Peter Zeihan on the Israel-Hamas War

26:10But once we had the 9-11 assault and the Iraq war and the coup attempt in Venezuela, the oil markets kind of wisened up and like, OK, there are a lot bigger things going on here that have a very real impact on this market than stone throwers in the West Bank. And so over the next 20 years, the Palestinians just vanished from the scene as a factor in energy. And what we're seeing today is an underlining that that is still the case. So if there is going to be an oil shock, it will not have anything to do with Palestine or Israel. It will be about the Saudi response to what's going on in Palestine and Israel.

26:47And at the moment, we're still waiting for that intergenerational argument to be shaken out. If the king wins, well, it was the king's generation that played a role in the formation of OPEC. And it will not be quiet if it goes that direction. Does the Netanyahu government survive this? No. Why not? There is a large faction of the population in Israel that are basically wards of the state. They're ultra-Orthodox. They study the Torah. They have low taxes and high subsidies. And so a very high population growth, lots of kids. And they now have been sufficiently strong at the polls to generate a significant amount of the factions that are part of the Netanyahu government.

27:33And to be perfectly blunt, most of them are most of them are wastes of skin. They've never had a real job. They've never been in business. Their education is purely religious. It's not based on politics or geography or economics or anything. and their ministers. And they have been on watch while this attack manifested. And the credibility hit to them with the overall population in Israel is crippling. So I don't know how long this government can last, but I know that this specific government will fall because they have proven they're incapable of running the country without a lot more practice at doing something else.

28:12Now, whether Bibi falls or comes back in the next election, who knows? That dude is a political survivor. Do not write him off. But this specific coalition government, yeah, it is not long for this world. Does Biden's visit there make it more difficult for Saudi Arabia to continue on those talks with Israel? I mean, the relationship between the US and Saudis have not been great. Yeah, well, I would say if you're Mohammed bin Salman, this is great because it's showing the writing on the wall and what the Americans want. And so, you know, you can either align yourself with that or align yourself against that.

28:46The older generation, this is going to be more complicated because if there's one thing that everyone in Saudi Arabia recognizes is that they're fat and they're lazy and they're incapable of defending themselves. They have to have a security guarantor. And if they side against Israel in this fight publicly and loudly, well, that'll never be the United States or Israel then. And all of a sudden then they've got to find someone else, anyone else. And all of the other options are messy. China. China doesn't have the capability to project power to the Gulf. Well, you know, there was all these talk about Yuan being priced, oil being priced in Yuan and the Chinese laying this, the groundwork for the moment when Saudis would turn to them.

29:34You don't think that any of that bears fruit? Well, there's a relationship there. I don't mean to suggest they hate each other. They don't. It's a business relationship, though. The Saudis know that the Chinese don't have the military capacity to project past Taiwan, much less all the way to the Persian Gulf. But they also recognize that the Chinese are the world's largest oil importer, and the Chinese recognize that the Saudis are the world's largest oil exporter. So the idea that the two of them wouldn't have some sort of corporate economic relationship is equally silly. But there's only so far that you can take that.

30:08And as for the denomination issue, the Chinese were very clear at the BRICS summit that they had no interest in a post-dollar world. It's just that wasn't picked up by U.S. finance because it doesn't match the de-dollarization drama mantra that we're all talking about here. I mean, it's really not a discussion in Beijing or in Johannesburg or in New Delhi. But the only one, the only country that feels that they have a strategic interest in a non-dollar world are the Russians, and they just want everyone to use the ruble, which is, of course, stupid. We're going to take another quick break to hear a word from our partners.

30:44We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

30:52so you completely reject this because that de-dollarization theme is strong it's strong it's strong in your world and nowhere else right yeah interesting uh because we hear a lot about the weaponization of the dollar the you know that the u.s using swift as the beginning of the end of the reign of the dollar there's got to be an alternative the yuan is not internationally exchanged. The rupee is a very soft currency. The Russian system is under sanctions, and the Brazilians have no idea what they're doing. There is no alternative here at all. The closest would have been the euro, but 10 years ago when they were having their financial crisis, they started confiscating insured banks' deposits to pay for their bailouts, which eliminated any possibility of ever being the euro.

31:43And in the aftermath of the sanctions on Russia, the euro and the yen are de facto subsidiaries of the U.S. dollar now. I mean, there's not even anyone who's pretending that they might be next. So, Edward, I think we answered part of your question with China's role in the conflict and strategic objectives, but Edward was also asking about Russia. So this has, in many ways, of course, obscured all headlines about what's happening in Ukraine. I mentioned before that there's been pushback from the Republicans and members of Congress about continuing to fund that. What is this? How does this situation in the Middle East now impact the conflict in Ukraine?

32:24Well, it's definitely a problem because it's a distraction. There is no economic outcome from the Gaza operation. It's a non-factor economically. And from a strategic point of view for the United States, it's also a non-factor. The only way it matters is through second, third, and fourth degree steps, none of which are guaranteed to happen, none of which are likely to happen. But Ukraine, Ukraine, a couple orders of magnitude more important. This is the ninth war that the Russians have launched since 1991, and in an attempt to reshape their neighborhood. And if they succeed in Ukraine, Ukraine doesn't solve their strategic problems.

33:04They're trying to build a better external crustal defense. Romania, Latvia, Lithuania, Estonia, and Poland solve that problem. So if Ukraine falls, We will have a different war and one where the United States will have boots on the ground and nukes will fly. So blocking the Russians from advancing past Ukraine is a core national interest to the United States. In addition, the economics of this speak for themselves. You've got the world's number one wheat exporter, number five wheat exporter locked in a war. It involves the world's largest and third largest sources of potash fertilizer. It involves the world's second largest sources of oil and natural gas.

33:44The economics of this are immense. And so you can I can think of no better way of showing you that everyone who was Republican who could do math has been ejected from the party than talking about how Republicans are now against assisting a country that is a democracy of failed, an economic conduit that's critical in order to hold back a irredentist power that holds huge control over wide swaths of the global economic system. I mean, it's like this should be the type of conflicts that traditional Republicans are all about because it stops so many things. But instead, we've got this wing of the party that has managed to take over and clearly can't find Canada on a map or do basic math.

34:28And so but that's important. I mean, this is we're going into an election year and they have a very loud megaphone that they're speaking through. So what does that mean for the future of U.S. support for Ukraine? We will find a way to make it work because the alternative is to risk losing American cities. We found out in the Battle of Kiev that the Russians were incompetent at modern warfare. They're not any good at logistics. Their training was atrocious. And the fact that you've got Ukraine, which functionally didn't have a military on the first day of this war, that still exists, is a testament not necessarily to Ukrainian pluck and creativity, but Russian absolute and utter incompetence.

35:09And so if we see the Russians prevail in Ukraine, when they reach the NATO border, a fight between the NATO forces, who are the best in the world, and the Russians, who are definitely in the bottom half, would be a bloodbath. And the Russians would be obliterated. But that doesn't change any of their strategic needs. And so nukes would come into play. And the Biden administration, because it's led by a guy who predates the splitting of the atom, knows this in his gut. And we will find a way to make it work. That's a terrifying prospect because what you're saying is that they will be backed up against the wall and they will use nuclear weapons against American cities.

35:53Is that what you're – Yeah. The Russian demographic is one of the worst in the world. This is their last generation where they can try to use conventional military force to reshape it. They know that this is their last ship. They know that this is their last decade as a coherent conventional military power, despite all their flaws. And so they're going to push until they get to a border system that they can hold with a degrading internal system. That goes all the way to Warsaw. So every time I talk to you, Peter, your turn of phrase is so funny, but what you're saying is so terrifying that I feel like I'm like simultaneously like want to cry and laugh at the same time.

36:29Good. The alternative is to just cry. Yeah, it's true. Actually, you and I were talking a little bit about just the sort of mental strain of having to hold all of this for everyone to watch this and try to figure out the future. And Roy, I appreciate your comment saying, how can we cope? What are the choices do we have to cope? Well, we'll talk about that in a little bit. But it is. All of this is so very, very serious, what we're talking about. So is the U.S. military aware of this and what role would they play? Because presumably if they believe what you just laid out, the scenario you laid out, which is that the use of nuclear weapons is a real threat from Russia, they do not have a U.S.

37:12Congress that's listening and may or may not have the next president who's listening. What's happening on the U.S. military front? Sure. Well, I'm not worried about the next election. I'm pretty confident that Trump is going to face a landslide defeat. We can go into the logic of that later if you want to. Yes, we will. But on the military question, there's a reason that the Biden administration has fast-tracked absolutely everything involving missile defense. By the books, by the numbers, we certainly don't have enough missile defense to protect against a broad-spectrum Russian strike. However, keep this in mind, every weapon system, every economic system that the Russians have used in the last two years has failed pretty dramatically.

37:57To think that all of the nukes are the one thing that works to spec, I think takes a little bit of analytical creativity. I would argue that the concern that this administration is going to have to deal with is what happens if we get to that point and Putin hits the big candy red button and nothing happens. What do you do with someone who attempts to kill a half a billion people but fails? I can't believe we're having this conversation. But that's the, I think this is the, it underlines the seriousness of, you know, sort of squabbling that's happening in D.C. Because these are the very, you know, even if you don't buy into your theory, these are the stakes of what we're dealing with on a global level.

38:44and we can't even move forward with any legislation. It's a little bit terrifying. Basically, what the Biden administration is dealing with is the four previous administrations abdicated pretty much all global involvement. And while I can argue that the United States, because of its insulation and its economic structure and its demographic patterns, is actually in a really good spot for not just today, but for the long term, that does mean that there are a lot of things that have gone down, that we've lost the ability to influence easily. This is one of them. Our biggest failure, biggest failure of the Clinton administration specifically, was ignoring the Soviet collapse and not managing the fallout.

39:26And we are still paying for that. We are still trying to clean that up. So General Mark Milley, former chairman of Joint Chief of Staffs, has been making the rounds and was just, I think, on 60 Minutes and warned about the changes that technology is bringing to the battlefield, specifically drones. We've seen them in Ukraine. I believe they were used in the Hamas attack. But they certainly have risen in everyone's mind now about how. And now add on AI to that. We know the Chinese have been investing massively, we think, in the use of AI military. The general certainly thinks that they have done that.

40:06How does this change the calculus of war? Because we're talking about shooting nukes. That seems very old school. But what about the threat? How do you contain this kind of technological threat that maybe you don't need the kind of apparatus and money that you used to? Doesn't that sort of make it a far more dangerous landscape? It certainly makes it messier. So until very recently, the United States was the only player in the game when it came to drones. We had drones of every size from things the size of a grasshopper to things the size of a 737. What is unique about the American drone system, and so what we thought was true about all drone systems, was that they were expensive and they were in small numbers.

40:50American technology, when it comes to the military, has always been about quality over quantity. because wherever we go in the world, we will always be hideously outnumbered. So we've got to be able to punch harder at a further distance. And that's the Reapers, and that's the Predators, and that's the Special Forces drones, all of that. What we have seen in the last few years, however, is that there's a cheap approach, that there's nothing about the technology that says it has to be top-notch. And if you make 50 really, really cheap ones, you can still do a lot of damage. Now, for the United States, I'd say that kind of the problems fall into two general categories.

41:27The number one is the new Joint Strike Fighter, which is supposed to be our only airborne weapons platform for the next 20 years. Its range is somewhat limited, and those little Iranian moped drones have greater range than the Joint Strike Fighter. So all of a sudden now, our weapons platform, to be perfectly blunt and broadly useless. because if they were to launch a thousand of those things at a base where the JSF was based, one of them is going to get through no matter how good your defenses are. So that limits the sort of military activity the United States can do. Largely removes our ability to have air cover from ground installations.

42:05We'll have to do it only from naval platforms. The second problem we've got is anyone can do this. I mean, Hamas is many things, but an economic player, no. A technological player? No. And the fact that you can basically put these together in your garage and launch them by the dozens makes for a different sort of conflict. Now that works both ways. And what the United States military is doing is something called the Replicator Initiative, where it will basically start using American resource scale to build Hamas-style drones. And the goal is to be able to independently attack 2000 Chinese targets and destroy them within 24 hours using our naval platforms.

42:52So basically things like destroyers and God forbid carriers just carry tens, if not hundreds of thousands of these things. And we just lost launch a locust swarm. So two can play by this game. But it does mean that the military tactics that we use are going to have to evolve instead of having a very large, I'm sorry, very small number, very high end. military vehicles, you just launch a cloud of very low-end stuff that is attributable and disposable. I don't think people have thought through how much that gives the advantage to a country like the United States. We will have to fight differently, and kind of the sunk costs that we've put into some of these technologies are suddenly going to become very questionable.

43:35But there is no country in the world that can adapt in the way the United States can. So let's say two years from now, we have a direct fight between the Americans and the Chinese. Sure, they can build a lot of drones, but they have to target something that they can't see and that can move. And AI is nowhere close to being able to target things over the horizon where they have to do a search pattern. Whereas the US Navy is going to know exactly where their targets are. They're on land with satellite recon, we can find them. And we just launched 10 ,000 drones at whatever it happens to be. So this is a really, really bad development for the Russias and the Chinas and the Irans of the world, getting the Americans to think about this differently, because our ability to adapt to that environment combined with our mobile firepower of the Navy, that's going to be crippling for all of them.

44:25I think it's probably safe to say there's a bad development for humanity, but point taken on the military advantage. It's just part of the process. So we were talking about the military capability and the political will. What about financial? There are some who have openly suggested and worried that the U.S. is spread too thin financially. We're funding two wars. Funding might be a strong word, but giving aid into two wars now. Our strategic petroleum reserves have been brought down in order to fight inflation, maybe win elections. We have huge deficits. We have a lot of treasury issuance. Foreigners are not buying treasuries.

45:02Janet Yellen has just recently said the U.S. can afford financial support for both Israel and Ukraine. But do we have a financial problem or cost to this that's going to become difficult? There's a lot to unpack in that. Let's start with the things I am not worried about. Most of the stuff we sent to Ukraine is hand-me-downs that we haven't used in over 25 years. And honestly, the Russians are doing a favor because we're disposing of it into their teeth. Otherwise, we would have to dispose of it ourselves. It would cost money. So actually, the Russians are doing a financial solid by absorbing that ammo for us.

45:36Israel is a little bit different. Israel is a much more technologically acute force, and they're after things that are precision guided, and that they have to get from the United States. So the financial cost of supporting Ukraine is very, very low in real terms. The financial support of Israel is much, much, much higher. That said, this is a country of only 8 million people, and they're trying to carry out a military operation in a zone that's only twice the size of the District of Columbia. So the scale of the needs is relatively low in comparison to what the U.S. military is capable of. For the broader question, there's a lot of low-hanging fruit in the United States when it comes to making budgetary savings.

46:15we have a healthcare system that is by far the most expensive in the world, twice that of your average first world country. And if we were able to just kind of go to a middle of the road system, we'd save 10 % of GDP right off the top, which would pay for everything we're discussing here. In addition to entitlement reform would pay for it all. Just that one thing. I would love, love to see meaningful health care reform in this country. Barring that, as long as the United States is the sole currency, and again, there's no pretended of throne at the moment, we do have the option of monetizing. That is not my preference, but it seems to be the preference for the last five political administrations.

47:00And honestly, if Americans had a problem with that and wanted to have a different system, they would have voted for the other guy every single time. There's an opportunity cost here. If we had stuck with what Bill Clinton did with the balancing of the budget back in the 90s, not only would we not have a budget deficit today, but we would have paid for the retirement of the baby boomers. But we chose a different road. So there's a difference between the opportunity cost and a national cost, there's no alternative for anyone right now. And honestly, the more the U.S. withdraws from the world economically, the more viable the U.S.

47:43dollar becomes as the global currency. Because the first thing you want from a currency is for whoever controls it to not intervene in currency markets to benefit themselves. So I feel bad about this. I'm a fiscal conservative, but people who feel my way have been out of power now for a very long time. Yeah. And I've learned a little bit. You can say that again, which brings us back to the potential third party. You said that you believe that Trump is going to lose in a landslide. That would seem contrary to a lot of the polls and certainly what his supporters believe. Why do you think it's going to go that way?

48:21Well, supporters obviously believe in him. No shock there. Okay, so a couple things. Number one, he has full control over the Republican Party apparatus, and I have no doubt that he'll get the nomination. I mean, he could campaign from prison where he's been convicted of 90 felonies, which is how many there are now. and he could live stream the abortion of his underage, illegal migrant, trans lover, and he would still get the nomination. He's got a lock on that. His supporters are fervent. They're cultists. They're not going anywhere. But then he has to win the general. And if there is one thing that Donald Trump has made very clear, it's that he doesn't think that the decision should be made by the general population in the general election.

49:11He wants the competition to be purely at the primary level. And so if you're an American independent, you're like, hold my beer. Because independents in the last midterms did three things that hadn't happened in American history before. One, they showed up. Independents usually don't vote in the midterms at all. Second, independents will violently vote for their own perceived best interests. And in exit polling, they indicated they thought the Biden administration was doing a horrible job and that his economic policy was borderline suicidal and that the damage being done to independents in particular were unfair and unwise.

49:55And they voted for Democrats anyway. And then third, independents almost never vote for the same side twice, they're very fickle. And so when Trump lost, they were voting against him. and then they voted for against him again. And so if the independents are willing to break all these normal patterns, you've got to look at the electoral map of the United States and figure out which states the independents hold the swing. And that's about 20 of them. And so you take the states that will go red no matter what happens with the independents and the ones that will go blue without whatever happens to the independents, you put them to the side and you look at what's left, they all go purple.

50:34So we're probably looking at the Trump team getting maybe a dozen states, none of which are big. And with Biden sweeping, among other places, Texas and Florida. You think both of them make it to the election? I mean, not to be grim. Oh, yeah. This all assumes that neither of them die. That's fair. If one of them keels over for whatever reason, then we're in a completely different environment. And a really unpredictable one that close to the election. Right. Yeah. Which, incidentally, is another great entry point for a potential third party. Right. Right. Someone who sweeps in and can can get away with not having done the full.

51:17At that point, you might be able to talk about a presidential run from a third party. Mostly I'm focused on Congress. Right. How are you thinking? You were in Mexico not long ago. A lot of attention always during an election of the crisis at the border. It's being broadcast nonstop in certain areas of social media. certainly going to the Republicans or certainly try to use it against the Biden administration to drum up support. I know you, of course, concentrate on demographics. How are you thinking about what's happening at the border? Well, let's hit it from the non-political demographic angle first before we get into the muck.

52:00The United States birth rate is the lowest in its history. And if we continue on our current path, we're going to be facing a Chinese or European style dissolution 30, 40, well, no, 50, 60 years from now. So we're at the beginning of what could be a very dangerous period. And in the next 15 years, we're going to see China and Germany disassociate. And so we're going to get some very clear examples of the path that we're on soon. When you say disassociate, what do you mean by that for people who don't follow demographics? China will cease to be a functional nation state with an industrial economy.

52:34Because of the birth rate? Yeah, their birth rate dropped by 70 % in just the last five years. During COVID? Predating COVID. Why does that mean they have to stop functioning as an industrial state? What about technology? What about other? We have a number of countries in the world that are in a similar situation. Korea, Germany, Italy, and to a lesser degree, Spain are all in that same bucket. But it's not that they're running out of children. For most of them, that happened 30 years ago. This is the decade they run out of working-aged adults. So young people do the consumption. How do you run a system without consumption?

53:10Older workers do the production investment. How do you run a system without production and investment? So at a minimum, we're looking at a fundamentally new economic model that hasn't been invented yet. And for a system like China, where decision-making is now impossible, I'm looking at them losing national cohesion. What does that look like? This has happened 20-odd times in Chinese history, so there's a really rich palette of national disasters to draw from. All of them involve a degree of civil breakdown, warlordism, and famine. It sounds so extreme. Some people, when they hear you say that, just think that that just can't happen.

53:50It just sounds so doomist and extreme. Well, then they have to say it can't happen again. Because it's happened before. Over 20 times. But not in modern history. Oh, it happened just after World War I.

54:07People forget that what sets the China of today out from the China of the last 3 ,000 years is the Americans provided them with trade access to the world for the first time and sent all the regional powers that were occupying home for the first time. And so for the last couple of generations, the Chinese have been allowed to build without interruption while having American granted access to the world. This is not their normal. good point it and european countries are facing the same situation yeah not as extreme as the chinese situation we keep getting new data out of china that indicates that it's just getting worse by the day uh but germany this is their last decade as an industrial power as well they're simply not going to have the workforce to continue the attempt yeah sebastian we had a question from sebastian with germany's trilemma beginning to take shape how do you see neighboring countries doing if the manufacturing base is starting to fall apart?

55:02How would Switzerland, I guess you might be from Switzerland, Sebastian, how would Switzerland, for example, do in this case? I mean, I think you can say, what does this mean for Europe more broadly? So Switzerland does have a younger demographic than Germany. They have a minimum 20 extra years. That doesn't mean that their future is particularly bright in the long term, but they've got a lot of time to potentially figure something out. And they're going to learn a lot from what the Germans do or don't do. France has the healthiest demography in the region. A lot of this is going to be picked up by the French.

55:30Now, yes, the French are not capable of doing German-style precision manufacturing, but that doesn't mean they're a slouch. As for the Central Europeans, most notably the Poles, the demographic situation is similar, but they're all 15 years younger. So there's, again, another couple of decades. So you'll see this system break up and a lot of people leave just like they did the last time that the Germans faced a major geopolitical stress back in the 1840s. Remember, we got a million Germans in like a four year period for Mount Migration. You're probably going to see something very similar again.

56:05The trick, of course, is whether the United States can fix its immigration system between now and when this break really happens so that we can take advantage. Yeah. Well, I mean, that's the question for everybody, I suppose, though, right? So we're looking at what we now call crisis at the border. But based on what you're saying, it sounds more like opportunity at the border. If you're looking to replace or funnel in a younger population, can't the same be said also for China and Germany? I mean, if you're talking about a breakdown in society, don't people become a very important asset? Yeah, an asset.

56:40And wouldn't you look to invite them from other places that are facing a different standard of living, climate crisis? I mean, we know that. So, you know, does the immigration conversation change? I hope it does. In the case of Germany, theoretically, emphasis on the word theoretically, it might be able to use immigration in some way. The scale of what is necessary would be huge, though. You need to bring in two to three million people under age 25 a year for the next 20 years. And if you do that, Germans are no longer a majority in our own country. So, you know, the cultural transformation. That's the rub.

57:16That's the cultural transformation of doing it so late in the day makes it much, much harder. And the same is true for everywhere, though, right? For everywhere. So Canada is an example of a country that did it before. So the Canadian demography was very similar to the German demography 15 years ago. And so they started up a massive in-ward migration program under the Harper government, continued it under Trudeau. And I don't mean to suggest that they've solved it, but they've provided an interesting case study for how it doesn't have to change you. The United States has a much healthier demography than Canada had 15 years ago and is generally the destination for a lot of countries who want people who want a better life.

57:58So we can theoretically make the decision to do this at scale. But the countries that we would reach to for that are now very different. So Mexico has been so economically successful over the last 30 years that net migration from Mexico to the United States has now been flat to negative for 15 years. And with NAFTA, they've industrialized and their birth rate has dropped. And so now they are a destination country for inward migrants as well. And so for the first time in U.S. history, we've got Canada, the United States, and Mexico who are all on the same side when it comes to migration issues.

58:37That's a very different conversation that's being had now compared to just five years ago. Most of the migrants we're getting are coming from failing states, El Salvador, Honduras, Nicaragua, Cuba, and most recently Venezuela. The numbers, the apolitical numbers are obvious. we need these people. The politics are obviously more of a problem. And in that, the issue absolutely has been Donald Trump, because he's done two things. Number one, he's closed down almost all methods for legal migration. So it doesn't matter if you don't know how to clean a window. It doesn't matter if you can design a supercomputer.

59:19You have to come illegally if you want to come to the United States. It's like, so all the people that we say that we want, We're saying they can't come either. Second, he built the wall. Now, the wall is going through the border zone, which is the most remote part of the American continent. The Chihuahuan and the Sonoran Deserts are some of the greatest natural barriers in the world. And by building the wall, he has built 50 construction roads across this barrier in order to build something that's 20 to 30 feet tall. Well, I ask you this. If you can quadruple your income by using a ladder once, Wouldn't you?

59:55Especially now that on the other side of that ladder are roads. So Donald Trump functionally has been the most pro-illegal migrant president we've ever had. Now, the Biden administration is, if anything, as hostile to migration because he's attempting to bring the unions into his political coalition. Part of this whole our politics are a mess is that some of the factions have broken away already, and the unions are one of them. And they, as a rule, are the first or the second most anti-migration group in the country. So no one in Washington wants to talk about meaningful immigration reform until we know where the unions are going to land.

1:00:35That's not going to be this year or next year. It's interesting because when you're talking about it, we know that there's a fight for talent in corporate America for valuable talent. It sounds like human capital. There are acquisitions made for that. It sounds like you're describing a very similar situation setting up, but there's no country that politically is there yet to have a discussion about it. And for most, it's too late. I mean, China is just too big. They could absorb all the world's willing migrants, assuming the migrants wanted to go there, and it wouldn't be enough to move the needle.

1:01:12Canada is a very special case. Their percentage of foreign born is triple that of the countries in second place. And it's a tie between us and Australia and New Zealand and Argentina, where we're all right around 3%, whereas the Canadians are at about 10. When you're traveling around talking to people, so many people are just fundamentally closed off to the idea that China might be as weak as you say. I mean, we have certainly hear voices that are convinced that they're an existential threat to the U.S. Where is the divide? Why do you why are you so sure that China is so weakened and others are so sure they're going to invade Taiwan and be a threat to the U.S.?

1:01:53Well, there's always the linear forecast fallacy. The idea is that the last 20 years had this percentage of growth. So the next 20 years will be that percentage of growth. I mean, by that logic, we're all going to be Nigerian by the year 2150. So, you know, that's number one. Number two, there is there's a lack of understanding of the degree to which China is a technological power. And even for semiconductors, forget the high-end stuff, which the Chinese can't even pretend to make. Like the low-end stuff, between like 70 and 90 nanometer things, are just like barely a step over the Internet of Things.

1:02:27Yes, the Chinese make a lot of those. But with imported equipment and imported software and imported labor, the skill sets of the Chinese just have not improved much. Labor costs have gone up by a factor of 14 in the last 22 years. But worker productivity has barely doubled. So China is no longer the low cost producer, and they were never able to become the high tech producer. They do low end. They do assembly. That is not nothing. That is an essential piece of the process, but it's not a dominance part of the process. And that is the easiest part to move. And so what we've been seeing in just the last couple of months is foreign net or foreign direct investment is now negative because people are realizing that you don't put your people at risk.

1:03:14You don't put your capital at risk in a system that now criminalizes due diligence. The story is in the process of turning. China has size, and that matters. But that's not the only factor. Now that we're losing those network effects, I think that the pace that we move out of China is going to be three and four times the pace that we moved into China. And to be perfectly blunt, it needs to be, because if we can't build out the industrial plant in North America before the Chinese system breaks, then we have to do it without Chinese gear. And that's going to make everything a lot more difficult and expensive.

1:03:51So you believe the narrative of deglobalization and reshoring is going to happen, but because of economic necessity in some way, not because of a political disagreement with China? The politics are not just a sideshow. That is very real. The national security side of this is relevant. But we've never, ever in human history seen a country face this sort of demographic collapse. Even if we decided to actively assist the Chinese in everything they do, this is still their last 10-year period. So we talked about Putin being, you know, what happens if his back is up against the wall? What about Xi? Well, that's the problem.

1:04:35We don't know. There's this great story that I was told once that basically, you remember back in January, just before the Ukraine war started, when the United States was releasing this intelligence that not a lot of people believed about what the Russians had planned up to and including the day that the war was going to start. Well, it turns out that we had found a way to weasel our intelligence system into their secure rooms where there were basically giant safes where there was no eavesdropping possible. There were no electronics, but we managed it anyway because Putin has an inner circle. Some of them are even competent.

1:05:12There's people he discusses things with. So there are phones you can tap, and there are faxes you can read and emails you can hack. And it turned out their information security was not as good as we thought it was. And so we just shared it with everybody. There's nothing like that in China. It's not because they have better IT protection. It's actually much worse than the Russians. But Xi doesn't speak with anyone. So there's nowhere you can go. There's no information you can get. There's no conversations you can listen into to find out what the Chinese are going to do, because it's all in one guy's head.

1:05:44So the normal things that you would do indirectly is like, you know, you look at the economic issues, you look at the military distribution, and you guess what someone in his position would do. None of that's relevant, because we don't know what he knows. He's destroyed all the lines of information to himself and yet at the same time established himself as the only decision maker. You can't climb into someone's head when you don't know what they know. And so we're in a complete black box. All I can say is that because he has done this, the Chinese system is not functioning as you would expect a nation state to function, economically, strategically, in anything.

1:06:27And so we have been seeing ever more interesting policy failures across the system, whether it's in housing or in finance or in supply chains or in diplomacy. The whole thing is showing the early stages of system failure. And so that 10-year horizon I keep talking about, that's actually the best case scenario. That assumes you've got a government that's doing mitigation all the way down. And we don't have that right now. So you're describing a situation where there's potential nation collapse in China. They don't necessarily have nuclear weapons, but North Korea does. Well, the Chinese have nukes.

1:07:05OK, the Chinese. You have Putin, who is hellbent, and there is a risk of nuclear. I mean, it sounds like there's a terrible potential for some sort of nuclear conflict. Do you understand why the Biden administration is fact-tracking missile defense now? there's not a lot that we can do here. We can't stop in Ukraine because we just face a bigger war a few months later. North Korea is a bit of a black box itself. And so we were always going to need some sort of missile defense there. And the Chinese system has become a question mark. And barring preemptively carpet nuking these places, which I am not recommending, your only option is to make sure that if something does get flung, you're in a position to intercept it.

1:07:56Missile defense. Do we see other nations run toward nuclear armaments now that if they also come to these same conclusions? That's a policy question. That's one of the risks that the Biden administration is making by going to Israel. If it becomes obvious that the United States is going to pick favorites but not put boots on the ground and is not interested in a broader regional strategic picture, we just pick friends and go front. Then anyone who is not one of those friends, whether they're friends or foes, good or bad countries, nukes are really the only option that they can really have. So I'm not so much worried about nukes in Iran.

1:08:40To be perfectly blunt, this technology is nearly a century old. And if Iran was capable of doing it, they would have done it already. I'm worried about Poland. I'm worried about Sweden. I'm worried about South Korea and Taiwan and Japan. I'm worried about Saudi Arabia, countries that have the technical or financial means to either build one themselves or go out and buy one. And if they think the United States really isn't concerned with their security, and for the most of part, we are not, then they're going to have to do something themselves. And that's a very different world. And that's where we'll be within 10 years.

1:09:15So what changes that scenario? Because that's a very dark road we just described. It would take a really big if. So the world that we are just now leaving, the globalized system, we created that at the end of World War II in order to combat the Cold War. We basically created this system that provided so many huge economic benefits that everyone wanted to join. We would have to do something on that scale again. And I don't think we can do that without a significant change in the way Americans view everything. Coming out of World War II, we understood the cost of global instability in our bones.

1:09:55And so there was a tolerance for international involvement. We didn't have that after World War I. We had to lose a half a million soldiers to be sufficiently shocked into involving ourselves. And so we're at this moment of political transition in the United States. Maybe the next transition is going to be more internationally minded, but it's hard to see the logic for it. The North American economy is doing very well. And in the transition we're going to see over the next 10 years, it's probably going to double the size of the industrial plant. I mean, that's a huge growth story, but it doesn't involve the Eastern Hemisphere.

1:10:36So it's difficult for me to see people on the left or the right embracing the sort of commitment that would be necessary to hold history at bay everywhere else. And then, of course, if we do decide we want to do that, the question is whether we can. This isn't 1970. We're not the only country with a navy anymore. Right, which begs the question, if the U.S. turns inward, is there anyone else that can fill that role? As we had Andrew asking about peacemakers, any country in a position to be able to step into that and somehow glue things back together, or at least stop an acceleration toward some kind of nuclear conflict.

1:11:19There's only two countries in the world that have the capacity of doing that today on a regional basis. So France could do it in far Western Europe. Turkey could do it in Southeastern Europe and the upper parts of the Middle East. And they could have spheres of influence that have their own rules and their own security system. That could work for them. But that's it. The Japanese found a way to get along with the Trump administration and the Biden administration. Japanese are the only people who figured out how to work with both sides of the American political aisle. So what could have been an independent sphere is now part of ours.

1:11:50And obviously, we're going to look out for the Western Hemisphere ourselves. And that's it. Keep in mind that our military, in terms of the firepower it can throw, is several times more powerful than the combined navies of everyone else. And the second most powerful navy in the world is Japan. And now they're on board. And the third most powerful is Britain. And if they can ever figure out Brexit, they'll probably be on board too. No one else can try. We have a very global audience, and sometimes people wonder if you're overly optimistic about the potential of the U.S. What do you say when people say that to you?

1:12:31Oh, I'm perfectly willing of dumping on the United States when we do something stupid, and we do things that are stupid a lot. But when you look at geography, the United States has the best geography in the world and significant insulation from everyone else. And if you look at demographics, the U.S. is the healthiest demography in the rich world. And even if we keep aging at our current point, we're not going to reach a Chinese or a German style problem before 2060, probably 2070. So just playing the numbers and playing the map, this is the place to be. We're not perfect. Dear God, we're not perfect.

1:13:05And I think Churchill said it best is you can always count on the Americans to do the right thing after they've exhausted all other options. Yeah, we certainly seem to be living that right now, don't we? So this is so much for us to hold in our head. I always love when we have a chance to catch up with you, Peter. What are you going to be sort of looking most closely at right now? There's so many moving parts. They're all interconnected. What's going to sort of hold your attention right now? What are you looking at? Ukraine is easily an order of magnitude more important than Gaza. So Gaza for me is, I hate to say this, especially if you're Israeli, I apologize, but it's a distraction.

1:13:43It's not a major issue. It's major for Israel. It's not major for anyone else. The future of Ukraine will determine what is possible in the Western alliance, not just NATO and the EU, but the whole structure of the region and how Russia dies. Because if Ukraine falls, Russia will come for Europe. And if Ukraine succeeds, then we have to deal with the breakup of the Russian system, which will be much messier than the breakup of the Soviet system. And an order of magnitude more important than that is how China disintegrates, because it is the workshop of the world. And we've got$35 trillion of sunk costs and industrial plant in that country, most of which is going to have to be rebuilt somewhere else.

1:14:27And how that process happens is going to determine the human condition for the next 50 years. Is Putin still in power next time you and I get together? I think he has sufficiently consolidated power with his own system to not have to worry about assassinations. And by Russian standards, he's in great health because he doesn't drink. So I would expect him to continue to run the Russian Federation until the day the Russian Federation dissolves, whether that is a year from now or 30 years from now. Which I assume is a big risk, because if he's not willing to yield power, it can't be taken from him.

1:15:08That will complicate the end. He spent a lot of his last 22 years as president basically dismantling the methods by how someone might rise up through the system. So he's got his inner circle. He's got his outer circle. The two of them combined are under 130 people. And that is everyone within the Russian system who is a decision maker. There's no one coming up from below. He hasn't been as thorough of purging the system as, say, Xi has, because Xi is one. There's no one else. But Putin has done a very good job of making sure that those 130 people think of him as the person who ultimately decides everything that matters.

1:15:44and they know that there is no one else among the 130 that could even theoretically take Putin's place, with one exception, there's a guy by the name of Igor Sechin who runs Rosnaft, the state oil company, used to be an arms smuggler during the Soviet period. He might have the guts and the brains to do it. But if there's one thing that the other 129 agree on, it's that Igor Sechin is an asshole and he would probably be killed within 24 hours of offing Putin. Well, everyone has been – no one survives trying to take out Putin so far. So he must have a long reach himself now. He comes from the security services.

1:16:23So intelligence is in his blood, and that's where his strongest allies are. And his second strongest allies are in organized crime. So if he wants somebody gone, he either has the official state do it or some irregular group do it. And it's – at least from a leadership point of view, it's been effective. All right, Peter, as usual, it's going to take me a while to recover from this conversation, but we love catching up with you. We appreciate all your insights. I think we managed to cover just about everything. So yeah, look forward to doing it again soon. Until next time. Yeah, thanks. Be well.

1:17:05All of us together are living through the death of an old world and the birth of a new one. This is a fourth turning, but this is not the fourth turning of demographics or politics. This is the birth of the new technological age. This new world has a world of 3D printed rockets, crypto payments in space, discussions on the rights for humanoid robots, machine intelligence that may outperform our own, simulated worlds where autonomous AI agents write code for other autonomous AI agents. It's a world full of opportunity and full of difficulty too. You see, we are living history and it's happening much, much faster than any of us can comprehend.

1:17:49This is Reid's law, Metcalfe's law squared. Humanity has never gone through anything like this. But we have to comprehend and understand what is happening. It is into this world that the Exponentialist is born. The Exponentialist is a new service from me, Raoul Pal, and David Matten, author of New World Same Humans. It's an almanac of the fastest period of change ever witnessed in the human history. A period of excitement, exhilaration, difficulty and terror. And The Exponentialist really is for humans first and investors second. Yes, the opportunities are enormous all round. To find out more and get our special launch pricing, go to realvision.com forward slash the future.

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