The Week: China’s Upper Hand, a Troubled Bond Market, and a New Mortgage Crisis

George Hahn connects the dots across the week’s biggest stories: why China might be the first to answer the AI question, what $40 trillion in debt means for the bond markets, and how mortgages above 7% have made housing less affordable than ever. Plus, Scott on when moving in with your parents is smart and when it becomes a trap. We’d love your feedback as we build this show! Let us know what you think: [email protected]. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

  Hogging seats on a crowded train, not saying excuse me, watching videos on your phone with no headphones in. Sometimes it feels like we don't know how to act anymore. What we have been seeing increasingly is people breaking rules. Why should I play by the rules if nobody else is going to do that for me? This week on Explain It To Me, how to mind your manners. New episodes Sundays, wherever you get your podcasts.

• 0:30George Hahn?

  Welcome to the week from Prop G Media, where we break down what mattered and what it all means. I'm George Han and it's Friday, September 18th. Today, the fight over slowing down AI reaches the midterms and a former Meta security chief says the bigger threat is coming from China. Then, the bond market pushes back on America's $40 trillion debt. And finally, homeownership slips further out of reach. Let's get into it.

• 1:08George Hahn?

  We'll start with something light, the end of civilization. Earlier this month, Anthropic researcher Jacob Coxon resigned, warning that people building advanced AI believe it could "kill us all by the end of the decade." Anthropic's head of alignment science publicly agreed, putting the risk above 10%. Then, Anthropic CEO Dario Amodi called for the industry to slow down. Sam Altman and Elon Musk agreed. President Trump called the push a hoax. On Monday's Raging Moderates, CNN's Dana Bash explained what that could mean for the midterms.

• 1:52Scott Galloway?

  What's your sense of how these growing fears about an AI apocalypse and the backlash over data centers will impact the midterms?

• 2:01Speaker 03

  I think it could be, and it sounds silly to say that this is an October surprise because AI is not a surprise, but this Anthropic statement from Dario and the way that other companies and CEOs are responding, and more importantly, to your question, the way that candidates are being forced to respond, should be seismic. And like everything else in politics right now, the way that Donald Trump is playing it is potentially not helpful to his fellow Republicans who are on the ballot, because he keeps saying, in fact, he has a lengthy

• 2:43Speaker 03

  post out this morning about the fact that this is just a conspiracy and people like the head of Anthropic and others are just weak and they don't have courage and they don't understand that we can't cede this territory to China and so forth, which the first part is obviously that's Trump and he gets personal. That's what he does. The second part is what we're hearing Mike Johnson, the House Speaker, and other Republicans saying, okay, we do need to address this, but we can't, we can pump the brakes, but not slam on the brakes, because if we slam on the brakes, China's going to pass us by. If this was in a vacuum, it would be one thing, but the fact that this speaks to the larger set of anxieties that people have, not just on affordability, but on like, what's

• 3:28Speaker 03

  next? And we don't know who to trust. Do we trust the CEOs? Do we trust the government officials? Do we trust the candidates? The answer to all of that is no. And so there's a sense of sort of foreboding among voters and this issue and the fact that we now have this dire warning really feeds on that.

• 3:50George Hahn?

  This summer, open AI models escaped a controlled test environment and accessed the systems of AI company Hugging Face during a security evaluation. On Thursday's Conversations episode, Alex Stamos, former head of security at Meta and Yahoo, told Scott what he believes is the greater threat.

• 4:12Speaker 04

  The upcoming security problem is not going to be from open AI in Anthropic. It is going to be from open weight models. The real challenge we're going to be facing is GLM-53, KIMI-K3. Those things are within percentage points of the best American models. And so we are entering a valley of pain from a cyber perspective. And it is going to be because every 19-year-old in St. Petersburg, who has made millions of dollars doing ransomware, but had to do it all manually, is now going to be running, you know, they're going to be in the club. You know that Bourne movie where he steps out of the club and it's actually 10:00 AM? Well, he's going to be in the club in his tracksuit on his phone and he's going to be managing, instead of having to have a conspiracy of a bunch of his friends who

• 4:55Speaker 04

  have, you know, the possibility of getting turned or getting picked up by Interpol on vacation or something. The conspiracy is going to be a team of agents running on these brand-new M5 Studio Maxes. He's going to have 10 of them in his apartment, daisy-chained with Thunderbolt 5 cables. And they're going to be running a bunch of GLM-53 models, quantized, finely tuned to do cyber work. And that is how he's going to be hacking a dozen companies at once. And so there's going to be a bunch of Hugging Face attacks, except they're not going to be super high-end French AI companies. They're going to be mid-sized, you know, medical supply firms, small insurance companies, school districts, the kind of people who

• 5:39Speaker 04

  get ransomwared all the time. And he won't have to do any of the manual work he used to have to do. He won't even have to do negotiations, because these things will speak English for him. He won't have to speak English anymore. He won't have to have the dude who can do the translation. It will all be AI. That's what's coming. It won't be the bots anymore.

• 5:56George Hahn?

  This week, China Decode signed off for good. For the past year, Alice Han and James King have covered how China's economy, politics, and culture are reshaping the world. In their final episode, they argued that China may be closing the AI gap by embedding the technology into its factories, cars, appliances, and robots.

• 6:20Alice Han?

  And as a quick sense of scale, the US spent about $285 billion on private AI investment in 2025 versus China roughly $12.4 billion, about 23 times less than the US. But the capability gap between the two countries, despite the investment difference, is rapidly tightening. So James, I think this has been the biggest topic for us over the past year. And certainly in the time in which we've covered this topic, I think China has surprise to the upside on a number of levels, you know, starting from its ability to do cutting-edge models, largely open weight, open source. In some instantiations, there are some people

• 7:03Alice Han?

  saying that China may be six months behind the leading closed models coming out of the US. China's also, I think, surprise to the upside when it comes to its ability to bypass the constraints on hardware, say chips, for instance, with homegrown talent, but also its ability to find workarounds in the existing architecture. And it's surprised on robotics, too, where I think it's had a real clear lead versus the West.

• 7:30George Hahn?

  But they closed the show with a warning. The US and China may remain rivals, but AI safety is one area where neither country can afford to go it alone.

• 7:41Alice Han?

  Yeah. And then the other threat closer to home, but still this topic is AI weapons or some kind of rogue agent AI attacks that could go into the nuclear bio weapons domains. You know, the fact that we haven't had any real leadership between Washington and Beijing or any concerted effort for some kind of arms controls or AI safety guardrails, I think, is also going to set back civilization, really, in the years and decades to come.

• 8:13Speaker 06

  Yeah. And I think that would be my kind of parting comment would be, if the West and China doesn't get on, that is just one of those things. That's one of those things that happens in international relations. But what I would hope is that the minimum amount of cooperation to ensure the safety of our respective populations is really focused on by both China and the US and Europe. Geopolitical competition is one thing, but kind of white-knuckled competition without anybody with their hand on the tiller and nobody even cooperating in the merest of areas is really a scary prospect.

• 8:57George Hahn?

  We'll be right back.

• 9:03George Hahn?

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• 9:48George Hahn?

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• 10:15George Hahn?

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• 10:55George Hahn?

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• 11:27George Hahn?

  Welcome back. This week, the yield on the 10-year Treasury rose above 5% for the first time in almost two decades. On last Friday's Prof G Markets, The Financial Times' Katie Martin explained what bond investors are really reacting to.

• 11:44Speaker 07

  There's a lot going on. The bond markets globally are not looking very happy at all. And I guess it's a bit of a paint-your-own-adventure kind of picture, right? You can kind of stick onto this whatever kind of narrative you want. But I think the most powerful one is that governments are just borrowing too much damn money. You know, the US national debt has, of course, crossed through $40 trillion for the first time. You've got a whole bunch of countries, including the US, that are now spending more money on keeping current with their debts than they are on defence. And that's just a bit of a kind of marker that this has all got pretty out of hand.

• 12:27Speaker 07

  I feel like there's a lot of countries, including the UK, that just seem to have forgotten how to talk to the electorates about trade-offs and taxes. And instead, it's much easier to just keep going, cap in hand to the debt markets, keep borrowing more and more money to keep the lights on, pay for your defence, fix your roads, build your schools, all the rest of it. And at a certain point, bond investors say, "Look, I'll buy these bonds, but it's going to cost you. I'm going to want a higher return on them." And that's exactly what's happening here. And inflation plays a little bit of a role here. Bonds famously hate inflation. It eats into their returns.

• 13:09Speaker 07

  So again, investors ask for a higher return if they're going to be investing in bonds in a high-inflation environment. But they're the kind of main reasons why we have this horrible malaise in debt markets at the moment. As you say, the US has been most activist, shall we say, in trying to calm this situation down. But it still doesn't seem to be ready to have a proper conversation about properly cutting spending or raising taxes. So it's difficult to see how they can properly turn this around.

• 13:41George Hahn?

  Scott asked her whether any leader anywhere has told voters the truth about what it will take to fix it.

• 13:48Speaker 07

  I mean, it's just not a vote winner to kind of stand up on a podium somewhere and say, "Guys, I've got this great idea. How about you all pay more taxes?" I just, we have forgotten as developed economies how to do that, how to say to people, you know, if you want all these lovely things, you want lovely, you know, schools and hospitals and roads and yada, yada, then that costs money. There's just this idea that you can lean on the bond markets to do it. And particularly since COVID, that is just what we've done. So that's, I think that's why we're in the situation we're in today. You know, as you've been asking, you know, why is the market freaking out about this now?

• 14:28Speaker 07

  I think just the amount of borrowing stepped up so high around the time of COVID. And don't get me wrong, that was the right thing to do. There was a pandemic going on and governments had to step into where the private sector was before. But the right thing to do after that period would have been to say, "Okay, look, that was all emergency borrowing. We're now getting back to normal." And instead, governments were like, "This is awesome. We've found this magic money tree. Let's just keep plucking money off it." And, you know, now here we are in 2026 and the money tree is bare. And it's, you know, it's just a fundamentally more expensive exercise to borrow.

• 15:09George Hahn?

  Mortgage rates tend to track the 10-year Treasury yield. On Wednesday's Prof G Markets, Ed Elson talked about what that means for anyone trying to buy a home.

• 15:19Ed Elson?

  As you probably already know, home prices in America are more expensive today than ever before. The average home now costs more than seven times the average household's annual income. That number has never been higher, not even during the housing bubble. And that is a function of the fact that while home prices have kept going up, average wage growth has remained relatively stagnant. In fact, over the past several months, average wages have gone down. And that is a result of the runaway inflation that was, of course, prompted by our seemingly forever war with Iran. But that is all old news when it comes to housing. Here is the new news.

• 15:59Ed Elson?

  As of last week, the average 30-year mortgage rate rose above 7% for the first time in 15 months. In other words, not only are home prices rising, but so is the rate at which you would need to borrow in order to buy a home. Now, why is that rate rising? Again, because of the war. With oil prices soaring, inflation is showing no signs of slowing down, which has resulted in a global bond sell-off, which is causing long-term Treasury yields to rise, as we covered. And of course, it is those yields that mortgage rates are largely anchored to. So when yields go up, so does your mortgage rate. And that is exactly what is happening. So what do we have?

• 16:40Ed Elson?

  Historically expensive home prices combined with historically high mortgage rates, resulting in the most unaffordable housing market in the history of America.

• 16:52George Hahn?

  So young adults are staying put. Nearly half of Americans under 30 now live with a parent. On Wednesday's Office Hours, a listener asked Scott whether he should move back home to save money or whether it can keep you from building an independent life. Here's Scott's advice.

• 17:12Scott Galloway?

  It's situational. The reality is, if you're a responsible young man or woman who's looking to save a home and has a job, the way I would phrase it is the following: living at home when you're just sleeping there. You're out of the house, you're with friends, you're working hard, you're out of the house 14 to 16 hours a day. I would argue being at home and saving the money, as long as you're disciplined around saving and investing that money, I think it's a great thing. And so I moved home after I started my job at Morgan Stanley and then I moved home for a year because, one, my mom was sick, but, two, I liked living at home and it just made things easier for me. I think like a lot of young men, I like the idea of simplifying my life, saving some money so I could just focus on work. I would argue that that's healthy.

• 17:56Scott Galloway?

  What isn't healthy? You're spending 20 hours a day at home, playing video games. You know, you come out of your basement to ask your mom, "Where's the meatloaf?", but you're not, you're not out. You're not working, you're not exploring, you're not finding friends, mentors and mates. That is unhealthy. And unfortunately, it begins to be kind of enablement. And these kids don't develop the skills. The real world is a fantastic training ground for making money, making relationships, developing social skills. And you are not playing, you are not practicing or on the field learning those skills when you're at home. So living at home, I think it's great as long as you are taking the money you'd be spending on rent and saving or investing.

• 18:41Scott Galloway?

  And specifically, you are just sleeping at home and nothing more. You're not in your basement, you're not hanging out, you're not using it as an excuse to not have the economic pressure or relationship pressure. So it comes down to this: if it's a bed, then stay at home and save the money. If it's a real home and you are not developing the skills or the economic warrior mentality to build your own life, then it's a problem.

• 19:11George Hahn?

  That's the week. I'm George Han. We'll see you next Friday.