KB: Going back on this one issue about the
way that the influence is being pushed through the corporations, we at our firm know that
there are several-- there's a couple of handfuls of corporations that each have more than $1
billion in capital that they're trying to get back from China. And they have been unable to get a dime out
of China since November of 2016 when China closed its capital account completely. When you were in the administration, did you
interface with any of these companies that were going through a lot of-- pardon the pun--
red tape- - trying to get their money out of China. Did they come appeal to you? SB: Yeah. I think this will be a big shocker to people. Remember, when Trump won in a complete upset
that nobody saw coming, and particularly, you have this post-war, liberal, democratic,
rulesbased order. OK? The Chinese have done nothing but gamed the
system from day one on every set of rules. The rules are what they determine they are. OK? And nobody calls them on it because everybody
thinks they're too weak. KB: Are the corporations afraid to call them
on it? SB: Absolutely. 100%. KB: Because they know if they say that we
can't get our money out, they shut their business off. SB: They'll be shut down. KB: There's a quid pro quo? SB: Shut down. They absolutely fear it. By the way, on the entire situation with the
tariffs-- and tariffs are just not about tariffs and not about protectionism. That's why Trump's done it at such a scale. Remember, before Trump got here, people are
talking about $25-$30 billion of tariffs, it was like, oh, my god. That's so huge. Trump's program is half a trillion dollars
to tariff goods because he knows the Chinese can't respond. And here's why they can't respond-- people
in the United States have to understand one thing. The Chinese look at us as a tributary state
to them. And let me explain that. China's been around for 4,000 years, right? They've had good runs. And they've had bad runs. OK? But one thing they know, and the reason they're
still organized as a nation over 4,000 years, is they know how to handle allies. And they how to handle bad guys. OK? Now what they've done is they've got this
system called barbarian management. And they know how to manage barbarians. The way they manage barbarians is they take
the leaders of the barbarians, and they give them a taste of the good life. And you're going to be something special. You're going to get a special deal. Now what happens back into the tributary state
is your problem. OK? In the United States, what they have done
for 25 and 30 years is play this as a barbarian state. It's barbarian management. OK? They incentivize our elites. And our elites de-industrialize, particularly
the upper Midwest of this country. It's the reason Donald Trump's president. The audience should understand one thing that's
important is that JD Vance, the great guy from Yale who wrote Hillbilly Allergies--
it's the best sociological study of the Trump voter. And it was JD Vance who told me those studies
that come out of MIT and Harvard show that there is a direct correlation between the
factories that left for China, the jobs that left with them, and the opioid crisis. Because this is not about tariffs. KB: It's actually logic. SB: It's not about tariffs. What this is about is human dignity and self-worth. Those factories went. Wall Street made the money. The corporations benefit from it for lower
costs. And devil catch the hindmost on the workers. And so this is what Trump is totally reverse
now. What China sees this as is we're a tributary
state. We send them natural resources, soy beans,
beef, cattle, Boeing Airlines and Apple products. Oh, excuse me. We don't send Boeing airlines and Apple products. you know why? Because they forced Boeing to do a joint venture. And they forced Apple to make their products
over there. So we're Jamestown to their Great Britain. That's why the tariffs at the scale that Trump
put them up at, they can't respond to. OK? KB: But what's interesting--let's assume we
put 25% on $520 billion. We're literally talking about a little over
$100 billion dollars. And I know that's a lot of money. But our economy is $19 trillion. It's still not that functionally meaningful
to us, in my opinion. But I do think it's a leveling of a field
to your point. They've been fighting a trade war with us
since 2001. And we just haven't fought back. SB: OK. The average compounded growth of the United
States of America from 1946, the end of World War II, to 2000, was 3.5%. OK? It's the reason we became a superpower. That economic engine that was unlocked and
grew every year at 3.5% and 1/2 percent through good times and bad on average-- when China
joined the World Trade Organization, they got most favored nation. The growth of the United States is 1.9%. There's a lot of factors to that. But the central beating heart of it is China
because we deindustrialize. We sent our manufacturing over there. Yes, the tariffs in and of themselves, on
a nominal number and absolute number, are not huge. But we look at the convergence of everything. What Trump has done is said, hey, we're at
economic war. And we're going to hit back with the 301s
that stop the forced technology transfers. We're going to put these tariffs into the
scale they've never seen before. We're going to have the ability, if we so
desire, to liquidate companies like ZTE to basically cut them off from their component
parts in the West. They'll be out of business in 90 days. Also, the new things about these limitation
investments that-- KB: The CFIUS Reform. SB: --the CFIUS Reform that people are talking
about-- you bring all forces of government together on that and the stopping of intellectual
property, you have something. And this is why NAFTA was so important. People mocked and ridiculed Trump. There's a book out called Fear that Gary Cohn,
the president of Goldman Sachs-- great Goldman Sachs-- and I used to work there. He takes the documents off the president's
desk. The book opens where he's taking the NAFTA
deal early on and the deal on Korea and actually takes them off the desk because in his judgment,
the president wasn't smart enough to understand what he was doing. Well, here's what Trump's done-- the new NAFTA
deal that he's created is basically setting up a geostrategic manufacturing base to counter
East Asia. And Japan is very quickly going to be part
of that. It's a bilateral deal, and not some TPP deal
where we're just one among many. It's a direct bilateral deal with Japan as
a partner. We've got one with Korea we're updating. And in the EU, Juncker has already told Trump
and indicated that they're going to be a part of this too. What Donald Trump has done in less than two
years against the second law of thermodynamics-- the immutable law of the rise of China-- what
he's done is reorient the entire world's supply chain away from China. And this is going to have economic growth
opportunities that are going to be incredible. And he's done that kind of single-handedly
against the fighting of the corporatist lobby, the fighting of the Wall Street investor relations
department, et cetera. So that's why I think it's really heroic. KB: It's interesting with the timing. If you look at just, let's say, the economic
laws of China, were already slowing down before we decided to fight back. It just so happens to be that this pushback
from a tariff or whether-- the most elegant idea was the border adjustable tax which was
immediately killed by you and I both know who. SB: I loved that one. KB: That was perfect in my opinion. SB: By the way, I am a huge believer that--
and Paul Ryan and I have had our differences, but when he first brought me through that,
I said, that's the solution. That's the solution. KB: It's kind of an egalitarian way of going
at it. SB: I Think--And we all know why it got crushed. I think that that is something that should
be brought back up very quickly in future years. KB: We could do away with tariffs if we imposed
a border adjustment tax. SB: Well, by the way, let's talk about tariffs
for a second. President Trump-- remember the G7 when he
was lectured by his betters-- Merkel and Macron on the first day about this whole thing about
tariffs. He came back the next day for breakfast. And what Trump told the G7, he said, OK, I
thought about it last night. How about this? No tariffs. Absolutely no tariffs. But no subsidies. People have to realize that the White House
put out this document over two months ago now. It was the 50 things that China's doing in
its economic war with us. It's kind of what the United States wants
China to stop. That's the deal. You stop that, we're all good. When you look at that, it's not just the tariffs. It's the investment in state-owned industries. KB: Free land. Free electricity. SB: Free land. Look at what they've done with steel and aluminum
throughout the world. Look at what they've done with ship building. You could go every heavy industry. They've gutted Western Europe. And they've gutted the United States. And they continue to do that. KB: Purposefully. SB: Purposefully. And by the way, ZTE showed you this. They have to create some number of 11 million
jobs a year. They're under enormous, internal, economic
pressure to create those jobs. They can't afford to have 150,000 high value
added jobs at ZTE just go away. It's the same thing with the steel. They're kind of caught on the wheel now. They're the first to admit they have to keep
adding capacity because they've got to keep these guys working. So I think that's why the Chinese model, and
all this happy talk that comes from the West about the Chinese model, when you really look
at it-- and I know you are one of the world's handful of experts I think had looked at it
and looks at the numbers as they really are not what people hoped they are, and not how
they're spun by China. Because every number that comes out of China,
to me, has to be questioned, verified-- trust, but verified. It has to be questioned, verified, and then
verified again. You've got to get on belt and suspenders. And that's why I think we may be hurtling
to another financial crisis driven by this financial model of China that can't stand
up on its own. KB: Right. Well, the good news about that is if we're
right about China, and we're right about their reckless build of credit, coupled with the
fact their economy's slowing down, coupled with the size of their banking system and
GDP-- if we're right about all those things, the good news is their banks aren't inextricably
linked to ours the way that ours were to Europe and Asia's back during our financial crisis. SB: They're not. But you used the word they're reckless. This is what upsets me about the lack of accountability
and responsibility by the world's elites. We just went through the worst financial crisis
in history. Not one CEO went to jail. And not anybody significantly gave up any
equity. OK? People have got to remember that on September
18, 2008, when Bernanke and Paulson walked into the Oval Office with Bush, and he sent
them up to Capitol Hill, the balance sheet of the Federal Reserve was $880 billion. On the day that Donald Trump took the oath
of office on January 20, 2017, it was $4.5 trillion. All we did in the Bank of England, ECB, Bank
of Japan-- did the same thing. KB: And the PBOC. SB: PBOC. What they did to save the elites was to turn
on the spigots of liquidity. So if you owned assets, real estate, stocks,
or intellectual property, you've had the greatest 10-year run in history. If you're a working class schmendrick, wages
are flat. This is what's unfair, and this is where the
anger that's driving the populist movement-- the whole burden comes down on the little
guy to finance these deficits with his taxes. And then his kids get sent everywhere in the
world to defend this. That's what's got to stop. You used the word reckless. It is reckless disregard what the elites have
done this time. Because what they've done--look, the American
banking system has $19 trillion of assets on it. You're 10 times smarter than me on this. I'd respectfully submit that all of those
assets are not good. OK? Maybe, let's say, 10% or more could be written
off today. That's the American banking system. The Chinese banking system I think has $49
trillion of assets. Correct me if I'm wrong, but I think $45 trillion
have been put on the books since 2008. This is completely reckless. Now, thank god they're not interconnected
through the SWIFT system with the rest of the banks. KB: Or through derivatives. SB: Derivatives. And by the way, the reason is-- and this is
another tell-- because none of the investment banks or none of the guys want to say, whoa,
we can't hook up with China because they all stopped themselves from doing it. They all limited their exposure to it because
they understand when it implodes, they don't want to be taken down in the first couple
of minutes. That being said, those banks are going to
implode. Nobody can put those kind of assets on and
have a great banking system. This is a total and complete sham in the economists,
the Financial Times of London, all the elites, and all the conferences they have. You had Richard Haass on this morning on Morning
Joe. Richard Haass is from the Council on Foreign
Relations. And all he's doing is beating up Mike Pence
and Donald Trump from Pence's speech. You know what he's saying? He's saying, hey, all my Chinese colleagues
and buddies in China are telling me they don't know what the United States wants. They came over here. They wanted to deal. And they want to be our partner. But we keep moving the goalposts. That is reckless for him to say that. He fully understands what the issues are. OK? And he sits there on a general news show in
the morning that basic voters watch and starts putting this stuff into the mind. It's unacceptable. I got to tell you, Kyle, that's why I think
what you're doing here, what you're doing with your work, and other things-- there are
a number of people like yourself that are sitting there going, this can't continue. And people are going to be held accountable
for this. If the elites think they're going to skip
on this one, it's not going to happen. The reason Donald Trump's president, the reason
you're seeing these populist revolts, whether it's in Italy, Germany, France, throughout
the world, in Brazil this weekend, in Argentina, in Pakistan is the little guy is fed up with
a group of elites that know better. And to take care of themselves, they will
play ball with anybody.
