuries, you go into default. So what does default mean? Well, let me explain how the system works. So first of all, it’s the Federal Reserve that lends money to the US government. OK? So there are different buyers of US treasuries. But the Federal Reserve is the biggest buyer.

All right? So let’s just say China has $1 trillion in US treasuries. And the United States says to China, “You know what? We’re not going to pay you back. Screw you guys.” OK? Does it matter? No, it doesn’t matter. Who cares? OK?

The Federal Reserve is a different problem. Why? Because let’s just say you owe the Federal Reserve $10 trillion. OK? Where does the money come from? It comes from private banks. OK? And who puts their money in the banks? The people put their money in the banks. All right? So in other words, the American government has borrowed its money from the American people.

So if the American government were to default on its debt, the American people would lose all the money in the bank. And what would happen after that? A revolution would happen. OK? In other words, it is impossible for the US government to default on this debt. It would create a revolution in America. The government would collapse. Does that make sense?

Forcing Foreign Countries to Buy US Dollars

OK? So now you’re just forced to get China to buy $2 trillion. Do you understand? Because you cannot default the debt domestically, because everyone in America would lose all their money. OK? So the only thing you can do is go overseas and force people to buy US dollars from you. And you do that through war. All right? Does that make sense?

OK? So Putin understands that all he has to do is stop foreign countries from buying US dollars, and America will collapse in itself, because the economics doesn’t make any more sense. It’s impossible for you to pay off that interest payment. So that’s a stark crisis that America is facing right now.

Audience Q&A: What Will Russia’s New Position Be?

PROFESSOR JIANG: Any more questions? Yeah, Alan?

AUDIENCE QUESTION: So I’m curious about, even if Russia really collapses systems of current global economies, what will be the new position of Russia? What is the precious commodity of Russia that can maybe give it the power to maybe lead the world?

PROFESSOR JIANG: OK. So we’re assuming that someone wants to be the new leader. And the reality is that it’s actually stupid to be the world reserve currency. It’s silly to be the world leader, because now you’re just forced to spend all your resources on defending your position in the world. OK?

It’s like being a high school bully. Well, being a high school bully sounds cool, but now you have to go fight everyone in the school. OK, so no one actually wants to be the world leader. And America doesn’t even want to be the world leader. It’s just stuck being the world leader, because of these historical accidents. It doesn’t make sense.

Russia Wants to Get Rid of the School Bully

So basically, all Russia’s trying to do is it’s trying to get rid of the school bully. Once you get rid of the school bully, there’s no more bullies, OK? Which means I can do whatever I want now. More freedom for Russia. Now, that doesn’t mean that Russia will be peaceful. Russia is going to exert its power where it can, but it will have more freedom of movement. OK? It sees America as its greatest threat. And so Russia wants to get rid of America.

China’s different. China appreciates that historically, its neighbors have been very aggressive. OK? Who are China’s neighbors? The Japanese, right? The Russians. The Vietnamese. They’re very aggressive people. So if I’m China, I would prefer America to be the global policeman, to be the high school bully. Right? Because honestly, if America’s not the high school bully, someone else is going to be the bully. And I’d much rather deal with America than with Russia. OK?

Russia-China: A Tenuous Alliance

So that’s why the relationship between Russia and China is much more tenuous, much more unstable than people believe it is. It is in the mutual benefit of the two to get along right now, but in the long term, there’s eventually going to be a divorce. Because their interests don’t actually converge together.

So Putin’s plan is just to make good friends with China. He knows that China in the long term is going to side with more of America than with Russia. But in the short term, Putin can do as much as he can to make China his friend. So you need China to be neutral. The worst thing that can happen is that China sees Russia as a threat, and China and the United States got together to defend the system.

Does Economic Collapse Weaken America’s Military Position?

AUDIENCE QUESTION: Does the collapse of economic systems affect the global police positions of America? Because I think we previously said that this global economy system is basically built on America’s military powers. But even though the system’s collapsed financially, it doesn’t mean that the military power of America decreased. Why then would Russia get its freedoms to move?

PROFESSOR JIANG: OK, look, the reality is that your military comes from your nation state. Your military comes from your nation state. Why? Because it’s your nation state that provides the weapons, the manufacture of the weapons, the people, the soldiers, the financing.

So let’s just say this nation state has a revolution, where the people are fighting a war against the government. The military has no choice but to retreat and try to crush this revolution. So America doesn’t have the interest in defending the world if its entire nation is falling apart. That’s just silly. It has to retreat.

And it’s possible that America’s so stupid that its military stays overseas. But if that were to happen, then the military would still be a nation state. And so it needs now to move from America to different nation states. And I imagine that if that were the case, the military would split off and help support three other nation states, which are Japan, Germany, and Israel.

In other words, different theaters of the American military would find a different nation state as their host. So the American forces in East Asia would go and support Japan. In Europe, they go support Germany. In the Middle East, they go support Israel. But they need a nation state as their host.

Final Examination Next Week

All right, so next week is the final examination. So if you’re on YouTube, please post your questions in the comments section. And my wife, my beautiful wife, will select the very best. All right, see you guys next week.

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