After Maduro: Who Really Runs Venezuela Now? with Juan Tokatlian

0:00David McWilliams: Today's podcast is all coming from the street in Medellin in Colombia. It's what is the word on the street in Latin America? What are Latin Americans thinking about Venezuela? What are they thinking about the United States? What are they thinking about their position in the world after last Friday's decapitation of the Venezuelan government? And this is Juan Tokatlian, the man who this time last week predicted all this stuff happening. he's going to be on the line telling us what the lie of the land is from the Latin American perspective. That's all coming up in a couple of minutes.

0:56Compliance done wrong is a giant headache. Security and compliance done right, that's Vanta. Vanta helps you earn trust and speed up growth. No spreadsheets required. For startups low on time and resources, Vanta becomes your first security hire, using AI and automation to get you compliant fast and unblock big deals. For enterprises, Vanta is your AI-powered hub for compliance and risk, bringing together data from across your businesses and automating workflows so you can prove trust at any moment. Vanta scales with you at every stage. That's why top companies from startups like Cursor to enterprises like Snowflake choose Vanta.

1:33Do security and compliance right. Get started today at vanta.com slash TED Audio.

1:42To understand the economy, you have to understand human nature.

1:48David McWilliams: This podcast is powered by Acast.

1:56David McWilliams: How are you doing there? It is time for the podcast and we have a little gem coming up for you. But before we kick off, this week on Friday is the beginning of a new online monetary economic course courtesy of the Dave McWilliams podcast. It is the course that I give more or less in Trinity College. It starts with money and it ends with money and it is the history of money. It is the functionality of money. It is how it operates. It's monetary economics. It's central banking. It's currencies. It's cryptocurrencies. It's the whole shebang. It's out on Friday. It is free to our beloved Patreons, without whom we couldn't do this podcast.

2:39David McWilliams: So patreon.com forward slash David McWilliams. It is free to you. And if you want to join us, sign up. Patreon.com forward slash David McWilliams. Now, John, what a weekend we have had. Where to start? We are going to go back to Latin America. You will know that on the 29th of December, we had a podcast which suggested that A, there would be an imminent change in Venezuela, and B, that would have severe ramifications for the Caribbean, Latin America, America's relationships with its southern neighbors, and possibly even its northern neighbors. Well, this has come to pass. What a week we have had.

3:24David McWilliams: This podcast is going to go to Colombia. Juan Tocatlian, who was our guy on the ground last week, who predicted what would happen. We're going back to Juan. He's in Medellin. And the reason we're going back to him is A, to see what the word of the street isn't Latin America, but B, also because Colombia is the country most affected by things in Venezuela, it'll be interesting to get that Colombian twist. And again, I think it's probably wise at this stage to have Latin American voices on, primarily because they are the people who are going to be most affected one way or another by what has happened.

4:05David McWilliams: John Davis, I see you looking down the tube. How are you, my man? I'm good. I am good. Yeah, it's what a weekend. Yeah, I was in London for the weekend watching football, Liverpool, Fulham. And they served up a two-all draw. A two-all draw. It wasn't the most amazing match. Four goals in the premiership. Four goals in the premiership. I mean, that's like, you know, Dalky United sort of stuff. But not as exciting, though, Mac. Now, just to give you a sense, what we're going to try to do, dear listener, is we're trying to try to give you a couple of frameworks through which to observe what is happening.

4:40David McWilliams: Not because we think those frameworks are absolutely accurate, but I think they help us get a sense of economic policy, commercial policy, mercantile policy, the use of arms and force to, in effect, enforce contracts, contract law, all those things that are in the mix now. Now, John, I can just tell you, over Christmas, as you know, I was given many books. And one of the books that Shan gave me was a book by Sven Beckert, who is an economic historian, German, but is based in the States, called Capitalism, A Global History. Big, big book. And we'll come back to refer to it. But as it became increasingly apparent that Donald Trump and his government were primarily interested, it seems, in extracting oil and doing the bidding of American corporations and vice versa, American corporations doing the bidding of the American government, I had a light bulb moment that what actually is the parallel here is not the 20th century, the 19th century, the 18th century.

5:53David McWilliams: It is the 17th century. It is the establishment of the Dutch East Indies Company and the British East Indian Company. So the English East Indian Company, EIC, or the Dutch East Indian Company, were established in 1600 and 1602 respectfully. And what they were doing is they were joint stock companies that were set up explicitly to exploit the resources of foreign countries. And the Dutch and the British Navy were set up in order to police the waters to ensure the enforcement of contracts between Dutch and British merchants and Borneo, Sumatra, India, etc. So places that had stuff that the Brits and the Dutch wanted, they set up a symbiotic relationship between the merchants, joint stock companies, i.e.

6:52David McWilliams: the stock market, and the military power. So much so that Edmund Burke, Irish, most people sometimes think he's British, Irish, he referred to the East India Company as a state in the guise of a merchant. So what he was saying there was that the state in Britain had become so involved with the merchant class that ultimately the company was the state and the state was the company. Now, when I looked at Donald Trump and I see the way he is now enmeshing the American state in the bounty of American private corporations where he will take an equity stake in the same way as he took a stake in Intel.

7:36David McWilliams: Now, what you have, the model for this, okay? For those of you who are interested in economic history, I know we're a small niche. I know it's not an everyday conversation, but nonetheless, bone up on early 17th century economic history. We'll come back to it. But a framework for looking at what happened in Venezuela in the last couple of days is the establishment of the symbiotic relationship between the commercial class in Britain and Holland, the state, the tax revenue that accrued to the state from the merchant class, and the enforcement of the contracts, which was guaranteed by the British and Dutch Navy.

8:18David McWilliams: I'll just give you a statistic about the British Navy. A hundred years after the establishment of the East India Company, which was by 1710, the British Navy could launch 180 ships and employ 48 ,000 sailors, all in the pursuit of profit. And if you came in the way of the British Navy, they scrapped you. Which is why between 1689 and 1815, Britain and France were at war for 65 years. Wow. All over resources, all over money, all over profit. So do you think that we're kind of back to the 17th to 18th century in this style of colonialism and statesmanship? Completely. Wow. Completely. History repeats itself.

9:12David McWilliams: Basically, what you have is you have a president who is driven by transactions. Transactions largely on behalf of his friends and those around him. This was the driving force of the expansion of capitalism out of Europe into the Indias, the Sumatras, the Chinas of this world. It wasn't that China and India were not capitalists. In fact, they were probably much better merchant traders than anybody else. But what the British and Dutch, Portuguese, French did is they combined the power of the merchant with the power of the state. and they in a way fused or forged the interests of capital, of profit, of commerce with the interests of the state.

10:05David McWilliams: And they did that with a thing called the merchant navy. The key is in the word merchant navy. It was a navy set up to enforce mercantile contracts largely on countries that couldn't defend themselves as violently as the European countries. When I look at Latin America, I look at Venezuela, I look at that extraordinary military operation by the Americans, all in the pursuit of profit, it seems. I'm thinking to myself, forget looking at 20th century, 19th century, go further back. And that's where we are. And then what you will see is a system of the rule of law built up around enforcing those contracts, enriching the merchants who are then taxed by the state.

10:53David McWilliams: And the state uses that to ameliorate the plebs, the peasants, the underclass, all that sort of stuff. So that's where I think we're going, John. That's where I think we're going. But let us now go straight to Latin America. Let us get a view from the Latin American street by Juan Tocatli. Juan, who was our man last week, who predicted all this on the 29th of December. He is now in Colombia, in Medellin. So let's go down to Latin America and talk to Juan. Now, Juan was not only prescient on the 29th of December when he said something big is about to happen in Venezuela, but his timing was ridiculously accurate.

11:32David McWilliams: The problem is Colombia is not only the country of Juan's wife where he's spending Christmas, but it's also the country which will be most impacted whatever happens in Venezuela. But what I want to establish first, because this is perplexing everybody, is what exactly is going on? Is it regime change? Is it America flexing its muscles? Is it a grab for the oil of Venezuela? Is it a mafia boss, i.e. Donny J, having a word with the other mafia bosses taking out the mafia boss, but dealing with the lieutenants and hoping for a cut of the action. Who knows? So let's go down. I want to understand what is the Latin American street feeling now?

12:17David McWilliams: What's the feeling on the ground? But also, how do we interpret what has happened in Venezuela? Juan, good afternoon. I know it's a big question, but let's get into it. Okay. Thank you for the invitation again. And let me start by a comparison just to present the case of Venezuela, the singularity, the particular questions that are around this case. In 1989, there was a military dictatorship in Panama. There were elections in May. The elections were won by candidate then Endara, but he was not recognized. And Noriega reaffirmed its dictatorship and a state in power. By that time, the United States had a major problem with drug consumption and also drug abuse that ended up in a lot of deaths due to cocaine consumption in the United States.

13:18So this mixture of questions, the fact that democracy promotion was part of the US debate at that time, well, democracy, human rights, drugs, all together make the possibility, at least from the United States' perspective, to justify the use of force against Panama. The United States decided to move more than 20 ,000 soldiers in Panama. The United States invaded Panama. And there were fights. In those fights, between 300 Panamanians up to 1 ,000 Panamanians approximately were killed, according to different figures. Then Noriega ended up in the house of the Vatican in Panama. And one day he decided to surrender.

14:08Well, he surrendered. He was taken then by the United States and brought to the United States where he was judged and sentence for 40 years. Now, what has to do with what happened here in Venezuela right now? Well, there are a lot of differences. First, there is a commonality against the use of force, against the use of force in Latin America. This is an abnormality because up to now, Now, the United States has used the force generally in history with Latin America in Central America or the Caribbean, not in a South American country and not in a very powerful oil country, the major country in terms of the availability of oil.

15:03And we have, yes, a dictatorship. We have an election in Venezuela, 2024. The president elected was outside the country because he was forced to leave the country. Now, this military operation is completely different. It has what one may say a series of phases. It started in September. By how? Well, attacking boats, both in the Caribbean and in the Pacific, 115 deaths. Then the issue ended being drugs and it started to be coming oil. Then Trump put it at the forefront of his argument that he wanted that oil from Venezuela because it is his possession. He made that my oil. So then we turned all of this to the geopolitics of energy.

16:04There's something, nothing to do now with drugs. Then this military action ended not with the surrender of Maduro, but its extraction and also the decision to take him to the United States. Is he then out of power and the president-elect of 2024 brought to Venezuela? No. This is a change of presidency, not of regime. This is not regime change as yet. It is not. This has a lot to do also with the fact that the United States has good intelligence on Venezuela. It's not poor intelligence. It's very good intelligence. They know two or three things. First, that the armed forces, even though it's highly corrupted, it's quite unified altogether.

17:05And the role of an armed force in Argentina, in Venezuela, in Colombia, wherever, is to avoid the collapse of the nation, of the nation state. And they were not going to play the rules of the game in terms of what So the United States wanted to make a coup d 'etat there. They want to preserve a role as a fundamental actor. Together with this, we have someone, Delcy Rodriguez, who has been Minister of Hydrocarbons, Prime Minister of Foreign Affairs, Vice President, has a lot of links, knowledge, networks, and someone with whom the United States was willing to talk. In order to what? To avoid disorder, to avoid instability, to preserve somehow a type of government that was or is supposed to now to be friendly with the United States.

18:08And he said, Trump said, well, I will run, we will run the country. Meaning by that, well, you, Daisy, nice, Daisy, you will become our reference as a protectorate there. Well, this is a different situation. The United States wants to negotiate. Is she in the capacity to negotiate? What? Resources? Investment? What are we talking about here? And this is an experiment that we have never seen it. We have seen the use of force, the illegal use of force. Okay, but we have never seen this in Latin America. This is not regime change. This is deal with whoever has real power in a country. There are the military on the one hand and the Chavistas.

19:03David McWilliams: So it looks from where you are sitting that the combination of the military, and the Chavistas, who have been hand in glove since 1998, will remain in power. Rodriguez, Delce Rodriguez will remain that pliant woman president that can be negotiated with and can be counted on for the United States to do the good job, to do the right job. And the right job is to allow in American oil majors to, over the next 10 years, extract oil from the Venezuelan oil reserves. Yes, indeed. Without generating a problem either with Russia or China. Delcy Rodriguez has a long, long tradition of good relations with Russia.

20:03She has spoken very openly about strategic relations within Moscow and Caracas. She has been quite friendly with Lavrov. She knows Russia. And there is any attempt to damage that relation. On the other hand, China has a lot of investment in Venezuela. approximately between$40 to$60 billion. Now, they want to recover that money because Maduro was not paying. The economy in Venezuela was dramatically acting like just for survival for everyone, for the people and also for the state of Venezuela. So if the Chinese are not taken from the role, okay, they can stay there and let's see and wait. But the problem now is that the United States says, listen, if you do not do whatever we have in mind, and we do not know that list of five, six or seven points, we don't know, then the question is, Is she going to allow that?

21:29Are the Chinese going to accept that? Are the Russians going to accept that? What are the conditions? Under which conditions are we talking about? Marco Rubio and Trump insist in talking about malign actors in Venezuela, among others, the Russians, Iran, China. Well, what can Delcey Rodriguez deliver? Because that's the question. Can she deliver? What will be the cost? domestic costs. Can she reorganize the economy? Well, you are talking about investment in oil. Well, but that takes a long time. That's not easy. That's not making money easily in a country. That is, with an economy that is in shambles.

22:14So my point is that this pact, alleged pact that we have seen, is very fragile. We do not know what is going on here. and also Washington said, if you do not behave, we go for a second round. So this is having a bullet close to the neck and saying you will have to perform. What does it mean? Well, that for the first time, the United States is willing to go for a sort of protectorate in Latin America. That's unbelievable. That's unbelievable. That is what the street is talking today. Where are we going? Where are we going? This is a change. This is a dramatic shift in US-Latin American relation.

23:02David McWilliams: So let's focus on that, because that's what I want to get to the bottom of. So now you have, in effect, an American protectorate in Latin America, which is mildly concerned about making sure the Chinese don't get particularly aggrieved, but is actually telling the Chinese, look, we're boss here. We're the boss. You're very far with the Chinese. The Chinese have an expression, which is the mountains are high and the emperor is far away. In this case, the Pacific is big and China is far away. So America is the boss. Absolutely. Russia may or may not play a small part, but my own sense is it's out of the game now completely.

23:46David McWilliams: It'll get whatever crumbs are on the table. Okay. But let's come back to this idea of American protectorates. What does this say about Colombia, for example, in the future, where the United States has a big problem, an articulated problem? What does it say about Mexico in the future, where, you know, Trump has already said to shine, bam, look, watch yourself. You know, we're looking at you. What does it say about Cuba in the future, all of this is now up for grabs. Okay. Let me include Canada here also. Remember that Trump said that he wanted to annex Canada. I mean, that issue is there. That issue is there.

24:27I convey to my Canadian friends to think about this, because maybe here there is something that Canada and Latin America and the Caribbean can join actions, forces, measures, whatever, to avoid having to live not with a boss, with a sheriff. Yes. Trump is a sheriff. He's not a boss. Second, let me go even farther in history. Panama was part of Colombia. In 1903, there was an independent movement that ended up making Panama a new nation, 1903. Theodore Roosevelt once said in a speech in Berkeley University, 1911, March 1911, if I'm not wrong, I took Panama. I mean, I was the boss in Panama. And that is why we make the canal there.

25:31So at that time, one can say, well, that was a use of force, obviously. There were no rules in the game. There was no United Nations, etc. The international law was very poor. But then you have a sense that the United States was becoming a major power, obviously, but with a sense of becoming the hegemon in Latin America. An hegemon brings persuasion, approachment, it brings investment, relations, soft power, etc. Now, if I move from Theodore Roosevelt to Trump, I will say first that the exercise we have seen on the 3rd of January was, I took Venezuela, as it was Roosevelt's phrase. But this is not searching for hegemony.

26:30This is searching for domination, which is another thing. It's coercion. is how to discipline. And then comes three or four countries in particular. First and foremost, Cuba. Cuba and Marco Rubio. Marco Rubio's obsession is Cuba. If Maduro is out and there are no more oil or support from Venezuela to Cuba, the Cubans will suffer a lot and we can go for them. Second, drugs, fentolin in Mexico, cocaine in Colombia. The threats by Trump, by Hexet, by Marco Rubio, are quite similar. Do your job or we will do that job. What does it mean that I will do the job? Well, I make, okay, attack some labs in Mexico.

27:34attack some places in Colombia. Is that open now? Yes, it is. Yes, it is. Yes, it is. And we have two center-left governments. Wow, what a nice combination. Let's go for them then. So I'm not saying that that will happen. I'm trying to put together the issue of ideology, the issue of drugs, the issue of the proximity. Chile is very distant from this type of debates. Argentina, even Argentina, or Brazil is a paramount actor. This is not with Brazil. But Cuba, Mexico, and Colombia should be very careful because another sentiment that I'm perceiving among governments, not at the citizen level, but among governments, is fear.

28:31fear of the United States that at any time, for any reason, domestic politics, election time, midterm election, whatever, inflation, the United States may decide to use force again X country or Y country. What I see also is the difference within the administration between Marco Rubio and Vice President Vance, who is more careful, who understands that the United States should revitalize its economy, that should not give more room to China. Now China, I don't know if you've listened to today's UN Security Council meeting, but the Chinese representative was formidable. I mean, he was one of the best friends of Latin America.

29:29Latin America should be a zone of peace. We are completely concerned with Latin America and the Caribbean. We will support Latin America and the Caribbean. So this gave China a diplomatic room, in addition to what is its economic projection in Latin America, an unprecedented level. And so we are in a confusing times. That is what I want to bring to the attention.

30:01David McWilliams: I mean, it brings to mind Napoleon's expression. If you look from the Chinese perspective, which is never interrupt your enemy when he's making a mistake. Yeah, that's right. That's what it looks. That's exactly what it looks like to me from the Chinese view. Look, this is a quagmire. This is a swamp into which the Americans are dragging themselves in, and they may take generations to get themselves out. Yes. and we will never forget in Latin America. They won three days ago, but we do not know if the win is for a long term. I don't think so. I don't think so. I don't think so. Can I just ask you the final question, Juan?

30:43David McWilliams: Is on the street, in the bars, in the cafes, you say at the higher level there is fear on the part of the politicians, the political class, the commentariat, if you will, who are saying, okay, the game has shifted now, and completely for that rim of countries around the Gulf of Mexico. What about the average people on the street, the average Venezuelans who are living in Medellin beside you, the people who are hoping on Friday morning that this was the signal that they could go home, that their place would change, that Machado might come back and be president, or whoever, or Gonzalez, what are they thinking now?

31:24Let me say the following because your question is very relevant. From my perspective, I'm not only from an academic point of view, but as a citizen, as someone that has been living in different countries in the United States, in Colombia. I live 18 years in Colombia, in Argentina. I haven't witnessed such a level of fragmentation among Latin Americans in the last half century as today. Latin American state governments have made it. The level of fragmentations, of divisions, the positioning of X country and Y country that used to have at least some interest in common and share some perspective on international law, whatever.

32:17that is dramatic. This is also a reflection of a larger degree of polarization inside every country. So Venezuela, as a case, also is part of a debate between the right and the left. The ultra-right that is gaining momentum in Latin America and the center left that is, I mean, trying to find a reason to survive. And this case of Venezuela brings to the forefront several debates, several domestic debates, several intra-regional debates, and several debates in terms of inter-American relations. So what I'm saying is that the consequences of this for the people in the street, as well as for the governments in the region, are extremely significant.

33:29And we will see for the foreseeable future, a very extensive, complex debate of what may be our future. Juan, can I ask you a question? When you were talking there about Trump removing Maduro with the intention of American taking control of the oil, from an historical perspective, it feels a little bit like Iran in the 50s when Mossadegh, who was elected, was removed in order that American and British companies could get access to the oil. I mean, Trump is doing a very similar thing. So how does this compare to around the 50s in terms of stability for the whole region? Well, your question is excellent.

34:14And I will add to that the fact that was a coup d 'etat organized by the United States with the support of Western countries also from Europe. But what that contributed, at least from my perspective, is also to empower the dollar as the main currency for trade in international relations, basically in the business of energy. Something similar, but not with a coup d 'etat, was what Kissinger arranged with the Saudis in 1974. Not with a coup d 'etat, but I mean, guys, the trade in oil should be in dollars. Okay? It's not, well, that money, the franc, whatever. No, no, no, no, no. One of the questions in the case of Venezuela that is very important to consider is that Venezuela was part of several other countries, mainly the countries from BRICS, that have been working in the last 20 years for dedollarization, avoiding the significant role of the dollar in the general economy, and specifically in terms of energy.

35:39And Venezuela was accepting euros, gens, whatever money, instead of dollars. If the United States has the capacity to recapture its leading role in Venezuelan oil, it's not only oil, it's dollar. Both things go hand in hand. Yeah. And I think that that dynamic should be taken into account. Fascinating.

36:05David McWilliams: Juan, this has been fascinating. It's just wonderful to hear such latitude of views and ideas and expression, experience. Wonderful. Listen, thank you so much. And you're becoming a regular. You're going to have your Irish citizenship. I should send you my honorarium now from now on. Exactly. Exactly. Great stuff. Listen, fantastic. We'll talk to you very soon. Thank you so much. Bye-bye.

36:38David McWilliams: A password manager should be the first security purchase you make for your team. Why? Because compromised passwords are the number one way bad actors attack companies, and small businesses are their favorite targets. But unlike a lot of security challenges, passwords actually have a pretty simple solution. 1Password lets you manage all your business's credentials, so you can feel confident that your data stays secure as your company grows. Find out more at 1password.com slash special offer and start securing every login. That new thing? Yeah, we've got it. The Drop by GNC, bringing you all the newness that matters, handpicked by the pros who actually know what's up and what's proven to work.

37:21We keep you on top of the trends and dialed into what's next. Whether you're crushing it at the gym, leveling up your game, or thriving every day, The Drop by GNC is where the latest solutions in health and wellness land first. nonstop innovation and fresh finds daily. Explore what's new and what's next on The Drop by GNC. Waiting days for key security answers you need straight away? Not an option. Start using Sola, the AI platform for cybersecurity that turns weeks of work into minutes. Simply connect your tech stack to Sola, cloud, SaaS, identity provider, anything, and ask in plain language.

37:57Get answers with your own context and with prioritized action items so you know exactly what to fix first to get security done. Start for free at Sola.Security.

38:14David McWilliams: Juan, on his holidays there, taking time out to actually talk to us. That was fascinating, Mac. That really was fascinating. The word on the street. But when he was talking about the Chinese investment in Venezuela being 30 to 40 billion investing in the oil industry there. Do you think, is that something that America can use as some sort of leverage against China? You know, because China got an awful lot of their oil from Venezuela. Okay, so John, I'm going to answer that question because I think we're into a very fascinating area of finance, of debt, of defaulted debt, of who gets paid back first and not.

38:58David McWilliams: I think the Chinese are now in the back of a queue. Right. The queue starts with Americans. That what will happen, I'm putting the hat on, which I haven't put on for a while, is that in the late 90s, I was the economist on a defaulted debt desk. And what a defaulted debt desk is, is basically all these debts that used to be paid back or were supposed to be paid back at par, at 100%, that were defaulted on, all those debts, and this is the debts of Latin American countries, this is the debt of former Soviet countries, all these things. When the countries collapsed, the debt didn't collapse. It kind of existed externally.

39:36David McWilliams: But what happened was those debts fell from being worth 100 cents in the dollar to let's say 10 cents in the dollar. So there was a 90 % chance you'd lose your money, right? And then what you were hoping is that somebody would come in and we structure the debt and you'd get paid a little bit, right? So you were a bit like a bailiff, were you? I was even worse than the bailiff, John. I was even worse than the bailiff, right? It was called Brady bonds and there were bonds introduced by a guy called Nicholas Brady to try and ameliorate the Latin American debt crisis of the 80s into the 1990s. So it was a small part, an unusual part of finance.

40:11David McWilliams: Anyway, the long and the short of it is, those Chinese debts are assets that the Chinese think they have will now trade at five or six cents on the dollar. Oh, really? That low? Oh, yeah. Maybe less because the chances of the Chinese getting paid back are very, very slim. The chances of the Chinese paying back, ironically, getting paid back. So the idea would be the Americans kickstart the Venezuelan oil industry. The Venezuelan oil industry then throws off lots of profits. Part of those profits will be used to pay back the debts of the Venezuelan oil industry. But all debts are not equal. This is the key thing to appreciate in a crisis, right?

40:52David McWilliams: Certain debts are senior and other debts are junior. Now, who gets to set the seniority of debts tends typically to be the man who is the paymaster general. And in this case, it is Donny J. Trump. So I would suspect that the Chinese can whistle Dixie to their money and get it back at all. or if they do, Trump will not pay them back and use it for leverage. He will do what he always does. He'll use it for humiliation. So he'll pay them back 10 cents in the dollar or 15 cents in the dollar. And he'll say, now fuck off back to Beijing. Yeah, yeah, take it or leave it. To which the Chinese might say, I'll see you in Taiwan.

41:28David McWilliams: Who knows? Right. So I think that's what's going to happen there. We're in a debt default situation, which is an unusual dynamic. And then what happens to the dollar and the value of the dollar? So Juan entered a very interesting, we're not going to go into it in huge detail here, because I think we might leave it for another conversation. But in 1974, you mentioned Saudi Arabia. So you have a little bit more economic history. 1973, you have the massive oil embargo orchestrated by Saudi Arabia and OPEC against the West for the crime of the West supporting Israel in the Yom Kippur War. Yeah. So what people forget is that the West lined up with the Israelis, and the West gave the Israelis arms and ammunitions, and the Arabs decided to punish the West by having this oil embargo.

42:26The Americans, in effect, sat the Saudis down and said,

42:31David McWilliams: what you want. We will give you security guarantees. We will be your major, major enforcer in the region. We will make sure that you, the House of Saud, i.e. MBS's grandfather, orchestrated by a guy called Sheikh Yamanee, we will make sure that you guys are actually absolutely golden in Saudi Arabia. There's no threat to you. So we'll give you all American arms. We'll give you a security blanket. In return, you have to ensure that oil will only be sold in US dollar in exchange for this military protection. Right. And what that created, John, was a permanent global demand for dollars. This allowed the Americans in effect, because what they said to the Saudis is, A, all oil has to be paid in dollars, and B, you as Saudi Arabia have to invest a certain amount of your oil assets in American assets.

43:30David McWilliams: So they, in a way, fused Saudi Arabia onto America using the dollar. And what that did was it allowed the Americans to run unlimited budget deficits because there was always going to be a demand for dollars coming from oil. It meant they could print money without the currency collapsing because there was always going to be demand for dollars coming from oil. It allowed them to finance wars, to pay welfare, etc., right? And therefore, any country that threatened that relationship between the dollar and oil was regarded in the American eyes, at least, or certain people in America, as an enemy competent.

44:10David McWilliams: So, for example, in 2000, when Iraq and Sudan started to price oil in euros, you get an invasion of Iraq a couple of years later. Yeah. When Libya in 2009 created a gold-backed oil currency, you get regime collapse of Gaddafi, right? When Venezuela, with the BRICS, decided to think about getting paid in yens and euros, and maybe even rubles, you get an intervention like we saw on Friday. So if you are somebody who believes that America is driven by concerns about the dollar, then this picture kind of makes neat sense, right? It kind of makes neat sense. What the Americans understand at a deep state level, not about Donald Trump and Mar-a-Lago and all those, but what you would call the American deep state understands that in effect, having the currency of the world helps.

45:17David McWilliams: I'll give you one, we'll leave you with one great little quote, right? Linguists will always tell you that a language is a dialect with an army. Okay. Now think about that. So you've got all these competing dialects in France and Germany and Britain and all over the years. Why does one language emerge? Because a language is a dialect with an army. So the biggest warlord who spoke that dialect, in effect imposes that dialect on people, right? Right. So think about currencies in the same way. Yeah. In fiat currency, a fiat currency is money with an army. Right. Yes, yeah. And if you think about that, the money with the biggest army wins, and that is the United States.

46:04David McWilliams: And we will leave it there, John. We'll talk to you on Thursday. We've got a lot more to talk about on this topic. Jesus, we do.

46:15Thank you.

46:45is powering the financial operations of nearly half a million customers. So stop the guesswork and start scaling with the proven choice. Ready to talk with an expert? Visit bill.com slash proven to get started and grab a$250 gift card as a thank you. Terms and conditions apply. See offer page for details.

47:04David McWilliams: Okay, I have to tell you, I was just looking on eBay where I go for all kinds of things I love and there it was. That hologram trading card. One of the rarest. The last one I needed for my set. Shiny like the designer handbag of my dreams. One of a kind. eBay had it. And now everyone's asking, ooh, where'd you get your windshield wipers? eBay has all the parts that fit my car. No more annoying. Just beautiful. Millions of finds, each with a story. eBay. Things people love.

48:01Thank you. speed up growth, no spreadsheets required. For startups low on time and resources, Vanta becomes your first security hire, using AI and automation to get you compliant fast and unblock big deals. For enterprises, Vanta is your AI-powered hub for compliance and risk, bringing together data from across your businesses and automating workflows so you can prove trust at any moment. Vanta scales with you at every stage. That's why top companies from startups like Cursor to enterprises like Snowflake, choose Vanta. Do security and compliance right. Get started today at vanta.com slash TED Audio.