About the talk
Geopolitical strategist and author Peter Zeihan explains how we got to the current state of geopolitics and the changing demographics across the global superpowers that will impact our coming economy.
*Please note: the background noise in this video is due to high winds outside the theater tent at the Rose Bowl Stadium, where this presentation was filmed. It was loud but harmless!
Everybody this is the part of the presentation where my College speech professor says that I'm supposed to tell a witty anecdote so that we can all Bond but he was a total jackass. So we're just going to Jump Right In This is what trade used to look like. We didn't trade goods we traded ammo and if you saw something you thought you needed you went out and you took the damn thing. You confiscated it. You colonized it you expand it into Empire empire spot over resources and access and markets. Those fights brought us Wars with culminated into World War II
the American government said, we're going to try something new this time instead of everyone having a separate sequestered Imperial Network. Everything's going to be pulled. The u.s. Navy the only one of size to survive the war with the pro the global oceans for everyone so that anyone can go anywhere at anytime purchase any Rock commodity ship it home metabolize it into finished good and then exported for hard currency. It's just one catch. You got to be on her side. The Americans
bribed an alliance to fight the Cold War and that gave us this map. The deep blue are the countries the Americans cared about the 4th conflict the front the backyard the medium blue. Those are the new allies in this new Global Order the first Global Order the first era of international trade. Order the other guys. We don't like to talk about them in this country. And light blue is the field of competition everything mattered every day. The Americans could never deny battle, but then won Idol Tuesday in the very definition of pent-up demand the Germans had a party
and it was all over and it had never occurred to the Americans that they might actually win. We were convinced that the only way that this could go down is with the end of the world. well We didn't think about the next day and as a result our view of the world almost overnight changed and there's a lot of cramp there a lot of places Americans just don't have a firm opinion. About the person who is in charge at the moment that the wall fell was George Herbert Walker Bush who from a foreign policy point of view was arguably the best president that this
country has ever had you certainly had the expertise ran the CIA vice president serve in the House of Representatives in Bastrop shine around the office of budget you with the right person in the right time with the right mindset in the right skillset. So, of course we voted him out of the office and we started down the parade of morons. Bill Clinton smart dude arguably the most intelligent president we've had since Jefferson, but he had a high should we stay this issue? He saw himself as a domestic
renewal leader. And so when he realized that he had a somewhat the following day, he would call up the CIA you call up the state department desk officer come over to the White House for the summit like he was back in college in preparing for a test. He was a millennial before his time if you will and he would hit it out of the park every time we good in small group settings relations with sore. Verde there was never any follow-up. When was called what it was a monochromatic foreign policy that dealt with one issue in one region into hell with
everything else? Obama comes in and Obama Obama had a very strange personality court for a world leader. No American president went to Congress to your times. Nobody's on cabinet secretaries fewer times. What would his own Inner Circle if he were times? I don't party allies fewer times than Barack Obama. What's not quite true? There's one exception you guys remember William Harrison. He caught pneumonia during his inaugural speech and then died on day 30 Obama beats him, but nobody else. Super
the 24 years of history of ministrations. We only had about one year foreign policy. You guys remember the thousand points of light the new world order. That was George Herbert Walker Bush's attempt to get American to have a conversation with themselves about what sort of world they wanted to live in and we punish them for it and just is making a bad decision can have consequences for decades so can refusing to make a decision at all. The glory and the horror of Donald Trump, is that at his core? He's got a really good point.
The Strategic order the Americans created to fight the Cold War no longer serves American strategic needs. It hasn't since the wall fell. But it was never supposed to Serve American economic me America subsidized of the global system the global system fights the Soviets. That was the deal. We never invested our economy in it. And as a percent of GDP the United States Remains the least involved economy in the world. We are not a trading partner power. We never have been. So the Americans can walk away from the global system in
be fine. And that's exactly what we're doing. Braces, the question at the Americans are going to drop the mantle of leadership. Is there anyone out there who can step up and replay to displace the Americans need two things first, you have to be able to provide Global Security on the Ocean by 85% of all International Trade travels the ocean blue got to be protected. Look at that. Bell on the right here we have what's called a jump carrier. And on the left we had was call the supercarrier on the deep blue sea without any support
from Land base assets. It takes eight of those to fight off one of these outdoor twenty one of these in the world 11 of them are American flag. There are 11 of these in the world. They are all American flag. The combined navies of the rest of the planet have about 4% the long range Fire tablet cut capacity of the American Navy today and a current rates of global Naval build out the combined navies of the rest of the world will roughly equal the United States in the year 2240. As an American I don't lose
a lot of sleep over this by the way, the Chinese have two of these one used to be a casino. The other one is a clone of the one that used to be a casino. context second consumption cuz people have to buy the stuff, right? This is what we call a standard demographic pyramid. You got Children of the bottom young adults mature adults retirees at the top men on one side women on the other. This is what we call a consumption-led demographic because whenever you got a big bulge in your population structure below roughly
age 40, it's all about the spending raising kids going to college buying cars buying houses smoking pot Benz Benz Benz Benz Benz. While we're in California, I figured that would work. When American political and economic leaders, look at a demographic like Mexico, we like what we see two big reasons number one all those young people consuming upwardly-mobile absorb. A lot of goods II young people writ large don't have the expertise to be to the high value-added. So the Mexican Workforce tends to be very good at low dammit in my
manufacturing and assembly that's not what the u.s. Is competitive in we do design we do high-end. So the propensity for trade the opportunities are huge Mexico became America's largest trading partner last year. It's a position. They will not give up at our lives. You may have noticed that the Trump administration's rhetoric on Mexico is a Volvo quite a bit in the last three years that started with Kyle the Mexicans are cheating us on trade, but that didn't resonate not with not with Trump core supporters. So he eventually evolved into the current issue with immigration and
identity. This is a partner. and this is not Chandler had a baby bus 45 years ago that they have yet to recover from that means they've got a huge chunk of population in their fifties and early sixties people who have been in there jobs for 20 30 40 years very high value-added very highly-skilled. But their overs populated in that segment, which is pushed down the relative cost of Canadian High skilled labor. And because there aren't a lot of young Canadians. There aren't enough
people there to consume what is produced it has to be exported 80th 80% of it comes to the United States has gone from being a partner integrated into the American system to a direct competitor and that shift is now reflected in American economic policy. Get your birth rate back up. Eventually you Asian to something like Japan. How do you run a first world economy without a Workforce? You automate to the world leader in robotics because they have to be funny thing about robots. They don't vote yet. So
it doesn't matter where you put some Soca pan has become the world leader. Not an Outsourcing orn resourcing but instead in something called the sourcing they picked up huge chunks of their industrial plant dropped it in the other countries with better demographic structures. So then get closer to end markets and get on the safer side of currency risk and political risk and supply chain risk build where you sell Toyotas for largest facilities in the world aren't anywhere near Japan during, Kentucky and, Texas. We're kind of in the middle work kind of a chimney
was too big group. We talked about first. We got the Baby Boomers. They are the largest generation as a percentage of the American population in this country's history and they are all right on the verge of retirement that changes our capital structure. Think about how have you invested in your life when you're 35, you put a small sliver of a small income away. Not a lot of capital there, but when you're 55, you put big fat in a larger income. When you're 64 and 3/4 to shut every possible dying, you can into those retirement
accounts as you age you provide more capital on easier terms to more borrowers. And as a country we are in the very urge of the Boomers Mass retirement Capital has never been this cheap. It's been never been this easy to get this is the right here. But I'm three years the majority of the American Bluebird class. Will he moved into retirement the velocity of capital? Won't stop little reverse the cost of capital at least quadruple, which means the capital conditions that we've been used to for the last decade
almost over if whatever you're doing takes a lot of cheap capital and get it done quick. Next Generation the Millennials now I normally like to spend about 45 minutes of every presentation talking about why the Millennials are waste of skin, but we don't have that kind of time today. So instead we're to go through all the reasons that we should all be grateful that the Millennials are here for you xers and Boomers out there. Don't worry. This won't take long is really only three reasons. So one. consumption all those juice
bar memberships Elizabeth dazzled flip flops and all those constriction jeans and all those goddamn scooters. They had up. Millennial consumption is kept the United States out of recession since 2009. We would head to recessions since then without them. That's fantastic. They're young enough is enough of them. We probably have another four years. It was consumption pulse. That's great. Second if you fast forward to the year 2030 when the Millennials are in charge. They will fill
out the tax paying class in a way that Gen X My Generation never could so there is a light at the end of the fiscal tunnel. It is not a trained. It's a millennial. Weather that makes you want to jump for joy or crying the corner Tire Lee up to you. We think of the Millennials in this country as the end-all and be-all but in reality, they're all alone in the night almost everybody else in the world has some version of the Japan or Canada problem. If you look at the combined tomography of the rich world without the Americans in it.
Retirement Community the degree of capital collapse that is just around the corner is Monumental and as important as that is what this means that the global order was going to end. Anyway, regardless of what the Americans did because consumption-led growth on this planet is about to become impossible. Quick walk around the world. People's Republic of China 30 years after the one child policy they run out of 25 year-old because that is how math works. South Korea aging even
faster about developing Asia Thailand only marginally better know if there's one country that can't have an open honest conversation about population policy. That would be Germany. And if there's one country that we were convinced that we just knew it are a bone to crack the code on how to have a lot of kid, that would be Italy, but apparently we were all wrong. Russia even if you believe Russian statistics, this is a terminal demography. They just made up 8 million children age 10 and under the last 18 months. Go fact, there we go. Brazil
country the future going to save us. All right. Yeah, look at the top left of that. This is Brazil 30 years ago ears Brazil today. They are aging at six times the American rate. They are becoming old long before they will become rich and the average American will be younger than the average Brazilian by the year 2042. The average American became younger than the average American sorry 2 years ago. Folks there's only two countries on this planet. But have a
sustainable demography outside of United States. And while the French can handle the catering in the kiwis can man the borrow a global order that does not make this was all going to end anyway. And if you remove the Americans from the equation, if you let the chips fall where they may you get a series of brushfire Wars has various countries with her out of desperation or opportunity feel compelled to take matters into their own hands. Zones are likely to see the greatest exchanges of ammo. For those of you who know your history, you'll recognize it. These are
the parts of the world that have historically have suffered the greatest conflicts because it's where the world's geopolitical tectonic plates Clash together. For those of you who know your economic history, you'll recognize these zones does the places that have seen the greatest economic growth over the last 70 years because of the order because the Americans forced everyone to be on the same side and outlawed War it was bass effect. And now it all goes into screaming reverse. The guy who is kind of a midwife in this process is Robert lighthizer. He's the US trade representative.
His job is to negotiate all the trade deals. The US has no this is not his first stint in government. He used to work for the Reagan team back during the Cold War quick War Story to go back to the night early 1980s. The Cold War was running hot and heavy we had a nuclear scare over Berlin in 1983. And the Reagan team saw that some of the Allies were doing things like currency manipulation that we really did appreciate but we really needed the Allies lined up shoulder to shoulder. So team Reagan turned a blind eye the fast forward to 1985 in the Cold War was cooling off. So team Reagan Thru
the Allies together at the Plaza Hotel in New York and says look, we see what you've been doing. You're going to stop you're going to stop today because if you don't the Americans will withdraw from the global order and you can deal with the energy markets in the Soviet Union by yourself, cuz we got a deal. The light Heiser was assigned to the Japanese to make sure they didn't renege on the deal. because the intimidation worked currency manipulation didn't stop at reverse the US dollar drop by half and we'll lighthiser was in Tokyo. He get his marching orders from the White
House. He walk into the Ministry of Finance and lay out the American and then when it was the Japanese is turn to issued a rebuttal. He'd actually take off his translator microphone disassemble it on the desk in front of them and have a little GI Joe worth more with the pieces while he spoke. I think it's stupid back together put it on his ears. They will that was riveting. I hope somebody really wrote that down, but we're going to do it my way, right? He make sure you hold all the cards and then he's got back in from his boss. And then he forces the issue. This is the guy in charge.
Quick walk around the world. So, you know where we stand the first trade deal that was modified with the Koreans. President Moon of South Korea was smart enough to realize there is no version of a world without the United States in it and with his country continues to exist as countries trade dependent and from a security point of view. If it's not North Korea, it's China or Japan the tough neighborhood. So it is first opportunity moon walk into the White House and says, you don't like our bilateral trade deal. Okay, how do I change it so that you do the technical talks were over in 6
weeks. Is it enough to keep the Americans in Fall the day that American troops are needed Moon doesn't know Trump doesn't know I don't know nobody knows but without the modification to the core steel. The answer would have been absolutely not. Next up with the Mexicans on the left there. You got an outgoing leader. He is from an American point of view. The best partner we could have ever had in Mexico City fluent English speaker pro-trade pro-business. What a deal on migration cooperation against the cartel breathlessly corrupt using the
perfect partner. He would call up Obama and Obama would pick up the phone. He would call Trump and only get insults hideous series of wasted opportunities. The new guy that's Lopez obrador amlo. He's he's funny. He combines the political Corruption of Hillary Clinton In The End by Foreigner sentiment of Donald Trump and the shrillness of Elizabeth Warren the blind ideology of Ted Cruz and the pathological refusal to do basic mathematics of Bernie Sanders all in one.
megalomaniac and he looks at Trump. He's like it's like looking in a mirror. There it is light an opportunity. Say what you will about amlo. He was smart enough to realize that if he got in a pissing contest with Donald Trump, it would consume his presidency and he sees himself as the Mexican equivalent of Bill Clinton a leader of national renewal didn't want that. So after his election, but before his inauguration, he called the White House and he called Pena conference them together to look if you two guys can figure out
the next iteration of NAFTA signed before I take over I give you my word. I will personally spearhead ratification. It works. He's proved to be an honest broker the Mexicans ratified the deal over the summer the Americans the Canadians in December. It's done Trump actually signed it today. All right, we're somewhere warm. So there have got to be Canadians here where I can watch. I mean the Canadians are you about to be up in California sucks? This is Christina Freeland. She's the Canadian
Deputy Prime Minister. She's the second most powerful person in the country. She used to be foreign minister. She got kicked upstairs with the last elections now in my opinion Minister Freeland is one of the 10 smartest people in western civilization today. 4 years ago, I beat her in a debate. But we're not here to compare records. Freeland's biggest Advantage. I think that she knows how to keep your ego in check which for a politician is kind of a big deal. Now she became foreign minister the week that Donald Trump became president and because she's the foreign minister of Canada her
first big meeting with a foreign leader was with Trump and she realized not five minutes into that first encounter that she was absolutely the wrong person for the job. Everyone has their own personality quirks Trump's biggest one is that he feels he must be the smartest person in any given room. And as long as Minister Freeland was in the same time zone that was never going to happen. So she knew that she had to step back from managing day-to-day foreign affairs with the United States. She couldn't be the face of the relationship. She
needed someone else to put in front someone with a nice smile and a great head of hair and a tight outfit entire body somebody who just stand there and nod and smile, but somebody was completely unburdened by having anything going on between their ears. She found the perfect person. Justin Trudeau is by far Donald Trump's favorite world leader because he's not allowed to speak. He just stands there and nods and smiles and Donald Trump's internal monologue filled in all the gaps was very complimentary the Canadiens called the defensive was working great.
Until a little over a year ago when the Canadians had the honor of hosting the G7 Summit. And has host Justin Trudeau had to speak and for the first time in the Trump Administration the inner monologue did not match the sound waves. relations literally collapsed in an hour now when the Americans would go down to Mexico City for the trade talks for NAFTA to we talk about rules of origin. We would talk about the digital economy and agricultural subsidies Wow real issues.
But when he lighthiser would come up to Canada. They look at the agenda like today were talking about the worker rights of left-handed handicap transvestites. What the fuck? The Canadians installing now. Why would the Canadians think that's going with this administration at this time in this political climate was even remotely a good idea. What do you want? It's because they had a really good read on how American Canadian relations have been for the last seventy years and it all has to do with this map. Canada is on the flight path for Soviet nuclear weapons on the way to the
United States, which meant there was never any version of Canadian. There's never any version of American Security during the Cold War it would Canada was not protected for free. So the Canadiens leverage like no one else in the world to their credit. They did not use this to free ride on security issues. They did the opposite Whenever there was an international crisis the Canadian Prime Minister was always the first world leader to pick up the phone call The American Presidents Day. We see what is happening. We are here we are with you. How can we help but Canadians
are not stupid. They use that leverage. They just didn't use them in security cuz at the end of that phone call with the details of work down the p.m. With Slippin. Oh, yeah, and we'd love a little bit of extra Market access for Aerospace and Ontario Automotive. 70 different occasions the Canadiens carb exemptions out of American Trade law all of them or folded in the natural one. But the Americans don't see the world this way anymore. None of those exemptions were folded into NAFTA to so when the Americans in the Mexicans reach their deal,
they did something kind of fun. They didn't announce it right away. They waited until Freeland was on stage with them. That's the moment you found out. And shortly thereafter. Leithauser said you were looked we have a deal with the country of the future. It's not you. We have a deal with our future partner and that's not you. You know our terms you've known him since day one. They haven't changed take them or leave them. You got 7 days. only took six Shinto Ave. Did everything right? He was the first world leader to congratulate congratulate
Trump on the phone after his win with the second world leader to visit Trump in the white house. He brought a gift of golden golf clubs. He lost to Trump hideously an 18-hole. Here's a shot from the game has restrict asses were kissed. They hit it off, beautifully. I may hit a series of deals on intelligence sharing a military cooperation that were actually deeper than what do u.s. And Japan have during the Cold War. That's the pretty high bar. Albany goes home by country. This guy's kind of well, it's a rough around the edges, but I can manage it the relationship the
alliance we're doing. All right. About two months later the Trump Administration slaps Japan with steel and aluminum tariffs and starts threatening Automotive tariffs. So I've been comes running back like what the hell dude. I thought we had a deal. I thought you and your carriers were going to be in front and the Japanese and all the other Asian allies when you get behind you were going to face down at the Chinese together was going to be glorious and you were to pay for everything. Entrance like oh Dawn's for butter like the order. Yeah. I've read about that.
No, we don't do that anymore. In fact, I don't think for a moment. You can call up the Koreans in the Taiwanese in the ties and the Australians and build this Pan Asian Alliance little pressure is a multilateral trade talks. We barely did that for Canada. So I'm a little crestfallen goes home breaks out a copy of the art of the deal Andre Reed's it comes to the conclusion that this is all undergo shooting tactics. We even pick up the phone when the state department calls. pain month after that Trump Administration announced finalize trade deals with the
Koreans in the Mexicans in the Canadian and fourth largest trading partners have already reorganize themselves into a post order Network. That doesn't involve Japan. The last big trading partner that the Japanese have is China. So are they caves talk start bilaterally a month later and just like with the Canadians and just like with the Koreans the Japanese have to give in on everything. One of them is far more excited about this deal than the other. We all complain about our jobs way
too much. Let me start with the punchline here the way decision making in the European Union works. Is it for any really big decision like individual country has full veto rights. So Malta freaking Malta can become anything. There was never any version of a divorce settlement that was going to involve Britain having access to the common market for any appreciable amount of time because individual countries would be to it. This was always going to be a hard crash out. The Brits were always going to be on the outside. They were
always going to have a depression and they were always going to be looking at the United States at the only country that they might be able to link up with in order to stand. Now the Brits have been here before back during World War. I Americans we're kind of late to the party and we forgot to build a Navy first poops. When we finally did declare for the Allies in 1917. We rushed these bad boys in the surface. This is the town class. They are barnone the shittiest Naval vessels. The United States has ever operated.
Most of them didn't even see combat because they would stall on the high Atlantic on their way to the combat at the end of the war. We brought them home and put them up on block if it starts over and we just pretended that they had never existed. World War II rolls around relate to that party to and at one point, Winston Churchill Come to the White House to plead his case in person to FDR and he says look if you're not going to get involved in this fight if we have to fight the Nazis by ourselves, at least give us some beer. FDR's we have the town class.
Winston Churchill heir to the British Empire the greatest naval force in American during human history has a stroke stumbles to the door while mumbling. Thank you fer stop since it's free. As payment we will take every single military facility you have in the Western Hemisphere. That is the scale of the capitulation awaiting the United Kingdom in trade talks among the things the United States will demand the complete transfer of the entire Financial District from London to the United States on the surface. It looks like they're getting along great me
know. It's all smiles and bad hair. But look who's in the back of the room. This is just getting started folks. And then I'm almost out of time for her to finish with tuna. I can give you 30 maybe 40 reasons why China will not be a unified country and an industrialized country a decade from now. This is the big one. It's the islands off the coast of Japan Taiwan the Philippines Indonesia Singapore the Chinese call it the first island chain and there is no. In human history where the Chinese have been able to integrate in an economic matter with the world beyond the chain. There's
one exception today under the global order because the Americans have put everyone on the same side. That is the dominant reason that we even think about China as an economic power today just for the first time. It's at United. It's at peace with itself and I can access global resources and Global markets remove that and it all falls apart with depressing speed. That's the big long-term reason the short-term reason is like hydrogen charge of the trade talks and he's been looking forward to this moment since the 1990s the World Trade Organization Charter.
He is the most Pro free-trade person in the American political system right now, and he thinks that he has to burn his baby in order to get some tactical advantages over China is worth the price but keep in mind even with a change of administration. This doesn't shift all that much of a 187000 Democrats trying to get on the ticket. Not one thinks that Trump is being too soft on China in trade talks for the Chinese. This is as good as it gets. All right, we're pulling out of time. So if you need a coaster or maybe some door stops
couple ideas accidental is how the world got to be in the shape that it is today absent talks about the major conflicts of the world what will happen when the u.s. Steps back. This United Nations is the new boy comes out in March the scusset what the countries of the future really will be you guys are the first people on the planet to get copies of this united. We have them out at the front of the Pavilion and we haven't at the reception Center take them use them read them throw them whatever you want. You left it everything but the pot jokes for me to call that a win. Thank you very much.
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