Modern Wisdom - #514 - Peter Zeihan - The Old World Order Is About To Collapse

Episode Date: August 18, 2022

Peter Zeihan is a geopolitical analyst, author and a speaker. The world is changing faster than ever, and a lot of the countries, dynamics, peace treaties and structures we're familiar with may be about to come to an end. Peter's job consists of him analysing data from geography, demographics, and global politics to understand economic trends and make predictions. And if his predictions are correct, the next 50 years are going to look incredibly different. Expect to learn why China will lose half of it's population by 2050, why globalisation is coming to an end even though we're more connected than ever, why population demographics are one of the most important factors in determining the future, whether automation will help or hinder us, whether food shortages are actually something to panic about and much more... Sponsors: Get 83% discount & 3 months free from Surfshark VPN at https://surfshark.deals/MODERNWISDOM (use code MODERNWISDOM) Get 10% discount on all Optimal Carnivore’s products at www.amazon.com/optimalcarnivore (use code: WISDOMSAVE10) Get 15% discount on Craftd London’s jewellery at https://bit.ly/cdwisdom (use code MW15) Extra Stuff: Buy The End Of The World Is Just The Beginning - https://amzn.to/3AekTQz  Get my free Reading List of 100 books to read before you die → https://chriswillx.com/books/ To support me on Patreon (thank you): https://www.patreon.com/modernwisdom - Get in touch. Instagram: https://www.instagram.com/chriswillx Twitter: https://www.twitter.com/chriswillx YouTube: https://www.youtube.com/modernwisdompodcast Email: https://chriswillx.com/contact/  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello friends, welcome back to the show. My guest today is Peter Zion. He's a geopolitical analyst, author and a speaker. The world is changing faster than ever, and a lot of the countries, dynamics, peace treaties, and structures we're familiar with may be about to come to an end. Peter's job consists of him analyzing data from geography, demographics, and global politics to understand economic trends and make predictions. And if his predictions are correct, the next 50 years are going to look incredibly different.

Expect to learn why China will lose half of its population by 2050. Why globalization is coming to an end even though we're more connected than ever. Why population demographics are one of the most important factors in determining the future. Whether automation will help or hinders, whether food shortages are actually something to panic about, and much more. This conversation, along with Nate Hagen's and Alex Epstein, between those three, is a very interesting picture,

I think, of the future. I like the fact that Peter, and Nate, and Alex are relatively positive. Like, they're actually optimistic about the fact that we can get through this stuff. It's not alarmism. It's not complete apocalyptic, naysay, or Cassandra complex stuff. It's people that have concerns about the direction that we're going in and need us to be prepared. And that seems like a much better approach than people that are crying the skies about to fall. Anyway, this is a very interesting conversation, and I hope that you enjoy it. But now, ladies and gentlemen, please welcome Peter Zayan. How real has the progress and prosperity of the last century been in your opinion?

Oh, it's been fantastic. This has been the greatest time to be alive. The combination of the American security umbrella plus globalization has changed the way we lived. It's allowed everyone to benefit from global trade. Before we had that, if you didn't have oil locally, you didn't have transport fuel. If you didn't have coal locally, you didn't have electricity.. If you didn't have coal locally, you didn't have electricity. If you didn't have good food locally,

you didn't have a population. Globalization, safe globalization, enabled anyone to trade anything that they could produce, even if it wasn't a commodity, and joined the system. It was like everyone had one world were two all at once. It's been a great ride and now it's ending. Was it inevitable that it was going to end? If you'd gone back a century ago and been able to change policy globally, could you have done something differently

back then? A century ago probably not. There's a couple problems here. So first of all, when globalization really got going in the 50s, we started moving off the farms and into the cities to take manufacturing jobs. Now, when you live on a farm, kids are free labor. You have a whole scatter of them. But when you move into a condo, kids are just really loud, expensive, mobile pieces of furniture and adults aren't idiots, so we had fewer. You play that forward for 70 years, and it's not that we're running out of children, that happened 40 years ago, it's that we're running out of mature adults. And so the economic model of globalization is consumption-based, and it just doesn't

work without people. So we've always known we were going to get here in the end. The Americans forced the issue. At the end of the war, we told everyone that we were going to get here in the end. The Americans forced the issue. At the end of the war, we told everyone that we would patrol the global ocean so that anyone could send any cargo ship anywhere to trade in any product with any partner. That's what made globalization work. Now, we didn't do this because we were nice. We didn't do this because it was a trade program.

We did this as a bribe. This is what we gave everyone so that they would join us against the Soviets. The Soviet Union collapsed in 1992. So Americans have been electing ever more isolationist and popular sleaders ever since. So for you to believe that globalization can continue, you have to believe that it doesn't require consumption anymore. And be that the Americans will continue to bleed and die so that the

Chinese can get that you know that's a bad bad. Before we start talking about where we're at and what that means for the future is there anything else that we need to understand about how we got here about any of the fundamental principles that we're going to be talking about? I will bring them up as we go but those are the two big things. The demographic flip, well past the point of no return, and the Americans have largely checked out. You said that 2019 is the best that the world will ever be. What was particularly special about that one year? So think of your demographic profile as a pyramid. Children on the bottom retirees at the top mortality built it into a pyramid. As we industrialized and urbanized it became more of a column and then and eventually an inverted V with more matured alts than

children. In 2019 was the last year before the baby boomers really got into retirement in a big way. So we had this massive post-war generation throughout the Western world that were all on average 63. So they hadn't retired yet, and all of their investments and all their retirement savings were churning along, providing capital for the whole system. We still had a huge amount of consumption out in the world, but you fast forward three years, this year on average, they turn 66. So it's over.

We've lose their consumption, we lose their investment. They have to liquidate all their stocks and bonds and go into T-bills and cash because they won't have the ability to recover from a crash. And we're also seeing some of the fastest demographic aging in human history throughout the developing world with China being the far most advanced. So we're losing the investors, we're losing the workers, we're losing the consumers all at the same time. On top of that, we had Trump and we had COVID and now we've got Biden and then we

had Brexit and everything that used to tie it all together has been broken apart either on purpose or just because of the strategic trends that we're already in play. We're never going back. Consumers, investors and workers. Those are the three main things that people of working age and above school age give us. Absolutely. And we're running out of all of them. And you need those to continue to grease the system. They're the people that drive not only creativity in terms of pushing technological progress forward and bits and pieces, but they also inject capital into the system. They're the ones that are spending on consumer goods, so on and so forth. So they just provide like financial lubrication and also the worker power, the employee power. Right. You can kind of split it into two general categories. For people roughly aged 18 to 40,

maybe 45, those are your young workers, relatively low value add, relatively low cost, but they're at the height of their consumption because they're raising kids and buying home. So that's where most of the economic activity that drives a modern system comes from. home. So that's where most of the economic activity that drives a modern system comes from. Once you pass 45 up until 65, the kids are moving out, the house has been paid down, but your income keeps going up. So the delta between your income and your expenses gets very, very large. And that's where all the financial heft comes from. But these are also our most productive workers because they literally have decades of experience. And from roughly 1985 until 2015, the world was in kind of the perfect balance because we had a lot of those countries with the mature worker demographics and then a lot with the

younger worker demographics. What's happened is that countries who joined globalization in the second wave in 1990s, mostly the developing world. They urbanized and aged out much faster than the rich world did. So when we hit 2015, that big chunk of developing world workers, the experienced workers, the productive workers, the ones who saved, they're now moving into retirement. We're losing their money, we're losing their skills.

But because the developing world is aging so much faster, they're moving into their forties and their fifties, but they haven't been able to build up the skill set because their systems were not as established. But their birth rates dropped faster than the West did. So they actually have lower birth rates in many cases in most of the advanced world. So we've lost children on both sides of the ledger, and now our new mature workers just don't have the skill set to keep it up, and even if they did, they wouldn't have anyone to sell to.

When old people died, did they not pass the money down as either inheritance or inheritance tax? Does that not go back into the system in one way? They do, and if they died at age 66, that would be great from an economic point of view. Unfortunately, if that's the right word, this people continue on for 20, 25 years after retirement. Now, this is gonna sound really weird, but in the United States, this is less of a problem.

Number one, our baby boomers actually had kids, so we do have a replacement generation. We know them as millennials. We can talk about them later in all the faults, but ultimately they're there, and that's a good thing. Second, we have a really high mortality rate among people over age 55 in the United States. The delta between the average age of mortality

in Europe versus the United States is an excess of 10 years. So we will get that churn a lot faster than Europe will. That's interesting. Okay, so which countries at the moment have got the worst demographics? Which countries should be, yeah, which countries should be very concerned about the ratio of young to old? The worst in the world is China. They've been in the process of updating their data over the course of the last couple of years. I mean, now starting to publicly admit that they overcounted by 100 million people. All of those people would have been born since one child, so age 40 and under, the young worker demographic, the child bearing demographic,

and two-thirds of them are probably women. So, we best guess is that China only has 1.3 billion people now. The population probably peaked more than 10 years ago. And by 2030, there will be more retirees than workers. And by 2050, the entire population of China will have dropped below 650 million. That's wild. It's beyond terminal. Yeah, so the Chinese system collapses this decade for sure.

Assuming nothing else goes wrong, and there's plenty other competitors to put the bullet in China's head. Dude, that is crazy. Okay, so. Yeah, all the way from pre-industrial to post-industrial collapse in 45 years. Just for the people that don't understand about how the one child policy and the preference for boys, overgirls and stuff created this landscape. What's the high level view of that? Sure, well, there's two things. First of all, of course, as one child,

Mao was concerned that they had a young upcoming generation after World War II that was going to eat the country alive. So they went to a two-child policy, ultimately to a one-child policy, and that was not loosened until 2015. But by that point, the damage was already done because there was a second factor. Remember, countries that industrialize later can follow the path of those who came before, they can skip some steps. So China was the fastest ever industrialization experience. What the United Kingdom did in seven generations, the Chinese did in one. And so they crammed seven generations of economic growth and development in one. And that's why their growth rate has been so impressive.

But you can only do that once. And now it's behind them. And now they have no children, and they have very few people under age 45. Is this, is population growth and collapse similar to an art number in a way that more people allow you to have more children, which gives you more people to have more children, but if the reverse is happening, then it causes a nose dive. You're absolutely right there. Now, I don't want to say that unchecked population growth is necessarily the way to go. That's not what I'm after here.

I mean, you require a balance between children, young workers, and mature workers. If you don't have enough mature workers, you don't have the capital. If you don't have enough young workers, you don't have the consumption. If you don't have enough young workers, you don't have the consumption. If you don't have the children, you don't have a future. China is already out of those last two categories. And so we know where this leads, it leads to zero. Given the fact that humans are being, I think it's every three generations lives for another generation at the moment, around about every generation lives eight years longer than the generation before increased healthcare, health, span, better access to. That is only true in this shift from

pre-industrial to industrial. So you get that once? Well, it depends upon how you apply the lessons to your system. In the case of Europe, I'd say they got it three times. But there's definitely an upper limit. One of the things to keep in mind, especially when you're talking about European demographics, is that Europe, in Europe, people are not living longer. Overall, lifespan has not improved. What's improved is we've gotten rid of a lot of mortality. So the things that used to kill you when you were zero to 65 don't kill you anymore. Right. Okay. That is going to change the shape of demographics as well, right? when you were zero to 65, don't kill you anymore. Right, okay. That is going to change the shape of demographics as well, right? The fact that young people are able to get old more easily, say, more safely, more safely,

yeah, precisely. So I guess there's just a lot over the last 100 years we've seen such change. It's not just been technological change, but downstream from that is what's happened demographically and how that's influenced the demography. Okay. So if Chinese got the worst, who what are some of the areas that have got better looking demography? The three countries in the world, in the advanced world, actually in the advanced and in the developing world, New Zealand,

France, United States. And largely for the same reason, there are countries that have a little bit more physical space, so their cities tend to be more of a sprawl. You're more likely to have a backyard. More people can live in the countryside and be economically viable. So when these three countries urbanized, they did it at a slower rate, and they remain the three advanced countries with the lowest urbanization rates in the world. In the advanced developing world, the closest one is going to be Mexico, and for similar reasons. Central Mexico, which is on a highland massive, is just one giant suburban sprawl, and that means that people can have more children. Now, all of these countries still have their own Central Mexico, which is on a highland massive, is just one giant suburban sprawl. And that

means that people can have more children. Now, all of these countries still have their own demographic hiccups. They all have the baby boomer problem. It's just that they all have replacement generations. I saw, I had a conversation with Jordan Peterson about this at the start of the year and I did some research before. Is the country with the highest current birth rate per family Chad? Could be somewhere in Africa I'm going to guess with a roundabout. Probably somewhere in Central Africa. Yeah, Chad, Nigeria, that cluster.

Uh-huh, but I'm going to guess that just lots of children isn't necessarily a good answer either because you then lock yourself into potential futures. You can't birth any more or fewer five-year-olds now. It's what whatever happens this year is now. Yeah, precisely. Precisely precisely. So in the case of Sub-Saharan Africa, and this is a very broad array of countries, it's very difficult to make a generalization, they've started to industrialize. And so they're going down the same path that everybody else did. And the first step of that path is lowering

infant and child mortality. And so when one out of three children don't die, you have an explosion in your birth rate. But if you play that forward 10, 15 years, then you start having adjustments in family planning and you get smaller and smaller families as urbanization kicks in. The danger for countries that are in this category who've taken the first but not the second step is that they've imported a lot of the technologies of industrialization which has helped them out but they have not developed the systems to sustain that themselves. So if something happens to the outside environment they lose all of the benefits. What like? Healthcare, medicines, fertilizers. It's very easy for me to see a lot of these countries facing famine in the not too distant future because if you break down globalization, yes, that means it's difficult to get oil or manufactured goods. I'm more concerned

about agriculture. Agriculture is by far the most delicate and vulnerable of the economic sectors because it needs the equipment, it needs the finance, vulnerable of the economic sectors because it needs the equipment, it needs the finance, it needs the fertilizers, it needs the trade options. You break any of those the whole system falls apart. And with the Ukraine war, we are seeing massive disruptions to the fertilizer sector with some of the decisions the Chinese have made same thing. So we're already looking this year at losing roughly a third of global fertilizer supply. That is going to haunt us for a decade. Wow.

Okay, so for the people that maybe haven't been able to work out why it is that increasing urbanization and education and development causes a reduction in birth rate. Can you just explain that for sure? It's a wide array of factors. So when you move into a city, you have less room and that just changes the mechanics of raising kids. When you move off the farm, kids are no longer free labor. You have fewer of them. When you urbanize, when you have electricity, you've generated time. And so people can do things after sunset. This is important for everything in terms

of economic development, but it's most important for women. Because if a woman moves off the farming into the city and all of a sudden can do something after hours, you have the opportunity for mass education and freeing them from doing more than just being mothers, nothing wrong with being a mother. But it's a full-time job on the farm. In the city, you're gonna have fewer kids that's less time allotted. And you have the greater apt chance to, you know, read. And so the entire women's right movement is basically linked indelibly to electricity.

And once you have it, women have fewer kids because they now have other things going on other lives that compete for attention. They can go and get jobs. They can pursue careers, they can do research, yes, interest. We absolutely, I mean, the British example with the cotton mills was probably the best example. The first group of people to urbanize weren't the men. It was the women. And we saw the impact on birth rates.

Going back to what you said there about food shortages and the delicacy of agriculture. I'm seeing a lot of videos come out, shaky phone videos come out of China at the moment. Just how bad is there any reliable information about how bad food and the future of food will be in China? It's getting difficult to get good information out of China. It's really devolved into a cult of personality state, even stricter than what Mao Zedong had. I don't think that the Chinese have a food crisis that is impacting their ability to have calories at the moment. Chinese land is among the worst in the world, and so it requires a huge amount of fertilizer to grow anything, specifically

phosphate for rice. By far, the world's most phosphate hungry crop, and the Chinese traditionally the Chinese traditionally because of that have been the world's largest producer and exporter of the stuff. The problem is actually with Africans swine fever. Now you may have heard of that a few years ago. They had a big outbreak. They ended up culling molar hogs from their farms and the rest of the world's commercial farms have hogs. Just give you an idea of just how lopsided the pork market is. It's two-thirds of it is China. They went to rebuilt their herds, but they never abrogated the debts for the farmers who went out of business. They just offered subsidies to bring in new people. They thought that would be cheaper. Well, you have now two million new hog farmers in China who have no idea what

they're doing. Unless you say that the phytosanitary does not translate into Mandarin well in the first place. So we're probably in the early stages of a second wave of ASF that'll probably be just as bad if not worse than the first one. So pork, just like it did two, three years ago, is about to fall off the market in China completely. That just leaves rice. So the Chinese have banned the export of phosphate fertilizer. In the short term, this is causing massive problems in agricultural producers in eastern

South Asia, Australia, especially Western Australia, is probably the part that's gotten hit hardest. Brazil is feeling the impacts because these are Western Australia and Brazil basically can't grow without fertilizer. They don't have soil on the way that we think of the term. It's a weird geology. But you interrupt the input flows and it's very difficult to grow food at volume. And China, in the best of times, is on a razor's edge in terms of food sustainability.

And they use about three to six times as much fertilizer as is used in the global average just because their land is so poor. Luckily, phosphate they've got covered. They produce that themselves. But the nitrogen is all made with imported natural gas. And the phosphate half of the potash, half of that comes from a different continent. So, yeah, China demographic collapse, unavoidable, food collapse highly likely. And that's before you start talking about things like energy manufacturing and trade. Does this not make China unbelievably dangerous? The question is, what would you do if you're China?

Where would you go to get what you want? If you go into Kazakhstan, fine, but you know, what does the winter get? You can't go to India, and the play is on the way. You could go into Vietnam, but when the Chinese did that last in 1979, they got treated just as well as the Americans were. And so that was a quick war. They don't have the Navy to push out. Japan and Taiwan could go nuclear in a month.

Hang on, that just leaves Russia. We heard, there's China taking over the South China Sea, there's all of these small island debts that they're putting together, they've got this scary big armed forces that's going to come and take over everything. Is that not the case? Are they not as strong militarily as they have been told? Really not. They have made significant strides over the last 30 years. I don't mean to

belittle that. But everything they're doing in the South China Sea was designed to intimidate Vietnam and the Philippines into powering and it had the opposite effect. And both countries just ran to Japan and now have defense packs. It doesn't really allow the Chinese to project power very far either. They do have a lot of ships. They've got like a 650 ship navy, but 90% of them are really small and can't sail more than 1,500 kilometers from the coast. And that assumes they're going slow in a straight line and no one's shooting at them. In actual combat

conditions, they can maybe make it 600K. So they don't have the power of projection. And they're the country in the world that is most dependent on reaching the world in order to reach markets and resources. Okay, so that's demographics. How does globalization play a role? Well, if the Chinese can't reach Europe, they lose their largest market. If the United States throws a trade war, they lose their second largest market. If they can't reach Africa, they lose raw material resources.

If they can't reach the Persian Gulf, the lights go out. They're completely dependent on globalization as maintained by the Americans for the entirety of their economic and cultural system. What do you mean when you say as maintained by the Americans? The United States is the country that guarantees freedom of the seas, or traditionally that has been our role since World War II. That's what we're getting out of. And we're, there's going to be this little fun thing with Ukraine where it's about to happen.

So I don't know how much you've been been following that but the Europeans have done an insurance ban. Which is dissuaded most reputable carriers from taking Russian crew to China so the Chinese and the Russians rented a bunch of super tankers a last them together into a raft off the coast portragal and they're bringing shuttle tankers from Russia's ports which can't take take super tankers, and doing sea-to-sea transfers in the middle of the Atlantic. I can't wait for somebody just to do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do, do is going to do that, and that's going to shut down the entire energy trade out of Russia. I'm a little surprised it hasn't happened already, but it's going to be a fun day when it does go down. Dude, that's wild. I mean, how much oil are you talking about here? Because presumably, if someone was going to do a small act of war in order to take it, it would have to be a worthwhile amount of fuel. Well, you probably wouldn't do it just because you wanted the oil. You would do it because you wanted to disrupt the Russian financial system, because this

would destroy it. One super tanker, the insurance polys and one super tanker is going to run about a billion dollars. The Russians only have five billion dollars put aside for this. So not only would you disrupt the immediate transfer, which probably would affect, I'm just spitballing here because the Russians aren't talking, but let's call it two to three million barrels immediately. But anything else that was in the chain going back to the Russian ports, probably another

10 or 15 million, I'm sorry, I said billionarily, two to three million barrels. There's probably another 10 to 15 million barrels on shuttle tankers on their way there now. And then all of a sudden the ports get clogged and then the pipes get clogged and the pressure builds up into Siberia into the Permafross and the Wells freeze. And that's it for Russian energy for 30 years. Dude, everything is so interconnected. And fragile. Okay, so that's globalization for China. You mentioned that the US was kind of like the police of the sea and they're getting out of it. What does getting out of it mean and what did police of the sea mean?

Well, part of globalization was making sure that everybody's commerce could go anywhere. In the pre-World War II environment, unless you were an empire with a navy, you didn't trade. You couldn't because the empires were in charge. When the empires died in World War II, and the Americans took over the global structures, we decided that rather than having a single American-led structure that was designed to siphon off energy and food and resources

and money to the United States as an empire would, we would instead prioritize security versus the Soviets. And so we provided the economic backdrop, the security backdrop that was necessary for everyone to play. And that's the world we know. That's what we've been living in. The Americans make sure that piracy is under control, they make sure that hostile countries can't rage commerce, and they generally provide policing actions.

Not to say that we've done it great in any given day, but that's been the plan and it's broadly worked. Since 1992 we've been back in away from that. We've been closing down our overseas bases, we've been retooling our military, so it's not destroyer heavy and designed a patrol, it's carrier heavy and designed to, and designed to hammer things. So we now have 11 super carriers. By the end of this decade, we'll have 14. One of them is more powerful than all but nine of the Air Forces on the planet.

And that assumes a fair fight. And the whole idea of a Navy is it's never a fair fight because chips move. We've learned this from you. And so it's really one of our new supercarries can take on any but one of three air forces in the world. And we have, you're gonna have 14 of them. So that's great if you wanna knock off a country. If you wanna patrol the global oceans,

and you can only be in 14 places at once, and that assumes they're all at sea, which never happens. So we no longer even have the military structure that is necessary to guarantee global commerce, no country in the world does. So the most likely outcome of this is we'll get a series of regional powers that have military force that is capable of kind of making a bubble, a little sphere of influence, and there will be trade within those bubbles. But the trade between the bubbles is going

to be very, very sketchy, difficult to regulate, difficult to protect, and by definition, can't really be very long distance. That eliminates a lot of what's out there. What are you protecting the seas from? Is this criminals and people that are going to Steel ships is that the risk that happens? I'm trying to work out the difference between the current state and the state where there are few destroyers patrolling the seas. Well pre-World War II is usually Imperial competition. If you didn't have something that you thought you needed you went out on your ticket and if somebody else had it,

you had a nice little war with a naval component. During the Cold War, it has been, I'm sorry, just during the post-Cold War era, a piracy has come back in a very big way. It's more an irritant, but if you look back to pre-World War II, privatearian was all kinds of fun. And the idea that you didn't have to go out

and raid your opponents shipping yourself, you get as high as someone to do it. I expect to see a lot more of that. So that was what I was thinking. I was thinking this sounds very primitive very medieval that. Countries that. Publicly are at peace and. Have their diplomats going to visit each other and conversations and their sat around tables together agreeing about stuff that they would try and steal shipments of potatoes or whatever it is that's going on or metals. That seemed a little bit unlikely, but what

you're saying is that there are ways around committing outright acts of naval war by... I mean, you can have state piracy, basically, using your military to grab things direct. You can have privateerian where you rely on third parties to do it and provide safe harbor. And then you can have flat out piracy. We've dealt with all of them in the past. We're gonna have to deal with all of them in the future.

Do you think that's realistic though? In the current state where information is able to be pushed around the world super quickly and sanctions and public lambasting and so on and so forth, would someone really come out and try and steal some ships, whether under the cover of a bunch of guys? What about Russia? Russia's been doing it for six months. Okay, yeah. Yeah. They are a war though, right? When you break down the rules

of action and when you remove the security guarantee, countries do what they feel they need to, whether it's out of opportunity or desperation. Interesting. Okay. So that's globalization. Globalization, let's say that it does start to slow down. What are the knock on effects of that? Oh, dear God. Okay. So I just wrote this book. The book split into six big chapters based on the various economic sectors, so transport, finance, energy, industrial commodities, agriculture, manufacturing, everything that we understand about all six is dependent upon the idea of global security. And so you remove the global security and all six of them have to unwind in reform in different ways. So really it's kind of pick your poison. With transport,

long haul goes out the window. That's an end to among other things, super tankers. So if you are getting your oil from 3,000 or more miles away, you're out of luck. Ships are going to have to be smaller and go faster because the concentrated risk that a giant container vessel has, you lose one of those and the shipping company goes away. If you're doing smaller tankers or smaller ships that are going faster, they can't carry as much. You just lost most intermediate goods trade. That's an into electronics manufacturing in its current form. So you can play this on really any topic that you want, but the structures that have all held it together and made it work are dependent upon the ceiling not falling and it's falling.

It seems to me like the current way that the world set up has got most people, myself included, to believe that everyone's just a bit nicer now than we were for most of human history. Do you understand what I mean? I totally do. How would you say it's global policing, masquerading as virtuous human nature? We established penalties for people who didn't play. And because the Americans started with Europe, which was the headquarters of most of the empires, it stuck. The only non-European empire that mattered at the time was the Soviet Union, which was the target of all this,

and Japan, which was subjugated. So everyone who in the past had been a bad actor, if you want to use that very loaded term, all of a sudden was on the same side. Everyone who had ever had a projection-based military throughout human history was in the same coalition. It worked for a while. You've said that energy is one of the sub components of globalization,

presumably because in order to get the energy, you need to move it around the world in order to take it from where it's taken from to where it needs to be used. Is just how crucial of a point is energy because Alex Epstein's been on the show, Nate Hagen's been on the show, Richard Betts from the IPCC's been on the show, I understand that they have their priors with regards to whether they're research-wise, but obviously their focus is that especially with Nate, energy is absolutely everything. What are your views on the current state of the energy climate and then moving forward climate change as well?

I would say that there's not a lot of light between me and those names. I mean, obviously, when you get into the details analyst, can quibble about everything and they can, they do absolutely. But the core idea that without energy none of this works is solid. We've spent the last 70 years bringing the energy from where it's produced towards consumed, which means primarily from the Middle East to Europe and East Asia. North America is more or less a self-contained component. Even was before the Shale Revolution.

Now it certainly is. That was one of the prices the Americans paid in order to get their alliances, making sure the energy would flow. In the environment we're in now, we're at a risk of losing all Russian crude. Now, I've always thought this was going to happen eventually, I didn't think it was gonna happen this soon. Russian crude is what has largely fueled the global economic expansion since 92.

Because when the Soviet system collapsed, their energy production did not, and all of their commodities were just dumped on the international market. And that has kept prices relatively low for 35 years. That period is now closing. And so we're going to lose 5% of global crude, which doesn't sound like a big deal until you remember that energy demand is inelastic. And a 5% loss in crude can easily generate a triple in in price.

So an energy-induced depression that is broadly global in scope will start because of the Ukraine war at some point. And this is probably the reason that no one's gone after that raft yet, because that would be the death blow for the Russian energy sector. So that would kind of be like, have you seen a margin call the movie? Not recently, no. Do you remember what it was about? It was a 2008 financial crisis and it's semi-fictional and they bring everybody in overnight

and they say, look, if you decide to do this, if you decide to dump all of everything into the market, you are choosing to begin the most Armageddon like financial situation that anyone's ever seen. So that's interesting that for somebody to go and do that, they're aware that downstream five degrees of separation, there are a bunch of externalities that are basically going to ruin everyone. There's the whole system.

Yeah. Now, the math going to be different for everybody. But like take Latvia. Latvia has the capacity to do this. All they have to do is grab one shuttle tanker as it's leaving St. Petersburg. That would do it. And the Latvians have already managed to wean themselves off of Russian crude. And while it would crush most of the European partners, they would see the destruction of the primary income stream for Russia as an unemployed good. Or consider the Americans. We're self-sufficient. We have the capacity of putting a wall around our energy exports so they stay at home.

So we could actually see energy prices in the US go down because of this. But then the rest of the world will lose access to Russian and American crude at the same time. So everyone has their own math to run. And a lot of it is going to depend upon, wow, everyone interprets the loyalty or the actions of their allies. So I mean, look at Germany. The Russians are in the process of jerking with the Germans on natural gas. And you know, for those of us in the rest of the world, yeah, natural gas, it's an energy source, whatever, no biggie.

That's not what it is in Germany. The entire German economy is based on taking a cheap Russian gas, processing it to petrochemicals, and then using those inputs in the entire manufacturing sector. If they lose that gas, it's not just that electricity prices go off.

It's that the German manufacturing model fails. So the Germans are being presented with a choice. Leave the coalition and keep the lights on or lose your gas and no longer be modern. So what's more important to the Germans being Western or being modern? That's a shit choice. But it has consequences and people will judge them done based on what they do. Peter, you need to give me something positive here, man. I'm just terrified. This doesn't sound like a very good situation at all.

What are the bright lights? What are some of the bright lights? There are countries that were damaged by globalization. The empire specifically, if you were a country that had a pretty good geography at the start of this, then when the Americans came through and changed the rules so that everyone can play, you saw a massive drop in your overall power. If you are one of those countries and you have a positive demographic structure, you could actually make a lot of hay out of what's coming because you could, I don't want to see you use the word imperial, nearom imperial might be the

right word. You can definitely make a bid for your own neighborhood. So the two countries that are on the top of my list is regards that are turkey and France. Decent demographics, good manufacturing base, largely not integrated into their neighborhoods economically. The French actually trade less with the EU than the Brits do. Fun fact, and I can see part of Western Europe becoming part of a French fiftime, and obviously parts of the Middle East for Turkey. I would have put Japan on that list, but the Japanese managed to cut a deal with both Donald Trump and Joe Biden, which makes the Japanese the only people who have been able to get on with both sides of the American spectrum of the late. So I think they've basically agreed to partner up with the US rather than

go their own way, which I think will be the best for everyone in the long term unless you're Chinese, of course. How's the UK going to do? That's up to you. You really need to figure out this Brexit thing. I mean, it's just, yes, you've left, but you still don't have any plan for what's next, and that is really hurting you. With every day that that is pushed off, your negotiating power with whatever these structures of the future end up looking like are going to be weaker and weaker. And you're very rapidly getting to the point where the only option you're going to have is a trade deal with the United States on American terms.

There are worse things that could happen. But we will be as, let's just wait and phrase this. We believe he has gentle negotiations as we were during the Len-Lis talks, where you basically had to give up half of a hemisphere of military presence in exchange for 40 destroyers that you're used to laugh up half of the hemisphere of military presence in exchange for 40 Destroyers that you're used to laugh at because they were so bad Not good. It doesn't seem no. It's not a good negotiating position. That's for sure Okay, you think that Mexico is going to be a big part of America's future also Canada's good because it's

Yeah, because it's able to do good immigration. It's able to keep its demographics pretty well. What's the future for America look like in your opinion? Well, the United States is starting this process with very little trade exposures to the wider world outside of manufacturing in Asia, a net energy exporter of all forms, the largest refining power in the world, the largest agricultural power in the world. So a lot of the things that every single country in the world is just going to have to stress about us is just kind of a no brainer. It's already there. In addition, successful manufacturing requires proximate labor that is at different skill sets and price points. So the person who's doing the injection molding is not the same guy who's making the microchip. With Mexico,

we've got that already. So for us, a lot of the hard work has already been done. And while I'm not a huge fan of Donald Trump by any measure, his renegotiations of NAFTA was a stroke of genius, and it got ahead of a lot of these issues. Because of that, North America's a unit looks pretty strong. And we're already seeing established linkages to other powers that might be useful. So we, for example, already have free trade

deals with Colombian Chile, which are, in my opinion, the two most dynamic South American economies. We already have a long-term agreement with both the Koreans and the Japanese. The Australians have a free trade deal with the United States, and we're in league with the Australians and the Japanese, really starting to become engaged with Southeast Asia, which is another part of the world where the demographics and the geography lineup. So that kind of greater American co-prosperity sphere is about as good as it's going to get. I mean, you'll have to do it with the Americans when you tend to be a little twitchy sometimes, but we're twitchy in a different hemisphere for most of the partners, which most people really like. In your neck of the woods, France is just going to be completely insufferable because they're going to become the broker for the Germans, they're going to become the first power in Iberia and in Italy, and they're probably going to make a bid for the low countries too.

And the longer it takes the UK to become a self-sustaining power again, the more advantage the French are going to have in rewriting the local rules. So a good example is that you've built these two super carriers. They're top notch pieces of equipment, but between budget cuts and austerity and the financial crisis, you let the rest of your Navy die. So you've got these two fantastic vessels with no defensive rings, which means the only way that you would ever let them leave port is if they're sailing as part of an American battle group. Again, not a good negotiating position.

What ways could America mess this up? Oh, so many, so many. We're in one of our once in every generation or two political or shufflings, and as long as that is going on, we really don't have eyes for the rest of the world. So there's a huge strategic and economic opportunity here for the long run if the United States would chose to leave and kind of define what the new world was going to be. What I've outlined here is probably what's going to happen on autopilot. And in many cases, because the Australians and the Canadians and the Japanese are doing most of the diplomatic heavy lifting.

Thank God they're there because it would be a mess otherwise. One of the great things to keep in mind about the United States is because the population is so big and so young and because the land area is so big and so young and because the land area is so huge and so fertile, we've never had to be at the top of our game. We can rely on geography and demography to do most of the heavy lifting for us and that allows our politics to be completely batshit and that's where we are now. There are many degrees of freedom that you can mess up with in. Yes. This isn't France where if you screw up, you have to pay for it for two generations.

If the US population is big and young, does that not mean that downstream from that, you need to have an even bigger, younger population in order to not end up with that inverted pyramid shape on your demographic. It's definitely possible. While most of Europe and Japan and Korea have that V shape in their demographics, ours is more of a double hour glass because we've got a bulge where the boomers are and then a bulge where the millennials are, but then a big cut out for Gen X and a big cut out for the Zoomers.

The ins and outs of that are gonna dominate our economic and our financial world forever. So right now we're about to go through a capital crunch. In 15 years when the millennials are in their 50s, we will be going through a capital boom. As a rule, large generations make large generations and small generations make small generations. So we would expect this wave to continue.

What that means is that the American propensity for overdoing things and then overcorrecting, that's just part of our DNA now and it's backed up by our demographics. That will take us all number of bizarre directions and we will drag along a lot of other countries with for the ride. I was with Jonathan Hyte a few months ago at the head redox academy conference and he was talking about the dangers in the dating market for Gen Z at the moment. The high levels of social anxiety,

the fact that you've got one third of people aged 18 to 35 is still living at home with their parents. The number of 18 to 30 year olds reporting no sex is tripled in the last 10 years from about 10% to 30%. A bunch of things that are causing young people to be less socially out there, presumably to have children later. I think it's 2019 that for the first time ever more women had children over the age of 40 than under the age of 20. For the first time ever in history, more women at the age of 30 were childless rather than with child. So all of these things seem like they would predict a ever aging generation or an ever-ranging demographic. What your suggestion is that you have this sort of hourglass shape

and there will be some sort of inflection point presumably with the 15 year capital boom that would probably that should hopefully encourage more families, more children, more population offset this going from an hourglass into an inverted pyramid. That's what the data we have today suggests, but I've got an underlying, we're an uncharted territory here. The world has never had a population bust without having some sort of massive endemic disease or war event.

So when I say, the Chinese collapse has to happen, I don't know how you make it work without kids or young adults. When I say that the Americans are gonna experience another baby boom as the millennials really come into their own, history and data suggest that, but we've really never seen this combination of factors before.

The Zoomers, I have concerns. They are not like millennials. Millennials are very outgoing. They're very social because they were raised by the baby boomers and they were always told that they were special. That's one of the reasons why a third of them stole a little bit home. The Zoomers were raised by Gen X, my generation. And we took a very different view of things.

We kept track of the score at the soccer game, we rode it down, we showed it to him before each game, we read it to him to bed so that they wouldn't forget. And when they turn 18, they're the hell out of the house. They're insular, they're competitive. They don't like relying on anyone for anything. And so the whole group dynamics and managerial dynamics that the millennials are positively known for and recognized for, they're the antithesis. Their dream job is to code alone in the dark in a closet.

And that makes it hard to have kids. So, I think we can guarantee that when it's the zoomers time, when they're in their 30s, that their birth rates are going to be low, their marriage rates are probably going to be the worst we've ever had. Their suicide rates are already the worst we've ever had. Their suicide rates are already the worst we've ever had, which just means that the millennials will save us all. Okay. You're relying on me and my heart. Fantastic.

Given the current state, and obviously there's lots of contributing different countries, what's going on with demographics, People talk about population collapse overall globally. What is your view of global population? Before we start talking about globalization, so assuming that globalization continues from its height onward, we were already in the process of revising down our estimates. So it used to be 15 years ago that we thought by 2050 we were going to have 11 to 12 billion people. That number is now under 10 and as the data continues to get upgraded, we'll probably, assuming nothing goes wrong, peak it just below 9 and then start falling back gently.

If I'm right about de-globalization, we're going to have a significantly sharper drop off and as soon as globalization hits agriculture at large, which may be in the fourth quarter of this year. Population peaks. Wow. Okay, positive stuff. Looking at the ways in which population collapse and the reduction of that could be tied in with automation, is there any technological savior that can come through and assist us with the problems that we're facing at the moment? There's always a known and knowns when it comes

to technology, I'm aware of that. But are there things that you can foresee if we get particular advancements that may alleviate some of this? Absolutely, so pros and cons, there are a lot of technologies with automation, AI, and robotics that look really good. Now, AI, the whole idea of general AI and SkyNet decades away from that.

So I was put that in a box, I'll let Ian Musk talk about that. AI is all about image recognition today and getting it so that machines can recognize different things and then do pre-programmed tasks. There's no real autonomy, but it's automated. That allows manufacturing to reshape, but it also requires massive economies of scale. The most expensive thing a country can do isn't industrialize. It's to automate. And it's not a one-off cost. You have to constantly update it because every time there's a change to the production line, you more or less have to start over with the programming. So it's a very expensive way to go. It does use different labor and less

labor, but it's not clear to me that it really moves the needle in a huge way. And if we're breaking down global transport and intermediate goods trade, then we're losing the economies of scale that make that model work. In North America, where you've got one-third of global consumption, we'll probably still be doing that. But I see that broadly leaving the East Asian sphere, which combined with their bad demographics are awful. We also have the baby boomers leaving, so that we know that the capital crunch is coming, and that means less money is available

to do this sort of upgrading. The technology that I'm most interested in are the combination of automation and agriculture. We're very close to having facilities that you can latch onto a tractor, that identify each individual plant, and identify if it needs water or fertilizer or pesticide or if it's weed or whatever, and then it gets a squirt of whatever is appropriate. So you do like six passes of stuff in one pass,

and each plant gets individual attention. That suggests that we would be able to reduce fertilizer and pesticide use by 80% and maybe even double yields. But again, economies of scale. It only works on mega farms where you can afford the equipment cost. So if you've got giant farms in the United States or the Netherlands or Argentina or Australia, sure. Doesn't work for most of the world. Talking about technology, I've heard that we are unbelievably reliant on getting cheap technological parts out of China, silicon chips and other such stuff. How much of an issue is it going to be if China is facing demographic collapse and then

can't make anything anymore? How much is that going to have downstream effects for the rest of the world's technology? Well, we've been a little bit lucky that the Chinese have kind of become a bag of dicks and really encouraged everyone to outsource and resource everything that they can. It's that's bought us a lot of time. Now, in the United States, everyone is paranoid about semiconductors. And we all see that 12% number that the US now only produces 12% of global chips as a panic point.

But that's by number. By value, we produce 60%. So all the chips are designed in Japan, the United States. They might be manufactured somewhere else if they're further down the scale. But in terms of cell phones and server farms, the important stuff, that's already safe. The problem is going to be the mid and the lower land. The mid ones are usually Malaysian Thailand, the lower ones are almost certainly China.

So when you're talking about the lower tech stuff, the internet of things, yeah, that's just going away. But I'd argue that I don't really need a meat thermometer that is going to tell my phone what the temperature of the meat is. I mean, we can get by without that, I think. It's overall electronics manufacturer that's going to be the big issue. As remember, differentiated labor forces is what makes manufacturing work. China's a huge place. It's got a lot of that internally. And then it has access immediately to Taiwan, Japan, Korea, and Southeast Asia. That's what's breaking down that whole ecosystem. We can't rebuild all of that. Just to serve

electronics needs for North America probably would require a workforce of 4 million people in manufacturing. We're already in labor shortage shortage and the Mexicans are kind of tapped out already. So there is going to be a huge amount of pressure. Americans do well at the really high end manufacturing and the very low end because we're energy rich. It's the part in the middle that we're really reliant on the Mexicans to save us for. What ways could you be wrong about all of this stuff? Yeah. Like I said, this is perspective or dealing with an environment

that we've never been in before. The way I would like to be wrong is that the Americans would actually do what George Herbert Walker Bush wanted to do back in 1991 and have a conversation with ourselves about what sort of world we wanted to live in and how to get there. We weren't interested then. I would argue that we're really not interested now.

So the risk here, from my point of view, is that globalization does manage to persist because of some lingering American commitment. I'm not seeing that. I'm certainly not seeing that with Ukraine war. Yes, we're seeing NATO having a new lease on life, but the whole guns for butter deal that we made during the Cold War, none of the economic stuff is on the agenda. All the sanctions that the Trump administration enacted are still there with one exception that the Airbus case. I don't see it's very likely, and then on the demographic front, that's just math. If you want more 30-year-olds, you had to

start 31 years ago. What difference would it make if China invaded Taiwan? That would probably lead to the end of the Chinese system as an industrialized economy in less than a year. Why, that's fascinating. It's an open question of whether or not the Chinese could pull it off. And with the Ukraine war, we finally got some good signposts of what it might look like. The Chinese have always assumed that the war would be a walkover,

that no one else will get involved, and that China is such a big place that everyone will just suck it up and move on. Well, that clearly hasn't happened with Ukraine. And the United States and the West have a much tighter relationship with Taiwan than they do with Ukraine. Ukraine was only preparing for this war for eight years. Taiwan has been preparing for 60. Ukraine can... you can walk to Ukraine from Russia. It's a bit of a swim to get to Taiwan. The sanctions that are in place against Russia would absolutely devastate China because while Russia has a lot of faults. It's a major exporter of food and energy. China imports those things. 75% of their oil is imported from

a different continent. And 75% of their oil is imported. And then I think it's really the boycotts that have really scared the Chinese the most. The idea that individual citizens might have any say on policy, they did not see that coming. They have no way to process that in a one man state. Because if you would have taken so different to the setup that they have. Yeah, exactly. So every assumption that they've

based the last 40 years of military planning on has proven to be wrong. And then of course, there's the question of whether they could actually do it. If they did a slow motion mobilization like the Russians did, it took three months. The Taiwanese would see that. They built a few nukes.

And so the cost of capturing Taiwan would be losing Shanghai in Beijing. That doesn't seem like a good plan. So the only battle plan that I've seen that might work is if they just text every member of the army and say, go to a port, get on a fishing boat and sail. You'd lose a million people in the crossing just to get to the beaches. So there's nothing about this that works. And if they did pull it off, even if they do capture Taiwan, they are now cut off from global manufacturing, global investment, global energy, and global food.

Truck stop running within a couple of months. The lights go out in less than six, and that is all she wrote. Remember, agriculture is an industrial sector, so you're talking about mass famine in under a year. Dude. Yeah, he's whining.

Now, normally I'd say that Chinese aren't stupid, they wouldn't do this, but it's a one-man show now. And nobody wants to bring G any information, because they don't know how he'll react. He's shot the messenger literally so many times that everything is a surprise to him. Yes, I understand what you mean. I suppose there's a lot of criticisms around the fact

that the vote of a stupid person is worth as much as the vote of a well-educated person in a democracy. But the problem is, if you condense all of that power down to a single individual, the decision of an angry or grumpy individual is the same as them on a good day or them, if they were less idiotic or somebody else had got to power. So yeah, I suppose it's a forcing function that condenses all of these things down to one individual human that is just as Falable as the rest of maybe a more Fala human is perfect

Every time okay But even a minor mistake just casket through the system and it's a full cult of personality So you know, we've got basically people who are zealotously trying to do what they think she wants them to do And just one of the more inane ones is seeing teams of people in hazmat gear disinfecting airport runways. Because they think that's what you have to do for COVID. Just that people talk about the Americans now in a fact free zone. That's nothing compared to what's going on in the Chinese system. Okay, so what do you think for most of the people that are listening to this UK, US, some

in Australia, what is life going to be like? What is the quality of life going to be like over the next 10 to 20 years? What can people expect? Well, the next five years are going to be rough. We basically in the West need to at least double the size of our industrial plant. Let me correct that. In the West, minus Germany, Germany is its own special case. Everyone else has largely hollowed out their manufacturing as part of globalization. We focus on the really high end stuff in the design, but a lot of the middle and the lower stuff is now done in other countries. That's got to change. If you are part of a network where

you can access lower skilled labor like the Americans are with the Mexicans? Great. If you're not, you either need to attach yourself to another system or find some way to go without. Now, if you are in that kind of friends and family network of the Americans, energy is covered, food is covered, investment will be tight but available, and there's a degree of security that you won't have in the rest of the world. So the biggest problem is going to be building out that industrial

plant. That means we should expect inflation in the US of maybe 9 to 15% for the next five or six years is that's what it's going to take to get through this. And if we do succeed at building that industrial plant over that time frame, then that inflation rate will come down and we'll have supply chains that are shorter, simpler, cheaper, and closer to the end consumer. So better all around. So if you're part of that network and you can get over that hump, it looks pretty good. If you decide to go your own way, things are going to get a lot tougher and less you

are one of those regional powers who actually has the geography and demography to make it work. France, after the financial collapse of say the euro, might not notice the rest of the world going to hell. The manufacturing is already in place. Their energy system is fine. They've got oil just across the Mediterranean. They're going to have subsidiary economies in Spain and Italy, it's a fairly good setup.

That means that cost of living is going to increase, that means cost of energy is going to increase. Quality of life going to go down, I mean are we going to see civil strife in your opinion, what's going to go on? I think we'll see a lot of governments collapse, but again, it depends on where you are. The Americans will always complain more than what the problem is worth. And the fact that we're going through our political transition, at the same time we're doing this is, you know, awkward to say the least, we're going to blame a lot of things on a lot of things that have no direct connection. That's very American.

If you're talking about Britain, that's up to you guys. If you can figure this out and figure out a relationship with the United States or the French before the break, that would be your best bet. Is that because after the break, bargaining power goes through the floor? Yeah, exactly. Now is the time to cut a deal. You've just had a change in government. The Ukraine war is hot and heavy. If you were going to have a leader take to the country

in a more sustainable direction now is the time. If people want to keep up to date with the stuff that you're doing, with the work, with keeping themselves abreast of all of everything that's happening at the moment, where should they go? The website is zehenn.com. And if you go to that slash newsletter, you can sign up for our video logs and newsletters.

They're free, they will always be free. I appreciate you. Thank you. No problem. you