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John Rubino: People We Should Know: Peter Zeihan

Guest post by John Rubino from his substack:

In a complex world, it’s tempting to escape the complexity by focusing on just one sector or scenario and ignoring everything else. My version of this myopia is viewing everything — companies, countries, individual investments — through the lens of credit booms and busts.

But there’s a lot of other stuff going on out there, some of it as or more important than the latest credit bubble. Which is where Peter Zeihan comes in. A “geopolitical strategist,” he ties demographics, war, and trade into one coherent and highly entertaining story. He’s an engaging speaker (as you’ll find out shortly) with an apparently photographic memory and some extremely aggressive predictions. Among them:

 

  • China’s population is collapsing, and the country as we now know it will end within a decade.
  • Germany is deindustrializing and will cease to be a manufacturing powerhouse in years, not decades.
  • Russian oil pipelines are going to freeze, break, and may never come back online.

 

And that’s just for starters. Here’s a typical Zeihan speech that I’ve watched several times, learning something new with each go-round.

 

 

But about that credit bubble …

If there’s a flaw in Zeihan’s worldview it’s his tendency to gloss over the impact that soaring debt will have on currencies and financial markets. He doesn’t have much to say on the subject in the previous video, and in the one below he dismisses the possibility of a “dollar collapse”. As long as the US is a global military and economic power with vast, liquid capital markets, he asserts, its currency will be dominant for international trade and therefore can’t collapse.

 

 

This — like most of what Zeihan says — makes a lot of sense. But it’s not complete. There are two ways of measuring a currency’s value: its exchange rate relative to other currencies, and its purchasing power (that is, its value relative to the things that can be bought with it).

In a world of badly managed unbacked currencies, it’s completely possible that even with America’s soaring debt and chaotic politics, the dollar will hold up pretty well relative to the euro and yen, and will thus remain the dominant means of exchange in global trade. But at the same time, it could also be losing purchasing power at an accelerating rate (i.e., collapsing).

In 2022, for instance, the dollar rose versus most other currencies (it was “strong” in relative terms), while it lost about 10% of its purchasing power (it was being rapidly inflated away). Let these trends continue for a few more years and the dollar might remain dominant in trade while its purchasing power craters and terms like currency collapse and currency reset become front-page news. As always, buy gold!

Guest post by John Rubino from his substack.


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