so that's globalization globalization let's say that it does uh start to slow down what are the knock-on effects of that oh dear god okay uh so i just wrote this book uh the book split into six big chapters based on the various economic sectors so transport finance energy industrial commodities agriculture manufacturing uh everything that we understand about all six is dependent upon the idea of global security and so you remove the global security and all six of them have to unwind and reform in different ways so really it's kind of pick your poison with transport long haul goes out the window that's an end to among other things super tankers so if you are getting your oil from 3 000 or more miles away you're out of luck ships are going to have to be smaller and go faster because the concentrated risk that a giant container vessel has you lose one of those and the shipping company goes away if you're doing smaller tankers or smaller ships that are going faster they can't carry as much you just lost most intermediate goods trade that's an end to electronics manufacturing in its current form so you can play this on really any topic that you want but the structures that have all held it together and made it work are dependent upon the ceiling not falling and it's falling it seems to me like the current way that the world set up has got most people myself included to believe that everyone's just a bit nicer now than we were for most of human history do you understand what i mean i totally do uh how would you say it's global policing masquerading as virtuous human nature we established penalties for people who didn't play and because the americans started with europe which was the headquarters of most of the empires it's stuck uh the only non-european empire that mattered at the time was the soviet union which was the target of all this and japan which was subjugated so everyone who in the past had been a bad actor if you want to use that very loaded term all of a sudden was on the same side everyone who had ever had a projection-based military throughout human history was in the same coalition it worked for a while you've said that energy is one of the sub-components of globalization presumably because in order to get the energy you need to move it around the world in order to take it from where it's taken from to where it needs to be used is just how crucial of a port a point is energy because alex epstein's been on the show nate hagan's been on the show richard betts from the ipcc's been on the show i understand that they have their priors with regards to where their research lies but obviously their focus is that especially with nate you know energy is is absolutely everything what are your views on the current sort of state of the energy climate and then moving forward climate change as well i would say that there's not a lot of light between me and those names i mean obviously when you get into the details analysts can quibble about everything and they can they do absolutely but the the core idea that without energy none of this works is solid um we've spent the last 70 years bringing the energy from where it's produced to where it's consumed which means primarily from the middle east to europe and east asia north america is more or less a self-contained component even was before the shale revolution now it certainly is that was one of the prices the americans paid in order to get their alliances making sure the energy would flow in the environment we're in now we're at a risk of losing all russian crude now i've always thought this was going to happen eventually i didn't think it was going to happen this soon russian crude is what has largely fueled the global economic expansion since 92 because when the soviet system collapsed their energy production did not and all of their commodities were just dumped on the international market and that has kept prices relatively low for 35 years that period is now closing and so we're gonna lose five percent of global crude which doesn't sound like a big deal until you remember that energy demand is inelastic and a 5 loss in crude can easily generate a tripling in price so an energy induced depression that is broadly global in scope will start because of the ukraine war at some point and this is probably the reason that no one's gone after that raft yet because that would be the death blow for the russian energy sector so that would kind of be like have you seen a um margin call the movie not recently no but do you remember what it was about this is the 2008 financial crisis and it's it's semi-fictional and they bring everybody in overnight and they say look if you decide to do this if you decide to dump all of everything into the market you are choosing to begin the most armageddon-like financial situation that anyone's ever seen so that that's interesting um that for somebody to go and do that they're aware that downstream five degrees of separation there are a bunch of externalities that are basically going to ruin the whole system yeah now the math is going to be different for everybody take take latvia latvia has the capacity to do this all they have to do is grab one shuttle tanker as it's leaving st petersburg that would do it and the latvians have already managed to wean themselves off of russian crude and while it would crush most of their european partners they would see the destruction of the primary income stream for russia as an unemployed good or consider the americans we're self-sufficient we have the capacity of putting a wall around our energy exports so they stay at home so we could actually see energy prices in the us go down because of this but then the rest of the world would lose access to russian and american crude at the same time so everyone has their own math to run and a lot of it is going to depend upon how everyone interprets the loyalty or the actions of their allies so i mean look at germany the russians are in the process of jerking with the germans on natural gas and you know for those of us and the rest of the world like yeah natural gas it's an energy source whatever no biggie that's not what it is in germany the entire german economy is based on taking cheap russian gas processing into petrochemicals and then using those inputs in their entire manufacturing sector if they lose that gas it's not just that electricity prices go off it's that the german manufacturing model fails so the germans are being presented with the choice leave the coalition and keep the lights on or lose your gas and no longer be modern so what's more important to the germans being western or being modern that's a that's a [ __ ] choice but it has consequences and people will judge them done based on what they do peter you need to give me something positive here man i'm just i'm terrified this this doesn't sound like a very good situation at all what are there bright lights what are some of the bright lights there are countries that were damaged by globalization uh the empire specifically if you were a country that had a pretty good geography at the start of this then when the americans came through and changed the rules so that everyone can play you saw a massive drop in your overall power if you are one of those countries and you have a positive demographic structure you could actually make a lot of hay out of what's coming because you could i don't want to use the word imperial nero imperial might be the right word uh you can definitely make a bid for your own neighborhood so uh the two countries that are on the top of my list as regards that are turkey and france decent demographics good manufacturing base largely not integrated into their neighborhoods economically the french actually trade less with the eu than the brits do uh fun fact um and i can see part of western europe becoming part of a french victim and obviously parts of the middle east for turkey i would have put japan on that list but the japanese managed to cut a deal with both donald trump and joe biden which makes the japanese the only people who have been able to get on with both sides of the american spectrum of late so i think they've basically agreed to partner up with the us rather than go their own way which i think will be the best for everyone in the long term unless you're chinese of course how's the uk going to do that's up to you you really need to figure out this brexit thing i mean it's just yes you've left but you still don't have any plan for what's next and that is really hurting you with every day that that is pushed off your negotiating power with whatever the structures of the future end up looking like are going to be weaker and weaker and you're very rapidly getting to the point where the only option you're going to have is a trade deal with the united states on america's terms there are worse things that could happen but uh we will be as um what's the best way to phrase this we believe be as gentle in the negotiations as we were during the lend lease talks where you basically had to give up half of a hemisphere of military presence in exchange for 40 destroyers that you used to laugh at because they were so bad not good it doesn't seem no it's not a good negotiating position that's for sure okay you think that mexico is going to be a big part of america's future also canada is good because it's over yeah uh because it's able to do good immigration it's able to keep its demographics pretty well what's the future for america look like in your opinion well the united states is starting this process with very little trade exposure to the wider world outside of manufacturing in asia a net energy exporter of all forms a the largest refining power in the world the largest agricultural power in the world so a lot of the things that every single country in the world is just going to have to stress about us is just kind of a no-brainer it's already there in addition successful manufacturing requires proximate labor that is at different skill sets and price points so the person who's doing the injection molding is not the p the same guy who's making the microchip with mexico we've got that already so for us a lot of the hard work has already been done and while i'm not a huge fan of donald trump by any measure his renegotiation of nafta was a stroke of genius and it got ahead of a lot of these issues because of that north america's unit looks pretty strong and we're already seeing established linkages to other powers that might be useful so we for example already have free trade deals with colombian chile which are in my opinion the two most dynamic south american economies uh we already have a long-term agreement with both the koreans and the japanese uh the australians have a free trade deal with the united states and were in league with the australians and the japanese really starting to become engaged with southeast asia which is another part of the world where the demographics and the geography line up so that kind of greater american co-prosperity sphere is about as good as it's going to get i mean you'll have to deal with the americans we tend to be a little twitchy sometimes but we're twitchy in a different hemisphere for most of the partners which most people really like in your neck of the woods france is just going to be completely insufferable because they're going to become the broker for the germans they're going to become the the first power in iberia and in italy and they're probably going to make a bid for the low countries too and the longer it takes the uk to become a self-sustaining power again the more advantage the french are going to have in rewriting the local rules so a good example is that you know you've you've built these two super carriers they're top notch pieces of equipment but between budget cuts and austerity and the financial crisis you let the rest of your navy die so you've got these two fantastic vessels with no defensive rings which means the only way that you would ever let them leave port is if they're sailing as part of an american battle group again not a good negotiating position what ways could america mess this up oh so many so many uh we're in one of our once in every generation or two political reshufflings and as long as that is going on we really don't have eyes for the rest of the world so there's a huge strategic and economic opportunity here for the long run if the united states would chose to lead and kind of define what the new world was going to be uh what i've outlined here is probably what's going to happen on autopilot and in many cases because the australians and the canadians and the japanese are doing most of the diplomatic heavy lifting thank god they're there because it would be a mess otherwise one of the great things to keep in mind about the united states is because the population is so big and so young and because the land area is so huge and so fertile we've never had to be at the top of our game we can rely on geography and demography to do most of the heavy lifting for us and that allows our politics to be completely batshit uh and that's where we are now there are many degrees of freedom that you can mess up within yes uh this this isn't france where if you screw up you have to pay for it for two generations if the u.s population is big and young does that not mean that downstream from that you need to have an even bigger younger population in order to not end up with that inverted pyramid shape on your demographic it's definitely possible um our while most of europe and japan and korea have that v-shape in their demographics ours is more of a double hourglass because we've got a bulge where the boomers are and then a bulge where the millennials are but then a big cutout for gen x and a big cut out for the zoomers the ins and outs of that are going to dominate our economic and our financial world for forever so right now we're about to go through a capital crunch in 15 years when the millennials are in their 50s we will be going through a capital boom as a rule large generations make large generations and small generations make small generations so we would expect this wave to continue uh what that means is that the american propensity for overdoing things and then over correcting that's just part of our dna now and it's backed up by our demographics that will take us all number of bizarre directions and we will drag along a lot of other countries with for the ride i was with jonathan height a few months ago at the heterodox academy conference and he was talking about the dangers in the dating market for gen z at the moment the high levels of social anxiety the fact that you've got one third of people aged 18 to 35 is still living at home with their parents the number of 18 to 30 year olds reporting no sex has tripled in the last 10 years from about 10 to 30 a bunch of things that are causing young people to be less socially out there presumably to have children later i think it's 2019 that for the first time ever more women had children over the age of 40 than under the age of 20. for the first time ever in history more women at the age of 30 were childless rather than with child so all of these things seem like they would predict a ever aging generation or an ever-ranging demographic what your suggestion is that you have this sort of hourglass shape and there will be some sort of inflection point presumably with the 15-year capital boom should hopefully encourage more families more children more population offset this going from an hourglass into a inverted pyramid that's what the data we have today suggests but i i've gotta underline we're in uncharted territory here the world has never had a population bust uh without having some sort of massive endemic disease or war event so when i say you know the chinese collapse has to happen you know i don't know how you make it work without kids or young adults when i say that the americans are going to experience a another baby boom as the millennials really come into their own history and data suggests that but we've really never seen this combination of factors before the zoomers i have concerns they are not like millennials millennials are very outgoing they're very social because they were raised by the baby boomers and they were always told that they were special that's one of the reasons why a third of them still live at home the zoomers were grazed by gen x my generation and we took a very different view of things you know we kept track of the score at the soccer game we wrote it down we showed it to him before each game we read it to him to bed so that they wouldn't forget and when they turn 18 they're the hell out of the house they're they're insular they're competitive they don't like relying on anyone for anything and so the whole group dynamics and managerial dynamics that the millennials are positively known for and recognized for they're the antithesis their dream job is to code alone in the dark in a closet and that makes it hard to have kids so i think we can guarantee that when it's the zoomers time when they're in their 30s that their birth rates are going to be low their marriage rates are probably going to be the worst we've ever had their suicide rates are already the worst we've ever had which just means that the millennials will save us all okay right you're relying on you're relying on me and my lot fantastic given given the current state and obviously there's a lot of uh contributing different countries what's going on with demographics people talk about population collapse overall globally what is your view of global population uh before we start talking about deglobalization so assuming that globalization continues from its height onward we were already in the process of revising down our estimates so it used to be 15 years ago that we thought by 2050 we were going to have 11 to 12 billion people that number is now under 10 and as the data continues to get upgraded we'll probably assuming nothing goes wrong peak it just below 9 and then start falling back gently if i'm right about deglobalization we're going to have a significantly sharper drop off and as soon as globalization hits agriculture at large which may be in the fourth quarter of this year population peaks wow okay positive stuff uh looking at the ways in which population collapse and the reduction of that could be tied in with automation is there any technological savior that can come through and assist us with the problems that we're facing at the moment there's always unknown unknowns when it comes to technology i'm aware of that but are there things that you can foresee if we get particular advancements that may alleviate some of this absolutely so pros and cons uh there are a lot of technologies with automation ai and robotics that look really good now ai the whole idea of general ai and skynet we're decades away from that so i was put that in a box i'll let ian musk talk about that ai is all about image recognition today and getting it so that machines can recognize different things and then do pre-programmed tasks there's no there's no real autonomy but it's automated that allows manufacturing to reshape but it also requires massive economies of scale the most expensive thing a country can do isn't industrialized it's to automate and it's not a one-off cost you have to constantly update it because every time there's a change to the production line you more or less have to start over with the programming so it's a very expensive way to go it does use different labor and less labor but it's not clear to me that it really moves the needle in a huge way and if we're breaking down global transport and intermediate goods trade then we're losing the economies of scale that make that model work in north america where you've got one third of global consumption we'll probably still be doing that but i see that broadly leaving the east asian sphere which combined with their bad demographics are awful we also have the baby boomers leaving so we know that the capital crunch is coming that means less money is available to do this sort of upgrading the the technologies i'm most interested in are the combination of automation and agriculture we're very close to having facilities that you can latch onto a tractor that identify each individual plant and identify if it needs water or fertilizer or pesticide or if it's a weed or whatever and then it gets a squirt of whatever is appropriate so you do like six passes of stuff in one pass and each plant gets individual attention that suggests that we would be able to reduce fertilizer and pesticide use by 80 percent and maybe even double yields but again economies of scale it only works on mega farms where you can afford the equipment cost so if you've got giant farms in the united states or the netherlands or argentina or australia sure doesn't work for most of the world talking about technology i've heard that we are unbelievably reliant on getting cheap technological parts out of china silicon chips and other such stuff how much of an issue is it going to be if china is facing demographic collapse and then can't make anything anymore how much is that going to have downstream effect for the rest of the world's technology well we've been a little bit lucky that the chinese have kind of become a bag of dicks and really encouraged everyone to outsource and resource everything that they can it's that's bought us a lot of time now in the united states everyone is paranoid about semiconductors and we all see that 12 percent number that the us now only produces 12 percent of global chips as a panic point but that's by number by value we produce 60 percent so all the food ships are designed in japan the united states they might be manufactured somewhere else if they're further down the the scale but in terms of cell phones and server farms the important stuff that that's already safe uh the problem is going to be the mid and the lower land the mid ones are usually malaysian thailand the lower ones are almost certainly china so when you're talking about the lower tech stuff the internet of things yeah that's just going away but i'd argue that i don't really need a meat thermometer that is going to tell my phone what the temperature of the meat is i mean we can get by without that i think it's overall electronics manufacturer that's going to be the big issue because remember differentiated labor force is what makes manufacturing work china is a huge place it's got a lot of that internally and then it has access immediately to taiwan japan korea and southeast asia that's what's breaking down that whole ecosystem uh we can't rebuild all of that i mean just just to serve electronics needs for north america probably would require a workforce of 4 million people in manufacturing we're already in labor shortage and the mexicans are kind of tapped out already so there is going to be a huge amount of pressure americans do well at the really high end manufacturing and the very low end because we're energy rich it's the part in the middle that we're really relying on the mexicans to save us for what ways could you be wrong about all of this stuff you know like i said this is perspective we're dealing with an environment that we've never been in before the way i would like to be wrong is that the americans would actually do what george herbert walker bush wanted to do back in 1991 and have a conversation with ourselves about what sort of world we wanted to live in and how to get there we weren't interested then i would argue that we're really not interested now so that the risk here from my point of view is that globalization does manage to persist because of some lingering american commitment i'm not seeing that i'm certainly not seeing that with ukraine war yes we're seeing nato having a new lease on life but the whole guns for butter deal that we made during the cold war none of the economic stuff is on the agenda all the sanctions that the trump administration enacted are still there with one exception that the airbus case uh i don't see it's very likely and then on the demographic front that's just math if you want more 30 years 30 year olds you had to start 31 years ago what difference would it make if china invaded taiwan uh that would probably lead to the end of the chinese system as an industrialized economy in less than a year why that's fascinating it's an open question of whether or not the chinese could pull it off and with the ukraine war we finally got some good signposts of what it might look like the chinese have always assumed that the war would be a walk over that no one else will get involved and that china is such a big place that everyone will just suck it up and move on well that clearly hasn't happened with ukraine and the united states and the west have a much tighter relationship with taiwan than they do with ukraine ukraine was only preparing for this war for eight years taiwan has been preparing for 60. ukraine can you can walk to ukraine from russia it's a bit of a swim to get to taiwan the sanctions that are in place against russia would absolutely devastate china because while russia has a lot of faults it's a major exporter food and energy china imports those things 75 of their oil is imported from a different continent and 75 percent of their oils imported and then i think it's really the boycotts that have really scared the chinese the most the idea that individual citizens might have any say on policy they had they did not see that coming they have no way to process that in a one-man state because it's so different to the setup that they have yeah exactly so every assumption that they've based the last 40 years of military planning on has proven to be wrong and then of course there's the question of whether they could actually do it if they did a slow-motion mobilization like the russians did it took three months the taiwanese would see that they'd build a few nukes and so the cost of capturing taiwan would be losing shanghai and beijing that doesn't seem like a good plan so the only battle plan that i've seen that might work is if they just text every member of the army and say go to a port get on a fishing boat and sail you'd lose a million people in the crossing just to get to the beaches so there's nothing about this that works and if they did pull it off even if they do capture taiwan they are now cut off from global manufacturing global investment global energy and global food trucks stop running within a couple of months the lights go out in less than six and that is all she wrote remember agriculture is an industrial sector so you're talking about mass famine in under a year dude now normally i'd say the chinese aren't stupid they wouldn't do this but it's a one-man show now and nobody wants to bring ji any information because they don't know how he'll react he's shot the messenger literally so many times that everything is a surprise to him yes i understand what you mean i suppose there's a lot of criticisms around the fact that the vote of a stupid person is worth as much as the vote of a well-educated person in a democracy but the problem is if you condense all of that power down to a single individual the decision of a an angry or grumpy individual is the same as them on a good day or them if they were less idiotic or somebody else had got to power so yeah i suppose it's a forcing function that condenses all of these things down to one individual human that is just as fallible as the rest of maybe even more fun human is perfect every time okay but even a minor mistake just cascades through the system and it's a full cult of personality so you know we've got basically people who are zealously trying to do what they think she wants them to do and just one of the more inane ones is seeing teams of people in hazmat gear disinfecting airport runways because they think that's what you have to do for covid just that people talk about the americans now in a fact-free zone that's nothing compared to what's going on in the chinese system okay so what do you think uh for most of the people that are listening to this uk us some in australia what is life going to be like what is the quality of life going to be like over the next 10 to 20 years what can people expect well the next five years are going to be rough we basically in the west need to at least double the size of our industrial plant let me correct that in the west minus germany germany is its own special case everyone else has largely hollowed out their manufacturing as part of globalization we focus on the really high-end stuff and the design but a lot of the middle and the lower stuff is now done in other countries that's got to change if you are part of a network where you can access lower skilled labor like the americans are with the mexicans great if you're not you either need to attach yourself to another system or find some way to go without now if you are in that kind of friends and family network of the americans energy is covered food is covered investment will be tight but available and there's a degree of security that you won't have in the rest of the world so the biggest problem is going to be building out that industrial plant that means we should expect inflation in the u.s of maybe 9 to 15 percent for the next five or six years because that's what it's going to take to get through this and if we do succeed in building that industrial plant over that time frame then that inflation rate will come down and we'll have supply chains that are shorter simpler cheaper and closer to the end consumer so better all around so if you're part of that network and you can get over that hump it looks pretty good if you decide to go your own way things are going to get a lot tougher unless you are one of those regional powers who actually has the geography and demography to make it work france after the financial collapse of say the euro might not notice the rest of the world going to hell their manufacturing is already in place their energy system is fine they've got oil just across the mediterranean they're going to have subsidiary economies in spain and italy it's a fairly good setup that means that cost of living is going to increase that means cost of energy is going to increase quality of life going to go down i mean are we going to see civil strife in your opinion what's going to go on i think we'll see a lot of governments collapse but again it depends upon where you are uh the americans will always complain more than what the problem is worth and the fact that we're going through our political transition at the same time we're doing this is you know awkward to say the least we're going to blame a lot of things on a lot of things that have no direct connection that's very american uh if you're talking about britain that's up to you guys it's like you know if you can figure this out and figure out a relationship with the united states or the french before the break that would be your best bet is that because after the break bargaining power goes through the floor yeah exactly now is the time to cut a deal you've just had a change in government the ukraine was hot and heavy if you were going to have a lead or take the country in a more sustainable direction now is the time if people want to keep up to date with the stuff that you're doing with the work with keeping themselves abreast of all of everything that's happening at the moment where should they go uh the website is z-e-i-h-a-n-dot and if you go to that slash newsletter you can sign up for our video logs and newsletters they're free they will always be free peter i appreciate you thank you via septum you
2022-08-23