Transcription
The US market accounts for about 65% of all the world's market capitalization. So it's huge. It's it's a d it's really the the elephant in the room is the US when it comes to capital markets and equity markets. And and we know that the US market isn't in a bubble. No, no matter what the news, they they they just eat up any news and the market goes up. and and I think the talk of ddollarization is is o overblown and uh and and ba basically misguided to to a large extent. The oil market will be in deficit essentially through the end of the year.
>> Hello everybody. Thank you so much for joining us. I'm Lyanna Petroa with a new episode of World Affairs and Context. Today I'm very pleased to welcome back a prominent American economist, Dr. Steve Hanky. Dr. Hanky is professor at John's Hopkins University and senior distinguished fellow at the Mises Institute. Dr. Hanky is a prolific author as well. He recently published a book titled Making Money Work, which we will hopefully discuss here on the program soon. Dr. Hanky, thank you so much for taking the time to join. It's great to see you again.
>> Well, it's great to see you, Lena. Thank you for having me.
>> Thank you for being here. And I've been really looking forward to this discussion because now that the US and Iran appear to be on a piece to uh sort of on a on a peace track um of course we don't know what will happen uh down the road but there's so much to discuss with respect to uh to the aftermath that the war has had on the US economy and the global economy. Dr. Hanky. Many analysts argue that the Iran war and the disruption of oil flows through the straight of Hermuz have created the largest energy shock in decades. During the 1970s, of course, oil shocks coincided with high inflation and economic stagnation and arguably this is very similar to what we have been observing as well. Now that the United States and Iran appear to be moving toward a negotiated settlement, what is your assessment of the economic consequences of the war against Iran that lasted four months?
>> Well, for for for one thing, we we we have an advertised uh memorandum of understanding between the US and Iran, but no, no one knows what the particulars are in in that document. So, there's no way to say anything with any certainty about even what what the document is says. Uh, and it's a little bit, it reminds me of that quip of the Hollywood mogul Samuel Goldman. He said that a verbal contract isn't worth the paper it's printed on. And I think that's what that's what we have right now. So, so we have the the spin misters are spinning with with Trump of course being the the major spinner. uh and uh given the uh accuracy of his spins uh I think we could discount those at a pretty high rate because what what you have in this memorandum of understanding and and the and the real problem even if we knew what was in it is the fact that you have significant parties to the conflict who who aren't part of the memorandum and and The only two parties that will ultimately sign on Friday will be Iran and the United States. If if all goes according to plan, I mean, we don't even know if they're going to reach the signing ceremony on Friday. It's that uncertainty. But let's assume they sign and you you have a major player, Israel, that's not in the picture. and and another one Hezbollah in Lebanon that's not in the picture. And and there's a great deal of disagreement about actually whether Hezbollah, Israel, and Lebanon are actually even included in the in the agreement. We don't know because we've never seen the agreement, but the Iranians say they are included and the Israelis will have to retreat from Lebanon and stop bombarding Hezbollah uh as part of the agreement and and the the the US uh bobs and weaves on this issue. Sometimes they say it's in or they imply that it's in that is it being Hezbollah and Israel sometimes not. And Israel of course is adamant that it that's not. So so right away you've got Israel in the picture as is as is the spoiler because they're they're a major player. They're not part of the agreement. uh and and it's very clear that they they want the confrontation with Iran to continue. They they don't want it to stop. So So there there we are. I mean that's fundamentally what what's going on.
>> It's a very it's a very uncertain situation. So what whatever I'm saying about it is just my conjecture because I I've never seen anything in writing that indicates what the key points actually are. When we look at the state of Hormuz, which has been sort of at the very center of of of this from an economic perspective, from a geoeconomic perspective, reports indicate that between 1 billion and 1 and a half billion barrels of oil have been taken off the market since the United States and Israel attacked Iran in late February. And now that there is this tentative deal that is a very, very fragile deal, Israel is not party to it. And Netanyahu of course made a post on next stating that he does not commit to you know, the requirements of the deal between the United States and Iran. So he made it known that he's not constrained by the deal itself and he reserves the right to strike Lebanon at will based on his post. But now that there's this tentative deal that will hopefully result in a sort of a peace initiative, Donald Trump says the straight of Hormuz will be open will be fully open by Friday the 19th. Assum assuming that's going to be the signing of the deal. How possible is it for the energy flows to be restored back to the pre-Iran war levels? And are we still going to feel the aftermath of this war for months to come or for an extended period of time? What are your thoughts on this?
>> Well, let's let's assume that the the strait is is open and and running smoothly uh uh starting on Friday. And and if that that's a wild assumption, by the way, this this is not going to happen. But let's let's let's now get in the hypothetical world. We're we're in a university seminar going through scenarios and hypotheticals and thinking thinking them through and and on the assumption that the straight will be open and there'll be no glitches. The International Energy Agency in Paris indicates that to to the the oil market will be in deficit essentially through the end of the year. Deficit. Okay. So that that that that means there'll be a there'll be a situation in which we have demand that's that's greater than supply. Now that that's what the deficit means. That means we're going to have elevated oil prices. So I think the price that prices we've seen coming down. Uh now it's Tuesday the 16th of June and Monday the 15th. We have two days the price is down pretty sharply because over the weekend we had the announcement of this supposedly this memorandum of understanding. I I think that those are temporary declines in oil. Oil will come back up because we you do have this deficit situation as the International Energy Agency indicates and and what that means is that as as you said, we've drawn down we've had this huge deficit. We've drawn down inventories and just to refill the inventories back to where they were prior to the war. I think it will be way in under the good scenario by the way with no glitches will be way into late 2027 before the inventories are just refilled. Okay. But on top of that, we have many countries, especially in Asia, they they had no strategic reserves going into the war and they they have indicated that they will want to establish strategic reserves. So, so that's another add-on to demand. So, where's the demand going to come from going forward? It'll come from refilling the depleted inventories and oil that will be going into new strategic reserves that that were never there in the first place like the Philippines, Indonesia, Singapore, all all of these places are going to be building reserves and and on top of that everyone is going to want to hedge a little it because of the fact that the choke point, the straight was choked. They're going to want they're going to want higher levels of precautionary inventories than before the war. So that so that's another add-on. So, we've got a lot of inventory building and strategic building that will occur and and I think the oil price will stay very very elevated uh for some time. I I my view is that it I I don't think the markets are on to this for some reason. I I think the markets have just missed it.
>> Very interesting. A and if you look at the markets in general, they they they're they're trading off the spin >> and and and the and and uh we have the emerging market markets have gone up tremendously in the last year. The US gone up much more than the US markets. By the way, the emerging stock markets are in in a very bullish mood, shall we say, and and we all know what's going on in the in the big US market. The US market accounts for about 65% of all the world's market capitalization. So, it's huge. It's it's a do it's really the the elephant in the room is the US when it comes to capital markets and equity markets and and we know that the US market isn't in a bubble. No, no matter what the news, they they they just eat up any news and the market goes up. And of course, the market's been up big time since the announcement of this so-called memorandum of understanding. So, so that's kind of the background. And and and by the way, the commodity prices in general are go going up, not just oil.
>> And I would love to discuss commodities with you shortly, but first help us make a link the link between oil and inflation. Historically, oil shocks have preceded several US recessions. Now, US inflation reading continues to rise as you mentioned as of May CPI rose to 4.2% which is the highest in three years. You have often argued here on the program that inflation is fundamentally a monetary phenomenon rather than an oil phenomenon. Do you believe that the current energy crisis poses a serious recession or stagflation risk? or is the US economy, let's just say, resilient enough in a way that it can absorb the rising oil prices and it can sort of sustain its current level of of it's weakening but it it's not collapsing perhaps.
>> So what what we have going on now is that again the the you have to look at the money supply. what's going on with the money supply because that drives not not only asset prices but real economic activity and inflation because not nominal gross domestic product has two components the inflation component and the real growth component and if the money supply is substantially increasing then with a lag you'll get the nominal GDP going up and that's what we're seeing right Now, we're seeing not only inflation going up, but also a pretty strong real not not a boom, but but certainly not a recession. A a a pretty good underpinning in the real sector of the economy. A
>> and it has characteristics. One one characteristic it has this so-called Kshaped economy where the the the wellto-d do are doing very well and those that aren't so well off are not doing very well. So it's it's not a it's not uniform. What the the real activity is is not uniform across the economy. There there are parts that are booming at at a much stronger rate than normal and some that are in in effect stagnant or going down.
>> Right. Dr. Hanky, I would love to get your thoughts on a very frequent question that I see in the comments to my videos. Um, as we know, the United States is a major energy producer, but Americans are still feeling the pain of rising gasoline prices. So, the question that I see many of the viewers ask is, why does energy independence not fully insulate the US economy from global oil shocks? Could you walk us through that question?
>> Well, the the the it's because the the market for oil is global.
>> [clears throat]
>> So that so and and and one one thing we we might be independent but you know since the the USIsraeli war in Iran started we've actually been exporting some of that oil. So it it isn't that all all oil we produce is just bottled up in the United States and stays here. That's point number one. And and point number two is yes, it's it's not bottled up because we are in an international market and and we we we actually have been exporting petroleum products from the United States.
>> So the best way to think about global oil market is is sort of imagining this big tub of oil, right? And it's it's it's a global sort of supply demand uh and and and any any country's oil market or energy market is not really insulated from um external shocks and that's precisely what we see in the case of straight of Hormuz being closed or open or navigation that are being restricted. It affects everybody regardless of, you know, whether you're the United States or if you're an emerging economy.
>> Yeah, that's that's that's true. There are differences. The effects are different, but the the effects are there every place.
>> Um Dr. Dr. Hanky, with respect to the Federal Reserve and monetary policy, so US inflation has accelerated amid rising energy costs. Do you believe that the Federal Reserve should respond to the shock or would tightening monetary policy risk creating an unnecessary recession or more of a shock to the US economy? What do you think the new Fed chair is going to to do in this regard?
>> Well, it they'll be announcing tomorrow whether there's going to be a change in the Fed federal funds rate. Uh the short-term interest rate that the is controlled by the Fed and this it it the federal funds futures market on the Chicago Merkantail Exchange in indicates that there's there's over an I think a 99.6% 6% chance there'll be no change tomorrow. So, so that and and I I think that's appropriate. I I don't think they should be jumping on the, you know, you using the oil price a as as a guide to monetary policy. The guide to monetary policy should be what's going on with the money supply, which of course the Fed isn't looking at. The Fed does look a at, by the way, it's data dependent and it looks at the data of various key prices. For example, the oil price now has been coming down the last two days. So, so if if if they were using that as the guide, what what would it be telling you? It would be saying, well, probably no change.
>> Steady as you go. But but the fact is for the last year and a half the money supply has been accelerating and that's why the inflation genie is out of the bottle and that's why inflation is going up. It's it's over twice the target rate of 2%. That's that's a that's a pretty that's a terrible job. If you have a target at 2% for inflation and the inflation comes in at 4.2% 2% you're you're doing something wrong. Something's way out of kilder. And what's way out of kilder is the fact that they haven't been keeping their eye on the growth rate and the money supply which has been accelerating. And they they don't use the quantity theory of money. That's not the macroeconomic model that they use. They don't even consider the money supply. They they're using postcanesian moni macroeconomic models at the Fed. And those postcanesian models, they don't even include an aggregate measure for the money supply. So, so you've got a Fed using macro models that don't even include an element for the money money supply, which is the key thing that that the Fed controls or has has an influence on. So, that that's why I I've said [laughter] the Fed the Fed is just flying blind.
>> That's right. They they they they're flying the airplane and and they don't have an altimeter. [laughter] [gasps]
>> And it would be fair to say that inflation is going to continue being elevated of course and as you said we should expect energy energy shortages through um the following year. Um and in the background it is fair to say that the economic growth is likely to weaken. So with with all of those factors being sort of you know considered what options would realistically be available to the Federal Reserve let's say in the second half of this year or the first half of 2027 when they do see that in the inflation keeps going up and energy shortages result in elevated energy costs. So what what at that point of course money supply is growing at that point what would you recommend that the Fed does?
>> Well the the the big thing we we have a new chairman Kevin Walsh is is the new chairman. tomorrow will be the first public announcement that he that he actually makes as chairman and and he has indicated that that he wants to change the way the Fed does business. Now, we're we're not very clear. He isn't very clear on exactly what he wants to change actually. Uh and and so therefore, what would I do? I number one I get the book that Matt Sukerki and I wrote that's that's now l literally just one year old uh making money work and in that book the basis of it is the quantity theory of money. So that it would be the that would be the model. So what is the quantity theory of money? The quantity theory of money ba in simple terms simply says that substantial changes in the money supply affect with a lag asset prices and with a little longer lag real economic activity and with a even a longer lag inflation. So the Fed is has two goals that it's supposed to be trying to achieve and that that is full employment. that that's the real economic activity part of the thing and inflation, the inflation part of the thing. And and that's all in the quantity theory of money because the quantity theory of money indicates that changes in the money supply ultimately affect real economic activity and inflation with a lag. So, so that would be step number one. change the macroeconomic model and the perspective and announce announce that you're going to start trying to target a money supply growth rate on a constant level that's consistent with hitting the 2% inflation target. And and if you work out the numbers, which I've done, Hanky's golden growth rate for the money supply growth for M M2, the broad measure of money that the Fed uses is is 6% per year. So you want to keep the money supply growing at about an even keel at around 6% a year, around five, six% per year. And and if you look historically in the United States, what what was happening, you know, recently be before the great financial crisis of 2008, if you look at the 10 years before that, the money supply was growing a little a little less than 6% and the inflation rate was averaging a little less than 2%. So, so the that's that's how that's that's what should be done. That that's what I would do. So, and and and and I would require everybody in the research department to obviously study making money work and digest it, get it under their belts and and and move ahead on that basis.
>> Absolutely. and I will link your book in the description below because I' I've started reading it and I think it is a fascinating read. Um definitely very unique because I haven't come across similar writing before. So um yes I do highly highly recommend it. Dr. Hanky with respect to uh the US dollar I think that that topic sort of dominates uh discussions as well. Several weeks ago, the world uh g gold council actually published a report on gold taking over the US dollar as a global reserve asset. In recent weeks, the US dollar has strengthened against foreign currencies. What impact do you expect the war against Iran to have on the dollar in the long term, if any, and um what does it really mean for the global demand for the US dollar in the near term? So, sort of two two parts of the question.
>> Okay. Well, dur d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d during the war it's it it's strengthened a bit and if if the war really ends uh and and we start moving into a a new a new regime because it's we're not going to move back to the old regime by the way. we're we're getting moved to a new a whole new global geopolitical uh framework, I think. But I I and and with that, I think we'll see the dollar uh you know, coming off the the strength that it's that it's been on in the last two or three months, but but not much. It it's it's still very strong. that the one thing people just don't get there's there's all this talk about and you mentioned the gold council's report that is true that the central banks have been buying gold and they they just did a survey and 45% of the there over 60 central banks that were surveyed and over 45% of them indicate that they're going to be buying this year. There's only one central bank out of the 60 plus that they surveyed that indicated that they were going to be liquidating any gold. Every all the central banks are buying gold and so they've been adding the quantities of gold and and and they have also been realizing capital appreciations because the price of gold in the short term it's gone down a little bit but over the last year it's gone up. So what's that mean? That means you've got more more tonnage of gold on your on the asset side of your balance sheet and the valuation per ton is higher than it was before you started adding more tons and and as a result the the value of the gold has gone up and and now is a little bit greater than the dollar denominated assets that are on the balance sheets of the of the central banks. That's that's what's that's what's been going on. So, uh, and I think that that that will continue, but but that doesn't mean the dollar is going to be, you know, in in the tank as a result of that. I don't think it will be in the tank. And and I think the talk of ddollarization is is overblown and uh and and ba basically misguided to to a large extent. the I think the fair value the the dollar the most important exchange rate to look at is a dollar euro exchange rate and I think the fair value is between about 120 and 140 but but it the dollar has been much stronger than that on outside that range for quite some time now and and even now it's trading at you know one 116 one you know a little over 116 almost 117 but that's that's that's outside the strongest end of of what I think the fair value of the dollar euro exchange rate should be. So it's so so from from my point of view the dollar is very strong still.
>> I'm so glad that you clarified it because um I know there there are so many different perspectives on this and you looking at the dollar euro exchange rate is certainly very very important and I'm glad that you brought it up and it's it's interesting to see to to hear that because um there's this segment of um of commentators let's say um who really focus on oh you know, China is selling US treasuries and this means dolorization. But but that's a very shallow way of looking at at this issue as you mentioned because there are so many more important factors and nuanced details that need to be considered in order to even make that statement and and what we see up and down up and down. That's certainly sort of the volatility in the market and and transactions, but the larger picture is is what you just described. And I think that's exactly what we need to be paying attention to.
>> Well, you you mentioned China. uh you see the the the central bank of China has has actually been selling treasuries but but China has not been because what what they do is is they shuffle off the US treasuries and and and put them on other balance sheets of stateowned financial institutions in China. So China isn't selling, it's buying. If you if you if you only look at the balance sheet of the central bank, which most people do, and journalists report on it, they say, "Oh, China, you know, ddollarization, chi China's selling treasuries, oh, what's what's that going to do?" And so forth. But you you have to look at all the financial institutions in China uh the the the state controlled financial institutions and if you look at all those and aggregate all those balance sheets up the treasury holdings are increasing. They're they're not decreasing. So that that that's that's why the narrative around this ddollarization thing mo most of it is just there's a big gap between the rhetoric and the narrative and and the reality of what's going on. And and to get a handle on that, one one very quick way is to look at the the most important price in the world is probably the dollar euro exchange rate. And and in my view, although the dollar is not as strong against the euro as it was, you know, two and a half years ago or It's it's it's it's very strong.
>> Well, I'm glad I'm glad that we touched upon that subject because I know many of the viewers are interested in it and they would like to have a clarification of what's actually going on versus as you as you mentioned the mainstream sort of independent media rhetoric. And this is a fascinating I think part of the discussion that um maybe we should record a separate video on just to really dive into the details and sort of explain the main points that uh we need to keep in mind. But we we started with the discussion um of of course of the Middle East and the war um has imposed substantial fiscal costs on on Washington. The war with Iran has cost the United States government at least $29 billion in direct military expenses and this is according to Pentagon estimates. So the real number is probably twice that amount. At a time when US debt is already at historic levels, how concerned are you about the long-term budgetary consequences of another major military engagement?
>> Well, this is the the military is well another military engagement. God, that's a that's a nightmare if I've ever heard one. The the nightmare is that we we don't even have another confrontation. But we approve the increase in the Department of Defense's budget from one one trillion to 1.5 trillion, which President Trump has requested. It's a massive massive increase. Uh and and and th this is going to be damaging because it will increase the deficit and and deficits are just deferred taxes. So that means in the future, future taxpayers are going to have to pay the interest to service the debt that was taken out to to finance the increase in the budget. this year, the current budget or or the prospective uh next year's budget for the defense department. Somebody in the future may maybe people who haven't even voted, maybe people who haven't even been born yet are going to be paying interest on the current increase in the defense department's expenditure or budget. So it's it's it's a it it means that interest expenses for servicing the debt are going to be going up. And and what that means in short is that now we have about 22% of taxpayer taxes that that go to disservice debt. In other words, you you you pay a dollars worth of taxes and and only 80 cents out of that dollar is available for e either receipt of government services, receipt of government transfers to you. So it's 20% is just siphoned off and taken away and and disappears into financing the deficits and basically the debt accumulation that's occurred in prior years.
>> and that 20% is probably going to grow because the US debt is growing. We're taking on more and more debt. We're operating at a deficit and now that we spend I think it is $1 trillion a year just to service that debt we ought to understand that that $1 trillion is going to transform into 1.2 2 1.5 or even more per year if this.
>> Yeah. The the the Congressional Budget Office, the bipartisan Congressional Budget Office has has this growing uh and uh and I'm I'm not exactly certain uh the the end point. I think I think we're talking about within within 10 years it's going to be up to about 30% instead of 22. Right? It's exponential growth effectively going forward if things remain as they are.
>> Right? So, so the the and the easiest way to think about the whole debt because it's it's very large, you know, 39 trillion dollars and and growing and and the debt held by the the public is, you know, a little over 100% of GDP. So, those numbers are hard for people to understand. Well, you have to think about it is that debt has to be serviced. And and what does that mean? That means interest has to be paid on the outstanding debt. And and that interest is is your taxpayer t taxes going [snorts] to the government that that produce no government services. They produce no government trans current transfers. All they all they are doing is paying for the expenditures that have been made in the past by somebody which which maybe you know you you you haven't even been around to vote on on whether th you haven't even agreed basically for a lot of the people paying their taxes and servicing the debt. they they haven't even been voters who nominally approved the expenditures that were actually made that incurred the debt in the first place that they have to be servicing. So it's a so it's a very unfair situation when whenever you have a a budget a government budget that isn't balanced you're you're pushing off taxes to the future and they and they have to be paid through debt service. So the idea that we that somehow this is free money is a joke.
>> Absolutely. And it's it's interesting to see this too because under Trump, the increase in military spending has been quite shocking. And of course, the only way out is to increase taxes or to cut government spending. And neither one is a politically uh politically let's say favored um decision because it would be a political suicide to cut government spending on Medicare for example or to substantially increase taxes. So there's really no good solution, no good way out of the situation, is there?
>> Well, the only Yeah, there is a good way out of the situation and that is to change a US constitution, amend the US constitution under article five, the US constitution and if if the constitution was changed so that in in effect the the constitution read that with the exception of times of war or times of recession, you had to be balancing the budget. And that that by the way that's what we were doing in the United States. We had the typical classical economic fiscal orientation until the great depression and and the new deal. And what was that? There there was one one constitutional provision. the constitution was followed in the sense that there are very few things in the US constitution that are enumerated that the government can engage in and spend money on. So, so that constrained things and the other was an informal rule this not a constitutional but an informal rule and the informal rule said that you had to balance the budget unless you were in a recession or in a war and and then you could in engage in deficit finance but you had to pay back with s with surpluses those deficits been accumulated ated. So a after the war or after the after the recession and as as a result we had number one the size of the US government in proportion to the overall economy was relatively small and also the debt to GDP was small. it be before the before the great uh depression the debt to GDP was around 15% something like that of GDP so we we had accumulated a little debt but not not very much.
>> um
>> so as a result of that the interest burden that people were paying that current people were paying for activities that had been taken place in finance by deficit finance prior to the to that point was very small.
>> Very interesting. That is fascinating.
>> And and and you you you really have to look at the interest payment. Another simple way to look at it, it's just a burden. Mhm.
>> If if if 20% or a little over 20% at 22% of what I'm paying in taxes is siphoned off for for no benefit, you know, it's it's a that's a pretty big tax on the tax.
>> Absolutely. And we just spoke about the military budget. The United States military budget for 2026 sits at approximately $1 trillion, which makes it the largest defense expenditure in the entire world. And US spending accounts for about 33% of all global military expenditures. So that kind of puts everything in perspective. Um because with the recent, you know, we just spent $29 billion according to the Pentagon and that's on uh direct military expenses striking Iran. So clearly something, you know, the the militarism and interventionism that is financed by taxpayers has to be addressed. And of course, we often hear about the great power competition. And just for our viewers, the United States spends uh or the budget on military is $1 trillion. And that is nowhere close to uh its pure competitors, China and Russia. China has a military budget of 336 billion. So a third of ours. And Russia has a military budget of 190 billion. So even smaller than China's and this is according to uh Peter Peterson Foundation um that I just pulled up quickly here. So that sort of puts everything in perspective and uh the the expenditure on on military on the military and on what they call defense which very frequently in reality is offense is is quite shocking given that we uh have these large deficits and the growing truly uh surging national debt.
>> Absolutely. Now, also ju just to put things into context, I'm just uh double checking. You know, yesterday we uh uh we we had one of one of our big bombers went down on at Edwards Air Force Base. It crashed a eight the eight member crew was uh was killed. it it's a B-52 Strata for fortress that went down and and to replace that now uh the the updated replacement is a B-21 Raider and the cost is is what $750 million for one one airplane $750 million to replace that that B-52 with a with a new version. So the the the cost of the military is just mindboggling and and as you went through those numbers, I mean the US is spending more than I I don't know when you go down your list, how many countries do you have to go down? I mean, you've got you've got China, Russia, Europe, the UK on down down before you before you get to an aggregate number that's equal to the defense department budget now, which they want to increase by 50%.
>> Right? So our our big problem it it we we have a lot of big problems but one big problem is obviously defense.
>> Absolutely. Absolutely. Um maybe we can close with this question that has to do with the military and that has to do with the um US sort of presence overseas and the expenditures associated with that presence. The United States has more than 700 military bases across the world that it has to uh you know finance in terms of upkeep, operational preparedness, uh personnel and the figures are not available for us to really look at to see just how much we spend every single year on those six 700 excuse me 700 plus military bases worldwide. Now, it is fair to say that US foreign policy remains fairly consistent regardless of who's in office. So, um there's really no talk about decreasing the number of military bases overseas at this point in time. Can the United States continue financing large military commitments abroad while simultaneously servicing an enormous debt burden without triggering financial instability? Is it even possible? And how sustainable is this?
>> Well, yeah, the qu Yeah, it it is possible, but the the po the the point is it's a huge burden. So So re rather than getting into, you know, the sky is falling kind of scenarios. I I I prefer to try to clarify and articulate what kind of a what's going on and and and what how huge the burden is. Why why all these military b number one I'd ask why all the military bases? What what what are we doing with those to to start with? And and the numbers are just staggering. I mean the the number of military bases that the United States has versus China or Russia uh you know I think number two is actually the UK United Kingdom and that that's basically just a residual of their old colonial they were an empire and it it's it's it's what's left after the the residue of the empire are all these British bases. So now the US is the empire. I mean in particularly after World War I and certainly after World War II, there's no question about it. The US became the the hedgeimon the the empire and and took more the lead over from the United Kingdom and and and that's why we have all those bases. But but the question is what what benefit do we get out of this? Why why do we have these? And and do you have the numbers right there for China for example? They have they have a tiny number of overseas bases. Yes, I believe they have a military base uh in Djibouti and that is the only one um that is first and only overseas military facility that China has is Djibouti in the Horn of Africa.
>> Yeah, I I think if you count them all up, they I think it's less than 10. Djibouti. They do. Everybody's got bases in Djibouti, by the way, including the United States.
>> And France, France does as well.
>> Yeah. Right. And and France. So Djibouti is very important. And now why why is it? Look at the map. [laughter]
>> So So that's why everybody wants to be there, among other things. They probably want to be there so they can spy on the other guy. But Russia, Russia is there, too.
>> Yes. Yes, it is. And uh I don't have the numbers available for Russian military bases, but I think.
>> it's small. It's it's pretty small.
>> It's it's fairly small. Yes, I think it's um
>> what what we have we you went through the budget, the defense budget in the United States swamps the everybody else. It's it's bigger than the accumulation of you know until you go down to you know the top 10 countries or something like that. So it's big a and the number of overseas bases comports with that. It's exactly the same. The number of US bases is way greater than than all all the other ones going down.
>> Absolutely. Dr. Dr. Hanky, thank you so much for such a fascinating conversation. Um, I would love to have you back on the program to discuss several of these topics that we sort of brought up in in greater detail. Um, and I hope that you come back for a new episode. Thank you.
>> That'd be great, Lena. Look forward to joining.