Germany Economy Shutdown, China falling Apart ,Putin, Energy & More | Peter Zeihan Full Interview

Germany Economy Shutdown, China falling Apart ,Putin, Energy & More | Peter Zeihan Full Interview

we all have 2 years of entertainment
budget saved up sorry I couldn’t join
you last night but look at this from my
point of view you guys are the 167th
presentation I’ve given this year and
because of that two years of
entertainment budget I have been to a
158 open
bars this is the ninth presentation I’ve
given this year
sober whether that’s going to make it
better or worse I have no idea uh we
have to start of course with the
war can we go ahead and get the slides
up on the sides that’ll really help
everybody uh what we’ve got here is a
map of the Russian
space uh this is population density map
and it’s on its side so if you have to
tilt that’s totally fine uh the orange
wedge the light orange wedge that goes
from roughly Central Europe down into
Central Siberia that’s where most of the
people
live over here here we have a climate
and economic map and the green zone that
roughly overlaps is the Russian wheat
belt now that light orange color that’s
roughly the population density of
Nebraska if you melon scoop out Lincoln
and Omaha so you have neighbors you know
their names you probably haven’t seen
them this
year the orange I’m sorry the the green
zone the Russian wheat belt that is the
lowest productivity agricultural zone of
the major zones in the world short
growing season you can get one crop of
wheat it’s short season wheat that’s it
lowest amount of income per acre of the
major a zones the income is so low that
the Russians have never been able to
build a National Road
Network you want to move something in
Russia at scale you must use rail it’s
your only
option you go to the right to the blue
to the north you end up with Tundra and
Tei no one lives there if you go to the
left to the South to the yellow you are
desert and no one lives there but what
really depresses the Russians is the
beige territories on the shoulders of
their good land that even by their
definition are completely economically
nonviable but they’re flat and they’re
open and you can run a Mongol horde
through that the Russians have been
invaded 50 odd times anytime their foe
has made it to the
green the Russians have not been the
ones to drive them out the weather has
because the Russians can’t move even in
their own space
but whoever The Invader was had to move
to get there so they can operate just
fine they have to wait for the weather
to drive it out so the Russian strategy
going back 350 years has always been the
same Advance out of the green through
the beige and reach a series of
geographic blocking points that you
can’t run a Panzer Division through and
then forward position your very slow
moving rail supplied troops in the
access points between those
gateways if they can do that forward
position defense they can hold and this
is what they had in the Soviet period
they controlled every single one of
those access
points but post Soviet Russia only
controlled
one everything that Putin has done in
the 23 years that he’s been Premier has
been about reestablishing those military
Footprints this is the kazak
intervention the caraba war the Georgia
War the Donas War we’re on stage roughly
five of eight so it’s not that the
Russians were never going to stop until
they had all of Ukraine because Ukraine
doesn’t control those gateways the
gateways are past Ukraine it’s that the
Russians were never going to stop when
they got all of Ukraine there’s more
steps to come and the next series of
steps involve countries like Estonia
Romania and Poland which are all NATO
allies where are my non
Texans it’s not as big as they think
the scale of what the Russians are
trying to do here we have a hard time
wrapping our minds around they’re trying
to secure a border system that’s three
times the length of the American borders
with half the
population
okay now if you take Russia Ukraine
bellarus the combatants of this war you
put them into a bucket collectively they
are the world’s largest supplier of the
First Column second largest for the
second and so on now I was in Langley
about a month ago basically just doing
this slide the 64 words on this slide
for four and a half hours yeah yeah that
wasn’t intimidating at all uh we’re
going to talk about a few of these in
peel outs that are relevant for you guys
but there’s just one that I want to kind
of draw special attention to Neon is
used in the cartridges that Focus the
apertures of semiconductor fusing lasers
that’s how we etch the
semiconductors you produce neon in a
two-part process first you have a steel
mill that has an air separation unit and
the the air separation unit pulls out
the oxygen and n of the air floods it
into the uh combustion chamber in order
to generate the heat quotient that
you’re after and then everything else is
put into an extra canister which is sent
to a more advanced facility where they
pull out and purify all the trace gases
you know the Argon the carbon dioxide
and the
neon the first stage for air separation
that steel mill is traditionally done in
the Russian space in Russian steel mills
which are all under sanction and which
are shutting down the second stage the
purification was done in
marle which is gone that was 80% of
global neon
Supply which means at some point in the
next 12 months we get to figure out what
goes back to analog because building out
a replacement neon system is a minimum
of a 2 to threee
Commitment just file that in the back of
your
minds you want to give up your cell
phone your dig ized car your computer
your airplanes your servers Big Data
what what can you do without we’re going
to have that conversation next
year we’ll have other conversations next
year what we have here is a pipeline map
we’re looking specifically at the green
lines those are the oil lines and
specifically we’re interested in these
terminal ports in the north on the
Baltic you’ve got pror in the south on
the black you’ve got Nova AIS and the
reason that these matter is insurance I
know I know guys it’s 9:00 in the
morning we just had breakfast there was
biscuits and gravy and you’re going to
talk to us about
insurance work with me this will get
sexy
fast you cannot enter a port or leave a
port or go into a constrained Waterway
like say Panama without an insurance
policy on Your Vessel and the Japanese
Americans and Europeans now have a
sanctions regime on Maritime insurance
so that no Russian tanker of or no
Russian ship of any type can get an
insurance policy the way that the
Russians and the Chinese are
collaborating to get around this is the
Chinese have rented a half a dozen super
tankers that they’ve lashed together
into a ra and have parked off
Portugal and the Russians are renting
shuttle tankers because super tankers
can’t sail into these ports anyway it’s
got to be small tankers to make the run
from these two ports to Portugal to do a
ctoc transfer to the the raft and then
the raft is a CTO SE transfer to a super
tanker that can make the long run around
the continents to the Chinese
Coast there’s no end of ways that this
can go delightfully wrong in a short
period of time CTO SE transfers in the
best of conditions and calm Waters just
outside of ports are already among the
more dangerous things that Pilots can do
and to do them on the high seas
wow uh or you may have noticed there’s a
lot of countries along these routes that
don’t like the Russians very much the
Russians are offering Sovereign and
Demon ifications for those shuttle
tankers and it comes out to about a
payout of about a billion dollars each
if something goes wrong so can you
imagine laia just waking up like one
idle Tuesday I think I’m going to cause
the billion dollars of worth of damage
to the Kremlin yeah that sounds like a
fun
Tuesday if there’s any Interruption to
the flows no one is going to let their
ships go into these ports and if that
happens we get a problem with oil
overnight because this is not Texas
if these ports cannot discarge cargo
disgorge cargo pressure will build up in
the pipes all the way back to the
Wellhead and unlike West Texas the well
heads in Russia are in Siberia and
they’re in
permafrost where are my Northerners
there’s got to be a few of you here you
came where it’s warm one northerner okay
he knows what’s up when it’s cold in the
north as long as you keep moving you’re
fine if you stop you freeze today death
same with oil as it comes through the
that as the oil comes up through the
subsurface Frozen layer it would turn to
gel if it stops and the water that comes
up as a byproduct of all oil production
would freeze into ice and when water
freezes it expands and it cracks the
pipe from the inside we know this will
happen because it’s happened already in
1992 when the Soviet system collapsed
shut the entire system down for a while
they didn’t repair all the damage for 30
years and wasn’t the Russians that
repaired the damage it was the Western
Services firms which are for the most
part
gone so we’re looking at 4 million
barrels of crew that will fall
offline and oil is not like other
products Energy Products have inelastic
demand so if you need a gallon of gas to
get to work and you can’t get that you
can only get 9/10 of a gallon that last
tenth whatever you have to pay to get
that and you will pay anything that
determines the price for the entire
Market so we can easily have $150 to
$180 a barrel
crude when will it happen well when the
Lans do something when we have an
accident on the raft or maybe January
because on January 1 the sanctions
regime
expands and goes from any Russian vessel
to any vessel carrying any Russian
cargo January
1 same map we’re now looking at the red
lines the natural gas lines and and this
is the one that matters this is
nordstream this is a subsea pipe from
the Russian Mainland direct to the
German Coast it provided 40% of
Germany’s total demand so it was not a
marginal supplier it was their Baseline
supplier the Germans are attempting to
replace it with seven different marginal
suppliers and so of course natural gas
prices in Germany are seven times what
they are here and they’re never going
down and somebody blew it up about two
months
ago the Germans don’t think of energy
the way we do we are very agnostic about
our energy we take oil from Canada from
Mexico we make a bunch our cells we get
some from Saudi Arabia if we don’t think
anyone is looking we’ll take some from
Venezuela that’s not how it works in
Germany Germany’s in a tough spot it’s
in a difficult neighborhood from a
strategic point of view disruptions are
common so they prefer to do locked in
contracts over longterm at fixed prices
with State
companies because they need the
reliability day by day they don’t have
that anymore and they don’t just use
natural gas as the base for their
electricity system they also use it as
the base for their petrochemical system
and the petrochemical outputs are not
exported they then form the base of
their manufacturing
system well that first link has been cut
and the rest of it is now falling
apart BASF
their chemicals major is in the Pro is
in the process of physically dismantling
a lot of their industrial chemical
producing facilities in Germany and
shipping the components to the US Gulf
Coast in a desperate attempt to
establish an alternate Supply system
they hope that within two years they can
build out sufficient processing capacity
in North America and then ship those
intermediate products back to Germany to
save their system but that would require
a buildout that is faster than what the
Nazis did at home during World War
II color Mak
skeptical more likely the entire German
manufacturing model is going to collapse
within 24
months if you want a BMW I suggest you
buy the current
model it’s probably the last
one be sure to get 10 years of Parts too
those are going to be hard to come
by it’s going to get so much worse
because this is the backup
plan Pipelines that go through the
conflict Zone in an artillery
War yeah that’s not going to
work okay one more small issue before we
get to the big
stuff chairman G has Consolidated power
unto himself more than any other human
in
history he now has a cult of personality
tighter than the Kim Dynasty in North
Korea tighter than Nero of Rome
and he’s ruling like
Caligula he hasn’t intimidated into
silence or exiled or imprisoned or just
Flatout executed everyone in the PRC who
is capable of independent thought he has
become everything that Donald Trump
always dreamed of it’s the voices it’s
worship and there’s nothing in
between and so we are seeing cascading
policy
disasters you guys remember last May
when we saw rolling blackouts in the
Chinese
system G didn’t find out until September
because nobody wanted to tell him you
know who ultimately informed him of it
Joe
Biden now I’m going to go out on a limb
and guess lots of people have lots of
opinions about Uncle Joe but I don’t
think there’s a person here who turns to
him for breaking
news it’s not that people don’t want to
bring him bad news it’s people don’t
want to bring him any news cuz they
never know what the status of the
conversation in his head is and how he’s
going to take it and he literally kills
people
so another good example February of this
year Putin and G had their T AET just
before the war and Putin lied to to G’s
face like oh yeah no we’re not going to
invade Ukraine that would be crazy why
would we do that can you imagine the
Intel people and the military people in
the back of the room like tell him he
like no you tell him and so was the only
world leader who was caught with his
pants
down the topic of the day of course is
co now I’m going to guess that there’s a
diversity of opinions that we’ve been
exposed to on that as well we are in
Texas some of us are like vaccines are
the way out of this others are natural
immunity is the only way we can get
through but I think if we’re all being
honest with ourselves not other people
ourselves at home with the doors locked
in the dark with the blinds pulled with
ourselves
we’ll admit that the other side has a
couple of points that are probably
worthy of consideration is that
fair okay thank you audience
participation I appreciate
that these aren’t options in China and
not just because it’s an information
controlled State the Chinese vaccine
does not
work and because the VAC the virus has
not gotten fast and loose in the
population no one has natural
immunity now the current
strain what are we up to Omron Theta QX
threatcon fuchia 7 I I’ve lost
track but I know that it’s got more
communicability than the
measles and at least five times the
fatality rate you release that into the
general population that is
unprotected and you will have two to
five million dead Chinese citizens a
month for a minimum of six months and in
a cult of personality government system
that is a regime ending
experience their only options are
lockdowns now they have stolen the
technology that is necessary to try to
make their own domestic mRNA vaccine
vector and they’ve launched their first
two but they don’t really understand the
technology they have very low hopes for
them they have deployed those to
Indonesia and the UAE for testing
they’re not going great but they’re
hoping to learn enough that they can
then do a second and a third and a
fourth round and they’re hoping to have
a domestically generated vaccine in Mass
application sometime in
2026 so the disruptions we have seen out
of China to this point this is the new
normal for a minimum of another three
years assuming nothing else goes
wrong so many other things are going
wrong let’s start with oil that raft is
going to go away soon
that’s a million to a million and a half
barrels a day that the Chinese get right
now that they won’t they get another
about a million and a half barrels a day
from Eastern Siberia which are fields
that the Russians didn’t develop that
was all BP and the services firms
they’re all gone we’ve never had this
sort of technical pullback from projects
before so we don’t know how long the
Russians can keep them running but we
know the Russians don’t have the
technical skill to maintain those Wells
so is it going to be 2 months 4 months 8
months 2 years we don’t know but we know
the are all going to
zero and the Chinese have to suck up the
near entirety of that shortage too
meaning that China will be the economy
that suffers more from the Ukraine war
than anyone other than Ukraine
itself and then there’s the minor little
detail that about two three weeks ago
the Biden Administration killed the
entire Chinese Tech sector there’s
there’s this weird delusion in the west
especially in the United States that
China is a technological peer and that
is not true they cannot make the
highquality chips they cannot make the
mid quality chips they can only make the
lowquality chips and only with imported
equipment with imported tools to operate
that equipment with imported software to
run the equipment and with imported
management staff to oversee the entire
process within the last month the bid
Administration has said no importing of
the higher the mid-quality chips no
importing of the equipment or the tools
or the software and if you’re an
American citizen employed in this sector
in China you know how to choose between
your job and your citizenship
and within 24 hours every American in
the sector was either transferred abroad
or
quit it’s
over and anything that comes from any of
those steps is also over because without
those high-end chips the Chinese don’t
have servers they don’t have a social
management system they don’t have the
great firewall they don’t have an AI
program they don’t have a Hypersonic
program they don’t have a big data
program it’s over
they can assemble with imported
components that they’re allowed to
import and that’s
it all right
oil back in 2014 a narrative took hold
what we’re looking at here is total
investment from all government and all
private into all oil and all gas back in
2014 a narrative took hold that oil was
done from a financial point of
view if by 2040 we are going to keep us
below that 2° centigrate threshold that
everyone keeps talking about we need to
purge carbon from our systems it takes
three to eight years from first
investment for an oil or gas project to
reach first production and then another
five to 15 years for it to break
even that’s already past 2040 so why
would you put your money into a project
that you will never get paid back for
that’s the logic now there’s a freight
train of logistical flaws in that
argument but it took hold in the
financial sectors in New York and London
and the rest and we got something called
ESG investment to the space dropped by
70% in seven
years so if we triple from 2019 I’m
sorry from 2020 levels today we should
not expect first largescale commercial
flows before 2026 just kind of keep that
in the back of your mind now luckily
what is true for the average is not true
for each individual piece thank God uh
this is my favorite graphic
sequence I like to call this the
checkbook map because everyone up there
has paid their power
bill here are the world’s conventional
oil and natural gas producing zones in a
snapshot this is the agony of
globalization bringing the energy from
where it is produced to where we
actually use
it but here is the world’s commercially
viable shale
there are a dozen 20 things about the
American Energy complex that are
fundamentally different from everyone
else’s I think this is the most
important at least for Today We Live
where we
produce and we’re the only ones who do
that so we’ve got options when things
like Russian crude fall off the
line all right same map we only have one
person from the north are you from the
Upper Midwest
Minneapolis okay he he gets it what
we’re looking at here is the Upper
Midwest and as he knows he’ll tell you
later this is the most important city in
the history of human
civilization it’s Marshall Town Iowa
it’s where I’m
from this is bismar North Dakota if you
find yourself in bismar you’re going to
have to sit down and ask yourself a very
serious question how the hell did that
happen and this is not a
party Western North Dakota population
four it’s lit up because of a problem
with
transport oil is a liquid it conforms to
the shape of its container you can put
it into a rail car tank or truck
whatever but natural gas disperses and
you have to have a system to gather it
to transport it to distribute it and to
use it and that all has to happen at
more or less the same rate because
storage is very difficult and expensive
now we’ve got the world’s largest and
most Diversified natural gas system but
we can’t keep up with what is bubbling
up as a byproduct from our Shale oil pre
yields and you’re going to see things
like this in all of the Shale projects
that produce oil so that’s the peran
that’s the eagleford or in this case the
backen we have to flare it until we can
build out the
infrastructure which means in the United
States only in the United States natural
gas has been priced as a waste product
and that’s changed
everything here’s Henry Hub our primary
natural gas pricing facility for those
of you on the Gulf Coast you of course
know what these are those are
hurricanes storm comes through the gulf
they shut everything down they go back
out the next day they spend weeks if not
months repairing the damage you get an
elevated price situation that lasts a
while but by 2009 the majority of
natural gas consumed in North America
came from the Shale projects and every
Shale well is on Shore so weather ceases
to matter from a production point of
view all right where are my
Texans Texans well shy this morning
usually there’s like whoops you of
course know what this is this is last
January when Texas got
cold got down to
25 and everything stopped working oil
natural gas solar wind nuclear coal it
just all stopped there were there were
there were snowmen in San Antonio they
were sad snowmen but they were there for
a
week and here’s here’s what we’re all
bitching about right
now back in September we hit $9 with
natural gas double what we had been used
to for 15 years $9 in inflation adjusted
terms is right at the 50-year average we
are bitching about average Energy
prices you guys want to see what the
Asians and the Europeans have to deal
with because of the Ukraine war
disruptions three years minimum to bring
new Supply online assuming the war in
Ukraine stops tomorrow the
infrastructure’s already been
destroyed this is the new price level
for them it can get a lot worse it will
get a lot
worse there’s a fun Al break that’s
already happened world hasn’t processed
it
yet the Europeans are already in an
energy induced recession many of the
countries in Europe will not recover
from
this the only way that the Germans have
kept the lights on is by shutting down
industrial production
completely I would say that the Chinese
are in an energy induced recession
already but they were already in a
recession because of Co they’re not
coming back people we are losing German
and Chinese manufacturing at the same
time and it will not
recover and we just have to deal with
that now this matters Beyond
manufacturing because part of the
industrial output that has been shut
down in Europe is anything that has to
do with say nitrogen type fertilizers
we’re also losing potach type
fertilizers because of what’s going on
in the Ukraine war and because of
Chinese mismanagement we’re also losing
phosphate type fertilizers let me give
you an idea of where that little
nightmare
goes this is the us fertilizer system
that first line of really big numbers is
the percentage of each nutrient that is
imported and then the pie chart shows
where we pull it from you’ll notice that
for the United States for nitrogen and
for phosphate we are mostly
self-sufficient it’s only potash where
we have an exposure internationally and
we get almost all of that from Canada so
you know they are good for
something this sliver is the only part
that we used to to get from the conflict
Zone and we are the world’s largest
agricultural producer and exporter the
world’s second largest exporter is
Brazil
we were very lucky this year
everyone had a fertilizer
reserve and the weather was perfect in
almost every agricultural Zone on the
planet the reserve is now gone the
disruptions are at the base so a
replacement system is 3 to 10 years away
basing on
nutrient and mother nature is never kind
for 24 months in a
row we start food shortages next
year I hate this graphic the blue and
the green are the world’s major sources
and exporters of calories in forms of
grain and
soy blue and dark green everyone else is
n importer you disrupt the fertilizer
flows and these are the countries facing
at least a 40% reduction in their
ability to grow the crop in the first
place assuming nothing else goes wrong
and so many other things are going
wrong this triggers a multi-continental
famine that will start by the third
quarter of next
year okay let’s get to your business
model let’s talk Finance this is net
worth by decades
every year you are in your job you get
better at it you get raises your skill
increases you become more productive you
get wealthier as you go but the real
magic happens when you turn about 50
because that’s when your biggest expense
your last kid leaves home and is someone
else’s
problem a lot of people just turned 50
noted
and with those expenses gone but your
income still Rising you have extra cash
to throw around and when you turn 55 on
average that change means you’ve
probably paid down your second expense
your house and from 55 to 65 you’re
typically debt free your income keeps
going up your expenses are lower and
you’re the wealthiest you will ever be
in your life from 55 to 65 that’s
Surplus Capital that is 70% of global
private Capital that’s where the money
is
now normally when you turn
65 the picture
changes because if there is a currency
crash if there is a market crash you no
longer have income because you’re
retiring and so what you do when you
turn 65 is you liquidate your more
prospective Holdings you go out of
stocks and bonds into T bills and cash
so you can weather any sort of financial
crisis and be fine because God forbid
you have to go back to work when you’re
74 normally this doesn’t doesn’t matter
because normally we have a demographic
structure that looks like this this is a
standard profile you got children at the
bottom young adults mature adults
retirees at the top men on one side
women on the other normally the thin
sliver of people who turn 65 year old 65
years every year is a small group and
there’s more people 64 below that and 63
below that and this proportion has
largely held true for 4,000 years of
recorded human history
until
recently because at the end of World War
II the Americans changed the way the
global econom economic system worked we
enabled globalization we patrolled the
Waters of the world so that anyone could
go anywhere and interface with any
partner and that changed National
economics it used to be if you had oil
and coal and
food you could make something of
yourselves throw iron ore in that
too but if you didn’t have those four
things you were probably a
colony with globalization you no longer
needed all four you just needed one and
you could trade internationally for the
other three and so the entire planet
started to industrialize and move up the
value added scale and that changed
Regional economics because now that
there were there industrialization going
on we started taking industrial and
services jobs and that moved us off the
farm and into the town and that changed
family economics because when you live
on on the farm kids are free labor you
have as many as you can everyone loves
free when you move into an urban condo
however kids are no longer
free they are very expensive very loud
very mobile very dirty pieces of
furniture and adults are not stupid so
we had
fewer 75 years on that changed our
demographic from something like this to
this and suddenly it
matters when people turn
65 the Baby Boomers are the single
largest demographic we’ve ever had
obviously that’s important for Social
Security and Medicare and Medicaid not
going to try to talk you out of that but
think about what it means for
finance because they’re all turning 65
they’re liquidating everything and on
average America’s Baby Boomers turn 65
this quarter we are
here we have known since the
60s that between January of last year
and December of next year the cost of
capital in the United States has to go
up by at least a factor of
five independent of anything the Federal
Reserve
does that the FED is locked in a death
battle with inflation and the business
cycle might be turning at the same time
that’s just bad
luck that’s on top of the demographic
change in capital
Supply the other problem problem of
course is that the baby boomers are our
largest generation ever which means
they’re our largest worker group ever on
average they’re retiring right
now energy inflation food inflation
housing inflation these are all real
things but I’d argue that labor
inflation is feeding through and is more
important than all the others put
together and there’s nothing that policy
can do about this if you want more 40y
old workers you are 41 years too late
the replacement generation are the
Zoomers they’re the smallest generation
we’ve ever had they’ve all already been
born we know exactly what the feed in is
to the labor market for the next 20
years they’re already here between the
largest generation ever leaving and the
smallest generation ever entering we
have a worker shortage of 400,000
workers this year it’s just math that
number will increase for each year for
the next 12 before peaking in 2034 at a
shortage of 1 million
annually it’s hardwired
in and it’s so much worse everywhere
else in the United States we have these
guys the Millennials who will save us
all they’re a large generation they’re
providing consumption today and when
they enter their 50s in the 2040s
they’re going to be 50 in the 2040s it’s
not that far away midlife crisis here
they
come they will be providing Capital so
if I was to give you any advice today if
you’re only going to remember one thing
higher and borrow higher and borrow
higher and borrow because the labor
situation today is the best it’s going
to be for 20 years and the capital
situation today is the best it’s going
to be for at least
10 don’t wait three months don’t wait
six months don’t wait nine months don’t
wait 90 months do it now it’s only going
to go down from here because of
demographics until the 2040s and 20 or
2030s and 2040s

Discover key insights into the global economic landscape in this illuminating interview with geopolitical strategist Peter Zeihan. Uncover the far-reaching effects of Germany’s economy shutdown and its implications for global trade and supply chains. Gain a deeper understanding of the internal challenges confronting China and how they impact its stability and growth prospects. Zeihan’s expertise provides clarity on Putin’s geopolitical maneuvers and their broader implications for global politics. Additionally, explore the evolving energy dynamics and their significance in shaping geopolitical landscapes. Don’t miss out on this opportunity to stay informed about the shifting dynamics shaping our world today. Tune in now for essential perspectives on pressing global issues.

Peter zeihan full interview 2024 part -1
special thanks to @ZeihanonGeopolitics
presentation at SFN

#peterzeihan #europe #china