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Tuesday, July 16, 2024

The Power Hungry Podcast: Peter Zeihan

Here’s a summary: 

  • Zeihan believes the U.S. has the demographics, domestic consumption, military strength, energy resources, and industrial capabilities to thrive in the coming decades as globalization declines.
  • He foresees higher capital costs and interest rates persisting for about 10 years due to the retirement of the Baby Boomers and insufficient housing stock. 
  • Zeihan expects Germany’s economy to face major difficulties due to demographics, dependence on Russian energy, and the unraveling of its manufacturing supply chains across Europe. Natural gas from Russia previously supported Germany’s industrial base and petrochemical production. Misguided opposition to nuclear power — fueled by Russia’s propaganda — and over-optimism about renewable energy have exacerbated Germany’s predicament.
  • France and the UK are in better economic positions than Germany. Italy is in worse shape. 
  • Zeihan argues that the U.S. Navy’s current structure, which is heavily focused on large, concentrated assets like supercarriers, is not well-suited for maintaining global maritime security in an era of increasing de-globalization and potential disruptions to shipping lanes. He suggests that to effectively police the world’s oceans and protect trade routes against threats like piracy or rogue states, the Navy would need a larger number of smaller, more dispersed vessels.

    However, Zeihan also points out that since the U.S. economy is less dependent on global trade than many other nations, the primary beneficiaries of the U.S. Navy ensuring open sea lanes would be other major trading countries, particularly China, and that the U.S. does not have the political will to fund a large enough naval expansion to fully protect global maritime commerce. 

    In summary, the U.S. Navy’s current force structure is not optimal for policing global shipping lanes in a de-globalizing world and the U.S. has little incentive to bear the costs of dramatically expanding the Navy to protect global trade.

  • Zeihan forecasts an economic catastrophe in China within the next decade. 
  • U.S. manufacturing will have to be re-conceived as supply chains reorient from China to the Western Hemisphere. More automation and productivity will be needed.
  • Zeihan expects President Biden to win re-election due to advantages with independent voters.
  • While concerned about U.S. debt levels, Zeihan believes the unique status of the U.S. dollar provides leeway for deficit spending in the near-term to rebuild industrial capacity. 
  • Based on demographic trends, housing supply, and expected capital inflows, Zeihan believes investing in real estate, especially in the Texas Triangle and North Carolina, will provide attractive returns over the next decade.

In summary, Zeihan sees enormous changes ahead in geopolitics and the global economy, but believes the U.S. is relatively well-positioned to navigate the challenges compared to most other major powers. However, the transition will involve economic disruption, inflation, and will require a major rethinking of energy and industrial strategies.

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