The Week: China’s Upper Hand, a Troubled Bond Market, and a New Mortgage Crisis

0:00If your best finance people are doing expense reports, chasing receipts, or spending time on month-end clothes, it's time to get Brex AF, a gentic finance that eliminates that work before it starts. Learn more at brex.com slash AF.

0:20This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. push your limits train with precision see the results at equinox that's high performance loving iconic spaces that inspire personal training backed by real data unlimited group fitness classes from yoga and pilates to strength and conditioning elevate your post-performance ritual with saunas steam rooms cold plunges and more everything you need to lock in and unlock your potential at Equinox.

1:09Start today at equinox.com.

1:15Welcome to the week from Prop G Media, where we break down what mattered and what it all means. I'm George Han, and it's Friday, September 18th. Today, the fight over slowing down AI reaches the midterms, and a former meta security chief says the bigger threat is coming from China. Then, the bond market pushes back on America's$40 trillion debt. And finally, homeownership slips further out of reach. Let's get into it. We'll start with something light, the end of civilization. Earlier this month, anthropic researcher Jacob Coxon resigned warning that people building advanced AI believe it could kill us all by the end of the decade.

2:11Anthropics head of alignment science publicly agreed, putting the risk above 10%. Then, Anthropics CEO Dario Amodi called for the industry to slow down. Sam Altman and Elon Musk agreed. President Trump called the push a hoax. On Monday's Raging Moderates, CNN's Dana Bash explained what that could mean for the midterms. What's your sense of how these growing fears about an AI apocalypse and the backlash over data centers will impact the midterms? I think it could be, and it sounds silly to say that this is an October surprise because AI is not a surprise. But this anthropic statement from Dario and the way that other companies and CEOs are responding, and more importantly, to your question, the way that candidates are being forced to respond should be seismic.

3:10And like everything else in politics right now, the way that Donald Trump is playing it is potentially not helpful to his fellow Republicans who are on the ballot because he keeps saying, in fact, he has a lengthy post out this morning about the fact that this is just a conspiracy and people like the head of Anthropic and others are just weak and they don't have courage and they don't understand that we can't see it. this territory to China and so forth, which the first part is obviously that's Trump and he gets personal. That's what he does. The second part is what we're hearing, Mike Johnson, the House Speaker and other Republicans saying, OK, we do need to address this, but we can't.

3:56We can pump the brakes, but not slam on the brakes, because if we slam on the brakes, China is going to pass us by. If this was in a vacuum, it would be one thing. But the fact that this speaks to the larger set of anxieties that people have, not just on affordability, but on like what's next. And we don't know who to trust. Do we trust the CEOs? Do we trust the government officials? Do we trust the candidates? The answer to all of that is no. And so there's a sense of sort of foreboding among voters. And this issue and the fact that we now have this dire warning really feeds on that. This summer, open AI models escaped a controlled test environment and accessed the systems of AI company hugging face during a security evaluation.

4:47On Thursday's Conversations episode, Alex Stamos, former head of security at Meta and Yahoo, told Scott what he believes is the greater threat. The upcoming security problem is not going to be from open AI ananthropic. It is going to be from open weight models. The real challenge we're going to be facing is GLM 5.3, Kimi K3. Those things are within percentage points of the best American models. And so we are entering a valley of pain from a cyber perspective. And it is going to be because every 19-year-old in St. Petersburg who has made millions of dollars doing ransomware but had to do it all manually is now going to be running.

5:25You know, they're going to be in the club. You know that Bourne movie where he steps out of the club and it's actually 10 a.m.? well, he's going to be in the club in his tracksuit on his phone, and he's going to be managing, instead of having to have a conspiracy of a bunch of his friends who have, you know, the possibility of getting turned or getting picked up by Interpol on vacation or something, the conspiracy is going to be a team of agents running on these brand new M5 Studio Maxes. He's going to have 10 of them in his apartment, daisy-chained with Thunderbolt 5 cables, and they're going to be running a bunch of GLM-5 III models quantized, finely tuned to do cyber work.

6:05And that is how he's going to be hacking a dozen companies at once. And so there's going to be a bunch of hugging face attacks, except they're not going to be super high-end French AI companies. They're going to be mid-sized, you know, medical supply firms, small insurance companies, school districts, the kind of people who get ransomware all the time. And he won't have to do any of the manual work he used to have to do. He won't even have to do negotiations because these things will speak English for him. He won't have to speak English anymore. He won't have to have the dude who can do the translation.

6:36It will all be AI. That's what's coming. It won't be the bots anymore. This week, China Decode signed off for good. For the past year, Alice Han and James King have covered how China's economy, politics, and culture are reshaping the world. In their final episode, they argued that China may be closing the AI gap by embedding the technology into its factories, cars, appliances, and robots. And as a quick sense of scale, the U.S. spent about$285 billion on private AI investment in 2025 versus China roughly$12.4 billion, about 23 times less than the U.S. But the capability gap between the two countries, despite the investment difference, is rapidly tightening.

7:26So James, I think this has been the biggest topic for us over the past year. And certainly in the time in which we've covered this topic, I think China has surprised to the upside on a number of levels, starting from its ability to do cutting-edge models, largely open weight, open source. In some instantiations, there are some people saying that China may be six months behind the leading closed models coming out of the U.S. China's also, I think, surprised to the upside when it comes to its ability to bypass the constraints on hardware, say chips, for instance, with homegrown talent, but also its ability to find workarounds in the existing architecture.

8:10And it's surprised on robotics, too, where I think it's had a real clear lead versus the West. But they closed the show with a warning. The U.S. and China may remain rivals, but AI safety is one area where neither country can afford to go it alone. Yeah, and then the other threat closer to home, but still dystopic, is AI weapons or some kind of rogue agent AI attacks that could go into the nuclear bio weapons domains, you know, the fact that we haven't had any real leadership between Washington and Beijing or any concerted effort for some kind of arms controls or AI safety guardrails, I think is also going to set back civilization really in the years and decades to come.

8:58Yeah. And I think that would be my kind of parting comment would be, if the West and China doesn't get on, that is just one of those things. That's one of those things that happens in international relations. But what I would hope is that the minimum amount of cooperation to ensure the safety of our respective populations is really focused on by both China and the US and Europe. Geopolitical competition is one thing, but kind of white-knuckled competition without anybody with their hand on the tiller and nobody even cooperating in the merest of areas is really a scary prospect.

9:42We'll be right back.

9:49Support for the show comes from 11 Labs. If you're a business owner, you probably don't want the thing your customers remember about you to be how frustrating your phone tree was. 11 Agents is a platform for AI voice and chat agents that can actually listen, understand, and resolve customer issues. They can look up your account, process requests, and hand off to a person when needed. 11 Agents helps create better experiences for customers while letting call center and support teams focus on the issues that need a person. And it's made by 11 Labs, the AI research and product company known for their realistic voice and audio models in over 70 languages.

10:20It's built for enterprise scale too. 11 Agents handles more than 10 million conversations

10:30Thank you.

10:54dot io slash prop g support for the show comes from pipe drive sales teams spend up to 50 percent of their time on admin work rather than selling building relationships and closing deals you know the work that's actually doing sales well what if there was a tool that gave them that time back that's where pipe drive comes in it's an intelligent ai-powered sales crm loved by growing sales teams pipe drive automatically pulls deal history emails records and previous conversations, you can walk into a call already briefed. During the meeting, PipeDrive's AI note taker records and takes notes so you can stay in the conversation.

11:31Then it turns those notes into accurate auto-drafted CRM updates ready for you to review and approve. The end result, less admin, more selling. Switch to a CRM built by salespeople for salespeople and join the over 100 ,000 companies already using PipeDrive. Our link gets you an exclusive 30 days instead of the usual 14-day trial. No credit card or payment needed. Just head to pipedrive.com slash prop chi to get started. That's pipedrive.com slash prop chi, and you can be up and running in minutes.

12:07This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+.

12:38Welcome back. This week, the yield on the 10-year Treasury rose above 5 % for the first time in almost two decades. On last Friday's Prof G Markets, the Financial Times' Katie Martin explained what bond investors are really reacting to. There's a lot going on. The bond markets globally are not looking very happy at all. And I guess it's a bit of a paint-your-own-adventure kind of picture, right? You can kind of stick onto this, whatever kind of narrative you want. But I think the most powerful one is that governments are just borrowing too much damn money. You know, the US national debt has, of course, crossed through $40 trillion for the first time.

13:23You've got a whole bunch of countries, including the US, that are now spending more money on keeping current with their debts than they are on defense. And that's just a bit of a kind of marker that this has all got pretty out of hand. I feel like There's a lot of countries, including the UK, that just seem to have forgotten how to talk to the electorates about trade-offs and taxes. And instead, it's much easier to just keep going, cap in hand to the debt markets, keep borrowing more and more money to keep the lights on, pay for your defence, fix your roads, build your schools, all the rest of it.

14:01And at a certain point, bond investors say, look, I'll buy these bonds, but it's going to cost you. I'm going to want a higher return on them. And that's exactly what's happening here. And, you know, inflation plays a little bit of a role here. Bonds famously hate inflation. It eats into their returns. So again, investors ask for a higher return if they're going to be investing in bonds in a high inflation environment. but they're the kind of main reasons why we have this horrible malaise in debt markets at the moment. As you say, the U.S. has been most activist, shall we say, in trying to calm this situation down but it still doesn't seem to be ready to have a proper conversation about properly cutting spending or raising taxes so it's difficult to see how they can properly turn this around.

14:53Scott asked her whether any leader anywhere has told voters the truth about what it will take to fix it. I mean, it's just not a vote winner to kind of stand up on a podium somewhere and say, guys, I've got this great idea. How about you all pay more taxes? I just, we have forgotten as developed economies, how to do that, how to say to people, you know, if you want all these lovely things, you want lovely, you know, schools and hospitals and roads and yada yada, then that costs money. There's just this idea that you can lean on the bond markets to do it. And particularly since COVID, that is just what we've done.

15:31So that's, I think that's why we're in the situation we're in today. You know, as you've been asking, you know, why is the market freaking out about this now? I think just the amount of borrowing stepped up so high around the time of COVID. And don't get me wrong, that was the right thing to do. There was a pandemic going on and governments had to step into where the private sector was before. But the right thing to do after that period would have been to say, OK, look, that was all emergency borrowing. We're now getting back to normal. And instead, governments were like, this is awesome. We've found this magic money tree.

16:07Let's just keep plucking money off it. And, you know, now here we are in 2026 and the money tree is bare. And it's, you know, it's just a fundamentally more expensive exercise to borrow. Mortgage rates tend to track the 10-year treasury yield. On Wednesday's Prof G Markets, Ed Elson talked about what that means for anyone trying to buy a home. As you probably already know, home prices in America are more expensive today than ever before. The average home now costs more than seven times the average household's annual income. That number has never been higher, not even during the housing bubble.

16:47And that is a function of the fact that while home prices have kept going up, Average wage growth has remained relatively stagnant. In fact, over the past several months, average wages have gone down. And that is a result of the runaway inflation that was, of course, prompted by our seemingly forever war with Iran. But that is all old news when it comes to housing. Here is the new news. As of last week, the average 30-year mortgage rate rose above 7 % for the first time in 15 months. In other words, not only are home prices rising, but so is the rate at which you would need to borrow in order to buy a home.

17:26Now, why is that rate rising? Again, because of the war. With oil prices soaring, inflation is showing no signs of slowing down, which has resulted in a global bond sell-off, which is causing long-term treasury yields to rise, as we covered. And of course, it is those yields that mortgage rates are largely anchored to. So when yields go up, so does your mortgage rate. And that is exactly what is happening. So what do we have? Historically expensive home prices combined with historically high mortgage rates, resulting in the most unaffordable housing market in the history of America. So young adults are staying put.

18:06Nearly half of Americans under 30 now live with a parent. On Wednesday's office hours, a listener asked Scott whether he should move back home to save money or whether it can keep you from building an independent life. Here's Scott's advice. It's situational. The reality is if you're a responsible young man or woman who's looking to save a home and has a job, the way I would phrase it is the following. Living at home when you're just sleeping there. You're out of the house. You're with friends. You're working hard. You're out of the house 14 to 16 hours a day. I would argue being at home and saving the money, as long as you're disciplined around saving and investing that money, I think it's a great thing.

18:49And so I moved home after I started my job at Morgan Stanley. And then I moved home for a year because, one, my mom was sick. But two, I liked living at home and it just made things easier for me. I think like a lot of young men, I like the idea of simplifying my life, saving some money so I could just focus on work. I would argue that that's healthy. What isn't healthy? You're spending 20 hours a day at home playing video games. You know, you come out of your basement to ask your mom, where's the meatloaf? But you're not out. You're not working. You're not exploring. You're not finding friends, mentors, and mates.

19:24That is unhealthy. And unfortunately, it begins to be kind of enablement. And these kids don't develop the skills. The real world is a fantastic training ground for making money, making relationships. developing social skills. And you are not playing, you are not practicing or on the field learning those skills when you're at home. So living at home, I think it's great as long as you are taking the money you'd be spending on rent and saving or investing. And specifically, you are just sleeping at home and nothing more. You're not in your basement. You're not hanging out. You're not using it as an excuse to not have the economic pressure or relationship pressure.

20:03So it comes down to this. If it's a bed, then stay at home and save the money. If it's a real home and you are not developing the skills or the economic warrior mentality to build your own life, then it's a problem.

20:22That's The Week. I'm George Hahn. We'll see you next Friday.

20:36push your limits train with precision see the results at equinox that's high performance loving iconic spaces that inspire personal training backed by real data unlimited group fitness classes from yoga and pilates to strength and conditioning elevate your post-performance ritual with saunas steam rooms cold plunges and more everything you need to lock in and unlock your potential at Equinox. Start today at equinox.com.

21:07Do you hear that? That sound, right? That means that summer's officially here. It means that grown adults just sprint into the street for a frozen dessert shaped like a cartoon. But this summer, Mint Mobile has a better treat. Every plan, including Unlimited, is$15 a month. And unlike ice cream, it won't drip down your wrist or look nothing like the picture. Does anyone have any cash? Give it a try at mintmobile.com slash switch.

21:37I see you. Avatar Fire and Ash is now streaming on Disney+. It's the film critics are calling the best Avatar yet. Go, go, go, go! A true epic and completely jaw-dropping. This is the only purest thing in this world. Return to Pandora on Disney+. It will be an adventure for the whole family. and watch the Oscar-winning phenomenon at home. This is sick!