Jiang Xueqin discusses the Iran war, US grand strategy, Europe's Ukraine delusion, and a possible US-China grand bargain
Glenn Diesen interviews Jiang Xueqin, host of the YouTube channel Predictive History, on the geopolitical consequences of the US-Iran conflict.
Summary
Jiang Xueqin, host of the YouTube channel Predictive History, joins Glenn Diesen to discuss the cascading consequences of the US-Iran war, arguing that control of the Strait of Hormuz has already shifted to Iran and that the US faces an impossible choice between retreat — which would signal dollar weakness — and a ground invasion requiring a national draft. Jiang contends that America's $39 trillion national debt is a ticking clock forcing escalation, and that Israel's pursuit of the Greater Israel project makes any durable peace agreement unenforceable. He argues that Trump's May visit to China signals a potential grand bargain in which the US trades opposition to Taiwan independence for access to China's financial markets, a trillion-dollar Chinese investment in American manufacturing, and Chinese EV manufacturers opening US factories. On Europe, he describes the continent's leadership as bureaucrats living in a fantasy of Ukrainian victory, while the US grand strategy is to plunge multiple regions into prolonged conflict — mirroring the World War II model that originally made America great — while retreating into a fortress Western Hemisphere. He closes with a sweeping assessment of Western civilizational decline, citing demographic crisis, financialization, moral decay, and extreme wealth concentration as signs of a society in terminal decline — a diagnosis he grounds in a lengthy discussion of how classical economists such as Adam Smith, David Ricardo, and John Stuart Mill are misused to legitimize the rent-seeking they actually warned against, and an extended exchange on how mass legal immigration through programs like the H-1B visa constitutes a form of human trafficking and how the absence of serious debate about cultural continuity is itself a symptom of civilizational decline.
Key Takeaways
FULL TRANSCRIPT
The Strait of Hormuz and the Consequences of the Iran War
Glenn Diesen: We see that rapid shifts in the international distribution of power tend to be extremely disruptive and destabilizing, and usually this is also when world order changes — that is, after major wars or the collapse of states. World War II fundamentally changed the international system. The collapse of the Soviet Union also transformed the world order from a bipolar to a unipolar world order. But the war in Iran appears to be changing more than just the Strait of Hormuz and the region. It has the potential of having wider ramifications. I wouldn't necessarily put it in the category of World War II or the collapse of the Soviet Union, but how do you see the possible defeat of the United States in Iran — and I would define defeat as anything that allows Iran to control the Strait of Hormuz — how would this affect the wider world?
Jiang Xueqin: For the longest time the GCC was the main driver of the global economy. It basically sold oil very cheaply for US dollars and recycled that back into the US economy. So if the GCC were to be removed from the global economy, this would have tremendous consequences for everyone. They say that in a month or two the world will run out of strategic fuel reserves, and this is going to ground a lot of airplanes. The bigger issue is that the region provides the world with one third of its fertilizer, and right now it's growing season around the world. So it's very possible that in five or six months' time we see widespread famine all around the world, especially in Africa. The geopolitical consequences of what's happening in the Strait of Hormuz cannot be overstated, and unfortunately the world is not at all prepared for the radical economic and geopolitical consequences of what's happening right now.
Glenn Diesen: How do you think this war could reorient the Middle East? The Middle East seems inherently unstable — it's a key hub for energy and, as you said, a key transportation hub for economic activities, be it energy, fertilizer, or any cargo trade going through that part of the world. As long as the region has weak actors it would be dominated from abroad, with more extractive relationships. If we end up in a situation where either Iran is defeated or Iran comes out on top, what would this mean for regional stability? Would a more powerful Iran stabilize the region or destabilize it? And what does this mean for the Gulf countries, which have had a key role in the international economy and have more or less been run by Washington?
Jiang Xueqin: Let's just look at where we are currently. Right now Iran has exerted control and sovereignty over the Strait of Hormuz. It's collecting tolls de facto, and apparently there's reporting that Iran has already made half a billion dollars just collecting tolls at the Strait of Hormuz, and no matter what they won't give it up — because they can use the Strait to reconstruct their economy, to industrialize it, and to build stronger trade relations with China and Russia. So if the status quo stands, Iran has a lot to benefit.
The United States has imposed a naval blockade, basically trying to embargo Iranian ships and trying to prevent oil exports to China. But as we've seen, it's actually very hard to enforce this blockade because the Indian Ocean is so vast, and right now the American Navy doesn't have the resources to enforce a full blockade.
Right now it's the UAE that is most desperate for war, because they've lost control over trade. Dubai is a very important hub for trade and finance in the Middle East, and its reputation has been shattered. The only way for the UAE to regain its reputation as a safe harbor for transient capital and for trade is by extinguishing the Iranian threat once and for all.
Saudi Arabia is in a very precarious position because the Iranians control the Strait of Hormuz but also, through their proxies, control the Red Sea. So from the perspective of Saudi Arabia, Iran will always maintain a long-term threat.
And then Israel wants to see this war continue because Israel has the ambition for Greater Israel, and no matter what happens in this war, Israel will see that it's much further along in achieving the Greater Israel project. Israel has already discussed or warned that it will attack Turkey and Egypt next, and this is all part of the Greater Israel project.
So I think the situation in the Middle East is a powder keg and it's very hard for the status quo to maintain itself. Eventually we will see a breakout of regional hostilities again — possibly with American air strikes against Iran, possibly with the Israelis creating a false flag incident in the Strait of Hormuz, very much like the Gulf of Tonkin incident which accelerated the Vietnam War. I don't really see things staying as they are. I would be surprised if the status quo maintained itself for the next three to five months.
The reason why is that Trump does not want to be seen as a loser. He needs something to distract people's attention, and it's very possible that they come to a tentative agreement that is not at all sustainable, and then Trump switches his attention to Cuba. Right now the Americans have imposed an embargo on Cuba — the Cubans can't access fuel, food, or water — and the Americans have also indicted Raúl Castro, who is 92 years old. He's no longer in the government, but they want to try him, and this could be a replay of Maduro, where they indicted Maduro for weapons trafficking and then sent in special forces to essentially kidnap him.
So it's very possible that we will see Cuba as the next global flash point. As you know, Russia is heavily invested in Cuba, and both the Chinese and the Russians are trying to support Cuba in this very difficult circumstance.
What I see happening is a greater conflict arising in the Middle East and then other flash points arising throughout the world. Cuba will be the next flash point, but it's entirely possible that North Korea and South Korea could also become another flash point. This war in Europe is only going to escalate. As you know, there was an attack on a student dormitory in Luhansk, Russia, which killed at least six students, and Putin was visibly upset when he talked about the incident and promised swift and decisive retaliation. So it seems like all gloves are off. Putin did promise a very important announcement at the St. Petersburg conference, and it's possible that he might declare war against Ukraine. Right now it's a special military operation, but if Putin declares war, Russia would switch to total war.
So I see this conflict in the Middle East basically dragging the entire world into a world war, and right now we're just waiting for the storm to break.
US Overconfidence, Cuba, and the Limits of American Power
Glenn Diesen: I think the successes of the United States in Venezuela helped to create some overconfidence and a belief — at least with Trump — that they could reproduce that success in Iran. I never really understood why, because it's a very different theater of war. But I agree with you that Cuba will probably have to pay the price for US failures in Iran, in order to give them a win. But do you think the Chinese and the Russians would interfere or intervene to a significant extent? I get the impression that when they're in the Western Hemisphere, close to American borders, they will essentially do what great powers usually do, which is not to interfere excessively — as opposed to how they would react if something happened in Korea, Iran, or anywhere close by. Do you think they could play a larger role in the Middle East?
Jiang Xueqin: Last month, Iranian Foreign Minister Araghchi visited both Russia and China. When he went to Russia, he was received by Putin, and Putin was very clear that Russia is very supportive of the Iranian people, that Russia will stand behind the Iranian people, and that the Russians see the Americans and Israelis as aggressors. So I think from Putin's perspective, Iran is crucial to Russia's strategic interests. What we'll see is that if Iran were to come into difficulties, Russia would reinforce Iran through the Caspian Sea. I think the lines between Russia and Iran are solid.
The GCC nations have gone to Putin and Lavrov and complained about how Iran has closed the Strait of Hormuz and how it's really damaging their economies. And Putin and Lavrov's response has been emphatic. What they said is: why don't you ever talk about the fact that Americans have killed 200 schoolgirls in Iran — innocent schoolgirls who had nothing to do with the war, which you could even say was deliberate. So I think the attitude of the Russians is very clear.
The Chinese are different. When Foreign Minister Araghchi visited Beijing at the invitation of the Chinese, he was not met by a senior vice premier. He was met by the foreign minister, his counterpart Wang Yi. And Wang Yi's attitude was that China seeks peace and a ceasefire in the Middle East so that the world can return to global trade. So the attitude of the Chinese is neutral. China is not taking sides. China is trying to be a mediator and to seek a peaceful conclusion to the war as soon as possible.
But the reality is that the Americans and the Israelis are the aggressors. They are the ones who broke international law. They are the ones who have committed war crimes in Iran by targeting innocent civilians and critical civilian infrastructure. They are the ones who are blockading trade in the Middle East. So unfortunately China refuses to take a clear stance on this matter.
What I think is going to happen is that China may even sign an agreement with the United States to buy more LNG from America in order to compensate for the loss of Middle East LNG, especially from Qatar. So these two nations see the world differently.
China's Strategic Patience vs. Russia's Urgency
Glenn Diesen: I can understand it though. I think since the end of the Cold War, the Chinese have seen rapid economic rise and a more or less stable status quo within which they can operate. So essentially, if they don't rock the boat too much and keep a low profile, they will be much stronger tomorrow than they are today. The Russians have been the exact opposite — they never had a stable new status quo after the Cold War. NATO continues to push upon their borders, and for this reason I think they always do the opposite of China: instead of keeping a low profile, they punch above their own weight.
So I guess that could make sense in this regard as well. If China thinks it's better to delay any confrontation — even over Taiwan — while Russia probably sees the Iran war similarly to the war against Russia, that is, as a regime change war. The British and Americans made that very clear already in 2022, that having Putin out of the Kremlin was the principal objective.
Also, the dormitory you mentioned in Luhansk has some parallels to the killing of those schoolgirls in Iran, in that the only coverage in Western media appears to be "Putin accuses Ukraine of hitting the dormitory" — sowing doubt wherever possible.
But I wanted to touch upon something you mentioned before. You said that Israel, under the Greater Israel project, could go after countries like Turkey or even Saudi Arabia. How do you think the Greater Israel project would be affected by a defeat in Iran? Because the Israelis seem already overstretched. Do you think this could be essentially the collapse of the Greater Israel project, or would they just escalate?
Jiang Xueqin: The reality is that it's impossible for Americans to walk away, because right now the Americans and the Iranians have been negotiating for the past two months, and there are three sticking points.
The first sticking point is the uranium issue, and here I think the Americans can compromise — where the Iranians agree to keep their uranium but allow international inspectors to come in and ensure it's being used for civilian purposes.
The second sticking point is the Strait of Hormuz. The Iranians obviously want control of the Strait in order to extract reparations for this war that has devastated their nation, and the Americans would be willing to make a compromise here.
But the third sticking point is Lebanon. The Iranians are emphatic that whatever peace treaty they sign with the Americans also applies to Lebanon — meaning the Israelis have to withdraw from Lebanon. And here, even if the Americans were to agree to such a deal, there's no way they could enforce it, because Israel would just expand this war. In fact, what's been happening these past few days is that Israel has gone on the offensive in Lebanon.
Israel is this pitbull that the Americans cannot put back on a leash. There is absolutely no way for peace to be negotiated now without settling the Lebanon issue, and the Israelis have shown that they are completely committed to conquering all of Lebanon. Right now I think they have about 20% of the territory, but Lebanon is a very important part of the Greater Israel project. They have to conquer all of Lebanon as well as Jordan and Syria in order to achieve it.
So there's really no way for a permanent peace to arrive in Iran. Whatever peace they negotiate will just be tentative — at most six months before the war resumes. And again, the sticking issue is Lebanon and Hezbollah.
There are so many ways for Israel to continually force America into conflict in the Middle East. As we saw from the Thomas Massie election in Kentucky, the Zionist lobby has tremendous political sway in America. They invested $30 million just to defeat one Republican congressman who didn't have much of an impact in Congress anyway — just one person. But they made a point of defeating him to send a strong message to all other politicians: if you defy the Israel lobby, they'll come after you.
Given the tremendous political sway of the Zionist lobby over American politics, and given the fact that Israel is intent on starting as many wars as possible in order to achieve the Greater Israel project, I think this war in the Middle East can only escalate. And when I say escalate, I mean that eventually America will have to send in ground troops. The reason is that America has just run out of weapon systems. It's too expensive to keep bombarding Iran with bombs. If you want to fight this war effectively, you have to send in ground troops. I see this happening within a year.
The Impossibility of US Retreat and the National Debt Clock
Glenn Diesen: It does seem like on each of these issues each side has some room to maneuver. On the nuclear issue, I think the Iranians would be willing to give something if they had sanctions relief in return. The Strait of Hormuz is core to their security, so they're not going to give that up. But the real breaking point could be ending the war against Iran's allies — Lebanon, Palestine. But if the US is not able to come to any agreement, which would be too humiliating, is it possible that the war just never stops but the shooting comes to an end? Because whenever the US attacks something in Iran, Iran strikes back immediately, which would be an incentive for the US not to do this. Could both sides just stop firing at each other, the US blockade quietly fades, and they're technically at war but no one's firing? Could that be a possible solution?
Jiang Xueqin: That's what a lot of people assume will happen. But we have to remember that America is running against a clock. America has a bomb on its head — it's called the national debt. Right now America has $39 trillion in debt, and it spends about $2 trillion annually on interest payments alone. The only way to sustain this debt is for America to force people to continue to buy US Treasuries. And right now what we're seeing is a sharp increase in US Treasury yields — I think it's about 5 to 6% and going up. America can't afford to wait, because if you just wait, everyone's going to dump their US Treasuries. Right now Japan and China are dumping their US Treasuries. The GCC nations are also dumping US Treasuries in order to buy gold and finance their economies now that they can't sell oil. So America has a very short time frame to conclude this war. It cannot afford to wait, because if it waits too long its entire economy could collapse.
Glenn Diesen: As you said, if there would be a possibility for peace, I assume the Palestinian issue would have to be resolved, because this applies to the Israelis as well. If they would want to find some kind of coexistence with the Iranians, I don't see this as possible without resolving the Palestinian issue. But do you think there's any appetite in Israel for a grand compromise, or is this wishful thinking?
Jiang Xueqin: From Trump's perspective, he's already solved the Palestinian issue. From his perspective, what's going to happen is that Jared Kushner and Steve Witkoff are going to go into Gaza and redevelop it as a Mediterranean resort, giving jobs to Palestinians and making everyone wealthy. So from Trump's perspective, Palestine is no longer an issue.
But we know that's not true, because there are continual flare-ups in Gaza, the Israelis are not respecting the ceasefire, and there have been a lot of war crimes committed by the Israelis in Gaza. The other issue is that you have elements within the Israeli state who are messianic and eschatological — they want to achieve the Greater Israel project and they want to cleanse Greater Israel of all Amalek, which includes the Palestinians. So there's a religious fever for genocide right now. I don't see these two sides being able to find a compromise. You have one side that is geopolitical and wants to make money, and another side that is eschatological and wants to see the world rise up against Israel.
Can the US Actually Win in Iran?
Glenn Diesen: If there is no possibility for the US to make peace with Iran, does it have the capabilities to defeat the Iranians? Even if it was limited to controlling the coast along the Strait of Hormuz — this is a very long coastline, and with new weapons technologies, drones, mountainous terrain behind the coast, the ability to supply and support any US occupation force would be very different from what they did in Iraq. They wouldn't have clear entry points either. How do you see this war ending? Because initially the US still thinks it might be able to strangle the Iranian economy and disrupt energy exports to China — so it's still a win. But the Iranians can now not just destroy US bases; they can incentivize the Gulf states not to rebuild and rehost them by controlling the Strait of Hormuz. They can dismantle the petrodollar. They can essentially put sanctions on anyone who sanctions Iran in terms of access through the Strait. So they have a lot of tools. Would you say Iran is winning?
Jiang Xueqin: It's impossible for America to retreat from this war, and the reason is the national debt — $39 trillion. America needs the world to continue to buy US Treasuries in order to finance this debt. If America were to retreat from Iran, it will signal to the world that America is a paper tiger, that it can no longer enforce the dollar as a global reserve currency. Everyone would dump US Treasuries, and they'd be forced to dump them in order to finance their economies, especially the GCC.
So retreat is just not an option. It's also not an option to continue the war as it is, where America bombards Iran continuously. Over those six weeks when America was bombarding Iran, they spent about four years' worth of munitions. Their stockpile is depleted. They cannot continue this air war — it doesn't get you anywhere.
So the only option they have is to eventually insert ground troops, to use a ground invasion. But for that to happen, you would need a national draft — calling up at least half a million soldiers and sending them to Iran. In that instance, you might have a possibility of winning. And in order to justify a national draft, you need a series of events to happen. You need a false flag incident, you need a justification to rally the American people. But you also need to create enough economic chaos within America and outside the world so that people will accept a ground invasion of Iran.
I think what's happening is that the Trump administration is intent on continuing this war, but they're just waiting for the economic pain to spread across the world so that the entire world begs America to end the Iran issue once and for all. The world knows there's no way America surrenders. So an option is to support America in its invasion. And already we're seeing NATO considering sending forces to the Strait of Hormuz.
Europe's Ukraine Delusion and the Forever War
Glenn Diesen: That's always been the assumption in Europe — that the only constraint on America would be its intent and willingness, because there's always this assumption that the Americans have infinite capabilities. The only thing restraining a victory is whether or not they will commit to it. That's the logic not just against Iran but also against Russia — they think that if only the US commits to defeating the Russians, we'll get it, even though Biden tried to do this for several years.
But on that topic — what is it that keeps the Ukraine war going? And how do you see the US position changing? Because now I see Hegseth making the point that we have to continue to help Ukraine. I'm not sure if this is just rhetoric or if the US hasn't decided they want to put an end to the war and would rather just transfer responsibility to the Europeans. What is it that keeps the war going?
Jiang Xueqin: I think it's just self-delusion. From the perspective of the European elite, they are winning the war in Ukraine. There's reporting that the Ukrainians have pushed back the Russian offensive and are now gaining more territory. And quite honestly, right now the Europeans live in their own elitist bubble, and you're only allowed into this bubble if you support the war completely. If you're trying to point out facts on the ground — for example, that Ukraine has lost over a million men and doesn't have the resources to sustain this war — you're pushed out. You're considered a traitor, a pessimist.
So the people in Brussels just live in their own little fantasy world, and they're absolutely convinced that, first of all, Ukraine is winning this war. Second, Russia is on the brink of economic collapse — any day now Russia will collapse economically. And third, Putin is on life support, the Russian elite are so angry about this war that they're ready to rise up against him. So if you just wait one more day, either the Russian elite will remove Putin, or the Ukrainians will break into Crimea, or the Russian economy will collapse. And once the European elite fall into this delusion, it's impossible to convince them otherwise. That's why this war continues to this day.
Glenn Diesen: I noticed as well that after having to listen to the European elites and their stenographers in the media saying Ukraine's winning for all these years — when it was obviously that they were being destroyed — it seemed like they were finally shifting towards reality. They were saying, well, they're in a difficult spot, we might have to help them more. But now they seem to have returned to "and yet Ukraine is winning." I consider the European elites to be essentially social constructivists. They view it as: if you say Ukraine is winning, the public will throw their full support behind it because they want to bet on the winning horse, and if they support it then we can send the weapons and somehow win after all. If you accept reality as it is — that we're losing — then the public will withdraw its support, we'll try to mitigate the catastrophe of this loss, the money dries up, and then we lose. So I think they ideologically like to construct their own reality. The problem is you can only do that for so long before you run into a wall. Just a funny comment — in this country a newspaper wrote about me that "multipolar" is a way of giving Putin legitimacy, because it suggests that Russia is a polar power in a multipolar world as opposed to just China and the US. So we should not call it multipolar because this gives legitimacy to Russia. We're essentially forced to live in a fake world, a world of delusion. Otherwise, if you recognize the world as it is, you legitimize our enemies, and as you said, you're kicked out of polite society.
Jiang Xueqin: Another point that's very important is that in order to maintain their fantasy, they will sacrifice everything. The Europeans are gearing up for total war. The Germans are planning conscription. They will fight this war to the last Ukrainian and to the last European. They will not give up their fantasy.
Glenn Diesen: This is where I was wondering where you see this going, because my concern — what I've been saying for at least the past twelve or thirteen years — is we should not go down this path towards a war with Russia. If you try to push NATO into Ukraine, it would be like the Russians establishing themselves in Mexico. The only outcome possible is war, and eventually Ukraine would be destroyed and escalation would compel Russia to retaliate. If Russia sees it as an existential threat, there's no way it's going to back down. So either we go to nuclear war or we defeat it.
But how do you see where this war is going? Because I think the Russians' calculations — at least what I hear from Moscow — is that the mood has shifted dramatically. After the Europeans expressed the intent and now the ambition to develop the capabilities to fight Russia, they couldn't be more clear in this language. There's no more point in pretending to be afraid of a direct war, because at the moment the Europeans are striking Russia and Russia's not striking back, so the war is already here. What is there to be deterred about? The Russians should restore their deterrence. So where is this going?
America's Grand Strategy: Fortress America and Perpetual Conflict
Jiang Xueqin: I see a larger American grand strategy behind all this. For the longest time in a unipolar world, America guaranteed peace and safety for everyone. That's what allowed for global trade and a period of tremendous peace and prosperity. Now that America has $39 trillion in debt and the American economy has basically been hollowed out — they've financialized their economy and shifted their manufacturing to China — America cannot afford to guarantee peace and safety for the world.
So what America wants to do is shift the world into one of continuous conflict. The grand vision is that America retreats back into the Western Hemisphere — something called the Monroe Doctrine — with complete control over all the nations of the Western Hemisphere, including Venezuela, Cuba. But after Cuba, we can imagine the Americans will target Canada, Greenland, Mexico, Colombia. It's all part of this greater North America project. You create a fortress North America and then you plunge the world into war by causing conflicts throughout the world.
In Europe, there'll be a war between the Russians versus Ukrainians backed by the Germans, the French, and the British — a continuous war that could go on for decades. And while this war is raging, America will provide financing, armaments, and resources to Europeans to ensure that they fight this war to the last European. By doing this, the Americans can sustain their national debt and grow their economy.
In the Asia-Pacific, we're seeing the same thing played out. The Shangri-La forum just concluded in Singapore and China didn't really go — China did send a representative, but China was not really there. Hegseth was there. The Japanese were there. The Filipinos were there. And I think what's going to happen is that the Americans retreat from the Asia-Pacific and let Japan and South Korea do more of the heavy lifting, backed up by American allies in the first island chain, specifically the Philippines. The goal is to force these nations to come into conflict with each other so that they're now again forced to buy American armaments and resources.
So that's the world that America wants to create — a world of continuous conflict, which is very similar to World War II. Remember, World War II was the greatest thing for America. Trump talks about making America great again — well, World War II is what made America great. The Europeans exhausted themselves on the battlefield, the Japanese exhausted themselves on the battlefield in China, and then towards the end the Americans came in and cleaned house and conquered the world and established Pax Americana. I would not be surprised if American strategists were planning the same thing — plunging the world back into a world war, leaving America alone to rebuild its manufacturing base, and eventually, when the time is right, conquering the world again and establishing Pax Americana. That, I think, is the larger grand strategy here.
Glenn Diesen: I got the same impression. I think the European leaders saw the Ukraine war as essentially themselves sitting at the table moving the Ukrainian pieces around against the Russians. I don't think they realized yet that the political West doesn't exist in its former form — that the Europeans have become pieces on the table now. The fight to the last Ukrainian will essentially soon be the fight to the last European. They also don't realize they're proxies of America. They think they're allies with completely overlapping interests.
But the problem is they have the wrong expectations, because they looked at the last four years and saw proper escalation control and the ability to manage the battlefield. The assumption is that it will essentially just be a continuation of this slow war in the trenches of Donbas, where they can tilt it in favor of the Europeans and the Ukrainians. I don't think the Russians would fight a war with Europeans in any way similar to what we've seen the past four years. I think the brutality would be much more vicious and it would be fought more on European territory.
Jiang Xueqin: One more point about Europe — right now Europe is controlled by bureaucrats. These are not leaders, these are not visionaries, these are not people who are responsible to the people. They're just bureaucrats, meaning they live in their own fantasy world, they refuse to take responsibility for their actions, and they turn a blind eye to reality. What they're really trying to do is not take blame for the defeat of Project Ukraine. They're just trying to pass the buck, to prolong this war as long as possible so that they can retire into their nice pensions and leave the problems to their successors. These are not competent leaders. These are just lazy bureaucrats.
The Feasibility of Fortress America and the Alliance System's Fragility
Glenn Diesen: May have used the word "leader" a bit generously there. But what I wanted to ask was: the war with Iran appears to have changed some things. When the Americans were going to fight and knock out the Iranians, they realized they had already sent too many weapons to Ukraine. So they had to pull weapons out of East Asia. And even the insufficient weapons they had in the Middle East were prioritized for Israel. So we end up in a situation where many of the Gulf states are discussing to what extent it's a good idea to be frontline states for the US empire. The Europeans are certainly having similar discussions — the Americans won't necessarily come to their aid, so they transferred responsibility to the Europeans and then essentially pulled back from NATO cooperation. And in East Asia as well, especially the South Koreans are having these discussions: why would we make an enemy out of China, and if something goes wrong, to what extent would the Americans actually be able to protect us? The alliance system of the United States could falter. The idea that you can replay World War II by building a fortress America and burning down the rest — I don't see this as necessarily feasible. So my question is: do you see this as feasible, or just a recipe for a very messy suicide?
Jiang Xueqin: I think short term it's very feasible. Let's just focus on Japan. Japan received most of its oil from the Strait of Hormuz. Japan has very little resources and is losing a lot of its reserves. If you run out of oil, you're in a lot of trouble. What are Japan's options? You can either buy LNG and fuel from Russia or from America. The fact of the matter is America has 50,000 forces in Japan. America right now is helping Japan build its own CIA, helping Japan remilitarize. If you're Japan, you have absolutely no option but to become a vassal, a proxy for America. Because if you don't agree to this, America will just blockade you. You're already losing all that oil from the Strait of Hormuz. If America refuses to finance you and refuses to provide your resources, your economy is completely and utterly screwed. So unfortunately Japan has absolutely no choice but to be a proxy for America and to do America's bidding.
Point two is that China has always been hostile towards Japan. So if America were to retreat from the region, it's entirely possible that China starts to blockade Japan, because China has tremendous shipbuilding capacity. There are all these historical, geopolitical, and economic factors within the region that America can exploit to its advantage. I don't see how Japan and China can avoid a conflict.
I live in China, and I can tell you that the rhetoric has ramped up tremendously these past six months, especially after Prime Minister Takaichi said that Taiwan is core to Japan's strategic interest. Last year there were millions of Chinese tourists going to Japan. Now there are very few. China has even discussed the possibility of closing its airspace to Japanese airlines, which would mark a major escalation.
So again, unfortunately, even though America is a bully, most of the world is too mired in its own regional conflicts to really care that much.
Glenn Diesen: That was my initial comment about the rapid shifts in international distribution of power. If these shifts happened over a longer period of time, there would be more time for countries to adjust to new realities. But it's very difficult for countries like Japan to reorient themselves away from the US, much like the Europeans after having essentially outsourced their foreign policy and had this excessive security dependence for 80-plus years.
But that's a great point — the renewed conflicts between China and Japan. What do you see, given that the main if not only peer rival of the United States is China, and the Americans keep referring to China as a motivation in the Iran war — if you can cut off oil exports to the Chinese, that in itself is a win? How do you see the sustainability of Taiwan's current status? Because as I said before, China has an interest in delaying any military conflict given that it will be in a better position tomorrow. The US has the opposite — with $39 trillion in the hole and China strengthening day by day, it's better to have that conflict today, or at least start chipping away at the one China policy. The status quo doesn't seem very sustainable anymore. Will this be a flash point over the next few years?
The US-China Grand Bargain and the Taiwan Question
Jiang Xueqin: Trump visited China in mid-May for a couple of days, and I understand that Western reporting is that the visit was lackluster, that Trump just came and sucked up to President Xi. But in China, the attitude is very different. If you look at Chinese media reporting, if you talk to Chinese experts, they believe this was a breakthrough in US-China relations, a radical turning point — meaning that the trade war will eventually come to an end, possibly as soon as this year.
I think a grand bargain is afoot. They're still discussing specifics, but let me go over what the grand bargain might look like. What America is most interested in is access to the Chinese financial market. The reason is that Chinese save 40% of their income — China has the highest savings rate in the world. What American companies like Visa, BlackRock, and Blackstone want to do is financialize these household savings, basically force Chinese into American debt in order to sustain the American Ponzi scheme. This was actually a precondition for China's WTO entry 25 years ago.
I think the Chinese will eventually agree to open up their financial market, but maybe not fully liberalize their currency — maybe allow Chinese to buy stablecoins, which is basically a backdoor into US Treasuries.
In return, what I think the United States will do is declare that they oppose Taiwan independence. This is something the Chinese have been asking for politically for the longest time. Trump, after the visit, said that Taiwan is not really a big deal, that he doesn't really care. He's also blocked or paused a $14 billion weapon shipment to Taiwan, which is a very big deal. There's talk of Trump wanting the Taiwanese to onshore their semiconductor industry to America. TSMC, the largest Taiwanese semiconductor company, has opened a factory in Arizona. So America is perfectly willing to sacrifice Taiwan if it means being able to access China's financial market.
President Xi has said he will visit America in September, and there are rumors that at that time China will announce a trillion-dollar investment in American manufacturing — meaning some of China's leading EV manufacturers will move to America and open factories.
So I think a grand bargain is afoot, and I think a condition of this grand bargain is to settle the Taiwan issue. If you just talk to Taiwanese in Taiwan, they're not interested in independence. Like most people in the world, they want to live a decent, good, safe life. If it means reunifying with China, they don't care. So I think both the United States and China would want a peaceful resolution to the Taiwan issue.
But there's a problem. The problem is Japan. If Taiwan were to reunify with China, China would now have access to the Pacific Ocean. The first island chain would be destroyed and China could now have a blue-water navy. This is a direct threat to Japan's interests, because Japan is primarily a naval power, primarily dependent on the outside world for imports and resources. If China were to establish a very strong blue-water navy, it could blockade Japan. So there's absolutely no way that Japan would countenance Taiwan reunifying with China.
The possibility of this happening is almost zero. So by opposing independence, what Trump is really doing is basically transferring the Taiwan issue from America to Japan. And I think from the American perspective, that's a very good and very strategic thing to do.
So I think Taiwan is not the flash point. I think the real flash point is North Korea. Given the current geopolitical chaos, what North Korea could easily do is threaten Japan and South Korea. Most people don't know this, but Seoul is within range of North Korean artillery. All North Korea has to do is set up its artillery on the border and threaten Seoul. Within about a day, it could flatten Seoul, where the majority of the Korean population lives. So I think the next flash point will be North Korea and not Taiwan.
Glenn Diesen: That's interesting. I would say that with a grand bargain, if it's simply returning to the status quo, then I don't think the Chinese would go with it, because it would simply look as if the US is postponing a conflict until it can sort out other things. But if it's actually about reunification — ending the former status quo — then it's a very different thing. Then I think the Chinese would probably be willing to make quite a compromise in order to remove this most likely source of war off the table. That would be interesting if it could actually be achieved.
And I think many people in the US — while it might seem outrageous after living through 30-plus years of a hegemonic era — are beginning to question to what extent they're actually able to protect Taiwan if conflict would break out.
The Legitimacy Crisis in the West
My last question is: how do you assess the possible legitimacy crisis in the West? You already mentioned that many European leaders act more like bureaucrats. But it seems this is not only limited to Europe but to the wider political West. There's a rise of these denationalized political elites acting like bureaucrats, not really looking after national interest. Key diplomats no longer believe in diplomacy, especially with Russia — the foreign policy chief of the EU has argued that she doesn't think it's necessary to talk to Russia. In the media, journalists act more as information warriors, spinning narratives — Ukraine is winning, Iran is defeated — and anyone who challenges their narrative tends to be smeared, censored, cancelled. This kind of failure of institutions can work for a while, but over time it destroys all trust and begins to degrade itself. How do you explain this, and where do you see it going? Because there would have to be a correction at some point. Every year the trust in government — if you look at the polling in America and across Europe — is at the bottom. The trust in media is all but gone. We're going to start to rot from within. Are we moving towards a correction or just going off the cliff?
Jiang Xueqin: I think it's going off the cliff. I'm sorry to say this, but I think what we will witness in our lifetime is the fall of the West. If you read some history — Oswald Spengler, but even the great religious traditions and their eschatologies, whether Buddhist, Hindu, Jewish, Christian Orthodox, it doesn't really matter — they all talk about how when a society declines, there are certain signs. The West right now has all these signs.
One major sign is demographic crisis, where the population is aging drastically and young people refuse to have children. So what do they do? They bring in immigrants. What do these immigrants do? They clash culturally with the local population. This is exactly what we're seeing in the West right now — baby boomers who refuse to die and have absorbed all the resources and all the political power, while young people refuse to engage in the economy, refuse to have children. And they're bringing in millions of immigrants, both legally through the H-1B visa system and illegally. It's causing tremendous social strife throughout society, and unfortunately this is a sign of a society in decline. That's sign number one — demographic crisis.
Sign number two is financialization, meaning the society no longer produces anything. It just gambles, it speculates, and young people fall into crushing debt. Think of all these young people in America right now who have student loans they can never get rid of — you can't declare bankruptcy on student loans. Think about credit card debt. Fifty percent of Americans don't have access to $500 for an emergency. So financialization is sign number two.
Sign number three is moral decay, where there's really no sense of right and wrong anymore in Western society. It's all about profit, it's all about following the rules. People aren't allowed to exercise their common sense anymore. You have this massive dictatorship going on. I just read today that two Americans — Candace Owens and Charlie Kirk, I'm sure you know who they are — were denied entry to Britain because they were a threat to the public peace. What does that mean, really — a threat to the public peace? You're not even allowed to speak your mind anymore. And it's all part of this moral decay when people are not even allowed to have honest conversation.
And then you have another sign, which is just that evil triumphs in the world. The more evil you are, the more powerful you become. Think about how these incompetent individuals — Peter Thiel, Jeff Bezos — just by co-opting the political system, are able to have billions and billions of dollars. I think just the idea of billionaires is outrageous. Never before in history have we had so many billionaires. In America, ten billionaires have as much money as the bottom 50% of the population. That's just astonishing to think about. One hedge fund manager in America makes more in a year than all kindergarten teachers combined in America.
So I think the situation really is hopeless. Historically, if you look at human history for thousands of years, this is a very typical cycle. Societies do decline over time, and we're seeing these radical symptoms of that. There's really nothing people can do about it right now.
Financialization, Rent-Seeking, and the Misuse of Classical Economics
Glenn Diesen: What is strangest to see — as you said with the concentration of wealth and the financialization of the economy — is that it should be common sense that you can't structure human society like this when you have this amount of concentration of wealth. The irony is that often when people bring this up, the defense of the direction we're heading is always a reference to liberal economists — Adam Smith, David Ricardo, John Stuart Mill, and others. The problem is that they said the opposite. If you go through the works of Ricardo, he recognized that with technological innovations there would be more concentration of capital in the hands of capital owners, moving away from labor over time, and that this could be disruptive. This is not Karl Marx — this was common sense. People understood the problem of rent-seeking, which is why Smith, Ricardo, and Mill didn't celebrate rent-seeking by financial elites. But we see essentially their names now being used to legitimize what they essentially warned against. So there's a lot of decadence all over the place.
Jiang Xueqin: And remember that for most of human history, most societies outlawed usury. There's a reason why they did that.
Glenn Diesen: Well, just the last point on the immigration issue — I think this is also something very mature in not just Europe but the US. The debate is just between those who are for more immigration and those who are racist. Either you're pro-immigrant or anti-racist — this is how the debate is framed. But they don't look at the shift in international distribution of power. There are rapid shifts in population, and if there's no possibility to adjust, no one addresses what happens to the culture. They use culture as this slang that doesn't have any meaning. But culture is what keeps society together — it's the glue, what we all have in common, what links us to the generation before us, what links us to those coming after us, essentially what's worth passing down from generation to generation as part of the collective consciousness. If you have a massive shift in culture, you cause a disruption there. Culture has a function in human society. But it's not discussed at all. It's either you hate immigrants or you like them. That's essentially the extent of our debate.
Jiang Xueqin: And look, what people don't discuss is that a lot of legal immigration is human trafficking. If you look at America's H-1B visa program, what they do is bring in lots and lots of Indians, and these Indians often pay a huge bribe to enter the program. And when they come into the program, they're slaves to the system, because if a company doesn't like you, they can send you back to India. So it's human trafficking. That's literally what it is.