The Peter Zeihan Podcast Series - Recession for (Almost) Everyone! || Peter Zeihan

Episode Date: March 6, 2024

I was scanning the financial news this morning and realized Germany was in recession. In my morning brief I was informed Japan was in recession as well. On a call with a client someone brought up that the United Kingdom had joined the downers club. A quick convo with the staff revealed the same was true for Hungary and Ireland. And Greece and Lithuania and Estonia and Finland. Israel probably as well, while Australia, New Zealand, France, Spain and Italy are only a rounding error away. China’s data, such that it is, suggests that the Middle Kingdom is by most definitions at best recession-adjacent. Full Newsletter: https://mailchi.mp/zeihan/recession-for-almost-everyone

Hey everybody, Peter Zion here coming to you from the coast above, Carmel, California. I was going through my sweeps this morning, checking out the news, and I realized that the United Kingdom was in recession, and then I got like another piece, Japan's in recession, another piece, Germany is in recession, another piece China to the degree we have, data, is either in recession or very close, and we kept looking, and, you know, Israel and the Netherlands, and most of Scandinavia and Western Europe, everybody is pretty much going slow, and even the economies that are still having growth in places like India are really slow.

Then Australia and New Zealand are probably within spitting distance, and it's really just North America that's doing fairly well economically at the moment. So I think it's worth explaining why. We've got two big things going on. The first is that the China post-COVID bump never happened. And as we get more and better data out of China on demographics, it looks like they had a population collapse that isn't recent. we now know that the American birth rate has been higher than the Chinese birth rate since the mid-90s

suggesting it's not that the Chinese are running out of children but they're now running out of working-age adults. In addition, new data that's come out in just the last few weeks indicates that there's been a huge shortage of kids showing up for kindergarten, indicating that starting five years ago, people to stock feeding bored. Anyway, you had all that together and it means that the Chinese are running out of people under age 50. So the possibility of them having any sort of consumption-driven activity is nil. Now, if you're a country like in Australia or New Zealand or Indonesia or Saudi Arabia that exports raw materials to the Chinese, that's obviously a huge problem. As for the Europeans and the Japanese, it's a different sort of problem, although wrapped into that because, of course, exporting to China is a big business for a lot of people. here it's also demographic but much further along

on average half of the world's baby boomers have already retired countries like Italy hit this a little bit earlier Germany is in the process of Indiana right now Korea is about to hit it as well Spain is not in good shape the Netherlands doesn't look great you know it's a long list

well once you age out of your mid-40s your consumption starts to drop off relative to your income, but obviously when you hit retirement, it just plummets. And so we're seeing that huge portions of the advanced world have now reached that point. And if consumption-led growth is no longer a possibility, and your export-led growth to a place like China is limited and the Americans start to close off their market, well, then there's nothing left. So it's entirely possible that we have, well, likely, that we have already been through the last major period of economic growth on a global basis. Because if the Europeans are done and a lot of the Northeast Asians are done and the Chinese are done, all that is left is North America.

Where the United States is leading some record growth for a mix of reasons, part of it, single biggest piece is millennial consumption because they still have years to run in that age bracket where the consumption heavy. And we also have a lot of government investment going in from the Biden administration that will generate debt issues, but it does generate growth, at least in the shortened midterm. And we've also seen industrial construction spending in the United States explode the last several years as people realize that if they still want stuff, they're going to have to build it in whole. And that has at least a decade to run ahead of it. So we're entering a very sharply multi-bifurcated, I'm not sure what that works should be, a world in which North America is looking more and more promising for reasons of domestic growth, while as everyone else can't do consumption-led growth that is losing the ability to export-led

growth. And this, unfortunately, is the world we are in until such time as we have a break in some of these producers where they simply fall off a map altogether. And then we can have all kinds of interesting things. You can have industrial growth and consumption growth in one place, at the same time supply chains that haven't been replaced break, and you get depressionary activity and inflation all at the same time. We're not there yet. But we're definitely going to get there before the end of this definitely.