2020 Elections, Putin, China & Deep State W/ Democratic Super Delegate Lanny Davis

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Ryan:

Welcome to Non-Beta Alpha I’m Ryan Morfin. On today’s episode, we have Lanny Davis political strategist, talking to us about the 2020 election. This is Non-Beta Alpha. The European view of privacy and the right to be forgotten. What is your view about Facebook being a publisher versus being an editorial provider? The republicans are talking about shadow banning and censorship, but Facebook’s saying, hey, we’re just a utility here. How do you balance that out? And what is good for the country in the long term do you think?

Lanny:

I’m pretty strong on this one, but I know there are two sides to this argument. And Mark Zuckerberg’s a brilliant, still, young man. And he has a view not only what’s good business, but what is right. I disagree with his, what is right. I certainly understand what’s good business. There has to be a standard. There has to be a line drawn somewhere where Facebook says, no, we’re not just a platform. We’re not a telephone line. That used to be the analogy used by Facebook. All we are as a telephone line, you can’t blame us for what goes through the telephone line. And even congress intervening to give the protection to Facebook and other internet service providers. We’re just to telephone line. No. Now this type of telephone line has such power that they never imagined, which means such profits in such power, that it can do real harm to human lives to institutions.

Lanny:

I promised I wouldn’t get political, but I believe that we have in the United States today, a challenge to our fabric of constitutional law and the rule of law. And it’s facilitated when the Russians are able to use Facebook. And there is no filter by Facebook. And I think Facebook is now like a big aircraft character turning in at least the direction of finding some place where they will draw a line and say, no, we’re not taking that post. We’re not taking that ad. And they have a large amount of investigative resources devoted to identifying Russian bots and Russian manipulators. I do think Russia is the main [inaudible 00:00:02:48]. I know this president wants to accuse China and everybody else, but we have the hardest evidence about Russia’s systemic intervention in 2016. Every intelligence agency had it nailed down who various… A hundred percent, certain ways. And then of course, the prosecutor Mr. Mueller managed to not only identify the institution that was doing it, but the address and individuals who were responsible. Right now, Facebook and every other platform from Twitter to Instagram, you name it, they all have to figure out where do we draw the line? Now that’s where there’s a fair debate, but there has to be a line drawn and it can’t anymore be the analogy to a telephone line. We’re not responsible, that’s just not acceptable anymore.

Ryan:

If they draw that line, I think they’re afraid of having liability.

Lanny:

Exactly, and they’re afraid of being in a no win situation. Right now, the conservatives are claiming that Facebook is censoring them or Twitter censored President Trump by saying something that they thought was dangerous misinformation on the pandemic and COVID. There’s almost a no win situation, but you know what? Harry Truman said it best, if you don’t like the heat, get out of the kitchen. They put themselves into this powerful and important place of having a community of communication systems. There is nothing negative about that, but having put themselves in this powerful position by their own success, they now have to step up and be responsible.

Ryan:

Lanny, one question about this utility or this communication platform, they’re collecting a lot of data. It’s freemium economic opportunities for people to get in touch with each other and get into an echo chamber. But do you think as consumers, we should have the right to know what data they collect or will there be regulation in the future on social media, do you think?

Lanny:

Yes. I think even if there is no change in administrations, there will be more and more regulation. You saw the testimony by the three or four giants in the tech world. And there’s no doubt that republicans and democrats don’t agree on much, but they do agree when there’s too much power unchecked by the marketplace. There will most certainly be either regulation or antitrust policy that breaks them up because concentrated power is inefficient. Quality goes down, output is very much influenced by decision makers rather than the marketplace and of course prices go up because there’s no competition. The very short answer to a long, difficult question is going to be about the market. And the marketplace is reacting negatively to Facebook. There are advertisers that are now not advertising, this is going to be a marketplace correction. I would like to see the least government intervention, which often gets it wrong. I speak as a liberal democrat that government often gets it wrong and the market usually gets it right. Somewhere in the next several years, there has to be more market competition on social media, on the internet and let the market and choice of market, meaning customers, get it right.

Ryan:

But all the ongoing issues around Coronavirus, what should employers be thinking about from communications standpoint and also what legal liabilities do employers have in today’s environment, given the pandemic?

Lanny:

Great question. And it is the question of our age. And again, I promised I wouldn’t be partisan or political on this call, so I’m going to avoid reference.

Ryan:

No, that’s okay. You know what? Rule book thrown out.

Lanny:

The analogy here, whether it’s a president of the United States or a CEO of a company, is to transparency and communication. In any venue, transparency and communication is the best answer. Especially when it involves science and death and danger, much less disruption to our economy and the suffering of people who are unemployed and being evicted and all of the human suffering that my dad told me about during the great depression, we’re now seeing in front of us. And we are looking at three times the number of people who died in Vietnam and it’s getting worse. Transparency and science and facts is what every company should be telling their employees, here are the dangers to going back to work, here are your options and trying to communicate more effectively by complete transparency. And I would say to any president of any party, your first obligation in a pandemic is honesty and facts and science. Nothing else can possibly come close to those three things. And I hope that we get more of it because this pandemic is only going to get worse, not better, unless we change the philosophy of being anti-science and not asking sacrifice of the American people to shut down and stop this thing before the United States, we are the worst in the world, because we weren’t able to shut down.

Lanny:

We started there and then we stopped and we did well for a while. And now we’re reopening and now schools and everything else is a great danger to the country.

Ryan:

And I ask this question because I’d love your educated perspective because you live inside the Beltway. Is it really much worse here or are we just testing more do you think? Because I think that’s the very important question that we need to understand.

Lanny:

Let’s assume the answer is we’re testing more people, because that’s not the answer. That’s not a factual answer. We should be testing more than we’re testing in order to stop the COVID from being a pandemic and confining it. We need to test people and then trace who they’ve been in contact with. And the test needs to be quick or else it’s meaningless if it takes a week to get back. But if you look at countries that have managed to handle this much better than we, including Germany, which is as close to parallel to us in terms of an advanced industrial democratic society, the difference between their cases and their deaths for a thousand, isn’t about whether they test more it’s that they shut down and used masks mandatory. And they followed and traced and segregated and quarantined people who had this very, very infectious bug.

Lanny:

We’re going to need to sacrifice. And Americans are not accustomed to voluntarily sacrificing. We have in our DNA, liberty and individual freedom from government interference, that’s how we established our republic on conservative principles. Thomas Jefferson, the least government is the best government. We’ve got to get over that when it comes to life and death. And this pandemic is only going to be turned around and the economy rebuilt, if we shut down or follow at least strict scientific protocols, if we’re not shut down, which means mandatory masks, mandatory social distancing and severe fines and penalties for anyone violating at least those two scientific facts to reduce the spread of this disease.

Ryan:

What are your thoughts about the Russian vaccine that just came out? Would you take it it was available here in the US?

Lanny:

The Russian vaccine? I don’t trust Putin as far as my distance from this laptop. Again, I promised I wouldn’t do too much of this, but in my lifetime, I have never imagined the President of the United States, not only admiring a murderous dictator like Putin, but when we know with almost a hundred percent certainty that he paid for American GIs to the Taliban bounties to be killed. And there’s an argument about whether that information was certain or not. I don’t care whether it’s certain, at least he should have been told about it and his own staff did not tell him. The answer to this question is pretty simple. We need to have a government that is honest with us and which stands up to the Russians and stands up to Putin. And for whatever reason, sincere or not, that has not been the case. I wouldn’t take the Russian vaccine, because I don’t trust Putin is the answer to your question, Ryan.

Ryan:

You’ve been in the White House. You’ve lived in DC. You’ve seen how international relations work. Why should Americans be surprised that Russia’s an enemy trying to kill our soldiers, manipulate our elections? China is using soft power to manipulate our election. We shouldn’t be surprised should we?

Lanny:

No, but never this bad. We certainly have been competitors, adversaries in many ways as we are with the Chinese, but the Chinese have not been aggressive. They haven’t taken their troops and taken over territories in Europe, the way the Russians have in the Ukraine, for sure. We know that the Russians seize territory. And they also, as far as we know, the Chinese haven’t intervened in our election in a massive way in favor of one candidate. Now, maybe they’re doing that now. There’s some evidence they might be, but so far nothing. But I do think that we should be ready to engage with Russia and get back to a normal adversarial relationship, not one where there’s an aggressive and hostile intervention in our democracy. We’ll see Putin in the hallways of diplomacy, for sure. And we’ll be adverse, but not engaged in what is really, acts of war, is when you invade through cyberspace and try to disrupt and distort a democracy. And to us, what Putin has done and I do say Putin, I’m not saying the Russians, what Putin has done to our democracy and intervening in 2016 and now doing it again in 2020, is a virtual act of war. And we need a strong government to challenge him, but we need to reengage with him and try to deescalate and go back to the days where we’re able to be adversaries, but without trying to destroy each other’s political systems.

Ryan:

One question that we have is TikTok. What do you think about the executive order that the president came out with for TikTok? The concept was there was a lot of offensive data being taken from people’s phones and shipped to servers in China. Do you agree with that, or do you think it’s counterproductive to the China relationship to have this [inaudible 00:14:12]?

Lanny:

Maybe the humblest answer I can say is, I have no clue why he attacked TikTok. Just as I have no clue why Mr. Trump does a lot of things. It appears as if there was a cartoon that offended him because the actual data danger to us isn’t TikTok, it’s Russian intervention on Facebook, which literally went into people’s personal lives and targeted them for misinformation. That’s a real danger. I have no idea. I’ve tried to figure out TikTok by asking my 15 year old son, “What happens on TikTok that I should be worried about?” And my son rolled his eyes and said, “Oh dad, you’re so 20th century.” I have a second generation of children, now I’m 20th century, makes me old. Something’s going on, Ryan, that bugged president Trump about TikTok. And the only thing I can figure out is the cartoon that is satiric about him. And he doesn’t like satire. Maybe somebody in your audience can help me understand what’s wrong with TikTok, as opposed to every other social media.

Ryan:

I think people are suggesting that the data that’s going back to China is not going to be scrubbed for personal information where Facebook, Twitter, they all grab our data from our phones all the time. I don’t think people realize that and they try to scrub [crosstalk 00:15:30].

Lanny:

And I imagine it is going back to China and I don’t like that. But, you could say the same thing about Facebook with data that went back to Russia, that led to targeted ads that affected a presidential election. One way or another, we know it had some effect with all that they did. What I’m saying is, not that I’m defending if TikTok is being used to gather data and foreign government is making use of it, we have to stop that. But to target TikTok, as opposed to all the other platforms, just because it’s China and say, oh, but Russia is fine. You know that doesn’t make any sense at all if the issue is privacy invasion of our data by a foreign government. The distinction between Russia and China, doesn’t meet with the facts.

Ryan:

Were you happy with the Mueller investigation? Do you think they were comprehensive enough or do you-

Lanny:

No. He pulled his punches. What president doesn’t get a subpoena? He wouldn’t even meet with him without a subpoena. Bill Clinton testified in front of a grand jury about his sex life. President Trump wouldn’t allow people to respond to a congressional subpoena in the middle of an impeachment. Of course Mueller should have subpoenaed the president. And of course he should have concluded from his own investigation one way or another, whether there was obstruction of justice. And to the extent there was cooperation, I don’t know what the word collusion means anymore. It was a very compromised half-hearted result, which then the attorney general, I think inaccurately, initially mis-described. And I would recommend too, I usually don’t plug other people’s books besides my own, Jeffrey Toobin has written the book on the Mueller investigation. He’s very pro Mueller, very professional, experienced lawyer, prosecutor. And he is extremely critical of Mr. Mueller, bringing us right up to the edge with a lot of facts and then nothing. I have a great deal of respect for Mr. Mueller, by the way, he’s a man of complete integrity. No political modus operandi whatsoever, but he was more conservative, let’s say, which he has a right to be, than the facts, I think suggested he should’ve.

Ryan:

Somewhere along the way, I’m not sure how long this has been policy, but whether it’s attorney general bar or [inaudible 00:18:00], talking about not rocking an election through the DOJ. What do you make of some of the text messages that Strzok and some of those other agents were exchanging? Do you believe in a deep state, or is there something to this conspiracy theory that the republicans keep pushing about illegal espionage of the campaign? Any thoughts on that?

Lanny:

First of all, what they did privately is their own business, as long as it didn’t affect their work. And there hasn’t been a single fact that has shown that their personal relationship or their biases against Mr. Trump affected anybody’s professional work or judgment. I’m interested in those facts, if there are any. There aren’t any even inferences based on facts that those two individuals affected the results of what FBI? No, the FBI doesn’t prosecute, they investigate. What prosecutor was affected by FBI agents having negative comments, much less a personal relationship? I haven’t seen a single fact that suggests that whatever they did that seemed improper and biased effected anything at all. What conspiracy theories do is blow smoke and make you wonder, but where there’s smoke there isn’t always fire, or it wouldn’t be a theory, it would be a fact. I’m willing to at least wait for their facts to show me that there was a difference made in whether to prosecute or not. Roger Stone admitted to being [inaudible 00:19:43] and Michael Cohen testified that he was a conduit between WikiLeaks and the Russians to Mr. Trump. And he lied about it and he threatened to win this and a jury convicted him.

Lanny:

We all know that Michael Flynn lied. He lied and stupidly, there were people listening in on his conversation with the Russian ambassador and he still lied. And he pled guilty and told the judge, I lied. Yet, his sentence has been commuted. My concern about using the expression deep state is, it’s an expression, but it isn’t a fact. Tell me what facts lead to the conclusion that there’s a permanent government that is unelectable, unaccountable and part of a conspiracy to do in what, conservatives or liberals or, or who? I do know I’m fighting an administrative process at the Federal Trade Commission. And I’ve actually used the expression, this resembles a deep state that the republicans talk because they’re permanent administrative personnel, never elected by anyone, they stay on forever and they have immense power.

Lanny:

Now I’ve given you some facts, so the deep state expression doesn’t mean anything without fact, but the fact that I’ve been fighting at the Federal Trade Commission is an internal system. When they bring a case over the last 25 years, they win 100% of the time. Does that sound like that’s equal justice? There, I’m putting some facts behind an expression. The expression deep state is just rhetoric. I’m interested in what are the facts to show me that something deeply permanent in our government, acting contrary to accountability and politics exists. And in the Federal Trade Commission administrative trial process, where they win 100% of the time over 25 years, I say, okay, I bet that will allow an inference, there’s something wrong here. Now, I’ve just been a very good lawyer for a client I can’t tell you about. Federal Trade Commission, if they’re listening, knows what I’m talking about because I have fought them before in a case involving Whole Foods. Exactly the same process, which is closed, one sided and always ends up in the FTC winning. And we’re challenging it in the courts as we should.

Ryan:

What are your thoughts about the VP pick, Kamala Harris? It seems she’s bringing the California party to the Biden camp. What are your thoughts? I did see some of your literature out the last few weeks about the advice you would have given the presidential candidate, Biden.

Lanny:

Well, first before I answer your question, Ryan, I was just thinking there might be a headline in my last comment to you. Can you imagine somebody like Sean Hannity or some conservative publication saying, Lanny Davis says there really is a deep state, at least at the FTC, that’s a headline. Kamala Harris is outstanding in terms of her qualifications and experience, period. If something happens to Joe Biden, God forbid, she can be president instantly. She served as a county prosecutor in San Francisco as a DA. She then ran and won and served as attorney general. And then she ran and won and served as United States senator. I’ve, full disclosure, known her since her days of running for DA. But then when I represented Michael Cohen behind closed doors, not only on national television, when she questioned Mr. Barr and when she questioned Brett Kavanaugh, now justice Kavanaugh, I saw her behind closed doors in an intelligence committee meeting, which of course there is no media and all classified information, at least a lot of it.

Lanny:

You have to be careful if you are a US senator. I saw her question and go through the evidence. And having read everything, clearly she had done her homework, not knowing she might someday be a vice presidential candidate. I thought to myself, this is really a serious person that does her homework, cares about facts, cares about the words she uses. She may make mistakes, but she’s very conscientious. I think the country is well served, regardless of whether you’re a republican or a democrat. She would be qualified to be president, which is the one big question for any vice presidential nominee.

Ryan:

We looked at the polls in 2016 and Senator Clinton was way ahead of Trump. And the media said it was a foregone conclusion. You brought up the infamous Comey intervention, if you will. Do you think that was the tipping point or did the pollsters just get it wrong? And is there any risk that they’re getting it wrong today?

Lanny:

Well, again, I’ll try to be short and I promised I wouldn’t give any speeches about James Comey and Hillary Clinton and all the things I speak so much about. Let me just summarize. Number one, the polls were exactly accurate in 2016. Let everybody write that sentence down because you won’t hear anybody say it exactly that way, but I will prove it to you. The final set of polls of real clear politics, which is an average of all the polls every day in the last two weeks, Hillary Clinton on the morning of October 28 was five points ahead of Donald Trump. Not the 10 that you see Biden, nationally. And the Comey letter dropped in the afternoon. In the morning, Nate Silver of FiveThirtyEight, projected the electoral map on October 28, Hillary Clinton wins by 350 electoral votes. From that day, if you track the average of each of the battleground states, forget about the national popular vote, which the polls predicted to be Hillary Clinton winning by 3%, she won by 2.6%.

Lanny:

Now, how can anyone say polls are inaccurate? If you take a sample of a thousand people and you come within 0.4% of the actual result, that’s proof that polls are accurate. What happened was in that last 10 days, most of the American people didn’t actually know how Hillary Clinton was dropping after the headlines about new criminal investigation emails, all about Clinton, saturating the media in the last 10 days. I wrote a book to try to prove that, but at least it’s a pretty good argument that she would’ve won, but for the Comey letter. Because after all, in Pennsylvania, Wisconsin, and Michigan 14.5 million votes were cast in those three states. If you lost those three states collectively by 70 000 votes divided by 14.5 million, do the math. Right now, I think, yeah, it’s favor Biden and Kamala Harris heavily, because that 70 000 vote switch or suppressed vote, because a lot of people didn’t vote because of the Comey letter and lost their enthusiasm of somebody that they were negative about to begin with.

Lanny:

And I think this time around, unless there is some late scandal that breaks about Joe Biden or Kamala Harris or something akin to a criminal investigation that is credible, as opposed to what Mr. Barr is threatening, which I so far, I haven’t heard anything that is serious. I think the likelihood is that Biden and Harris will win, but having been wrong before, I’m not going to predict anything for this November.

Ryan:

Do you think the Durham investigation could be an October surprise?

Lanny:

I think right now, whatever Durham says or does, if it’s dropped in October, it violates the same policy that James Comey violated for the last 50 or more years. Nothing is announced by the justice department, including an indictment and a serious crime in the last 60 days before a presidential election, it’s never been violated. Now, if it’s a terrorist who might threaten lives, of course they don’t wait. But if it’s just the indictment of a non terrorist crime, nothing is announced in the last 60 days before an election. Nothing. The exception was when an FBI director decided I get to decide when to violate that [inaudible 00:00:28:14]. Well, Mr. Comey, how do you get to decide? You report to the attorney general? You’re not a course of your own. Well, I thought it was the right thing to do because I promised congress. Now what will be Mr. Barr’s explanation? Mr. Comey was just plain out wrong. And for a lot of reasons, he did what he did. What is Mr. Barr’s explanation for allowing Mr. Durham to make what [inaudible 00:28:36]?

Lanny:

No trial and indictment is a ham sandwich, even if they indict someone until you prove your case. They’ll make that effort. And if they do, the American people have already discounted it, I think. The American people who haven’t totally closed their minds one way or the other, and that’s a pretty small number. I’m not really worried about the quote, October surprise, by Mr. Durham.

Ryan:

Do you think we’re going to have debates? Do you think there will be a presidential debate?

Lanny:

Do you think we’ll have a Durham announcement?

Ryan:

No. Do you think we’ll have presidential debates between Biden and Trump?

Lanny:

Oh, for sure. And it will be fun. Fun because I’m sure that Joe Biden will be rational and sensible and we’ll see great entertainment from President Trump and that makes it fun.

Ryan:

One of the few bipartisan issues that we have in the countries, both parties are frustrated with China. Do you think we risk going into a cold war with China, given the failed trade deal that is unraveling right now and some of the rhetoric that’s going to come out in the next 90 days?

Lanny:

I don’t think so. Even President Trump acts tough on China one day and then he says he’s in love with the head of North Korea or even China’s president on another moment. I don’t know if Mr. Trump is reelected, whether it means anything about relations with China or anyone, because he changes from day to day. I do want to give one summary comment. That may be as bipartisan as I can be. There are times in American history where people get fatigued. Fatigued with chaos, fatigued with controversy, fatigued with partisanship on both sides. I see terrible partisanship on the extremes of the democratic party as I do on the republican party. And there comes a time where the word normalcy becomes the most effective campaign message. Normalcy, decency, civility. And I’m not just throwing political stones here. If you test out my thesis, that’s the biggest issue facing the country right now, whether you’re pro Trump, anti Trump, pro Biden, anti Biden.

Lanny:

People want normalcy. They want decency. They don’t want invective and vitriol constantly, every day on Twitter, all night long on cable shows. That is the big issue facing our country. And in the 1920s, Calvin Coolidge was elected on the expression normalcy and Jimmy Carter in 1976, an unknown governor from Georgia, was elected because he said, I’ll never lie to you. That was in reaction to Richard Nixon. I think the 2020 election is going to be about we’re tired of this, whether you’re a democrat or republican, we want good government that listens. We don’t want big government. I’m a liberal and I don’t want big government. I want better market place [inaudible 00:31:54] to govern more than people in government. But most of all, I want decency and normalcy. And I think most Americans share my view, whether they’re Trump voters or Biden voters, that’s the big issue of our time.

Ryan:

Yeah. I think a lot of Americans are trapped in social media, echo chambers, or they just watch one cable news channel over the other. And I don’t know how we bridge this, but I think it’s probably the most dangerous and most pressing issue we have as a country is getting past this [inaudible 00:32:22] moment.

Lanny:

Agreed.

Ryan:

Lanny, any interesting book manuscripts or any books you’re reading today or any places you get your news that you think are worthwhile for our viewers to pay attention to?

Lanny:

No. I think the salacious books to come among the many and don’t really move the needle much is the Bob Woodward book coming out in September, just because he’s probably the greatest living reporter, certainly greatest reporter I’ve ever met. And he’s got a book coming out where he actually sat down… By the way, he takes everybody and tells them, if you want to talk to me, tell me the truth, because I’m taping you so you can’t deny what you told me. And somehow he gets away with it, most reporters they’d hang up. Woodward taped Donald Trump for hours and hours and hours. And he taped everybody who said things about Donald Trump. And in his last book, entitled Fear, people who said things to him about Mr. Trump, who worked for Mr. Trump, including his chief of staff and senior military people then said, no, I never said that. Until Bob Woodward said, excuse me, I got a tape of you saying it.

Lanny:

This book is called Rage. And that word comes from Mr. Trump, just as the word Fear, his first book came from Mr. Trump, but second hand, that he believed in the politics of fear. And he wrote that Trump denied it, but it was told to him on tape by several people. Now he’s got Mr. Trump saying, he believes in the politics of rage and that’s a tape. Now, of course, that doesn’t surprise anyone. Of course, Mr. Trump [inaudible 00:34:03] on rage, some people have a right to be angry. But to use it as a political tool, is at least subject to some debate, whether that’s appropriate, but that is the only book I think I’m looking forward to. Otherwise, I’m weary of all Trump books.

Ryan:

Lanny, I appreciate your time and your advice. It’s always sage wisdom and I hope you have a great rest of your summer. And-

Lanny:

May I just make a final comment to apologize to those of you who heard me be too partisan. I promise you, this was moderate compared to the way I usually am. I certainly appreciate your listening to me. It’s an honor to be invited by a long time friend, Ryan. And I consider him a young man, but he’s grown up and has a family. And I admire the work that you all have done. And I hope I’ve contributed a little bit besides some political partisanship, that I truly apologize for. It’s in my DNA and it’s hard to resist, but my advice to you about crisis management is really apolitical. And I thank you all for listening.

Ryan:

Thank you so much, Lanny. Appreciate you. Thank you for watching Non-beta Alpha. And before we go, please remember to like, subscribe and follow us on Spotify, YouTube and Apple podcasts. This is Non-Beta Alpha, and now, you know.

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Ryan Morfin: So you're an investor and a miner in rare earth minerals. Can you share with our listener base, what are rare earth minerals? Why are they important and why is there a geopolitical race going on globally?

Pini AlthausYeah, I mean, rare earths are an extremely ubiquitous part of all advanced manufacturing or technology manufacturing today's day and age. Several years ago, I had not heard too much about rare earths myself. I was not that familiar with it and being involved in this sector, in this company, for the past few years has given me an education of course. And I mean, I was sad to hear that 50% of all imports into the United States contain are earth elements and it runs the gamut from consumer electronic devices that we use every day. Our cell phones, our laptops, most communication devices, medical equipment. So there's a tie with COVID, which we can touch on at your discretion. Electric vehicles, defense equipment. So pretty much anything or everything high tech today has a rare earth element or critical minerals contained within them.

Ryan MorfinAnd what are some of the names of some of the more important rare earth? I know there's lithium for batteries, but what else is considered in this category, critical?

Pini Althaus: Yeah, so lithium is a separate category to battery material. The rare earths are 17 rare earths. The four, let's call it, key rare earths that we're focused on at our company, the four rare earths that go into the permanent magnets. And these are the magnets that are found, there are a number of them in your back of your cell phone or an iPad. But if you look at an F35 striker jet, you've got about a ton of rare earth magnets in those. And we've got two heavy rare earths and two light rare earths is part of the permanent magnets. You've got dysprosium, ytterbium are the heavies, and then you've got neodymium, praseodymium as the two light rare earths. So those would be key rare earths that are the focus.

Ryan MorfinAnd you use these in, I guess, in military applications as well, but historically, where has the United States sourced the rare earth for supply chain?

Pini AlthausYeah. And that's the shocking part. We've been securing those materials from China. So China controls the rare earth sector and has done so for the past 30 years or so. And it was a significant misstep on the part of the United States, allowing China to have this control. And actually this wasn't a question of China coming in and doing anything nefarious as far as stealing IP or anything. The US government made a conscious decision about 30 years ago to allow China to come to the United States and acquire the processing capabilities for rare earths. So just as part of some background, you've got the rare earth materials containing various mining projects, but once you extract them, you have to then process them and they go through certain phases before they get to the magnet phase. And China, the thought process was let China do the mining, let China do the processing.

Pini AlthausWe don't need to do that here. And we'll buy the materials from China cheaply and the premier of China at the time, Deng Xiaoping made the comment, he said, "The Middle East has oil. China has rare earths." And unfortunately we weren't smart enough to understand what he was saying. And the Chinese understood that the future of manufacturing is going to revolve around control of the rare earth and critical mineral supply chain. So if you think about it today, Ryan, we cannot build... Forget about consumer electronics and medical equipment. We cannot build the equipment that the US Pentagon or the US armed forces require, whether it's F35 fighter jet, Tomahawk cruise missile, communications equipment, without going to China and obtaining those materials. And it's obvious to all that this should be extremely alarming. We've seen China use this as a weapon, if you will, as far as how it interacts with other countries back in 2010, when there was a dispute between China and Japan on the East China Sea.

Pini AlthausSo China cut off rare earth exports from Japan for 40 days. Japan obviously being a significant user of rare earth elements for their high-tech manufacturing sector, that was stopped after 40 days. But in fact, it was President Obama that first made the United States aware of this, formed a division within the Department of Defense to handle this issue, but not much has happened. And we continue to be relying on China for these materials. And what has been made about trade war with China and whether the trade war is really the impetus for China withholding rare earth exports. And that is a huge misnomer. Whilst China had been talking or implying that they would cut off rare earth exports, the truth of the matter is that China, under it's made in China, 2025 mandate, its belt and road initiatives and others. And you seem to control the critical minerals and rare earth supply chain so that it can continue its dominance as a manufacturer or a global supplier of these materials and finished products.

Pini Althaus: It's the backbone of its economy. And in fact, China has become a net importer of rare earths from different countries like Miramar and others. So with that, they are decreasing the exports to countries like the United States, Japan and others.

Ryan Morfin: And was it ever a risk that the Chinese were going to turn off the exports of rare earth to the US during the trade war? How close were we to that? And was that ever some saber rattling that went down during trade negotiations?

Pini AlthausYeah, I think it was saber rattling. I think it would be paramount to an act of war. I can't say with any authority that that would not happen, but it would be probably, aside from war itself, it would be one of the most significant acts of war cutting the United States off from the ability to procure rare earths. But that being said, I mean, if you look at, as an analogy, the oil and gas sector and the reliance of the United States had for many, many years on OPEC countries to supply us with the oil. And we had embargoes and we had price manipulation by OPEC. This is far more significant given the ubiquity of where these rare earths go. And yes, we're always under the threat that China can cut off exports under the guise of a trade war or for any other nefarious reasons.

Pini AlthausBut I think even more importantly, to just as the natural run of the course of things with regards to their business and their desire to maintain themselves as the global leader in manufacturing and exporting of goods, China is in a position now where it actually requires these materials for their own domestic consumption and can legitimately cut off rare earth exports by stating that they need it for manufacturing and that would actually be somewhat correct. So we're in an extremely dangerous position here with this reliance on China. And it wouldn't just be China. If it was another country, it would be similar issues, not to the same extent, but reliance on one country for these materials is dangerous.

Ryan Morfin: And it's been mentioned in the past that in 2010, China flooded the market to really kill all the competitors in the rare earth mining industry. Where was the World Trade Organization during this period? And how did that play out and how does that set the chess board for China to run the tables?

Pini Althaus:

Yeah. So the WTO stepped in when China cut off rare earth exports from Japan, I think it lasted for about 40 days because the US and Japan protested the WTO, and they stepped in and China resumed exports. While I'm not an expert on these trade matters, one thing that I am aware of is that one of the reasons why China had to resume the export of rare earths was it did not legitimately need all the rare earths for domestic consumption. So therefore it was a nefarious act, if you will, to cut off rare earth exports. Now that has changed, which means China have to cut off rare earth exports today, they have a legitimate case to say that they require these materials. There's a shortage of these materials and they require them for their own domestic purposes. It is the backbone of their economy and there's very little we could do about this today, which is why it's becoming an even more urgent issue.

Ryan Morfin:

And the US government started stockpiling some of these after that incident. Can you talk a little bit about what DOD and DOE has done to start making sure that there's not a critical supply shortage going forward, and is it enough?

Pini Althaus:

Yeah, again, there is a national defense stock pile, and there are materials still that the United States needs to procure in order to shore up its stockpile. There are magnets, the finished magnet products as well, the United States government needs to stockpile. Again, there's a limited amount that the United States government has. It requires approval from Congress, whether it's in the NDAA or other approvals from Congress, to allocate monies for the national defense stock pile of these materials. That being said, there's no endless supply of these materials. And unfortunately, the apparatus, the way it's set up right now with the US government, it's going to continue to require having a secure supply chain of those materials for many, many years to come. So it's not a question of stockpiling for 10 or 20 years, and then this complacency and saying, we'll kick the can down the road. But keep in mind as well, Ryan, that US government accounts for low single digits of overall rare earth imports into the United States.

Pini Althaus:

We're talking about defense contractors, we're talking about the manufacturing sector. The direct impact this has on the economy, jobs, the automotive sector, and others is significant. So it's not just limited to the United States government. If you look at over the past couple of weeks, the sanctions that China have put on Raytheon, Boeing, Lockheed, et cetera. I mean, the question is where are they going to get those materials? And if we go beyond that, you need rare earths for the 5G network. Now that Huawei has been banned from installing the network, not only in the US but other countries, we have to have the ability to get a secure supply of these materials as well. Which currently, again, trying to control the hundred percent. So it runs across the board, both for government, defense and manufacturing in this country.

Ryan Morfin:

Well, and so help me paint a picture for our audience. Does China have all the mines for rare earth, or they're the only ones who started mining it? Or are their mines globally dispersed and nobody's been doing the actual infrastructure to do the mining?

Pini Althaus:

Yeah. So finding rare earth projects or rare earth elements is not the difficult part. It's finding them in significant quantities that makes a project economically viable. And part of that consideration are the environmental rigors that companies in the West have to adhere to. And China, even by their own admission, have had a complete disregard for mining these materials and even for processing these materials. And in fact, just the last week or so, the BBC did an expose on this, 60 Minutes has done an expose on this. But the Chinese have not denied this and have talked about cleaning up their act, but it has an effect on the bottom line for what the costs of mining and processing are if you have no environmental standards to adhere to. So China have exploited those rare earth projects they have, primarily in inner Mongolia, and have brought a number of projects online and quite quickly, and in a significant way, with a complete disregard for the environment.

Pini Althaus:

So it was seen as an environmental no-no in the West for many years. Now, what's happened over the past few years is you're starting to see rare earth projects in different parts of the world sprout up. You've got the Mountain World project in Australia owned by Linus, which is a producer of Nd and Pr, neodymium and praseodymium. So two of the light rare earths. They may have some heavy rare earths coming online at some point in time. And you've got Arafura, which is another company in Australia that we're working with to assist them with their processing so they don't have to send the materials to China for processing. But really these are a drop in the bucket for what the requirements are for the United States. And certainly what the requirements are for allied countries, the EU, et cetera. So there is a race, if you will, worldwide to start bringing projects online. The Chinese are very active in trying to secure assets outside of China.

Pini Althaus:

So in Africa. They have ownership of a project in Greenland. So there is somewhat of a race. The Australian government has stepped in and has started limiting the ability for China to own, or have ownership in, or off takes for the Australian rare earth projects. And that's part of the strategic Alliance between Australia and the US. Canada, similar thing as well. There are a number of projects that are looking to come alive, but these projects are, for the most part, will take many, many years to come online. We have to expedite the process. We have to assist with a [inaudible 00:14:41] supply chain and the domestic rare earth sector, because previously investors have been scared off by things like China flooding the market, which is not a possibility at this point in time, given that China can't actually afford to flood the market. They are already very heavily subsidizing their mine to magnet supply chain there.

Pini Althaus:

This is more now a case of being able to get production from non-Chinese sources so that the United States and allies have a viable, secure supply chain of these materials. And it's a concern worldwide. We speak to governments all over the world, and we're all facing the same issue. Some more than others, especially countries like Japan, that don't have their own rare earth projects there and are reliant on Australia where they've made some investments there. And in the United States, they've made an investment recently in Africa. So there is this race, if you will. And I think we've got a five-year window here to at least stand up a few projects worldwide. Otherwise we've lost this race and we will be dependent on China for many, many years to come. And Ryan, it's a bit of a hypocrisy. If you look at it where you've got materials going through clean, green energy applications, like electric vehicles, wind turbines, et cetera.

Pini Althaus:

That we're sourcing these materials from China, where they've, again by their own admission, has been complete environmental devastation to water bodies around these mines and processing facilities, to the communities. People have been getting sick around these projects yet we're putting these materials into our electric vehicles or wind turbines. It makes no sense at all. And people are starting to wake up to this. And that's why the sector is starting to see a lot of support come out of Congress and bi-partisan support. And in fact, it's one of the only bi-partisan issues right now in Washington. And it's good to see that some things decided to move in the right direction.

Ryan Morfin:

And is there a special process? You talk about the expense, is it really difficult to mine these? You have to go through a special chemical process to extract and clean and purify. Is it a lot harder than, say, gold or silver or some of the other, we'll call, more traditional elements?

Pini Althaus:

Yeah. It's all about the processing to some extent. So if you look at MP Materials in California, which used to be Molycorp before they went through their bankruptcy. They are a miner of Cerium and Lanthanum, which are two of the light rare earths, the lower valued light rare earths. Given that they do not currently have processing technology, they are sending those materials to China for processing where China is tariffing those heavily. Linus is also, they're doing their processing work in Malaysia and elsewhere. So it's really about the processing at this stage. One of the things that we've done, after we put out our PDA last year with our upgraded resource, which now includes a significant amount of lithium. We make a decision that, based on the test work that we had done around our processing methodology, that we were not going to send our materials to China. That it's paramount for us to do this work in the United States and in a collaborative effort as well.

Pini Althaus:

We've been asked by some of our investors, "Well, why would you be looking to help other projects with their processing?" And the answer is simple. There's no one project or one company that's going to put China out of business or make a dent, or somehow be able to take care of the overall demand worldwide for rare earths and critical minerals. And it's very important for us to have processing capability in the West. So that was the impetus for us opening up our own rare earth and critical minerals processing facility earlier this year, which we did in Wheatridge, Colorado. And in fact, we've made some significant progress on the method that we're using for this. And we're starting to collaborate with Australian companies, Canadian companies. We're currently talking to a group over in Europe as well, because this has to be a collaborative effort.

Ryan Morfin:

How does Europe solve for these problems? Do they have this better under control than the US?

Pini Althaus:

No, they're in a far worse position than we are. The EU commission recently put out a report, I think, a couple of months ago that the requirement for rare earths is going to increase tenfold within a short period of time. Lithium 18 times. They don't really have rare earth projects. Again, there are the Greenland projects, which people have heard in the news recently. Those need to further development work so they don't have rare earth projects ready to come online there. There are a couple of lithium projects that are spread around Europe, but for the most part, Europe is in an even more precarious position. If you look at Germany with the auto manufacturers, you look at the big companies like ThyssenKrupp and others, all these countries and companies are looking for alternatives to China, because we've already seen in the news about China withholding or reducing exports of some of these rare earths that are required for these industries.

Ryan Morfin:

And you mentioned earlier the regulatory posture of the US makes it difficult to mine. Is it becoming a more bi-partisan issue that we need to maybe relax some regulation around the mining exercise, to incentivize private sector to come in and start producing this? Or is the Republican party versus the Democratic party on two separate pages of music?

Pini Althaus:

Yeah. Good question, Ryan. I mean traditionally the Republican party is obviously being more pro-mining and in favor of less regulation when it comes to these things. With regards to our project, we're on Texas state land. So we don't trigger federal environmental permitting at this point in time. And obviously Texas being Texas, a mining state and oil and gas state, things are a lot easier in Texas than they are on projects on federal land where the Bureau of Land Management controls the environmental process around that. But the thing is here, and I don't want to step into what other companies are doing, et cetera, but we do need to be reasonable about allowing projects to come online if they're adhering to environmental standards that are acceptable worldwide. And what we do know, is that China is destroying the environment and cities and water bodies around their mines and processing facilities.

Pini Althaus:

We have standards here in the United States, and I think what we need to do is make it easier for companies to mine, while at the same time protecting the environment. And there are ways to do that. And we're definitely seeing buy-in from Congress, from both sides, with regards to looking how we can stand up a secure supply chain. And, obviously under the Obama administration, they had very strict regulations when it comes to mining. And that's changed under the Trump administration. Hopefully what we start to see is some normal middle ground that'll allow other projects to come online.

Ryan Morfin:

And typically in these rare earth mines, is it amalgamation of different minerals that are all consolidated together and you have to separate them out? Or do you ever find pure play, Europium, I can't even pronounce some of these. Gadolinium, Cerium. I mean, are they all mixed together and you've got to filter and sift them through, or are they pure play mines?

Pini Althaus:

No, they're generally they have a mix. So they're polymetallic projects. They have a number of different materials. Some projects, you more to what we call the light rare earths like MP in California or Linus in Australia. Our project is actually on the opposite end of the spectrum. We have a very high concentration of heavy rare earths. That being said, we do have to go through a process of separating these materials. But the case of our project where we've got 30 materials. We're not going to produce 30 materials. We're not going to market 30 materials. So what we're doing is we're focusing on the key materials that are marketable, that we need for permanent magnets, lithium as well, and working on the separation and the optimization of those materials in particular. But we're all faced with the same processing challenges and that is something that can't be set.

Pini Althaus:

There's no easy way to do this. There are different technologies that have been used in different parts of the world. So predominantly there's a process called solvent extraction, but it's big, it's bulky, it's not benign. It's a bespoke solution for one particular project. So it doesn't work for feedstock from other projects. What we've done is we're using a processing technology that's actually been around since the 1940s. It was part of the Manhattan Project. It's called continuous ion exchange. In fact, the Chinese use it to increase the purities from 99.99 to four nines, five nines, and even six nines. So for some applications you require higher purity levels. It's a far easier processing method to scale up and to take feedstock from other projects. In fact, we've demonstrated for the Department of Energy that we can take coal waste from Pennsylvania and do high purity separation of rare earths using our processing methods. So it's not a step that can be skipped unless one needs to send it to China for processing, which is not going to help us with our objectives here.

Ryan Morfin:

How many other, we'll call it, going concerns on any other businesses that are doing this, that are trying to, I guess, start the development of these mines. Are you guys one of a few or are you one of many? And is it an international or just a US game? Who's leading the charge at going after this?

Pini Althaus:

Yeah, well, I'd say the Australians are leading it outside of China right now. You've got some really good projects in Australia. Again, more skewed toward the light rare earths. There's one more heavy rare earth project in Australia, which is not yet producing. The United States, you've got MP Materials, you've got Ucore in Alaska, you've got the Bear Lodge project in Wyoming, which is also another light rare earth project. So as far as a heavy rare earth project that looks like it will come online in the near term, that would be our project. In Canada there are a couple of projects there as well, and again, more skewed toward the light rare earths. But we really need to get as many of these projects online as possible. Because again, I don't see it as competition. We all have a problem doing supply agreements or offtake agreements for our materials.

Pini Althaus:

In fact, one of the things that we're going to have to consider is looking at potentially scaling up our production, based on the demand that we're already starting to see. And I think other companies would find that as well. So it's all about the economics of the project. You have projects that were economically viable back in 2012 or rare earth prices with 35% or so higher than they are today, and are not necessarily viable today. So that's the challenge as well, economically viable projects. And we've got to get as many of them online as possible. It takes many, many years. I mean, our project has had over $70 million put into it to get to where we are today, and we're close to getting to the production scenario. It all revolves around processing at this point in time.

Pini Althaus:

We'd be very happy to see another couple of projects come online, because this is extremely important for national security and for the economy as well. I mean, if you think about it, Ryan, if you've got a billion dollars of rare earth materials, that translates into a trillion dollars or I should say trillions of dollars of finished product. So you've got a magnet in your phone there that's worth a couple of dollars and the cell phone's a thousand dollars. And electric vehicles and defense applications even more.

Ryan Morfin:

Yeah, everyone has one of these iPhones now, and there's tremendous amounts of rare earth on the circuit boards here. And I think people take it for granted that that supply chain is not secure right now. So one question for you, there's talk of this maybe medium term to longterm, but there's talk about mining in space. Do you think that's a feasible option in the longterm, medium term? What are your thoughts on that?

Pini Althaus:

No, that's just ridiculous. I mean, we're trying to find ways to make mining on earth economically viable. I think the cost of going up to space would be more than what our capex will be bringing our entire project into production. I mean, we've got about a 350 to $400 million capex to bring 130 year mine life into production. I'm not an aerospace expert, but I think sending a rocket, building a rocket ship and sending it up, I think maybe on the fuel alone, you could bring a couple of projects into production. So unless we have a fortunate situation or an asteroid lands on earth, and fortunate if it lands somewhere where we don't care, I don't see how that happens. And if it's big enough, it's a problem as well. It's nonsense. And even, options aside of the deep sea mining for rare earths, I mean, you've got all sorts of environmental issues around that as well. I think we need to look at projects that we can bring online, that can be done so in an economic way, that can be done so in an environmentally responsible way.

Pini Althaus:

I mean, one of the things that we've done at our project is we've got in excess of 60% of the materials that have come out around top, will have a clean green energy applicability to them. So we're using the benign processing method. We're going to be using renewable energy on site. In fact, we will likely be putting a solar farm on site as well. We've talked to a couple of companies that have approached us about that, and we'll be a net producer of power for the surrounding area. So there are ways to do it which don't affect the environment. Obviously if there's a project that's situated on a sensitive area, that's a unique situation for that specific project. We've seen it with the Pebble project, which is not a rare earth project. The Pebble project in Alaska where their environmental concerns is we've been recognized by both Republicans and Democrats, but we have to be reasonable about the projects that don't have environmental concerns.

Ryan Morfin:

So Pini, in season two, we ask all of our guests a series of six questions. They're usually, yes, no questions, but trying to take a survey of our conversations. And if you want to add a little context to the yes or no, feel free, but here goes the first question. If there was a COVID vaccine available today, would you take it?

Pini Althaus:

Yes.

Ryan Morfin:

Who do you think is going to win the election?

Pini Althaus:

Which election?

Ryan Morfin:

The US election.

Pini Althaus:

Well, I think it looks like Joe Biden's going to win it, but I think what happens, if we go past January six from my understanding is that the house will vote on it and it's one vote per state. But I don't know if I see it getting there at this point in time. I really don't have a crystal ball.

Ryan Morfin:

Third question. What type of economic recovery are we in? What type of shape is it taking? A V-shape, W, U, L?

Pini Althaus:

Yeah, I think 2021 is going to be challenging. I think we've been, and rightly so. I mean, we've had no choice as of almost every other country. We've been printing money for the past year because of COVID. And I think we've got to brace ourselves that, at some point in time, the chickens come home to roost. It was a necessary step. People needed it on an individual level. Businesses needed it as well, but I think we've got to do whatever we can to stimulate the economy, give people confidence to go out and work again, employ people. So I think we've got to watch ourselves, especially in 2021. And I have some concerns, but long-term, I think the approach in the United States is a healthy one.

Ryan Morfin:

During lockdown this summer and quarantine, was there anything in particular that you accomplished that you're particularly proud of?

Pini Althaus:

Yeah. A great amount of family time, which, if you would've asked me a few years ago if I could sit at home and be at home for six months, I would have told you absolutely not. I wouldn't be able to do it for six days, but it has... I'm sure it's done this with a lot of families as well. It's brought families together. We had a baby actually last year on Thanksgiving. So I was doing a lot of travel at the time and thought I wouldn't get to see my daughter in her first year or couple of years too often. And being home with her every day is actually been just the most amazing experience. So thankful at least for some silver lining in COVID.

Ryan Morfin:

Are there any silver linings that you see in the economy going into 2021?

Pini Althaus:

Yeah, I think we've gone through an absolute beating and it looks like we've got the ability to come out of it. And I think that's a testament to how strong the economy was built up in the years preceding COVID. So overall I remain an optimist. I mean, we are a country built on opportunity and going out and making it happen. And we're not a socialist country sitting and waiting for people to send us paychecks or wealth distribution or anything like that. I think the American dream still lives on. I think if you go out and you're willing to work and put your head to it and heart in it, I think we do have the ability to climb out of it. So if we look at what the economy is doing over the past few weeks, it looks like it's starting to rebound. And to me, that's assuring because it could go completely one way as well.

Ryan Morfin:

And the last question is, is there anything that you're watching, or listening to, or reading today that has been impactful on your thinking that you'd like to share with our audience?

Pini Althaus:

Yeah, that's a good question. I think it's been more personal stories. The news, I sort of take that in context or with more than a grain of salt. In some cases stay off the news channels for a number of days at a time, it became quite repetitive. But I think on the personal side, talking to friends, my family's all back home in Australia, they've just come out of 110 day lockdown, which we can't relate to that. It's been very trying on them and seeing the fortitude that they've had to come out of that and stay intact. I think the mental health issues that will come out of COVID are going to have a far longer effect than the economic issues. I think we're going to have to focus on mental health issues in this country for a long time to come.

Pini Althaus:

The impact on kids has been significant with regards to lockdown or remote schooling, et cetera. But to see people come through it. I think it's a testament to people in general and to the country and other countries as well, to see got that fortitude and survival instinct to try to get through whatever adversity we can. So hearing the personal stories, the challenges that people have gone through, I think it's made me a lot more aware of things that I have to be thankful for and where we can help out other people as well. I think we have to be united going forward because there are things...

Pini Althaus:

I think one of the things that COVID has shown us is we can get into this complacency and life goes on and we go one day to the next. And all of a sudden we get hit by something that affects everybody equally. I mean, COVID, whilst there were groups of people, whether it was the elderly or people with underlying health conditions, that got hit the worst. I mean, we all got hit in some form or another. So really, this should be something that unites us, not divides us.

Ryan Morfin:

Well, Pini, I appreciate you coming on today to talk to us a little bit about the supply chain crimp on rare earth and we'll definitely keep an eye on it and would love to have you back in the future.

Pini Althaus:

Thank you, Ryan. Thanks for having me.

Ryan Morfin:

Absolutely. Thank you. Bye-bye. Thanks for watching Non-Beta Alpha. And before we go, please remember to like, and subscribe on Apple podcasts and our YouTube channel. This is Non-Beta Alpha, and now you know.

 

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