Peter Zeihan on the Future of Global Commerce

Editor’s Note: For today’s Saturday edition of The Bleeding Edge, we’re sharing a new voice with subscribers.

Recently, our colleague Nomi Prins sat down with geopolitical expert Peter Zeihan. As Peter shares in the interview, the world as we know it has changed… and there is no going back.

To listen to the interview with Nomi and Peter, simply click the image below. Or scroll down to read the transcript.

And if you enjoy this conversation with Peter, then be sure to grab a copy of his latest book, The End of the World is Just the Beginning. Get your copy today – and much more – at a discounted price right here.

TRANSCRIPT

Nomi Prins, Editor, Inside Wall Street: A lot of people are scared of what’s going on in the world today.

You are a geopolitical economist. You’ve written four books. You are in demand everywhere. You’re all over the internet. Your interviews are so amazingly insightful and prophetic.

So, thank you for coming here. And let me hear a bit more about why that title, and why now.

Peter Zeihan, Geopolitical Expert: OK, well, let’s start with the basics. International trade and the way we think of it is a very new concept. It only dates back to World War II. And it didn’t just magically happen.

In the world before the war, trade was something you did within your empire, and that was it. And you didn’t trust anyone else to have components or inputs or raw materials.

Because if there was a war, even if they were rude and didn’t invite you, you could be collateral damage. You’d lose access.

So everything was kept in-house. And those systems competed. And those competitions brought us the world wars.

Well, that ripped the whole system down. So the Americans tried something new.

We said that we would use our Navy, the only one of size and reach to patrol the world, to make sure that no one else could go after your commerce. We guaranteed all civilian activity.

And that allowed countries that had never had an empire, or that had an empire but were competing with others, to, all of a sudden, access any material or market that they wanted to – easily, cheaply, safely – without needing to have a military escort.

And so, trade went from just a few high-end luxury goods to this explosion of activity, where countries that couldn’t previously feed themselves now could import grain and pay for it with some other export, whether it’s manufactured or mineral.

After 70 years of complexity expansion, we all became specialists. And we got this crazily integrated and diversified system that we have today.

But that’s only half the story. The other half is how it changed us. Because in a world where everything is based on what you have at home, you tend to not be very sophisticated.

Most people are in agriculture. But if you globalize, all of a sudden, there are these manufacturing and services jobs. And so, people go to where the value-added positions are because that’s where the income is.

So the countryside emptied out. The cities erupted.

But when you move into a city, you don’t need lots and lots of kids. On the farm, they’re free labor. In the city, they’re just really, really expensive habits. And adults aren’t dumb, so we have fewer of them.

You play that forward for 75 years, and it’s not that we’re running out of children – most of the world ran out of children 40 years ago. We’re now running out of adults.

And so, whether it’s capitalism or communism or fascism, we don’t even have an economic model to describe what we’re going into, much less have a way to manage it.

So we’re looking at a systemic breakdown on two fronts:

Demographically, there aren’t enough people to consume or produce. And geopolitically, the Americans are leaving the party. And the security that has overwritten everything about globalization is now over.

Either one of these is a deal killer. And they’re both happening at the same time – this decade, right now.

Nomi: It’s so scary. And in the opening of your book, you write: “Since 1945, the world has been the best it has ever been, the best it will ever be, which is a poetic way of saying this era, this world, our world, is doomed.”

And then you go on: “The 2020s will see a collapse of consumption and production and investment and trade almost everywhere. Globalization will shatter into pieces.”

And what’s interesting is: How does that very scary concept of doom also connect to what people are seeing today? High prices, inflation, supply chain disruptions – and just the costs of all the things they need completely changing?

Peter: One of the things we forget is that there’s a huge amount of integration today among all the economic sectors.

Think manufacturing. It doesn’t work unless the megacities of East Asia can import the food and the energy and the raw materials that they need.

And that requires not just a global energy and agriculture sector, but a global transport sector. Everything is tied together.

And when you start pulling threads out, the whole thing starts to break down.

What we have seen over the three, four years that it took for us to put the book together is that we’ve had the rise of Trump, the spread of populism and trade protectionism to both sides of the aisle in the United States.

We’ve got the Chinese attempting to break out and get all the benefits of globalization, without paying any of the costs.

We had Covid, which did more to damage trade than the Trump policies. We now have Biden, who’s more populist than Trump. And the Ukraine war kind of puts a hard stop on everything.

The challenge in my work has always been to figure out time frames. And which block do you pull out of the wall? And how does that affect things?

But we’re now in a position where at least half a dozen of the blocks have been pulled out. And we’re already past the point of no return. Too much damage has been done already.

We are feeling that today as the leading edge of a massive inflationary boom in the United States.

Now, I say boom because the United States basically has to double the size of its industrial plant in order to make sure that we get the stuff we want.

This is a good problem. And it means high growth and high inflation together.

Most people are just obsessed about the inflation part right now. They forget that in fixing this, we’re going to have some explosive activity.

But for the rest of the world, you’re talking about losing raw materials access and agricultural access and financial access and transport access.

And of course, if the U.S. doubles its industrial plant, that means there’s a requisite loss somewhere else, where that productive capacity becomes stranded.

Everything we’re seeing right now in the United States is a problem of strength. That is not true everywhere else.

So, we can get these weird inflationary and deflationary trends going at the same time. And it’s going to happen against the backdrop of a currency system that is just becoming singular.

We have always thought of the euro as a secondary currency. And here, we’ve got the world’s second-largest economic bloc pooling their strength.

But the demographic decline there was terminal two, three decades ago.

And now, we’re reaching the point where Germany, Italy, and a number of others are aging into mass retirement this decade. And they now have more people in their 60s than their 50s than their 40s than their 30s than their 10s.

So, it was never going to last.

But the Russian sanctions have sped it all up.

P.S. If you enjoyed this excerpt, then we’d encourage you to access the full interview with Nomi and Peter.

The full conversation lasted close to 45 minutes, and Peter made a bombshell prediction: If Russia fails in its war on Ukraine, it will mean the disintegration of Russia as a country within 20 years.

To access the full interview – and to grab a copy of Peter’s latest book – go right here.