so in this class this semester I'm making three big predictions right first is that Trump will win uh in November second is that um United States will go to war against Iran and the third big big prediction is that the United States will lose this war which will forever change the global order um the past uh so last class we looked at one reason why the United States would invade Iran uh which is the Israel Lobby and in today's class we'll look at another reason which is the defense of Empire America is an Empire and it must defend its Imperial status so let's examine what an Empire means for America so from 1950 to 1980 America's economy was mainly focused on manufacturing factories okay so um manufacturing as a share of GDP was 40% it made 40% of profits okay and and employed 30% of the workforce so during World War II uh America had a lot of factories produce weapons and after World War III these factories produce consumer goods cars electronics to sell to the world and this made um the American workers the wealthiest and most well educated middle class ever in human history if you were a factory worker from 1950 to 1980 you had a really good life um you worked 40 hours a week you had health insurance you could buy your own house your wife didn't have to work you could have three to four kids you could have two cars every year you could go on vacation to some to some place nice you could eat out once a week and then you retired and had a very good pension so it was really the best life um and so workers from 1950 1980 in America were really the luckiest people on the planet you were better off actually being born into the middle class in America then you were being born rich in Africa or Asia or South America okay but then after 1980 was something called the Reagan Revolution and the introduction of what we call neoliberalism and remember that we studied neoliberalism before NE neoliberalism is a economic philosophy that believes in the Primacy of free markets and deregulation um so after that we now live in today what we call a financial economy okay the economy has been financialized and so what does that mean it means that right now Financial Services okay account for 22% of all GDP in America manufacturing has gone down to 10% so went down from a high of 40% to now a low of 10% Financial Services is now twice as much as manufacturing Financial Services bringing 40% of all profits and financial services employs 5% of the total American Workforce okay now let me explain what these numbers mean what you're seeing behind these numbers is a radical shift overhaul transition in American society okay let let's just look at politics politics governance from this period 195 19 1980 um American workers had a lot of political power right because they were middle class they were confident they participated in politics for unions okay today most of this power has shifted to the financial services which basically means Wall Street and working for Wall Street are what we called um the professional manager Elite okay so these are people who live on the coast San Francisco New York Washington DC Boston they went to Elite schools okay the ivy league um and they're Multicultural and right now they're the most powerful political group in America and this has led to massive political divisions within the country okay so it's the first major consequence before it was workers who had uh a large say over American politics and now it is Wall Street the financial sector and the coastal Professional Management uh Elite and so government chapes policies that favors this Multicultural Elite Financial Elite over at the expense of workers okay so that's the first major shared but then you look at um education and so what I mean by that is that you know if you went to a good school a good University in 1950s and 1960s your ambition was to become a professor right or maybe a scientist or maybe an entrepreneur uh or a corporate executive okay nowadays most people who graduate from these top schools all want to go where Wall Street and that's it okay why because you make more money on Wall Street than anywhere else okay so you're talking about these phds in statistics and artificial intelligence who should be working for IBM um developing the latest technology right instead they're on Wall Street working for a hedge fund get gambling with other people's money okay so basically the economy has gone has gone from one that is um productive or creative to one that is entirely speculative okay so remember that finan the financial services all it does is take people's money and gamble with it or invest in it to make more money okay it's not actually productive it's all it is is speculative okay and the smartest people in America the most well educated are all focused on this sector okay and then you look at um the economy and what has clearly changed is that the economy in America has become much more unstable so in 2001 there was the internet crash right the do crash in 2008 there was the financial crisis right the sub crime uh crash and then after that you have all the um you have these Banks going bankrupt okay I think like this past week three Banks went bankrupt in America this should not be happening and the reason why this is happening are all these um bubbles okay so in other words all assets right now in America over pric okay housing stock market um and people are gambling that these asset prices will only go higher which creates Bubbles and when these bubbles burst you have volatility and instability and uncertainty okay so this is bad for the uh economy and then you you have things like inequality right so um if you look at profits if you look at wealth generation the top 1% make much more money than everyone else and this inequality is only increasing okay so in other words the financialization of the econ of the American economy has been really bad for America and you can make the argument that it's actually destroying the fabric of American society okay it's making politics much more divisive it's making the economy much more volatile the smartest people are engaged in speculative activities young people don't want to work they just want to buy Bitcoin um and you can also make the argument that you're creating a rentier economy okay and a rentier economy just means that if you are young you can never afford to buy a house you can only rent which means that you yourself can never go from you you have no more social Mobility okay so this overall is really bad for America now the question then is how did America get to this point how how did it how did it transition from a manufacturing economy to a financial economy and there are different theories out there okay there are some economists who say that this is just late stage capitalism okay this is the Natural Evolution of capitalism there are some who argue that it is the neoliberalism or the regular Revolution that CED this okay when you take when you cut back the role of government when you emphasize free markets um then you have this situation the over financialization of the economy okay what I want to show you today is that the real reason is the transition to Empire okay there's a really simple explanation for why this is happening and the reason is that after the end of the Cold War 1991 America became a global Empire it could Now set the rules of the game and it set the rules of the game so that it would always win and then all money flow to America which created um all these asset bubbles okay so uh that's the argument um I'm making to you today okay so um are we clear about what's happening any questions so far okay now I want to explain to you how America became an empire in fact the most powerful Empire in human history because even though Rome was powerful it didn't really control the world whereas America the American Empire Today controls the entire world okay and so to understand how America became an Empire you have to go back to the founding of America okay so in 1776 America declared independence from Britain and at that time they had something called the Declaration of Independence and the Declaration of Independence if you read the document it's very clear it's what the founding fathers of America said is that we are founding a new Society in America based on God okay now the founding fathers were Christians but they were a special type of Christians who believe in the idea of theism and theism is the idea that yes there is a God um and the go and God they create everything but God is not interested in managing human Affairs God leaves us alone which means that we as humans are empowered to create the world we want to create okay and the founding fathers want to to create a new Society based on um the idea of God okay and what they believed is that God gave human beings three fundamental rights that all governments must respect okay and so the famous phrase is do you guys know the famous phrase life liberty and the pursuit of happiness okay that is the mission the purpose of America to ensure that every American would have life liberty and the pursuit of happiness and that's really the goal the role of government life to to to make you safe okay Pro to provide security against enemies Liberty the right to say whatever you believe the right to believe whatever you believe okay so the tolerance of all Creeds religions the last is the pursuit of happiness what does Pursuit of Happiness mean you guys know so Thomas Jefferson wrote the Declaration of Independence and when he wrote The Pursuit of Happiness he had a very specific idea in mind what what does the pursuit of happiness mean uh which is what okay so wellth okay so in America your fundamental right the fundamental purpose of your life is to make as much money as you can to amass as much wealth as you can okay and the idea here is that in this Society in this new Society this new experiment called America if we allow everyone to pursue uh the creation of wealth then America will become powerful okay that's the idea and it turned out that this idea was absolutely correct okay in a very short amount of time America industrialized very rapidly and at the end of World War II America became the most powerful country in the world okay after World War II it decided that um it can now export its philosophy to the rest of the world so in 1944 there's something called the Breton Woods conference okay and so in 1944 everyone knew that Nazi Germany would be defeated okay and Japan would be defeated which would make America the most powerful the richest nation um on the planet okay now the Soviet Union was a competitor but they didn't really matter okay they had their own sphere of influence so America got got together with its allies in Europe and they decided what the new Global Financial system would look like and the idea was that with Brendon woods they decided that the US dollar would become the global Reserve currency which basically meant that you could buy anything with the US dollar now there are some people at um Bron Woods um some economists who were afraid that this would cause problems right if you have a government which was in control of the global Reserve currency that would basically make the government God right if they could just print as much money as they wanted they could become like Midas if they touch something it it would become gold okay so some people thought it was dangerous and so the compromise is that the US dollar had to be backed by gold okay the gold standard in other words the US dollar was basically like a receipt for gold if you had a million dollars okay you could go to any American bank and get a million dollars worth of gold for it okay does that make sense so that's what we call the gold standard and for the longest and so that lad this this bread and WT system led to tremendous prosperity in America and in Europe Europe and Japan okay then in 1971 Richard Nixon did something really radical he basically said we America we're going to get we're going to go off the gold standard okay uh remember that America had spent too much money on the space rise on Vietnam on domestic expenses okay so they needed to transition out of the gold standard but if you trans transition out of the gold standard then how do you um ensure the US dollar is worth something how do you ensure the intricate worth of the US dollar so they transition from the gold Center to what do you guys know oil okay do you understand this what we call the Petro dollar and the idea here is that look every economy needs oil to to um run right you need oil as the basis of your economy and so after America went off the gold standard these countries in the Middle East meaning Saudi Arabia but other countries as well agreed that you could buy oil using US dollars so um the idea is okay before if you had a million dollars a million US Dollars you could change convert that to Gold okay and now you can convert it to oil and this what we call the Petr dollar and this is really the basic is uh for the value of the US dollar today okay so then what happened is that in 1991 the um Soviet Union fell and now America was in charge of the entire uh global economy basically okay and so America at that time said to everyone listen let's focus on trade because trade trade will make everyone Rich okay so let me explain the theory of this okay so America basically wanted um everyone to trade and the idea of trade okay this is like uh Russia China okay South America the idea of trade is that each country would focus on its competitive Advantage what are you good at and then you would sell this competitive advantage to other countries for what they're good at okay and the theory here is that if you do it this way then all countries will become rich okay so let me explain why all right so let's look at uh us and China okay so what China's really good at is cheap labor United States what what United States is really good at is TE technology right okay so the idea is that United States and trying to trade right um so China makes all these cheap goods for American consumers but unfortunately Chinese consumers don't have enough purchasing power to buy American Technology right okay so what happens is that America gives China US Dollars instead okay trillions and trillions of US Dollars now in theory what's supposed to happen is this money trickles down to the average Chinese so that the average Chinese worker his wages go up right and when his wages go up what he can do now is buy us products like iPhones and so over time trade evens out okay does that make sense that's a theory okay that that's that's first Theory the second theory is is how Capital moves okay and the idea here is that capital is going to go to places which allows it to grow the most okay and so the idea is that when you have a globalized world then what happens is capital from the United States moves to China right because if you invest in China your Capital grows the most you you can buy a million dollar house in United States or you can buy 10 houses for the same money in China so you're better off buying houses in China right okay so these these are the two theories one is that trade will make everyone rich and second is that Capital will move from rich countries to poor countries okay and when you actually go to university and you study economics like like jackwell then you actually have to learn these theories um but in reality these two theories aren't true okay why not why aren these two theories true so the first theory is that if you two countries trade over time wealth um trickles down to everyone in that country which makes everyone richer okay is that true for China no it's not okay workers wages have not gone up for the past 30 40 years why because of the idea of elite capture Elite capture so all the money is captured by an elite group of people when that happens okay they can't spend it they can't buy us Goods right so only thing they can do is invest it right now according to this Theory they should invest it back in China because if you investment in China should allow for more growth than in than investment anywhere else okay but but in reality where where do they put their money in the United States and why would they do that why exactly okay you don't put your money where you make the most money you put your money where it's the most safe okay that's why we have Banks so because the United States controls the US dollar and because people's wealth uh is expressing US Dollars it makes the most sense to put your money in United States okay and this is not just just true for China it's true for most countries in the world and that's why um starting in the 90s you have all this wealth amassing in the United States okay does that make sense so everything in United States became overpriced everything became a speculative bubble okay so let me give give an example let's let's look at equities okay stock market stocks in the year 1900 okay in the year 1900 if you look at all the world stock markets the largest was the UK okay because obviously the UK is the most powerful country in the world was the most powerful country at that at that time what sorry at that time the UK was the most powerful country okay so in a stock market as a as a percentage of the entire Global stock market was about 25% okay 24 to 25% the United States was second at 14.5% then you had Germany about um 133% France at 11% okay so that was the situation of wealth in the year 1900 and this makes sense right these four countries are industrially um extremely powerful today okay today the year 2024 the United States has 60% of all the world's stock wealth okay who second can you guys guess who would be second Japan okay and what is the percentage of global stock wealth can you guys guess a number United States has 66% 60% how much does Japan have can you guess a number 10% is a good guess right it's actually 6% okay do you see the disparity number one is 60% Japan number two is 6% it's huge disparity how much is China the world's second largest economy 3% okay you understand right so all this wealth that's being generated around the world it can only end up one place okay the United States all right so you have and that's what's that's what's pushed the financialization of the US economy okay because this wealth goes to United States and someone has to manage this wealth and that this is the financial services sector okay so people on Wall Street and this is very important people on Wall Street they make their money based on how they manage this wealth not on whether or not they make money out of this money you understand they charge a management fee okay so in other words they're not actually incentivized to be conservative and make sure that this money grows what they're incentivized to do is design riskier and riskier um assets and investment opportunities to attract more investment and because then they can take a management fee a cut okay does that make sense and that's what's led to so much Financial over speculation over the past 20 years in uh America and one of America's biggest problems is the growing national debt okay so the government is paying for a lot of government services just by putting money okay so right now the US national debt is about 34 trillion okay and this $34 trillion debt half of it is owned by foreigners okay so Japan has about a trillion uh China has about 800 billion so they buy us treasuries okay so America owes Japan a trillion dollars America owes China $800 billion and then half of it um the government owes to its people so the two largest expenses are the military and the pension system okay um so $34 trillion is a lot of money because the US GDP p is about hundred trillion dollar so the total debt is about a third of uh America GDP and this debt has interest right so this debt is going about one to two one to two trillion every two to three months okay and all all this is saying okay these numbers all they're telling us is there's ABS no way that America can pay all this debt okay so then the question then is if you're China and you're J your Japan why do you have all this debt knowing that America can never pay you back or uh America will at some point default on this debt why why does America why does Japan and China and other countries have all this debt your treasuries knowing fully knowing knowing that America can never pay back all this debt why okay so there are many reasons okay the first reason is that in theory uh Japan and China can always take this debt and buy oil with it okay so this this is again the Petro dollar second reason is that um even though America's in debt it's still an Empire it's still the greatest military power in the world so at some point you so so you feel that the money is safe there okay does that make sense because no one can actually challenge America militarily and the third reason and this is the most important reason is there's no place for you to go you understand what do you what what else where else can you put your money nowhere okay so that's the issue right now and so in theory because um China and Japan can buy oil with it um and because there's really no place for China and Japan to put this money in theory the system can go on forever okay so it's possible that maybe in um 10 years time the debt will be 340 trli okay who knows okay so in theory this could go on forever right because America's an Empire but then what happened uh two three years ago is Russia invaded Ukraine okay Russia invaded Ukraine and why this is important is that this is basically Russia challenging the dominance of the American Empire okay what put is really saying to United States is I think your Empire is full of lies your Empire is based on nothing your Empire is based on the perception that you are invincible in war well I'm going to invade Ukraine and prove everyone war and prove everyone wrong okay I'm going to show that you America are in fact a paper tiger okay and so if Putin succeeds in his war in Ukraine then the fun fundamental understanding of how the world works that America is an Empire that America is Invincible that the US dollar is safe will radically change okay it will be destroyed it'll be undermined it'll be subverted okay does that make sense so that's why America needs to um stop Russia um in Ukraine okay can it stop Russia can it stop can it stop Russia and Ukraine how's the war going for America America and Ukraine pretty badly okay I mean the war is almost over okay so um if so but what America can do okay which will which will solve all these problems is for America to transition from a financial economy back to a manufacturing economy okay if America can if America just does this America has nothing to worry about it doesn't have to worry about the debt it doesn't have to worry about Russia it doesn't really have to worry about the world okay because America is a self-sufficient economy meaning that it has the resources to sustain itself it doesn't really need to trade with the rest of the world okay if America can return to being a manufacturing um economy then it would be Invincible okay now the question then is Can America reindustrialize yes or no why not Jack because the politics doesn't allow them to exactly but can you explain that yeah that's exactly right jack okay so yes the problem right now is the very structure of American society and politics and the economy right now the financial sector has all the power and they don't want to go back to the time when manufacturing had all the power right so that's a first problem but let's just say for the sake of argument that they agree to this okay what's your other problem if you want to re reindustrialize excuse me um okay but all the foreign investment can just go into factories right but there's actually a really big problem with reindustrialization okay so as Jack says there will be political resistance to this okay but then you have a bigger problem than this which is what okay guys the problem with this economy is it creates a speculative mindset okay so therefore no one wants to work hard no one wants to go want no one wants to go to work work in factories anymore do you understand if you're a young person you would much rather spend your time investing in Bitcoin than working in a factory do you understand because investing in Bitcoin gives you the opportunity to become rich but if you work in a factory you have to work hard for 40 years just to buy a house does that make sense so you're not going to find people to work these factories that's a bigger problem okay and the third problem of course is just investment how how do you build these factories you not only have to build these factories but you also have to build Logistics networks to move move goods from one place to the next okay okay so in other words America could reindustrialize but it's a pain in the ass right you're you're going to face a lot of political opposition especially from the financial sector it's very hard for you to to to get people to work in factories and plus where's all this money going to come from okay so if you can't beat Russia in Ukraine and if you can't reindustrialize then what can you do to protect the petrol dollar and your financial system well I have an idea okay invade Iran okay invade Iran now why would you do that and the answer is that unfortunately of all the options out there okay because America can't just sit back and let its empire collapse right of all the options out there invading Iran happens to be politically the easiest to do okay you're not you can't go fight a war against Russia because Russia has nuclear weapons you cannot reindustrialize because there there be too much political opposition towards that plus it'll take you about 50 years to reindustrialize but if you invade Iran well you accomplish three things okay the first thing is you show the world that you're still the top dog your milary is still Invincible okay so if you're a foreign investor in America you you have a trilon US Dollars you feel safe okay you don't you don't think the US dollar will collapse okay that's the first thing to show the world that America is still the world's foremost military power therefore the US dollar is safe okay second is um oil right what is the usar based on oil right well if you control oil then you don't have to worry about people abandoning the US dollar okay does that make sense okay and it happens that the Middle East uh produces uh 40% of the world's oil and Iran is the world's fourth largest oil exporter but but when you take over Iran you also control Iraq as well you control that entire area okay and the third thing about invading Iran is trade okay so um that area most of the World's Trade has to pass through that area right so invading Iran would allow you to control the world's shipping lanes okay so that would be the theory behind evading Iran okay but the motivation would be to save the American Empire because if Putin wins in Ukraine then America is going to look weak it's going to look like a paper tiger okay and in this in this situation as the Empire you have to act today um you have a lot of countries in Africa who are Reb rebelling against the Western Powers France basically and and America why because they think that Putin is now in charge okay why did October 7th why did Hamas uh attack Israel I guarantee you that if we were not for the war in Ukraine Hamas would not have done such a thing okay for the longest time before the war in Ukraine um there was a perception in the world that America was militarily invincible no power no country could ever DARE stand up against uh the United States and by invading Ukraine Putin has proved everyone wrong okay that the United States can be defeated and so what the United States must do now is prove to the world nope we're still militarily the greatest power in the world okay does that make sense okay and again uh it must do so to prevent to to protect its Financial economy otherwise uh there's a very good chance that this financial Eon economy will implode onto itself okay if uh China Japan other countries pull out of the US financial sector okay if they sell their us treasuries not only will um America face a sovereign debt crisis but it will lose access to Easy Money okay easy money and the problem in America today is that America is an Empire addicted to Easy Money okay people are so used to just around and makeing millions of dollars that they cannot imagine or tolerate a day when they would have have to go back to working hard okay so it's this addiction to easy money which will drive American um which will drive America to invade Iran okay does that make sense okay any questions okay so um all this money coming to America how is it managed okay so this is actually very complicated okay because again the financial sector is very large but if you have US Dollars then your options are you can invest in the stock market you can invest in um H houses okay the problem today is because there are too many rich people in the world and all this money is going to America all assets are bubbles now okay so the irony of all this is that you feel that your only option is to invest in America but but when you do this you're actually losing value okay and that's why the system is not really sustainable everyone in America and that's driving up all these asset prices but in the long term that will destroy the American economy and in the long term uh it it'll create all these bubbles that will destroy that will also destroy individual wealth okay does that make sense any more questions okay so so so so Jack asks a great question which is like listen if going to if going to e to Iran is all about restoring confidence in United States well if America loses the war then that would destroy even more confidence okay and so this is this is the problem of Empires empir have something called huis right Imperial huis which means that they cannot imagine the possibility of losing a war okay so why is that okay there are two reasons okay there are two reasons the first reason is that an Empire what an Empire is it it's it's a force that imposes reality onto others okay an Empire makes you see the world the way the Empire wants you to see the world okay does that make sense which means there's no feedback loop which means that you cannot actually tell the Empire what you think it doesn't your voice doesn't matter which means that an Empire it's not possible for an Empire to imagine the possibility of it ever collapsing you understand if it could it would never collapse okay that's the first problem second problem is that okay let's do a thought experiment if you had a choice if you had a choice would you rather be smart and strategic or stupid and arrogant if you had a choice in in an ideal world would you would you rather be smart and strategic or stupid and arrogant okay the answer is stupid and arrogant because it makes you feel good okay stupid people feel good about themselves right smart people get depressed they doubt themselves they question themselves and that makes you feel bad most people in an ideal world would want to feel good themselves always okay so it so when you are an Empire you want to be stupid and arrogant because it makes you feel good does that make sense okay but that's why Empires collapse because once they have too much power they become stupid and arrogant and they refuse to consider the possibility that they could be wrong okay does that make sense Jack okay any more questions okay uh the American Empire has been building for a long time okay so you can make the argument that the Empire really started after World War to because now America controlled half the world and then it became dominant after the after the end of the Cold War when the Soviet Union collapsed and at that time okay before the collapse of the Cold War Amer had to behave itself and the reason it had to behave itself was it wasn't afraid of the Soviet Union it was afraid of Communism right that's why from 1950 to 1980 they treat their workers so well because they were afraid of a worker Revolt right so the real threat was not the Soviet Union the real threat was communism as an opposing ideology to capitalism Unfortunately today there's no opposing ideology towards capitalism okay and that's why America uh can do what what what it wants it doesn't it it it does not fear any enemies it does not fear internal Revolt okay does that make sense okay all right so I'll see you guys next week