Peter Zeihan: Investing in The End of The World | China, Economic Collapse, And New Beginnings

Boom, people! Welcome back to the show. Today we got with us an amazing guest, Peter Zeihan. I'm so excited for Peter to come on. So Peter, welcome to the show.

It's great to be here.

So I'll tell you a quick backstory. People that, if you don't know who Peter is, I'm excited for you to listen to this show. It'll be an amazing introduction for you. I first got introduced to Peter's stuff about 5 years ago. One of the wealthiest people I know, this guy's worth close to $1 billion, we were at a party, he says, hey, have you heard of this book called The Accidental Superpower? And I said, no, I haven't heard of this. And he goes, let me tell you about it. And he spent the next 25 to 30 minutes telling— there it is right on the screen— telling me about this book. And what was so fascinating, I'm excited to talk to Peter about this today, is he goes, you know, a lot of people talk about economics and stuff. He goes, first off, this guy is so thorough, number one. But secondly, he keeps predicting stuff that comes true. And we'll talk about some of that today. But he's like, The trade war. He's been talking about a trade war. It's going to happen with China, and things will deglobalize and move to Mexico. He's been talking about for years, and ta-da! Here we are seeing this. He's going to. He's predicted chip manufacturing onshoring. He's predicted a lot. The Russian invader invading different parts of Ukraine and Georgia and the Donbas region because of certain shipping lanes. Anyways, I can go on and on. I'm sure Peter you could give us more detail, but I was pretty enthralled. I then started reading your books, became a super fan. I've loved your content, your daily posts. If you guys have not followed Peter, go follow his YouTube channel every pretty much every day. You get a new video. on some different corner of the world and what's going on. So anyways, it's phenomenal to have you here, Peter. And also, we got Peter booked to speak at Fund Launch Live in April at our event live in person in Orlando, which is pretty fun to have you there in person. So it was funny, we were talking a few weeks ago like, what topics are you going to talk about on stage? And you're like, well, the world, like you just said, the world keeps falling apart. We'll just talk about the current stuff that's happening right there. So without further ado, let's dive in. China right now is in quite a predicament, and I was with a big group of fund managers, multi-billion-dollar fund managers this week, and they're all talking about shorting the China market, how there is a 2007-2008 crash, maybe a Great Depression type of thing that is happening in China right now as far as their economy. Right here, JP Morgan just put out a statement in October that 40% of Chinese developers have defaulted on their debt. since 2021, just in the last 2 years. Pretty interesting right now. So give us your take on China, their current economic situation, what you're seeing.

We're in an ever-steepening slope, not just to a recession or depression, but actual Chinese collapse. The birth rate has fallen by more in the last 5 years than what happened to the Jews of Europe during the Holocaust. So we are literally looking at the dissolution of the country itself. Now, there are all other little issues, if you will. The trade war, which is now a competition between Biden and Trump about who can crash China faster.

Interesting competition.

You've got the debt situation, you've got the overbuild in the housing market, you've got their agriculture and their energy dependency, you've got the fact that from a manufacturing point of view they're no longer the low-cost producer and they didn't become the high-cost producer, so they're just waiting for somebody to take their lunch. There's any number of things that go wrong, but underlining all of it is this absolute demographic collapse. They're now starting to lay off teachers in the hundreds of thousands. Because there are no more students. So they know that the workforce they have right now is the youngest it will ever be, the most skilled it will ever be, and the largest it will ever be. And they no longer have enough people under age 40 to ever even attempt to have a consumption-led system. So they've become completely dependent upon exports. At the same time, the rest of the world has wisened up to not want their exports.

So—

It's now a contest about whether we have an economic collapse because the model fails, a demographic collapse that takes everything with it, or political collapse because Xi has gutted the entire system of talent. Those are 3 very bad things, any one of which is a country killer. All 3? Yeah, there's, there's no way that China survives the next 10 years.

Which is something you've been saying for years. And now we're just seeing it come to, I guess, realization. Right now, I mean, we're speaking right now in February of 2024, and we're starting to see major disruptions and shifts and actually the outcomes of what you've talked about for years. So, I'm curious, and I talked about before, a lot of predictions, and it's a hard job to predict the future is what you're trying to do every day. But I would say you've done a pretty— you're not 100% off. No one's 100%, but you've done an incredible job at looking at different trends. And I'm actually just curious, before we dive deeper into China and other things, walk me through Your framework of how you go about, and maybe some of you can talk about some of these previous, you can call them predictions or probabilities that you run. Walk me through a framework that you run. Maybe China could be the example, how you draw these conclusions, and now we're seeing them play out in real time. But walk me through that framework.

Sure. There's 3 big things we look at whenever we look at a new country or a new economic sector or a new company. We look at what the possibility is for physical safety without having to have a partner on the outside. So, do you have good external borders? Do you border an ocean that allows you to project out? Or are you hemmed in by geographic barriers that also allow others to access your territory? And China kind of gets a solid D in that category. It's really difficult for the Chinese to protect themselves. Most of the Chinese population is in the northern China Plain or on the coast. And it's a very exposed zone with not a lot of good ports. And so foreign powers throughout history have always been able to punch in. Second is the demographic structure. Do you have enough young people to generate your next generation? Do you have enough older workers who can pass on skills and who generate capital? Well, China now has had a birth rate that has been lower than the United States' likely for 25 to 30 years already, and they're simply running out of people. So they do have some of those older workers, but the Chinese government refused to educate them in the way that it would allow innovation. And so you basically have low-skilled labor that costs a lot. Labor costs have gone up by a factor of 15 in China in the last 25 years. They're no longer cost competitive in anything. And then third is the degree to which your economy is either self-sufficient or dependent upon other powers that you cannot influence. And this is the world— I'm sorry, this is the country that is the world's largest energy importer and is the largest importer of food and is the largest importer of the materials that allows it to grow its own food. So not only are we facing a series of economic pressures where it's dependent upon the American consumer and the American political system, If it doesn't work out, this is a country that starves in the dark, and we're probably going to see all of that go down in the next several years.

Yeah, that's interesting that you've— well, and it's— I love what you say in your books too. You're like, it doesn't matter who the— I mean, it does, but who the president is or who's in current control, just when you look at demographics and look at the positioning of this country in the world, these are the likely outcomes of this country. I think you— I would give you the credit for popularizing the The— I don't know, it felt like about 2, 3 years ago, a lot of groups started talking. Elon Musk started talking about reproductive rates and how we're having this collapse in reproductive rates. I would give you credit for pushing that out as a world. Everyone, oh crap, we need more babies. China especially, because it's funny to say that China doesn't have enough people. It's just a funny thing to say. But when you look at the breakdown with the pyramids, it's very interesting.

A couple things to keep in mind. Best guess now by the Chinese Academy of Sciences, which are the people who interpret government statistics, is that they've overcounted their population by more than 100 million people. And that's no longer the low-case estimate. Some Chinese demographers are now saying the number is probably more than 250 million. So this concept of this giant monolith of China probably was never correct in the first place. I don't mean to suggest that it's a small place, but we have never seen this pace of aging in history. And if they were generating bad data on what the headline was in the first place, we all need to adjust our expectations down.

So, what is that, you know, bringing us back to now with China specifically? So, I was with a few multi-billion-dollar fund managers last weekend talking all about this. They were all mentioning they believe bailouts are coming from the Chinese government, but it seems like China has already bailed out their economy for years. They've done this, the Belt and Road Initiative. They've built these empty cities is what we've heard. And They've spurred on a lot of their GDP has come from government, a communist government party. To what end can they take this? Is a bailout the path forward for the Chinese government? What do you think is the path forward for in the near future?

Well, never think of it as the Chinese government because there's only one decision maker left. It's just Xi. He has purged the system so thoroughly that there's no one else who's either competent or willing to put forward a solution. It has to come from him. So you have to look at his understanding of the crisis, and from his point of view, anything that's based in consumption is flawed anyway. He's— I don't want to say he's an old-style social communist, because that's not quite right. He's an old-style feudal fascist. And so the concept that the population has a role to play here at all is kind of a stretch. And when you have a system like China's where they print currency like mad, basically everything that the Bitcoiners say that the U.S. Fed Reserve is like guilty of, China's actually done to a factor of four or five more in terms of absolute volumes, much less relative volumes. If you're in that situation, people don't have a store of value to put their money in, so they put it in real estate. So probably seventy percent of private savings is in real estate and. Why would somebody who's a feudal fascist decide to bail that out? These were people who were trying to escape the government. If anything, he sees that system crashing as people getting their just desserts.

Yeah, interesting. That one, I have a few topics I want to hit on. First, let's talk about Xi. I've loved your videos talking about the Chinese spy balloons that have come across the United States and how much data we collected on and the understanding it gave us of Xi. And how he really is in this silent box. He has no advisors around. Do you want to give us a quick summary of that? And then we can, we can talk further. I want my listeners to hear that analysis of the Chinese spy balloon. I thought it was so interesting.

Oh, when the balloon crossed in from Canada and started to go over the missile silos, the president got a briefing from folks in the Defense Department and the CIA basically explaining that this was not a threat. The hatches over the missile silos were closed. So the Chinese would get photos of close hatches from 7 miles away. No big deal. However, by allowing it to continue on its merry way, every spy platform and whisper sensor we had pointed at this thing for 9 days. And so we got copies of their entire cryptography and we were able to trace back through the civilian and the military networks how these things were being controlled and what office, what terminal was ultimately controlling them. Then we hacked the tar out of that. So in the end, it was the intelligence breakthrough of the decade, because we got copies of everything and we ripped up their system from the inside out. And we now know that Xi wasn't even aware of the balloon at all until it was shot down on the other side. It gives you an idea of the complete breakdown in decision-making and information flow that we now have within the Chinese system. And this is happening in every economic sector with all the regulatory systems. And, you know, anyone who wants to talk about a bailout, Xi has established himself as the sole decision-maker. But he's also destroyed all avenues of information transmission because he has to be the only decision maker and he punishes people who don't bring him information that he wants to hear. So nobody wants to bring him anything because they don't know what he wants to hear.

Yeah. Which is a— so when you're investing, if you're someone that's going to invest in China, are you just hoping and wishing that Xi has his graceful eye on your sector or your industry? How do you make bets based off of someone that's really flying by their own will and consciousness? Any thoughts there?

I'm not going to tell people how to invest. That's not my world. I will point out that you have to think of China today as basically gambling when you know that the casino is on the way out the door and it's going out of business. And if you want to short sell that, keep in mind that for a short sale to work, somebody has to take the other side and the market itself has to survive. If you look back throughout history, in the world before 1950, most markets went to zero, and a short sell just meant you lost everything. So just keep that in mind. This is not a normal Western-style market at all.

Yeah, it's a good take. Is it? Yeah, there's got to be someone on the other side of that short to pay it out, um, buy back that trade. That's interesting. Um, dovetailing this, a little bit different section, I want to talk about energy. I know you have a lot of takes on energy. China, I don't know the exact number, you probably know, building a lot of nuclear plants right now. Uranium is a hot topic, interesting commodity that a lot of people are trading, talking to me about. What's your take on uranium? And I'll just say this, the future of energy around the world. Any takes from you where you think things are moving with energy?

That's a lot. Okay, let's start with the nuke question. The problem with trading uranium is a lot of times it's a national security issue for countries. So getting ahold of it in any sort of liquid form financially is tricky. I'm not suggesting it's impossible. I'm just saying that there's always going to be that layer of complication that restricts the trading value— sorry, restricts the trading volume. And there's always the fact that a government might just come in and confiscate it. So you just have to— it's one of the reasons it really can't be done in the United States in the traditional sense.

Well, there's a few ETFs or other exchanges that allow you to kind of pontificate on the price.

Exactly. There are indirect routes, but indirect routes in a world where the rules themselves are starting to crack open, you're braver than I am. Let me just put it that way. In the case of China, uranium is plentiful enough, and with Kazakhstan being the single largest exporter, the Chinese feel that that is one of their more secure options for energy, and they're probably right about that. The technology for a light-water reactor is decades old. There's no reason to think that the Chinese aren't going to be able to build that at whatever scale they choose to. And they've had a nuclear program since the '70s. So while there are obviously concerns for the weapon systems that goes along with that, the Chinese have had that since the '70s as well. So there's no new road to plow here. And if I'm— that was a horrible mixed metaphor. There's no new road that requires paving for this. To a lesser degree, the Japanese are getting back in on it. The Koreans think it's fine. The Russians never went anywhere. The French are discovering that the solar and wind doesn't really work in a cloudy, windy, or in a cloudy, still country. And so they're getting back into it. Nuclear is definitely part of the future if you have public support and government support for it, which in many countries is the case. For—

you're seeing, you're seeing winds shifting that way to nuclear.

In the places where politics will allow. Yeah, it's— I mean, if you want to have a natural gas burning power plant, you have to have natural gas flowing in every single If you want to have a 1-gigawatt nuclear power plant, you just need to get a few hundred pounds of partially enriched uranium once per year. One of these can be supplied by a plane once, and the other one requires a dedicated infrastructure system that stretches hundreds, if not thousands, of miles. I understand why people like nuclear. In terms of the overall picture, wind is great where it's windy, if it's close to a population center. Solar is great where it's sunny, if it's close to a population center. The problem is there are very few places that have dense population footprints that meet those criteria. So you've got the West Texas zone where wind and solar is both great. You've got Southern California where solar looks pretty good. You've got the Phoenix area where they've got both. And that's the best spots in the world. After that, it falls off pretty quick. And if you put up Solar panels in Vermont, which is apparently— oh God, the new data suggests that Vermont is like one of the 5 densest concentrations for solar panels in the world. That's batshit crazy. I mean, you're never going to pay down the carbon debt that it took to generate the panels in the first place. Oh God, people can— the fetishization of solar just annoys me. People don't do that with wind. People realize that if it's not windy, you don't put up a turbine. There aren't a lot of places in the world where this works. Chile, Argentina, Morocco, Greece, ironically, Britain for wind, Australia, and that's about it. Anywhere else, it's not nearly as much of a slam dunk. But the even bigger problem, if you remove the carbon issue, if you remove the efficiency issue, the problem is sourcing the The materials. You've got 2 issues here. Number one, something like 75% of the photovoltaic quality polysilicon comes from western China where it's made with soft coal and slave labor. And so, you know, there's some issues there even if China survives. And second, the materials that go into green tech require an order of magnitude more copper And nickel and lithium and graphite and on and on and on and on more than what a conventional system does. It requires globalization. It requires global access to everything at all times. And that's not the case now, much less the case what it's going to be as globalization breaks down. So one way or another, we're either going to be stuck with fossil fuels for a few more decades. Or the United States has to go and conquer a lot of places so all of those materials flow here so that we can do it. No one else would be able to. There's not enough, but we would be able to. These aren't good options.

Yeah. Do you see the United States— in your book, you talk about how much natural resource energy we have in North America. We've now become an exporter of energy again with oil and gas. Do you foresee the United States drilling and pumping more oil as before this, I guess, revolution and moving to— let's call it a few decades— moving to alternative energy sources and juicing that up? What's your take on the United States and/or North America with oil and gas?

Let me preface by saying that if you change the technological suite that's available to us, I reserve the right to change my mind. So, for example, if we can figure out room temperature Superconducting materials, or if we can figure out a much better battery chemistry than lithium, I reserve the right to change my mind. But at the moment, it looks like with global trade breaking down, the very capacity of the green transition to function isn't going to happen, even if we had the materials, and we don't have the materials. So we're pretty close to the peak right now of what can be applied on a broad scale, and what we're going to be seeing in the future is a concentration of what Right. ...little materials we have in the places where you get the biggest bang for your buck. Now, in the United States, luckily, the Great Plains is great for that. Luckily, the Southwest is great for that. So we're going to continue with parts of the green transition. But beyond that, your choice is to either use internationally traded oil and natural gas— and this is going to piss off some people— those are the low-carbon internationally traded fuels. And if you lose access to those for whatever reason and you have to go with something more local, you're typically left with soft brown coal, lignite, or wood. So I not simply— I don't simply see the green transition coming to a screeching halt in most places. I see a significant regression in terms of carbon intensity.

So back to the oil and gas question in the United States. Do you—

This is a place where you can produce at scale and it's relatively clean and compared to the production elsewhere in the world. Right now, natural gas specifically is 40 to 45% of our total load. Natural gas is a perfect complement for solar and wind. It cancels out the intermittency. As for the oil, until we find a better battery chemistry, gasoline, diesel, and jet fuel is what we're stuck with.

I guess we'll— again, with our current, you know, product set, everyone's hoping for these new— something which maybe we'll get there. I have a few friends working on PhD programs and stuff. Everyone's trying to crack to make more efficient batteries, more efficient energy. I mean, it's a trillion-dollar market if you can crack it.

Absolutely. And if we get a better battery, then this conversation changes quite a bit. But if I was a betting man, I would guess that the future of lithium isn't for EVs, it's for grid storage. Because that is something it can do now. Because it's big, it's bulky, it heats up and swells. You don't want that in a vehicle if you don't have to have it in a vehicle. And that means you don't have to spend massive amounts of subsidies in order to build an electrification program for a battery chemistry that you're hoping is transitory anyway. You'd focus on where you can get the biggest bang for your buck, and that's going to be putting grid storage everywhere in order to kind of smooth out the surge demand period that we have every single day. You do that, you can reduce carbon emissions by 10% for a lot lower price.

Totally different topic. What's it like going to a dinner party with you, Peter? If we went to a party, is it like, do you sit there and people talk about politics and the border and energy and you just keep kind of keep quiet? Or do you like throw up data on people? I've had this problem because I study certain topics and I, you know what I mean? I'm curious what it's like. How do you handle that social dynamic?

If they don't know who I am, I have a nice meal. If they do know who I am, I don't get to eat anything and I leave the party fairly drunk. Gotcha.

So it depends what crowd you're with, but you'll keep quiet. Usually just keep it to yourself if they don't know who you are.

Yeah, it tends to ruin the mood when I shoot everybody's putt theories down if they're not expecting it.

I could imagine that. I could see that happening. So you've learned over time, just, hey, let's just keep it cool unless people are really asking for my opinion.

Yeah. Let's talk about mountain climbing. Okay. So, different.

Let's shift over to politics. We have about half the world's population having an election this year. A lot of people talking about this is the great year of elections, 2024. Obviously, US elections heating up, a lot of different topics there. But let's just talk macro for a second. I mean, you have India, UK, Taiwan, Spain. You can go across the board. It's a massive amount of people having elections this year. How does that play out on a macro scale for this year? And then we can maybe get down to certain countries, but what's your macro take?

Believe it or not, the variety of policy options among internal political systems isn't nearly as wide as most people seem to consider. Take our own elections for that point of view. Biden and Trump, from an international economic point of view, are the 2 most similar presidents we've ever had. They're both strongly nativist. They're both strongly protectionist and nationalist. They obviously have their differences, but none of it really matters if you're from the rest of the world and you're trying to figure out what trade policy is or what your economic wherewithal will be. Beyond that, there are very few elections in play where I don't— what's the best way to phrase this? Most powers, in my opinion, have the election in the bag and we know how they're going to go. In the case of India, obviously Modi is going to be reelected. The question is if he gets a wide enough majority that there's anyone left in the Indian Congress except for his party. And in the case of the United States, Biden's going to win in a landslide. The question is how long are the coattails? There are exceptions, but you have to go pretty far down that list to get to them.

Sorry, cut out the end there. You said you believe Biden's going to win in a landslide in the United States?

Yeah. The only way that Trump wins is if Biden dies 2 months or less from the election date.

Well, and last week we saw that DOJ come out saying he's incompetent, can't stand trial because of his mental state. And a lot of people talk about the 25th Amendment. I mean, we're— I guess we're speculating at this point. Do you think Biden's going to be the candidate for November?

Unless he dies.

Unless he dies. You think he'll be the guy still?

Yeah. And if he's going to die to the point that we— this is morbid— for it to not be Biden or Harris. He would have to die before primary season ends. So if we get to the point of the convention in June, I want to say it is, and then he dies after, then Harris is obviously the candidate.

So you don't see a path for Newsom or they've had other people speculating, Michelle Obama or other—

Newsom and Obama, Michelle Obama have never once publicly expressed any interest in the I realize lots and lots of people think they'd be a good candidate. Maybe that's right, but they don't seem to think so.

So, from an international lens, you believe most elections, we know the outcomes, what will happen. United States as well. How does that play? Do you think that affects markets much? A lot of financial institutions will say typically incumbents will juice markets or try to help economic markets increase. They'll do quantitative easing. They'll do Debt forgiveness, whatever it is, we can just pay the people to vote for us. Do you see a lot of that happening this year, or is it so baked in, in your opinion, that it's not that big of a deal?

And again, it depends upon how independent the monetary authorities are. So, in the United States, doing monetary easing is not something that the president can do. So, not really here. There are other things the president can do, move some money around. But the Biden administration is limited to what the budget does. And there's not a lot of flexibility for From that point of view, India is the opposite. Uh, and so absolutely the Indian government is sending out scads of fresh currency, uh, and it's, it's working. Um, but I would argue that they were already facing a massive victory even before they started doing that.

Yeah, interesting. I know it'll be very, uh, interesting 2024, I think, with just all this.

Oh, it's gonna be loud and noisy and interesting. I'm just saying that there's not a lot of wiggle room for a different outcome.

What makes you so certain about Biden? I'm sure people are gonna ask me about in the comments before. What makes you so certain about Biden over Trump or RFK or a third-party candidate for this year?

Well, let's deal with the side stuff first, then get to the nut of the issue. So number one, my assumption or my forecast assumes 2 things. Number one, Biden doesn't die. And number two, Trump doesn't go to prison. Because obviously, if one of those 2 things happens, the math changes pretty significantly. And RFK, Crazy people are going to vote for RFK, and most of the crazy people who are voters right now are MAGA supporters. So it would actually bleed support off of Trump rather than off of Biden. So that just kind of entrenches it. I mean, that guy is a complete nutcase. Anyway, 2 big things. First, the Republican alliance is not what it used to be. One of the reasons why the Republicans have always done well at the national level is that they've got a very tight coalition. And the factions within their coalition don't fight. So the business community doesn't care about social issues. The social activists don't care about military policy. The military voters don't care about the budget. Everyone has an issue that they really care about, doesn't clash with any of the other groups, and they all show up to vote. It's very reliable. Whereas the Democrats are very la-di-da. You've got your coastal urban elites. You've got your minorities. You've got organized labor. Fight among themselves all the time. They may have more voters, but whenever an issue comes up, a real issue, not just charisma, then the factions start fighting and some of them just won't show up to vote. So the Republicans tend to win. What Donald Trump has done is he's broken up that alliance and he set them off against each other. He ejected the business community from Congress and he encouraged fights among the social conservatives and other factions. You remember the whole Tuberville disaster when Tommy Tuberville started the abortion fight by blocking everything the military could do. You took 2 factions who had been tightly allied and had never argued about everything, and now they won't even talk to one another. So you're never going to get all the Republicans to show up now. And since they have fewer numbers, they're automatically going to lose to the Democrats. So that's kind of Point one. Point 2, everyone seems to have forgotten what happened in the midterms. It's like it was supposed to be a red wave.

Yeah, the red wave, and that didn't happen. Yeah, it totally went opposite. Yeah.

We've only not had the opposition party dominate congressional elections twice in the history of the country. Once was right after the Civil War. Uh, what happened was Donald Trump told independent voters, That, you know, the general election doesn't matter. The primaries are the only thing that matters. And the independents were like, hold my beer, because that's the only place that it matters if you're an independent. So they showed up to vote in many races 4 to 1 against the Republicans. They— the Republicans have never won a national election unless they've carried the independents 2 to 1. So you're talking about, for Trump to win, just a whole cloth change of opinion on the independents. And I don't think that's in the cards. So I think what we're going to see is Trump may be capturing 10 to 12 states, none of them big, not counting Texas, and leading the Republicans into the 2nd or 3rd worst electoral outcome in American history. And that is going to force a rationalization of the party in some way.

You— and you think that even with Biden's So even with Biden's record low approval rates and Harris's low approval rates, if it was a Biden-Trump campaign, you still think they would, they would be that big of a tidal wave?

Right. Now, if you bring in a real candidate from either side to replace one of the people who's running, different math. Yeah. So if Haley comes in, she wipes the floor with Biden. If someone like Newsom were to come in, he would wipe the floor with Trump. But the 2 candidates, Trump and Biden, absolutely dominate the primary process. So, that's not going to happen unless, you know, they die or go to prison.

Well, good take. I love it. Well, I guess we'll see. We'll talk in November. We'll follow up and see how it goes. I love it. Okay, different, totally different question. So, I'm bouncing around. I'm curious, I've never heard you speak of this before and I've listened to a lot of your stuff, maybe you have. Walk me through your decision, you, to come and be like a public person, a public figure, to write books, to go on stage. Like, and I'll just tell you, my For me, I do a decent amount of social media and it's a step. You know, when you start making videos and posting and like being online, it's almost like this internal step that you have to decide like you're going to be a public kind of person. Walk me through that for you because it's a lot easier just to stay at home, write things anonymously, you know, consult for a firm, make good money, but to be in the public space where you're criticized, you get negative comments, you get hate.

Yeah.

Walk me through that, how you've worked through that psychologically and why even do it in the first place.

It's actually a pretty short story. At my old company, I was the only generalist. So I was always drawing connections among the different regions, the different economic sectors. And that meant that I was always the natural person to put in front of clients because if they had questions, I could draw upon my expansive background and draw connections that would be relevant to them. If they asked me— if they'd asked, like, say, a Europe analyst anything, all the answers would have been very Europe-centric, and there would have been no connection to energy or economics or trade, or very few. And so when I realized that that was kind of my special sauce, I also realized that that meant that interaction was the key factor. Because otherwise, if you're not asking me the questions, I don't know what to expound upon, because everyone is coming at it from from a different point of view with different interests and different timeframes and different geographies. So that put me on stage regularly, and from there, it was a pretty natural step to doing things like the YouTube channel.

So for you, it's just a natural progression to be online. There wasn't like a moment where you just said, I'm going to go try it. I'm going to write these books. I'm going to go out. It was just a natural progression of what you were already doing?

Well, I also got an agent once I went independent, and it became very clear from conversations with the agents and the speakers bureaus that if you did not have a book, there weren't a lot of people who were going to be interested in booking you unless they knew you already. So in many ways, Accidental Superpower was just intended to be a very, very large, hefty business card.

And then it turned out to be a—

You know, it did pretty well. Yeah.

I don't know, bestseller, whatever, all the titles around it, but that's pretty cool. Okay, that's awesome.

All right.

Sorry, I keep bouncing around, but I've got this. It's just, it's just so fun for me to talk with you. Different, totally different topic question. I want your thoughts around maritime shipping and global shipping centers. So during COVID we had the Suez Canal that got blocked. There was all these ships off of LA and they weren't coming into port. And there's all these political reasons and everything else. It seems to me they've solved a lot of those problems. And I'd love to hear your take on what's happened. And then right now, we're seeing a lot of stuff happening in the Middle East that has blocked shipping routes and trades. There's different legislation happening with carbon centers where they don't want ships producing so much CO2 gas and all this kind of stuff to affect maritime global shipping. I'm curious your thoughts on just shipping right now and what's happening. So, give us— sorry, I'm going to phrase it up. Give us what's happened. And then, if you can, give us what you think will happen in the future.

Okay. So, the issues that have happened before last year, most of those were incidental and did not pose any sort of Meaningful danger to the industry. So, for example, the Ever Given issue in the Suez Canal, that was just bad luck. And as soon as they got the thing moved, everybody was good and they went back to business as normal. What was going on in California was some very, very, very, very, very stupid regulations that prevented you from stacking more than 2 semi or container units on top of one another, even though the global normal is 5 to 6. And so there was just no place to put anything. And since during COVID we all shifted from consuming services to goods, there were a lot more containers. So California adjusted a few things, our consumption levels changed back to pre-COVID levels, the 2 things equaled out. So none of those were accidental— existential threats. What we're seeing now is starting to edge into the serious danger zone. So 2 things. Number one, insurance. Uh, we now have roughly 1/5 of the global tanker fleet that is called a ghost fleet. They don't report to anyone. They sail without the transponders, and they're involved in sanctions evasion in some way, primarily but not exclusively transporting Russian crude. What that means is—

1/5?

1/5.

1/5 don't— aren't like— are untracked?

Untracked.

Really? Oh my gosh, I did not know that.

So What that means is—

And they operate for primarily Russia?

Primarily, not exclusively.

Huh. Wow. Okay.

So what that means is it's no longer in the known system. It's no longer being monitored. It's no longer being insured in a way that we would consider to be proper. What that does is takes this huge question mark, this huge amount of risk around the Ukraine war, and moves it over here and puts a blanket over it. We have no idea what's going on over there. And if something goes down where one of those ships gets into trouble and it becomes Yeah. And then when it becomes apparent that the insurance policy that it has isn't worth anything, then the whole ghost fleet goes up all at the same time. And now you're talking about 20% of global shipping capacity for liquids. You know, that's a big deal. So that's kind of piece 1. Piece 2 is the US Navy is not shaped the way it was back in the '80s. Back in the '80s, we had a huge number of small and medium-sized ships, a lot of destroyers, for example. That could literally patrol the entire ocean. But when the Cold War ended and we declared that the world was safe, we changed the way our Navy works. So instead of a lot of smaller ships, we went with a small number of very large vessels, the supercarriers. We now have, I think, 12, about to have 13 of those. But all of those smaller ships have basically been either decommissioned or assigned to be rings of defensive perimeter around the carriers. So, what we've seen in the Red Sea is that Houthis, who are arguably the least competent terrorists in the world, occupying some of the most worthless territory in the world, can really give the US Navy a run for its money when it comes to protecting mercantile shipping. And if we had something like that happening anywhere else in the world right now, I don't think we could do both of them. And no other country has the capacity. So, we're like— This close to people realizing that civilian shipping on the water is no longer safe because of a bunch of desert rats. So once that becomes apparent, any shipping that operates on a low margin simply stops. And that's every single manufacturing supply chain step.

With the, you know, 12 to 13 supercarriers positioned around the globe, I've— since you put that in your book, I've been enthralled with, you know, supercarriers. I follow them. I look at the Ford-class carriers that they've They've parked one right now off of Israel, 3rd largest air force. If one of those parts off—

The Navy is thrilled with that because they know that that is not the right tool for the job, but it gives them a chance to actually prepare their troops, which is something that is always good. It's always good to have warm training rather than cold training.

Yeah. Well, on that note, actually last night, it looks like they passed another $95 billion for Ukraine and Israel defense measures. What's your take? I'm curious on spending with Ukraine. You know, the current consensus, you see Mitt Romney, a bunch of other senators saying we got to stop Putin. He's going to continue to progress through Europe. If we don't stop him here, he'll be in Germany, he'll be in Poland, he'll be across the world. What's your take on, on that in regards to U.S. military spending and defense?

Sure. So the Russian program is very, very clear, has been for 400 years. 100 years until they get to Warsaw or the Danube. They don't stop. And we now know that they're not nearly as militarily capable as we thought they were. So if they win in Ukraine and they come for Poland, Romania, and the rest, their conventional forces will be obliterated. But for them, it's an issue of strategic survival. Right now, their external borders are about 5,000 miles long, and their population and army is less than half the size of the Soviet system. That's bad. But if they can get back to something closer to their old Soviet borders, natural geographic barriers reduce that 5,000 miles to under 500 miles. That they can do. But that means they need Warsaw. And that means if they can't win it conventionally, they will use nukes. So it's a very, very easy calculus if you're willing to actually look at a map in history and listen to what the Russians are actually saying and watch what they're actually doing. So I'm definitely with I agree with Mitt Romney on that one. As to the cost, because the Russian system has proven not nearly as capable as we had feared, this has been really, really cheap for the United States so far. Somewhere between 70% and 80% of the aid we've sent has been decommissioned equipment that we were going to either have to hand off to an ally or destroy ourselves. So from a financial point of view, the Ukrainians and the Russians are doing us a solid here. The two exceptions to that 70 to 80% ammo, especially artillery shells, and then there is development funding that helps plug holes in their budget because the Russians have taken over pieces of specific infrastructure that, for example, prevent the entire steel belt of Ukraine from having electricity, which obviously hits their bottom line and prevents them from having from helping themselves. So there is an economic argument. to be made here, but it's about 1/10 what the detractors are saying.

So, you're obviously very pro. This is a very cheap expense.

Oh my God. This is the cheapest way you could ever get rid of someone who would nuke you if they had the chance.

On that, I guess, same note but with China, you mentioned this briefly, but the idea that one theory is obviously inflation's been in the United States. We had to raise interest rates. Which I know is the story that's told, but as a byproduct, or maybe the actual reason was to squeeze China very economically. I think you've talked about economic wars often precede physical wars. And so, we've seen this economic war with China and interest rates as a byproduct squeezing the Chinese economy pretty drastically and the Russian economy. And you could say that arguably the rest of the world with the US spiking interest rates at such fast rates. Do you think this is a coordinated plan, or do you think it's just a byproduct?

I think it's a byproduct. I think it's incidental. It is not particularly common to ever have the American executive and the American Fed coordinate policy. And if they do, it's generally— in fact, I can't think of a single exemption to this— it's for domestic economic issues. So, for example, not Bernanke, Greenspan. Greenspan and Bill Clinton famously had a conversation in their first year working together when Bill Clinton said, what do you— what will I need to do so that you keep rates low and growth high? And he said, get debt under control. The end. That was the conversation. Now, that had consequences beyond the United States, but that was not part of the consideration because that's not the Fed's remit. Now, in the case of what's going on right now, I don't mean to suggest that sharply raising the cost of capital in the United States doesn't have an impact internationally. But when you look at a place like Russia that is under financial sanctions, it really doesn't matter what the cost of capital is in the United States or Europe or Japan because they're not putting their money into Russia anyway. And then China has arguably the most sequestered financial sector on the planet. So again, what happens in the United States has only a limited impact on anything happening in China. Or at least Indirect. Let me use the word indirect because higher cost of capital here will slow growth, will slow consumption. That is not great for China. But you want to talk about doing it the hard way, that would be it.

Do you see China economically squeezed doing something out of their norm, attacking— maybe it's on the Western Front or maybe Eastern Front with Taiwan. Do you see them going to war because they've been so economically squeezed? Do you see them over the next decade saying, well, we got no other choice, kind of like Japan during World War II, we need to go and conquer other nations around us? Do you maybe see that playing out?

Let me hit the core of that argument and then ask a different question. So if economic squeezing means you're going to act militarily, it would suggest that there's some military action that you could take that could address your problem. In the case of Japan in World War II, the United States was actively constricting Japan's ability to source any energy. And so if Japan could have launched military activity, gotten the U.S. military out of the region, and occupied what were then the Dutch East Indies, today's Indonesia, they could have solved their oil problem. And that ultimately was their war plan. China is the world's largest importer of almost every raw commodity, and it is the world's largest exporter of manufactured goods, which have to go to consuming nations. There is no war plan that China could launch that would secure either of those things. So the day that China decides that a military solution is its only option is the day that China ceases to function as an industrialized modern nation-state. And if you had asked me 5 years ago, I would say that They knew that, and that's why war was not a serious concern. Even a war for Taiwan was not a serious concern. But in the last five years, Xi has done nothing but guzzle propaganda, and I don't know if he's thinking that way because we're not looking at a normal nation state or a normal military and strategic and economic decision making here. We're talking about one guy who has locked himself into a dark room, and his decision making process, the information.

On the same front, I love to study, and that's why I love listening to you, is things like this and people that are smarter than me. And I love to dive into this stuff. And what I found over the years is there's been many things that have been manipulated or misstated. JP Morgan manipulated the gold market for about— the silver precious metals markets for about 7 to 8 years. They refined $980 million in 2021. That's a good question. Barclays Bank manipulated the LIBOR rate. China overstated their, like you mentioned earlier, overstated their population growth. So, obviously, we have things in the past that were maybe overstated or manipulated. I'm curious if you believe it's almost the unknowns of the unknowns. What are things that I wish we knew or maybe you're skeptical of right now of data that you're looking at and go, that just doesn't add up. I know they're saying it one way, but it just doesn't add up another way. I'm curious if you have anything like that you're following right now.

Well, the big red-letter issue for me is the Chinese population. Every time we get some sort of independent evaluation or even a government reissuing of data, it's a quantum leap down. And the big drop in the birth rates from 2017, we only got that data in July. So, I mean, that wiped out 80 million people right off the bat. To know how bad the situation is unless you do a full census, and China's last full census was done during COVID and nobody's COVID data is any good. So I mean, that's that's the big hole in the system. I mean, I know, I know. I'm certain if the data is correct, they have less than ten years. If the data is still overinflated, they could have a lot less than that.

So China's that big hole right now, and it's interesting seeing data from China because it's you always take it with a grain of salt of. I'm guessing they're overstating something here, right? And so, that's what you're saying. That's the base case. What could be worse, right?

Exactly. And with demographics, there's a growing understanding that unless they actually know what the size of the problem is, they can't even begin to craft solutions, especially when it's just one dude at the top. But they're kind of at a loss as to how to do it. And I don't blame them.

I've got a few last questions. But before I get to that, I've already mentioned your books and other stuff, but I want to just give another reference to you if people have not heard of you before. Accidental Superpower, Disunited Nations, End of World Is Just the Beginning— incredible books. You can flash them on the screen there. Peter, what's the best way, or maybe what would you say the best book to start with if someone wants to follow you? What's the best place to go?

Well, if you want to start with it and see where it all began and be able to judge me fiercely, this is the one you want. So Accidental Superpower came out 10 years ago, and back in around Christmas, we issued the 10-year anniversary version, which has about another 15,000 words of text where I dissect what I got wrong, what I got right, and why, and do a general update.

Wow, that's awesome. I love it. That's the book that turned me on to— turned me on to you. That's the right— that's the right phrase, right? Turn me on to you. The— but I— that's great. So Accidental Superpower. It's everywhere you can find it. It's an amazing book. And then you do pretty much a daily video on your YouTube channel as well. People would just, for whatever reason, don't have time for the full book. They want a little snippet. Peter's amazing there. And then we'll have Peter at Funnel Launch Live as well in April. So, grab tickets, funnellaunchlive.com. All right, Peter. I got just a couple, I guess. Well, I'd love to just summarize with one question. I love to ask all my people on my show this question. So, the question is this. When I read historical documents, some of my favorite things I like to read Are people's last word or last testimony. If you read religion or scripture, people's dying testimony or dying words is usually amazing. I'm curious if this was your last interview, this is the last time you got to speak to an audience, and you can talk about religion, politics, spiritual things, whatever you want. I'll leave you open mic. What would be the most important thing, something that you wish the world remembered you by and that you would feel great to pass on to the rest of the world?

Time. It's the second half of this title. The end of the world is just the beginning. We're going through a phase of history. One chapter is ending; a new one is starting. So in the next few years, it's going to seem nuts, and a lot of things that we're used to—China, for example—just aren't going to be there much longer. But this isn't the end of everything. This is the start of something new.

I love that message. Yeah, that's great. It's the. This kind of new world. Do you, uh, have you read the book or followed the book The Fourth Turning or heard of that concept?

I'm familiar with it, yes.

So, for people that don't know, The Fourth Turning was a book came out in 1995, talks about 4 turnings or 4 generations, 80-year cycles. So, we had 1776 to the Civil War was 80 years. We then had 80 years from 1776 to World War II. And now, we're approaching 80 years from World War II. You go through these 4 generations. We are currently in, they would say, the Fourth Turning. where there's usually major world conflict, an end of the world, and then maybe a new beginning with the first generation after that. I'm curious your take on maybe that concept or that timeline. Do you like it? Do you not like it? Where do you fall on that?

I'm in the heavy-ish camp. The first 80 years of that was pre-industrial. The second 80 years was early industrial. The next 80 years, was globalization. And now we get into deglobalization and deindustrialization. So I see them more as organizational and technical acumen periods rather than something that's 2.5 generations.

So, okay, gotcha. So kind of in the middle, in the middle on that.

Yeah. It's like, I think it was a near miss.

Yeah. That's a pretty interesting concept from those guys.

And I think you've taken that to the next But to be written back in '85 and predicting that that 80-year period would hit in the late 2020s, you got to give that a good look.

No, they hit some good things in those books as well. Well, Peter, it's been phenomenal having you on. Go again, Accidental Superpower. I would recommend as well, great place to start. Come see Peter at Funnel Launch Live in person. I know you've been probably busy as ever. You were on Rogan's podcast twice now, and I think everyone's Trying to get you on their show or whatever. I was just on Rogan the one time. Oh, just one?

Yeah. Although, you know, tell him I'll be back if you want to bring me on.

Yeah, I'll put a good word in with Joe. Wild interview. What's it like being in there? Is it pretty wild?

It is. He is a great interviewer with a broad reach in terms of his topics. So, I mean, I thoroughly enjoyed myself. I wish I had had more time that day.

Oh, that's awesome. That's great. Well, go watch that interview. Peter, thanks for coming on today. You're amazing. Go get the book and we'll see you guys all next time. All right, Peter. Thank you.