The Accidental, Absent Superpower

[Music] please join me giving Tim woodsman a warm pecker in public this all started in the spring at Wichita downtown rotary they had a gentleman named Peter Zion speak and he's a geopolitical strategist used to work for George Friedman who some of you may have looked at some of his stuff geopolitical strategists look at geography climate demographics and things to sort of predict how countries will behave and they get paid kind of like the old sears of ancient times who'd read the entrails of birds well that's what they're doing except using data to predict what's going to happen in the next several years and they make a lot of money doing that so I got turned John on to it and John said oh I'd like to have him check out how much will it cost so I did twenty thousand dollars John thought that was above the budget so he said well Tim if you'll do it we'll just take one number out and I said cool sounds great to me he took the two out you know John so I got I did get to keep the four zeros and the comma so that was alright so anyway I'm not a person who sort of becomes an acolyte of anything if I when I saw Zion I thought this best presentation I'd ever seen not because of the green with him on stuff but because the data was so good I mean this was factual stuff so I started researching and reading I read his books he has two out and I want to give him the credit because most of these slides are from Zion and it's apparently allowed there on the net but I wanted to give that credit those are his two books he has a third one they'll be coming out soon and they're I think they're well worth it they're the best things I've seen on where the world is and where it's headed for okay I'm gonna take you back I've got to move really fast if we if I hope I finished by one and if if so then they'll take questions after and I know some of you have to leave 1944 July first the Americans called their allies together at Bretton Woods in New Hampshire and the country's coming there knew that the United States was going to tell them the way the cookie crumbles it was going to be how are things gonna be house how are things gonna operate and they're worried about that obviously so the Americans pull them in and say okay here's the deal where there's like there will be something to sign when we're through one you're gonna peg your money to the dollar and the gold standard everybody everybody who signs on this that's the deal - we're gonna give you access to our markets and we're gonna protect the oceans and they're kind of really you do that so everybody signed except for the Soviet Union make sense there were 44 countries assigned now how could the US do that well first we had two-thirds of the gold in the world everybody else had had to give us their goal to get munitions and whatever and we stayed on that gold standard until Nixon took us off in 1971 at that point the US dollar becomes the reserve currency for the world other countries joined later the original members are that fourth from the fourth down countries and then these others some join later and some never did but this was about the Cold War obviously what these countries got was the biggest market they'd ever seen the United States GDP gross domestic product was equal to somewhere between a fourth and a third of the world's at the time okay do you know what is today almost 25 percent almost no change in proportion so indirectly we subsidized every one of the Allies part of what mattered was shipping 3/4 of the world's trade goes by ship ok a container ship costs about 17 cents per container mile rail cost 60 cents trucks costs two dollars and 40 cents for container mile that's hugely significant because it means you can move an awful lot of stuff very cheaply Trump is absolutely correct we paid now we didn't do it because we were sweet and wonderful we did it it was a bribe in an essence for people to be on our side all right that was the deal and it was it played out that it was against the Soviet Union so we didn't do it to get rich it was a tool and it was a tool against Soviet expansion at the end of World War two the United States Navy was equal to all the navies of the world combined today Zion says it is still equal to all the navies of the world combined their arguments about who's next on this Zion says it's Japan second and Britain next the reason he says that is those are navies that are called Bluewater navies they can go they can project power Japanese supposed to be only for defense they have carriers that are for helicopters but they can be modified to carry Jets okay others will list Russia and China as second and third Russia has a big fleet and suppresive except a lot of its rotten it hasn't been maintained through this post-soviet era China is building and building fast they're building a carrier they they have 13 nuclear submarines already but they want submarines in a different way than the Germans did when the Germans had them they wanted them to sink ships carrying supplies to England the Japanese would use them to keep people away from the coast that make any sense to you different purpose okay so when World War two ends the u.s. GDP was more than Britain France Italy Russia Germany Austria and Japan combined we're the only game in town folks what people younger people don't understand is in world war ii you know germans couldn't fight a two-front war they lost it the United States fought a two-front war on different continents and supplied all the other allies as well Stalin was asked after World War 2 what won the war his answer the Ford truck the Germans were moving their stuff with horses and Stalin had Studebakers and dodges actually he just called everything a Ford because if it was American and it was capitalist it was forward so okay one of the things that's happened with containers is we've also brought the cost of shipping down the cost of sea freight by 2005 was only 22% of what it used to be in 1930 that's rather consequential and the world GDP has grown ten times since the end of World War two now the United States Navy could you take out one of our super carriers yeah you could with missiles etcetera and that's another thing the Chinese are doing it's mostly submarines and missiles but the trouble is the last two countries who did that more war - got to engage in complete urban renewal so it's not advisable and when we talk about size I checked and the United States tonnage is an old way they used to it that doesn't really get the nuances of modern technology but you'd have to add the next nine navies to equal hours in tonnage aus supercarrier would ranked 16th in the world in tonnage and we have ten of them and nobody else has any all right so who benefited the most out of all this you'll be surprised China we've gone from a colonial period where countries would grab on to places to get supplies to bring them in to produce them the same way Britain treated us when we were a colony any of you none of you were around them were you okay but we've gone from that and that had been obliterated by World War two the United States was the cop for the world essentially I'm going to move to the US okay land quality if you see in here and some of that goes up into Canada that's the greatest land you can find folks you ought to get up every morning and kiss the ground I mean I grew up in Indiana northern Indiana the black loam 18 inches deep you can't find that stuff I mean that so this area produces more food than the next two in the world combined that means that we have an ability to ship things rather cheaply with the water but we also have this fantastic land this this is the world and there are only a few places where there's really good land down here in Argentina Paraguay a little bit of Brazil you're why that's the Pampas down there and the north european plane which runs you know France Germany Poland cross through there and then gets bigger as it goes to the east and a little strip down here in Australia I won't try to find them all China has a piece too okay not very many places where you have temperate climates the problem with the tropical is diseases and a lot of that land is very acidic and you can't grow the kinds of crops that we we grow let me let me stay on the water bit for a moment the United States has more within our country more navigable water on rivers than the rest of the world combined that isn't as important as he used to be in the 19th century think of a farmer in the US you could move stuff to a river pretty easily nobody was that far away from a river that whole Mississippi system you can get to and you can move product cheaply we have more port potential we haven't used all of it but we have more port potential than the rest of the world combined it just in places like Africa there aren't very many good ports just aren't the way the land is laid out but we have it today only about five and a half percent of our trade or our product here internally moves by water so design kind of over emphasizes that but what it does is it holds down the price of trucking and other things because it's an alternative if the other prices get too high you can use water and we have these incredible barrier islands most folks don't have that either the barrier islands allow us to have the Intracoastal Waterway that runs from up in New England all the way down in the Gulf we also have the largest capital base no one can compete with us on that and then I want to talk about demography and this is perhaps the most important thing down here we have the Gen Y okay up here the Gen Xers and then the boomers here everybody talks about the boomer retirement which is hugely important these would also be called Millennials and a lot of people want to throw stones of Millennials but here's the deal we're the only developed country that has them nobody else has got any what goes on is these people from 22 early 40s regardless of generation they're the consumers they're the people going in debt they're the people at Target and Walmart buying the stuff the people from the early 40s up to 65 are the investors they're putting money aside that's where the the money to create companies comes from all right and then the folks past 65 folks like me we just take we don't give anything well you need these different groups and while this is not an ideal shape we at least have some now when the Millennials get into the 40 to 65 it's going to be tougher for investment because you won't have as many people you won't have as much money which will chase the cost of that up all right let me give you the rest of the world without the US no I'm sorry this is us in 2030 I've just advanced the time and you can see it's it's not terrible it's not perfectly desirable - this is the rest of the developed world do you see any problems ain't enough young people not enough consumers they're okay and a lot of people getting older who's gonna pay for them let me give you something a place like Italy in Italy Social Security right now is double ours they'd have to double it again if you imagine a young person paying a third of their income that's crazy the other thing that matters so much along with this is where does financing come from in the United States over half the financing of business comes from stock add in bonds and you're at about 70% no other country does that it's banks in Europe it's 70% from banks and I'm going to show you why that's a weakness on the moment American banks are different from banks in Europe American banks were created to service economic needs banks in Europe there's always state involvement sometimes state-owned and they're too advanced national interests that's different you have loans for different reasons okay so ours are not geopolitical and they're thinking they're more measured and a lot of the loans you find around the world wouldn't be made by an American Banker the consequence of us having the land the the low-cost having Millennials having an internal market I mean this the biggest internal market the world had ever seen is that we are now a global power but we're beginning to have fewer global interests and I can't finish that off until later in this and I'll show you what how that works in terms of trade it's hard to talk about the you can get to different people say things and you'll think that they're disagreeing with each other the United States has not been a big export country when I was graduated from college imports exports were five percent of the u.s. economy five percent it's not that much today our exports are twelve percent our imports are about seventeen okay we've gotten an imbalance on that that's still not huge but what Zion and some of the others miss is that we talked about China which is the biggest exporter China is much bigger than ours but they're going down as a percent of their GDP ours are going up as a percent of GDP so we're hit in two different directions the largest exporter in the world is China second is the United States even though it's a small piece of our economy Germany it's 45 percent of their economy so you can look at it is it small is it large from the American viewpoint it's not as big a number from a world viewpoint it's big okay that's where people sometimes get into arguments because they don't understand it where do we where do we ship our stuff 1/3 goes to North America half goes to the Western Hemisphere so most of our tray or a good deal of our trade is really pretty close to home Canada US trade is the largest bilateral trade ever in the history of the world we ship incredible amounts to each other now I'm going to go to Europe and see some of the issues and problems they have that's European demography looks kind of like that world one doesn't it there any kids and you're gonna see here worse than that for some other places but not enough young people that's Italy who I was talking about you see why they would end up having to have more okay Europe went to the Euro and I I have to admit to you that I had a great interest in all that when I wrote my master's thesis it was on the European community European Economic Community at that time but what's happened has really changed things greatly going to the Euro allowed money to flow from the rich countries like Germany to the poorer countries that are mostly southern Europe then Central Europe as they came in but that created a mess and the mess is that they're not as able to do things as the Germans and they can't devalue the normal thing you do if you're you're having an imbalance like Germany is exporting everything and you can't get anything out what do you do you devalue your money you make it cheaper for people to buy your stuff make it more expensive for your people to buy anything from somewhere else okay if you're all in the Euro you can't do that and Germany calls the game Germany has incredible number of regulations that's the way Germans do things and you have the banking that still even with a common currency you've got banking by all the different countries 28 different countries so that finances state not market directed and the states guarantee loans but the problem is you get into a difficulty with the kinds of loans in the amount in the United States in 2008 liquidity loans amounted to about 1.3 percent okay in Europe in 2017 excuse me I thought it was 2017 for us also for Europe that's about 900 billion dollars in Greece it's 43 percent of the loans or liquidity loans in Ireland 21 percent and the eastern countries you know the Czech Republic's etc it's about it's in the teens so an awful lot of liquidity loans I mean money do you need just to stay afloat non-performing loans are huge almost a trillion dollars and in in Europe there's 2 trillion in euro debt every year that's maturing now they've had some message you remember Ireland going through the crisis Iceland going through the crisis Greece etc another thing to consider is government debt in the u.s. the last numbers I had with us about a hundred and five percent of GDP place like Greece it's one hundred and eighty nine percent some countries are actually lower than France UK Germany and Spain for example but let's talk about the Germans for a moment they're fascinating we're not like them by the way even though a lot I'm largely German stock but that doesn't matter we're not we're not like them they plan everything 1840 the Germans do not have a country but they are planning a an a rail system to connect the major centers and also to get troops back and forth across east and west the United States is discussing a second row National Road okay I mean other things had been built but a National Road we don't plan like that this really struck me when I was studying educational things I was looking at Germany and I saw 83% of the people in Germany got either a college degree an associate or certificate 83% I thought well that's an interesting this was back when Americans saying 100 percent of our kids will be the better than I'm thinking have you ever seen a bell-shaped curve so that 83 fascinating I thought 83% 83 percent think of the bell-shaped curve let's see two thirds of the people or between 90 and 110 IQ that leaves 33 and 1/3 percent half of that is 17 so what does that mean that means the only people they're not getting at least a certificate have an IQ below 90 means the Germans are educating everybody it's possible to educate to that level doesn't mean somebody below 90 can't work but they're not going to be a plumber not going to be an electrician did you see so the Germans partly because of their position they've had had to be better in in many ways and so they work really hard at that 32% of their exports require the sea lanes so a third of their exports remember exports are forty-five percent of their whole economy now I'm going to turn to Russia Oh Russia is always a sad case in 1939 Russia had about 21 million people more than we have today do you know what the Russian percentage is compared to us they are 45% of our population about two million have left Russia and their GDP is 115th hours and I will predict to you that between 2030 and 2050 Mexico will pass Russia some people think it's nearer to 2050 I think it'll be faster than that it's it's a sad case in that Russian mortality is terrible do you know what the average death age for a man is in Russia 59 you know what is it for us 76 something somewhere in that area it's alcoholism TB is terrible I mean these goes on and on but the problem for Russia is they just don't have it let me see did I miss one I want to advance no I don't have one on the Russian demographics but let me let me talk some more about that there aren't enough Russian young people to support a population half its current size and many of them would like to leave the problem is they can't leave because there are any skills the West can use their whole training system to fall on a part they do have oil and gas but let me explain the Russian paranoia for a moment then they are paranoid but even paranoids have real enemies got America the Russians were invaded by gustavus adolphus and the Swedes mine apollyon by Hitler they've been invaded over and over they lost 26 million people in World War two do you know what that equals I went back and looked at the populations of American States start with this North Dakota South Dakota and Nebraska Idaho Montana Kansas Colorado New Mexico Oklahoma Texas Iowa Missouri Arkansas and Mississippi that's what the Russians lost in World War two so can somebody manipulate them and you know get them exercise that somebody's coming after heck yes if you lost all the people in the middle of the United States and the Russian leadership is something very interesting when I in the nineteen late nineteen sixties early seventies I knew some people who were in diplomacy and also intelligence and had served in Russia and so I asked them uh tell me about the Russian leaders and they looked at each other thought about it and one guy said think mafia and it made sense and they really did that's the way you get to the top and then some of you may have been at a Chamber annual meeting where Condoleezza Rice spoke some of you there and they asked condi to describe Putin and when she gave her answer I knew she was never going back into government she said he's a thug and he liked her because she spoke Russian she was Russian estándar good relationship but when she said that I thought that woman's not going back into government she wouldn't have said that if she were okay this is the issue with the Russians then if you're paranoid and you think everybody's after you they have this long border 3,000 miles along the border they'd like to have us a1 when they cut the deal with Hitler in 1939 and that is to move the border to about the middle of Poland I get my hands are too shaky sorry folks but that means they've got to take a stony out Latvia Lithuania Belarus Ukraine and Romania and some other countries well they've been fiddling around with Ukraine and trying to find out what somebody would do will the Europeans react haven't so far the Europeans probably couldn't be successful unless we came in if you add up all the European armed forces they are just the same size as Russia's but Russia would be a unified command god knows what you'd have with forty countries maybe so that's what they'd like to do because that plane that northern European plane we talked about that narrows to about 300 miles if you can get yourself into the middle of Poland and then you've got Carpathian Mountains you've got other things you can defend but they badly want that how far they and the thing for Russia is see this is a real time-sensitive deal in five years he ain't got no kids who's going in the army so if you gonna do something you might want to do it now we don't know what the u.s. is going to do I find it I can't figure out exactly we've done some things that are pretty strong we have pre-positioned a lot of stuff and sold things to the poles loved the poles by the way the poles represent us in other parts of the world where we don't have a embassy there are buddies and in Romania Romania is right below the Ukraine and so those are pretty strong moves at the same time you know Trump has said he's not sure he'd go to war for something in Eastern Europe but I don't know we'll find out I don't think that the Scandinavians and the Brits would ever let Russia take back the Baltic countries I think they would go to war and at the very least we'd supply everybody and all that kind of stuff and give him intelligence Germany now didn't have an arm and they got 62,000 people then mean anything's the Russians have a huge edge in planes if they got into a conflict within these folks they'd probably lose their Navy but plane wise they'd be pretty strong not sure they could actually accomplish all that they would want to accomplish all right I'm gonna shift for a second and talk about growth and how do you get yourself to grow well for GDP there are only two things a matters population productivity policy wise you can go for consumption led gross investment led growth or export led growth only ways to do it consumption means you gotta have a whole bunch of people that's what we've had we have had an enormous ability to absorb and buy things investment led growth means you need a bunch of people there who have some money that's what we had with the Boomers the problem is when you have too many of those then you get bubbles you start chasing rates and you know the good deals have already been taken so you start looking at the not-so-good deals to get a higher rate i when I worked in financial services people would want to buy GM bonds I know and I lost customers cause I'm gonna do it it's bad stuff you know what happened they lost every penning export-led is what a lot of countries have done and the only reason they've been able to do that is the United States because the United States protecting those sea lanes etc so we're gonna move to China they're demographics that's the product of one-child policy that's been changed but the trouble with demographics is you may not like it but it takes you 60 years to change it now there are countries I've been talking about in vitro fertilization trying to up their birth rates but that's what the Chinese have and that is not a pretty sight for the future in finance they do things differently that we do we invest to make money they invest to create jobs whether or not makes money when I was in China I talked to a Taiwanese owner of men of factories in Shanghai and he told me first this was some time ago I think it's changed but he told me that most of the factories in Shanghai were actually owned by Taiwan but they had to do what the Chinese authorities wanted what the Chinese authorities wanted was for him to run a second shift he didn't need a second shift that he had to run a second shift so you've got a whole lot of companies particularly the state-owned enterprises it's similar to what Russia was like when Pizza Hut went to Russia they had to do several things they're putting up their first Pizza Hut in Moscow they had to hire the Russian army to protect the potatoes caught like a bribe if you would like the second was they needed a warehouse and the Russians took him out to this warehouse and it was full of front-end loaders and the Americans said yeah that's that's fine the warehouse will work what you do with the front-end loaders and they said oh they met quota they just don't work that's the problem with state-owned enterprises the purpose is to keep somebody employed not to produce something a might want to buy okay Chinese banks the best estimate of non-performing loans I didn't even talk about that in Europe but I probably should have they have a much looser standard and what's a non-performing loan if a bank gets it what is the number now five six percent we closed a bank down Europeans most of those countries are way above that way way above that and the Chinese it's maybe 15 to 19 percent okay there's a shadow economy too it's very hard to deal with the Chinese numbers I see different estimates I don't just take what science says I look up this stuff all over the place and you get wildly different numbers they have a shadow economy that's maybe 15 20 percent of the economy illegal hedge funds loan sharks all kinds of stuff that makes it tough to know and in 2009 their money supply was double what ours is with a economy that was half our size print money and you invent you throw it in there to keep people working their big problem has to do with different parts of the country along the coast those folks are Western I mean they've been in a sense you can think of them as colonies because they've always been part of the Western or at least since China was opened but north you get Beijing and there that's different that's the political power that's the Han but what's occurred even though the Chinese don't like it is that the dollar has become the reserve currency it's the only store of value this is a quote from 2009 the director general of the Chinese Bank if they're the review people over the banks I keep trying to remember the acronym now I can't get it here's his quote except for US Treasuries what can you hold gold you don't want to hold Japanese government bonds or UK bonds US Treasuries are the safe haven for everyone including China it is the only option we hate you guys once you start issuing 1 to 2 trillion in new debt we know the dollar is going to depreciate meaning their money goes down so we hate you guys but there's nothing much we can do now that the Chinese are hopeful that they can make their wand the remedy stronger than it is and make it an alternative to the dollar at one point the EU was created to be an alternative to the dollar that ain't happening the EU is in deep deep trouble and one of the few things that's good for Britain right now is our not in the EU because the brexit is a killer for them absolute killer one of the things they have to do well I'll get to that later I'll leave that alone by 2015 more Chinese money was flowing to the US than us to China that was odd what's going on rich Chinese want to put their money where it makes money where its purpose isn't just to provide a job that's what she means by corruption that's what the corruption deal was all about there was an enormous spike in Chinese investment the u.s. they also invest in Australia New Zealand I mean in New Zealand it's now like the West Coast you know my modest house I paid 143 thousand for would be worth a million they don't sell houses in New Zealand by the way we do it I'm selling my mother's house date some roof things came off in a storm yesterday it's a mess I'm not gonna talk about that part but in New Zealand it's auction you sell a house buy an auction so the there is a flight of that money and what she's tried to do is make them keep that money in the country so that's when they say corruption you know we think of something else they're talking about people taking their money and getting it out of Dodge and putting it someplace where it's safer and can make more money 3/4 of the deposits are in for large state-owned banks the Aged the Agricultural Bank of China the construction bank the industrial bank and the commercial bank and what they had for a long time was cheap labor and cheap credit but the labor ain't so cheap anymore from 2002 to 2014 labor costs grew by 6 times while Mexico's grew by about one and a quarter so they subsidize the prices of finished products they subsidize the consumption for inputs and there's a collusion of banks and local officials that produces large but not efficient companies in essence too big to fail now the Chinese do and they are going through in the north closing some of those state enterprises but that means people out of work so what they do is they take money from the coast the Singapore's the hong kong's where the money's made and that's used elsewhere to try to keep the peace because China is not national naturally an adhesive thing a lot of different ethnicities there are all kinds of reasons why these people might not hold together and then after the global financial crisis the lending is triple so their financing is now at five trillion in an economy of eight trillion and they their new lending is seven times what our new lending is seven times now that you can this is another one of those where I read even Zion you know when they get on their high horse about how the Chinese total debt when you take private debt etc it's two hundred and fifty percent of GDP Wow American is three hundred and fifty percent we got our own problems folks and it what's going to happen is in this country since we haven't felt dealt with Social Security which could have been done easily with few tinkering things at one time and with the movement of those Millennials not millennial excuse me the Gen Xers up there you're gonna see interest rates go much higher you're gonna see taxes go much higher they have to and science says they'll have to go up double I think that doesn't change things I think that doesn't change what you'd buy so some people would say the entire Chinese system is subprime now let's look at this thing of what's going on between Trump and China right now for a second for China their shipments to the US their exports represent somewhere between four and seven percent of their total economy our exports to China represent one percent so who's got the leverage if you are like China or Germany you are beholden to outsiders I think you exist because Outsiders are willing to buy your product now I don't know exactly what's intended I think my own analysis is that Trump is still transactional he's looking for a good deal but there are people in the administration like Bolden and like the trade representative pretty hard case people and I'm not sure they're not trying to break and using economic leverage to do it we would benefit in the sense that they wouldn't be a threat but let me go on there's more to this on if you hold the question still and I appreciate it China is the largest importer of everything they've got to have everything shipped in Boonton you're talking about food you're talking about I don't mean they don't produce any but they absolutely need food they need fuel and the US made modern China in that the oddest thing I have a book at home I I probably should have brought it there was a Chinese city that came over and I hosted them and they gave me a book about their city and it was fascinating because the world started with 1984 that was when dum Xiao ping and the people from Shanghai took over after Mao and they began opening you know playing to the game the Chinese believe in free trade they just don't practice it that makes sense they know what works they just don't want to do that so I'm gonna say a little bit about Japan among other things after World War 2 what we removed was the biggest threat to China Japan and the colonial powers they're all gone the only thing left the US Navy it's hard to understand younger people I fear don't get what went on a world war two that was the only war I've ever seen I found these numbers myself where the losers killed seven times as many people as the winners the Japanese killed tons of Chinese Filipinos you know others and Germans everybody knows the Germans story they've got all of the press but the China the Japanese killed seven times as many people I'll give you a quick anecdote and I'm gonna run over folks way over [Music] just keep going okay well The Rape of Nanking I mean they killed something like 350,000 people the only thing that saved 250,000 is 22 Europeans and Americans created a one square mile area until the Japanese is a international zone you can't come in I mean it was Western arrogance and the Japs Japanese bought it okay so let's look out from China and you'll see what they see the North is now that way okay we flipped a map and here's what the Chinese see they see up here Japan next South Korea next Taiwan and then the Philippines those are all allies of us and their problem is where did they get everything well it comes it's got to come through there those are the Malacca Straits Singapore that's why Singapore is such a busy thing does anybody have a laptop or uh what you call them tablet if you do Google ship map that's all you have to do there's a fascinating map from 2012 and it shows where all the ships in the world the container ship any kind of a freighter was and you can see where there it's really bright it'll be along the China coast it'll be along the Malacca Straits London Belgium Netherlands New Orleans Houston you know that kind of thing but you can actually see what's going on and do that it because it's an interactive map I couldn't get it to work here but ship map that's all you have to put in and you can find it okay Japan is insulated from any little battles here because their cities are on the eastern side they're not on the western side and they can ship down more through here and stay away from through Indonesia and stay away from any bad stuff that happened the Chinese by the way are trying to build a canal over here to get past the Malacca Straits understand what all that stuff about the South China Sea that's where they're building those bases putting in Islands you see what that's all about okay China has to get those things most of the oil coming out of the Middle East if those streets are pinched off by the US Navy or anybody else they've got real problems how do you get that stuff in addition the costs they are very high ok I'm going to move to the Gulf for a minute others Japanese demography they're the worst in the developed world why do you think they were going for automation no workers that and Florida they build their plants of us build it where there are workers where you can sell the product and you don't have to deal with that this is the Middle East I'm not going to take a lot of time on it but over on this side you've got Iran over on that side Saudi Arabia up there if the u.s. pulls out they're very likely they will go after each other Iran is stronger but Saudi Arabia might be able to hold them in the desert Saudi Arabia by the way a third of the population ain't Saudi and they're their fighters aren't Saudis they're Pakistanis and others they're Air Force I've met them what they have is a whole bunch of us equipment stored there their hope that the u.s. is going to show up and use it so the United States has been in the Middle East to protect our partners not us so much we used to be importers but now two years ago the u.s. became the top producer in the world within a year we will be the top exporter in the world that's a huge change so we no longer have a direct interest in that area we used to keep two carriers there all year now we're down to half a year one if we pull out that can blow if that blows that totally messes up Asia Eastern Asia okay now you get your going back what Zion sees is that these people will go and act the way they did before we impose this peace America since 1945 now will they I don't know but that's the worry Canada has one of those demographics that looks like the rest of the developed world and it's a big problem for them they sell their oil into the American Midwest which is lowest price place to sell into British Columbia trades more with us than they do with Canada Canada bribed Quebec by transferring a huge amount of money to them every year who pays that Alberta pays it what is that Berta have Alberta has oil and gas and other things Albertus per capita income is way higher than any u.s. state but they are the ones being asked to pay for all that and they don't like it the second largest party now is a secessionist party and the brilliant Canadian Court Supreme Court has ruled secession is legal that was for Quebec okay so there is a danger there then Canada has a real danger if they lost in Alberta where would Alberta go probably with us British Columbia possibly the same ok Mexico now that's what a healthy demographic looks like see how it differs from all the rest lots of young people their problem is they got awful geography there are no rivers that flow to the sea ok and even places that are jungle their high high desert it's just a very tough place to grow anything but they do have a large market and a large labor pool and more important than anything else they're in the right neighborhood in 2014 there were 350 million legal crossings of the border that's the most anywhere in history and the bigger the labor cost differential and there's a big one between there in the US the more integrated those two economies become you understand that from both sides of matters right now they get about half their fuel from the US and they're headed for blind ten times as much as in 2010 from us and four times the natural gas were the supplier now okay so they're in pretty good shape if the world gets nasty if Europe assuring I always knew this about Europe I knew a lot of this stuff that Zion has before but I didn't know all the pieces i I thought of Europe going and it's nice kind of Oh slow decay you know where you go in the house and the furniture is a little bit worn you know but it's it can be worse than that because when least those things start to happen in Europe you get trouble one of the things I was saying about the young people too is if you don't give young people jobs it's not a good idea in France 20 30 % unemployment in Greece over 50% the one thing you never want to do is have unemployed young men they're awful they decide that there's something wrong with the world is the Jews fault it's the blacks fall that's the every somebody's fault that they're not successful and it's a terrible mistake so you try to avoid that it's sort of like in some of these developed countries developing countries they educate a bunch of people I come back from Oxford or whatever and they don't have any job and in my there's something wrong with the system of course that's the way it works but this is a country that is going to do well because it's got the biggest market in the world right next door to it and again I say it will pass Russia's just a question of when in the next couple of decades that happens Latin America I'd always thought just had bad political culture actually its geography it's bad geography you get coastal elites then you get mountains or jungles with indigenous populations very hard to make anything work you're gonna have rich and poor you're gonna have huge differentials if you try to build infrastructure through Highlands cost five times as much and that's almost all you've got to do if you take a place like Caracas and the major population centers of Brazil there's no road not one road that goes between those two and it's very very difficult again the best place is down there than that Argentina area Argentina is a wonderful story you know if if the geopolitical strategists were right policy doesn't matter but that's not true in 1920 Argentina was the fifth largest economy in the world pretty good but by populism fascism socialism they've managed to screw it up beyond belief they have now a businessman as president who's trying to get them out of their mess but they're basically bankrupt if they ever can straighten it out they've got everything you need they do have a water weight where they can convey stuff they do have good land they're out of any of the danger zones the Russians aren't gonna invade them the Saudis aren't gonna invade them the Chinese are gonna invade them so that's different shale is what changed everything for us and met created a situation where we're now independent on almost everything we don't need very much that's South America again if you look on the left jungle for most of Brazil and then this yeah I keep hitting the wrong button sorry we'll come back to oil exporters back in 2015 see where it's coming out of largely Saudi Arabia in that area top oil exporters of 2020 that changed we used to be importing a bunch of that stuff now we're not breakeven oil prices this is what happened up here is what shale was in 2012 breakeven full price cost this is what it is now or was in what is this 2016 towards something like that so it totally changed the game and American shale the what we get out of it it's clean compared to very dirty out of Venezuela on some of these other places very hard to process the American oil company spend a fortune trying to create facilities to process that dirty stuff and that along comes jail they got a huge investment and it's now needed actually ok immigration I'm gonna say a few words about oh the Asia battlespace this was what I was trying to say before about having to come down here get through those straits of malacca and then the chinese canal they're trying to build across Thailand they're on immigration here's the problem you can't create a 20-year old for demographics if you can get them to come that's a pretty good deal if they're trained if they're trained that's why businesses and the the Chamber are always fighting for things like h-1b visas we want train talented people because if you get a 20 year old who's trained you saved a half a quarter of a million dollars you can pay for the education you get a person who's 30 or 40 years old it's a little different deal you've got them and they have talent but they haven't paid in for Social Security and everything for all those years so 20 s of what you'd rather have immigration largely helps the federal government because they get revenues off of it locals it costs because of things like schools local and state aggression is expensive for but here's let's go back to demographics in order to maintain the current population you need 2.1 children per capable woman okay we have 1.77 then we'll do it you're gonna have a decline in population if that's all you have decline in population since that and productivity of effect gee are the one things that matter to GDP you're gonna have GDP go down so we've done it with immigration but not in a very orderly or sensible way the biggest threat to the u.s. is really geopolitically is drugs and it's interesting because the drug cartels prey on the illegals because they can manipulate and use them okay my own view I'm not gonna get into this but better to provide some sort of temporary status and my reason for that is I want to know who's here and I want to sort them by who I want and who I don't want and that would also hurt the cartels future the problem is the success of our challengers is mainly due to the system we built they've had economic Mariel miracles based on cheap capital absolute freedom of the Seas and open markets we know where the flash points are but if something happened in the Middle East because they couldn't both sides could hit the others supply and production and shipping areas okay if that happens US oil might be $70 a barrel world oil would be 150 or higher so it would be very serious for them if free trade ends capital and credit are going to go plummets in mortgage rates probably into the teens dramatic increase in government spending for health and pensions and in this new world the u.s. is going to be the friend to have because we have market we have capital we have security and we have trade protection you want to be friends with somebody or the ones and we drive pretty hard bargain by the way low-skilled work will move to Mexico and Southeast Asia Southeast Asia has growing populations that's one thing I disagree with Trump on he should have made a deal for Southeast Asia because that's one of the that's going to be successful area over the next several decades demands for inputs will plunge that'll hurt Brazil and Africa u.s. assets will become more popular there are only a few countries that will have about 17 everything that you'd want here's a global stability map from 25th on 2015 to 2030 and you'll see sort of the usual suspects of Australia New Zealand Argentina and some of Southeast Asia by the way Vietnam is an interesting thing because on a map that you'll see rir have shown that's a nearly nearly a US ally why would they be a US ally we're not a threat to them anymore folks it's their neighbor who's the threat to them here's another a political risk these come from different sources does that look similar to the other one where the political risks are okay and I look up economic freedom every year it's one of the things I always study similar where you have economic freedom where those things work then dollar diplomacy if we get disorder if the rest of the world gets disorderly and we pull back these are places where our money will make a difference and they will need us Latin America will need us on things like production of oil etc we have a lot of we now have the money we have the expertise and then this is the consequence of what's happened over these 75 years and you this is world poverty now it's defined very very narrowly I mean extreme poverty about a dollar and a half a day or now up to two dollars a day almost you can see how dramatically it's dropped China is the biggest one in that 1 billion people out of extreme poverty 1 billion and here's another way to say it because of the other one only expressed the amount in poverty the green are the people who aren't in extreme poverty ok these are huge changes so the question it it is perfectly sensible for an American to say I don't want part of that stuff we can do what we need to do we'll just stay home that's not an illogical thing to say the question is what's going to happen with the rest of that world do you want to have to deal with it I'll give you another example there were some well let's let's do it quickly with the people who first came to see Trump heads of state first one is Teresa may from UK she knows going out of with the brexit she's gonna have to double the diplomats in their Intel they're building two carriers super carriers and they want to integrate them into our battle groups okay those were nice things to say she also wants a free trade deal will drive a terribly hard bargain I know everybody here thinks were softies not when we do trade deals we're not Trump you know broke apart NAFTA he wanted separate deals he got one with Canada and then with Mexico the Mexican was fast named because the previous president was the best we could ever hope for and the new president is in Mexico but he went to the guy who was leaving and said make a deal with Trump and I'll get it passed and they did but we will drive a very hard bargain with Brits they'll get their free trade deal but it will not be fun for them the next was obey the head of Japan noticed these are the two naval nations these are the islands who are the first people to come see Trump if we rule the sea and obby said what we'd like to invest half a trillion dollars in the US is that gonna make you happy Trump said yeah but you're gonna have to spend do your own defense now I I don't believe not neither do most people that Trump would ever pull out of Pacific the America America has never allowed somebody to become the owner of the western Pacific I don't think that's gonna happen okay then Merkel came and she tries to explain she did the German you know I believe how this works and she does and Trump barely stays awake through that and she's telling him these are the reasons not to do it this is what it would do to us she didn't bring anything that didn't move the Donald at all and then she from China came and his message it wasn't pleading and it wasn't threatening it was just don't pull the rug out but I don't know that he had anything to offer okay so which way is the world gonna go I don't know the things I do know are that those demographics are absolute nothing gonna change that so Europe is going to be in decline Russia is in decline will it do something goofy I mean think of Russia now I'm not talking about Putin as kind of an aging drunk with nukes that's not a pretty picture I don't know you have to give credit to the Soviets in the United States we went through that whole cord Cold War 47 years and they very carefully managed not to have a war with each other now at one point went to the Soviets and said would you give me some nuclear weapons and their Soviets so but what he gonna do with them he said well I'm bored with the United States and the Soviet said you understand that hundreds of millions people are gonna die and he said it's just a pile of bodies they went back and says he's crazy he we're not giving him any nukes so there well it's like the Mafia the Mafia does not go out and do hits on federal prosecutors there may be some random crazy who does that stuff but they don't do that stuff in other words you don't start that war with the United States the key Mexico excuse me China is a more interesting thing if the Middle East thing comes that could provoke things with China this new present is clearly been made himself president for life he's a nationalist he is pushing but I don't know for sure where they're gonna end up the the thing about these one-man deals is they're so fragile I remember people used to tell me the Soviets are gonna pass us and then it was the Japanese and now it's the Chinese and I'd always say no no no this been going on for 50 years I've been have making this argument you don't understand how fragile their systems are I tell the people on the Soviets all it takes is one guy to change one in our country one guy change and doesn't do anything nothing doesn't matter but for them it does and when Gorbachev came in game over it's over so the same kind of thing could happen with China but I don't predict thing that one thing I'd leave you with is straight line projections the farther they go don't believe the reason is people do stuff to prevent people make decisions they change things that make sensitive so you can't just assume that things are gonna be that way I'll stop Iran 25 minutes over that's all drama what is it's almost impossible you just voted to give them a little more time here's the difficulty with the EU it takes all 28 countries to agree to a change and they all want something different Spain wants Gibraltar Ireland wants the access across how you can negotiate that in this kind of a timeframe it's virtually impossible and in Britain they know what they don't want but they can't express what they want you got meaning you can't get a vote for something positive well I'm not sure that I am knowledgeable enough we did pretty well when it was coming up to Miami in that kind of an area I mean we really hit them with our Coast Guard etc most of it comes up through the cities and it's through trucking it's not individuals so much so it's technology and things you could address I'd be pretty draconian on how I treat people who bring it in I'm not so gonna be so nasty to some 18 year old kid taking something but I'd be pretty rough I think with the folks who did it but there's a lot of technology to be done I'm sorry give me a little more I'm not sure whether it's technology because when it first started you know it was pretty expensive to extract but the technology was advanced so quickly I don't think anybody saw that coming that fast I'm not an expert on oil there are people in the room around here who might know more than I do about that but it was the technology and the fact is there are parts of the world who could do some production but most of the talent is in the American majors there are a couple of other companies around the world but not many now it the interesting thing about shale though is the producers that wasn't the big guys it's a little people and so they're their whole style is completely different thank you I was really surprised at how much populations plays into the GDP I wasn't quite aware of Aetna says you made clear Russia in 1919 I think started the world on divorce and they were the first country to legalize that I think we're kind of seeing Asia chickens come home to roost here my question was between Russia and Ukraine what do you see it where's the end game for that dynamic and where's that going to end up it's not good right now you know part of Ukraine is considered a war zone you know well the Russians got the biggest thing they wanted by taking the Crimea they've essentially got their own aircraft carrier and they can control that see they'd like to have more than that and Ukraine is a mess you know it just it's not terribly coherent the other let me see if I can explain let me say a little more on that because it applies to more parts of that area when you start getting things going bad people go you you create the far left and the far right and things can get very hairy that's in Germany you're now seeing more far-right coming up I don't know has already said she's leaving but when she leaves I'm not sure what Germany is going to look like it may not be the Germany where we've been used to so on a place like Ukraine it's terribly unstable most of their good fighters were actually Russians and so that didn't help trying to take on the Russians themselves a lot of them went over to the Russians took the equipment over mr. Tim winchman [Applause]

Channel: Wichita Pachyderm Club

Views: 19,647

Rating: 4.8027396 out of 5

Keywords: Foreign policy, Geography, International relations, Labor, Tim Witsman, Wichita, Pachyderm Club, Superpower

Id: jepmJbh0MoE

Length: 76min 28sec (4588 seconds)

Published: Mon Mar 18 2019