HEIDI YACOUBIAN: My
name is Heidi Yacoubian,
and I am a junior art major
here at Hillsdale College.
Tonight, I will be introducing
our guest speaker, Roger W.
Robinson Junior.
Mr. Robinson is
President and CEO
of RWR Advisory Group,
a risk management
software and open-source
intelligence firm.
He is also co-founder
and chairman
of the Prague Security
Studies Institute
in the Czech Republic.
Mr. Robinson earned a BA from
Duke University and an MA
from George
Washington University.
He served as Senior Director of
International Economic Affairs
on Ronald Reagan's
National Security Council,
where he was the
principal architect
of the secret economic and
financial strategy that
was a key component
of efforts that
led to the demise
of the Soviet Union.
He later served as chairman
of the Congressional US-China
Economic and Security
Review Commission.
Prior to his
government service, he
was a vice president in the
international department
of Chase Manhattan Bank
with responsibility
for loan portfolios in the
USSR, Central and Eastern
Europe, and Yugoslavia.
Everyone, please join me
in welcoming Mr. Robinson
to the stage.
[APPLAUSE]
ROGER W. ROBINSON:
Well, I want to start
by thanking Larry Arnn
and all of his colleagues
at Hillsdale for this
special opportunity
to be with you tonight and
address this esteemed CCA
event.
I also want to
give special thanks
to Kim Ellsworth and Matt Bell.
I took the tour today, ably
executed by Nathan Lehman.
It was an experience.
And I just couldn't be
more delighted to be
with you tonight.
And I apologize in
advance in the sense
that I'm going to give you
a fire hose of information,
much of it new and original.
And time is a bit tight, so I'm
going to be jumping right in,
if I may.
And I apologize for a
little bit of a cough,
but we'll try to
push through that.
Before we turn to
what is clearly
China's economic and financial
warfare strategy being waged
against us, and I'll explain
the components, many of which
you know, some of which you
won't know until we're done,
I want to get into an
earlier episode that was
alluded to in the introduction.
Namely, the true story of
the Soviet Union's effort
to almost succeed in
continuing to keep itself
a going concern by living
off of the West, off of us,
and muddling through to
this very day, all of which
was brought to a screeching
halt by a president
named Ronald Reagan and his
National Security Advisor
and best friend,
William P. Clark,
who I had the privilege
of serving under.
And as mentioned, I had
been with Chase Bank as vice
president division
executive for the US-USSR--
sorry, the USSR-Eastern
Europe division of the bank.
And in that capacity,
you can imagine
it was my job to know
where the money was.
Because after all,
as a banker, you're
trying to gauge
credit-worthiness.
And so what I came to
realize, something I
brought to the White
House, to the NSC,
which was that these
folks had no money.
Or what they did have
was largely from us.
And let me give
you some numbers.
When I went to the
National Security Council
in the beginning of 1982, Soviet
total hard currency income
was approximately
$32 billion a year,
which was one third of the
annual revenues of General
Motors and Exxon at the time.
So you have an empire
stretching from Havana
to Hanoi that is the equivalent
of the revenues of one
third of one American company.
And it was that
kind of circumstance
that we were looking
at, and other
what I would call life
support tubes that
were keeping them going,
notably loan arrangements.
I mean, the Soviets were
spending about $16 billion more
than they were making.
All of that $16
billion gap was being
financed by Western
governments and banks.
We weren't funding 10%
or something like that.
But when you think
about $16 billion,
coincidentally, that
was the approximate cost
in hard currency,
remembering that the ruble is
non-convertible,
that was the cost
of the external Soviet empire.
Everything outside
of the Soviet Union
itself was totaling
about $16 billion.
So you can imagine
President Reagan,
who always believed that
the Soviets were terribly
vulnerable economically,
to learn that we, the West,
were financing 100% of
the external empire.
It's that kind of thing,
those kind of numbers,
that he was looking
for all this time.
He knew that they had
no entrepreneurship,
that they had no
technological dynamism,
that they had none
of the freedoms
that you need to have a
functioning free market
economy.
This was all an administered
command event, as all of you
know, fraught with rigidities.
And so this really
came as a surprise.
The Europeans, on
the other hand,
had a completely
different philosophy.
They believed in
Ostpolitik, as the Germans
call it, which is that
commercial bridge-building
would lead,
inevitably, to greater
geopolitical cooperation.
Gee, I wonder where
we've heard that before.
You know, China, right?
We were supposed to
buy into the notion
that if we just gave them
WTO, and we gave them
our technology, and we gave
them our money and access
to our capital markets and
trade markets, that they, too,
would come around to a
political accommodation
and give their
people more freedom
and have a safer, more
secure world with us.
Obviously didn't happen.
The same was true
with Soviet detente,
the Nixon-Kissinger period.
What did they do
with those credits?
What did they do
with that technology?
Of course they used
it all against us,
and to make themselves stronger,
to expand their empire,
and to basically continue to
engage in nefarious activities.
And so here we go again.
So basically, where we drew
the line was on a project
called the Siberian
Gas Pipeline Project.
It was a two--
a twin strand huge
pipeline, 3,600 miles,
from Siberia into the
West European gas grid.
It was going to
be the centerpiece
of their future hard
currency earnings structure.
For them, it was a
magnificent twofer.
Dependency of Western
Europe on natural gas
would soar to over
70%, 75% minimum,
and they would nearly double
that anemic $32 billion
figure with just one deal.
And this is in the midst
of their massing troops
on the Polish border
to invade the moment
that they learned that
General Jaruzelski was not
going to suppress Solidarity.
He was not going to
silence John Paul II.
That he was going to
declare martial law,
or we would have yet another
Soviet-style invasion, tanks
and all.
So it's in this window
that the largest
deal in East-West economic
history was going down.
Not only was it going
down, but it was going down
on taxpayer subsidized terms.
The Soviets were viewed as
a less developed country,
worthy of below
market interest rates.
And Germany, France, others
were too happy to accommodate.
Because for the Germans,
they had 19 million hostages
on the other side of the wall.
I mean, for them, this
was a protection racket.
They wanted to pay
off the Soviets
so that they would have
better care of their people
that keep the
peace at all costs.
You know, throw steak
in the cage of the bear
and keep it mollified.
France was no better
in this regard.
So the president had
a decision to make.
We had a monopoly on
oil and gas equipment
and technology that could
go through permafrost.
We got it from the North Slope.
Nobody else in the world
had it at the time.
So we used that monopoly
to basically take
the side of our
Polish friends and try
to penalize the Soviets
for massing these troops
and threatening yet
another invasion.
Far from doing the biggest
deal in East-West history,
the president was
dedicated to stopping it.
And appropriately so.
So basically, we declared oil
and gas equipment sanctions.
Those contracts were
picked up by the Europeans,
who were selling
the same equipment,
but under our licenses.
Now, this is kind of a long
story, too long for tonight,
because I want to
transition over to China
as quickly as we can.
But we need to understand that
this disconnect with Europe,
then and now with Russia,
was a blood on the floor
estrangement at the time.
I mean, we had to, at one
point, close the US market
entirely to those
European companies
that continued to ship to the
Soviet Siberian Gas Pipeline
over our objections.
And we had to give
them a choice.
You're going to do business with
the Soviet Union or the United
States, but you're not going
to do business with both.
Well, four of the six companies
that we imposed import controls
against, as they're called,
went under within six months.
And about 250,000 people went
into the street unemployed.
Europe got the picture.
And the epilogue of
this story, in short,
is that we put a cap on
Soviet gas deliveries
to Western Europe at 30%
of total supplies period.
We ended the subsidized credits.
In fact, we helped dry up
the provision of credits
by Western governments
and banks altogether.
We went to the Saudis
secretly to have
them pump two million
barrels more oil a day,
and [? decontrolled ?]
prices at the wellhead
here, knocking oil prices
down to $10 a barrel.
Knowing that for
every dollar drop
in the price of a barrel of oil,
the Soviets lost $500 million
to a billion per dollar.
This is on that anemic number
that I was talking about.
So the strategy for the
takedown of the Soviet Union
was a secret one, but
nothing was more secret
than the economic
and financial piece.
There were maximum 13
people in the country
that knew about this
strategy, because our fear was
that if the Soviet
Union understood what
we were about there,
and they started
to see their demise
loom too large,
it could be use it
or lose it time,
as we say in the nuclear trade.
Back up against the
wall, the whole thing.
So ironically, you'd think
that the political military
is always the more
secret components.
Wrong.
It's about the money.
It's about economics and
finance, then and now.
So with that-- oh,
and you know we're
looking at Nord Stream 2 today.
The president's calling
Germany a captive nation
to Russia today, when the
dependency level's about 35%.
How would we be feeling
if that number was 80%?
Which it would have
been had there not
been a Reagan and a Clark.
And to the extent that I was
able to play a role in that,
it's been a privilege
all my life.
So that's a little bit of the
epilogue that we're looking at.
And it is relevant
to the China story,
because the Soviets,
if you think about it,
were doing something
rather unique.
They were using natural
gas as a weapon.
There was no such thing
as pipeline politics
like there is today.
They had never used
natural gas as a weapon
before to leverage
NATO and cause
those divisions in the alliance
that are so debilitating.
We thought, and
had to speculate,
that if they had the
power, they would use it.
Europe didn't think so.
They thought that, my
gosh, if the Soviet
Union shows itself not to be
a reliable supplier, that's
crazed.
I mean, that's just
not going to happen.
Of course they were
wrong, as history
has proven, when
they could use--
ask Ukraine, ask
the Baltic states.
Ask anybody who's ever crossed
the Soviets and the Russians
today.
They're using natural gas
routinely as a weapon.
So who would have thought
that, literally underground,
on this subterranean basis,
the tentacles of our demise
were being delivered?
Today, those tentacles are
China in our capital markets.
Now, I'll get to that
story in a moment.
Let's talk about China's
economic and financial warfare
against us for
just a moment here.
You know about Belt
and Road, obviously
a strategic, wildly
ambitious undertaking,
to wrap up huge segments of
the world on their terms.
You know about China
2025, where they're
trying to dominate the
key technology sectors--
everything from
artificial intelligence,
quantum computing, you name it.
And they are trying
to get there first.
5G.
You read about these things.
The forced technology
transfer we know about.
The predatory trade
practices you know about.
The president brought these
things to the forefront
after countless
presidents let it slide.
And he is to be given
credit for that.
The tariff war is a
good thing in the sense
that we've got to take a stand.
But these are things you know.
Here's something you don't know.
China has something over 700
companies in our stock and bond
markets, our so-called
capital markets.
They've got about 86 companies
in the New York Stock Exchange,
about 62 in NASDAQ, and over 500
in the over-the-counter market,
this very murky,
poorly-regulated market.
Of course they
gravitate to something
that's non-transparent and the
most lax regulatory regime.
All good police states do that.
And among those
700 companies, we
have some of the most
egregious bad actors who've
been committing
national security
abuses against our country.
The same with human
rights abuses.
I mean companies
like Hikvision that
is responsible for
the facial recognition
technology and the
surveillance cameras that
are placed along the walls every
few meters of the concentration
camps holding one to two million
Uyghurs, religious minorities,
in Xinjiang.
Gee, I wonder if we had in mind
helping finance concentration
camps with our retirement
dollars and our investment
accounts.
Most of the people
in this room are.
I know that that
sounds wild, but that's
an empirical fact,
in my view, if we
take that statement as it is.
The majority of you.
Unwittingly, of course, because
we have no screening mechanism
in the United States.
Never have for our
capital markets.
I don't know how big they are.
Around $40 to $60 trillion of
funds under management or so.
Look, it's not the same.
It's not true with trade.
We've got the Committee
on Foreign Investment
in the United States.
We just strengthened it further
with the so-called FIRRMA
legislation.
We're worried about
Chinese coming in there
and trying to take our
high technology companies,
to try to position
themselves right
next to our military bases.
In other words,
anything they can do.
We've got to be
scrutinizing this,
and we've belatedly woken
up and are doing so now.
Belatedly.
Well, what about the money?
Completely unprotected.
Do we really think the SEC is
screening Chinese companies
for a litany of their past
national security abuses?
If they are, they're doing a
pretty poor job, because there
are repeat sanctions violators.
There are proliferators of
weapons of mass destruction
and ballistic missiles.
There are advanced weapons
manufacturers for the People's
Liberation Army.
There are South China Sea island
builders and militarizers.
There are companies underwriting
the North Korean threat.
There are known hackers.
We know who they are.
They're here in our
capital markets.
There are companies
accused of espionage,
that have been indicted or
had their employees indicted.
Do you find any of
this in the risk
section of the prospectuses?
Are any of you
hearing about this
from your financial planners
and your fund managers?
I mean, have you ever seen
one risk communicated to you
of who these folks
really are, and who
their network of
subsidiaries are?
No.
Not a word.
Not one of you, ever.
Have you ever heard
this topic discussed
before at a cocktail party,
much less on television,
a think tank session, a session
like the one we're having now?
Guess what.
There's not been one
interagency meeting
in the executive branch.
There's not been one
hearing in the Congress.
Ever.
Now, what does that tell you?
What it should tell
you is that China
wants us to concentrate on
this shiny object over here
called trade.
They can do tariffs
all day long.
I mean, they're
not-- it's hurting
them, which is a good
thing, but not that badly.
In other words,
I'm talking tonight
about what they never
want you to see.
What they desperately
need is the dollars.
I mean, they have practically
a trillion dollars
of exposure in our markets.
We don't even know how
much, because they've
got dollar-denominated
bonds, our currency,
being issued in Hong Kong,
Frankfurt, Singapore.
Well, guess where
they're ending up?
In your bond portfolios, because
our investment banks buy them
from overseas to get
around the loopholes
of regulatory
regimes, and in they
come in the secondary market.
So we don't even know
what our exposure to China
is, but I can tell you this.
In the next 36 months, it'll
be about $2 to $3 trillion
more than it is today.
I mean, they are
moving as fast as they
can into your portfolios.
I don't know how many
people in America
are in the capital markets.
Let me give you a rough guess.
150 million, 180 million of us.
You know, older folks, babies.
The Gerber program.
I mean, this is all
stocks and bonds, right?
So what if we wake
up one morning
and we find out 14%, 17%, 22%
of our retirement accounts
are in Chinese securities?
Now, that may seem
far-fetched to you.
I suggest to you that's
what's going to happen.
And that's soon.
Now when that happens--
if it does--
I pray it doesn't, but these are
trends that are pretty clear.
I mean, Goldman
Sachs and others are
the ones that are predicting
this, at least on the numbers,
you know, on how
much is coming in.
Well then the Chinese
have figured out
that all of these scores
of millions of Americans
have a vested financial
interest in opposing
any future sanctions
against them,
in opposing any penalties
whatsoever against them,
irrespective of the
severity of the offenses.
That's called checkmate,
ladies and gentlemen.
That's called an
exponential increase
in the scale of the
so-called China lobby.
We think that the China
lobby's very formidable today.
Lord knows it is.
That's kiddie cars next
to where we're headed.
And we're-- it's
not talked about.
We're not seeing
it any more than we
saw the subterranean natural gas
strangling our European allies,
and undermining the
structure of NATO.
So here we go again.
Another unseen villain in
the economic and financial
portfolio.
I mean, let me give you a live,
happening right now, event.
Well, first I
should say that it's
even the case that China's
sovereign bonds are here.
That Russia has
sovereign bonds here.
When I say sovereign
bonds, I mean
these are bonds initiated
by the government.
Remember our Liberty
bonds during World War II?
I mean, we used to
finance our war effort
with bonds which the
government, of course,
can use at their
sole discretion.
Well now, our
countrymen are buying
Chinese and Russian bonds
to destroy our liberties.
I mean, do you know that
CalPERS owns $460 million
in Russian sovereign
bonds by itself?
Just do the math as to what
the other 50 states have.
I mean, when we talk
about the 50 states,
we've looked at probably
20 of those states.
They're littered with Chinese
bad actors of the type
that I've described.
When you look at university
endowments and college
endowments, same.
I mean, University of
Michigan, for example,
has 44% of its $12.2 billion
in assets in private equity
and venture capital.
That's a new, big
shift in that direction
from University of Michigan.
Of the venture capital
portion, one third are Chinese.
Now, I chose a local example.
And it's not like I'm
trying to excoriate
University of Michigan.
I'm not.
This could be any of us.
That's the problem.
I mean, I'm not here to point
fingers at them, because again,
where's the disclosure?
But also, I have to say
they're not blame-free.
Where's their diligence?
I mean, they have all kinds
of rules, and standards,
and governance that on paper
say that they're not going to be
financing concentration camps.
And they're not going to
be funding and underwriting
the People's Liberation
Army and folks
like that, or folks engaged
in espionage and US sanctions
violations.
I mean, really.
But it's happening.
So we have a problem
in the 50 states.
Let me tell you.
State legislatures need
to take this up ASAP.
So that's where we sit.
Now, take your live example.
Now, this is private
capital for the most
part we're talking about.
Let's talk about
our taxpayer money.
For the longest time, the
federal Thrift Savings
Plan in this country, which is
the federal retirement system
for all federal employees.
All members of the military,
the cabinet, the Congress,
the Joint Chiefs, our combatant
commanders, our fighting men
and women, are all relying
on the Thrift Savings Plan.
$578 billion-- the biggest in
the country that I know of.
CalPERS is $370.
That's the biggest pension
fund, but this is bigger.
5.7 million people, not
surprising, are covered.
So I was checking on them.
Well, for the longest time,
they were doing the right thing.
They would-- they have an
international portfolio.
It's $50 billion.
For the longest time,
they were using an index.
The Morgan Stanley
Capital investment
has a whole range of
indexes, but this one
was developed countries, largely
industrialized democracies.
Well, OK, international
exposure, diversification,
all that's not a bad thing.
But guess what?
In November or
December of 2017, they
had the bright idea
of making a change.
They wanted to capture those
yields of the emerging market,
so they hired a consulting
firm, an investment consultant
from Wall Street,
and said we want
to expand the
universe of companies
we can own internationally.
Well, they said fine.
Have we got a deal for you.
The Morgan Stanley, the MSCI,
All Country World Index.
Well, that includes China.
And I know for a fact
that it includes many
of these egregious bad actors.
I could name them.
I mean, we're talking
about companies like AVIC.
That's PLA.
They make fighter aircraft.
I mean, we're talking about
some of these indexes own China
shipbuilding.
They make ballistic
missile submarines
targeting our cities.
And the list goes on.
Not to mention, again,
the facial recognition
and surveillance state.
This digital, totalitarian,
police state innovation,
in their minds.
Well, I don't think we have
a mind financing that kind
of innovation for China, right?
Not with our money.
So this is going
to be implemented.
And by the way,
that's going to be
all of the international
portfolios.
It's not like you're
going to have a choice.
If you have any
international exposure,
you're in the MSCI All
Country World Index.
And you own China automatically,
and the bad actors there too.
This goes into effect in 2020.
Right around the corner.
The decision's already made,
yet it's not been implemented.
We've got to reverse
that decision.
Either that, or Nancy
Pelosi, who cares deeply
about the Tibetans,
with her money,
is going to be
financing, or is going
to own a company, that is
doing the facial recognition
technology to be able to pick up
the Tibetans at train stations
and incarcerate them.
Again, the same
with the Uyghurs.
Any champion of
human rights is going
to be violating
their sacred values.
The Joint Chiefs of Staff,
our combatant commanders,
our Secretary of
Defense, they're
going to be underwriting
the militarization
of the illegal islands
in the South China Sea.
Not conceptually, with
their retirement dollars.
The Secretary of State
of the United States,
if he has
international exposure,
he is going to be financing
multiple US sanctions
violators.
Gee, that'll go down
well politically.
So if we can't stop this,
ladies and gentlemen,
we're in a very, very bad way.
You know, we can lose
this thing to China.
I mean, they have no cushion.
They're a lot more frail
and weak than we think.
But again, like the Soviets,
if we keep these life support
tubes pumping, we're going
to finance our way out
of our freedoms, out of our way
of life, and out of everything
we hold dear.
It's the money.
It was the money on the Soviets.
It's the money on China.
That's what they don't
want you to know.
If you go and ask
your fund manager
or your financial planner,
gee, do I own China?
I mean, do I own
Chinese companies?
They're going to look at you
quizzically and probably say,
you know, I don't really know.
And if you ask, well, what
kind of Chinese companies?
I mean, have you guys looked
at the parent companies
and their subsidiaries?
And do they have a track record
of national security and human
rights abuses?
You're going to have a
blank stare coming back.
No way you're going
to get that answer.
What does that tell you?
I'm telling you, they're not
going to answer the question.
So you tell me what that
says about the state
of play in your own lives
and the life of our nation.
So our detractors, of arguments
like mine, are saying, well,
this guy Robinson
and people like him,
I mean, they're going
to be-- their views
are detrimental to the free
flow of global capital.
They're trying to contract
our investable universe.
They're trying to
narrow what we can own
and what we can buy as we
try to get a better yield.
They're going to say we're
politicizing the markets.
What's it going to be next?
Tobacco, guns.
You know, they're
comparing national security
and human rights to socially
responsible investing.
These aren't preferences.
These are material risks.
They are undisclosed.
That's legally actionable.
It's called material
risk omission.
You're not allowed to do that.
That's what class action
lawsuits are made of.
And that's, by the way,
one of the directions
we're going to go.
Now, I could give you,
maybe in the Qs and A,
some ideas about what we can
do, but let me give you--
I've given you a
lot of bad news.
Let me give you some good news.
[? Kind ?] of.
And it is good news.
We dominate the economic
and financial domain
on the planet Earth.
Our capital markets
are roughly the size
of the rest of the
world's combined.
One could say if we're making
it difficult for China,
they're just going to
go to another exchange
somewhere else.
And we're just going to be the
ones left out of those fees.
Of course, this is what
Wall Street's thinking.
There's nowhere else to go.
Nobody has the depth and
volume of our markets.
China's needs for dollars
are so voracious that they
would use up the
volume in a Frankfurt
or a London months, maybe.
There's only us.
You know, we had that oil and
gas equipment and technology
monopoly during the Soviet
days because of North Slope.
Guess what our near
monopoly is today?
We have all the money.
They're playing in our sandbox.
We're not playing in theirs.
These guys are waging
economic and financial warfare
against us.
We're not only not on
the field, but we're not
even at the stadium.
Now, President Trump is
trying to put us there
on the field on trade.
But China is OK with that.
You can throw them
into that briar-patch.
You don't see-- you won't
see any kind of gamesmanship
on the money.
That's what they
don't want us to know.
So it is within our power
to take action here.
And all I can say is, and I want
to leave time for questions,
we just have to remember, both
as taxpayers and individuals,
this is our money, and
we don't have to play.
I mean, Article 7 of the
National Intelligence
Law of China allows every single
entity, commercial entity,
every enterprise, to
be weaponized instantly
if Beijing orders it so-- to
commit espionage, technology
theft, anything they need.
That's a matter of record.
That's public.
OK?
So for those that don't
want to try to differentiate
good Chinese from bad Chinese,
meaning seemingly commercial
benign companies
from bad actors who
have a track record of
doing egregious harm,
one solution is
to say no, China.
Well, that's a fairly
straightforward message
that a fund manager or a
financial planner can--
that could penetrate.
Anyway, we're
playing the game here
and trying to do this
in a constructive way.
If you look at
market principles,
and when you're talking
to the Wall Street types,
and when you're talking to
$40 to $60 trillion of funds
under management, if we go
with outrage in our hearts
about these, you know,
how could this be?
And how could you do this?
It's unpatriotic.
It's not the right thing.
You're undermining our country,
our values, our moral compass.
Do you know what you're going
to get from Wall Street?
A big yawn.
But if we go to them and say,
where's the risk management?
Where's the disclosure?
Where's the transparency?
Where's the good governance?
Where's the preservation
of share value,
and corporate
reputation, and brand?
Well, that's a lot
more uncomfortable,
because that's their lingo,
and they can't ignore that.
I mean, the SEC
is again supposed
to demand the disclosure
of material risk.
They don't consider
national security abuses
and human rights
abuses of the scale
I'm talking about
as material risks.
And yet there is example after
example of Chinese companies
whose stock tanked as soon as
this press became available.
For example, the
surveillance cameras
on the concentration camps.
Their stock fell.
I mean, that's what a
material risk is all about.
So it's not as though I'm
asking for the world here.
We can ask for enhanced
disclosure, for goodness sake.
I mean, how minimist and how
benign does that sound to you?
It almost makes me seem
like I'm not a serious guy.
Except there is
one small kicker.
The Chinese aren't
disclosing anything.
They're not going to
acknowledge these risks.
They're not going to
acknowledge disputes.
They're not going to acknowledge
a history of wrongdoing.
Because if they do, literally or
figuratively, they're taken out
and shot back in Beijing.
Again, figuratively, perhaps.
Lose your job.
I don't know what it
may be, but you're not
going to see folks volunteering
to make such disclosures.
And I've got an example
or two for people
that want to hear about
what disclosure can do.
So we have the tools.
And we've got the enforcement
of market principles.
We don't have to say, hey,
we want all Chinese excised
from our markets.
We want sanctions.
We want market closure,
or select market closure.
We don't have to do that.
Of course that's
when they argue.
Oh my gosh, the
sky's going to fall.
No, no, no.
Let's just go for
the enforcement
of market principles and
then see what they say.
Because when they
say they're not
going to engage in enhanced
disclosure, that tells you all
you need to know.
What are they hiding?
It's that old refrain.
So I want to leave
time for questions.
But again, this is our
money, and these trillions
are not going to be funneled
for the demise of our country,
the gutting of our values,
the destruction of all
we hold dear.
Not on my watch, and
not on your watch.
Thank you.
[APPLAUSE]
Please.
SPEAKER: Thank
you, Mr. Robinson.
We now have time
for a few questions.
Please make your way
to the microphone
if you have a question.
AUDIENCE: Thank you.
Morgan Stanley Capital Index.
ROGER W. ROBINSON: Investment,
I think it is, but yes, it's
the Morgan Stanley Index.
AUDIENCE: That's right.
Morgan Stanley we know.
Capital Group owns
American funds.
Be careful.
ROGER W. ROBINSON: Right.
I'm not sure I quite
deciphered that, but--
AUDIENCE: Capital Group
owns American funds.
ROGER W. ROBINSON: Oh.
OK.
Well, it might be a
nice touch if they
engage in some diligence and
protect the American investor
from material risks to share
value and corporate reputation.
That's my answer.
SPEAKER: We have a question
to the speaker's right.
AUDIENCE: Thank you
for [INAUDIBLE]..
It's the first actionable thing
I've heard at this conference,
and I'd like to do something.
So do you have a roadmap of
what you just commented on
that I can follow with my
investment councilor to get--
change, at least in
my portfolio, relative
what you're talking about?
ROGER W. ROBINSON:
We are working on it.
This has been such an intense
three years of research.
And if you can believe it, this
little Prague Security Studies
Institute of mine,
and, to be frank,
our private sector
company as well,
we're the only think tank in
the world that's pursuing--
that I know of--
that's pursuing this issue.
I mean, think about that.
So you can imagine that
our bandwidth is just
stretched to the max.
So we want to be able to
service just this kind of need.
We are developing a list
on the private sector
side of Chinese bad actors.
And we're way down the road
in successfully doing that.
A track record, a risk
profile, for all of these guys,
and what they and
their subsidiaries
have done in these
two material risk
categories of national
security and human rights.
So that's going to be something
that would be available.
And we're looking into, again,
the 50 states, the university
endowments.
Right now, we're researching
the official US sanctions list
to find out how many sanctioned
companies are in our markets.
We're looking at the entity
list of the Commerce Department.
Same purpose.
In other words, how
widespread is this problem?
It's a little bit
like trying to detect
what level of metastasization
do we have going on here,
if you want to use
the cancer analogy.
So the answer is we're
working hard now,
and we can be in touch to
be sure, as to helping you
be better informed about the
questions, specific questions
that you want to be asking.
And also to search
your own portfolio
to find out where are going
to be the problem areas?
I mean, it's not just MSCI.
The FTSE Russell
Index, in June, they
bought 1,097 Chinese
companies right out
of the mainland Xinjiang
and Shanghai exchanges
and added them to their
Emerging Market Index.
How many of those
are bad actors?
We know several.
We've already done
the research on that.
Bloomberg Barclays
Aggregate Global Index,
I think it's called.
$54 trillion of funds
under management.
They're buying Chinese sovereign
bonds, and Chinese bank
and corporate bonds, and
adding those to its index.
As I say S&P is following suit.
This is the new big thing.
So the index providers
are the inscrutable,
but most problematic, because
when they buy, it's viral.
I mean, they're infecting
every healthy cell
of the American body
politic overnight.
So when folks are buying Chinese
companies left and right,
in over 1,000 in a
shot, you are picking up
all kinds of egregious players.
So we'll work with you best
we can, and anybody else
here, in trying to give you
the tools that you need.
And we're trying to
develop those tools
as quickly as we can.
I mean, we've been
concentrating on trying to get
the scope of the problem.
But now, it's time to worry
about the solution set, so
thank you.
AUDIENCE: [INAUDIBLE]
available and how can I get it?
ROGER W. ROBINSON: OK.
Well, there's two ways.
You can contact--
I mean, this isn't to
be an advertisement,
but rwradvisory.com
is the corporate side,
pssi.cz is the think tank side.
We're trying to
do some research,
and we're trying to do the
activist piece on the think
tank side.
So I would say that we're good
to go within the next 60 days.
And the folks here at Hillsdale
can give you our contact info.
And we will answer these
questions directly,
even though I seem to
be dodging them now.
I mean, you know.
We're not-- we're trying to do
this on our own, pretty much
our own dime.
So it's been a tough round,
but we're getting there.
And I hope-- oh.
I mean, we're not
keen on being alone.
AUDIENCE: Thank you
for coming here, sir.
I appreciate that you're calling
out the human rights violations
that China is doing,
especially to the Uyghurs
and the Tibetans.
And I was curious if what
you're talking about,
of how to deal with that and
to stop their human rights
violations, if you would say
you're advocating for something
similar to the Boycott,
Divest, and Sanctions
movement to free
Palestinians but for China?
Something like-- is that
what you're talking about?
Economic sanctions like that?
ROGER W. ROBINSON:
No, I wouldn't say so.
I mean, we're not
calling for a boycott.
We're actually not even
calling, yet, for divestment.
I mean, clearly there are
companies in these portfolios
that shouldn't be there.
And I can't believe that
the Indexes are hanging
in there the way they are.
It's been a callous
performance, to say the least,
on their part.
I mean, they should be dumping
some of these companies,
because they've gotten a
tremendous amount of press.
And Hikvision,
their parent company
is on the entity list for
national security abuses.
They've been banned from
federal procurement.
They themselves are headed
for the entity list.
Did MSCI drop them?
Divest them?
No.
So we're leaving it to folks
to pressure, including states,
to pressure the index
funds, but we're not
doing an instant replay
of the Israeli thing.
And we certainly see no
remote comparison there.
We're trying to do this, as I
say, through market principles
so we can be as little--
to have as little disruption
to the competitiveness
of our exchanges and the
free flow of capital.
And we're not trying to
gratuitously politicize
our markets.
I mean, this is a
risk consideration.
And China and Russia, gee,
where did we find those?
I'll tell you where
we found them.
The national security
strategy of the United States.
The national defense strategy
of the United States.
What two countries have
been identified explicitly
by the Trump administration
as the primary adversaries
of the United States?
Gee, I wonder what they are.
China and Russia.
China-- Russia has 25
companies in our markets.
Seven of the 25 are
under US sanctions.
You can't do business with
them with a 100-foot pole.
But you can invest in them.
You can fund them with impunity.
How does that work,
ladies and gentlemen?
You know?
Where's the consistency there?
This is the disconnect
I'm talking about.
AUDIENCE: Hi, sir.
Thank you for coming
and speaking tonight.
Like you said earlier,
this issue isn't really
getting any press,
and I know I certainly
haven't heard of it anywhere.
Why is that?
Especially with the
attention that China
is getting in this trade
war and everything.
It would seem that
this would come up.
So why is it so quiet?
ROGER W. ROBINSON:
There's two reasons.
One, nobody seems to have
thought to do the research.
Nobody saw a national security
angle or a human rights angle
to the cap markets
prior to ourselves.
And it's a skill mix problem.
I mean, when you
think about it, it's
useful to have some
Wall Street skills
and some national
security skills.
Well, the Wall Street
types don't really
go for the national
security types,
because they think they're
gratuitous disruptors.
They're sanctions people.
All they do is create
problems for them.
On the other hand, the
national security types
don't feel comfortable
talking about global finance
in the capital markets because
their knowledge level might
be a millimeter deep, and
they're frantic with concern
that some Master of the Universe
type from Goldman or Morgan
Stanley is going to come on CNBC
and call them a neanderthal.
Really.
So it's very rare that you have
a Wall Street-national security
skill mix.
I've been in this business
for over 40 years.
And I can count the number
of folks with that skill mix
that I've met
basically on one hand.
In over 40 years.
So we need a cadre.
I mean, you know, we need
trained national security
professionals who are
conversant and steeped
in global finance
and our markets.
I'm not myself an
investment banker.
You know, stocks and
bonds weren't my trade.
I'm an international banker
with a commercial bank.
In other words, I had to
learn this kind of stuff.
But it's not rocket science.
It's all common sense.
I mean, this is not--
doesn't require a Wall
Street genius to do this.
I mean, it's as straightforward
as the conversation
we're having now.
It's a common sense thing.
It's just that nobody
focused on the money.
And in part, it's true that
that $40 to $60 trillion
doesn't want you to
concentrate on it.
China certainly doesn't.
I would argue that the
Department of Treasury doesn't.
And I wonder whether
the SEC does.
Because remember,
like the gentleman who
asked the earlier question,
you know, this is disruptive.
This is not welcome.
That's for sure.
And that's a big
part of the problem
as to why this thing never
has seen the light of day.
Yes.
AUDIENCE: Would you
address the reciprocal
in terms of China's investment
in US government bonds?
ROGER W. ROBINSON:
I've got no problem
with their ownership of
T-Bills, and for those
who think that
their $1.1 trillion
exposure in our T-Bills makes
us hostage to them in some way,
and that they could
crater our economy,
and lots of these things
you hear, it's just not so.
It would probably mean
a half a point to 100.
I mean, it would be a 1%, half
a point to a point interest rate
change.
It could raise our
rates somewhat.
But the notion that
a trillion dollars
these days is going to
make that difference.
And of course China
would lose their shirts,
because obviously the
value of their portfolio
would go through the floor.
But we can handle it.
I mean, how much did we spend
to get out of the 2007, 2009
financial crisis?
It wasn't $7 trillion.
I think it was more like $15.
Now, mind you, we were hurt.
I mean, it halved my portfolio.
And we've taken a long time
to recover, so it hurt us.
But a trillion is not
what it used to be,
and China doesn't have any
meaningful leverage over us.
SPEAKER: We have time
for one more question.
AUDIENCE: Does President
Trump know this information?
ROGER W. ROBINSON: Sorry?
AUDIENCE: Does President
Trump know the information
that we're hearing tonight?
ROGER W. ROBINSON: No.
AUDIENCE: [INAUDIBLE]
President Arnn send him
to [INAUDIBLE] [? Phoebe. ?]
ROGER W. ROBINSON: I
did a radio interview
on this with Hillsdale today.
That 15 or 20 minutes is pretty
incendiary, I can tell you.
But look, I think
that the president
is very steeped in the
markets in his own way.
He's got the picture on this.
Newt Gingrich did an--
he's very close
to the president,
he did an editorial
on this that I
worked with him on just recently
on this Thrift Savings Plan.
That we have to reverse
that decision and why.
I mean, on Wednesday
in the Post,
there's a guy named
Josh [? Rogan ?]
that's going to do a piece
that is just ruinous on this.
We've got CNBC
interested in this.
We've already had two
Financial Times pieces on this.
They're going to go again.
Rubio and Shaheen, in
a bipartisan letter,
went after the Thrift
Savings Plan board on this,
so it's already in the Congress.
So again, this thing only
started to go public,
with our research, in
mid-March of this year.
So this is still
a nascent issue.
It's going to take some time.
But we don't have a lot
of time, as you can tell.
I mean, this is a race.
So we've got to get cracking.
And anybody that can make
members of the administration,
and the Congress, and even
your state legislatures,
and even your
university endowments.
I mean, this is an
awareness-raising time.
This is an educational time.
And we've got to
step up, and we've
got to step up fast, because
these guys are predators,
and they are coming after us.
Thank you.
[APPLAUSE]
