Peter Zeihan: What Will The World Look Like in Five Years?

Loss of people from agricultural carrying capacity without fertilizer will result in hundreds of millions of deaths, possibly a billion people even in best-case scenarios, making famine the most serious near-term risk from deglobalization.

“I'm specifically really concerned about the agricultural question because the carrying capacity of everyone's lands without agriculture I'm sorry, without fertilizer, you're talking about it dropping by half. So, we're going to lose hundreds of millions of people, maybe even a billion in the better case scenarios.”

Baby boomers turning 65 are not just becoming tax consumers (pensions, social security, Medicare); they are simultaneously at the height of their earning potential and capital accumulation, so the economy must cope with losing both boomer consumption capital and boomer labor/productivity simultaneously.

“They're not just turning into tax takers. They are at the height of their earning potential right now. When you're 65 but you haven't yet retired, this is as much money as you will ever have. And so, it's not so much that we have to learn to pay for the retirement of the boomers, we have to learn to pay for everything else without the boomers' capital.”

Argentina has best land outside the Midwest, good river system, zero security concerns; while Argentina faces typical financial instability, in world where finance breaks down and rule of law becomes scarce, Argentina's previous normal (no finance, political instability) becomes relative advantage.

“things are just getting going in Argentina. Now, I know I know I know, Argent freaking Tina. Everybody's like, you know, the place is a basket Fell out of the financial system. yes, yes. And everything that you think about Argentina is true. However, it's got the best land in the world outside of the Midwest. It even has a good river system to help with local transport, and it has zero security concerns. So, in a world where rule of law breaks down, where long-range transport's more difficult, where finance is restricted, you know, for the Argentines, this is just a typical Tuesday.”

China's census data shows they overcounted population by over 100 million since the one-child policy began, mostly women, making demographic recovery impossible even with 'low-level cloning'.

“The uh the Chinese are releasing bits of their 2020 census now, and they're grudgingly admitting that they overcounted their population by in excess of 100 million, all of whom would have been born since one child, and most of whom would have been women.”

mRNA vaccines had already passed prototype stage and been used extensively in agriculture before COVID; jump from cattle to humans is significant but not starting from scratch; coding vaccine in 6 weeks was possible because technology was mature.

“One of the reasons that the mRNA vaccines happened so fast is they had already been past the prototype stage. They were already used fairly extensively through agriculture. So, you know, there the jump from cattle to humans is not an insignificant one, but it's not like they were starting from scratch. And as we saw, they have been able to code the vaccine in less than 6 weeks.”

Countries will decivilize when they lose access to inputs of modern world, experiencing breakdown and regression; this is unavoidable, but does not apply uniformly—depends on geography and resource access.

“I I am concerned about a number of countries simply decivilizing when they lose access to the inputs of a modern world. That means a breakdown and a regression. That's unavoidable.”

Sub-Saharan Africa lacks manufacturing footprint; incomes depend on raw material extraction and export without local value-added; this allowed population growth without expanding production capacity; this model works only while international capital flows and supply chains persist, creating catastrophic vulnerability when they break.

“But if you move into sub-Saharan Africa, there isn't much of a manufacturing footprint at all. Most of their incomes comes from raw material extraction and export without adding any value locally. What they've done in many ways is the worst of all worlds. They've used the income from those raw commodity exports to purchase things of the modern world, electronics, computers, food, and that's enabled their populations to grow without actually expanding their capacity to do things at home. That works so long as international capital keeps flowing and international supply chains keep running. But should those break through break for any reason, you're looking at catastrophic damage in the countries that haven't been able to pull themselves up.”

Technological progress will slow considerably in a deglobalizing world because technology development requires: many young people who are interconnected, large amounts of capital, research capability, and economies of scale for rollout; regionalization eliminates critical mass, reduces financial capability, and limits economies of scale.

“Whenever you're talking about technology, regardless of the sector you would like to apply it to, is time, cost, and labor. You need a lot of young people who are interconnected, who have access to a lot of capital to do the research and then ultimately the operationalization of the new technology. And if we're moving into a world where it's a little bit more broken up, we won't have that same critical mass. We're certainly not going to have the financial capability, and the economies of scale that you need to justify the rollout are going to be more limited.”

China's navy consists mostly of small ships with range under 1,000 miles that cannot sail without slowing and avoiding combat; China is entirely dependent on the US Navy for maintaining sea lanes and cannot project force to secure markets or resources.

“the Chinese have a lot of ships, but most are very small, and almost all of them can't sail more than 1,000 mi from port, and only that if they're moving slow and not dodging and no one's shooting at them. So, the Chinese don't have the naval capacity to go out and secure markets or resources. They are en- entirely dependent on the US Navy to do that for them.”

Fertilizer production is the binding constraint on global food supply: potash mines take 10 years to bring online, nitrogen/phosphate systems take 3+ years; China has cut phosphate exports for food security; this decade's planting season already cannot access needed fertilizer, making harvest shortfalls guaranteed.

“It takes 10 years to bring a new potash mine and processing facility online. It takes at least 3 years for nitrogen system or a phosphate system. The Chinese have removed phosphate from the system cuz they're concerned about food security in their own country...it's already too late for the Northern Hemisphere's planting season.”

The Cold War ended 30 years ago, and in the last seven US presidential elections, each candidate has been less interested in globalization than the previous one, creating a clear political trend away from maintaining the system regardless of party affiliation.

“But the Cold War ended 30 years ago and in this last seven presidential elections, we've gone with the candidate who is less interested in globalization at large and that includes the shift from Trump to Biden.”

The consumption and production cycles that the modern economy has become dependent upon are mathematically no longer possible once the demographic profile has been inverted, and the advanced world hit this tipping point this decade.

“the whole consumption and production cycles that we've become used to simply are no longer even mathematically possible and we hit the tipping point this decade”

By sublimating American industry to encourage manufacturing abroad, the US allowed countries like China to become powerful enough to develop their own geopolitical ambitions, creating a situation where American voters will no longer support subsidizing Chinese expansion through military protection and market access.

“part of what made globalization work is the Americans would sublimate their own industry to encourage growth abroad. So, ultimately, this has worked for us because we design the products, they build them. But some of the countries that are doing the building are now more powerful than they would have been in a deglobalized world. China's at the top of that list. Are starting to have their own ideas about how the world should function. And to think that the Americans are going to subsidize the Chinese expansion over the long haul, that they're going to bleed and die so that the Chinese can import food and energy, that's a bit of a reach.”

Supply chains that have been maintained since 1985 are breaking down due to China's COVID lockdowns and the Ukraine war disrupting Russian commodity exports, and these disruptions are not temporary substitution problems but require fundamental replacement of the entire supply chain architecture.

“The COVID disruptions were about substitution. The disruptions we're now starting to see are about flat-out replacement. We know that the system that made everything that we know in 2019 is not coming back.”

Permafrost oil wells in Russia cannot be restarted once shut in due to pressure cracks throughout the system; restoring these wells historically required Western technicians now unavailable; this means 3-6 million barrels/day of Russian and Kazakh crude will permanently fall off the market.

“pressure will build up within the Russian system through their pipes all the way back to the wellheads and they're going to have to shut it in. And as a rule in the permafrost, once you shut it in, that well is now never going to be turned on again because you get cracks throughout the system from the pressure builds. This is the permafrost. It's problematic in many ways. That crude doesn't come back. And the only way that the Russians were able to bring it back after the post-Cold War collapse was by bringing in Western technicians who are no longer available.”

Supply chain regionalization will flow capital to manufacturing, transport, energy, and labor sectors, with first-mover advantage accruing to states actively recruiting this investment, particularly in the South and Texas, with some Midwest heavy industry retooling.

“A lot of these cities are in the South. Texas, of course, is doing very well. And we're even seeing some retooling of some of the heavy industry in the Midwest.”

Xi Jinping has created a cult of personality so tight that no one wants to bring him information about problems and no one wants to take action if they think it might clash with his preferences, creating system-wide policy paralysis.

“He's enacted a cult of personality that is tighter than anything that has ever existed through Chinese history, and it's gotten so tight that no one wants to bring him information about anything, and no one wants to do anything if they think it's going to clash with what he wants. So, we have this policy paralysis throughout the entire Chinese system.”

Fertilizer prices have increased 50-200% depending on type; US farmers can finance crop switching to lower-input crops; most of the world lacks farm credit and cannot make this shift, forcing them to use less fertilizer or abandon marginal lands.

“fertilizer prices based on type are up between 50 and 200%. That means in the United States, we have seen a significant amount of crop switching as farmers choose outputs that don't require so many inputs. And that's something we can do here because we can finance the difference. It's not a problem, but most of the world doesn't have access to something like farm credit.”

Only the US Fed can effectively use interest rates as monetary policy tools because most other countries lack sufficient consumption demand to regulate (interest rates primarily control consumption); this structural advantage makes Fed policy increasingly powerful relative to peers as global consumption capacity shrinks.

“the tools you would normally use to shape monetary policy, primarily interest rates, do not work in a society where there isn't a lot of consumption. That's what you're trying to regulate primarily with interest rates. So, the US Fed can still do that. Most other countries cannot. Which means this tightening process that the Fed is going through is making an ever larger delta in terms of interest rates between the United States and everybody else.”

Capital flight during COVID was approximately $2 trillion/year and is certainly going to increase as demographics decline globally; this capital flight will make adaptation to supply chain and demographic changes even more difficult for countries experiencing outflows.

“during COVID, that was probably a little over $2 trillion a year. It's certainly going to increase. That is going to make it even more difficult for these countries to adapt to the changes in supply chains and demographics and economic norms.”

Many developing countries took on massive debt in the 2010s when US dollar was weak; they now face crisis as dollar strengthens and dollar-denominated debts become harder to service, leading to currency crises and debt defaults in majority of developing countries.

“There were a lot of countries, especially in the developing world, that took out huge volumes of debt in the 2010s when the US dollar was relatively weak to the global norms. We now see the other side of that, and you should expect a series of not just currency crisis, but debt crisis in at least the majority of the countries out there. That is also unavoidable at this point.”

Only three sectors of American economy are internationally linked: tech manufacturing (all in East Asia, most not coming back), agriculture (US farmers export 1/3 of calories produced), and finance (bipartisan hostility to finance sector makes it non-protected).

“There's only three parts of the the American economy that are internationally linked at all. One is tech manufacturing. That's all in East Asia. A lot of that's not coming back. Number two is agriculture because American farmers and ranchers are just so hideously productive that they have to export about 1/3 of the calories that they produce. Finance is the only other one.”

China's grain stockpiling is motivated by sanction-proofing, not war preparation; China recognizes that sanctions hurt food/oil importers and would end China within a year, so they're trying to build buffer stock as only available option given policy paralysis.

“The sanction-proofing, that makes a lot more sense. The Chinese are discovering that sanctions really can hurt a major country that happens to be a food and oil exporter. Can you imagine the damage for China, which is a food and impoil oil importer? They're concerned that if these sanctions were put against China for whatever reason, that that would be the end of China within a year. And they're right. There's only two things you can do in that circumstance. Stockpiles, you can buy more time. Or fundamentally change your foreign security output so that sanctions don't happen because you are no longer perceived as hostile.”

Young demographics are an asset but not determinative; Mexico and India have demographic pyramids that declined later than China/Russia because they industrialized later; this provides them advantage, but only if paired with industrial capacity to absorb the young workforce.

“It's absolutely an asset. Just make sure you don't take demographics as a factor and that's everything. They feed into the picture. So, a good example, two good examples, are Mexico and India. They were relatively late to industrialize, and so their birth rate collapses happened later than they did in say Russia or China.”

Productivity gains cannot fully offset loss of young people in aging societies because: (1) young people are consumers as well as producers; AI is nowhere near capable of replacing human consumption demand; (2) productivity requires capital investment that aging societies lack; (3) automation must be constantly updated as product sets change, requiring huge capital sunk costs.

“There's just two things you have to keep in mind. Number one, if you run out of young young people, it's not just a production thing, it's also a consumption thing. And we are not to the world of AI where AI is consuming products. We're nowhere close to that. Thank God. Number two, productivity. Oh, yeah. If you don't have a lot of young people, you then have to export those products. And let me give you a third one, too. Automation is expensive. If you don't have a strong capital base, it's very difficult to get the money to operationalize these technologies. And one of the unsaid dirty secrets of automation is it has to be constantly updated as the product set changes. That is a huge capital suck.”

The US chose to support Ukraine by destroying Russia economically as opportunity to eliminate a country that has pointed nuclear weapons at US for 75 years; this is a choice not based on economic rationale but on geopolitical rationale.

“great example, of course, with the Ukraine war is the United States. Ukraine is not a NATO ally, but we saw an opportunity to destroy the country that has been pointing nuclear weapons at us for 75 years. And we're taking it. That's a choice. It's not free. It will generate more heartburn down the road, no matter how it turns out. But we are no longer in the globalization era where it's all about economies of scale and economic efficiency.”

Solar and wind work in sunny/windy places where 80% of human population does not live; breakthrough needed in long-range power transfer and energy storage; batteries are environmentally damaging and may create net carbon increase if deployed in non-optimal locations; lithium breakthrough required but not available this decade.

“Solar and wind work great in places that are sunny and windy. That's not where 80% of the human population lives. So, we need a breakthrough in two things, long-range power transfer and energy storage. Now, a lot of people are talking about moving into batteries in a big way, and that's great. But, batteries are one of the more environmentally damaging technologies we have, and if you're putting it in a place where it doesn't have good wind or solar capacity, you're probably looking actually at a net carbon contribution to the system instead of a reduction.”

Regional trading systems will emerge with limited interconnection: French-centric in Western Europe, Turkey-centric in Middle East/Southeast Europe, Japanese reaching out via trade and money (not warships) due to demographics, Western Hemisphere as own system.

“We're probably going to have a series of regional trading systems with very little interconnection between them. You'll probably have a French-centric one in Western Europe. You'll probably have a Turkey-centric one in the Middle East and Southeast Europe. You'll probably have the Japanese reaching out to a whole lot of folks, but because of their demographics, they're going to do it with trade and money instead of warships. This is a good thing. And then, of course, the Western Hemisphere is kind of its own thing.”

Japan is relative winner despite demographic challenges because: (1) world's second most powerful navy; (2) dealt with demographic transition since 1980s and adapted over 30 years, a luxury other countries lack; (3) consciously chose long-term alignment with US and succeeded under both Trump and Biden.

“they've got the world's second most powerful navy. So, they have a capacity to reach out in a way that very few countries can, really only half a dozen. Second, you're absolutely right. This is the first country to go through that demographic transition. For them, it started in the '80s and it's well past the point of no return, but it's come on at such a slow rate and the Japanese have been able to adapt their policies to it. One of the reasons that we all think of Japan as an automated robotic place is because this is a conscious choice. As they deal with fewer and fewer workers and consumers, they've had to automate. Now, they've done this under the ages of the American-led globalist system and that has allowed them to do things over 30 years that other countries are going to have to do over like five.”

All elements needed for US revitalization already exist domestically; all that's needed is a shock elsewhere to highlight necessity; COVID, Trump, Biden, Ukraine war are all providing this shock and everything is moving in direction it needs to in the United States.

“All the elements that you need for revitalized America are already here. All you need is a shock elsewhere to underline the fact that things need to move. COVID did that. Trump did that. Biden's doing that. The Ukraine war is doing that. COVID in China is doing that. Everything is moving in the direction it needs to in the United States. We will emerge from this in a much better position.”

A coup in China is theoretically possible but unlikely to improve outcomes because Xi has purged all potential rivals, eliminating anyone capable of independent thought from the bureaucracy; even if a coup succeeded, whoever pulled it off could not control the country, as different regional leaders would have conflicting claims, leading to civil war.

“She has really done everything he could to purge the system of all potential rivals. And that has included intimidating to silence or or imprisoning anyone who is capable of independent thought within the bureauc- bureaucratic system. So, you never want to rule out something like a coup. It could happen, but if that did happen, it's difficult to see whoever would pull it off to be able then to control the country on the other side of it. They might be a regional leader and they might be fine for their region, but the rest of the Chinese system would have a different opinion on who should be in charge. That's how civil wars begin.”

Success in post-globalization world requires: (1) borders not easily penetrated by military; (2) ability to grow own food; US has both (deserts, mountains, Great Midwest); China has poor land quality and internal barriers, dependent on US Navy for security.

“It's going to be a little different everywhere, but it really helps to have borders that are not easy to roll tanks through. And it's very good to have land that allows you to grow your own food. Those are kind of like the two baseline ones. And so, for the United States, we're pretty good. We've got deserts and mountains to our south. Even if Canada was hostile, we'd still have forests and lakes separating us from their population centers. And the Great Midwest is the largest chunk of arable land in the world.”

Demographics move at two speeds—glacial and lightning—and while the consequences of demographic change have been predictable for 40+ years (since the last baby boom generation was born in 1965), institutions and governments have failed to prepare because multi-decade timescales don't align with political incentives.

“Well, as the joke goes, demographics move at two speeds, glacial and lightning. We know exactly what's going to happen this year. It's going to be the majority of baby boomers will turn 65 and will go into retirement. That has investment and tax applications, consumption and production implications. And we've known this is coming since 1965 when the last of the baby boomers were born. But when something only takes place over decades, you always think, 'Oh, we've got time to adjust that later.' Well, we're in the here and now and we're actually dealing with the complications coming from the baby boomers leaving us.”

Expectations for mean reversion in commodity prices are wrong; prices will remain elevated with persistent shortages rather than reverting; this will create ongoing high food and energy prices for the foreseeable future.

“Absolutely. If it plays out the way that you see, you don't you don't see any reversal. You see elevated prices, shortages, and elevated prices. I mean, using elevated, I think it's probably you know, I'm understating the case. Sky-high prices for the foreseeable future when it comes to food stuff and energy?”

North American supply chain regionalization is a 5-10 year process of rebuilding industrial capacity closer to consumers; during this transition, capital dedicated to supply chain reconstruction cannot be dedicated to other productive investment, guaranteeing at least 5 years of high inflation with no government solution available.

“It's a 5 to 10-year process. And while that is going on, capital's getting dedicated to that, which means it can't be dedicated to other things, and we can't take the full advantage of these new supply chains that are closer to home until they're done. So, we have at least another 5 years of high inflation as we struggle through this transition. And there's nothing that government can do to make it better. Now, government can make it worse, but not better.”

Reshoring manufacturing to North America will eventually produce lower production and retail costs than East Asian manufacturing, despite high current infrastructure investment, because North American labor productivity and proximity offset Asian sunk cost advantages.

“There are very very few economic sectors where an industry that is based in the United States and Mexico is more expensive than those that are based in East Asia. The only reason we really think of China as a manufacturing power still still is simply because of they the sunk cost of the industrial plant has already been paid for.”

Both current Democrats and Republicans agree that the financial world is not a constituency they speak for; this bipartisan hostility to finance means no political support exists for rescuing financial institutions if their interests conflict with real economy needs.

“if there's one thing today's Democrats and Republicans agree on, it's that the financial world is not a group they speak for. So, the political support that might have existed during the W administration or the Bill Clinton administration, that's that's gone.”

East Asia faces worse labor shortage dynamics than the United States because East Asian countries lack millennials (and have one-child policy demographics), while China is experiencing the fastest collapsing demographic in human history and cannot survive in its current form over the next decade.

“the labor crunch situation in East Asia is far worse than it is in the United States because while we have millennials, they don't. And they also have something called the one-child policy, which has been gutting the Chinese demographic for 40 years now. And China is now the fastest collapsing demographic in human history. And there is no way the PRC survives the next decade in its current form.”

Regarding potential coup in Russia: approximately six people have regular access to Putin; three are toady incompetents (Shoigu, Medvedev); three are intelligent (Patrushev, Igor Sechin); only Igor Sechin might have the capacity to remove Putin, but all other Russian elites would kill him if he tried.

“There's probably six people remaining that have access to Putin on a regular basis, three of whom are toadies and who are incompetent. That's like the Defense Minister Shoigu or um Medvedev, the former president. Uh and then there's three people who are actually intelligent like Patrushev, who is ran the the KGB for the longest time, or excuse me, FSB now, or um Igor Sechin, who's in charge of the state uh oil concern. But of everyone within the Russian elite, the only one who might have the guts to actually off Putin is Igor Sechin himself. But if there's one thing everyone else in Russia agrees upon, it's that Igor Sechin is kind of a prick and they would all kill him if he actually tried.”

Energy shock has not yet occurred because India is running potential blockades and boycotts to import cheap Russian crude at ~1-1.5 million barrels/day more than would occur otherwise; Europe's May 30 oil embargo removes 2.5-3 million barrels of Russian crude, driving pressure throughout Russian system that will force permanent shutdown of wells.

“the Indians are proving willing to run the potential blockade and the potential embargoes and the potential boycotts in order to get Russian crude on the cheap. And as long as they are doing that, there's probably about a million, maybe a million and a half barrel more of demand out of the world for Russian crude than there would be otherwise. Now, with the Europeans on May 30 deciding that they were going to go ahead with an oil block, that is going to make about 2 and 1/2 to 3 million barrels of Russian crude homeless.”

Digital gardening with AI-guided tractors and fertilizer application can double crop yields while using quarter of inputs within a decade; this technology is past prototyping and ready for deployment.

“We're moving into something that I call digital gardening. You basically have AI on your tractors and your modules, and you give individual attention to each individual plant. So, they do something that's kind of like facial recognition to recognize the state the plant is in. Is it thirsty? Does it need fertilizer? Is it a weed? And then you squirt it individually, and it's all automated. That suggests in large farm row crop facilities like we have in the United States, a doubling of yields while using a quarter of the inputs within a decade. That's already past prototyping stage, so very positive.”

Global grain reserves are approximately 2 months of consumption, but half is stored in China with severely degraded storage facilities; much Chinese grain has rotted and some is stored in unprotected piles on roadsides, effectively leaving only 4-5 weeks of actual usable reserves concentrated in specific countries.

“We have about 2 months globally in terms of stocks we've saved up. But half of that is in China and every time the Chinese have tried to tap their grain stocks, they've discovered that it's rotted almost to nothing because their storage facilities are awful. In the case of some of the grains, they don't even have facilities. They just literally make a big pile of it along the side of all the roads. And then, lo and behold, half of it rots in 2 months. So, we're really only probably have four or five weeks in terms of reserves.”

US dollar will strengthen over the next several years due to higher US interest rates (Fed tightening) creating interest rate differential against other major currencies; $2.5 trillion in negative-yielding sovereign debt is flowing into US dollar assets; this dollar strength will persist for at least a half decade.

“We've got $2.5 trillion in negative sovereign debt out there, and money is just flooding from that into the US dollar. So, for the next several years, you should expect the dollar to go nowhere but up. Maybe not in a straight line. That would be way too convenient. But, this is the future for at least the next half decade.”

The difference between financial economy and real economy is critical: the Federal Reserve focuses on real economy when times are tough; currently not there, but will probably shift next year; this means government prioritizes real economy over financial system stability.

“It's a question of what's the difference between the financial economy and the real economy, and there's definitely something to be said. As a rule, when times get tough for the average American, whether it's because of inflation or disease or war, whatever it happens to be, the Federal Reserve just ignores whatever the financial system wants and focuses on the real economy. We're not there yet. We'll probably get there next year.”

Latin America is net energy and food exporter, positioning it well for world that is energy and food short; however, must separate Mexico from rest of Latin America because Mexico has better demographics, industrial plant, workforce, and NAFTA integration.

“Overall, Latin America is a net energy and food exporter. So, for a world that is going to be energy shy and food shy, Latin America at large should do reasonably well. Um but, it's important to separate Mexico from the rest of Latin America. It's got a healthier demography at large. It's got a better industrial plant, has a more educated workforce, it's part of the NAFTA system.”

Brazil has difficult geography with highlands on coast forcing all trade up and down coastal routes, limiting interior participation; past capital inflows for infrastructure won't continue; golden age of Brazilian development is probably over.

“The Brazilians are going to be facing some issues. They're okay for energy, they're okay for food, but they've got a very difficult geography. Basically, uh think of Brazil like a table that's lost two legs, but the high side is on the coast. So, anything that wants to float has to go up up up up and then straight down. And that limits their ability to participate unless they can have a lot of capital come in to help with infrastructure. That happened in the last 15 years. It's not going to happen moving forward. So, a lot of the value add we've seen in industry in Brazil is very questionable. I mean, we're not talking like a Chinese-style collapse here, but the golden age is probably over.”

The trend toward American economic nationalism (Clinton to W to Obama to Trump to Biden) is clear; unless that trend reverses, US is unlikely to return to pro-globalization policies; Apple's decision to pull out of China is example of corporations recognizing reshoring benefits.

“On our road from Bill Clinton to W. Bush to Obama to Trump to Biden, we've become more and more economically nationalist. And if that were to change, it would matter, but I don't think the American population at the moment is interested in engaging in the rest of with the rest of the world economically. I just don't think that's even in the cards. And I think Apple's decision to start pulling out of China is kind of the quintessential example because they were always the furthest, the most extreme when it comes to doubling down on the East Asian system.”

Power has shifted from corporations/shareholders to workers due to: (1) environmental and social governance shifts giving workers/consumers bigger say; (2) demographic worker shortage between boomer retirement and zoomer workforce entry, creating ~400k annual worker shortfall, giving labor negotiating advantage.

“Part of that is environmental and social governance shifts, which do give the workers a bigger say and do give consumers a bigger say. But, the core issue is going to be demographic. We are in the middle of a worker bust between the boomers retiring, large generation, and the zoomers entering the workforce, small generation. We're currently at a gap of about 400,000 shortage workers or shortage of 400,000 workers per year. You would think that would give a lot more negotiating power to workers.”

For the United States specifically, the outlook is positive: stable consumption system, robust labor system, no security threats, energy self-sufficiency, food self-sufficiency, educational system well-geared to training manufacturing workers.

“In the case of the United States, you've got a stable consumption system, a reasonably robust labor system, no security threats, energy self-sufficient, food self-sufficient, and an educational system that hasn't worked great for the last 20 years, but is actually really well geared to training up the next round of manufacturing workers.”

Countries most concerning for the transition: (1) China—over 1 billion people cannot be fed with available land and inputs; (2) Germany—supply chains dependent on half-dozen countries now angry over Ukraine; (3) Korea—numbers are worse but historically overcomes challenges.

“China would be top of the list. You've got over a billion people that simply cannot be fed with the lands' quality and with the inputs that are going to be available. It is by far the country that is going to suffer the most. Other countries that are dependent upon international interactions for trade are at the top of that list for slightly different reasons. I don't see how the Germans make this work. Their supply chains are dependent on a half a dozen countries and as long as the Germans are turning a blind eye to Ukraine, those half a dozen countries are really mad.”

China's demographic collapse will inevitably occur this decade regardless of COVID; the pandemic may speed the timeline slightly, but is not the cause of the collapse.

“This was always going to fail this decade. COVID may be speeding things up a little bit.”

Automation works when co-located with consumption demand; reshoring to Mexico works because Mexico is near US consumption; automation in China doesn't work because China's consumption is collapsing.

“it really needs to be co-located with consumption. That makes it work in Mexico. That doesn't make it work in China.”

Japan uses foreign investment to construct products in countries with healthier demographics (e.g., Toyota in Texas/Southeast US); this model allows Japan to serve markets without relying on shrinking domestic population.

“they have a program that's basically built where you sell and they use foreign investment to go into countries with healthier demographics and construct their products there. That's basically the whole model for Toyota in Texas. I was going to say the South the Southeast in the US. Absolutely. Very successful.”

The speaker is not pessimistic about the future but rather sees it as 'just different'; the world will look very different with many concerning developments, but opportunities exist for different countries and regions.

“It's just the world's going to look different. The world is going to look very different and there's a lot of things in the wider world to be very concerned about.”

Pro-immigration policies will not come from the federal government initially but will emerge when corporate America makes its case in individual cities, and those cities/states then approach the federal government for policy support—a process that will take multiple years.

“It's going to take corporate America making its case in each individual city and those cities and states then going to the federal government for an ask. That's not going to happen this year, probably not next year, either.”

Oil prices are difficult to forecast precisely but likely in range of $120-170/barrel; if Russian supply loss had occurred in March, prices would likely be ~$170; current Chinese demand destruction from lockdowns and shale production increases make $150/barrel a reasonable stake in the ground.

“If this had happened very, very quickly back in March, we'd probably be talking about a $170 crude. That might be a little bit high now because the Chinese have partially gone offline with their lockdowns. We've had a little bit of demand destruction. We've got the shale sector accelerating their output...That suggests that 170 is probably a little high, but 150 is still a good kind of stake in the ground.”

The Euro is a political project, not an economic one; monetary policy appropriate for Germany is inappropriate for Greece; Euro was always going to disintegrate until Ukraine war unified Europeans more than any time since Treaty of Westphalia in 1600s.

“Ultimately, the Euro is a political project, not an economic one. Because to think that a monetary policy that is appropriate for Germany is appropriate for Greece, I mean, that's kind of silly...I would have said blithely that of course the Euro is going to disintegrate cuz it was a political project, not an economic one. They've got all these those class currencies, it just can't work. And the Europeans are actually more united at this point than at any time since the Treaty of Westphalia in the 1600s.”

China is not preparing for war with Taiwan; Ukraine war has shown China that international communities don't accept conquest, wars don't end quickly, and consumer boycotts can shape corporate policy—concepts China has no frame of reference for.

“I don't think the Chinese are pre- anticipating a conflict. I mean, the US certainly doesn't have an interest in a war in the Western Pacific right now. And if when the Chinese look at what's happening in in Russia with Ukraine, they realize that every bit of their plans for Taiwan have proven incorrect. Uh the international community did not just accept the deal. The war was not over in a week, and the concept of boycotts that individual consumers could actually shape corporate policy. Wow, the Chinese have no frame of reference for that at all.”

Green tech lacks prototype stage that vaccines had; smart money is investigating many options but no breakthrough technology is identified; even with prototype breakthrough today, 10-year timeline for mass application remains.

“When you're talking about green tech, we're not to the prototype stage yet. Right. There are a lot of people who have a lot of irons in the fire, and you know, this is the the where the smart money is going. I don't mean to suggest we won't have a breakthrough, but even if we do have the breakthrough today, you're still talking 10 years before mass application.”

The road from present to US revitalization is not a straight line; the transition will be difficult with multiple setbacks and complications.

“Just that the road from here to there is not a straight line.”

The United States cannot easily increase population through pro-immigration policy in the near term because both Republican and Democratic coalitions are currently anti-immigration (Republicans explicitly, Democrats because they're attempting to re-solidify the union movement).

“The United States, both on the left and the right, is feeling relatively anti-immigrant right now. And everybody understands the Republicans and the Trump side of that, but on the Democratic side, remember that the Biden administration is attempting to re-solidify uh the union movement within American industry within the Democratic Party, and he's only having occasional success.”

Shanghai airport runways are being disinfected due to COVID fears despite being clearly ineffective—an example of how centralized cult-of-personality governance creates dysfunctional policies that cannot be changed once initiated.

“in Shanghai, they are now literally disinfecting runways at the airport because of COVID fears. There's just no functional policy coming down from the top”

Korea's numbers are worse than any other country by metrics, but Koreans have demonstrated ability to make hay out of anything—future outcomes uncertain but not to be underestimated.

“For the Koreans, by the numbers, everything's worse, but if there's one thing I've learned in my life, it's never underestimate the Koreans. They can make hay out of anything. We'll see. We'll see.”

Worker negotiating power is uncertain despite structural shortage because we're coming out of COVID and everything hasn't yet settled; mechanics suggest labor advantage trend will continue for next few years.

“The only reason I don't want to underline that, I'm not quite sure, is because we are coming out of COVID and everything has yet to settle. But, the mechanics certainly suggest that that is going to be the trend for the next few years.”