we've had two big bursts of inflation since world war ii the first was in the late 40s to early
60s when everyone was taking advantage of that first big globalization wave and industrializing
so that was industrial demand driven inflation our second big one was in the late 70s to roughly 1990
that's when the baby boomers had caught were all coming of age and they were founding families and
buying cars and homes that was consumer demand driven inflation and then the last 40 years
has been weird we've had the lowest inflation in human history and it's lasted since roughly 1992.
but look on what was going on in the background the baby boomers were no longer in their peak
consuming years and the millennials were too young to be in theirs my generation gen x were the
consumers in that period and there weren't enough of us so we didn't have demand-driven inflation
we also had the chinese labor enter the global market which pushed down the cost of labor
the baby boomers tended to favor two income families which also pushed down the cost of labor
and then the soviet system collapsed soviet industry collapsed but soviet raw material
production did not and so all that aluminum and steel and wheat and oil and natural gas got put
onto the global markets which kept prices down atypical for any age but it lasted until now
well now the russian stuff is going away because of the war chinese labor has aged out the
millennials have come and grown as consumers we need to double the size of our industrial plant
every inflationary thing from the last 70 years is being repeated now and every disinflationary thing
from the last 40 years is now flipping on its head so we were always with the rebuilding with
the demographic shift with equalization we were always going to have an inflationary pulse here
and it is going to last until such time that we probably double our industrial base
i don't see that process being done until at least 2027. so regardless of what trump or biden do
or don't do this is the macroeconomic environment now and there's not a lot that the government can
do to make it better or they can certainly make it worse but there's not a lot they can do to make it
better and we were always going to get here well afghanistan has only been a country and in time
periods when every country around them has been in uh breakdown as long as there is a pakistan
and a uzbekistan and a iran you should not expect afghanistan to be a functional state
so it's going back to what it was more or less in the 90s whether or not the taliban is the dominant
power over time you know that is subject to all kinds of cross currents i don't want to make a
forecast on that but it's certainly not going to be what we would consider to be a normal place
for the middle east writ large uh if you would if you eliminate the administrative staff in doa and
the special forces in syria were already gone uh troops in iraq are there's a few there an advisory
role but you're talking in the hundreds we don't have anyone in saudi arabia we don't have anyone
in all all those supply lines we had to get stuff into iraq or into afghanistan those are all closed
down so the fifth fleet is no longer hanging out in bahrain the french typically now have more
ships in the persian gulf than we do we're done uh that's good and bad for us we're obviously
like we shall revolution we don't care that's exciting after 15 years of crap in the middle east
but if you're anyone else this is a bit of a problem because the iranians and the
saudis have some very strong opinions about who should be in charge in that part of the world
and if the united states is not there keeping them separate or picking sides
i expect this to boil up into another crisis on a scale roughly similar to that of the ukraine war
and while ukraine uh going offline is bad for agriculture in so many ways obviously the persian
gulf going offline even in part is horrendous for energy prices and so we're going to be
entering a world in the not too distant future where just the ukraine war takes us above 170
but if we get a few things popping off in the persian gulf 200 is going to seem
cheap demographics moves really slowly until it doesn't and so from the start of my professional
career in 1992 until two years ago it's like i can see this coming i can see this getting closer
i can see everyone pretending that it's just going to be more of the same
now we're here and i am ceos and echoes of the demographic collapse in almost everything that
is going on right now that's everything from the american culture war to the ukraine war
to what's going on with covet in china uh at the core it's a shortage of workers it's a shortage
of consumers and very soon a shortage of capital and that is coloring everything that is going on
i don't see it and it's making the america more vulnerable but certainly more distracted and less
capable of doing something internationally now if our economy was dependent on international
connections this would be a big problem but it's not uh so the culture war what's the best way to
phrase this this isn't new and it's not just this decade uh social media makes it seem bigger than
it is and certainly makes shortens the time that it takes for people to blow their fuses
but our political system is in a period of going of a of reorganization we have a two-party system
with a first-past-the-post network uh for selecting electors uh think you take away the
fancy word what that means is in order to win you have to get one more vote than the other guy and
in that environment you're naturally going to have only two parties because you want to throw as wide
of a net as possible and that's why the democratic party and the republican parties traditionally
have been such big organizations tapping different factions so like on the democratic side you've got
minorities you've got college professors you've got um urban dwellers you've got single women
you know these ins these groups don't have a lot in common on the surface but the democrats have
built them into an electoral alliance that has the single largest chunk of votership in america
uh but when you have change in geopolitics and demographics and technology the factions move
around some of them jump ship others come in and if you look at the last 30 years we've had the
end of the cold war we've had the rise of uber globalization now the collapse of globalization
we've had the baby boomers be the primary consumers and now they're moving into mass
retirement of course this was a time when the factions were going to move
and trump is representative of that and so the factions are moving around and when the factions
are moving around they have to shout to be heard because if they get left outside of a party
being in a swing voter in the united states is not all that much fun because you don't get a
decide any of the platforms and so nobody wants to be left out but that doesn't mean everybody wants
to be in the coalition they're in or have been in for the last 30 years uh the last time the united
states went through one of these reshufflings it was the 1920s and 30s we had the great depression
we had world war ii and it took 12 years for the parties to settle into the forms that we have now
african-americans all used to be republicans big business all used to be democrats so
we'll get through this wow is it messy i'm sure it's going to be there but that goes for socialism
and fascism too all of our economic models are based on the idea that the pie is going to get a
little bit bigger and without population growth that is no longer guaranteed and we're already
seeing contractions and significant parts of the world uh europe's probably furthest involved
furthest along in this i think china is going to be a hard second uh and in a world where the paich
shrinks were in a world of less we need a new economic theory now in north america because of
demographics in the us and mexico we are the the place where that's least true uh our demographics
are still aging but we're not going to age into a situation of china or germany within 30 years
it's more like 50 years maybe and that assumes our birth rate never comes back up which it may
so we get to watch everyone else deal with this and i know that sounds like all wonky and boring
but keep in mind that the last major conflicts we've had the cold war the world wars the german
reunification wars economic theory was one of the big bases for all of that and to think that
everyone in the world is just going to figure out what the next thing is 100 years after this thing
and their first try i'm not that optimistic uh the the how you manage an economy determines who
is who in your society and that is worth fighting for so i can see us having conflicts in turn and
multi-state over how economics works now that we are in a world of less sure so the website
is z-e-i-h-a-n.com that's where you can sign up for the newsletter it is free it will always be
free and we're doing all kinds of things right now because of the ukraine war and then of course
the new book drops in june and its title is the end of the world is just the beginning
we we all need to get used to a a faster pace of change but ultimately what is going to allow
us to get through this is building out that industrial plant so one of the things that
i'm really impressed by the united states capacity to do is not at the national level
it's at the state and local level of cities taking their futures into their own hands
and going out and finding their own investors or building their own infrastructure or partnering
with other cities in other states we have a great record of doing that in the united states and the
communities that are better at doing that are the ones who are going to be able to write the future
you