How the U.S. Weaponized the Dollar (And Stablecoins), with Eddie Fishman, New York Times Bestseller

0:00 In February of 2022, when Russia launched a full-scale invasion of Ukraine, and the US and Europe within just 48 hours imposed sanctions on the Central Bank of Russia, and what you had in the ensuing weeks was utter chaos.

0:13 People lined up at ATM machines. The Russian stock market was closed for the entire month of March 2022.

0:19 Just a few officials in Washington and Brussels signing some documents could cause a nationwide bank run in Russia and shut their stock market for an entire month. What is China trying to build here?

0:28 What's their strategy? What China's strategy is, it's not really to displace the dollar, is they're just trying to create an insurance policy.

0:35 Let's say a year from now, Xi Jinping decides to launch an invasion of Taiwan, and the US retaliates by sanctioning the biggest banks in China.

0:43 They then want to have this infrastructure, this insurance policy in place that they then can scale up rapidly.

0:50 Economic story of 2025 really was when China imposed export controls on these rare earths to the United States.

0:56 I mean, within a few weeks, Ford had to shutter factories in the Midwest, uh, because they didn't have enough magnets.

1:01 Raytheon, uh, being concerned that they didn't have the, enough magnets for their Patriot missile system. There are significant concerns that, you know, these magnets pose a sub- a substantial threat to the US.

1:12 Eddie, if we are entering that new reality of economic warfare, do you think we'll see more sanctions and less wars?

1:19 You know, the global economy just doesn't make sense in today's geopolitical reality, and so you're gonna see more sanctions, more tariffs, more export controls, more industrial policy.

1:27 This is actually something I predicted in my book Chokepoints, where, you know, as an analyst, I'm happy that my prediction was right, but as a citizen, I'm sad that it's coming to fruition.

1:39 Welcome to another episode of 51 Insights, today with Eddie Fishman. Eddie, welcome to the show. Thanks so much for having me on, Marc. I really appreciate it. Eddie, thank you for coming.

1:50 It's a pleasure to have you here today. Eddie, you spent nearly a decade at the US State Department designing sanctions on Iran, Russia, and other adversaries.

2:00 Your book, Chokepoints, that you published in 2025, became a New York Times bestseller and Financial Times Business Book of the Year finalist.

2:09 You trace how the US turned control over the dollar, Swift, semiconductor supply chains, and maritime insurance into instruments of statecraft.

2:20 Your central concept, chokepoints, are non-substitutable domains dominated by a single state, and they give Washington extraordinary leverage, but their overuse drives adversaries to build alternatives.

2:34 Eddie, I'm very excited to have you here today. We have lots of ground to cover. And my first question to you is, you wrote about chokepoints.

2:43 Can you explain our audience of institutional allocators, investors, decision-makers, what did you mean by chokepoints, and how do they have to think about geopolitical risk? Sure. Well, thanks so much.

2:58 And I think that, uh, you know, when my book came out a year ago, uh, i- in some ways it was a bit harder to explain the concept.

3:06 I think now it's, it's much easier, especially with what's going on right now, uh, in the Gulf.

3:11 Historically speaking, geographic chokepoints have been predominant, like the Strait of Hormuz, where you have a narrow waterway where one in every five barrels of oil flows through every single day.

3:22 And throughout history, these geographic chokepoints have provided the countries that control them substantial geopolitical power. You're seeing it right now.

3:30 The, the main reason that Iran has any fighting chance really against the US and Israel is that it's able to stop tankers going through the Strait of Hormuz and spike oil prices.

3:40 They're currently, uh, you know, go- going well above $100 a barrel.

3:44 But what happened in the 1990s after the end of the Cold War, where China, Russia joined the global economy, they started using the dollar to clear cross-border transactions. They integrate into global supply chains.

3:57 We have the creation of these invisible chokepoints in the global economy that have similar characteristics as the physical one, but can just be controlled, uh, with legal means as opposed to physical means.

4:08 Uh, the most important in the global economy today is the US dollar. It's used in 90% of all foreign exchange transactions.

4:16 And as I, as I explained in my book, you know, trying to do business across borders without access to the dollar is kind of like traveling without a passport. It's effectively impossible, uh, for a global business.

4:27 And what that means is, because the US government can actually block any foreign government, company, individual from using the dollar, it gives the United States government tremendous geopolitical power without having to put troops in harm's way.

4:43 Uh, to define sort of what a chokepoint is, I'll give you kind of a simple framework, and then we can kind of discuss. There are really three c- characteristics you need for any good or service to be a, a chokepoint.

4:54 The first is you need one country or a close coalition of allies to control a dominant, concentrated market share. You know, being a market leader is not enough.

5:04 You know, if you control ten, 20% of a market and you're the leader, that's not a chokepoint. You usually need 80, 90% market share at least.

5:11 That's why the dollar, like I said, 90% of foreign exchange transactions, other chokepoints like rare earth minerals that China controls about 90% of global refining capacity, or AI chips, where US companies like Nvidia have over 90% global market share.

5:26 In addition to having dominant, concentrated market share, you need a difficult, uh, substitutability. If You have dominant market share, but the good could be substituted in a month or two.

5:36 It's not that valuable as an economic weapon.

5:39 I think we saw that with medical masks in the early weeks of the COVID pandemic, when the US lost access to medical masks from China, but we were able to substitute it very, very rapidly.

5:48 And then the final, uh, component you need is the ability to weaponize that choke point with asymmetric harm. You need to be able to cut someone off from it and impose devastating harm on them without harming yourself.

5:59 Certainly, the dollar has this characteristic. The US could cut off a big Russian company from the dollar. It's terrible for that Russian company. It doesn't affect Americans at all.

6:08 But there are other choke points that have much more sort of symmetric harm, and it makes it harder for governments to use them as geopolitical weapons. Eddie, can you walk us through a choke point in practice?

6:19 When you were at the State Department and you decided to cut off a country from the dollar system, what actually happens in the first 48 hours after that decision? Yeah.

6:29 So I mean, uh, there are not that many examples where it happens that swiftly, where you fully cut off a country from the dollar in one fell swoop.

6:37 I think the closest analogy we have to that was in February of 2022, when Russia launched a full-scale invasion of Ukraine, and the US and Europe, within just 48 hours, imposed sanctions on the Central Bank of Russia, plus the largest banks in Russia, like Sperbank and VTB.

6:55 And what you had in the ensuing weeks was utter chaos.

6:59 You had e-effectively a nationwide bank run across all of Russia, where you had people lined up at ATM machines trying to pull out their money, convert their rubles to dollars or any foreign currency they could.

7:10 The Russian stock market, which before, uh, this crisis had never shut down for more than a day or two at a time, was closed for the entire month of March 2022.

7:19 Uh, they effectively froze their entire, uh, capital market. The economy totally seized up and was, was headed for a precipitous decline.

7:27 You had market analysts at places like Goldman Sachs and JP Morgan projecting that Russia's economy was gonna contract by ten or fifteen percent in 2022.

7:35 But what happened was, the reason that that wasn't a more prolonged shock to the system, was that while the stocks of Russia's economy were frozen, sort of the, the accounts of, of big banks, of the central bank, the inflows into the economy in the form of petrodollars were allowed to continue.

7:52 So the Biden administration was hesitant to impose sanctions on Russian oil sales for fear of spiking oil prices and worsening inflation at home.

8:00 And so that allowed Russia to sort of limp along and eventually recover from that shock.

8:05 But it does show that just a few officials in Washington and Brussels signing some documents, effectively, that's what sanctions are, right? They're not putting troops in harm's way.

8:13 They're fa- bureaucrats in an office, you know, signing a few documents, could cause a nationwide bank run in Russia and shut their stock market for an entire month.

8:21 I mean, that is a dramatic power and something that I really tried to illuminate in my book, Choke Points.

8:27 And you could almost argue, like, if you just spin this further and zoom out a bit, that the US starting to apply those choke points in their geopolitical strategy is one of the reasons why we see the dollar under pressure and why we see countries like China now starting to invest in all kinds of different assets, including gold, and trying to get less dollar-dependent.

8:54 Would you agree with that, or, or what's your take on that? Definitely.

8:58 So I think the, the most interesting example of this is that in 2014, when the US and Europe first imposed sanctions on Russia, this was after Russia initially invaded Ukraine and annexed Crimea in March of 2014.

9:12 I was involved in shaping those sanctions at the State Department. Um, of course, naturally, Russia then started looking for alternative systems.

9:20 They created something called, um, SPFS, which is their alternative to the SWIFT network. And most interestingly, they launched their own domestic payment system called NSPK and their own card network called Mir.

9:32 And this actually wound up being very valuable, uh, to Russia, because in 2022, when these big sanctions were imposed that I just discussed a few minutes ago, both Visa and Mastercard pulled out of Russia.

9:43 And there were tens of millions of Russians that had Visas and Mastercards.

9:47 And yet, even after Visa and Mastercard cut tries with-- ties with Russia, their cards continued to work for domestic transactions because Russia had forced them to move card payment processing to a system in Russia.

9:59 They basically onshored that infrastructure. But I think the thing that's even more interesting than what Russia did in 2014 is that China did the same stuff, right?

10:08 So China in 2014, 2015, created something called CIPS, or the Cross-Border Interbank Payment System, which was their alternative to SWIFT, um, that also not only is, is payments, uh, messaging, but also payments processing.

10:21 And the reason I think it's so interesting is that, uh, in 2014, China was not targeted by sanctions, right? It was Russia that was targeted.

10:28 But Chinese leaders looked at the situation and said, "If this can happen to Russia, one day it can happen to us, too. And we need to take steps to really provide ourselves with financial sovereignty."

10:39 So they-- It started with this, the CIPS that I just talked about, but over time, they also launched a central bank digital currency, the eCNY, which is by far the largest, uh, central bank digital currency in the world.

10:50 Um, and they also created, uh, a platform called mBridge, which enables, uh, central banks around the world to clear cross-border payments using their own digital currencies without touching US financial s- infrastructure at all.

11:03 All of these initiatives are driven by fear of US financial sanctions. So it is a clear, I would say, reaction to the weaponization of the dollar. And how do we need to think about this from a geopolitical perspective?

11:18 I mean, if you look at this and you say globalization has been the prevailing narrative of the last twenty or thirty years, and now we're entering a period where certainly, uh, countries like the US start weaponizing their dominance in certain economic areas.

11:34 Probably the, the latest and best example of that is, are the tariffs imposed by the Trump administration. What's the end game here? How does this play out? Yeah.

11:43 So I think that it's important, I think, to zoom out for a minute because, you know, sometimes people ask, well- Is this a, a story about Trump?

11:51 You know, is it just that Trump loves weaponizing American economic might, and that's why the US is doing this? The answer is no. This is a trend that predates Trump and that will almost certainly outlast him.

12:02 Every single US president in the 21st century, from Bush to Obama to Trump to Biden, has imposed sanctions at twice the rate of their predecessor.

12:12 So you have this sort of secular trend where there's a doubling of sanctions with each administration.

12:18 And I think when you see that kind of a statistic, you have to ask yourself, this can't just be, you know, that Donald Trump and Barack Obama don't agree on anything except for the fact that we should always weaponize the dollar.

12:29 There has to be a structural driver.

12:31 And the way that I would define this is that the global economy is still designed for the benign geopolitical environment of the 1990s, but we're living in a period of intensifying great power competition.

12:42 So decisions that were made in the '90s that made a lot of sense, you know, US companies saying, "We should source our, uh, raw materials from Russia or our, uh, our manufacturing, uh, products, uh, from, from China."

12:54 Those made sense 'cause who, who was worried about Russia and China weaponizing them against them-- us, right?

12:59 Or even Chinese decisions to say, you know, "We're making these big surpluses with our exports, let's invest them in US treasuries."

13:06 That made sense for China 'cause they weren't worried about us weaponizing against them.

13:10 So I think one way you can kind of view the rapid proliferation of economic warfare, by the way, also not just an American story, something that's happening around the world, is that it's these haphazard efforts by governments everywhere to try to retrofit the global economy for today's geopolitical reality.

13:29 So I think the end game, uh, is that we will eventually have a fundamentally reshaped global economy. We'll have a global economy that is, is significantly less interdependent at a global scale.

13:40 Uh, I think at the very least, uh, you will have more, uh, of a global economy defined by blocks.

13:45 I think in a worst case scenario, you could have something that looks much more chaotic, kind of like every nation for itself.

13:50 But that to me is the end game, and it's the type of situation where it's not gonna happen overnight.

13:56 You know, you-- if you were to fall asleep today and wake up next year, you'd probably say, "Hey, not much has changed. We still have a lot of trade with China." Um, you know.

14:04 But I think if you were to go to sleep today and wake up ten years from now, uh, the world would look totally different. And Eddie, one thing you did as well is you compare sanctions to antibiotics.

14:14 Overuse breeds resistance. The US has now imposed three times as many sanction as any other country. Is the US already peak effectiveness?

14:23 And how do we have to think about how they're gonna use that in the future, connecting to the question before?

14:28 Like, are those adversaries suddenly just exiting the dollar, and how long can they keep playing this game until those measures lose effectiveness?

14:37 You know, it's rare as an author that you come across an analogy that's really apt, but I do think that sanctions and antibiotics works well for two reasons.

14:45 One is for sure, overuse, using sanctions for, uh, for missions that they're not, uh, designed to solve, for problems that they're not fit, uh, to address. That certainly, um, creates more harm than good.

14:58 It does breed resistance, and it doesn't solve the underlying problem, similar to, you know, when your doctor prescribes you an antibiotic for a viral infection.

15:06 Um, by the same token, on the flip side, which, uh, you know, I think is also worth recalling, is that when there actually is a problem that sanctions are worth solving, you should hit it hard with high doses, right?

15:18 Um, they tell you, you know, uh, e-even if, if you have a bacterial infection and you start taking an, a ten-day antibiotic and after two days you feel better, you gotta finish the course, or else you're not gonna get rid of the problem.

15:29 And I think that that's just as much of a pathology of US policy.

15:32 If you look at Russia, for instance, they were a, a country that was highly susceptible to US sanctions, deeply dependent on the dollar-based system, deeply dependent on US technologies.

15:42 And I think one of the problems of US sanctions policy against Russia was that we escalated incrementally.

15:47 We didn't, uh, sort of hit it hard with high doses, and as a result, Russia did, uh, wind up weathering the storm and, and breeding resistance. So I think that you need to sort of look at both sides of the coin.

15:57 To your question on peak sanctions, um, my short answer to that, and it might disappoint people who d- who think that sanctions are bad, is that no, we are, we are anything but, uh, close to peak sanctions.

16:09 And that's because choke points are not immutable. For sure, over time, some choke points will lessen in their salience, but others may emerge that are even more powerful. So you think about it now.

16:20 Let's say we, we're moving toward a world of, you know, currency multipolarity, such that in five or ten years, the dollar is still the top dog.

16:29 But, you know, if the US sanctions you, you have ano- a number of alternatives that may allow you to deal without the dollar, right?

16:36 But let's also say in that year, that world, five or ten years from now, all of our businesses are completely run and completely dependent on running on LLMs from OpenAI and Anthropic and Google. Well, guess what?

16:48 All three of them are US companies, and the US government can completely shut off your access to it, and you can't stockpile it.

16:54 So if you're running your business on one of these LLMs and the, and the US government decides to shut you off today, well, guess what? Your business shuts down today.

17:02 So, uh, you know, uh, to me, I, I think that we don't wanna get too our hopes up that economic warfare is going away.

17:08 The choke points that the US uses, that China uses, that Eu-Europe uses may change over time, but I think it will continue.

17:15 And then even with the dollar, and I know your audience, uh, contains a lot of folks who pay attention to digital currencies. You know, the Trump administration is making quite an interesting bet right now.

17:25 They're basically assessing that we are moving toward a fundamentally different system, uh, for, for finance, that we are moving toward a system that digital currencies are gonna play a bigger role.

17:35 And their bet is that the way for the US to dominate in that world is not through a, a sovereign currency, not through a central bank digital currency, but through privately issued stable coins, you know, these, these privately issued digital currencies that are pegged to the dollar, right And in that world, let's say they're right, and we start having whole countries like Argentina and Venezuela and Turkey that are using dollar-pegged stablecoins for everything, paying employees, buying your morning coffee.

18:03 Think about the power that that gives the US government. These stablecoins are not beyond the reach of the US government.

18:09 I mean, at, at the very basic level, in order for you to have a dollar-pegged stablecoin, you have to be able to peg the coin to the dollar, which means you need a whole lot of US assets.

18:19 You need a ton of US Treasuries, right? I think Tether now is one of the biggest buyers of US Treasuries. But what happens if the US government says to Tether, "Sorry, we've frozen your accounts."

18:28 Tether no longer exists, right? So I mean, to me, like the idea that these stablecoins exist outside of the realm of the control of the US government makes no sense. Yeah, that's definitely a good point.

18:38 And, uh, for our listeners who might not be familiar with, uh, that example, that was primarily enabled by the Genius Act that came into force last year, uh, which allows private companies to issue stablecoins, and they need to back it primarily by US Treasuries.

18:55 You've also written, Eddy, that the, the biggest risk isn't a single adversary, it's the gradual erosion of choke points. And when we come back to that currency example, China, for example, is building the mBridge.

19:09 Uh, Russia is building a ruble stablecoin that processed over ninety-three billion US dollars last year. So those are, uh, great examples. Let's zoom in on China a little bit.

19:20 China banned crypto domestically, but it's allowing controlled experimentation in Hong Kong. The e-CNY has program surveillance features Treasuries can only dream of, but lacks international adoption.

19:32 Can you walk us a little bit through that China example, and, and what is China trying to build here, and what's their strategy?

19:39 Yeah, I think, I'm glad you asked this, Marc, because China's strategy is oftentimes misrepresented. I think if you conceive of China's strategy as they're trying to displace the dollar, by any

19:52 metric, by any sort of way you look at it, they're, they're, they're not even close to succeeding, right?

19:57 Uh, th- I mean, all of these projects are a fraction as big as the US alternatives, and even the e-CNY is a big, uh, is the biggest central bank digital currency.

20:06 But if you add up the market capitalization and volume and all the dollar-pegged stablecoins, it dwarfs the e-CNY. So, but I think what China's strategy is, it's not really to displace the dollar.

20:18 They're actually shooting for something way less ambitious. What they're trying to do is they're just trying to create an insurance policy.

20:26 They want parallel infrastructure to exist such that, let's say, a year from now, Xi Jinping decides to launch an invasion of Taiwan, and the US retaliates by sanctioning the biggest banks in China.

20:39 They then want to have this infrastructure, this insurance policy in place that they then can scale up rapidly at the time of crisis.

20:47 And so the goal for them is really to, to achieve sort of like a minimum viable product, uh, you know, or sort of a minimum viable scale stage, uh, for all of these projects, such that they can function as insurance.

20:58 And I think with some of them, they've already achieved that. Certainly with CIPS, the Cross-Bor- Border Inter-Bank Payment System. This is not digital currencies. This is just clearing RMB transactions.

21:08 I mean, they now have over a thousand, uh, member banks, uh, they-- from over a hundred and twenty countries that are part of this system, and it's about one-seventh the size of Swift.

21:19 So, I mean, it's far behind the size of Swift, but it's not nothing, right? It's not like, uh, one-one-hundredth the size of Swift or something like that.

21:25 And it's obviously grown from a very low base, you know, so it's growing ve- quite quickly. So I think China is doing quite, um, an effective job at the sort of less ambitious goal that it set out to achieve.

21:37 If you look at China today, what are China's major choke points, and how have those choke points evolved over the last ten, twenty years? Yeah.

21:47 So while the US choke points tend to, um, gather around two industries, finance and technology, right?

21:55 So the dollar, other financial services, then you have, you know, uh, advanced semiconductors, uh, AI, uh, uh, services. You have, um, jet engines, cloud services.

22:07 These are US choke points that are either financial or technical in nature. You know, Wall Street and Silicon Valley. China, their choke points are much more based in manufacturing, supply chains, uh, and clean energy.

22:21 So China now is by far the world's dominant manufacturing power. They're heading, uh, quite rapidly to having about fifty percent of global manufacturing output.

22:30 And so when you look at areas like rare earth elements, which are used in all manner of products, you know, from, uh, electric vehicles to drones, um, to engines, China refines ninety percent of the global supply, and they also produce ninety percent of the global supply of rare earth magnets, which are kind of the, the end product that these rare earths are used in.

22:54 Um, and to me, this is, you know, you know, we saw sort of the biggest geoeconomic story of twenty twenty-five really was when China imposed export controls on these rare earths to the United States.

23:05 I mean, within a few weeks, Ford had to shutter factories in the Midwest, uh, because they didn't have enough magnets.

23:11 You had, uh, you know, uh, Raytheon, uh, being concerned that they didn't have, uh, the, enough magnets for their Patriot missile system.

23:19 So I mean, there's significant concerns, uh, that, um, that, you know, these magnets, uh, pose a sub- a substantial threat to the US. Um, China also has choke points in other parts of the clean energy supply chain.

23:32 If you look at batteries, uh, China dominates, uh, the production of advanced batteries. Uh, one of the most salient examples there is there's a company in Silicon Valley called Skydio.

23:42 They're the largest drone company in the United States. They were sanctioned by China, and they actually had to ration batteries such that each customer only got one battery per drone.

23:53 And if you think about it, you're using a drone For a military use case, for surveillance, or for an industrial use case, and all you have is one battery, you can't replace a, a missing battery.

24:02 I mean, it's a significant problem. It limits the efficacy. I mean, China now also is very rapidly becoming the world's biggest automaker.

24:10 You know, and that's why, uh, the United States has imposed 100% tariffs on Chinese electric vehicles for fear that if we didn't have those tariffs in place, companies like Tesla, General Motors, Ford, would be wiped out by cheap electric vehicles from companies like BYD, uh, in China.

24:26 So those are the most salient Chinese choke points today, and for a lot of them, the US doesn't have a great near-term answer.

24:33 I think the Trump administration is doing, um, an admirable job trying to break China's choke point over rare earths. But even in the best-case scenario, that's gonna take several years, uh, to get done.

24:44 And how does it look in the AI landscape? I mean, one of the key ingredients for AI is compute, and ingredient for compute are chips, and chips are still primarily produced in Taiwan by Taiwan Semiconductor Company.

24:59 Does the US have an edge, or, uh, do they need to be worried about future potential choke points on the Chinese side? To produce best-in-class AI, you need a handful of ingredients, right?

25:11 You need really good researchers, which I think the US has the best, but China's close, close to parity. You need a lot of energy, which China is ahead of the US in.

25:21 Um, you need good algorithmic design, which probably, again, the US may be a little bit ahead in because our researchers are slightly better, but again, it's close.

25:30 And then you need a lot of computing power, and this is the area where the US holds a huge insurmountable advantage because, you know, the makers of the top AI accelerators like Nvidia, AMD, they're all US companies.

25:42 Over 90% of the AI accelerators, these chips that actually are used to train AI algorithms, um, those are all US companies.

25:52 So I think if the US is able to keep those chips only available to US AI labs, it has a, a huge lead in this AI race.

26:04 On the flip side, if China succeeds at accessing these chips in large scale, either through smuggling, which they've gotten very good at, um, or arguably more problematic, just the US lifting some of these restrictions.

26:16 And what I'll say is, in the last six months or so, at the behest of Jensen Huang, you know, the CEO of Nvidia, the Trump administration has started weakening some of these AI chip restrictions.

26:26 Not all-- They haven't destroyed them, you know, so the, the best chips still can't go to China.

26:31 But we've gone from China only being able to get chips that are sub-substantially worse than the ones that are available to OpenAI and Anthropic and Google to ones that are maybe a little bit worse, right?

26:42 Um, if that keeps going, then yeah, China will probably catch up to the United States, if not outpace us, because again, they actually do have an advantage when it comes to energy.

26:51 So if they were to achieve parity with the US in chips, I think they would have an, a leg up. But that's really up to the US government.

26:57 If the US government wants and, and they're determined to do so, they can keep China, uh, from obtaining these chips in large numbers.

27:04 But there's an active debate going on right now in the Trump administration with one camp saying, "We need to prevent China from getting these chips because otherwise we're gonna lose the AI race."

27:13 That's kind of been the consensus view, uh, from the Biden administration as well.

27:17 And then there's another camp that I think currently sort of has a leg up, uh, led by David Sacks, which says, "We should sell as many chips as we can to China because then they become addicted to our technology."

27:29 Um, and I think if that's the policy, sure, maybe China will use our chips in large numbers, but they'll also have LLMs that are better than OpenAI and Anthropic and Google and, you know, we'll see if we like that.

27:40 Eddie, I would also love to jump a bit deeper into the Iran conflict that is playing out right now.

27:47 And I wanted to ask you, is there anything that you came across when you look at this conflict and how the US operates here that reminds you of the things that you wrote in your book, Choke Points, and it feels like, "Oh, this is exactly what I laid out, and this feels like a blueprint to what the US is doing"?

28:09 Yeah. Look, I think there are a few important lessons here. One, and this actually ties back to our conversation about antibiotics. You know, if you use sanctions for a job that they're not suited to accomplish,

28:23 you oftentimes create e-even bigger problems.

28:27 So during the Bush and Obama administrations, those administrations said, "We're gonna use sanctions for one specific purpose against Iran, and that is dealing with their nuclear program.

28:37 We don't love the fact that the Iranian government is terrible, that they, you know, uh, commit human rights abuses, that they have this Islamic ideology.

28:47 We don't like the fact that they support groups like Hamas and Hezbollah. We realize that sanctions are not suited to achieve regime change.

28:55 We have to choose, so we have to prioritize what our goal is if we're gonna use sanctions." And that resulted in the Iran nuclear deal in 2015, right, which substantially constrained Iran's nuclear program.

29:07 Trump, when he came in in 2017, what he said was sanctions were working so well, if we only did more sanctions, we could even get regime change.

29:15 We might get the Islamic Republic either to collapse, or they would just change their ideology entirely such that they're not supporting Hamas and Hezbollah. They no longer want missiles.

29:25 Women, uh, you know, are, are liberated, uh, and given f- uh, the rights of everyone else. And I think that while it's a noble objective, sanctions are a limited tool. They're not gonna achieve regime change.

29:37 And the concern I have is once you sort of come out and say, "That's our goal," instead of-- it, it's likelier that a president's gonna escalate instead of backtrack. So instead of saying, "You know what?

29:47 Sanctions d- uh, haven't achieved this goal. Let's change our goal to something less ambitious," they're likelier to say, "Sanctions haven't achieved our goal. Let's escalate to military force."

29:56 That's what happened in Venezuela when Trump tried to use sanctions to push out the Maduro regime. That didn't work, and so they escalated to military force.

30:04 They used the special forces to nab Maduro and his wife in Caracas, and now they're a couple miles from my apartment, uh, in Brooklyn at the Metr-Metropolitan Detention Center.

30:13 I think with Iran, you know, Trump tried to use maximum pressure to achieve regime change. When that didn't work, when the sanctions failed, they escalated to the use of military force.

30:22 And so it's a lesson that When you're using economic warfare, you just have to pick an objective that can actually be accomplished with these types of means.

30:31 I think the other thing that I think is, is relevant now, and I think it's, uh, depending on when this episode comes out, uh, could be very, you know, could, could change.

30:39 But, you know, one of the biggest Achilles heels for the US when it comes to foreign policy, but certainly economic warfare, is how anxious we are about higher energy prices.

30:50 Um, when it came to Iran sanctions, uh, uh, under the Obama administration or Russia sanctions under the Biden administration, both of them were very nervous about any sanctions that could potentially take oil supplies off the market and spike prices.

31:05 I talked about this earlier. That was the big problem with Biden's sanctions on Russia.

31:09 Even though they shut down the financial system, they allowed Russia to keep generating petrodollars because we were so worried about taking Russian supply off the market.

31:18 But what's happened now, the war in Iran has shut down the Strait of Hormuz, right? Now, as I mentioned earlier, one in every five barrels of oil goes through that strait on a normal day.

31:27 Uh, you know, you take that offline for a few weeks, you're getting oil well over a hundred dollars a barrel. Uh, so

31:34 I think the real question is: Is Trump going to show the same Achilles heel that other presidents have had on oil and say, "You know what? We can't tolerate this, and so we need to, we need to back down.

31:46 We need to exit this conflict that we started," even though the Supreme Leader, Ayatollah Khomeini, he's dead, but his son has taken over. So it's not like you've had regime change.

31:55 Um, and I think that'll be, uh, something I'm watching out for.

31:58 And I think one of the lessons I recommend in Choke Points is, look, the only way for us to deal with this is to reduce our consumption of, of oil and gas, right?

32:06 We're already the world's dominant producer of oil and gas. We've achieved e-energy dominance, and yet we're not insulated from these giant price spikes.

32:14 The only way to actually insulate ourselves is to reduce our consumption, and that's not something we've, we've really done in any serious way. You mentioned Achilles heels and one of the Achilles heels of the US.

32:25 How do we have to think about Achilles heels when we think about Europe or China? And anyway, like the state of Europe, I mean, what are the choke points available to Europe and, and what are their Achilles heels?

32:36 Uh, the US should not be using economic warfare against our allies. I think that's very clear.

32:41 Um, the idea that we should be opposing sanctions, tariffs on Europe or Canada, I mean, it, it-- there's no strategic logic to it.

32:48 And not only is it bad for us economically, but to get back to what we said at the beginning of the conversation, you know, when the US sanctioned Russia in twenty fourteen, it inspired China to cr-create alternative payment systems to the dollar because the Chinese looked at Russia, and they said, "If it ca- happen to Russia, it could happen to us."

33:03 But guess what? It didn't inspire Europe or Canada or Australia or India to create alternative payment systems 'cause they don't view themselves in the same light as Russia or China.

33:12 They don't, they don't view themselves as US adversaries.

33:14 What I worry about is last year, twenty twenty-five, by virtue of the Trump administration whacking the Europeans, the Canadians, other US allies with sanctions and tariffs and export controls, it's now created this broader incentive to hedge, where it's not just US adversaries, it's everyone who sort of sees an incentive to hedge.

33:31 You see the Europeans now, the, the head of the European Central Bank, Christine Lagarde, is pushing for a digital euro. And she said that it's not just a currency.

33:39 This is a statement about our political sovereignty, that we need this to defend ourselves, you know, against, uh, an unnamed adversary that, that's clearly the United States.

33:48 So I think there's significant downsides to the US using economic warfare against allies. That's never something we should do.

33:54 And then when it comes to Europe, I mean, the, the biggest weakness they have, it's not economic strength. They actually have a lot of levers they could pull. It's political will.

34:02 Uh, still in Europe, you know, you need a majority, uh, if not unanimity, to make a lot of key decisions. And a lot of the times, you just can't get that kind of political consensus amongst European countries.

34:14 And you saw it, uh, with respect to the US. You know, uh, instead of basically fighting back when Trump imposed substantial tariffs on Europe, the Europeans said, "You know what?

34:23 We'll just agree to this lopsided trade deal" in summer of twenty twenty-five because they couldn't get consensus to do their anti-coercion, uh, instrument and actually impose tariffs and, and, and other measures on the United States.

34:36 But look, if the Europeans wanted to, they, they have a lot of leverage over us. I mean, even Silicon Valley tech companies like Meta, I think earns, uh, almost twenty-five percent of its revenue in Europe.

34:47 So you think about a scenario where additional regulations, uh, decrease, uh, uh, US tech giants' revenue in Europe. I mean, that would be catastrophic for, uh, for market, uh, valuations in the United States.

35:01 And as you know, Mark, I mean, the entire US stock market right now is, is effectively buoyed by big tech, right? It's the Magnificent Seven.

35:07 And if all of a sudden they start losing revenues in Europe, um, you know, that would be bad for everyone in the US. And so that, that's one. But I mean, there are others too.

35:14 I mean, ASML is a company in the Netherlands that produces, uh, machines, uh, these, uh, EUV machines that you need to produce advanced semiconductors. They have a hundred percent of the market.

35:24 So if you can't buy those machines, you know, you're not gonna be starting up chip fabs in Arizona or anywhere else in the United States. So there are levers that Europe can pull.

35:33 But look, I hope it doesn't come to that. The US and Europe should not be fighting economic wars against each other. It really doesn't make sense.

35:39 But, you know, if the Europeans are forced to, they certainly have the means to retaliate against the United States.

35:44 Eddie, if we are entering that new reality of economic warfare, do you think we'll see more sanctions and less wars, or the other way around?

35:53 I think almost certainly we're gonna see more economic warfare, uh, in the coming decade, and that's 'cause of the structural mismatch I mentioned earlier.

36:01 You know, the global economy just doesn't make sense in today's geopolitical reality.

36:05 And so you're gonna see more sanctions, more tariffs, more export controls, more industrial policy to try to sort of jury-rig, uh, the global economy to fit this new reality.

36:15 In terms of real wars, um, I do worry that there is this trend now where you're seeing the US use military force a lot more, uh, in the last year.

36:23 This is actually something I predicted in my book, Choke Points, where, you know, as an analyst, I'm, I'm, I'm happy that, uh, my prediction was right, but as a citizen and a human, I'm sad that it's coming to fruition.

36:33 My concern is that, uh, if economic warfare feels like it's losing its, its bite, and certainly the US against China, for instance, the US has very little political will to impose any sanctions on China.

36:48 And, you know, if President Trump had come to me and said, "Eddie, I want to impose more economic pressure on Venezuela or, and, or Iran," before basically these wars started, I would've said, "Mr.

36:58 President, you have one option. Both of these countries are selling a, a lot of oil, and it's all going to China.

37:04 So you could, uh, threaten sanctions on Chinese refineries and banks and tell them if they keep buying oil from Iran and Venezuela, you're gonna lose access to the dollar." And you know what?

37:13 It'll cause diplomatic and economic friction with China, but it'll probably work because for these Chinese banks, they need access to the dollar more than they need to process payments for Iranian or Venezuelan oil.

37:24 That was an option that Trump had at his disposal.

37:26 But because China has shown that it can retaliate against the United States with these rare earth export controls, and we basically can't break that chokehold for at least a few years, Trump has decided to use actual war, to use kinetic military force over threatening non-violent economic pressure against China.

37:43 And so I do worry that this new factor of China basically establishing some level of deterrence against the United States has made the use of actual war more likely in the coming years.

37:55 Uh, Eddie, you also mentioned stablecoins as a tool for economic warfare. I quickly wanna touch on Bitcoin as well because- Yeah... Bitcoin was a story over and over again as a strategic reserve asset.

38:10 The US has a strategic reserve. Other countries have Bitcoin reserves as well. Is this right now more a gimmick, or is it an actual strategy?

38:20 What I will say is that it's clear that at least for now, and for the last five, 10 years, Bitcoin has grown as a store of value, right?

38:30 I think if you break down kinda the use cases of money, you've got unit of account, medium of exchange, store of value.

38:36 The dollar is dominant across all three, but it actually has different challengers in the different spaces, right? So for medium of exchange, the challengers to the dollar are the euro, the RMB, stablecoins, right?

38:50 For store of value, you know, stablecoins aren't a great store of value. Generally speaking, they don't ch- you know, they're, they're just pegged to the dollar, right?

38:57 It's like holding cash, uh, a- assuming that, uh, you know, the issuer is actually doing a good job pegging it. So when you're looking for yield, usually you're investing in, in US debt, US equities.

39:08 The alternatives, uh, in recent years, you've got Bitcoin, um, you've got some other cryptocurrencies, but the most important, of course, has been gold, right?

39:15 I mean, that's what the, you know, it's, it's not digital gold, it's real gold that's actually delivered the best, uh, returns when you think about these alternatives in the last, you know, five years or so.

39:24 Um, so I think Bitcoin does have a potential role to play as an alternative, uh, store of value.

39:32 Um, but what I'll, what I'll also say is, you know, it's shown worrying tendencies in the last six months or so because if Bitcoin is digital gold, it should have the same characteristics of gold.

39:43 You know, when, uh, you know, there's a crisis geopolitically, uh, it, it, it, uh, its value goes up.

39:49 Um, and, you know, we've seen sort of a divergence of that, uh, in the last six months as, you know, the, clearly we've had more geopolitical tension, and Bitcoin's taken a big hit.

39:58 So I think the jury's still out, uh, on Bitcoin.

40:01 What I will say, though, is even in a world where Bitcoin does become, you know, fulfills all the fantasies of, of Bitcoin enthusiasts, I don't think that that actually does much to undermine state power in the United States because, I mean, you know, the flip side of having an immutable ledger is if you have good enough analytics, you can actually figure out, uh, who's behind transactions, and you have a public ledger of every single transaction.

40:25 And so I think over time, it's very likely that the US government will have better and better capabilities to actually unmask, you know, who's behind different transactions, and they already have.

40:34 I mean, they already imposed sanctions on different Bitcoin wallets.

40:37 They've used, uh, you know, Bitcoin analyt- you know, uh, crypto analytics firms and, uh, and digital analytics to try to actually unwind certain transactions. So I, I'm less panicked about Bitcoin.

40:50 As, as somebody who thinks that ultimately it's good for the US to have some levers of economic power, I don't think Bitcoin is gonna spell the end of it, even in the scenario where it continues to grow.

40:59 Eddie, we're almost at the end of the show. Last question. What is on your radar? What are the signals that you're looking at in the next 12 to 24 months that you think are important? Oh man, there's so many.

41:11 I mean, if we're focusing on, on finance, I do think, you know, we're in uncharted territory when it comes to the dollar.

41:19 And so the real question I have is does it look likelier that we're in this base case scenario where you have gradual erosion of the dollar share across those three categories, medium of exchange, unit of account, store of value, where, with sort of different challengers eating away at each?

41:33 Or are we in sort of the Scott Bessent dream scenario, where the dollar's an even more deeply entrenched global reserve currency because US-backed stablecoins are everywhere, right?

41:44 Every, a- anywhere you travel around the globe, uh, you're able to use them. That's something I'm looking out for in the next year. Um, do we see, uh, substantial growth in stablecoins, or does it sort of plateau?

41:54 There have been some signs that as Bitcoin has fallen in recent months that stablecoin volumes have also, uh, taken a hit, which maybe suggests that they're not being used as much for payments or infrastructure, and they're still just primarily used as a way of trading, uh, cryptocurrency.

42:09 So that's one thing I'm watching out for. Uh, Europe is another factor.

42:13 You know, we, we often discount the Europeans here in the United States, but, you know, the euro is probably the best alternative to the dollar still today.

42:21 Um, it is a, uh, a currency backed by stable democratic governments. It is a convertible currency. It's a liquid currency.

42:28 Um, it doesn't have the same problems, uh, uh, with the rule of law, uh, that the Chinese RMB has, and they've got good leadership in Christine Lagarde at the Central Bank. So I think the euro's another one to watch.

42:39 Um, and then I think finally, uh, and, and most worryingly, what happens to this trend of increasing, uh, military force? What's the lesson Trump takes from the war in Iran? Is it, "Wow, I bit off more than I can chew.

42:51 We need to, you know, rein it in and maybe stop doing these kinds of things"?

42:54 Or, uh, you know, does he take the opposite lesson, which, um, you know, I think he took from Venezuela, which is, "I can achieve a lot, uh, through military force"?

43:03 I, I hope that he winds up reining it in for, for the sake of humanity, but, you know, I think we'll have to see h- where it lands. Eddie, thanks so much for coming on the show. This was very interesting.

43:13 I would have had a lot of more questions for you, but we're short in time. Eddie, where can people learn more about you, about Chokepoints? Yeah. So the best thing you can do is read my book, Chokepoints.

43:24 Um, available everywhere books are sold, audiobook, uh, if you wanna just listen to it walking around, uh, or, uh, reading it in hard copy or Kindle.

43:32 And the thing I love as an author is if you do read it, um, shoot me a note. My email is publicly available at the Council on Foreign Relations website. Shoot me a note. Would love to hear what you think.

43:41 And then you can also follow me, uh, on X at Edward Fishman. That's great, and we'll definitely link that in the show notes. Eddie, thanks so much for coming. It was a pleasure to have you, and all the best. All right.

43:51 Have a nice day. You obviously like this video enough that you got to the end. Listen, do me a favor. Hit that like and subscribe button because I think you'll like it.

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