Peter Zeihan: In the Next 10 Years, China Will Collapse

Summary

China's Economic Outlook: Peter Zeihan predicts China will face economic collapse within the next 10 years due to severe demographic challenges, with more people over age 54 than under, leading to an unsustainable economic model.Global Trade Dynamics: The podcast discusses the implications of China's dominance in rare earth processing and the potential need for other countries to rebuild their own processing industries as China's economic influence wanes.Demographic Challenges: The conversation highlights the global demographic crisis, noting that many countries, including China, are facing declining birth rates, which could lead to economic and societal shifts.Geopolitical Shifts: Zeihan argues that the United States is retreating from its role as the global policeman, leading to potential regional fragmentation and a return to pre-1945 geopolitical dynamics.Energy and Agriculture Concerns: The discussion emphasizes the potential collapse of global agricultural and energy systems due to the breakdown of long-range trade, with the Western Hemisphere better positioned to handle these challenges.Future Economic Models: The podcast suggests that countries will need to develop new economic models as traditional globalization falters, with some regions like Southeast Asia and parts of Europe potentially forming stable economic bubbles.Investment Implications: The conversation implies that investors should consider the geopolitical and demographic shifts when making decisions, with a focus on regions that can maintain stability and self-sufficiency.

Transcript

My guest today is convinced that the Chinese economy only has 10 years left before its demographic challenges absolutely consume it, which quite frankly flies in the face of everything I've come to believe about the future of the Chinese economy after covering it in depth on this channel for 3 years. So, I did make my guest plead their case and I would love to know what you think in the comments. So, please let me know because despite this being a contradiction of my highest convictions, he is one of the most recognized faces in geopolitics today and the author of the best-selling book, The End of the World is just the beginning. His name is Peter Zan. And I want to know what you think about this episode. This is the J Martin show where we dissect the greatest minds in geopolitics and finance so that we can better understand the world. Here is Peter Zan. Enjoy. This is J. Martin. >> Well, Peter, it's great to have you on the show. Thanks so much for making the time. And I have a handful of different directions that I want to go with you today. Uh so I'm looking forward to this. >> Let's go wherever we need to. >> So, let's start with uh with this major headline that came out last week. Um you could call it an escalation in the trade war between the United States and China. And obviously I'm talking about the uh extension of rare earth exports. Um quite frankly I I kind of factored this headline to be a bit of a nothing ber when I dove into the details but it sent it sent media and markets into a tail spin. So I want to get your take. Is is this hyperbolic? Is it a a headline of substance? How did you interpret this? And what do people need to know? >> Let's start with rare earths themselves. um rare earth and a lot of various materials. All the processing is done in China. It's something the world has steadily outsourced to the Chinese for environmental reasons. And the Chinese tend to subsidize the crap out of any sort of industry that they have the technical skill to do uh both in order to build up industrial plant to reduce unemployment levels and in order to corner the market over the long term. So for rare earth specifically and they've done this for copper and steel and aluminum and lithium and cobalt and dozens of other materials but for rare earths specifically uh the process started back in the 1980s and at that time rare earths actually were rare because the processing requires several hundred vats of acid. You dump in your tailings from mining silver or copper or something else. You leech out some of the rare earth. put that in the next bin and on and on and on and on and starting with tens of tons of rubble. You eventually get 1 ounce of rare earth after several months. Uh it takes up a lot of space. It takes up a lot of power. It's very input intensive but it's not technically challenging. These techniques were developed in the 1910s. Uh but it was something the Chinese could do. So the rest of the world made the bare minimum that they felt they needed to do and then the Chinese came in and suddenly were producing two, three, four times as much as the rest of the world combined. And that allowed among other things us to have semiconductors and computers and phones in the way we now know because they rely on those materials. So until the Chinese dumped all this on the market at subsidized prices, we would have we didn't have the digital revolution in any meaningful way. So you can thank them for that. They paid for us to have stuff. That's kind of peace one. Uh piece two, the Chinese are dying. They now have more people over age 54 than under. And within 10 years, their entire economic model, any economic model that you can hypothesize right now will not work because there will not be a workforce. So sooner or later, we are going to have to do this for ourselves. And when I say this, I don't just mean rare earth processing or turning boxite into aluminum. I mean everything that is manufactured in China right now is going to go away, which will obviously impact a few things. Which brings us to Trump. Uh are the Chinese engaging in unfair trade practices? Well, duh. Uh so the idea that the Chinese use this as leverage in trade talks with the Trump administration is perfectly reasonable. And the idea that the Trump administration will hit back is perfectly reasonable. But what see people seem to be forgetting is we're running out of time. The Chinese are going to be gone in 10 years. If we want to rebuild this processing industry for everything, we need a minimum of 2 years. And the Trump policy has given us until November 1st. That's not going to work. But we all need to prepare for a world where all of this stops anyway. And if we still want the materials and the goods that make up modern life, we need to process and build them and manufacture them ourselves. And my biggest gripe, well, I've got a lot of gripes, but one of my gripes with the Trump administration is that, you know, the tariffs are an interesting step, but by themselves, they don't do much because they don't actually build the infrastructure here. We've actually seen industrial construction spending drop in the last 7 months because it's easier now to build the supply chain outside the United States and then import the finished product because you only have to pay the tariff once. Uh and until we have some sort of actual incentive to build that infrastructure here, we're actually going in the wrong direction in the short term. >> Okay. I have I want to pull in a few threads. >> A lot of >> Yeah. No, it was great actually. Thank you. So, you know, where you began was that the the refining because yes, rare earths are no longer rare. They're quite abundant in the Earth's trust. The rare part has been the refinement, right? That's been the bottleneck and that's the part of the supply chain that China's monopolized so effectively. Um, it was interesting when you said this is not a complex process, however, because it's my understanding that China's become very protective of their proprietary refining process and is now in talks to open up a refinery maybe in Malaysia, but outside of that, they've really kept their process relatively covert. Is that correct, Peter? >> There's nothing about the technology that is hidden or particularly sophisticated. I mean, don't get me wrong, when you dump a lot of money into something for 40 years, you're going to be okay at it at least. Uh, but the technologies that the Chinese have developed are not exactly groundbreaking. But the bottom line is that all of these rare earths are chemically similar to one another and separating them from one another is the problem. That's why you need the hundreds of ads. Uh there's just there's no shortcut. >> Okay. You made a very uh bold statement. You said China will be gone in 10 years. and you point to the demographics as your case for this. There's presently more people over the age of 54 than under. That's a problem. Um, I'd love you though to expand on that statement. China will be gone in 10 years. Could you just elaborate and provide some context to that for me? >> It's it's it's the story of industrialization. So when globalization really got going back in the 40s and early 50s, uh we started moving off of farms and into towns because all the new manufacturing and services jobs were in the cities. Well, when you live on a farm, kids are free labor and you have as many of them as you can put up with. But when you live in a city, they're an expense. So over the decades, over the generations, we had fewer and fewer and fewer kids. So if you go back to 1900, you know, Americans were having seven, eight kids per couple. Now we have, if we're lucky, two. the later you start industrializing, the faster the process goes because you don't have to reinvent the wheel. All of the technologies are there. So, the Chinese uh didn't do what we did. We went from farm to small town to suburb to city. The Chinese went from farm to high-rise condos. And so they went from having six, seven kids per child or per per uh per woman uh back in the 1970s to in the major cities now less than one quarter of one child. Uh we now know from new data releases from Beijing that the American birth rate has been higher than the Chinese birth rate since at least 1990. And that's 40 years of having almost no kids. That has now caught up to them. and they realize that they just don't have a generation that's under 40 that has any people as a proportion of the population at all. So we are in the final singledigit years of the people's republic of China and within the final probably 30 or 40 years of the Han ethnicity itself >> did you say less than one quarter that's the fertility rate and replacement >> rate in Shanghai and Beijing and the rest is below 0.25 now >> below 0.25 25 replacement rate being 2.1. Um, I got my fourth on the way. So, I'm carrying Canada on my back right now. Uh, you guys got to catch up. Okay. >> My sister's taking care of that for me. >> Okay. Jokes aside, that's far lower than reported. Obviously, I guess maybe that's not what >> Not anymore. Check the data in the last couple of months. Um, okay. >> Keep in mind that half fully half of the Chinese population now lives in high-rise condos, >> right? >> So, it shouldn't be that much of a shock. And in none of the tier 1 or tier 2 cities do they have a replacement rate that's above 0.8. >> Right. Okay. Okay. So um uh let me play devil's advocate a few different directions here. The first one I'll take is that the fertility crisis in China is far from a Chinese problem. Uh nor is the demographic problem. Right. Um I was in Japan last week. If I understand correctly, Japan is maybe 15 years further down the demographic crisis path as China is. Is is that correct? And is there a lesson? >> Yes and no. So the Chinese started their demographic conversion when they industrialized and they were one of the kind of second tier countries. They started around the year 1880. So their decline kind of like the United States has been a slower process um faster than ours. Um, and if you dial back to roughly 1990, they feared that they were about to fall in a situation similar to where the Chinese are now. And so we saw a number of government reforms in health care, in child care, and in getting women in the workforce that um that slowed the decline, and they were able to get their birth rate up significantly. Still nowhere near replacement levels. I don't mean to suggest that they've solved this problem at all, but they saw it coming and they spent 30 years working on fixing it and they're no longer the world's fastest aging demographic. They're still the oldest cuz they started early, but now Korea and Taiwan and China and Germany and Italy and many others are now actually aging faster than Japan. So, if you have some creative state policy, you can buy yourself more time, which is really what this is all about. uh but they certainly haven't solved the problem. But at current rates of decline, the Japanese are going to outlast all of those countries. Interesting. Okay. Okay. Okay. So, my second uh devil's advocate point here would be the the the main pain point of a demographic crisis is that your productive generation ages and they move into a generation that needs care and can't provide it. Right? and go from tax payers to taxers. >> That's right. They pull from the pensions. They don't pay into it. This is the issue. Um, China now employs, I believe, more uh robots in their workforce than the rest of the world combined. Around 2 million in the labor force right now in China. And in 2024, they added 300,000 new uh robots to the workforce. And I believe America added, for context, uh 34,000, so about 10%. So could there be a case that the production crisis that will come as a consequence of the demographic crisis could be automated could be innovated in such a way that we haven't had the opportunity in the past. >> Yeah. I know absolutely. Now the specifics of that oh my god this has never happened before. We don't have a lot of things to compare it against. Uh the best example we have is when the black death hit Europe, wiped out 1/3 to 2/3 of the population based on where you were living and was pretty indiscriminate. And so we had a complete gutting of the skilled labor force. Uh and over the course of the next two generations, what we discovered was if you wanted to maintain things, much less build new things, you needed to train up more carpenters and stonemasons and everything. and we got our first experience as a species of a significant expansion in the skilled labor force which led to the Renaissance. Uh it took a while. You had to hit us with a pretty hard hammer to get there. Um will some version of that happen now? Maybe. But a couple things to keep in mind. Um number one, the Chinese robots, while they are obviously a value added productive capacity issue, um the ones in China are not nearly as good as the ones in the first world. Uh it's not a night and day comparison. They're completely different categories. That doesn't mean that they're irrelevant. U but careful when you use the word robot what you mean. Uh second, and probably far more importantly, you put your finger on it. This is not a Chinese problem. This is happening throughout the entire world. And what we used to consider the third world, the developing world is actually aging much faster than the first world. So by the time we get to 2042, uh the Americans will be younger than the Indonesians, the Turks, or the Brazilians or the Indians. So we're they're not just catching up, they're overtaking us in terms of average age. And when you age past about 45, which they all will have by that point, uh consumption slows down dramatically because you're no longer building your homes or buying your cars or raising your kids. Uh you're in the advanced worker, you're more productive, you're generating more capital, but you're no longer consuming. So if we build this robot workforce uh to produce for us, but there's still no one to consume, the economic model still fails. uh there are a thousand factors that we'll have to figure out. I mean, all of them are going to matter, but getting past that one kind of topline issue is something that we're going to need a fundamentally new economic theory for. And the last economic theory that we invented was fascism. It took about a century uh in from idea justation to application. The idea that we're going to figure this out before 2042, I find laughable. >> Okay. I I have a third point, but I I need to understand something better that you said. Um and this is the speed of age, I suppose. And and the way you just phrased it was that by 2042, America will be younger than Indonesia and India. And >> average age of the citizens, >> the average age of the citizens. And because I would have pointed to India as a country with some of the most favorable demographics and Southeast Asia in general. Um partially why I'm here, right? We looked at the world and wondered will Canada provide the same opportunity to my kids that it provided me like maybe it will maybe it won't but just in case let's build some optionality and if demographics demographics is destiny Southeast Asia is looking pretty good. Uh so could you explain that to me how from an age standpoint countries like India Indonesia can overtake America from a average age standpoint just to make sure I I get this. So the United States industrialized and urbanized much more slowly. We had a lot more uh space, a lot more elbow room. We were not densely populated when we started. Most of the advanced developing world um imported a series of industrial technologies before they really started to industrialize as part of the colonial process. And so everyone kind of congregated in major cities anyway. And then industrialization then happened. >> Okay. >> So they went through the process faster in a more compressed physical space. Uh and so the birth rate declines in all of those countries uh proceeded at two to four times the speed that it did in the US except for China which is special case which is like eight times as fast. This doesn't mean they're doomed. Let's be clear about that. And there is a process in the demographic aging that from a growth point of view is exactly what you've identified. Because when you run out of kids, people at age 20 and under, and you're spending on yourself instead of them, so cars, vacations, and pizzas instead of diapers and healthcare and school, that generates a lot more economic activity and a lot faster growth. And so what we saw in China in the '90s and especially the 2000s was that moment when there were no kids, a lot of working-aged adults, and not yet any retirees. And it's a spectacular story. We saw it in Europe in in the 1990s. Um we see we're seeing it in Mexico right now. We're seeing it in Indonesia right now. We're seeing it in India right now. And based on what your birth rate is, it can last anywhere from 20 to 40 years. But you only do that once. And on the other side of it, you haven't had children now for 20 to 40 years. And you start having a big chunk of population that ages into mass retirements. You get the tax taker versus tax payer situation. At the same time, your consumption drops and once you have your average age past 40, you no longer have enough young people to even theoretically repopulate. Now, Brazil, Indonesia, Mexico, and India are not to that point yet, but they'll certainly, if unless something really dramatic changes, be there by the end of the 2030s. And then you're on the other side of the cliff. Is there anything that can um that can that can bump up against this urbanization trend that results in the birth rate dropping and I think about a country like Indonesia. It's um you know Bali where I am is very devout Hindu. It's a very religious island. The remainder of the country is very devout devout Muslim. And are there any like cultural values or nuance inside of um a community that could mitigate the negative effects on fertility rates that urbanization creates? Is my question making sense? Because you know >> Yeah. No, I I totally get it. Um God, how can I say this without coming across as an ass? >> Um there's two things. Um both involve women. Option one, the better route, it's child care. If you if women can enter the workforce, if they have to choose between a job and a career, a job and a family, they will choose and some of them will choose the career and that means they're not having kids in the same number. It's that simple. So, if you provide child care, then they can have both. And countries that have done a robust child care system have either seen their rate of decline drop less precipitously or managed to recover. No one's been able to turn it around yet. No one's been able to get back up to 2.1. But at a minimum buy you some time. And so we're seeing that sort of effect in say Scandinavia. This is part of the Japan story. Uh in the United States we've got really good data on this. And as a rule, we don't do any sort of state sponsored child care at all. But among advanced health professionals, particularly doctors and nurses who work in like ER sort of situations and where they're on call, they have excellent child care because you never know when you're going to have to go into the hospital. So you have to be able to drop your kid off at a moment's notice. And so ironically, our medical professionals tend to have three, four, and five kids. Uh so the data is there to support that. That's number one. Number two, not my preferred way to go. Don't let the woman leave the house. uh that is the Islamic story in many cases. Now we have reached the point that uh you combine oil subsidies in the desert um and eventually with that sort of attitude the population balloons until it gets to the point that it breaks the state budget and then all of a sudden all the subsidies go away and the birth rate plummets as a result. So across the Islamic world, with very few exceptions, we went from the highest birth rates in the world to some of the lowest in the last 15 years because the money is no longer there. They basically subsidize child care in a very different way. Uh but it was a one-shot deal for them and that is now over. So if you look at a place like well if you look at any place where the Arab Spring hit that those were literally places where the money ran out and all of a sudden the economic and demographic model that generated very high birth rates collapsed and birth rates collapsed with it. >> Okay. Okay. I appreciate that context. My my third um my third question around this would be around the the sort of the decade left for that you've projected here for the Chinese economy to be relevant maybe that's you know one way to phrase it would be that it it seems like there's many major economies around the world that are forming their future around China and like the SEO a month ago in Shanghai the Shanghai Cooperation Organization the summit had over 40 companies countries is at it this year, the largest it's ever been. You look at the continued um applications to join the >> start by saying that any any organization that has China and India or India and Pakistan as pairing you know immediately that it's pointless. Okay, I want to that has China and India or India and Pakistan >> or Japan and Korea or Saudi Arabia and Iran any of those pairings because they work by consensus and those countries hate each other so much that they will automatically veto anything that the other side says that is substantive. So when I look at the SEO I just I just yawn. >> Interesting. Okay. So what's >> your general statement that people are trying to frame their futures around China? Totally legit. Um just I wouldn't use that example. >> Okay. Okay. Let me Okay. Um what's the purpose of the SEO and what's the purpose of the >> SEO is a deal between the Russians and the Chinese to manage Central Asia without having a war. And in that it's been broadly successful, but as soon as they expanded it, it became pointless. >> Same with bricks. >> Same with bricks. Same with bricks. Okay. What do you make of the uh kind of the Ray Dallio model that you know often what you see at the end of an empire, right, the sunset years of the empire is you don't see one um one challenger rise up and take a crack at regional hedgemony. What you see is a conglomerate of smaller nations bind together and challenge the regional hedgeimon. Right. And that's >> you know I'm going to disagree with them on that because it's never really happened. >> Okay. Okay. It's like uh the um what's his name? Allison. Grandma Allison. His idea that when you have a a stable power from a previous era that a new one can come up and challenge it and overthrow it. I think that's a more viable way of looking at the world. But Allison, as he pointed out in his book, it's about a 50-50 chance. uh either the new power overwhelms the older power and sets the new era or the new power comes up and the old power smashes it into oblivion and then redefineses the new order order. Uh we're not in a situation where the Chinese are the rising power. Uh they are they are utterly dependent upon freedom of the seas and they do not have a navy that is capable of imposing freedom of the seas and they no longer have a consumption base. So they have to sell their product somewhere else and bring in the raw materials from somewhere else. So their greatest ally in the world today and for the last 40 years has been the US Navy. That is not a hedgeimon. >> And that's been their ally because the US Navy provides predictability over trade routes. Is that the idea? >> Yeah. It's like until we got to the postw World War II era, the only trade that happened was trade that was militarized or trade that was fast and dirty and usually in raw commodities. um we didn't get to intermediate goods manufacturers trades until we had the bread and woods order. Now I will argue that that is going to fail for different reasons and that is another reason that the Chinese are going to be gone before long. Uh but there's nothing that the Chinese can do to secure that world much less replace it. What about you know since 2013 through the belt and road initiative China's allocated about a trillion dollars in infrastructure loans I think like $147 different countries around the world and >> focused on about 15 but yes >> okay yeah that's good good nuance I appreciate that and I understand the purpose here was to uh sort of bring the next generation of consumers online in response to 2008 China seeing its markets in Europe and the United States go temporarily bankrupt or just buying less stuff from China. You know, one strategy was can we lift up the next generation of consumers by providing them with the refineries, the ports, the the bridges, the roads, the rail, uh to get their economies online and buy Chinese goods. Um it's also a strategy to just build allies and build trade. It's Chinese infrastructure scattered around the world. Is this not some kind of a lifeline uh Peter that now we're going to now it's going to be put to the test in this sort of new sort of deglobalized order. These allies have been built over the last decade and and there's reason to have confidence in Chinese trade as a consequence. >> Uh the Chinese didn't build refineries. They built no manufacturing plant. It was most mostly exclusively transport infrastructure. And the Chinese discovered the same thing that the Russians did back in the 1990s and 2000s. Um, back then the Russians were giving all of their former subjects concessionary prices on natural gas. Uh, they were buying friends. And what they discovered is when you raise the prices to market levels, uh, they stop being your friends. Cuz if you pay people to be your friends, they're only your friends as long as you pay them. So the the searing moment for the Chinese happened during COVID. They had built all this infrastructure throughout Southeast Asia and East Africa. And it during CO they were dispatched. the the diplomats from China were dispatched saying these were these were all loans. None of these were grants which was not the understanding of the countries that were getting the infrastructure. Um only two countries paid the Chinese back. Sri Lanka which led to a government collapse and Pakistan because they didn't have a choice. Uh but my favorite response was the Kenyans because the Kenyans just started laughing at the ambassador and didn't stop until he left the room. um these were bribes. These were never anything more than bribes. And when the bribes stopped coming, China was just another country. Does that mean that there's not a degree of alignment here and there? Of course not. Uh but overall in China, among the CCP, Belt and Road has been seen as their greatest foreign policy failure because it really didn't secure anything for them. when you say bribes. So, okay. So, the infrastructure loans were provided as a bribe in exchange for what? What were they buying? >> The idea. Okay. So, something to keep in mind about China is that China does not have a deep bench of leaders and thinkers the way any other country in the world does. It's one man rule. And in the 13 years that she has been in power, he's basically purged the system of everybody uh who might be able to challenge him in any way and then took it down another level to basically prevent any information that he didn't like from making it to him. So he's kind of ruling in a box. So when Belt and Road started and people could sense that the political alignment had shifted and it was all about one dude and what he thought, uh, everyone took their own personal project and tried to put the Belt and Road label on it. So, of that trillion dollars, probably half was basically just Capital Flight labeled as Belton Road. Uh, so it's not nearly as big as people think. Um, second, I forgot what second was. Remind me what your specific question was. I I talked myself into a circle. >> Yeah. Yeah. If the Bel and Road infrastructure loans were effectively a bribe, I'm I'm curious. What were they buying with that bribe? >> They were they were going for diplomatic influence. Absolutely. But again, bribes only work so long as the bribes keep flowing. And as soon as the Chinese kind of cut this down, and you know, it's it's been almost 5 years since Belt and Road really was a thing. There hasn't been a lot of stuff like that since then. Uh me too. Um they're just discovering that leverage isn't there. Now you you give them a new bribe, it's a new day. You go with a different issue, it's a new day. But you may have noticed that since co Chinese foreign policy has gotten a lot more bare knuckled and it's generated a lot of resentment in a lot of places. And if we dialed back the clock uh to the Biden administration when we had a different sort of tone in the White House uh Chinese standing in the wider world was not nearly as positive. It's only with the turn in January with the new/ old repeat administration suddenly the Chinese are having a moment again. If you remember way back to Trump won, remember the World Economic Forum like globalization blah. It's like the Americans were on the outs because Trump was in and all of a sudden Chairman Xi comes in starts talking about free trade and everyone's like oo la even though that the Chinese were by far the most protectionist country in history and we're gutting the economies of many of the attendants. There wasn't an alternative at that moment and so Xi was showered with praise. Uh it's it's a moment in time. It's PR and most importantly it's really not backed up by the facts on the ground. >> Okay. So let me ask you a question. It would be easy to interpret the it is easy to interpret the sort of trade war developments as China smelling blood in the water. Right? America is exhausting its leverage with the world and swinging wildly to retain influence and it's not working and more countries are trying to thread the needle of neutrality between the US and China. Whereas historically they might have said US is the obvious answer for us. That's the regional hedgemon we should align with. But today maybe that choice is less clear and maybe that's why we're seeing more countries um apply to be bricks nations attend the SEO. Uh we're seeing interesting little pieces of alignment like I don't know what you make of Saudi Arabia signing a defense pact with Pakistan which I believe is the only Muslim majority nuclear armed nation in the world. And I would >> that's a rich topic to explore. I'd love I'd love to. Yeah, because when I saw that, Peter, it struck me as this was in response to the bombing in Doha and the Saudis looked at what happened in Qar and thought they were supposed to be allies 6 months ago. The headline was Qatar's gifting a $400 million airplane to the American president. Today, they got bombed and there's been no recourse. So, we don't know who our friends are anymore and we need to look out for oursel and Pakistan opened the door to a defense pock. They have the nuclear technology that I would assume came from China which de facto puts the Saudis under the Chinese nuclear umbrella which is a big shift from the >> but let's deal with the bigger issue and then go back to Saudi Pakistan. Okay. >> Um the demographic picture of the world is evolving to the degree that the Europeans are basically on this terminal decline for consumption. China's already there. Uh even the United States is aging. All the advanced industrializing countries like India are aging quickly. So the consumption base of the world is probably around as big as it's going to get right now and then it's just going to shrink from here. And if you got your ear to the ground, part of what that means is the old model of making yourself a young industrializing indust export-led economy. That model doesn't work anymore in the way that it worked for Japan and then Korea and Taiwan and then China. So a new path is going to have to be figured out anyway from an economic point of view. And most of the countries of the world that have industrialized have followed that path in some way until they became developed. And if that entire path is now gone, we need to figure out something fundamentally new. And that's before you consider that we haven't as a species been in a situation of demographic decline since at least the year 1500. So we don't even have any theories about what that might look like. Second, the Americans are clearly losing interest not just in globalization at large but in providing security on a global basis. So now whatever this new economic model ha is based on has to be based on your relations with your immediate neighborhood or most likely just within your own national borders that removes a lot of the potential inputs that you need to become an advanced country or even maintain your current position. So, everyone is trying things that are new. Everyone is looking for new relationships that might be stable, but everyone still realizes it's still dependent upon the US Navy in order to access anything. And once that cover really does go away, we're in a fundamentally new system and we don't know what that's going to look like. So a lot of my work for the last three years with the Ukraine war has been watching to see when we flip over that situation uh because if the United States for example or any of the European allies for example go after the ghost fleet all of a sudden freedom of the seas is circumspect and you've got the navies of the world starting to go after civilian shipping and that that's a different system and we don't have an agricultural system or an industrialized system or a manufacturing system or an energy system that can survive. that so everyone is looking for something new and against that context you got Saudi Arabia and Pakistan now Saudi Arabia's number one enemy for a very long time has been Iran and Pakistan is an Islamic country that flanks Iran uh and so they have had a very strong economic and defense relationship for the last 40 years what happened recently is for a number of factors of which the bombing of Doa was one. Uh the Saudis are realizing that the Americans really are checking out one way or the other. And if they're going to have their country be defensible, they either need another security guarantor or they need a much more active diplomatic position to establish kind of a balance of powers. So if somebody does come after them, there's there's an allerggetic response from somewhere else. And Pakistan scratches both of those itches. So most of the Saudi Air Force is piloted by Pakistani pilots has been for 20 years. The single largest chunk of expats that are working in Saudi Arabia doing the work are Pakistanis and a lot of the engineers that build Saudi infrastructure are Pakistani. So it's it's a deep relationship even before we got to this recent development. But I guarantee you if push comes to shove and the Saudis really do get scared, they will write a check and get a Pakistani nuclear weapon. The Chinese are okay with this and the Chinese do have a huge amount of influence over Pakistani policy, but that does not extend on to Saudi Arabia. If anything, the Chinese are more concerned about the Saudis in a way that sounds almost American. Uh there was a moment back in the 1980s and 1990s before the shale revolution when we felt we were running out of oil and the Saudis came in and bought up a bunch of refineries and then just started to park super tankers out in the Gulf of Mexico. And whenever there was an oil shortage, they'd send them in. And it got them huge amounts of influence over American security policy. The Saudis are now repeating that strategy in China because China is today the world's largest oil importer. And Saudi Arab I'm sorry. Yes. And Saudi Arabia is the world's largest exporter of Islamic extremism. And the Chinese are terrified of anything that stokes Islamic extremism anywhere in their borders, much less within their country. So when they look at Jang, their largest Muslim minority, and they start putting these people in camps and stationing CCP loyalists in people's homes so they don't have kids, their primary concern is Riad because they see this Pinsir movement culturally in the West and economically in the East and they don't quite know how to deal with it. And then of course Pakistan's there talking to the Saudis about nuclear technology. >> Is that a thing? CCP officials being stationed in people's homes to ensure >> they started it about six years ago and the the weaguer birth rate uh dropped by 34 since >> that is some terrifying stuff. Okay. >> Yeah. It's it's full-on fascism. There's no other word for it. >> Yeah. Okay. Okay. So, you know, you mentioned Americans losing interest in policing the global order, which, you know, your book, The End of the World is just the beginning, argues that, you know, without US naval protection, as you've discussed today, the the world returns to some kind of like a pre945 regional fragmentation, more if we're lucky, if we're lucky, maybe more anarchy than anything else. So, so walk me through that a little bit. Why is the United States retreating from being the global policeman? Why are they doing that and what is the consequence of that? >> Uh let me start by saying that I'm an internationalist and I'm a political independent. So this is not how I would do things but this is how we are doing things. >> Okay. >> The whole idea of globalization was an American security program. Uh after World War II we said that we would patrol the oceans. We had the only navy that could do it uh if and allow everyone's commerce to go everywhere if in exchange we could write your security policy. And that's the alliance with Korea and Taiwan and Japan and with all the European allies. That that was the deal. It was guns for butter. And that worked when all of these countries were war torn and impoverished. But you fast forward 70 years and a lot of these are now first world countries. And the economic balance between the United States and all of them combined in 1946 was 2:1. >> Okay. Now everyone else combined is a little bit bigger than the United States and that's before you consider the whole developing world has come in as well. >> So it has gone beyond the ability of the United States to pay for and maintain that system and we've also gone from a world where there was one navy to where there's now a dozen. So the security and the economic underpinnings of that order no longer hold and that's before you consider that politics evolves and the United States is very clearly going through a nivist moment. And that is not just a Trump thing. The Biden's administration's policies on trade were just as harsh as Trump one was. Trump 2 is of course another step beyond. Uh so the the United States no longer has the population or the wealth to subsidize that sort of system. Uh and it's starting to reverberate through our political system and through our strategic choices. That's before you consider the consolidation of a lot of the manufacturing of the developing world into China. Keep in mind that probably about a third of the manufacturing capacity the Chinese have has driven out or has been sucked in from the rest of the developing world. So, you know, Americans about losing steel, aluminum, and some manufacturing to the Chinese, and and some of that is true, but it's nothing compared to what's happened to places like Brazil, where the entire industrial plant has basically been sucked out. >> So, we're we were about to flip on the geopolitical and macroeconomic model point of view. Anyway, the demographic situation just happens to be happening at the same time. either one of these is enough to shatter globalization. But both of them, yeah, it's it's going to be a rough transition. And on the other side of it, you're basically going to have countries fall into two categories. Uh, one where their demographics and their internal trade systems are sufficiently robust and young to make themselves their own island in the storm, sort of, so to speak. And if we play our cards right here in North America, we are one of those islands. Southeast Asia is one of those islands. France and Turkey are two of those islands. Um or you have to come up with a completely new model or watch your society fracture and that's going to be most of everybody else. >> So let let me ask you because some of that sounds like it lays over the uh sort of Ray Dallio cycle of empire model and then some might be at odds. And when you talk about the defense obligations becoming too expensive because of how expansive the United States military has had to become, that's a parallel that maybe I would see there where um a country uh becomes wealthy uh you know is is leveraging global trade to an extent that they need to protect those trade routes and they send their navy out to do that, right? Simultaneously the standards of living increase as the country grows in wealth and so they end up exporting uh the manufacturing jobs to a cheaper labor country so they can um benefit from cheaper goods. But this hollows up the middle class. You stop producing as much. You start spending more. This is kind of the problem that empires typically end up in. My question first of all is that correct? And secondly, have we ever seen this occur before? whether with the British Empire or the Dutch Empire, maybe the Spanish, I don't know, where we've seen the empire successfully recede back to its borders and and maybe is that just the recession of an empire? Is it that simple? Like what's your take, Pet? >> Let's do the world before 1945 first because that really is a hard break. Um the world before 1945, you had two different kinds of empires. You had landbased and maritime based. The maritime based ones tend to be more based on value added trade whereas the land-based ones were based more on military position. But what they had in common was that both of them extracted value from the territories that they held in some way. And the wealth of the capital was based upon what they could extract. And so when the provinces started to rebel or there's a war and they lost control, there was a direct negative impact on what happened back in the imperial capital. And so every empire that we've ever had died from from an economic point of view, a reduction in wealth because eventually the wealth that they brought in restricted their ability to do things whether at home or abroad. The Brits were a partial standout because the British Empire was founded mostly on a technological advantage. The Brits were the first country to industrialize. They invented most of the base technology. So for a century and a half, the point when the the flag was flying everywhere. Um they were bringing guns to knife fights. And so of course they won. So they had 2 to 3% of the world's population, but they controlled like a third to half of the world's surface. It was a great time because they had a technological advantage. Once those technologies leaked out to the rest of the world, there was nothing special about Britain anymore and it just retracted back to one island. Um, and so if you want to talk about empires in that context, I think there's a lot of commonality with what you just saw. I'm not sure it's quite that dogmatic, but you know, I'll give it. United States is different. Uh, the United States didn't extract wealth from its empire. It's not an empire. The United States had a continent to itself and in the aftermath of the cold war with NAFTA, we had a value add manufacturing system with our neighbors. It's a very different model. Um, we didn't extract value from anywhere else. We had trade relations, but we encouraged bigger trade relations of those provinces, if you want to use that term, with one another. Part part of the deal with the Bretonwoods compact was that you can sell your goods into our market, but you can still protect your own. so long as we can write your defense policies. It was about security for us, not about wealth. So if you peel off the rest of the world, I don't mean to suggest that the United States is not going to suffer, but we only trade with the rest of the world outside of NAFTA for about 3 or 4% of GDP uh in terms of our uh economic exposure. and we will feel that especially since it's concentrated in the manufacturing sector. Um, but it's nothing compared to what the rest of the world would go through. So, we're in this weird situation where the old hegeimon if it leaves it'll stumble, it'll fall and get an acne outbreak, but the rest of the world's going to burn. >> I want to unpack that a little bit. So, if the United States stops writing these defense policies, that's part of retreating from the global policemen. Um there might be some villains that emerge, right? But the United States >> Many, many and not necessarily are villains, but villains in general. >> Villains in general. Yeah. 100%. Um the United States from a geographic standpoint is um incredibly defended, right? Fish on one side, fish on the other side, Canada to the north, Mexico to the south. You're in a good place, right? And uh and yeah, the stopping power of water is a very real thing I think in in in defense. I don't know if you agree with that, but so that's >> Yeah. Okay. So that's that's the real leverage that America has from a security standpoint. If they stop being the world's policemen, America maintains its security strictly because of its geography. Is that correct? And then could you expand a little bit? >> As long as you're thinking about it on a continental scope, 100% agree. Once you start going globally, that's a different conversation. >> Okay. And what does that mean? What does that mean? Once you start going globally, what one of the deals with Breton Woods that's hardwired into NATO, among other things, is when there is a conflict in that theater, the United States immediately takes full command of the armies and navies of our allies. We're in command. We back away from this model. That is no longer true. And that means those countries are going to have to think for themselves and make defense policies for themselves and arm themselves and all of a sudden they're no longer in the ally column. They're somewhere in between. And when you force people to take care of themselves, they make their own decisions. So part of the arguments that I'm having here in the United States is if you think that globalization is bad and all the defense agreements where the United States protects these countries are bad, you have to consider the cost of the alternative. There are a lot of countries out there that cannot defend themselves conventionally and if the US pulls the rug out from under them, they will start building militaries to compensate. And one of the fastest ways that you can build a military deterrent against a foe is to get a nuke. And so we have a half a dozen countries in Europe right now that are probably going to go nuclear within the next 2 to 3 years because they don't think that the United States is going to be there. And I think they're probably right. So we're we're taking the lid off the pot by going home. And if you're an American and you think that that is going to be cheaper, you are wrong because it is so much easier and cheaper to use your allies forces in that theater than to use your own. >> Right. Right. Okay. Um, is there dispute within American policy about whether or not this is the best course of action? And I imagine some of my viewers will say, "What are you talking about? Look how involved they are still in Eurasia, in the Russian war. Look how involved they are in the Middle East. They don't seem to be retreating from my perspective. Uh what would you say? >> We're absolutely in a transition moment. And the the problem we're having right now is the Trump administration has cut its ties to all external sources of thought. So normally is a pretty robust foreign policy and defense community in the United States. Uh unless you are part of MAGA and MAGA is basically one person. Um there's there's no influence. So the discussion is not happening. MAGA has made their decision about XYZ. Okay. >> Um but it really comes to the mood of the man in the White House right now. And when he came in, >> he was extraordinarily isolationist. But then he wakes up one day, he's like, "Hey, we're going to do something with Israel." Uh so uh it is very very erratic at the moment. And we will see, for example, with Gaza, whether or not there's going to be any continued push. Uh, I I don't mean to take any accolades away from Trump from what he's achieved in the last 3 weeks in Gaza. I think that's great. But if that's the end of it, it's going to be very temporary. And on the other side of it, we will have an Israel who all of a sudden thinks that the United States doesn't matter as a defense force. Uh, that's what they thought 3 weeks ago when they bombed Gutter. Um, and if everyone in the region realizes that the United States only matters when Donald Trump is in the room, then we have a different sort of defense planning. >> Okay. And so, you know, effectively this this trajectory that you're describing, just simply put, it's much bigger than any one president, right? And, you know, in hindsight, 10 years, 15 years into the future, the policies of the current administration will just be a blip on the radar. The uh trajectory of the global order Maybe. But I mean, we've we've been moving this direction since the Cold War ended. The US has been steadily losing interest in everything. And people who wanted to kind of renegotiate the Brentwoods Compact and figure out what Brettonwoods 2.0, globalization 2.0 is, how do we how do we take this alliance and refabricate it for a changed world, those people have lost every presidential election since. Uh to think that that is a hiccup is is inaccurate. It's it's a trend. Uh and we're now seeing where it leads. >> So, if I put myself in this situation or this world, you know, it strikes me as like um you know, when when you see a top narco boss get uh either locked up or knocked off in Mexico and suddenly we're in a drug war again, right? Because everyone's fighting for territory, they see the opportunity and they take it, right? Is that the global order therefore that we're heading to? If the global policeman retreats, says, "All right, it's been great. I'm gonna go home now. You're on your own." That's a massive opportunity for countries that have been uh, you know, the victims or subjects of proxy battles and, you know, this and that and and now they're on their own truly and territories can be taken back, resources can be fought over without external influence to a degree. But what's what's your take on that, Peter? >> Uh, let me give you two thoughts there. Uh number one, first thing to keep in mind is any sort of long range transport stops. Uh unless you can provide security from point of origin to point of destination, you won't have it at all. So just just to pick one product, lithium, it really comes from two places, Australia and Chile. Uh and if you can have a security line to those countries, you can still have lithium. So the Western Hemisphere looks pretty good for that. The Eastern Hemisphere not so much. Uh you have to do that for every product. And so when you're thinking about things like oil, forget it. There will be no global trade in oil. So if you import your oil from the Persian Gulf or from the Russians, that goes probably to zero or very close to it. And then you can redo what that math means for your economy. That's peace one. Peace two, there are going to be countries who do have military capacity to make a bubble around themselves. And if you can be part of one of those bubbles, your problems won't be as severe so long as you can get the materials and the trade that you need. There aren't a lot of countries that fall into that secondary category. Japan, Turkey, France, and then the Western Hemisphere. That's really it. And for everybody else, it's going to be a bit of a scramble. And that's where the wars are going to get kind of crazy because you're going to have countries that are desperate. and whether it's thereafter food or energy or raw materials or a workforce, it's kind of an all or nothing thing. So, I would expect dozens of brush fire wars to boil up, but I won't expect any of them in the Western Hemisphere. >> And you mentioned Japan, Turkey, France because of the strength of their military. Is that why? >> Primarily, in the case of Turkey and France, there's also a demographic component to consider that is very robust. Uh these are countries that won't face the same degree of economic degradation because they still have a tech base. They still have a manufacturing base. They still have a productive workforce. So they're not going to be under the same degree of stress as say a Germany and Italy or a Russia will be under. >> Okay, that's it. Because from from Japan, my first thought would have been well there's a country that is 100% dependent on imported energy and right away that's a vulnerability if you can't control as you put the long >> you got to look at the broader geography. So Japan is an interesting case. Number one, it's got the world's second largest navy. And if you remember back to Trump 1, they were the first country to come and try to seek a new bilateral understanding. They signed the first real trade deal with Trump 1 because they realized that if they don't have a relationship with the United States that's positive, they can't use the Western Hemisphere to get energy. And so they have become the second largest importer of US shale, crude, and natural gas, for example. Second, what they need is a consumption base. And so they've been very very aggressive at partnering with Southeast Asia for example. So you can see a way that some of these things can combine and an American Japanese access in the Pacific makes a lot of sense for a lot of reasons if the relationship sticks. So when Trump too came in and the first thing he did was started badmouthing the Japanese, the Japanese were like what? It's like we bent over backwards to make you happy the first time and now we have to start over. And so you now have the world's second largest navy with a large fleet of civilian nuclear program, a large fleet of civilian nuclear reactors wondering what the rules of the game are and trying to figure out if there's something that can be salvaged or if they need to try to make their own bubble. And the last time the Japanese tried to make their own bubble, things got delightfully lively in the Western Pacific. >> Okay. Okay. So, um, long range transport stops if you cannot defend it. There might be exceptions to that rule, regional alliances. Maybe if you're Japan and you have those the world's second largest navy, you can defend the specific trade routes that you need. Um, and so there's exceptions, but on mass large long range transport is just not predictable or certain anymore. And it's up to you to find a way to to find that certainty. um strikes me right away as massively inflationary and it kind of I guess like where I'm at with this Peter is like we are from my perspective witnessing some sort of deep globalization event. I mean I'm my whole life has been the era of globalization right like if you had the cash or the credit countries seem to be able to buy whatever they want from whoever they wanted and that game definitely seems to be over and we're seeing a scramble for raw materials and commodities occur globally right now. Um, I think that's reflected in some of the raw material prices, specifically gold and silver. Uh, but we've seen it elsewhere as well. Um, the way you're describing this to me, however, makes me think we're just at the very tip of the iceberg of this delization. >> It is >> frantics uh race for resource control. Um, and and that's really is that correct? Like that's you seem to be a great Yeah. Okay. We're we're I didn't I I think we're past the Rubicon at this point. There's no >> past the Rubicon. Okay. So, the the idea of like um liberalism from a from a like a world order standpoint. You're familiar with like John Mshammer's work and and the idea that, you know, if we could just democratize the entire world and get everybody trading with each other, we could abolish war because democracies tend not to go to war with each other and you're not likely to go to war with your trading partners. >> 100% unmititigated but okay. I agree with you 100% and I just feel like that which but it seems to be one of the most common sort of geopolitical theories despite what you just said. >> You know remember since 1945 the United States has written everybody's security policies and we didn't let anyone go to war with one another. It wasn't for lack of trying and Hitler was elected. So, um, no, no. Uh, but but you know, when when you have a hegeimony, you tend to not have wars because everybody's on the same side. >> Yeah. >> And the economic model gave everyone a vested interest in being on the same side. >> Okay. Okay. That's interesting. So, so walk me through, I guess, like first of all, I need to understand timeline a little bit as best that we can, and we're talking in big trends, I suppose, but actually, you know, a 10-year timeline on China's economy is pretty near-term and specific. Um, what does the rest of this look like from a timeline standpoint? We talk about the United States receding from their policing of the global order which creates an environment where long range trade routes are just no longer certain and predictable and therefore either more expensive or unavailable. Right. Um walk me through what that looks like from a timeline standpoint. >> Right. >> All of this is going to fall into the educated guest category because we've never done this as a species before. We've never done globalization at this depth, much less than unwound it and tried to recover from something new. We've never had the demographic bomb before. >> Okay. Uh three things to keep in mind. Agriculture, energy, manufacturing. Agriculture is arguably the most globalized of the sectors. Oftent times farmers get their equipment from one continent, their energy from another continent, their inputs like fertilizers and pesticides from another continent. All of that is long range trade. So we're looking at a collapse in the ability of the world to be able to grow sufficient food to feed itself on a hemispheric scale in the eastern hemisphere. The western hemisphere looks better. There's the the um the fertilizers either come from Canada or the United States for the most part. The industry is in the United States and Canada and Mexico for the most part. Uh and the land is really good. So, the Western Hemisphere has a food surplus nowhere near enough to compensate for what's going to go down on the Eastern Hemisphere. And with what the Trump administration is doing with some of its tariff policies right now, we're probably going to lose between one quarter and 1/3 of the American farm production over the course of the next 3 or 4 years. Uh so we're probably looking at somewhere between 1.5 and 2 billion people starving to death. That's piece one. That all happens in the next 15 years. uh peace 2 energy shell revolution is great and the technology is probably applicable in parts of Canada and parts of Mexico and it's already proven to be applicable in parts of Argentina but those are really the only four places in the world that have a geology that is appropriate for the technology we haven't found any place in the eastern hemisphere where it really looks like a good match so the eastern hemisphere is stuck on old school energy production and as a rule bring in a new field online in that sort of environment is 5 to 15 years. So the Western Hemisphere has an energy surplus. The Eastern Hemisphere has an energy detriment, which means we're literally looking at large swaths of territory de-industrializing. And there is no way when you de-industrialize that you don't also have a population event. Agriculture is an industrialized sector. And then finally, manufacturers. Good. Um, what is unique in the world of manufacturers after 1945 is when the sea is safe and you can ship anything anywhere cheaply, everyone starts to focus on the specific parts of manufacturing that they're really good at. And the supply chains start to get broken up into not just dozens or scores, but hundreds, maybe even thousands of individual steps. And that means you got ships going everywhere. And so your average manufactured pro project in East Asia taps seven countries and has over 80 steps. You want to get into electronics, you're talking about over a couple hundred. You want to talk about computing, you're talking about several thousand. You want to talk about high-end semiconductors, you're talking a hundred thousand. All that goes away until we rebuild those manufacturing supply chains in a more geopolitically stable environment. We will not do that within 15 years. So, bestcase scenario, we have a 15-year transition period that ends at some point in the 2040s during which all of these things break and are reinvented. The Western Hemisphere has a hell of a time at juggling all of this and figuring out what to put where, but it has energy in its food and that makes everything else possible. The Eastern Hemisphere doesn't have any of it at large. There's still going to be some bubbles that get interesting. And the United States will probably from time to time reach out and touch one country another, not always negatively. And so the Eastern Hemisphere has some places that look really promising like where you are. Southeast Asia is one of the small clusters that actually looks like from a manufacturing point of view can be wildly successful and with help from Australia and New Zealand can feed itself and its energy situation is a little wobbly but not disastrous. But if you're in China, you're looking at the end of the Han. If you're in Europe, you get to be there for Russia and Germany's death throws. I'm sure that will be a lot of fun. And if you're in Africa, in the Middle East, you're in an area that either imports 85% of what needs needs to grow its own food or just imports 85% of its food. And so civilization rolls back. That's that's the rough sketch of the world between here and 2050. >> It's not a pretty picture, Peter. >> No, there's a reason why the book is titled The End of the World. >> Okay. Hey, but let me ask you. I mean, Russia is the world's largest commodity exporter, or at least that, you know, they have been until maybe recently, but they might still be. >> Yeah. >> I think 25% of the world's grain comes from the lands shared by Russia and the Ukraine. Uh oil, gas, uh say grain, but wheat. >> Okay. Thank Thank you for that. Um you know, richest uranium deposits in the world. If you're going nuclear, you know, at the bastion, >> probably Kazakhstan, but Russia's no slouch, >> right? And I believe it all goes to the port in St. Petersburg. That's where access to the global market. I kind of put that under the Russian umbrella. I don't know if that was a assumption. >> The Russians certainly would. >> Right. Right. Okay. So, I mean, that seems pretty secure to me. Right. I understand. It's it's uh it's a continent that is just there's a reason Europe continually descends into war, right? So many countries sharing borders, different cultures, it happens, right? But from a resource, from a agriculture and an energy standpoint, it seems quite set up. Um, but you dispute that >> the problems. I mean, the problem Russia has two problems. Geography for number one, uh, huge territories. It no longer has a skilled labor force that's necessary to maintain even its basic rail infrastructure. So, we're already seeing that fail without war damage, I might add. So, the ability to access those materials is falling apart. Hilarious story. So if you go back to 1929, just as the Japanese were like getting really crazy and going all all bonsai on on Asia, they did a study uh about if they were to conquer eastern Siberia and extract all the mineral wealth, uh they did a costbenefit analysis and they realized that the cost of building the infrastructure would um outweigh any benefits they get from the minerals. And then they did the same study again in 1989 and had exactly the same result. So developing Siberia, it sounds nice. There's a lot there. No argument there. But there's a reason they fly out the gold. Um the infrastructure just can't keep up for what they need. And the technical difficulty of getting this stuff out of the ground is really rough. So around for example, there's a place called u there's a field called Kova. Um the Russians could never do it. The Soviets could never do it. The Chinese could never do it. BP did it until the war started. Um and now even that one is failing. Slin is failing. Uh because without the topend technology and a lot of capital, this area just isn't very productive because the terrain is so hostile. That's problem one. Problem two is labor. The Russian educational system collapsed back in the 80s. It's never recovered. Most of the people who were skilled labor in Russia have been trained abroad. That all stopped three years ago. And the average age this year of a Soviet educated engineer is 65. So without imported skills, the system is falling apart. Uh if you go back 15 years ago, almost 20 years ago, the Russians had the worst demography on the planet. And then two things changed. Number one, they stopped collecting demographic data, so we really don't know anymore. And then number two, the Chinese screamed right by them. So it's still a really horrible story. And we are still looking at the end of the Russian Federation. Um the question is whether this is a 10-year process or a 40-year process, but regardless, uh accessing Russian materials is on its way down. >> Okay. All right. All right. And uh Okay. So, let me ask you, we we touched on liberalism as one of the two sort of most common geopolitical theories that we hear about, and we both agreed uh there's no historical precedent that that allows that to be real. The other side of the argument is realism, right? Either defensive or offensive realism. Um, and and that would say that a country's first priority is survival. And the best path towards survival is to have the most relative power versus whatever your threats are. And if everybody's accumulating power simultaneously, building militaries, trying to protect trade routes, it's in everybody's best interest to build up their military more than their neighbors have done. Um, where this gets me to is a power vacuum that would inevitably be created by the United States withdrawing from that, you know, global policeman role. And inevitably uh two three or four countries would try to fill the shoes either regionally probably at first and maybe globally who knows but is that a fair assumption and where do you think those centers of power would gravitate globally? Like where where are the where are the uh the I guess the competitive advantages? Keep in mind that any ideological theory like realism or liberalism are bit of a straight jack. It's the world is a is gray. It's in between. Appreciate that. >> But but you know I I broadly agree with how you've outlined both. >> Uh two thoughts. Uh number one, you have to look at existing capacity. Not necessarily the order of battle of their military, but their capacity to build an order of battle very quickly. because we're go it took the United States a century to get to where it did with say aircraft carrier operations and there's no one there is no one who can even come close to competing. There's there's a reason why the Brits have insisted that the Americans provide commanders for their carriers or why the Japanese have insisted that the Americans provide the fighter jets for their carriers. Uh it takes generations to build this sort of stuff. we don't have that kind of transition time. So you've got to look at the countries that can do it quickly and that's a very short list single digit. Um second you always have to keep in mind that just because the United States withdrawing is like we're not disarming and the US will reserve the right to stick its nose wherever it wants, however it wants, for whatever reason it wants and that will continue to shape security uh the security of math on a global basis. uh countries will try to stay out of the United States's way and will try to drag the United States in. One of the things we found after September 11 is all of our allies were gung-ho against al Qaeda, but then with like the Israelis was it's al Qaeda and Hamas. With the Pakistanis, it was al Qaeda and Kashmir. With the Russians, it was al Qaeda and the Chetchins and the Chinese. It was al-Qaeda and the Weaguers. And the United States fell for a lot of that. So the countries today that have the order of battle that looks really promising, these same ones keep popping up. Japan, Turkey, and France. The Brits have built two super carriers, but they did so in an era of austerity. So they basically gutted the rest of the navy to do it. So, the only way a British super carrier can be safe on the high seas is if it's in a ring of American ships to protect it. That's not an independent power base. Will they fix this in time? Yeah, they will. Will they fix it in 15 years? Yeah, I don't think they will. And so during the transition time, the Brits have a very ugly choice to make. Do we become a subsidiary of the United States or do we cease to matter at all? we just put these carriers off the coast of northern Scotland so no one can hit them in which case they have absolutely no combat utility. Um, everyone's got to go through their own decision-m in that regard. Uh, and there just aren't enough countries that have projectionbased military capacity. Now, you also have to weigh that against what their neighbors have. So, for example, India is the queen of the Indian Ocean, but it can't project power and it's got Pakistan on one side. That hugely constrains what they can do. uh they just don't have the military reach in order to create a meaningful bubble and if they did Pakistan would have to be within that bubble and let's just say that that would be complicated. I would have to imagine that the unwinding of the American global order is happening simultaneously with the unwinding of the United States dollar as the world reserve currency and and world. I mean >> I mean it really depends upon political decisions are made in Washington. We can be our own worst enemy in that regard. But you know do you really think in a post-globalized environment where global trade goes away that the euro and the European Union survive? And if the euro goes away, why why would any of these countries who no longer have the demographics of consumption adopt any currency other than the dollar? When China cracks and the yuan basically becomes toilet paper, where do you think the Chinese money is going to run to? One of the things we saw during the Great Recession, one of the things that we saw during the dotcom bust, one of the things we've seen in every military conflict over the last 50 years is money flows to the dollar. Not because we did anything right, but because there really isn't an alternative. And if we're moving into a world where trade is even more circumspect, you're not going to use your local currency and international trade because it means nothing on the other side. You have to use something that's a store of value. And we're moving into a world where there's only one option. >> So why wouldn't >> unless unless you do the Russian system and you use gold and you just physically fly gold to your trading partner. >> Yes. Right. I mean that's you know and when you discuss this you know for the last 50 years whenever there's been an event like 2008 uh do bust all of this stuff people fled to the dollar and they still do in 2020. Everything got sold that during that brief period before the everything bubble uh and the US dollar popped, right? People fled >> everything bubble. I like that. >> Yeah. Yeah. Well, then and you know, even gold caught a bit. Everybody ran into the dollar because they had to meet the payables, right? And and but during that 50-year period, that's also been the time when America's been increasing their global power. Um you know, and you don't have to go that far back to find the era when that thing was the sterling, right? the pound sterling and go a little bit further back and and so you know is gold actually a realistic option when you look at history in more than century timelines and you think we are fracturing the global order we don't know what what's around the corner we know what was is no longer and what was was a US dollar-based system call it US military call it dollar power it's the same thing to me in Southeast Asia or in Africa or wherever in the eastern hemisphere I am and I can't rely on that cuz I can't rely on them, right? What's the US dollar? >> I get it. But keep in mind that there there has to be an alternative. And you know, gold's fun uh as a panic buy, but there's not enough volume to undergur trade, not by a factor of over a hundred. So, you know, gold might from a trade point of view, from a fear trade point of view, be a reasonable investment. I'm I'm I'm very agnostic about this. This is not me endorsing any specific trade or commodity here. uh but there's not enough of it to lubricate a national economy. So does it play a role in some interesting ways? Sure. >> Can you have a globalized system based on it? Absolutely not. >> That's interesting. And I just I imagine you know in this scenario you're going to hoard what you can, right? What has and can store value and and that game becomes a lot more diverse in this scenario. And if what you have access to in Indonesia is nickel, maybe that's where you store your wealth, right? I think in Indo's got about 67% of the refined nickel. >> Maybe keep in mind though that gold is a very specific exception to most of the rules of economy because um it doesn't have a lot of industrial uses where nickel and all the others have massive almost endless uses. >> So I'm not suggesting that there's not a a a trade there to be had from time to time. But one of the top 10 demand sources for gold is literally Olympic medals. Um if you're in a situation where gold is the only option, you need so little of it whereas all the other commodities have such a wide range of largecale industrial uses. So they trade on a different metric. Gold of fear trade primarily. Um, and personally I don't have the heart stability to play that game. Uh, but when I'm looking at all the other industrial metals, I can bet on technologies and supply chains and countries, you know, a world I'm more familiar with. >> I mean, yeah, the fear trade lands, right? like when uh US confiscated the US dollar assets after the Russian invasion, we saw central banks all over the world buying physical gold and repatriating it in amounts in and in in amounts we hadn't seen in 40 50 years. And you know the assumption there is that we thought the dollar was the safe haven. You just showed us that that's actually up to your discretion and if we do something to offend you, you can take that away, right? And so what happens when the United States steps back? Because we're in this weird moment where the United States is still going through a lot of the motions of defending to global commerce, but politically is very clearly getting out of this business. And eventually this the uh the carpet's going to match the drapes on this topic and things will break >> and people will realize that even though the United States has kind of gone off its rocker, there's no other liquid deep pool of financial assets that can make anything work. It's like we're in this really weird world where the US is holding things together which allows the gold trade to function in the way that it is. No, it's temporary. >> Okay. So, I have uh three young kids, Peter, and I have a fourth on the way. And um all of my kids were born in Canada, but they have dual American citizenship because my wife was a proud Texan. And um we often have the conversation about where we should, you know, put down roots. And we've decided we're not ready to make that decision yet. And so we're moving around a lot and we're exploring options um both at home and abroad. So you know we're shortlisting American cities. We're experimenting um in various countries around the world. Uh Indonesia has become a second home to us for the last three years. Um our decision is fundamentally based in where will my kids be uh be able to access the same opportunity that I was growing up. I couldn't have been luckier, right? Grew up in a country surrounded by safe, predictable governance uh and and the exchange of hard work rewarded you just incredibly favorably, right? If you were willing to work hard, the world's your oyster, right? And it's been great. And uh I'd love to find that opportunity for my children. um through this frame uh of near-term volatility and uncertainty. A lot of countries on the chopping block, some numbers you put out here, 1.5 to two billion people starving because they just can't access reliable agriculture or energy. Um and that's a consequence of just global trade structures breaking down because one person can't afford to defend it anymore, doesn't want to. Not in their best interest. At the end of the day, every economy's first priority should be their own economy. Um, so that's maybe what's happening here. Where do you go? Where do you look? You know, um, is is is America the place to be? I mean, I guess that's the question I'm asking. >> Yeah. Well, I mean, I don't like to live a particularly exciting life. So, I want stability. I want to be in one of those bubbles. So, you know, your franoscentric system, which will probably include Spain and Iberia, maybe parts of North Africa, obviously Belgium, probably the Netherlands. Uh second bubble is Turkey probably will involve the uh the lower Balkans and based on how the war with Ukraine goes maybe Ukraine uh and then with a little bit of energy from places like Azeran and Iraq. Third bubble, Southeast Asia can't defend itself, but never has had a history of going to war with itself and is stable enough in terms of food and energy and manufacturing demographics that it's a very very attractive partner with either Japan or the United States. And then of course the Western Hemisphere as a whole is its own bubble. But you've got to look whichever bubble you pick, you got to look at what they're going to need to do. So in the case of France, France joined the Europe European Union, founded the European Union, but never included its economy in the European Union. So they never de-industrialized. For example, they have their own national system. Has its pros, has its cons, but it's functional. Case the United States, we did somewhat de-industrialize as part of the trade program. So we need to double the size of our industrial plant. So if you want to be a white collar worker in the United States, that's not where it's at. But if you can learn to wire and become a master electrician by age 23, you can probably earn a million dollars a year. So it's just the everything that we understand is going to evolve based on the things we're going to have to do and the things we're going to lose. And a lot of the math that you might look at today is just isn't going to be applicable 5 years from now. five years from now. >> Well, think about where we were five years ago. Think about how far this process is already down the line. >> Yeah. Yeah. Okay. Okay. That's really >> 2019. That was probably the high year for globalization and we've already started the slide. >> Yeah. Yeah. Okay, man. Peter, this has been a a fascinating conversation and a different perspective than I've heard on the show before, which I really value. And uh you know, it's funny. I as a commodity investor um and and quite frankly a gold investor, we hear a lot of doom and gloom predictions on the show because a lot of the thesis >> You're a gold investor. That's your bread and butter. Yeah. >> You know it, right? Like it's, you know, and I'm not a gold bug per se. Um but I I um yeah I I I I hear you know we spend a lot of time dissecting the uh you know the the sort of I guess future of US influence, US dollar influence and and all this stuff and often comes out with some pretty dire predictions. This was was a different take similar outcome but completely different perspective and I found that incredibly fascinating. Um, I learned a lot and I really appreciate your time and I'm grateful you came on the show and I encourage everybody to pick up a copy of of your book. Um, The End of the World is just the beginning. Uh, Peter and your podcast. You post daily on your podcast or pretty pretty much >> Yeah. Well, it's it's great though. And you're often out in the trails like in Colorado hitting some hikes and you'll just whip out the phone it seems, right? And just give an update on whatever posted today. I got lost, so I think I might as well record something. >> All right. Well, it's like it's super accessible um consumable um uh yeah uh recaps of the most important geopolitical headlines that are occurring and you're touching on those daily. So, I appreciate that very much and thanks again for coming on today. >> My my pleasure. This has been great. >> All right. All right. Well, love to do it again. I have a great day.