The Peter Zeihan Podcast Series - Remember When...(Taking it Back to 2021) || Peter Zeihan

Episode Date: November 16, 2024

I'm sure this isn't a shock, but a lot of folks have asked what I think of the incoming trump administrations cabinet nominations. Before I delve in Monday's video into the simple and forgiving world of American domestic politics, I think it would be best to review where this all began. In this special weekend edition we reach into the way-back machine and go back to New Year's 2021 when the world seemed so different, and so similar. Join the Patreon here: https://www.patreon.com/PeterZeihan Full Newsletter: https://mailchi.mp/zeihan/remember-when-taking-it-back-to-2021

Hi, everybody. Thanks for joining us for another edition of Hold My Drink, where we navigate the news and politics with a chaser of civility. I'm your host, Jen, inviting you to grab your favorite beverage, sit back, and imagine with us how to create a new American identity together. Welcome to this week's Hold My Drink. I am still in Colorado. And today I am with my friend Peter Zion. He is the author of several books, including my favorite, the accidental supercala. We also have an ad, Disunited Nations is his latest. And absent. And absent. Okay. So we're going to talk a little bit about today. Peter is this like geopolitical guru.

And he's going to help me understand what's in store for us for 2021. And then although he looks at geopolitics, we're going to talk a little bit about domestic politics. We could turn right now, whatever. But first, here in Colorado, sit down this porch, we are drinking. Melavelet Marys. Mereys. Cheers. Cheers.

All right. So give us, like, quickly your, well, yeah, as quick as you can, like, your five-minute, what in the world just happened? And what was happening in the world before Corona? How did Corona, like, change it? And what is 2020? Like, 30,000 foot, go. Okay. So this requires, like, a 3,000-year backstory.

throughout all of history, recorded or otherwise, populations have more or less looked the same. You've got a gaggle of kids, slightly fewer young adults, slightly fewer adults, slightly fewer mature adults, slightly fewer old elders. Mortality just kind of build demographics into a pyramid that way. And then came industrialization. And we all crammed into cities and we started having fewer kids.

And so instead of a flat pyramid, it kind of got narrower. And then we had globalization under the American-Leges, order during the Cold War and beyond. And so people just stopped having kids altogether. So we've had this weird demographic twist where now most countries have more people in their 50s than people in their 40s and people in their 30s and so on. Now, for a moment in time, that works. Because the money that you would have spent on educating children and preparing for the

workforce can now be spent on pizzas and condos and cars. So you get a consumption boom? You get an investment boom because people in their 50s. invest more than people in their 20s. So from roughly 1980 until about 2015, we were in this magical moment where it all just worked. And it's that environment that we've all grown up in, that we've had our adult lives in, that we think of as normal. Trade flying all over the world. Computers coming out of East Asia, cultural goods out of Europe. The United States provides raw materials and a consumer base. Everything just worked. But now two things have changed. Number one, the Americans are done.

maintaining the global system anymore, and you can't have globalized trade without a globalized military structure that allows that trade to happen. There's no point in history where that's ever worked before. So the U.S. created something for the Cold War that served its purposes now it's done. So the security's going away. And then second, the consumption's going away, because there just aren't enough people in the 20s and 30s to buy stuff anymore. And we now are facing in the next few years, the majority of the world's economies, either aging from consumption led to export lead or from export led to nothing. And 2022 was kind of the magic year where a lot of this was going to flip.

2022 is when you expected this to flip. Right. But then coronavirus came along a year ago. And the last good year that everyone had to prepare for what's next got shot. So all the young consumption led economies like Mexico and Australia and Brazil and the United States we're not doing anything right now. We're in recession. We are facing lockdowns, and they will not let up until we have massive community.

In the United States, that won't happen until the latter half of 2021. In the developing world, probably the latter half of 2022. There's not enough time left. And if you're an export-led economy, a Germany, in Italy, a Korea, a China, there's no one to sell to right now. So the world will never go back

to where it was in 2019. That was the peak of globalization. That was the peak of trade. That was the peak of capital generation and the peak of public consumption. And that's in the past. So do you, I mean, we're not consuming as much. Let me make sure I understand the idea. We're not consuming as much because we're just, we're older.

It's like demographics mainly. And then that was fast-forwarded by the breakdown in the trade system because of the virus, what we're all in London. Do I get that? Think about this way. When you're in your 20s, you're raising kids, you're buying homes, you're buying cars. Right.

20s and 30s are the peak consumption for everybody. So when you're in your 50s, the kids have left home, the house has been paid down. You're probably thinking of downsizing. You're saving. So young people consume. So young people do the consumption. Older people generate the capital. Okay. And we're past that now. So what does that mean? Like you look at all the countries in the world and like let's then narrow down into it for America. is that, what are we looking at? What does that look like for us the next five years, 10 years? I mean, how are we, how is our life going to change as a result of this? Well, the United States, I don't want to say it gets a pass, but it's pretty close. The United States is the slowest aging country in the world of size. Something that was unique about our baby boomers is they actually

had kids. In Germany, in Japan, China, everybody else, the baby boomers moved into condos and stopped having gold. And that's why this transition is happening. But at the United States, that never happened. We've got a lot more elbow room. We're a lot more dispersed. And even in our urban centers, our suburbs are so huge and that's where the majority of population lives. So there's still room that raise kids here. And so our boomers generated the millennials. We can say what we want about the millennials. There's so much we can say about the millennials, but they exist. And their consumption today is keeping our system going. In fact, from the financial crisis until January of this year, their consumption was sufficiently powerful to overwhelm what would have been

three industrial recessions. And we just kept on going because of them. And they have another decade-ish of consumption left in them. So the U.S. will get through this. We will grow through this. And, oh, even more importantly, than the millennials, so many things are more important than millennials. We're partnered with Mexico in NAFTA. And Mexico of the developing countries is one of the youngest and slowest aging. So we've kind of already locked in domestically to the system that works for the most part. Uh-huh. Obviously works.

But if not something where we're facing systemic challenges to our very economic order, which is what everybody else is wrestling with. So imagine Germany or China if they can't import raw materials or export finished products. That's the end of their political system. That could shatter the culture. Right. We don't have any of that. Right. And would you say, too, though, and I want to say, too, though, and I want to be a lot of,

get back to domestic stuff, but also one of the game changers for the United States, as I understand it, is one of the reasons that we kept, in addition to the Cold War, that we kept the trade blowing was because our need for natural resources mainly from the Middle East, and now we don't really need that anymore. Well, that... I mean, you're not wrong, but that's... Most people think of that in all caps, and it's really should be a footnote. The United States became an oil importer in 1973.

And by the time we got to 2005, we were importing roughly two-thirds of the crew that we used. But our two single largest import sources were local, Mexico and Canada, and our number three was Venezuela. So our imports from the Middle East were rarely more than 10 to 15 percent of our total means. Okay. But the United States had to maintain the global system. We had allies that imported all of their crude from the Middle East. And if we didn't make sure that their economies worked, and this is Germany, this is France, this is Britain, this is Japan, this is. China? If we didn't make sure that their economies could work, there's no way they would

stand shoulder to shoulder with us against the Soviets. So when the Cold War ended, the rationale for that just became about price. Because if you remove 10% of the oil from the global market, prices will probably double and that would hurt. And then we, it's starting in 2008 with the show revolution. And by the time we got into the fourth quarter of 2019, the U.S. was a net exporter. Now there's a little gurgling within the system because of what happened in the first quarter of a year in coronavirus, but we're within arms reach of being a net exporter once again. All it would require is like a month

of prices over $45. I need to be there. So let's look, okay, let's bring this back domestically. Obviously, I know you look at 30,000 foot views. And so you, when we've talked before, you don't really believe that

administrations matter. I mean, we're more... A bit of an overplay, but not by much. Okay. But, you know, I mean, here we are sitting in the U.S., and of course, we're just, I mean, this has been the most contentious, you know, four years. I disagree. You do?

Okay. Then tell me, because I'm that, you know, Pete, sure. That's a shocking state. Okay. Think back to the 1970s or early 1980s. The only media that existed was what we call broadcast media, you know, NBC Nightly News. Like the big four. Yeah.

ABC. And the big papers or even your hometown papers. but everybody was consuming the same information. Yeah. And in that environment, we were at each other's throats all the time. If you go back to the beginning, the very first presidential debate, Jefferson accused Adams of being a hermaphrodite without any of the redeeming characteristics. No, that's kind of saucy now.

You can imagine what that would be like in the 1700s. it's like this isn't new. What is new is the method of disseminating the information. So 1980s, all broadcast, we all got the same thing. Then we had the fax machine. And information government got loosened up. The fax machine is one of the things that, for example, brought down the Soviet Union. It has a big cultural impact when the state can't control information flows.

Then we got email. And when we got email, all of a sudden, all of these bureaus that we had all over the world reporting didn't need as many people because you could just attach your article and send it in. So the Paris Bureau did not of the Paris Bureau of like the New York Times no longer needed an editor or a copy editor. It could all be done in New York. Well, then we got

cell phones. We got instantaneous information transfer. And all of a sudden, you don't even need those overseas bureaus. You just need one reporter who roves around the country in question or maybe surges to where the news is. Now we've got computers and AI and algorithms that can write and

select stories for us. So what we've done at every stage of the process is we've removed critical thinking from the news production. At the same time, we've democratized who can participate in the production. And now with Facebook and Twitter being our primary sources of information, the crazy people that we normally left locked in the basement can participate and even lead the conversation because no one can stop them. So one of the things that I do agree with Donald Trump about is Section 2.

30 has to go away in some, or at least be modified. Section 230, yeah, explain that. Part of the Telecommunications Act that says that media companies, social media companies, are not responsible for what is produced and posted on their platforms. Okay. So, for example, you go to the New York Times or NBC Nightly News and you say, the Washington Monument is on fire. Everyone should evacuate Washington, D.C., and this isn't true.

Yeah. They are liable, criminally liable for any damages. But if you do that on Twitter, you're fine. And so we now have people who normally are not part of the political conversation because the nutbags leading the conversation because we can't shut them up. And the social media platforms are giving them a bullhorn to dominate the entire process. So it's not that we've become more like this. It's just that voices that we had silenced over the last 200 years suddenly are in charge of things. A good thing to think about.

If you look at how we actually voted, not what we said, what we voted for. 30% of people in Wyoming, where half the population are still working cowboys, voted for biking. And in Vermont, oh, is that 30% that you said? And in Vermont, where everybody is like, you know, they're not quite sure about Bernie Sanders. He's just too conservative. 30% voted for Trump. And those are the two states on the extremes. And that ratio, that 30%, that has held true for roughly the last half century.

So we're not acting any different. We're not even saying anything that's really different. We just have these people screaming in our ears from the extremities, unfortunately. And until we figure out a way to deal with that, such as 230 might be a good first step. Right. this will continue to feel like we're all on fire all the time. Yeah, it feels like we're on fire all the time.

You know? And it feels like he feels like Trump, you know, kind of exacerbated that with some of his language and his use of. Oh, here's the funny thing. If Section 230 were repealed, Trump would be banned on day one. So I'm not quite sure what his play is here. But, yeah, there's no way that Twitter would want to be criminally liable for things that Trilp says. But the same goes for Bernie Sanders.

The same goes for AOC. You know, all these people who have become these loud, larger than live voices, if 2.30 goes away, the page would you vanish. So I'm kind of like, I don't know how Twitter would have a business plan with 230 gone. But I could look at that. Yeah. Is that even a discussion?

Is that even a discussion with this current administration? Everybody knows that social media is more part of the problem than part of the solution. But there is no good solution. Because, you know, if you censor it, then who's making the decisions on what gets censored? Who's the gate? And if you repeal it, you've destroyed a big segment of the economy. Yeah. So I'm not suggesting it's an easy solution, but it is one that we are grappling with.

And this isn't new either. The last time we developed the technology that loosened up who could insert information was the telegraph. And that's where we got yellow journalism. People just lied. And we got into a war because of it with Spain. So I hope that doesn't happen this time, but that is something to, you know, kind of keep on your radar. Okay, so I have two questions for you. And they're not, I mean, they're related in dealing with politics.

They're a little bit intruded. So I know it's a little chilly. Hands are cool. So we don't have hot chocolate. We have bloody merit. Maleveled. Mable is nice. And by the way, hat.

Okay. So you were saying we were talking the other day and so many people, because of social media, because of what you were just saying, would go and say that, you know, Trump is the worst thing that's ever happened, worst president ever. And you said to me something that I was like, kind of shocked me. You're like, no, I really think in 50 years time that we're going to look back and say that both Obama and Trump were the worst ever. Well, maybe not the worst ever, but bottom 10%. Bottom, okay, bottom. 10%? All right. I mean, Uber. Wow. Let's rant.

Let's talk on the ones that we can actually remember. That's almost like white more words with some people. So explain that. Like, how would you say? Because you either really love Trump or you really love Obama. And there is no. So the fact that you're saying both of them would be in the bottom 10% with historians review.

One of the problems with social media is we only get information feeds that make us, that we subscribe to. And for most of that means we only get things that we agree, agree with. So we kind of get very siloed. That's a problem with the end of broadcast media. We're not seeing the same information. So when you're presented with different information, you come to different conclusions. And if you use your personal ideology to guide your information flows, well, of course you're going to have strong opinion one way or the other.

I'm adopted. I've always considered that a plus because I never have considered myself part of a tribe. And I'd like to think that allows me to look at things from a little bit more objective. You're my try. Yeah. Okay, go on. Sorry. He should have brought refill.

Many who. So let's start with Trump because he's fresh in everybody's mind. Yes. He's kind of a jerk. He treats his staff horribly. He has been through more cabinet secretaries in four years than any other three presidents combined. It's a revolving door because he's very abusive and he really, really, he runs the country. he runs the government as if it were social media.

He only subscribes to information flows to confirm his beliefs. And because of that, he's not interested in context. He fired his first real national security advisor because he tried to inject context into the conversation and Trump was not interested, which means he's making decisions based on a very narrow information set from people he agrees with or from things he hears on Twitter that he agrees with. That's awful. I mean, it would be like driving, but ignoring all the signs and all the stoplights because you don't find them convenient. And so we've had some issues.

The bottom line is he is allergetically opposed to the idea that he needs to learn about an issue before he acts on the issue. Okay. So that's a management crow. Okay. Obama was the opposite, or the other side of the same coin. very cerebral, very grounded in the context, but he hated people. No American president has gone to Congress fewer times, met with his cabinet secretary's fewer times, met with his own party affiliates fewer times than Barack Obama. With exception of Harrison, he died a month on the job.

Obama being able to pass it. And so Obama understood how everything worked, but he didn't have a policy for any other. So the only thing that he did is he would make a public announcement in front of the press corps. I want health care for everyone. Congress, you figure it out. I'm the president. You guys do what I say, figure it out. And so Congress did what Congress did, does.

The Obamacare bill that came through with Charlie a thousand pages too long, it was made mostly by lobbyists. And then pork was stuck in it from all angles. And that was really the only legislative achievement he had in eight years. because after his first two years, when you only have one thing happen, ObamaCare, the population turned on him because he wasn't doing anything.

In the next six years, he didn't have a friendly Congress. And so he did nothing in six years. I mean, we criticized Trump for ruling by executive decree because he hates everybody. Obama did the exact same thing. Now, Obama, obviously better at PR,

but only for people who supported him. People who support Trump thinks he's great at PR. So we got two presidents that were ideological that refused to actually engage with the government to enact policy. And if you look back historically speaking, that has never happened. So we're at this moment in history right now. When the Americans are abandoning the globe and where the global consumption system and trade systems have collapsed. And we have now had 12 years of presidents who really haven't dealt with. 12 years. So I was going to say, based on what you were just talking about with Obama not crossing the aisle, Trump not crossing the aisle.

Well, Obama didn't just not cross the aisle. He didn't even talk to Democrats. Okay. So would you say, like what we now, what I call polarization, that it kind of started with Obama? Because when we don't talk about polarization and at the highest levels in Congress, where we're not even having these conversations and we're not doing what Congress is supposed to do, which is to negotiate for the American people. I mean, would you say it started then under Obama? I mean, Obama certainly didn't help. He certainly made it worse. But, I mean, really, you'd have to probably go back to Clinton. We got really bad or when it started to get bad.

I mean, we've always had problems with bipartisan. So it's like, this is not new. But under Clinton, Clinton was a minority president in that he did not get the majority of all. You only got like 43%. We had a third party candidate. and the Republicans of the day, Newt Gingrich, if you remember him. Wow, he's somebody who's not age 12.

Yeah, the whole contract with America, which made no sense. I mean, I was a, I consider myself a Republican when that was going on. I was like, yeah. Anyway, that's when we kind of got in this ideological bickering. That was the rise of Fox News,

the first non-broadcast media. And that was way before social media, but email was starting to impact things. So that was kind of when the information lines went askew. Under W, things were actually going really well under W until Steps 11th, and then everything fell apart because he just didn't focus on domestic policy anymore.

Reasons that are not exactly crazy. And then, of course, Obama. So, you know, we've been coming this direction in terms of isolationism or retrenchment or what you want to call it as well as polarization for 30 years. I don't think it started with Obama. I don't think it started with Trump. I think we are on actually a fairly linear path.

Now, whether or not a Biden administration can take us in a different direction, we'll see. But the parties have now broken down, so there's an opportunity and there's a danger. So then that goes back to kind of where America sits in the global system right now. And we'll end on this. What are your expectations for the American dollar and the American financial system? Just in general. Again, I know you're not a financial analyst, 30,000, but you. And then what do you, would you say it's going to be the biggest challenge in 2021 and how would we best manage that if we had an administration that was functioning?

God, I might need another drink. That will be another. Podcast. So let's start with the U.S. dollar in the financial system. The U.S. dollar market and the U.S. financial markets are the largest, most liquid, most exchangeable stores of value in the world. That's not going to change. In fact, for the last 15, 20 years, there have only been. a half a dozen hard currencies in the world.

The U.S. dollar, the euro, the pound, the Japanese yen, the Canadian dollar, the Australian dollar, the Kiwi dollar. And the Swedish Corona. Okay. Danish Corona. So that's like, wait. That's all of them. Everybody else is a soft currency or is not interchangeable. Well, let's review what's happened in the last 20 years.

The Europeans had a financial crisis and a banking crisis, and they started confiscating, insured bank deposits to pay for their own bailouts. So everyone bailed on the euro. It is now no longer a global currency, not a reserve currency. It is just a regional method of exchange. Does that make it unimportant? Of course not. But it does mean it's not a store of value. It's no longer a traditional art of currency.

The British pound. Have you been following Brexit? Oh, my God. It's a podcast in and if it's out for the whole series. There's no version of how this shakes out where the British economy looks great or autonomous and it's certainly not going to be a store of value. So that's the number two on that's goal. Chinese yuan is not a hard currency, not exchange.

The Japanese yen, they tried going global back in the 1980s, and it cost them 30 years of economic activity. So they closed down every bank they had abroad. All of them, they're gone. Japan went from having eight of the ten largest global banks to zero. So the Japanese yen is not a hard currency for a store of value. Well, the next one down is Canada. And you know, Canada is a resource exporter, and it can only really export to the United States, which has a better relationship with Mexico.

So honestly, the Canadians can run a tight ship, and they do. But it is not something that I would sink long-term savings into. Next one down is Australia. Another resource it's common. The next one down is Sweden. A member of the European Union now. I think the Swedish corona over the long term will be fine. But if anything happens to the EU, holy crap.

saying with Denmark, and now we're down to New Zealand. So it's us and the Kiwis. And don't get me wrong, I love me the Kiwi. I know you do. But there are no way that the Kiwi dollar is going to be the global store of value. So, you know, you can say whatever you want about the U.S. economy being not well run or corrupt or valuing things inappropriately or being politically ridden. I'd argue that none of that is new. but even if it's all true

so there's got to be a competitor and there isn't all also as global systems break down anyone who has mobile money will move it to places where there's a stronger rule of law and a larger more liquid market which means it all comes here so in the last five calendar years we've seen something like $7 trillion

of capital flight to the United States already the only thing arguing for a A dollar that doesn't go up year and year and year for decades to come is some of the short-term stuff, of course. So, for example, Obama ran the largest budget deficit we've seen in this country since World War II. And Trump topped him. So we've been had 12 years of just completely reckless budgetary policy. And of course, that drives the dollar down in comparison. But despite all that, it still looks pretty good.

All right. So biggest challenge for 2021 and your suggested solution for us as America, living in America, our challenge to America is, well, actually, you know, let me back here for a second. I feel like our challenge to America is internal. Okay. So what do you think that's my two cents? So that's my two cents. You know, what is there? I'm an internationalist. Right. So I like the idea of the United States leading a world that is growing, that is free economically important. People who believe my way have now been defeated in 11 straight elections. It's depressing. And this time we didn't even have a horse on the race. I mean, I mean, Trump is pretty obvious when it comes to international affairs. And Biden says, we will rule the world, but we will bring all the troops home and we will spend no more money abroad.

So you're going to lead the world without money or about forces. Yeah, that's not how that way. works. So the United States is going to continue with retrenchment under Biden. Now, that's not a disaster. That's a missed opportunity. But it's an opportunity we have now been missing since 1993. So it's not something I've kind of gotten used to, even if it depresses me. Well, I don't see any big international challenges for the United States the next few years. I see lots of opportunities that we're just going to pass upon. In terms of challenges internally, we are going to be dealing with an extreme

inequality crisis. Now, regardless of what your politics are, I think it's safe to say that the data supports that we're dealing with some inequality issues now. But what coronavirus has done and what de-globalization will do is exasperated. So let me kind of unpack that.

Globalization, trade, it's all about differentiation for manufacturing. So you need high-skilled and you need low-skilled. And so when we globalized, what we basically did we took a low-skilled component and we tossed it to China. Now, that will come back now, but the jobs will look different. Because, for example, in Kentucky where I used to live, they used to be big into textiles.

And when NAFTA happened, all those jobs went to Mexico. And then they moved on to China. Well, what's happening now is these textile jobs are coming back, but it's not a bunch of ladies sitting around sewing underwear. It's machines that can kick out a pair of, or kick out a t-shirt for like $0.50 every 15. seconds. So instead of having a thousand low-skilled workers, you have like five software engineers that maintain the machines.

So as globalization collapses and the jobs come home, they will be more concentrated into people with the higher skill sets. In terms of short-term, coronavirus, if you have a service job, you're probably able to do a significant

amount of work over Zoom. If you drive a bus, you can't. And so what we've seen is the hit, the economic hit of COVID has disproportionately impacted the people on the lower end of the scale. So the whole world is going to have to deal with this in some way. Between the demographic shift, between de-globalization, we are going to see extreme levels of inequality, both between and within economies. And since everyone else is aging faster than us, and since everyone else was dependent on globalization more than us, they've got to go through all this first and

faster. But we're going to be able at least to look around the world and pick and choose and learn from everybody else. But the social contract of capitalism, socialism, command-driven communism, and corporate fascism, you know, the four dominant political or, excuse me, economic ideologies of the last 150 years, none of those work without a growing population base. So we have to come up with a new economic theory to run our world, to run our country. I have no idea what that's going to look like. But I can tell you that those four systems, when we were debating among ourselves as a species,

which one to use, we argued pretty fiercely. And we had the World War, and we had the Cold War, and we had the European War. So economics is not boring, and it requires a few baseline things that we're just not going to have here much longer, but everyone else is going to lose them first. So at least we get to learn from their mistakes and successes.

Okay, so the silver lining is that we might be able to figure out a solution before it comes to us. We have something that no one else has. We have time.