The old order is not coming back. We should not mourn it. Nostalgia is not a strategy!

0:00David McWilliams: Today's podcast, and it is maybe the most crucial one that we've done in a long time, is on the world has changed. 2026, the end of the great American bargain, the end of Pax Americana, the beginning of European rearmament. And the final week of January, 2026, is the time that the world stood still and changed. and we're going into a brave new world and it may not necessarily be half as comfortable, half as stable and half as prosperous as the one we've come out of. It's all a couple of minutes. This podcast is supported by MidiHealth. Are you in midlife and feeling dismissed, unheard or just plain tired of the old healthcare system?

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2:41David McWilliams: Wayfair, every style, every home. Just before we start, lecture three of our monthly economics course is out on Friday. And it is, ironically, given what's going on in the world, about the glory of free trade, of money, of how money is second nature to humans, and how using money we have opened up the world via trade, and we have innovated, and we have collaborated at scale. Maybe Donny J should do a few lessons. It's free to Patreons. And if you want to join us, join us on patreon.com forward slash David McWilliams if you are not yet signed up. To understand the economy, you have to understand human nature.

3:27This podcast is powered by Acast.

3:33David McWilliams: How are you doing there? It is podcast time and what a time to be looking at the global economy, to be looking at global politics, to be looking at the end of the American empire. Ironically, at their own choice, seeing how does this end. We're going to start in Davos. We're going to look at Mark Carney's speech. We're going to examine Trump's body language, if nothing else. but also we're going to put it into the context of we are now, without a shadow of a doubt, coming to the end of something. Most of us, or many of us, and those of us who are slightly optimistic about the future, slightly nonchalant, a little bit too indulgent of the past, we're kind of of the view that maybe the world will rebalance, it'll go back to where we were, There'll be a couple of genuflections to American power, but ultimately things won't change.

4:33David McWilliams: However, I think it's fair to say now that 2026 is the year when the mask slipped and at their own volition, at their own prompting, at their own policy, the United States has decided that the grand bargain that it presided over since 1945 is no more. We will explain the grand bargain. We will start though in Japan because there's a little tremor in the Japanese bond market which will have profound implications for international global financial markets. We're then going to go back to Davos and then we are going to try and give you a flavor of where we think the world is going. This will be part one of a series.

5:20Part two will come out next week when I'm going to look at specifically the implication for Ireland of what is happening around the world.

5:30David McWilliams: Because Ireland is and has been the most globalized economy in the world, bar none. And that means it has been the economy and the society which has had a profound and positive vested interest in the status quo. Unfortunately, that status quo is coming to an end. We in Ireland will have to get our thinking caps on and figure out where do we go next, because we have invested more in the American alliance, I would say, than any other European country and maybe than any other country, bar none and full stop. So if the Americans are rejecting us, if they have decided they don't love us anymore, if the breakup is real, we have to figure how do we move on.

6:15David McWilliams: Johnny boy, it's all in play. How are you doing? Isn't it just, yeah, no, I'm good. Just to let you know, I got an early morning bat signal or max signal to record a podcast this morning based on Davos and all the rest. So it's clearly an emergency. But what is interesting though, Mike, two weeks ago, the world was hysterical about Venezuela. Now that's gone. Nobody's talking about Venezuela. And I think it was John Stewart who said about Maduro, he was de-iced, as in, you know, the reverse of ice. He was imported into America. But that story is gone now. So let's go to Davos. I mean, Mac, you're a recidivist in Davos.

7:00They gave you a huge award there a few years ago. So you're thick in it.

7:04David McWilliams: Yes, John, you're right. I've been at Davos. I got an award at Davos. I went in 2007 and I sat in the rooms. We can talk about it. We can criticize it. We can be cynical, all that sort of stuff. I'm just going to say, in terms of being a podcaster and a commentator, it is better to be in the room than not in the room. Yeah, for sure. And what I saw there, yeah, and what I saw there was the way in which the 1 % works. And the way in which lots of people who are not in the 1 % but want to be in the 1 % kowtow and genuflect it. had you thought that Davos was on the way out, and many people did and lots of its critics did, you will be now thinking, where did all world leaders go this week to tell the world what they thought?

7:49They didn't go to the UN. They didn't go to the IMF. They went to Davos. So it still is, whether you're a cynic, whether you're a critic, whether you're a fan, it still is the place to be. Absolutely. But let us focus on two things. One is the end of the American empire, which has been signaled this week.

8:11David McWilliams: They've been hinting at it for the last couple of months. I think we were on top of this in the podcast when before Christmas, we went large on the American strategic strategy document, where they absolutely attacked the European Union. That's the first thing. That was the precursor for what's going on now, I suppose. It's the kind of blueprint. They basically said, this is what we're going to do. But just before we start, John, I want to take us to Japan because this is a global podcast and there's something really, really unique happening in the Japanese bond market. And this is going to have profound ramifications for what is happening elsewhere in global financial markets.

8:52because don't forget that what Donald Trump does react to is not newspaper articles.

9:02David McWilliams: It's not pressure from foreign governments. It's not some morality that people play in his heartstrings. It's financial markets. If things go badly in financial markets, there's a part of Trump that reacts to it. Okay, so what is happening in Japan? Is it completely separate to what's going on in Europe and the whole Greenland question? Is this a separate thing? Or does it have some sort of bearing on it? Give us a rundown of that. In fact, John, I would split your question to two. I would say, even though Trump said he doesn't want to use force, he wants to buy it from Denmark to negotiate it.

9:37David McWilliams: The Danes don't want to sell it. And once they don't want to sell it, the only way he can get it is by force. So I think it's going to happen. Jesus, such a scary prospect. But what happens then? The battle for Greenland will be the trigger for the end of American power in the West, and when I say the West, in America and Europe. But what's happened in financial markets in the last 24 hours, across the gamut of financial products from Bitcoin to American stocks to tech stocks, etc., has got much more to do with Japan. So that is a crucial fact. So what has happened in Japan is the 10-year yield in Japan, so the rate of interest that the Japanese government has to pay in order to borrow has gone stratospherically high.

10:32Right, okay.

10:33David McWilliams: Now, this is a massive, massive change, right? So typically what has happened in Japan, let's just introduce the background noise and why it's important, right? So over the last 10 years, Japanese interest rates have been incredibly, incredibly low, right? And what that has done is that has allowed Japan to be the borrower, the cheapest borrower in the world. So if you want to borrow, you should borrow money in Japan because Japan is incredibly cheap. Why? Because Japanese interest rates are very low. Why are they very low? This comes back to our discussion about demographics, Jim. So when a country gets old, it tends to have very low levels of inflation.

11:26David McWilliams: And the reason it has low levels of inflation is that it has lots of old people who don't spend as much as young people. Because they can't get out. That stands to reason. They don't get out. They just don't get out. And they save much more. They save much more. And so basically, it's a thing called the lifestyle hypothesis of consumption in economics. So it basically says you spend more when you're young, and then as you gradually get older, you spend less and less, and you begin to save more of your income. And what that does is that puts downward pressure on interest rates because there's more savers than there are spenders.

12:00David McWilliams: Right. And if the population in general is getting very old, then you'll have significantly more savers than spenders on what you would describe as a structural basis, because there's more old people than young people. So just to be clear, that the low interest rates in Japan weren't a strategic central bank move. It's just, that's the way it is. That's the way it is. Now, in fairness, the central bank in Japan did not in any way try to change this downward move. Why? Because what tends to happen, as well as interest rates falling, is that you begin to incur lots more debt because the government is borrowing from the older people in order to finance old folks' homes, larger health bills, all those sort of things, right?

12:51David McWilliams: So you get a sort of a virtuous circle where interest rates are beginning to fall. And as long as the society is stable and as long as there's a perception that this is not going to change, you can gradually get very low interest rates for some time. Now, that's the first thing. What happens then in an integrated global financial market, where if you are trading in London, and let's say you want to buy Apple shares, but you're trading in London, you think, okay, well, I can borrow US dollars in order to do this. So I borrow 100 million US dollars and I buy 100 million US dollars worth of Apple shares.

13:29David McWilliams: And that's how I trade, right? I'm borrowing and then I'm spending. I'm borrowing and I'm spending. and then you manage that. And the treasury of a bank manages what they call the back end of that. So they manage the back office. They manage that trade and they make sure that everything is all hunky-dory, right? But if there's a country where the interest rate is incredibly low, John, like 0 % or 1%, well, then what you will do is you will borrow in that currency, you will hedge that currency, the exchange rate risk, and then you will spend in some other asset. So the idea, there was this incredible, what they call carry trade over the last 10 years, where financial markets borrowed in yen at very low interest rates, hedged that yen exposure, and bought, let's say, the more racy American stocks like the Magnificent Seven, and bought American real estate, and bought Bitcoin or any of those things, right?

14:26David McWilliams: so that underpinning the global financial market was the liquidity that was being provided by the Japanese enabling people to borrow in yen. So you've got this other factor, which is that the Japanese low interest rates was in effect the floor of global interest rates. And if you were prepared to take a risk on the yen and the value of the yen, then, of course, what you would do is you'd borrow in Japanese. Right. In Japanese, yeah. So is this distorting all financial markets then? That's what's happening, right? So there was a sort of a bubble in, it's a very, when we think about bubbling, bubbles, we think, okay, you bought an asset that went up in value, and that's the bubble, right?

15:15David McWilliams: The Irish housing market in 2008, or, for example, tech stocks or AI, right? All that stuff. However, there's another bubble, which is the bubble in borrowing, is that if so much of the world's borrowing is located in one particular area, well, that in itself becomes a problem. And what has happened in the last couple of weeks, but particularly in the last 48 hours, is that the price at which the Japanese can borrow has risen dramatically. Now, why is this? This is related to what we're going to talk about. It is because the new Japanese leader, Mrs. Takichi, has called a snap election, right?

15:55David McWilliams: But it's against the background of the United States deciding that's not going to be the global policeman anymore, right? Yeah. So if the United States is not the global policeman anymore, it means the countries that it used to police, Europe and Japan in particular, are going to have to finance their own rearmament, their own arms industry, their own defense policy. So what people are looking at is, hold on a second, the Japanese are going to have to borrow even more in the future than they are now. And people said, yeah, but their population is getting older. And can they borrow even more in the future?

16:34Okay, they can. But we're going to have to be given a higher rate of interest in order to lend to them.

16:42David McWilliams: Why? Because they are actually in this sclerotic. fence. Right, okay. So this is all happening, so it's all happened like a perfect storm at once. Yeah. And one last thing, John, is that Mrs. Takachi is kind of having a Liz Trust moment. Oh dear. Not only did she call a snap election, but she also said they were going to have a massive reduction in taxes in Japan to kickstart the economy, to coax people to spend and the markets have looked at that and say, mmm, rearmament, spending, old population, we're not buying it. And as you can see, then Japanese bonds have sold off, and that's changing the entire complexion of global financial markets.

17:26David McWilliams: Then what happens is as the Japanese rate of interest rises rapidly, loads and loads and loads of other assets that you borrowed in Japanese yen to buy are falling, which is what you're seeing all over markets today. Right. Now what happens is because there's so much contagion in the market, if you are borrowed in Japanese yen and the thing you borrowed to buy is falling in value and you still have to pay back Japanese yen, you have to sell the very thing you bought in order to generate the cash in order to pay back your debts. Yeah. So this is like a margin call. This is the margin call thing.

18:12David McWilliams: So you're looking at mass global contagion, which is why all assets from Bitcoin to Tesla to Apple to mid-cap stocks in the United States are all falling. Because the anchor price of debt, which wasn't the United States, it was Japan because we're in a globalized world, has begun to rise. Okay. Okay. So keep that in your back pocket as we discuss what's happening in Davos. Yeah, so how does that, to go back to Davos then, how does that affect, you know, things on the ground in Davos and Greenland and Europe? And does it also affect Trump's kind of bargaining power in many ways? Well, what it makes is it throws into stark relief just how fragile the world is.

19:05Yes, it sure does.

19:06David McWilliams: How interrelated the world is. the last 80 years, the United States has been the global policeman. And when you decide to shift that and change that, all sorts of other things become loosened, unravel a wee bit. And so what you get is events in Japan have a profound impact on financial markets, which themselves are reeling from the end of the status quo. Because what financial markets want is stability. They don't want this mad stuff. So this is kind of what Carney was getting at when he made that actually brilliant speech in Davos. Have a quick listen to this. Let me be direct. We are in the midst of a rupture, not a transition.

19:51Over the past two decades, a series of crises in finance, health, energy and geopolitics have laid bare the risks of extreme global integration. But more recently, great powers have begun using economic integration as weapons. Tariffs is leverage. Financial infrastructure is coercion. Supply chains as vulnerabilities to be exploited. You cannot live within the lie of mutual benefit through integration when integration becomes the source of your subordination. We understand that this rupture calls for more than adaptation. It calls for honesty about the world as it is. We are taking the sign out of the window.

20:34We know the old order is not coming back. We shouldn't mourn it. Nostalgia is not a strategy. But we believe that from the fracture, we can build something bigger, better, stronger, more just. This is the task of the middle powers.

20:52David McWilliams: So it's a brilliant speech, and I love the way he ends with this idea that nostalgia is not a policy. Yeah. So the question is to break down what are we being nostalgic about, and why is that over, right? what we're nostalgic for, what the West is nostalgic for. And what I will say is this is very much an American and European issue, right? It's the Europeans are really being betrayed by the Americans here. So the battle for Greenland, which I think will come, I actually think the Danes will fight. I've been saying this for months. And you have, in fairness, been saying that in months. I actually thought, no, Greenland, it can't happen.

21:26David McWilliams: And you're like, no, Mac, it can't. And you were absolutely right, John. And I think the Americans will win, but the subsequent humiliation of Europe will lead to a profound change in Europe's attitude, not just to the Americans, but to the whole world. So we're going to get onto that as we talk in the podcast, right? So let's look, right? The grand bargain from 1945 was that America would be the global policeman. Now, what did that mean? It meant that America would finance and put its military muscle behind basically doing the job that major powers used to do in the past. So what the Americans said is in Europe, we will finance the defense of Europe.

22:14David McWilliams: You don't have to worry about security. We will provide your security. We will underpin the liberal alliance. we will create the United Nations, we will create the IMF, we will create the World Bank, we will create all these structures, number one. Secondly, we will allow the European Union to flourish under the umbrella of the American military deterrence, what they call, right? And they did exactly the same thing in East Asia. So with their enemies, with Germany and Japan, with East Asia and Europe, what the Americans said is, we're going to take control. Now, this was unprecedented. A major superpower has never, ever done that.

22:56David McWilliams: Now, what did the Americans get in return? The Americans got free trade. They got free capital movement. They provided the world with the largest navy. So the shipping lanes were broadly open. There was peace and broad progress since the Second World War. They also involved Europe and Japan in a system of alliances, in a system of military bases, in a system whereby America could in effect call upon the rest of the world to be their frontline states. and they could have their military bases in these frontline states. So they created a network, an extraordinary web of promises, counter-promises, obligations, treaties.

23:47In effect, what they did was they surrounded the world with American interests.

23:53David McWilliams: And what they also said to the countries that were left out of this, which was basically Russia stroke Soviet Union and China, I know you're pissed off, but you can't really change things because we are in the driving seat, right? So that is the grand bargain. Now, what was the bargain? The bargain on the side of the Europeans, the great powers in Europe, I'm talking Britain and France and Germany, and to a degree, the likes of Poland and emerging power. They, not only did the Americans undertake to provide the policing service. But the Europeans and the Japanese, previously imperial powers, undertook to be subordinate to the Americans.

24:36David McWilliams: And they looked at the Americans as partners rather than enemies. So you have this incredibly intricate, very detailed policy framework that in effect spanned the world. And what it gave the Americans was peace, was trade, was security, was the understanding that their forward bases in Germany and in Japan and in Saipan and in Okinawa and all these places could be used as, in effect, the first line of either the American defense, but more likely the American offense against its enemies, which were China and Russia. so this is what we call the unipolar world so when people talk about the unipolar world there is one major major power and that was the united states and up until 1990 they were kind of in a rivalry with the soviet union but not really like the rivalry wasn't that really not really yeah it It was more an intellectual, you know, it was a sort of a rivalry that, you know, what I call the coffee table left discussing these things, right?

25:52David McWilliams: But on the ground, American-supported West Germany was producing Mercedes and Soviet-supported East Germany was producing Travacist, right? That's all you have to look at the difference, right? All the other shite hawkery about ideology and whatever, right? That is basically what happened. And when the Central European countries, the communist countries, got their chance to escape the orbit of Russia, they did willingly. Yes, absolutely. And with great enthusiasm. They were out the door. And in a way, that was America's greatest victory, was liberating hundreds of millions of Eastern Europeans from the orbit of the Kremlin.

26:39David McWilliams: And then, of course, after that, the East Europeans wanted to double down on American guarantees of security, and they joined NATO, which, of course, helped the Americans again because it meant that they were shifting their border east a little bit more to Poland, to Lithuania, to Latvia, and since the invasion of Ukraine to Finland. So that is the grand bargain. And the bargain is the old imperial powers undertook not to try and invade their neighbors again. And I'm looking basically at Japan and Germany and Britain. I mean, Britain dismantled its empire under this grand bargain because the Americans never, ever supported the British Empire.

27:28David McWilliams: The Americans felt that they were the very, very first victims of the British Empire. They were very happy to allow the Brits dismantle their empire under this American global military umbrella. The Germans accepted that they would never again invade countries in Europe. The Germans accepted massive territorial losses in Central and Eastern Europe. They made peace with France. They became the anchor of the European Union. In fact, Kennan, who was the great American diplomat of the 1950s, said the only way to solve the German question is through European unification. So European unification comes about really as a way of disemboweling German nationalism.

28:13All of this creates years and years of prosperity, Yeah. Progress. Right? People are doing well. There's warps and all. Are there problems?

28:23David McWilliams: There are. Do they make mistakes? They do. Do they get involved in regional skirmishes? Absolutely. But in general, this is an unprecedented period of peace and prosperity. And the Americans are getting rich all the time. So they're doing well out of this too. So the Europeans are doing well. The East Asians are doing well. The Americans are doing well. And now that's all come to an end. The amazing thing is Donald Trump's MAGA movement has decided, out of its own volition, nobody's threatening it, that it is going to dismantle this arrangement. And how does it do that, John? It attacks explicitly its allies with tariffs, ranging from Canada to European Union to Japan.

29:11so it attacks the very people it was in partnership and it closes up to the very people it isn't excluded from the partnership, China and Russia. And it's done all this in the last seven or eight weeks. Yes, it's incredible the pace at which it's doing. But, you know, in fairness, also last year as Trump was coming into power for the second time, he had under his arm Agenda 2025. And this is his playbook. So he's just going through it page by page, fulfilling all his promises. And this is the incredible thing about Trump and the incredible thing about the observers going, nah, he'll never do that.

29:51He is doing it and he's going to keep doing it. You've mentioned that before about Ayn Rand, the fountainhead, isn't it? The fountainhead.

29:59David McWilliams: Howard Rourke was the name of the character, Jonathan. When he said, you know, it's... That's Howard Lutnick, your mate. Yeah, exactly. But as Ayn Rand said, it's not who will let me, but who will stop me. and that's his approach. You're absolutely right on the Ayn Rand quote. So the American worldview is now that if I can do it, who's going to stop me? Yeah. And I think the assumption is there that based on the last 70 years of evidence, the Europeans will roll over and take it. The Europeans will become supplicants to the United States and this new power. Well, maybe, maybe we don't. Maybe we kind of, for once, grow a pair.

30:45But let's talk about that after this.

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32:26So, Mike, you've explained how we got here in the old world order, but that's now changing. And as you said, the assumption by the Americans is that Europe are just going to roll over and take it. But maybe they won't. What are the kind of practical responses and effective responses that Europe can take now? Okay, well, I think this is the beginning of the end.

32:54David McWilliams: I think the Europeans will not roll over. I think what's going to happen, you know, a lot of people say, are we in the 20s again? You've got like stock markets going through the roof. You have leaders. You've got AI, which is this extraordinary sort of technological development. You have nationalist leaders emerging, all this sort of stuff, right? There was a thing in the 1920s, John, called the Corfu incident. So many people used to say Donald Trump is a bit like Burlistoni, right? Yeah. The bunga bunga parties, all that sort of thing. Not as good looking, though. Hanging out with his rich mates.

33:30not as good looking, all that sort of stuff, right? I think he's more like Mussolini, right?

33:35David McWilliams: And what Mussolini did, so if you think in the 20s, in the same way, there was a thing called the League of Nations set up by Woodrow Wilson. And it was supposed to be like the UN. And of course, Mussolini, a bit like Trump said, look, hold on a second, the UN is absolutely just a talking shop. we're going to test this by creating an incident in Corfu that will see whether or not the League of Nations will respond. Which Corfu, when we think of Greenland now, think of Corfu. Right, okay. So the Trump playbook is the Mussolini playbook in the 20s. So it doesn't really matter. You can Google the Corfu incident.

34:17David McWilliams: And basically what happened was the old power in that part of the world was the Ottoman Empire. And the Ottoman Empire had disintegrated. And Mussolini regarded the Ottoman Empire in the same way as Trump regards the European Union. The talking shop of old, weak powers that had their day, were once imperialists, but now they're all woke and they're too high taxes, they're too full of immigrants, and they have no leadership. Same sort of idea about the Ottomans. So there was a carve-up of what you would call the Western Balkans, where the Ottomans used to be the power brokers. And Mussolini goes into Corfu, the island of Corfu, which had been in Ottoman territory, and decides to take a bit of it.

35:01David McWilliams: There is a skirmish. The guy he sends down there as his legate, his military legate, is murdered. And the Italians move in to Corfu. This was seen as the very first test of the League of Nations. The League of Nations, of course, backs down. And this emboldens Mussolini and later Hitler, because they're basically saying these guys are a bunch of pussies. Yeah. Why did they back down? Why didn't they put it up to them? Because it was after the First World War. Nobody wanted to fight for Corfu. The world thought, you know, the Brits were exhausted. The French were exhausted. The Germans were exhausted.

35:42David McWilliams: And Mussolini said, this is my backyard. This is the Adriatic. This is the Mare Nostra, our sea, the Italians. Exactly as Trump is saying, Greenland is our backyard. It's part of our hemisphere. And nobody had the energy to take on the Italians. They also probably thought the Italians were stronger than they were. And at the end of the day, this is seen by historians and geostrategic punters as the beginning of the process whereby the world order was unraveled by European imperialists, first by the Italians, then by the Germans, and we know how that all ended. So the assumption, I'm not sure that Donald Trump has ever heard about the Corfu.

36:28No, I doubt it. No, no, I think I'm pretty sure that he hasn't.

36:31David McWilliams: His assumption is that the Europeans will do what we've done for the last 80 years. We will back down. I think your man Besson said, oh my God, I'm quaking in my boots. The Europeans are going to respond with a European working group. Yes, the dreaded working group. Yeah, I saw that. Oh, that smug get, I hate him. Look, I think the Third World War is upon us. And I really mean this. Are the conditions where a cold Third World War emerges? And many people, if you'd said like, if historians were writing in, I don't know, 2040, and they're looking back on this period. And they'd have said, well, what happened?

37:14David McWilliams: How did the world implode? How did the Americans go from being the top dog to having a multipolar world where China and Russia basically got, in effect, a pass by the United States? How come the Europeans and the Americans fell out? I mean, these are huge moments. Lots of people would say, well, was it the Iraq War where the Europeans and the Americans were at loggerheads for 20 years, the Europeans didn't join the Americans in the second Iraq war? Or was it, for example, the Europeans and the Americans falling out over eastern Ukraine, over the Donbass? Or was it the Europeans falling out with the Americans over Israel in the Middle East, where most Europeans are anti-Israeli, most Americans, at least the politicians, are pro-Israeli?

37:59David McWilliams: And of course, the Israelis have humiliated their neighbors and their neighbors are supported, strategically at least, by the Europeans. So maybe like the three big areas would have been, you know, it's going to be over the Middle East. It's going to be over Israel. It's going to be over Russia or it's going to be over Taiwan. So had you been looking back, you would have said, well, you know, these are the big issues. Amazingly, John, it's probably going to be over the Battle of Nuuk. Yes. N-U-U-K, right? Which is pitting the Canadians and the Europeans against the Americans in the Arctic. I don't think anybody would have forecast this three or four years ago.

38:41David McWilliams: Now, Trump said at Davos that he didn't want to take it by force, that he didn't want to send in troops. He wanted to negotiate. He basically said, we will buy it from Denmark. But I can tell you the Danes are not going to sell it. And once the Danes don't sell it, the Americans, to take it, will have to take it by force. And then the Danes will put up resistance against the Americans in the area that is Greenland. and if the Americans try to take this by force because they're so emboldened by what they did in Venezuela and they're thinking this is going to be a piece of cake we'll just send in a whole bunch of special force marines and they will take out the Greenlanders and before we know it we'll have the stars and stripes flying I think that's highly likely to happen and I think it's highly likely that the Danes will put up a fight it's also likely that some Europeans will join the Danes maybe not all, but some.

39:36Well, I would hope so. Maybe the Dutch, maybe the Norwegians, maybe the Finns, maybe the Swedes, maybe even the Brits, who knows, right? Maybe the Germans, or at least small detachments of troops from these countries. Now, what happens is, obviously, the Americans will win because they have the overwhelming power. But it will have been the moment of rupture where there's no going back after this. And then, of course, what you see is the Europeans will be humiliated, but they'll go back and lick their wounds. And you get American troops killed, Danish troops killed. And what the Europeans then do is say, okay, that's it.

40:22They dissolve NATO. They completely dissolve it. This thing could all happen this year. They say, that's it. we are going to ban American goods from Europe, full stop. We're going to put in a tourist ban of all Americans coming to Europe will not be allowed in. We are going to kick out American troops from European bases, which would mean the 10 ,000 American troops in Rammstein in Germany have to leave. The American troops all over Europe have to leave. What that does is that means the Americans have none of those forward bases we talked about in the first part of the podcast. It also leaves Europe incredibly exposed to the likes of Russia and Putin.

41:08David McWilliams: It does. And Europe will rearm incredibly quickly. And I think that there will be an understanding that if Putin beat the Ukrainians after four years, it's going into its fifth year now. It's a risk that Europe has to take. And of course, that means that the Poles and the Latvians, the Lithuanians, the Estonians, and the Finns, they will take charge of their own defense against Russia. Will Russia swivel around and go to the Baltics? Probably yes, because the Russians will see this as an open goal. But is there a chance that Russia gets beaten in the Baltics with German and Polish help. And of course, don't forget that, you know, France and Britain are nuclear powers.

41:58These are not small countries, right? This could all happen this year. Hang on a sec, Mark. I mean, this is all military, frankly, scary stuff. But are there other options we have? I mean, for instance, Europe holds something like 10 trillion in US bonds and assets. If there was a big sell America drive, what does that do to America and actually the global market? We might be shooting ourselves in the foot slightly, but it's kind of preferable to military action.

42:33David McWilliams: Well, the issue now for Europeans is liberation or subjugation. Do you live as a vassal strait of an American superpower that dislikes you, that humiliates you, that invades your countries, that rides roughshod over you? Or do you say, hold on a second, we're 520 million people, number one. We have a much bigger population than them. We have a GDP of close to 20 to 25 trillion euros combined with the UK, right? Oh, by the way, the UK will be in the European camp. All that Brexit stuff will be bashed in the head, right? Unless Farage doesn't get into power anytime soon. Even if Farage gets into power, being close to Trump will be so toxic that he'll flip.

43:25Yeah. But what happens is the Europeans say, wait a second, why are we afraid of Russia? There's 120 million of them. There's 500 million of us. We're afraid of them because we have been absolutely infantilized by the Americans for the last 80 years,

43:44David McWilliams: where it's a bit like if somebody takes over policing your neighborhood and you give up the power to that policeman, you ultimately end up infantilizing your own power and your own potential. And if the Europeans wake up and say, hold on a second, we're not going to roll over. And I think this is the way people are talking now. And this is the way people are going. And nothing will more unify the European Union and all the various cultures within the European Union as having two external enemies. One is the United States in the West and one is Russia in the East. And of course, this fear, of course, that China is eating our lunch in various manufacturing areas, et cetera.

44:30Yeah, and then what about the economics and market side of things? So then you say, well, I mean, we know that the European Union has the lion's share of American treasuries, ex-Japan, right? So could those be sold?

44:49David McWilliams: Yes, they could be sold. Who would buy them? That's the question. Maybe the American treasury would buy them. Yeah. And would there be a massive haircut for Europeans in the sense that Europeans would lose? Yeah, absolutely. But ultimately, America's weakest link is that it cannot pay its own bills. It depends on international investors to keep it afloat. So its prosperity is rented, not earned. So yes, that would happen. Would it be Armageddon in financial markets? Of course it would. Of course it would. But just think about how this could actually play out, right? You're selling American assets.

45:29David McWilliams: The dollar begins to slide dramatically then. The rate of interest on American treasuries rises dramatically. Why? Because the people who used to own them are selling them. So the price of the treasuries falls, the rate of interest rises. What happens in America, which is highly indebted, it means that you get a cratering of the mortgage market because as American interest rates increase, the American housing market collapses. And we know that American corporate debt is as high as it's ever been. So if the rate of interest in American corporate debt rises, You'll get this cascading effect of defaults within the United States.

46:09And ultimately, what you will get is Europe will suffer and America will suffer. But this is the price that Europeans might be prepared to pay

46:22David McWilliams: in order to reassert sovereignty over their own continent. Yeah, yeah. Now, various Europeans will have lots to lose. and we're going to do a podcast in Ireland in this scenario because we have the most to lose in this scenario. But let's park that because for once, we are not the important crowd in this discussion. We're going to have to go along with, right? You know, there will be, of course, theatrics, Starbucks will be kicked out, McDonald's will be kicked out, all these things. No, but they will, like all these, you know, the World Cup, no Europeans will go to the World Cup. Well, I firmly believe that regardless, we should, Ireland doesn't really matter, I know, but the World Cup should be boy-possed.

47:08It really should by all European countries.

47:11David McWilliams: Well, all this, and again, it would be mud in your eye for Donny J because he thinks this is going to be the biggest World Cup ever. But he's already targeted Latin American fans. Yeah. Saying that they can't come in. So all these things, John, I'm saying this could be the year the world changes. Now just think about what happens then elsewhere. Russia may well turn its sights on the Baltics, but what does China do? China probably takes the opportunity to have a go at and or negotiate with Taiwan. What happens if Taiwan negotiates? What happens if the Taiwanese say, okay, the world has changed, we can't stand mainland China, but we are ethnically Chinese.

47:59David McWilliams: We can't depend on Japan to defend us. And obviously, Chinese and Japanese relations have always been very, very toxic. The Americans have left. The Filipinos have a big army. They're not going to come to our aid. So what are we going to do? Imagine Taiwan just negotiates. They say, okay, let's negotiate in the same way as Hong Kong negotiated with China in 1997. Let's have a 50-year integration project, right? Now think about what the Chinese could do in that case. Chinese might say, okay, that's fine. Well, why don't we just take the control of the microchip industry that is in Taiwan? And why don't we really attack the Americans where they think they're preeminent, which is AI, because we know they've spent 400 billion or 500 billion on investment in AI.

48:55Why don't we just make the algorithm of DeepSeek available online to everyone? And at the stroke of a pen, undermine all the capital investment in American AI. You get a complete collapse in the AI market in America. Yeah. So the vulnerabilities of the United States are so self-evident because underneath that particular unipolar world are relationships, are licenses, are networks, are bases, are understandings that other people will do their bidding, that the Germans will be the first in the Cold War to do the fighting, all those sort of things. If they're all off the table, the actual vulnerabilities underneath the networks So networks exist, and remember we told you this idea, John, of the power of weak ties.

49:54So when the ties are reasonably weak, they're incredibly powerful, right? Because what you have is everybody's got an interest in being part of the same system. If you go then from weak ties to strong ties, what you do is you dramatically narrow the potency of the network. And so you can see these things happen. And so, yes, the American flag may well fly over Nuke in Greenland, but they'll have lost everything. And that, I think, is at stake. And people will look back and say, did that actually happen? Did they go from being the preeminent unipolar power with all these alliances, all these friends, all these partners, where everybody actually did their bidding?

50:40They just had to squeeze a little bit. Nobody stood up against them. they've gone from that to being completely isolated in North America, to having no alliances, to having no partners, to having nobody who can pick up the phone to them and say, yeah, we'll help you out. I mean, just one last thing, John. The United States is only 4 % of the world's population. They're going to realize that incredibly quickly, that superpowers that are only 4 % of the global population require partnerships and alliances to remain the top dog. And although they feel now like your quote from A.N. Rand, who's going to stop me?

51:27It's not who's going to stop you tomorrow. It's who's going to stop you in four years time or in three years time. And yes, you might humiliate the Danes and the Europeans in Greenland, but don't forget the European Union is a massive block and its very weakness was the fact that it had no external enemy and America could be the leader. Now what happens if America is the external enemy and the Europeans react and decide, you know what, we can deal with three or four years of austerity are five years of austerity. But the price is sovereignty, is integrity, is independence, and is imperial power.

52:14I mean, don't forget there's imperial ambitions in Europe that have been subjugated for the last 80 years. What if they emerge again? You've said it before. Le Pen in France, our friend Farage. I'm not sure the Brits have imperial powers anymore, but they have sovereign powers and sovereign potential. AFD in Germany. All these characters are waiting in the wings and all of them, particularly Le Pen and particularly the AFD, would have as part of their nationalist arsenal standing up to America. So 2026, John. Yep. The year it all changed. We'll talk to you on Tuesday.

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