In this week's Stansberry Investor Hour, Dan welcomes Peter Zeihan to the show. Peter specializes in geopolitics and brings a critical perspective on how foreign affairs impact the U.S. market.

Peter kicks things off by discussing why the market hasn't reacted or improved in response to the peace talks surrounding the Strait of Hormuz. He says the reason is threefold. First, the White House acted with very little planning, only using Israeli intel and data. What was supposed to last no more than 96 hours was drawn out into a monthslong conflict. Second, Peter says that President Donald Trump fired numerous ambassadors and policy experts with the intention of not refilling those seats. This has made negotiating more difficult. And third, turning the oilfields back on will take months at best. Peter then says that due to comments made by the Trump administration, Europeans have a growing mistrust of America and are seeing it as a potential enemy...

There was a poll... [that revealed] that only 11% of Europeans consider the U.S. to be an ally... The Europeans realize – believe now – that they're on their own, and that the United States is now actively part of the problem rather than part of the solution. And they see the Iraq war as part of that for the first time in post-World War II history. The United States didn't even alert its allies to a major military operation, much less consult, even though most of the economic fallout is falling on the Allies.

Next, Peter delves into Ukraine and its usage of drones in the war. Drones have and are continuing to become so advanced that Peter considers them part of what he calls the "second revolution of military technology." They're now capable of making decisions on what to target once they arrive at a destination area and cannot be jammed once they've made a decision. And the first-generation ground drones in development could be a game changer for Ukraine. Following this, Peter gives an update on a video he made titled "Don't Be Fooled. China Is Collapsing." He says the Chinese population numbers are not as high as stated, partially due to millions of citizens in the census having possibly been fabricated. Unlike the U.S. and other Western countries, China only has several "touchpoints" that determine that a citizen exists, and these have had falsified numbers in the past. While the official numbers might provide a false sense of security, the population decline will have a massive impact on the country...

All of the missing millions [are] people under age 45... This system can't survive the decade. There are no people. And so when you see this push for them to adopt automation and manufacturing, it's working from the understanding that they just don't have workers. And that only works so long as globalization and open trade remain a thing. And I don't think that's going to survive this year... China is failing because it's running out of people, because it doesn't have the military capacity to secure its supply lines, because it's dependent on consumption in a different hemisphere.

Finally, Peter shares his thoughts on a major transition period. He says that this will be a time of short-term pain, but in the long run, the countries that could weather the storm and emerge first would be the big winners in the new era. The United States was one potential winner, but with hostile work environments with other countries (in addition to globalization universally deteriorating) and an aging power grid, it's facing strong headwinds. Peter says the country will need to double its efforts in manufacturing at home if it wants to have a chance of surviving without other countries, especially if trade slows down or is even severed...

The links that have made the economics of our world possible are breaking, and the demographic transition is on top of that... Industrial construction spending – that's a measure of the money that is putting shovels into the ground to build the things that build things – dropped by nearly a third since the beginning of last year, and about half of what's left is data centers. So today we are going through the most rapid deindustrialization in my lifetime at a time that we need to double the industrial plant... We are not actually doing it.

Click on the image below to watch the video interview with Peter right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

Peter Zeihan is an expert geopolitical analyst. He presents customized executive briefings to a wide array of audiences, which includes financial professionals, Fortune 500 firms, energy investors, and a mix of industrial, power, agricultural, and consulting associations and corporations. Peter has been featured in and cited by numerous newspapers and broadcasts, including the Wall Street Journal, Forbes, the Associated Press, Bloomberg, CNN, ABC, the New York Times, Fox News, and MarketWatch.

Dan Ferris:              Hey, before we talk about anything else today, go to stansberryconferencevegas.com to find out about our annual Stansberry Conference for 2026. It'll be held in September. I'll be there. Doc Eifrig, all the gang will be there from Stansberry, plus really great speakers like Henry Winkler. Yeah, "the Fonz," Henry Winkler. He's a great speaker. You'll love him and you'll learn – you'll get lots of ticker symbols and lots of ideas for investing by going to this conference. Go to stansberryconferencevegas.com to find out more. Do it now.

All right, today's guest is Peter Zeihan. He is an amazing geopolitical expert. He simply talks about things that other guests don't know this much about, and we're going to go around the world a little bit. We're going to talk about China and the Middle East and Africa and Europe and the United States. Because that's what this guy does. He talks about all the different geopolitical regions in the world. He analyzes them. He travels endlessly and talks with people who are on the ground in these countries. So let's do it. Let's find out what's on his mind right now. Let's talk with Peter Zeihan. Let's do it right now.

Peter, welcome back to the show. It's good to see you again.

Peter Zeihan:           Hey, hey, how are things?

Dan Ferris:              Good, good. How are things with you?

Peter Zeihan:           It's been a weird year.

Dan Ferris:              To say the least. [Laughs] That's – hence your presence here. I was telling Marko Papic, a fellow you know, recently when we spoke with him on the show, that geopolitical topics seem to have become very important this year. And when they come up now, I always say, "Hang on, I know a guy," and Marko and you, those are my – I know I should say, "I know a couple of guys. I'll talk to them and get back to you," because the normal – our normal sort of dippy opinions aren't cutting it anymore. I'm like, there are experts, there are people who know about this. Let's talk with them. So of course, the thing that everybody wants to talk about right now – and I love talking to guys like you about what everybody wants to talk about, because the view is always completely different, and I love it, is, of course, the Iran war and the Strait of Hormuz. I saw on Zeihan on Geopolitics on your YouTube channel that you had talked about why the market wasn't reacting to Iran. So I'm dying to hear the Zeihan take on this.

Peter Zeihan:           Well, when it comes to the market, I try to my mouth shut because Lord knows what everybody is thinking there.

Dan Ferris:              Yes.

Peter Zeihan:           But I can give you an idea of why we're kind of in this – trapped in this holding pattern and nothing is getting better and nothing will get better. Three things. First of all, if you go back to the very start of this, when the Israeli Prime Minister Benjamin Netanyahu visited Trump on the 11th of February to make the pitch for the conflict, these supercarriers sailed later that day. So there was no planning whatsoever on the American side. They absorbed the Iranian – excuse me, they absorbed the Israeli findings and intel and analysis wholesale, did none of their own. And so the idea was that this was going to be over in 96 hours. You kill the top handful of people in Iran and everyone else will just fall in line. There'll be a revolution and all of a sudden, Iran will be ready to join the United States as the 52nd state after Canada. That was literally the plan. And it clearly hasn't gone that way. Second –

Dan Ferris:              Is anything ever over in 96 hours? Do these – I feel like I've heard this before, and it never quite works out.

Peter Zeihan:           The second issue is that Trump is in many ways the other side of the coin of Barack Obama. They both believe they're the smartest person ever born. And they both believe that everyone should just do what they say. But while Obama was so secure in his arrogance that he didn't mind being in the West Wing by himself for eight years, never really spoke to anyone, Trump insists that anyone in the room with him reinforce that belief. And from Trump's point of view, his first term wasn't a lot of fun because they would bring in policy experts who knew more about, I don't know, Kyrgyzstan than he did, and he didn't like that. So his solution in his second term is to fire everyone who knows everything about Kyrgyzstan. So in the opening days of his [second] term, he fired the top roughly 6,000 civil servants in the United States and have replaced very, very few of them. And even today, more than half of our ambassadorial seats are empty, and Trump has no intention of filling them. Like, we don't have an ambassador to Russia, for example, which means that there is no one who has access to the president who knows anything about how the world works. And that goes for the negotiating teams as well.

Dan Ferris:              Oof.

Peter Zeihan:           So right now, the head of the American negotiating team on Iran is Field Marshal [Asim Munir] of Pakistan. There's not even a single American involved in the talks. So lo and behold, there's no meaningful progress that's been made in the last three months on discussions with the Iranians, because aside from that very first meeting when it was J.D. Vance and Jared Kushner and Steve Witkoff, there hasn't an American in the room for any of it. And so we still have yet to begin Step 1. And then the third problem, how oil works, for a conventional oil field when it shuts down, if you want to turn it back on, you're talking one to three years. If you have a –

Dan Ferris:              Especially when they shut it down as fast as they did. You can shut it down. But it's not a daylong process.

Peter Zeihan:           Right. It's definitely not a daylong process. You can set up an oilfield for rapid recovery, and that is what the Saudis and the Emiratis do in order to comply with OPEC sanctions. But turning those fields on and off takes 90 to 180 days. So if it's done right, three to six months. If it's not done right, one to three years.

Dan Ferris:              Yeah.

Peter Zeihan:           In the case of Iraq, the last time they turned it back on, it took 20. And Kuwait has really never had to do this, so we're probably talking three to five for them. And in the case of Qatar, where a lot of the physical infrastructure has been blown up, you're talking about a five- to 10-year rebuilding effort before the production comes back. And then Iran is a bit of a black box on the oil question. So, whether it's 9, 10, 11, 12, or 13 million barrels a day, there's a lot of estimates out there. None of it comes back this year if we get a perfect peace treaty today.

Dan Ferris:              Right.

Peter Zeihan:           And the market is just pretending that that's not a problem because the market has become used to U.S. shale, where the geology is different and the technology is different. And you can bring a new well on in six weeks.

Dan Ferris:              Yep.

Peter Zeihan:           So we have yet to have the real shock. It's probably going to come in July because at some point in late June or early July, we hit minimum operating thresholds for a lot of refineries in the Eastern hemisphere. And I don't see how the market pretends that doesn't happen.

Dan Ferris:              Yeah, I – this is one of my issues right now as I look at the future strip on oil and I think, am I just – Is it that I don't respect the verdict of the marketplace here? Because I contend that the – you know how it works. You just said it. The drills stop turning and the chemistry and the geology don't stop. You don't stop those. And those reservoirs, they've got those layered reservoirs and they're pumping them with water and gas sometimes. And when you cut off the pressure, what happens? Well, it kind of all migrates.

Peter Zeihan:           It settles.

Dan Ferris:              Yeah, it settles. And, and, and you also get this sort of – like you're stopping the blender when you're making your salad dressing. So, the paraffins kind of come out and, and asphaltenes come out. And – [crosstalk]

Peter Zeihan:           Well, that depends upon the field, but that is a very real problem. Absolutely. It's not, it's not everywhere there. I don't want to overemphasize that.

Dan Ferris:              Well, no, it's – I'm not saying everywhere. I'm just saying there's, there's myriad problems that may seem niggling at this moment to anybody who knows about them. But I believe they're serious. And I mean, tell me I'm wrong that we're looking at probably a permanent destruction of some kind of low single-digit percent, maybe 1% or 2% – I don't know what you want to call it – of global production capacity here.

Peter Zeihan:           Well, two things. First, the geological and the chemistry side. If everything goes back to hunky-dory in the Persian Gulf tomorrow, I don't – we'd have to do assessments to find out if we actually have reservoir damage, but there's so much large, cheap, easy-to-lift crude in the Persian Gulf that if the security environment magically took care of itself, they would be able to get back everything that they've lost in 15 years.

Dan Ferris:              Yeah. OK. I'll give you 15 years.

Peter Zeihan:           Let's be clear. This isn't the U.S. shale patch where you can add a million barrels a day every year. This is something where it has taken 40 years for them to get to this point.

Dan Ferris:              Absolutely. And if, and if everything, if the government is fixed in Venezuela, we can start producing the peanut butter that comes out of the ground there.

Peter Zeihan:           In a decade. Yes.

Dan Ferris:              Right. Right. OK.

Peter Zeihan:           If Venezuela is really, really on, it's on. We're looking at a fresh million barrels a day by the end of next year and then maybe another million barrels a day by the end of 2037.

Dan Ferris:              Yeah. And who's going to spend– you think Chevron's going to spend the money to do that?

Peter Zeihan:           Well, I think absolutely. But we're talking about a very different world. I don't know if it's going to be Chevron specifically, but some companies are going to get involved because, second problem, the security situation is not going to get fixed. Even if Donald Trump turned over a new leaf, got some good advisers who could do basic math and find Canada on a map, even if that happens, the Persian Gulf is not returning. The military force, the naval forces that the United States had back in the '80s are not what we have now. We made the conscious decision over seven administrations, including Trump 1, that we were going to concentrate our power in the supercarriers. And we did away with most of our frigates and destroyers. And if you're going to shuttle convoy civilian tankers in and out of the Persian Gulf, you need dozens of ships just for that task. And we only have 60 destroyers total globally now, half of which are protecting the carriers at any given moment. So the U.S. does not have the military hardware that is necessary to do a 1980s-style convoy, and no one else in the world does either.

In addition, the Iranian military of today is not the military of the 1980s, as we've seen with the drones. Now, the drones have a hard time targeting moving vessels. They follow the dumb – they're pretty dumb. They go to coordinates. They don't go to a target. But we're starting to see some early exceptions to that. And the Ukrainians are pushing back the envelope of what a drone can do with independent targeting. And if Ukraine were where Iran is now, I have no doubt that they'd already be hitting the tankers. So it's only a matter of time before Iran's declaration that they now control the strait becomes truth. And the Iranians already have 600-mile range with their Shaheds. That can't just hit every energy-producing asset in Kuwait, Qatar, the UAE, and Saudi. It can hit the entirety of the bypass pipeline systems that go to the Red Sea and out to the Gulf of Oman. And they've demonstrated they could do that in the hot part of this war. So the Persian Gulf is not coming back until someone develops a defensive series of technologies that can protect 150 ships a day. That's not going to be this year or next year or the year after, and maybe not even next decade.

Dan Ferris:              I love when somebody who knows a hell of a lot more than me justifies one of my stock picks that is making the defensive tech. I made this whole argument about defensive technologies that went back to the 14th century and stuff. But yeah, makes sense to this guy. You had a lot– you have a lot of videos lately on drone tech, it looks like, in the past six days. This is so – this concerns you.

Peter Zeihan:           Yeah, so when the Ukraine war started and we started seeing the Turkish Baykars come out and just obliterating the Russian armored formations, that was a big deal. I had seen it coming because two years previous, the Azerbaijanis had done the same thing to Iran. So we knew the technology existed, and we knew it was being refined. But seeing it used against the Russians and just giving me giving them bloody nose after bloody nose was crazy. But the real turning point happened when J.D. Vance insulted [Ukrainian President Volodymyr] Zelenskyy in the White House repeatedly. The Europeans turned a page at that point. They had already been providing more aid to the Ukrainians than the Americans had for the last two years. That wasn't new. What was new is U.S. aid went functionally to zero, and the Europeans realized that they were now on a path to face the Russians directly, conventionally, in a nuclear arms race without the Americans being there. And in fact, the Americans started directly threatening American allies. And so they realized they needed to prepare for a fight, not just with the Russians, but also with the United States. And –

Dan Ferris:              Wait, wait, wait, wait, wait, wait. Can you say that again?

Peter Zeihan:           Have you not been paying attention?

Dan Ferris:              You dropped that like it was just –

Peter Zeihan:           Yeah, the Trump administration has directly and repeatedly militarily threatened Canada and Denmark, allies. Relations with the United Kingdom right now are the worst that they've been since the Civil War. There was a poll that came out yesterday that only 11% of Europeans consider the U.S. to be an ally or not. So we can argue about whether this is a negotiating tactic by Trump or whether this will outlive his administration. But the bottom line is the Europeans realize, believe now that they're on their own and that the United States is now actively part of the problem rather than part of the solution. And they see the Iran war as part of that. For the first time in post-World War II history, the United States didn't even alert its allies to a major military operation, much less consult, even though most of the economic fallout is falling on the Allies. And now there's no chance –

Dan Ferris:              Badgering them. Yeah, he's badgering them to get involved. He's like, "This is all –" we started it – "It's your problem." Yeah.

Peter Zeihan:           American military strategy since '45 is to make sure that the Allies do not have independent capacity to project power outside of region. That's, we control the global system. You have influence locally. And so even if they had all wanted to, they couldn't. Anyway, so there are only two paths that really make sense for the Europeans. If they're looking at fighter jets and tanks and artillery, it's too slow. It takes too long to build out the industrial plant, takes too long to build it, takes too long to train. So the only options are nukes. And we now have Finland, Romania, Sweden, Germany, and Poland all actively discussing how – not if, how – they're going to be nuclear armed. France is signing bilateral deals with a number of countries to basically develop a joint decision-making mechanism. I'm not sure that's going to go anywhere. But Poland can certainly build a nuke within a year if it wants to. And then drones.

And in that, you take European money and panic and Ukraine as kind of the development cradle and a live testing range. And over the course of March of last year, when J.D. Vance sh** on everything, to March of this year, we've seen dozens of new systems brought in. And March, April, May, and now into June of this year, we have about 60 new operationalized weapon systems, many of which have independent targeting capacity and range pushing 1,000 miles now. And so the entire field of populated Russia is now facing regular attacks whenever the Ukrainians decide they want to do it. And the volume has been increasing by about a factor of 100% every month. So we're already about eight times the production of what we were at the start of May. And the Iran war kicked this into high gear because all of a sudden, the Saudis, the Emiratis, and the rest are all desperate for interceptors that the United States simply can't produce. And so there's actually now significantly more Ukrainian counter-drone munitions in the Persian Gulf than there are American.

Dan Ferris:              So what is – you make me wonder, want to ask you about Ukraine and how that war turns out.

Peter Zeihan:           Let me caution this by saying that before the war started – I was one of the few people who said that this war was going to happen and when it was going to happen. I'm very proud of myself, feather in the hat for that.

Dan Ferris:              Yeah.

Peter Zeihan:           And I was probably the most optimistic of everyone about what the Ukrainians' chances were. And even I thought it was all going to be over within a year. But the Americans and the Europeans stood up in a way that I didn't think was possible. The Ukrainians stiffened their back in a way I didn't think was possible. And the Russians have really underperformed. But we have now had several technological revolutions since 2022. And we're in a fundamentally new phase of warfare. I call it the second revolution in military affairs, the first one being in the '80s and the '90s when we first started applying digital technologies to military tech and we got satellite communications, cruise missiles, smart bombs, all that. Now there's a democratization of those technologies and people are making advanced drones with limited AI in their garage and they're on the front less than a month later.

So the issue is – let me talk about the old drones and the new drones. So old drones, think of a Predator, think of a Shahed, you would have a little bit of flash memory – that's what's in a thumb drive – and you would program in a specific route and coordinates where you want the thing to crash. And these NAND drones require some sort of external signal, typically GPS for guidance. And so if you're going to jam them, you jam the signal.

Dan Ferris:              Mm-hmm.

Peter Zeihan:           We now have a newer type of drone that has a little bit more aggressive memory in it, and it has a little decision tree loaded into it. So however it gets to its targeting zone, whether it's first-person control via satellite or a manned route, doesn't really matter. But once it gets into the vicinity of its target, it loads up that decision tree. And you've told it that anti-aircraft defenses are your first target, power plants are your second target, refineries are your third target, tanks are your fourth target. And when it gets there, it looks around, it's like, I don't see any anti-aircraft, but I see a refinery. So it's like, ding, ding, ding, refinery, and it goes. And once it makes that decision, there's no signals. There's nothing to jam. So all of a sudden, the Ukrainians have developed all these weapons systems with ranges in the hundreds of miles that are immune to electronic warfare.

Dan Ferris:              I see. And so it's a line-of-sight thing. It's not like a radar.

Peter Zeihan:           Exactly. So the earlier drones either didn't have optics at all because they were just following GPS breadcrumbs, or you were controlling them in real time, either by fiber-optic wire or the cellular network, a satellite network, and that could be jammed. This can't. And the newest ones that we've seen just in the last week, in the first full week of June, once they get to the targeting area, if it's either going after, say, trucks, they identify the road and then they go into automatic and they just follow the road until they see a truck, and they're hands-off at that point.

And so the Ukrainians are seeing the entire Russian logistics tail going out over 100 miles from the front line. Is now totally contested space, and the Russian strategy has been to send two three men at a time forward to grab a position and do that in a thousand places at a time, and eventually it gets sticky enough that you can come in with reinforcements and equipment. The reinforcement and the equipment can't come now because it can't get to the front at all, and so we're seeing a disintegration of the entire Russian position all up and down a thousand miles front. The question now is, what do the Ukrainians do next? Using the old strategy of going in with a degree of air cover and doing demining is very slow, but it might actually work now because the Russians can't get forces forward. But that would also assume that Ukrainians don't have something in their back pocket for ground warfare, and I would not bet on that right now.

Dan Ferris:              Oh, any ideas on what that would be, or –

Peter Zeihan:           We've seen reports of tracked automated warfare systems that have been pretty effective because we've seen Russians surrendering to them. But it's early days and the Ukrainians clearly have not launched a major ground offensive. And I think when they do, we're going to have some interesting surprises. I just, I don't know. Guessing what the Ukrainians are going to do on a week-by-week basis is a loser's errand. And I'm not playing that game anymore.

Dan Ferris:              And when you say tracked, are we talking about physical tracks like vehicles?

Peter Zeihan:           Yeah, no, do you remember Rise of the Machines, Terminator 3?

Dan Ferris:              Remind me.

Peter Zeihan:           It was my favorite, but it's like, it's basically looks a lot like an early Terminator model. It's got a tracked base, guns up high, a sensor suite that looks kind of like a head.

Dan Ferris:              Yeah.

Peter Zeihan:           The future is now, man.

Dan Ferris:              Oh, that's wild. Jeez. What a world. OK.

Peter Zeihan:           And this is first-generation ground robots.

Dan Ferris:              Yeah.

Peter Zeihan:           I don't have enough information on their specs to know how they're controlled. I suspect they're first person, but I don't know that.

Dan Ferris:              All right. So I hope you don't mind, you being one of my guys, I got to skip around with topics here.

Peter Zeihan:           That's fine. It's a normal day for me.

Dan Ferris:              OK, good. Yeah, I figured it was. I can't imagine the calls and emails and texts that a guy like you gets in one day, but the thing I'm wondering about is one of your videos, it says two years ago, OK, just to let everybody know, and it says, "Don't Be Fooled. China Is Collapsing." And we had talked about that when you were on the show previously. And like, where are we? Is that still happening? Is that still the thesis?

Peter Zeihan:           Well, let me give you two things. First of all, Chairman Xi Jinping achieved years ago what Trump is doing right now, the complete gutting of the Chinese bureaucracy and system of any meaningful data collection, so that he's never presented with news he's not ready for. They just decided to stop collecting. So if you remember back when COVID ended because their vaccine was hot garbage, people were dying in the hundreds of thousands in all the major cities, and we could see the lines of bodies outside the crematoria from space.

Dan Ferris:              Mm-hmm.

Peter Zeihan:           The Chinese just stopped collecting cause of death data. So how many people have died then and since? No idea. It's – there's no – you can't hack their system to get the data because they just stopped collecting it. And that has now happened across the economy at every level. So we just don't know their condition. Second issue, one of the few institutions in China that is still functioning is called the Shanghai Academy of Sciences, and it's their job to look at government data and interpret it. And they've made it very clear publicly that they don't believe Russian – excuse me, Chinese demographic data at all. And they are now admitting privately that the Chinese system has overcounted their population by at least 100 million people. And they're now discussing internally how high the number of missing millions really is. They seem to be circling 300 million, and a few members of the academy have even said the number 500 million in hushed tones. With all of the millions being people under age 45.

Dan Ferris:              Missing?

Peter Zeihan:           Missing, like they were never born. They were fabricated in the data for various reasons, usually fraud related. This system can't survive the decade. There are no people. And so when you see this crush push for them to adopt automation in manufacturing, it's working from the understanding that they just don't have workers. And that only works so long as globalization and open trade remains a thing. And I don't think that's going to survive this year.

Dan Ferris:              OK.

Peter Zeihan:           Because if we get an energy crisis because of the Persian Gulf, China shuts down, too.

Dan Ferris:              Right. That's right. Help a music major out here. When you say 300 to 500 million people, right away my mind goes to – are we saying the population of China is a lot different than we think.

Peter Zeihan:           Yeah. So according to the official statistics, it's between 1.2 billion and 1.3 billion. According to the official statistics. That makes them the second most populous country in the world. But according to – they've been doing a number of revisions, and so we now know that the average age – let's see. No, let me make sure I phrase this correctly. They know now that the Chinese birth rate has been lower than the American birth rate since at least 1991.

Dan Ferris:              Mm-hmm.

Peter Zeihan:           1991 Was 35 years ago. Play that forward, it's like we know that we're starting to run out of people under age 5. This means that they are starting to run out of people under age 40. We now know that the Chinese system has had fewer people for certain than India for at least 15 years. And it's probably worse in any number of other ways. The two real issues that seem to have generated the most data disconnect is No. 1 – what's the best way to phrase this? OK, in the United States, first world country, in Britain and Germany and all the rest, there are thousands of touchpoints through your life where the government becomes convinced you're a real person. Neonatal visits, birth, every vaccination, every matriculation in school, your driver's permit, your driver's license, and on and on and on and on. There's a couple hundred before you even turn 18. In China, before you turn 18 –

Dan Ferris:              A couple hundred.

Peter Zeihan:           Yeah, it's – well, we have local government, state government, federal government. They all have their own touch points. In China, before you turn 18, there are two. Because remember, until recently, the majority of Chinese weren't born in hospitals, so there's no data log for that. So No. 1 is when you get a certain set of inoculations when you're 6 months old, but doctors got paid per shot, so they lied about the number of shots they gave.

Dan Ferris:              Of course.

Peter Zeihan:           The second is when you enroll in the equivalent of kindergarten, but local governments get subsidies from the national government based on the number of kids who enroll. So they lied about the number of kids that were enrolling. And the third stage is when you pay taxes for the first time. But you remember Tiananmen Square?

Dan Ferris:              Oh yeah.

Peter Zeihan:           Just like the Occupy Wall Street protests in the United States, protesters self-segregate by class. And so, here we had yoga instructors on one side and homeless people on the other. There they had blue-collar and white-collar workers. And what they discovered is that if you tried to run a tank over a bunch of [blue]-collar workers, they came at it with wrenches and they disassembled it while it was moving. And that was a little harder. Whereas the white-collar workers, you know, came with pocket protectors, you just mowed them down.

Dan Ferris:              Yeah.

Peter Zeihan:           So for a number of reasons, 30 years ago, the Chinese government decided that we're going to be a white-collar worker economy. That's what an advanced, successful economy is, right?

Dan Ferris:              I see.

Peter Zeihan:           Well, they changed their educational system to gear it that way. And that pushed first taxpayers back from year 18 to year 21. Well, the first big batch of people to turn 21 did so in 2019, which is the same year that COVID hit. And then the Chinese didn't recover from COVID until after everyone else. So it was 2024 which was their first data that was real post-COVID. And tax receipts went down. That generation was never even born, and now it's too late.

Dan Ferris:              Wow. The narrative that I get from investors about China – actually, there's two of them. One of them is it's totally uninvestable. The other narrative I get is, oh, in some ways it's a freer market than the U.S., and the stocks trade at big discounts, and they're fantastic companies. They have a strong entrepreneurial bent in among their people, etc., etc.

Peter Zeihan:           I think the best argument I can give you is that Ray Dalio was like the quintessential example of Group 2 until two years ago, and now he's the quintessential example of Group 1.

Dan Ferris:              Yeah, and that man spends some time in China and is surrounded by others who spend time in China. I've spoken with some of those Bridgewater folks. The one story I got from the Bridgewater guy, I'll tell you – former Bridgewater guy – he says, "We were meeting with a bunch of folks in China and we were concerned because we heard about people being carried away in the night and, you know, we're afraid of investing in totalitarian regimes and stuff. So we kind of gently as possible broached this with the guy from the finance ministry." And the guy from the finance ministry said, "Oh, that's not my department." That told me a little bit about China. That told me what –

Peter Zeihan:           It's never stopped happening. So for anyone on the American side of the equation who thinks that this is new, No.

Dan Ferris:              No. And that, it was Soviet, it was, oof, it was a rough moment for me when I heard about that because I was still in the "but China's reformed their economy and they've got all these entrepreneurs and billionaires," right? They still do, Peter, right?

Peter Zeihan:           It can be both. Just –

Dan Ferris:              Yeah, for a while, huh?

Peter Zeihan:           It lasts until it doesn't. I think the best way to think about China right now is like subprime in 2008. 2005 And 2006. It's like we all knew that this didn't make sense for any number of reasons, but it was growing. It was growing. It was booming, booming, booming. And so we're like, "OK, maybe we're wrong about the basics of how economies function."

Dan Ferris:              Yeah.

Peter Zeihan:           No, we were right. We just had to wait a couple of years.

Dan Ferris:              Yep. So I admit to having this kind of libertarian bent or bias. So, inside part of me wants to say, oh, China, it's the government's too authoritarian and they – it's too command control and it can't work. And then, you know, they sprout billionaires and huge companies and things and they make, they, they make my narrative look bad, Peter, is what they're doing.

Peter Zeihan:           There's more than one kind of economic system. Whether it's communism or fascism, they've got corporatist fascism there, or capitalism or European socialism, whatever it happens to be, it's all about balancing supply and demand and labor and capital in different ways for different goals. Different things are sublimated, different things are elevated. All of them are viable economic models. China's not failing because it's totalitarian. China is failing because it's running out of people, because it doesn't have the military capacity to secure its supply lines, because it's dependent on consumption in a different hemisphere. There's a whole long list of reasons why it's not going to work. And if you want to make the argument that it's not going to work because it's totalitarian, there's a lot of history that tells you that you're probably at best looking in the wrong spot. Is capitalism more efficient long run, all else being equal, than fascism? Yes. But there's 1,000 things that go into that.

Dan Ferris:              Sure. Yes. Yeah. We talk about – that is a pet peeve of mine. We talk about the economy here and the economy there, and we throw that word around as though it is not just unfathomable myriad of interactions among millions of individuals with millions of incentives, etc., etc. So, yes.

Peter Zeihan:           And if you're looking for something to stress about, we have yet to invent an "-ism" – capitalism, fascism, whatever – that works in a world that's going through a population inversion like our world is. Now, in the United States, we've had the highest birth rate of the rich world for the last 60 years. Even if our birth rate never recovers from where it is now, even if we never let in immigrants again, we've got at least a half century before we're in a situation like, say, Germany or Japan, or now China. So capitalism, as we understand it, will work for us for quite a while yet, but everyone else has to figure out something new. And if you look at the last several dozen times major countries adopted different economic models, there was always a major conflict, whether it was civil or interstate. We're due for that real fast.

Dan Ferris:              Peter, why don't people in developed countries want to have kids anymore? Is it just too expensive or something?

Peter Zeihan:           Part of it is just the mechanics. When you move from an agrarian system into an industrialized system, you move from the farm into the city. On the farm, kids are free labor. You have a lot of them. When you're in the city, kids are an expense. You have fewer. You play that forward for 80 years, that's where we are.

Dan Ferris:              That simple. I've never heard it made that simple.

Peter Zeihan:           The countries that have done the best at stabilizing or even raising their birth rates are the ones that have free childcare. Because if you force young parents to choose between having kids or having a career, they will choose between having kids and having a career. And enough of them will choose to have a career that there won't be as many kids. So you have to basically reduce that burden on them so they can have both. But there are not a lot of countries that have figured that out. Mostly, we're talking about Scandinavia.

Dan Ferris:              I thought as much. Yeah. All right.

Peter Zeihan:           Plus France.

Dan Ferris:              France. All right. So let's see. I feel like, I feel like we're going around the world here. We, we've talked about Europe, we've talked about the Middle East, we've talked about China. A place that I often wonder about, because it's – to me, I've never been there. It's the one continent. Yeah, it's the one continent I've never been on. Well, besides Antarctica. OK. So, the other continent I haven't been on is Africa.

Peter Zeihan:           OK.

Dan Ferris:              And I wonder what – here's what I – I wonder, I like – I want something to be hopeful about.

Peter Zeihan:           Oh, and you want to talk about Africa?

Dan Ferris:              Yeah, well, yeah, It sounds crazy, right? Because –

Peter Zeihan:           It kind of does.

Dan Ferris:              Politically, politically, it's just like, "You're kidding me, Dan, you're kidding me." But I guess I still have it in my head that this is sort of a wild, untamed, undeveloped place, and that that means that there's some potential for somebody in some country or another there to figure out a system that doesn't result in widespread corruption and people hacking each other's arms off and all the other horrible –

Peter Zeihan:           It's adorable.

Dan Ferris:              Yeah, it's – I'm getting old, man. I need something to feel good about.

Peter Zeihan:           Yeah, well, two big Africa problems, neither of which is easily fixed. No. 1, they decided for various reasons back in the '60s and '70s to keep the borders where they were at the end of the colonial era. And most of the borders do not make sense. They don't mirror the geography. And unless and until they do that, every single African state, especially sub-Saharan African, is going to have internal conflicts because the borders don't make sense. And you've got people on different sides of a mountain range who want different things, but they're in the same country. And you're also going to get interstate conflicts because you might have an ethnicity on one side of a political border with no physical barriers from the rest of their people on the other side of the international border. And unless and until that is right-sized, and you either do that with a long grinding series of wars or a degree of agreed territorial exchanges, Africa can't really begin the process of forming modern states. So that's problem one. And so we've had major wars over and over and over in Africa these last 30 years. That's a primary reason for it, including the ones that are going on right now.

Second problem is, because of that, none of the African states have been able to develop in the traditional sense. They don't have the stability or the capital generation that's needed to build out the physical infrastructure. But they can, using old colonial infrastructure, export raw materials, which brings in cash to the people who control the political system. And they can use that cash to purchase products on international markets that they couldn't possibly make themselves. So the technical term for these economies isn't undeveloped. That's not where they are anymore. They're underdeveloped. They have access to the advanced world, but they don't have the ability to produce any of those products locally. So you break globalization. Their populations have exploded because they've gotten access to imported healthcare and imported medicines and imported food and imported fertilizer. You turn that off and there's no local replacement, and you're looking at a pretty horrific population adjustment.

Dan Ferris:              OK, let me come at this question from another angle. Is there a place in the world – are there places in the world where you are particularly optimistic about the next, oh, you tell me, 10, 20 years?

Peter Zeihan:           Well, until a couple of years ago, most of my work was preparing companies for this dislocation that was coming. Between calendar year 2025 and 2035 was always going to be the window when global demographics were going to flip and the old models weren't going to work. Which country that happens to first matters. What those countries have done to prepare for this moment matters. And so most of my work was looking very long term because we weren't in the churn. We were getting I could see the churn – it was coming, but we had a window. And so most of my work was talking about the countries that would emerge on the other side of that window as the new global powers. And they were ones that had the right mix of demographics and physical infrastructure, physical location, energy and food access and production.

And so it was the United States, Argentina, France, Turkey, Japan, [which] were the big ones, the big winners for whatever the next era was going to bring. Well, since January 20 of last year, we've had 7,500 tariff changes. We now have the most hostile business environment in the United States in my lifetime. We're about to have the biggest energy crisis that the world has seen since at least World War II. And we have an American administration that is basically gutted at the top level. So the government's broadly nonfunctional. The window has been compressed and brought forward, and we are now at the beginning of the churn. And the United States is now not going to be able to build the physical plant and the power grid that's necessary to prepare for the transition. We have to deal with what we have now. So does everyone else. And so the transition is going to be more painful, and it's going to take longer, and more countries are going to fail. And the ones that are going to emerge on the other side, it's just going to take an extra decade or two.

                             So we're now living in the transition and it's going to be short, very short, historically speaking. I'd say no more than four or five years, maybe even less.

Dan Ferris:              Yeah. Basically, Peter, just – I'm sorry to interrupt, but just for our listeners' sake, the transition from the U.S. as the undisputed global hegemon to the multipolar world that –

Peter Zeihan:           Not even that, it's just deglobalization. The links that have made the economics of our world possible are breaking. And then the demographic transition is on top of that. So both of these things were always going to break. They were always going to break in the next decade, but that doesn't mean they had to break this year. But here we are.

Dan Ferris:              OK, here we are. You said something interesting: the most hostile business environment, more hostile than – Barack Obama's administration is cited as a hostile business environment, more hostile than –

Peter Zeihan:           Almost all of those regulations plus the Biden-era regulations are still on the books. Trump has simply told companies to not abide by them. We're not going to put anyone in the bureaucracy who will change the regulations because that requires Trump being in the room with someone who knows more about him than something. So you assume full legal liability for deliberately violating the law, but we're not going to enforce it. If you were a company, what would you do? Nothing.

Dan Ferris:              Yeah, nothing. Yeah.

Peter Zeihan:           And so, industrial construction spending, which in my world is the only number that matters right now – that's a measure of the money that is putting shovels into the ground to build the things that build things – it's dropped by nearly a third since the beginning of last year. And about half of what's left is data centers. So, today, we are going through the most rapid deindustrialization in my lifetime at a time that we need to double the industrial plant.

Dan Ferris:              Yeah, I remember – correct me if I'm wrong here – I remember you doing a video a few years ago. I don't know, one, two, three, or however many it was. And you were talking about the need to reindustrialize, let's just say. And there may – I, I seem to remember you pointing to that particular bridge between Michigan and Canada and doing a little video. Do you remember this?

Peter Zeihan:           Yes. Yeah.

Dan Ferris:              Yeah. And, you were saying, well, and this is – this reindustrialization is going to require capital and it's going to lead to higher interest rates and inflation and so forth. But now it sounds like you're telling me that the – this regulatory situation, decapitation of government, and you're not changing the rules, you're just not enforcing them. And so corporations do nothing.

Peter Zeihan:           Yeah.

Dan Ferris:              That sounds, that sounds like a different argument.

Peter Zeihan:           It's pretty bad. To be clear, we need to double the industrial plant. We are not actually doing it. We, during the Biden administration, we did see industrial construction spending roughly double. And that was great. And some of that, maybe a fifth of that was because of what the government did. The rest was private enterprise. So even during the Biden years of regulation, businesses were really getting to it. But now nobody knows what the rules of the game are. Nobody knows what's going to be enforced. Nobody knows what the tariff situation is going to be tomorrow because they know it's going to change because it has changed every day for the last 450. And no one can plan. And so if you can defer, everyone's deferring...

Dan Ferris:              Right. And yeah, deferring. And in many cases, what we get is the closure of ancient, aging, less profitable infrastructure, things like refineries. I recommended the refineries.

Peter Zeihan:           We're not – we have not closed any refineries in a while. The question is –

Dan Ferris:              Three of them recently. We closed Benicia. We closed –

Peter Zeihan:           Oh, you're talking California. Very special case.

Dan Ferris:              And there was one in Texas as well, but yeah...

Peter Zeihan:           No, American refining capacity is almost double what it was 30 years ago. It's just on a more concentrated footprint.

Dan Ferris:              Right. I don't think you can build a new one, though.

Peter Zeihan:           Yeah, I think – I would argue that overall the industry has given up on that. But let's be honest, we are currently exporting 5 million barrels a day of refined product, not crude, refined product. So we have from that front, we have everything that we need.

Dan Ferris:              All right. I recently heard – who was it – Mike Wirth from Chevron talking about running down. And this is a story – this is another one of those stories that hit the headlines that I've got to hear what you have to say, especially based on your comment just now. Mike Wirth even was talking about running down diesel inventories and other refined product, jet-fuel inventories especially.

Peter Zeihan:           Sure.

Dan Ferris:              To whatever they were, 20-day levels that they're – Goldman is talking about 20-day levels in July or August or something. Not a problem, though.

Peter Zeihan:           No, it's a problem.

Dan Ferris:              OK. I'm just checking.

Peter Zeihan:           Yeah, I know. It's a chemistry issue. Different types of crude oil are good for making different types of refined product. And as a rule, gross oversimplification, it's the heavier-crude grades that are generally considered lower quality that are better for the middle distillates like jet fuel, kerosene, diesel, and gasoline.

Dan Ferris:              Right.

Peter Zeihan:           On a global basis, that has really taken a big hit because a lot of those grades came out of the Persian Gulf. In the United States, most of our local production, our shale production, is super sweet and super light, and they're not ideal for those particular products. And so, what we historically have done is import crude from Canada and from Venezuela, which are very heavy crudes, and use that to make those kinds of middle distillate products. Canadian stuff is still flowing. Venezuelan stuff is a trickle now. And without the Persian Gulf, a lot of East Asia has – and Europe has lost the ability to do that. Remember that Russian crude is still constrained, too. You shouldn't expect this to get better because the only way that you can get your light-crude refining facilities to make more of those middle distillates is to produce a lot less of something else and have a lot of refinery loss.

So we basically have to pick what we want the shortage to be. And so we've already had something like, I think we're up to 3 million passenger seats and flights canceled. I've already had three of my flights from the – for the summer canceled. And that's in the United States. We're seeing routes just vanishing across Europe, and especially East Asia, pretty – at a pretty quick clip right now because of the jet-fuel problem. But yeah, diesel is probably the next problem. And for the United States, of course, the issue there is half of our internal commerce by ton miles transported by semi.

Dan Ferris:              Yeah. Yeah. That – I recommended refinery stocks, not because I thought we were having a war, but because I – some of the stuff you're talking about – and war just made everything more wonderful for those stocks. I hate to say it. Yeah.

Peter Zeihan:           I'm not going to comment on where any sort of trade is going to go. No, you guys play that all your own.

Dan Ferris:              OK. Yeah, fair enough. That's what they pay me for. Actually, this is not a bad time. There were some other things I had on my mind, but we'll have to have you back. This is a good time for my final question, which is the same for every guest, no matter what the topic, even if it's a nonfinancial topic. So the question is simply, for our listeners' benefit, if you could leave them with a single thought, with a single takeaway today, what would you like it to be?

Peter Zeihan:           There's a bit of a backstory. Every generation or two, the American political system goes through a transition moment. We have a first-past-the-post single-member district system, which is a very fancy way of saying that you vote for one person who will represent a specific group of people in a specific geography. And that forces the existence of two big tent parties, because you need to get one more marginal vote than the other guy. And so you get huge coalitions that vote as a group. So, for example, the Republican coalition for most of the last two generations has been business voters, fiscal conservatives, law and order conservatives, national security conservatives, social conservatives. Conservatives and populists. They don't have a whole lot in common, but they agree that on the issues that matter to them, no one else really cares. And so they'll vote as a bloc, and it's very reliable. But every generation or two, the factors that empower these factions shift. Technology changes, information changes, culture evolves, globalization looks different, the demographics look different.

And so in the past 30 years, we've gone from the Baby Boomers being the largest worker cadre ever to now the largest retired cadre ever. We've had the height of the Cold War and then the height of globalization and now deglobalization. We've had the rise of social media. Of course, we're going to manage our political system different. The moment we're in right now, Trump has not just ejected but actively campaigned against any business conservatives, national security conservatives, law and order conservatives, and fiscal conservatives that were in Congress. And he has now ejected almost all of them. All that's left of the Republican Party is Donald J. Trump. It's not a party anymore. It's a person. And it's a person who refuses to even have a talent pipeline for the next generation. So he is the last Republican, if that is even the right term anymore. And it will take an election cycle or two for the Republicans – or whatever the conservative movement reforms as – to turn into something new. And I don't think that that can happen as long as he's alive.

The Democrats are in a similar mess for different reasons. So we are at a moment in our political system where our normal two-party network is shattered. It's not coming back. And in that sort of environment, only one person matters. And that one person has decided that he really is the only person. So you will not see reasonable, thoughtful, long-term policy out of the United States, not just this administration, out of the United States until this reshuffles. And the soonest that might happen is 2030. Soonest. So we are in one of those moments where everything is up in the air politically. We'll recover from this. We've done this five times before. We'll do it this time, too.

Dan Ferris:              Mm-hmm.

Peter Zeihan:           But in the meantime, everything that matters, everything that could make a coherent decision, everything that could lay out a new path, is gone. So if there's anything that's going to happen that's going to matter, it has to be at the state, local, or corporate level. The federal government is fully nonfunctional.

Dan Ferris:              All right. Boy, that's a hell of an answer. Now, I have to say, when you started talking about Trump, the party versus the person, when you said person, I thought you were going to say cult of personality.

Peter Zeihan:           Oh yeah, that's a perfectly viable term to use for where we are right now. The committee is gone. Republican National Committee is gone. When Trump was in, he destroyed the research arm. He destroyed the recruitment arm. It's just a campaign arm and just for him.

Dan Ferris:              All right. Listen, Peter, I love talking with you. I, as our producer said before we started, we like to have a lot of back and forth. But I am, as my listeners can now tell, I am content to just let you go because I always learn so much. It's like I'm getting –

Peter Zeihan:           Wind me up and there I go.

Dan Ferris:              Yeah, wind him up and there he goes. But, you know, if– believe me, if I wound you up and you went somewhere and it was like boring the hell out of me and sounded like bullsh**, I would cut you off. I promise, I promise. But I always learn a lot, and I certainly hope you can make some time for us in the near future again.

Peter Zeihan:           We'll see what we can do.

Dan Ferris:              All right. Thanks a lot, Peter.

Peter Zeihan:           No problem.

Dan Ferris:              Now tell me that guy is not fascinating. He is extremely well-informed on literally what is going on in the world at a really deep – at a level of detail that most of us just simply don't have time for. I love having Peter on the show. There's another fellow I mentioned, have mentioned before, who we've recently interviewed as well, named Marko Papic. And it's the same kind of thing. They're both geopolitical experts and they just know things that frankly other guests of ours simply don't know. These guys, they're unique. Their focus is unique. And I think it can be valuable for investors, especially because I know that investors are human beings. So we have all of these sort of macro top-down worries about the world. I mentioned Africa. I thought, isn't there some potential for Africa to be this wonderful place? He was like, well, there's a couple of problems. And then, of course, he talked about the Middle East. I kind of agree with him about oil and the Gulf. And not coming back anytime soon. Whereas the oil futures prices aren't saying that. They're saying everything's going to be fine by December. I disagree. And it sounds like Peter did, too. So it's nice to get a little confirmation bias now and then and to learn some new things.

His views on – I found his views on Trump and the Republican Party and the current administration, generally, versus the previous administration very interesting. And I'm sure you did, too. Whether you agree or disagree, you can't you can't say that the guy is not coming from a place of being well informed and experienced in analyzing these matters. Right? You can disagree all you want, but you can't say he doesn't know what he's talking about. And that's why we have him on, man. It's really cool. I hope you enjoy it the way I enjoy it. So that's another great interview and another great episode of the stand. That's it for this week's Stansberry Investor Hour. I really hope you did enjoy this one as much as I did. And by all means, please remember to hit like and subscribe and sign up for our free daily e-mail.

Announcer:             Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company, or affiliates.

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