"the way we have liked to look at markets and the world up until now no longer works and that's because we are no longer in the previous architecture" - Michael Every [04:00]
"everything is now about geopolitics and so if we start from that assumption... it can prepare you for some of these wild shocks" - Michael Every [05:04]
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"you win war with bullets not profits" - Michael Every [31:40]
"we don't need to make videos of Tom Cruz and Brad Pitt having a fist fight on a rooftop we need to have them in factories running robots 24/7 to make stuff that we need" - Michael Every [33:32]
"a trade deficit is a national security weakness if you can't make anything you can't make military products if you can't make military products you can't defend yourself" - Michael Every [30:23]
"once you've shown that a key waterway like that can be closed a choke point can choke... you can never use it quite the same way again it will always be seen as a liability" - Michael Every [40:43]
Speakers & Credentials
Julia La Roche: Host of The Julia La Roche Show and interviewer.
Michael Every: Global strategist of economics and markets at Rabo Bank. He possesses three decades of financial industry experience across nine countries, holding expertise in country risk, macroeconomics, FX strategy, and rate strategy.
1. Executive Summary
The global economic and financial architecture has fundamentally broken down, shifting the world into an era defined strictly by economic statecraft rather than free-market equilibrium.
Market dynamics and trade flows are no longer driven by pure capital efficiency, but are increasingly subordinate to national security objectives and geopolitical power struggles.
Traditional central bank models are obsolete because they rely entirely on demand management while completely ignoring the rolling geopolitical supply shocks that dictate physical trade.
Long-term interest rates are structurally biased higher due to the massive fiscal requirements necessary for defense buildup, industrial reshoring, and securing critical commodities.
Governments are expected to reintroduce differential interest rates, subsidizing borrowing for strategic defense and manufacturing sectors while penalizing speculative civilian capital allocation.
Transformative technologies like artificial intelligence will be treated as strategic military assets rather than civilian profit engines, likely leading to forced government equity stakes and profit caps.
Massive structural trade deficits are no longer viewed as standard economic equilibrium but are recognized as acute national security vulnerabilities that destroy a nation's ability to manufacture munitions.
Geopolitical supply chain disruptions, such as the conflict in the Strait of Hormuz, prove that once a maritime choke point is weaponized, global trust is permanently shattered, forcing the adoption of costlier alternatives.
Despite internal political polarization and the necessity for a painful economic restructuring, the United States retains the geopolitical leverage required to maintain its global primacy in this fractured order.
2. Chronological Table of Contents
Introduction and Framework of Economic Statecraft [00:00]
Obsolescence of Central Bank Models and Supply Shocks [08:12]
The Conflict Between National Security and Single-Rate Borrowing [11:10]
Investment Implications in a Geopolitically Driven Market [18:48]
The Future of Interest Rates and Differential Borrowing [24:25]
Global Risks, War, and Rebalancing Trade Deficits [27:02]
AI as a Strategic Imperative vs. Civilian Commodity [33:01]
The Strait of Hormuz and the Fragility of Choke Points [39:07]
American Primacy and the Changing Global Order [45:31]
3. Detailed Thematic Summary
The Transition to Economic Statecraft
The global economy has entirely departed from the previous architecture where financial and monetary policies operated independently of national power dynamics [03:20].
Policy tools, ranging from tariffs to monetary supply, are now strictly utilized as instruments of economic statecraft to secure national interests against rival states [04:17].
Investors who ignore this paradigm shift and benchmark to outdated models will face painful financial realizations as domestic industrial bases collapse from unanticipated geopolitical competition [20:11].
The fashion of maximizing offshore supply chains to generate the highest possible corporate margins has completely died, replaced by the vastly more expensive reality of onshoring and nearshoring [20:53].
The Fallacy of Modern Central Banking
Central bank forecasting models consistently fail because they cannot account for permanent, rolling exogenous supply shocks driven by conflicts like the wars involving Russia, Ukraine, and Iran [08:28].
The foundational mandate to target 2% CPI through demand management is fundamentally broken when nations face existential security crises requiring massive infrastructure and defense spending [09:42].
Raising interest rates by 200 basis points makes necessary government defense spending instantly unaffordable, severely compromising the state's ability to procure hardware like aircraft carriers [11:38].
Conversely, lowering interest rates fuels private sector speculation on economically irrelevant assets, absorbing the physical and financial resources that should be flowing toward vital industrial supply chains [13:26].
The Federal Reserve historically abandoned pure inflation targeting to explicitly monetize debt and secure military victory during World War II, a precedent that highlights the subservience of central banks to state survival [14:51].
The Restructuring of Capital and Interest Rates
Long-term bond yields are structurally biased higher due to massive fiscal demands required for national defense spending, securing commodity supply chains, reshoring subsidies, and appeasing angry domestic populations [24:10].
The global economy is fragmenting into distinct blocs, meaning the post-Cold War era of a single global interest rate dictated by the Federal Reserve is effectively over [25:18].
Governments are likely to introduce differential interest rates, allowing strategically vital manufacturing and defense sectors to borrow at significantly lower costs while penalizing capital allocation toward trivial civilian ventures [26:05].
Patriotic investment vehicles, operating similarly to historical war bonds, are emerging alongside government mandates leaning on pension funds to allocate captive domestic capital into national security priorities [25:49].
Artificial Intelligence and the Defense Industrial Base
The current market assumption that defense contractors or AI firms will generate endless outsized returns ignores the historical reality that governments prioritize material product volume over corporate profits during security crises [22:14].
If a defense contractor generates massive profits through a crisis, the state will inevitably cap those returns, viewing dividends and buybacks as capital diverted away from producing essential munitions [31:40].
AI is strategically critical for physical production processes, such as running advanced factory robotics continuously, rather than generating civilian media novelties or summarizing corporate emails [33:32].
Developing transformative tech requires the private sector to absorb the immense initial sunk costs, functioning essentially as a privately funded, $5 trillion modern Manhattan Project [34:32].
To prevent monopolistic power and ensure strategic alignment, governments will likely take direct equity stakes in vital technology companies, a dynamic already observed with state involvement in Intel [37:01].
Trade Deficits, Choke Points, and American Hegemony
Running massive trade deficits is no longer viewed as standard economic equilibrium but is recognized as a profound national security vulnerability that actively strips a nation of its ability to manufacture necessary munitions [30:23].
Shipping traffic through the Strait of Hormuz is operating at roughly 40% to 45% of normal capacity, forcing vessels to utilize alternative routes like the Omani channel [40:28].
The disruption in the Middle East demonstrates that once a maritime choke point is weaponized, the baseline trust never fully returns, permanently forcing supply chains to build and price in costlier alternative routes [40:43].
Despite severe domestic political polarization and the urgent need for structural economic remodeling, the United States remains the primary geopolitical fulcrum and is uniquely positioned to retain global primacy in this new era [48:24].
The Reference Vault
4. Data & Figures
Data Point
Value
Context
Timestamp
Interest rate adjustment
200 basis points
Used as a theoretical hike or cut to explain the central bank's dilemma regarding national defense spending versus private sector speculation.
The standard inflation target that central banks claim to defend to maintain independence, a mandate rendered absurd during geopolitical security crises.
Economic Statecraft
The overarching geopolitical paradigm where all financial, monetary, and economic policies are subjugated to national security and power projection. Rather than markets optimizing for capital efficiency, offshoring, and maximum shareholder returns, the state orchestrates economic outcomes to guarantee its strategic survival. This model flips the post-Cold War globalization consensus on its head, demanding that modern investors analyze every asset class—from equities to bond yields—through the lens of national interest rather than free-market equilibrium [04:17].
The Central Bank Trap
A strategic irony highlighting the fatal inadequacy of modern monetary policy in a fragmented world. If a nominally independent central bank hikes rates to fight inflation, it simultaneously starves the state of the cheap capital required to build necessary defense infrastructure and reshore industry. Conversely, if the bank cuts rates to fund government rearmament, the cheap liquidity inevitably flows into speculative civilian markets, depriving the defense sector of actual physical resources and supply chain capacity. This framework exposes the impossibility of managing supply-constrained geopolitical warfare with blunt demand-side monetary tools [11:38].
Differential Interest Rates
A historical and likely future monetary framework where the cost of borrowing is aggressively segmented by sector. Strategic industries vital to state power—such as defense contractors, semiconductor fabrication, and advanced manufacturing—receive subsidized, artificially low interest rates. Meanwhile, non-essential consumer or speculative sectors face punitively high rates to discourage resource drain. This represents a complete unwinding of the single global base rate system, replacing it with targeted, state-directed credit allocation designed to reconstruct the defense industrial base [26:05].
The Privately Funded Manhattan Project
A conceptual framework for understanding the interplay between massive capital misallocation and strategic technological breakthroughs. Recognizing that heavily indebted states lack the fiscal capacity to unilaterally fund trillion-dollar innovations like advanced AI, they allow the private sector to aggressively speculate and absorb the immense sunk costs. Once the atom-splitting breakthrough is achieved, the state intervenes, capping profits or taking direct equity stakes to ensure the technology serves national security rather than a private monopoly [34:32].
Choke Point Fragility
A geopolitical and supply chain mental model dictating that once a vital transit corridor is successfully weaponized or closed, its utility is permanently impaired. Even if hostilities officially cease, the shattered trust forces global supply chains to price in a permanent geographic risk premium and construct costlier, inefficient physical alternatives, forever altering the baseline economics of global trade and commodity pricing [40:43].
6. Anecdotes
The Federal Reserve in World War II: The speaker points out that during World War II, the Federal Reserve completely abandoned its modern pretense of strict inflation targeting. Instead, it explicitly engaged in aggressive debt monetization to ensure the United States and its allies possessed the industrial might to defeat the Axis powers. This historical reality was raised to expose the absurdity of modern central bankers pretending that adhering to a rigid 2% CPI target matters more than existential national security [14:51].
The Defense Contractor Ultimatum: The speaker references contemporary headlines regarding the Pentagon and White House aggressively pressuring defense companies to reinvest their capital into expanding production capacity rather than executing share buybacks. This anecdote highlights the inevitable clash between free-market corporate incentive structures and the immediate, material requirements of a state attempting to wage a geopolitical conflict with depleted munitions [30:38].
The Tom Cruise and Brad Pitt Deepfake: To illustrate the gross misallocation of advanced computing power, the speaker critiques the civilian use of AI to generate trivial entertainment, such as a fake rooftop fistfight between Hollywood actors. This story serves to emphasize that true strategic value lies in deploying AI natively within physical manufacturing and industrial robotics, rather than wasting processing tokens on office productivity or media novelties [33:32].
Iran's Pickaxe Mountain Nuclear Facility: The speaker references intelligence reports regarding Iran constructing a "Plan B" nuclear base located fundamentally underneath the entirety of a mountain, rather than just buried deeply underground. This anecdote underscores the intractability of the Middle Eastern security crisis and the extreme physical and geographic measures states are taking to secure their strategic assets against superior conventional military threats [42:12].
7. References & Recommendations
People
Alexander Hamilton: The first U.S. Secretary of the Treasury, referenced as the historical architect of American industrial policy and statecraft, whose protectionist and state-directed ideas are currently being revived by modern policymakers [06:46].
Scott Bessent: Mentioned as a Treasury Secretary nominee or prominent financial figure who conceptually understands the need to remodel the US economy along Hamiltonian lines to compete globally [06:38].
Tom Cruise & Brad Pitt: Hollywood actors mentioned in passing to mock the triviality of civilian deepfake AI videos compared to strategic industrial robotics applications [33:32].
Geopolitical Institutions & Nations
The Federal Reserve: Referenced continuously as the central node of the outdated global monetary system, and historically as the entity that actively monetized debt to win World War II [14:51].
Iran: Discussed extensively regarding the ongoing proxy conflicts, the disruption of vital global shipping lanes, and their construction of deeply fortified nuclear facilities [28:10].
Oman: Mentioned in the context of the Strait of Hormuz, where alternative maritime shipping channels within their territorial waters are being utilized to bypass Iranian disruption [40:05].
Lebanon: Referenced briefly as a complex, unresolved theater of conflict that complicates any potential broader regional ceasefire agreements involving Iran [42:28].
Russia & Ukraine: Cited as the primary historical example of an exogenous geopolitical supply shock that shattered European assumptions about modern warfare, supply chains, and economic integration [08:42].
Historical Events & Entities
World War II: Used as the ultimate historical benchmark and mental model for how domestic economies, central banks, and industrial bases must completely restructure to survive during a total national security crisis [14:51].
The Axis Powers (Nazis, Japan, Italy): Referenced collectively to explain the existential threat level during WWII that forced the Fed to abandon inflation targeting in favor of state survival [14:43].
The Manhattan Project: Invoked as a metaphor for the massive, sunk-cost capital investment required to develop paradigm-shifting technology, which the state cannot fund alone in the modern fiscal environment [34:32].
The Soviet Union: Mentioned briefly as a historical adversary to contrast the clarity of the Cold War with the complex, structurally intertwined challenges the US faces today [47:36].
Black Sea Chokehold: Used as a comparative historical example of how waterways are choked during conflict, drawing a parallel to the current fragility in the Middle East [40:49].
Companies & Platforms
OpenAI: Referenced as a strategically vital technological entity that is reportedly offering equity stakes or back-channel access to the US government, illustrating the necessary merger of the state and the private sector in critical technology [36:48].
Intel: Noted as a critical domestic hardware manufacturer receiving direct government support and strategic involvement, underscoring the statecraft approach to securing domestic semiconductor supply chains [37:01].
Kalshi: A prediction market platform highlighted during a sponsor read, used as a data source to gauge market sentiment regarding the timeline for normalized shipping traffic through the Strait of Hormuz [43:32].
Monetary Metals: An investment platform highlighted during a sponsor read that allows investors to earn a yield on physical gold, framed as a hedge against rising fiscal deficits and geopolitical uncertainty [17:21].
Jul 16, 2026
How Chef Daniel Boulud scaled a restaurant empire with intention | 9 Jul 2026 | Capital Group
"I always prefer to stay in the kitchen than going helping around the fields. So of course when you grow up as a kid around food like that I think it's bound to impact you some." Daniel Boulud 00:01:26 https://www.youtube.com/watch?v=UsO1J…
Kalshi market probability
61%
The prediction market pricing for Hormuz traffic returning to fully normal levels before December 1st.