#876 The Truth Behind The Russia vs. Ukraine War w/ Peter Zeihan

Peter Zeihan is a Geopolitical strategist and author of the upcoming book "The End of the World Is Just the Beginning: Mapping the Collapse of Globalization" In this conversation, we break down the Russia vs. Ukraine situation. Peter gives us all of the details on how we got here and what might happen with the war in the coming months. Also, Peter is not a supporter of Bitcoin, so we have an open debate about the pros and cons of Bitcoin. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Go to https://www.eightsleep.com/Pomp to check out the Pod Pro Cover and save $150 at checkout. Eight Sleep currently ships within the USA, Canada, and the UK. ======================= The world's 2nd largest crypto exchange, OKEx, has dropped the "E" to become OKX, reflecting its evolution from a traditional crypto exchange to a comprehensive, cross-platform crypto services provider. With OKX's decentralized platform and Web3 wallet, MetaX, you have full custody over your crypto. Explore DeFi, NFTs and play-to-earning gaming with the world's most powerful crypto exchange. Visit OKX.com to learn more. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Peter Zeahan is an American geopolitical analyst, an author, and a speaker. Peter also happens to be one of the foremost experts on a number of different topics related to Russia and Ukraine. In this conversation, we talk about that geopolitical conflict, the impact on commodity prices, and how various groups around the world will be impacted. I really enjoyed this conversation with Peter, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, underscored by 100% uptime

• 0:47Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:10Anthony Pompliano?

  This episode is brought to you by OKX. OKEX has dropped the E to become OKX. Founded in 2017 with a mission to deliver a cutting-edge crypto-trading experience, OKX, the world's second-largest crypto exchange by trading volume, has since expanded its scope alongside the wider industry, adding features from all corners of crypto. If EX is about exchange, X is about intersections. Cross-chain, cross-functional, cross-platform, an interoperable future that's not siloed into isolated platforms and blockchains. The name change and the new look and feel represent OKX's ongoing move towards decentralized finance. With OKX's decentralized platform and Web3 wallet, MetaX, you have full custody over your crypto.

• 2:55Anthony Pompliano?

  Connect MetaX in your browser or within the OKX app to explore DeFi, NFTs, and play-to-earning gaming with the world's most powerful crypto exchange. Whether you're just learning about crypto, you're a seasoned DeFi DJ, an NFT enthusiast, or a pro trader, you're all invited to a better future. Go check it out today and let me know what you think. All right, let's get into this episode. I hope you guys enjoy this one.

• 3:19Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 4:13Anthony Pompliano?

  Peter, how are you?

• 4:14Speaker 02

  I'm doing great. How about yourself?

• 4:16Anthony Pompliano?

  I am doing fantastic. I'm super excited to talk to you. When I told people that you were coming on, I got inundated with questions and all kinds of things to talk about. So maybe first, let's just start with the Russia-Ukraine conflict. I think is kind of the event that everyone is focused on at the moment.

• 4:33Speaker 02

  Oh, there's a war I hadn't noticed.

• 4:36Anthony Pompliano?

  When you think about that, what is your analysis in terms of like, how do we get here? And is it specifically related to just the NATO kind of expansion and what's I think been talked about a lot in the mainstream media? Or are there other elements that led to this event that maybe people aren't as aware of or paying attention to?

• 4:55Speaker 02

  This was always inevitable. In any world where the United States is no longer banning war and is no longer regulating commerce in the way that we did during the Cold War and the post-Cold War period, the Russians were always going to go out and try to resecure what they see as the gateway invasion access corridors, places like the Polish Plain, the Bosphorusian Gap, the Baltic Sea. They were always going to try to do this. What has changed is that the Russians are literally dying out. And the post-Cold War generation that was born through the 1990s was so small that the Russians were losing the capacity to field a regular army. So if they didn't do it now, they would lose the possibility and they would be then unanchored

• 5:37Speaker 02

  in this kind of great open flat zone in the middle of Eurasia. And the next time there's a war, they couldn't stop it. So they're hoping to forward position what they've got left in these gaps. And Ukraine unfortunately is between them and two of the most important gaps. So it's not just that they're going for Ukraine, they're going for Minsk, they're going for parts of Romania and Poland and all of Estonia, Latvia and Lithuania. It's just a question of timing. But Ukraine is the flavor of the month. I kind of see this war as the last conflict of the Cold War. Because as long as the Russians existed and their security was going to drive their decision making. So it's kind of like how the Civil War was the final war of the American Revolution. We're kind of at the end of this section of history now.

• 6:20Anthony Pompliano?

  When you think about what's happening kind of on the ground, and of course, I always am careful to say like, we don't really know what's happening because we can just go off of the reports that we're getting. It seems like Russia may have thought that they would be able to be successful in Ukraine much quicker than they have been. So I think they've been a little surprised by the resistance that they faced. And also, it appears that they may have thought that China or other countries were going to have much more support for them than it appears that they do. Is that a fair categorization in terms of maybe some assumptions that Russia had going into it and they've been surprised by the lack of success or support that they've received?

• 7:02Speaker 02

  Absolutely. One of the things we've seen in a lot of the authoritarian governments that are in existence right now, most notably Russia and China, is that their leadership has completely isolated themselves from the rest of the world. And so if you are not, if you are in Putin's inner circle, you don't dare give him bad news because he will kill you. So there were a lot of assumptions that were made in the Kremlin that just have turned out to not be true. Now, in all due defense to Putin and the Kremlin, everyone in the West was thinking the same way. We never thought that the Europeans would pull together in the way that they did. We never thought that we would get any sort of meaningful international sanctions that included countries like Japan and Korea. We thought that the Ukrainians would crumble. We thought that the war would be over in a month. You know, everyone has

• 7:44Speaker 02

  gotten it wrong. But from my point of view, the single biggest flaw is the complete collapse institutionally of the Russian military. They are making mistakes that were worse than what the Iraqis did in 1992, or what they themselves did during the Chechen wars. Just that the inability of them to launch any sort of meaningful multi-domain operation in what we thought of as the second most advanced military in the world is just blows your mind and forces the Russians now to do siege mentality tactics where they just obliterate civilian infrastructure because now that's the only way they can win the war.

• 8:21Anthony Pompliano?

  When you start to think about the participation of NATO allies in this conflict, there still is no no-fly zone. There still is at least officially no troops on the ground from those NATO allies. But there seems to be quite a bit of flowing of both capital and weaponry to Ukrainian forces. How is that helping? Would they not be able to provide this resistance without that? And I guess kind of how important is it that the European countries came together along with the United States to provide the support to Ukraine?

• 8:57Speaker 02

  Well, I don't have a good answer for you for how the Europeans came together because no one even in Europe anticipated this level of support. And everyone is taking any weapon system that they can that doesn't require a static footprint, like a, so no jets because that requires an airport or an airfield. But anything that can be carried or moved by truck that is not nailed down is being shipped in. And the reason originally was they wanted to give the Ukrainians a fighting chance. But I think it was the convoy that was north of Kiev, the 40-mile-long one, that terrified Western leaders. Because we hear, we had this 40 mile convoy with thousands of vehicles that stalled out in a day because of lack of fuel, just horrible logistics. And then two days later, they ran out of food.

• 9:42Speaker 02

  And so all the soldiers had to get out and walk back to Belarus, just leaving their vehicles behind. Well, you know, from a certain point of view, that's a yay, the Russians are incompetent. But until you realize that if there ever was a direct conflict between Western and especially American forces and Russian forces on the battlefield, the Russians would be obliterated. That's a bad thing because it means that if Russia pushes through and captures all of Ukraine and then moves to its next stages, which are those gaps in Romania and Poland, for example, there will be a direct flight, fight, and the Russians would be obliterated. And they would then face a simple choice. Do we go into a humiliating strategic withdrawal from which this country will never recover? Or do we up the ante to include nukes?

• 10:27Speaker 02

  And so, once that decision, once that issue kind of sank in in the White House and DOD, now we are almost desperate to send any possible weapon systems that we can. So in April, this war is going to be incredibly bloody. Because when the war started, the Ukrainians only had a few hundred Javelin anti-tank launchers, and they only had a few dozen Stinger anti-aircraft missiles. Well, that was before the Americans started supplying things in bulk. They're only now starting to arrive. So we're talking about the Russians suffering tank and air attrition at an order of magnitude higher than they are right now. And this has gone from an issue, well, we need to slow the Russians and extract a cost,

• 11:12Speaker 02

  but we know we can't win, to a, if we don't win, we are really risking a nuclear conflict. We have to do everything we can short of regular, direct intervention to crush the entire Russian system as quickly as possible. So Ukraine is now the field upon which this will all be determined.

• 11:30Anthony Pompliano?

  So it feels like there's two conflicts that are very much tied together. The first is the violent conflict that's playing out in Ukraine. This is the Russian forces versus Ukrainian forces. The Ukrainians have the support of NATO, the United States, and many other allies. The Russians have somewhat of a trump card in that they're nuclearly armed and no one wants to push them far enough to actually execute that power. That's the violent conflict. There's also a financial war that seems to be taking place, which was essentially over before it even started, once the European countries, plus the United States, came together and they levied what are unprecedented sanctions against not only the Russian banks, the Central

• 12:15Anthony Pompliano?

  Bank, their leadership, but also what essentially has been every single wealthy person that even knows a politician, it seems like, in Russia, seems to be getting all of their assets frozen, etc. Like, talk a little bit about what your analysis is of the financial war that's being levied, and just how effective that has been so far.

• 12:34Speaker 02

  Okay, so first, the splash that's in the news. Second, the stuff that's behind it that's actually more important. And then the third, what's coming. So the splash that's in the news is going after the oligarchs. In the 1990s, a group of people took advantage of the collapse of the Soviet system and grabbed assets for themselves by any number of means. Very little of it was what we would consider illegal, or what the Russian law would consider illegal, because there wasn't a lot of Russian law then, but it was definitely unethical. And they have now become multi-billionaires. This first batch of oligarchs, when Putin came in in the year 2000, he brought them to heel. He made them a deal that if they stayed completely out of politics, he would not go after their assets. And so there's been this truce between them for the last 20 years.

• 13:20Speaker 02

  Under Putin, he elevated a number of people from his FSB days, KGB days, based on who's doing the math, to take over large portions of the Russian economy. This includes things like the defense industry, Gazprom, which is the world's largest natural gas company, and Rosneft, which is the world's second-largest oil company. And these are all people who were not part of that original group. These are people who are all in Putin's inner circle. So we're going after two different groups of oligarchs here. The ones that are around Putin, totally worth it. These are people who have been with Putin, bolted to the hip with every single policy he's done for 20 years. These people should be brought down. The other people, the folks that have been there since the 1990s, I don't mean to suggest

• 14:05Speaker 02

  that they're kinder, gentler folks. I mean, they are robber barons at best. But going after them just makes you feel good, because they have very little influence over Putin. So we're talking here about melon-scooping the entire core out of the Russian economy by going after the leadership, but one group is not going to affect the war whatsoever. And it's that first group in the 90s, they're the ones who have most of their assets overseas. So they're the ones who are actually vulnerable to what's going on. Now, behind that, we didn't just sanction a bunch of companies and people, we sanctioned the Russian Central Bank. And we don't think of how important a central bank is in systems, because we always assume it's a neutral actor in the background that maybe messes around with

• 14:48Speaker 02

  interest rates and bond purchases, and that's about it. But they are the primary connectivity point between any economy and the rest of the world. One of the thousands of reasons that I'm not a big fan of Bitcoin is it assumes that the central banks, A, will empower it, and B, will do nothing to impede it. And that's clearly not true. And in the case of the Russian Central Bank, they can no longer deal with any entity in any of these countries and access any currencies that are dollars, euros, yen, yuan, Australian dollars, Canadian dollars, Taiwanese dollars, and I'm sure I've met Swiss francs, and I'm sure I've left out a bunch. So anything that the bank tries to do... Anywhere cannot use any of those normal channels.

• 15:33Speaker 02

  And so, among other things, that denied the Russians access to some 90% of their currency reserves. That means that when they sell oil, somebody has to like physically do a transfer in a third party and fly the money into Moscow. This is not a tenable situation. We tried doing some version of this for Iran and it was crushing, but we've never done it to an economy this big or this holistically. And then what's coming? We have a number of sanctions against Russia. It's the most sanctioned country in history now, actually. It has more sanctions on it than all other countries and all other timeframes throughout human history. The Europeans are now talking about an open ban on all sales of Russian crude, not just to the Europeans themselves, because all that would do is shift the pain.

• 16:18Speaker 02

  They're talking, at the beginning of the process, of talking about making sure that Russian crude can't make it to market anymore. That would mean, among other things, blocking ships from going in and out of the Baltic Sea, probably the Skagerrat, and probably blocking ships going in and out of the Black Sea, probably through the Turkish Straits. Now, how the Russians respond to that would be really interesting, but if the blockades are further back from Russian ports, the Russians militarily can't do anything about it. So we're looking here at removing four to five million barrels a day of crude production from the world. That is more than enough to guarantee an energy-induced depression that is global in scale. And the crazy thing is, we might even get there without an official sanction, because insurance companies are not allowing ships to go into these ports.

• 17:03Speaker 02

  The ports are shallow, so they can't take supertankers and then run it to China. So either you get this daisy chain of dozens of mid-sized vessels that are going to be loading onto a supertanker in sight of a NATO port and expecting that NATO is not going to do anything about it, or they just close the strait altogether. One way or another, we are headed for a very interesting year.

• 17:26Anthony Pompliano?

  So we'll get to commodities in one second, but I want to talk about this central bank kind of sanction that you mentioned, which is it's one thing to say, hey, you cannot transact, right? If I said, hey, Peter, Central Bank, you're not allowed to transact in these certain currencies or in these other organizations. There's an added piece, though, where we essentially have frozen or confiscated the central bank reserves as well. And that, to me, feels like it is today, a footnote, given how complex this situation is and how kind of just mind boggling everything. But it has massive ramifications across many countries over

• 18:08Anthony Pompliano?

  the next 50 to 100 years. What is your thoughts around the actual freezing and confiscation of another country's central bank reserves that just happened to not be within their border?

• 18:20Speaker 02

  Let me put it to you from the point of view of an outsider. So here we've got the United States, who has been moving down a path towards isolationism for 30 years, and it just wakes up one day, decides that it wants to get involved in the Ukrainian-Russian situation. It's been removing troops from the Middle East, it's been removing troops from Asia, it's been removing troops from Europe. When Biden was elected, we were at the low point for international involvement since Reconstruction. We had fewer troops stationed abroad than since Reconstruction. So we're at 150-year low right now. And now we're telling people that they can't use the dollar, or any currency. Everyone who thought that

• 19:03Speaker 02

  the American retreat was going to give rise to a multipolar world in which the United States had minimal power really hadn't been paying attention to how the world works. To have a global currency, the first thing you have to be sure of is that the country that issues currency has to really not care about what happens with it every single day. Because if they're going to manipulate the currency in order to achieve trade advantages, then nobody's going to want it. And in addition, it has to be sufficiently deep pool of liquidity in order to work. There's only one country that fits that criteria. There's only one country that's fit that criteria since 1945, and it's certainly not China. And people are discovering now, countries are discovering now, that if you want to be

• 19:48Speaker 02

  part of that system, there are certain things you can and cannot do. Invading countries that for whatever reason the United States should not be invaded makes the list. And so I would say that the biggest panic, the biggest damage that we are seeing from the Ukraine war, outside of Ukraine obviously, is in China. Because in one month, the Russians have pulled back the blinders on what has been a 50-year strategic program. The idea that China can become the global power with American sponsorship, with American indifference, that it can take Taiwan, that it can intimidate Japan, that it can dominate all of East Asia, and yet not suffer economically at all.

• 20:30Speaker 02

  It was always ridiculous, but now it's been shown to just be absolutely stupid. Now, the question moving forward, of course, is what's the next thing the United States is going to care about? And considering how erratic our politics have been for the last 15 years, that's a tough question, but it's something that every single country that trades now has to obsess about if they want to continue doing anything along the lines that they thought they could.

• 20:56Anthony Pompliano?

  It's basically, I have to remain in good standing with the issuer of the global reserve currency, or else I could be next, right?

• 21:04Speaker 02

  Exactly. And there's nowhere else to go. I mean, the yuan is only traded internally because it's the most manipulated currency in history. The euro confiscates bank deposits to pay for bailouts. I mean, are there things that the Fed could do better, in my opinion? Of course! But compared to all the competition, I mean, there isn't any competition.

• 21:25Anthony Pompliano?

  So let's talk about commodity prices. I specifically want to start with oil and natural gas. We've talked a ton on this show about the fact that they're the third largest oil producer. I think they come up with almost 15% or so of all natural gas globally. And it's not just is it produced in Russia or even in the Ukraine kind of region, but also there's a lot of flow of these assets, as you were describing, in terms of the straits and many things that are kind of being at least evaluated as potentially creating problems. How do you think about, let's start with oil maybe first, and the price has exploded, it's come back down, there's people running around saying that

• 22:10Anthony Pompliano?

  if we actually stop buying oil or natural gas from Russia, it'll create these energy shocks. Like, what's your evaluation of it?

• 22:17Speaker 02

  Sure. Now, I'm not a financial analyst, so I'm going to put that out there at the beginning as a caveat. I am going to throw some numbers out there where I think this is going to go based on supply mechanics. But, you know, take it with a grain of salt. Okay, so Russia is the world's second largest oil exporter, and it exports via four Bane routes, one to China, one to the Baltic Sea, one to the Black Sea, and then via pipe to Europe. What's going on right now because of the Ukraine war is that the pipes that go to Europe are going to be disrupted either by the war itself, or because Ukrainian partisans are targeting Russian income flows. One way or another, those pipes aren't surviving this year. The stuff that goes to the Black Sea is in a war zone. So insurance companies will not give the indemnification that is necessary for vessels to operate in that

• 23:02Speaker 02

  area. So the only way a ship can go and dock it in overseas right now is if a country gives it sovereign indemnification and takes all the risk. Some of that is happening with the Chinese, it might be happening with the Indians, that's the little touch you can go, they're still under negotiation. Primorsk, that's the Baltic port, so right next to St. Petersburg. That is not in a war zone, so you can get insurance to go to Primorsk. However, ship captains, for the most part, are refusing to go. And European dock workers are refusing to unload the cargo when it arrives. So that is still in use, but not nearly as much, maybe a quarter of what it used to be before the war started.

• 23:42Speaker 02

  And then the final pipes either terminate on the Pacific coast, near Vladivostok, or there is a short spur line that goes down into Daching in northeastern China. Now, the Western Three, Black Sea, the pipes to Europe, Baltic Sea, those are interconnected to a decree. So if there's a problem at one port or on one pipe, they can redirect some, less than a third, but some of the crude to other places. It is completely disconnected from the Eastern pipes that go to China and Japan. So if all the stuff in the West is shut down, which is what I think is going to happen, none of it can go east. The rail line is already operating beyond capacity, the pipelines are already full.

• 24:26Speaker 02

  You would have to build a fundamentally new infrastructure from the fields in northwest Siberia to Chinese population centers. That is greater than the distance from Miami to Anchorage, most of which is through virgin territory that is very rugged. That's a 10-year program, minimum, even with the Chinese building it. So, one way or another, we are looking at those Western flows, which add up to 4 to 5 million barrels a day, going offline. There's still about a million and a half barrels refined product that might go out, but most of that is going out via rail. So that'll be a little trickier to disrupt. I figure the Europeans can maybe disrupt half of that if they really want to.

• 25:07Speaker 02

  But we're looking at the single largest removal of crude from the market ever. And in proportional terms, it's going to have a shock somewhat similar to World War II. And that assumes that there are no downstream effects anywhere. Because we have insurance companies not doing it, shipping companies not doing it, dock workers not doing it, and now Halliburton, Baker Hughes, and...

• 25:30Speaker 02

  Schlumberger have pulled out and they do the technical work that makes a lot of this possible. All the super majors are gone. We even have a couple of major projects out in Sakhalin that are probably just going to die because the Russians can't make those projects work by themselves. Most of the oil and gas out of that goes to China. So we're actually looking at an environment where the Chinese see reduced flows rather than increased as Russia is just melon scooped out of the market.

• 25:58Anthony Pompliano?

  When you think about this, obviously, I think Europe, the United States, many other importers of oil and natural gas are kind of scratching their heads, being like, how did we get to this place? And I'll ask this in an open-ended way, because you can take it so many different directions. How did we get to the place where European countries and the United States are so dependent on Russian oil and natural gas to essentially survive?

• 26:26Speaker 02

  I would say there are two kind of main threats here. The first one is at the end of World War II, the Americans changed how the world worked. We created free trade and globalization and told everyone that could participate in any market anywhere without military escort, they could access our market if in exchange, they formed an alliance with us against the Soviets. We bought an alliance and we guaranteed as part of that alliance, their energy flows. So the primary reason that the US has been so bogged down in the Middle East for so long was because we had to in order to keep our alliance fueled. If the Middle East would have gone offline, the European alliance would have shattered and the Soviets would have walked away with Europe. That was the logic. Post-Cold War,

• 27:09Speaker 02

  we kept holding up the ceiling. We kept up our end of the deal, but there was no boogeyman. So people went their own ways and in many times, that meant that they started signing deals with the Russians. It's kind of thread one. Thread two?

• 27:24Speaker 02

  Europe's a nasty place. Its history is horrific and the world wars were just the capstone of what had been a millennia of conflict. And so with the American-led order, the Europeans let themselves believe, let themselves hope that history had finally turned the page and that they were finally, finally had all that behind them. And in that sort of environment, especially in the post-Cold War version of it where the Germans had reunified, Russia was seen as a country that in the end needed to be incorporated into the European family so that Europe could finally be whole at peace and free. It didn't work. And so we're dealing with a lot of shattered dreams in Europe right

• 28:07Speaker 02

  now, right alongside with the war, because a lot of people's guiding ideology and hopes for the future died on February 22nd when the Russians moved in the tanks. And so one of the reasons I think that the European response has been so vitriolic is that they're not just disappointed here, they feel betrayed, that their whole idea of what could happen isn't going to happen anymore. And in their mind, it's very clear who's at fault.

• 28:36Anthony Pompliano?

  When you think about this lack of energy independence, both in Europe and in the United States, how much of the environmental kind of pitch over the last 20 years has also played into it? So there's a geopolitical element which you're speaking to.

• 28:49Speaker 02

  There's some, yeah.

• 28:50Anthony Pompliano?

  Talk a little bit about that in terms of, it seems like one extreme is pointing and saying, oh, the environmentalists did all of this. Another extreme is saying they had nothing to do with it. Truth's probably somewhere in between.

• 29:00Speaker 02

  Yeah, the truth is definitely somewhere in between. And if you're looking for someone to blame, I mean, if that's what you're after here, it's definitely the German Greens, because they decided that coal was better for the environment than...

• 29:15Speaker 02

  Nuclear power. They saw it from a nuclear waste point of view rather than a carbon emission point of view. So there are a number of countries in Europe that followed the Greens and started dismantling the nuclear power plants, which meant that they had to use something. And natural gas from Russia was the cheapest of the options available that wasn't coal. Of course, the Germans did coal as well. So yeah, we are looking at a massive unwinding of ESG issues in boardrooms across Europe and a massive unwinding of environmental progress in general. Europe is neither a very sunny nor a very windy place. And so they can build all the turbines they want and put in all the solar panels they want. But in most parts of Europe, especially the northern part that is wealthy,

• 29:59Speaker 02

  the only way they've been able to bridge the gap is with Russian natural gas. And now that's gone. So they're going to try to build more solar and wind and they're going to realize very quickly that that really isn't going to solve the problem in most places. They're going to try to bring in LNG from other parts of the world, but every shuttle tanker of LNG that they take in is one that's not going somewhere else. So somebody has to be left handed holding the bag. It'll probably be the East Asians. And then they're going to make up the difference with coal, which the Germans have a very big head start on because they already get about a quarter of their fuel from something that's called lignite, which is a soft brown coal that's 20% water. It is actually more carbon intensive and less energy intensive or generates less energy than wood. But that's what they have.

• 30:43Speaker 02

  So we're, we're going to see a lot of what we thought of as progress towards green goals just being unwound violently over the course of the next several months because the alternative is to have no electricity. And that is not a viable option.

• 30:58Anthony Pompliano?

  Let's talk about wheat. Obviously, Russia, Ukraine kind of region is one of the largest producers of wheat in the world. What is the disruptions that will happen there? And what's the impact kind of globally?

• 31:11Speaker 02

  Well, this, this is the horrific part. If the energy induced depression didn't get you down this well. All right. The last time the Russians interfered with exports from the former Soviet Union, it was 2010. And they had had a bad harvest and a drought and a lot of fires in western Siberia, where they grow a fair amount of their wheat. So they blocked exports for a couple of months. That drove global wheat prices up by a factor of two. Remember, food, especially based commodities like wheat, have inelastic demand. So it doesn't take much of a disruption in supply to make prices go bonkers. In their primary export markets, which are the Middle East, prices tripled. And that triggered the series of coups and revolts and wars that we now come

• 31:51Speaker 02

  to know as the Syrian Civil War and the Arab Spring. So, small amount disrupted, prices tripled in the Middle East, doubled globally, big deal. We're still feeling the effects of that. Oh, this is gonna be so much worse. So Russia is the world's largest wheat exporter, and most of their wheat is exported via Novorossiysk, the port that can't be accessed right now. And Russia, the world's largest wheat exporter, has invaded Ukraine, the world's fifth-largest wheat exporter, and they are making a drive for the city of Odessa, which is where the Iranians offload all of their wheat. So we're looking at two of the top five, maybe not vanishing, well, Ukraine's vanishing from the market. Ukraine's gonna be a net importer this year. They can't plant anymore. But a lot of the Russian production

• 32:35Speaker 02

  is not gonna be able to make it to the global market. Only if they can rail it to you can you still get it. So Iran's probably okay. There's gonna be a little bit more maybe going to China. And that's everybody. Everyone else replied upon Russian wheat, you're just out of luck. And if you replied on Ukrainian wheat, it's just gone and it's not coming back this decade. That's all piece one. That's just piece one. We had a phosphate and a nitrogen fertilizer shortage globally when this all started. You need natural gas to make nitrogen. The European fertilizer manufacturers have already suspended most of their nitrogen fertilizer production because of what's going on with the Ukraine war. And the cost is

• 33:19Speaker 02

  already, I believe, today where it's $60 per

• 33:24Speaker 02

  Thousand cubic feet in Europe for natural gas versus the United States, which is like four and a half. So, I mean, there's no way you can be viable making nitrogen at that prices, and that's without sanctions. And forty percent of the world's potash comes from either Russia or Belarus. So, we now also have a potash shortage because they can't get that to market. So, all three of the primary components that go into all fertilizers are in shortage globally. It takes a minimum of three years to build out the physical infrastructure to bring a new phosphate, excuse me, to bring out, yeah, a new phosphate or nitrogen facility online, and probably closer to ten years to get the mine and the mill situation in place for potash. So, this isn't a one-year issue. This is a multi-year

• 34:06Speaker 02

  issue. And we're going to have a lot of countries around the world, particularly on the poorer side, that just aren't going to be able to use fertilizer this year, which means their yields will crash. The number one importer of Russian fertilizer is Brazil. That's the world's second-largest agricultural exporter. So, at a minimum, we're going to see the prices for their output going up stratospherically. This is more than enough to trigger a multi-continent famine that starts probably in the third or fourth quarter of this year, and then just doesn't let up for quite some time.

• 34:35Anthony Pompliano?

  What does that mean? When you say a multi-continent famine, help people understand famine could mean people have a caloric deficit and aren't getting enough food. It could also mean people literally get zero food and everyone dies. Like, what is the severity or extreme when you describe that?

• 34:54Speaker 02

  Well, again, let me start with a caveat. Not that I don't follow this stuff, but there's a lot of other things that go into agricultural supply chains. Assuming that the only disruption we have to deal with is what's going on in China with phosphate, which is a separate story, and what's going on with potash in the former Soviet Union, and what's going on with nitrogen because of natural gas prices. Let's assume that there are no other factors that play into this. We probably only have enough fertilizer that's going to get out there to support a population of about 6 billion. So that means we're looking at 2 billion people entering chronic malnutrition over the course of the next 18 months, probably.

• 35:36Speaker 02

  One of the things we're going to see is when people realize that they can't just export widgets or iron ore and then import wheat, because there's not enough of it, they're going to have to grow it themselves. Now luckily, wheat is a weed. It is very easy to cultivate, it grows in a wide variety of climates, and under globalization, where everyone goes after whatever bit they can earn the most money for, wheat has been pushed to the margins. So you can go into a place like Algeria and grow more wheat and rip up some of your orchards, for example. You won't get as much bang for your buck in terms of income, but your people won't starve that way.

• 36:16Speaker 02

  We're going to see that happen across Africa, across Latin America, across East and Southeast Asia, because they're not going to have much of a choice. So either we have 2 million people in malnutrition, or we have maybe, I'm sorry, 2 billion people, or we have maybe closer to 1 billion people in malnutrition and the collapse of the global agricultural system that brings us out of season blueberries and avocados, or somewhere in between. We are definitely entering a period where it's going to be a very rough sledding in places like Sub-Saharan Africa and South Asia, because they are the world's most, countries that are the world's, sorry, they are the parts of the world that is most dependent either on direct food imports, or on the imports of the fertilizers that allow them

• 37:00Speaker 02

  to grow most of the food themselves. I would actually toss China into that bucket as well, they're probably at like an 80% import dependency upon the inputs that allow them to keep the Chinese population alive.

• 37:12Anthony Pompliano?

  I've got two of my brothers here, Joe and John. Joe, what questions do you have? Hey Peter.

• 37:17Speaker 03

  Thanks for joining us. Off the back of what you just talked about with the fertilizer shortage and price increases, I think the last time we saw something similar was around 2008, right, where natural gas prices increased really dramatically. And it caused subsequently the same thing to happen with fertilizer. I don't know exactly how many people this caused to be put into chronic malnutrition, but can you compare the two events, right? Because I think that the main difference now, obviously, is we've had COVID for the last two years. There's obviously supply chain issues going around globally. Does this make it much worse, or is it just a totally different event?

• 37:49Speaker 02

  There's definitely some parallels to draw upon, but let me kind of put that in context. So the primary problem we had in 2007 to 2008 was that the Chinese boom was huge. It was just gobbling up any resources they could. And American subprime was generating an artificial inflation of demand, if you will, in the United States. At the same time that the Iraq war was keeping oil off the market and Venezuela was early in its national suicide. So we had oil prices between 100 and 150 for a prolonged period of time, which contributed to the financial crisis, obviously. You don't use oil to make fertilizer. And in a lot of places, natural gas is indexed to oil because a lot of times they're co-produced, but they are different commodities.

• 38:32Speaker 02

  So natural gas was drug up with oil because of that linkage in 2008, and that definitely contributed to a fertilizer problem.

• 38:42Speaker 02

  But even at its peak in the United States, natural gas never breached seven. Now, in the United States right now, courtesy of the shale revolution, we have a lot of excess natural gas that we've been gobbling up in the years since. We went to six at the end of last year. Right now, we're below five still. I don't think we're going to go above seven. But in Europe, because natural gas, well, natural gas, because it's a gas, it's more difficult to transport. You need a more dedicated pipeline system, or you have to bring it in via LNG, which is incredibly expensive. Before the war started, the Europeans were already experiencing shortage,

• 39:24Speaker 02

  which had already taken natural gas prices up to 30 compared to six in the United States. It's doubled since then. So we're talking about prices in Europe at least that are seven times what they were in 2008 at the peak. And so it's not an issue of fertilizer is expensive. It's an issue of they're no longer making it because the base material is too costly.

• 39:49Anthony Pompliano?

  John, what questions do you have?

• 39:50Speaker 04

  Yeah, Peter, thanks for joining us. My question would be about the timing of this situation. So it looks like Russia has been planning this for years. Why now? And what effect does that have on the economy globally?

• 40:01Speaker 02

  Well, the demographic situation was certainly pushing them to do it in the near term. But I asked as to why specifically, why February? It had to do with the combination of the Trump impeachment and the Biden administration's changing of arms export rules. So you may remember that the first impeachment trial for Donald Trump was about him trying to blackmail the Ukrainian president, like the current guy, the guy who's like doing TikTok videos in downtown Ukraine when the bombs are falling, that guy, tried to blackmail him into investigating Hunter Biden for him in order to get dirt on the Biden family for his reelection campaign. And as a result of that, he cut military aid to Ukraine substantially. The Russian thinking

• 40:45Speaker 02

  was if that if Trump wins reelection, that's the end of NATO and we'll just be able to swallow the place. Well, that didn't happen. Biden won. And one of the first things that Biden did was restart the military aid. And in November, if you remember, that's when the Russians started getting all squeaky and screamy about security issues in Europe. Well, November is when the javelins met the frontline troops in the separatist provinces of Luhansk and Donetsk, and the Russians actually saw the impact of American military aid on their troops. That's when the buildup started.

• 41:21Anthony Pompliano?

  Peter, when you start to think about kind of why they're doing this now, I immediately jumped to, okay, obviously, right now, it's not a good situation. There's massive ramifications, whether it's the commodity prices, whether it's kind of second order effects like global famine, etc.

• 41:39Anthony Pompliano?

  What is the off-ramp? How do we get out of the situation? If there is any at all?

• 41:46Speaker 02

  Well, the Russians see this as an issue of existential national survival, and I think they're reading the situation correctly. They they know if they don't win in Ukraine and Poland and Romania and Latvia, that this is the end of that the end of Russia is inevitable, and probably before the mid-century point. They think that if they can plug those gaps, they buy themselves more time. And I think they're reading the situation correctly, which really does make it an us or them. There is not a version of a peace here that would satisfy both sides. The Russians like to say that, you know, if you only gave us what we wanted on security, none of this would have ever happened. But remember, what they're asking for is the ability to either put troops in or decide the security policies of Finland, Estonia, Latvia, Lithuania, Poland,

• 42:31Speaker 02

  the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Bosnia, Croatia, Slovenia, Macedonia, Serbia, Ukraine, Belarus, Kazakhstan, Armenia, Azerbaijan, Georgia, Tajikistan, Turkmenistan, Uzbekistan. I probably missed a couple. Anyway, they're saying that they need to be able to write the security policies for a combined population that is twice of theirs. That's asinine. So anyone who says that NATO forced the Russians into this is technically correct, but they're also stupid. There is no version of this. There is no off-ramp that Putin would accept because he knows, especially now, that if he fails, that's the end.

• 43:15Speaker 02

  And the only thing that would be worse than not launching the war would be launching it and failing. So he's not going to stop.

• 43:21Anthony Pompliano?

  What is the odds of nuclear war at this point? We know that they are armed. We know that the United States and other NATO allies have explicitly stated they do not want to intervene out of caution and or appetite for participation, but caution to not trip kind of World War III and nuclear war. Is that avoidable? Or how do you think about that the nuclear component or overlay on this?

• 43:50Speaker 02

  Here's my concern.

• 43:54Speaker 02

  Ukraine is, today is not the Ukraine that it was in 2013. If the Russians had done this in 2013, this war may well be over already. They didn't have a strong national identity, their military was weak, and there was a substantial percentage of the population that was overtly pro-Russian. That's not the case anymore. So now the Russians are looking to have to occupy a country that at the start of the war had 45 million people. That's going to take a couple million troops, and they only have a couple million troops. So from a conventional point of view, this is already the last war that the Russians will fight. When they move on to Romania, Poland, and the rest, it is a nuclear question, because that's the only way the Russians can get what they want.

• 44:33Speaker 02

  So if the Russians can pacify Ukraine and Moldova to their preference, they will then start explicitly threatening nuclear attacks across NATO in order to get what they want in those areas. And they will not be afraid to use nukes to do it, because from their point of view, the end is already nigh. So better to go out swinging and maybe possibly be able to intimidate countries and to give them what they want than not. And it's not as stupid as it sounds, because there are two pipelines that take natural gas under the Baltic Sea and under the Black Sea direct to Germany and Turkey. And without Germany and Turkey, there is no NATO function in this area. So we're getting very close to the point that energy is going to be disrupted,

• 45:17Speaker 02

  but the Germans and the Turks can be offered a deal, that the Russians can keep their lights on, and only their lights on, but only if they abandon NATO. I don't know how the Germans and the Turks are going to respond to that, but that's probably the next chapter of this, which makes it absolutely beyond critical that Russia never sufficiently pacify Ukraine so that they feel they can move on. This is where, from the West's point of view, this has to end.

• 45:46Anthony Pompliano?

  And does that mean that if it is needed, your belief is that the United States and NATO should step in with boots on the ground, no-fly zone?

• 45:54Speaker 02

  No, because that would immediately trigger nukes. Now, the Ukrainians have to do the fighting. We can provide them with all the equipment and intelligence and targeting information that we can. But if we have American soldiers in Ukraine, the Russians will know, and then it's a different sort of field. If we put fighter jets or start doing a no-fly zone, same thing, the Russians will feel they have no choice but to escalate. So this has to remain conventional, and it has to remain in Ukraine. Anything else, you are talking about mushroom clouds.

• 46:27Anthony Pompliano?

  Yeah, I tend to agree that the de-escalation is incredibly important here. We've talked a lot about the United States, European countries, and various allies. We haven't spoken as much about China and India. China seems to be taking more of an indifferent approach, maybe is the way I would describe it, where they're not necessarily supportive of Russia, but they're also not supportive of the US and NATO in terms of taking the position that they're taking. India also seems to be a country that is heavily reliant not only on the wheat and fertilizer, but also has much more of an appetite to settle outside of the sanctioned currencies to go ahead and continue to conduct bilateral trade.

• 47:10Anthony Pompliano?

  How do you evaluate kind of the geopolitical chessboard, right? When I think of that chessboard, I think of you as one of the people who pays attention to it all day long. Those two chess pieces of China and India seem to not necessarily be aligned holistically with the US and NATO, but maybe not also completely with Russia either. What's your read here?

• 47:29Speaker 02

  Well, let's start with the Indians, because it's a simpler situation. India never joined the global order. They were definitely pro-Soviet. And even when the Soviet Union died, they continued to be pro-Soviet. There's a degree of ideological catch-up that the Indians have not yet done, and they've barely started, actually. And so when they look at this situation, they see Russia as Soviet, even though they're not, even though the Russians can't give them any of the money or most of the weapons that in the past they thought were viable. We're certainly seeing on the battlefield that Russian weapons are not nearly as useful in a real war as we thought they were. So whenever you see, or aside from that,

• 48:12Speaker 02

  geographically, the Indians are absolutely trapped in South Asia. Even if Pakistan wasn't there, there's still deserts and mountains that hem them in. So India is incapable of projecting economic and political power into Europe in a way that would allow them to establish an independent trade link. They can only trade with Russia if the Europeans and the Americans allow it. And I think in April, that is going to stop. And the Indians will absolutely bitch, but there's absolutely nothing they can do about it. Also, the damage is done already in terms of the agricultural situation. So they're going to be obsessing about that issue here fairly soon. So that's India. China, whoo. Okay, so China joined the global order with Mao.

• 48:57Speaker 02

  That was the whole point of the Nixon Mao summit, that we would bring the Chinese into the system if they would turn their back on the Soviets. And it worked, and that contributed to the end of the Cold War without a shot being fired. Big victory for both sides, both sides being the US and China, not the Russians, obviously. Now, the Chinese have expanded by a factor of 10 economically. They see themselves as a peer power to the Americans, but they are unwilling to admit that all of the growth that they have had, every little scrap of it, is because of the globalized system that the US maintains. And when the Russians fell under sanctions, everything that the Chinese thought was true about their future was laid bare as at best wishful thinking and bad analysis.

• 49:41Speaker 02

  So they are now looking east to the United States and west to the Russians in a little bit of a panic, because they are being tied indirectly to what's going on in Ukraine. And they have now found out, not only does the West's, and specifically the United States', financial tools work very well, they now know they would work much better against China than against Russia. Because at its core, Russia is a commodities exporter, most notably oil, natural gas, and food. China imports all those things. So if an equivalent sanctions regime was done against the Chinese, you'd have 500 million dead Chinese in less than a year from starvation. And that assumes nothing else gets folded into the situation.

• 50:23Speaker 02

  So the Chinese are trying to wrestle with the collapse of 50 years of strategic planning and their core ideology as being completely non-functional. I'd say, if you look at the rhetoric for the last three weeks, they're doing a decent job of segueing. But you don't rip the mental roots out of an entire system overnight and expect people to just blink and then all of a sudden be on the new scale. Oh, Europeans have shown that maybe that is a little bit more possible than I'm saying here. But the Chinese have always seen themselves as anti-American. They've always seen themselves as anti-Western, anti-democracy. And now they're realizing that the mood of the man in the White House determines whether their country exists. They're not going to turn on a dime for that.

• 51:07Speaker 02

  But we'll know soon. I think this is another one of those things that we've shaken out one way or another by the end of April. Oh, one other thing. As tight as the sanctions are and as big as they're getting, they're nothing compared to the corporate boycotts. Almost every single company that left Russia was under no legal requirement to do so. They just didn't want to be associated with the war. And we're talking about those ESG, social goodie, two-shoes, mammoth companies like Exxon and Halliburton, who are now gone. And everyone else followed. So if that happened to China, you know, that's all of their investment that matters. That's all of their technology transfers.

• 51:51Speaker 02

  That's all of their end markets. This system, if it turned against China, would be far more damning than anything we've seen out of Russia so far.

• 52:01Anthony Pompliano?

  Yeah, it's fascinating to kind of think through the complexity here on the geopolitical landscape. We've got a couple more minutes left and I want to spend our time talking about Bitcoin. My understanding is that you're not nearly as excited about it maybe as I am.

• 52:16Speaker 02

  I think that's a safe bet.

• 52:17Anthony Pompliano?

  Is one way to put it. Help me understand kind of like what's your view on it and maybe actually what would be interesting is like, what are the challenges that you think Bitcoin has that you probably have more confidence or insurmountable than maybe I or others have?

• 52:32Speaker 02

  Sure. Well, I mean, let's start with the what works. Blockchain, digital currency, I have no problem with that. I just see that as the next step in how central banks manage their money supply. So it's not like I'm opposed to digital writ large. But Bitcoin, anything that is going to be a currency has to have liquidity and Bitcoin has no mechanism for expanding what is necessary to match market demands. It is based on how many people can crunch however much data and then them getting paid for it. But that doesn't actually generate anything of value that is not in Bitcoin already. So there's no issuing mechanism that works. It's not a method of exchange. It's too volatile. There's no one that regulates

• 53:11Speaker 02

  its supply. There's no one that can make it access this market or that market as legal tender unless you want to be in, what is it, El Salvador, one of the Central American countries that decided to go that way. It's not working out great for them. It's tulip mania without the tulips. I mean, it doesn't, it's not an asset. It's not a store of value. It's not a method of exchange. And it's certainly not independent. Because what we saw with the Russian sanctions is all the connections between Bitcoin and the real financial sector got locked. And if you're going for Bitcoin on a libertarian basis, I mean, that should just prove that there's any use to it at all. So that's kind of like

• 53:55Speaker 02

  the big three from my point of view.

• 53:57Anthony Pompliano?

  All right. I want to take each one of them individually.

• 54:01Speaker 02

  Sure.

• 54:01Anthony Pompliano?

  And I don't come at this from the perspective of trying to convince you differently, but I think talking through it actually is super educational to both people who are critics and also. Supporters of the asset.

• 54:13Speaker 02

  Go for it.

• 54:14Anthony Pompliano?

  So when I think of a central bank, right, there's kind of a framework I use, which is, most people would say you need two things for a central bank to be effective. One is it needs to be independent from political influence, etc. It needs to just evaluate the monetary situation. And then two is that it needs to be somewhat predictable. So the more surprises a central bank provides, the less effective it is, or the less people kind of trust it, right? So predictability and.

• 54:41Speaker 02

  I agree with you with one exception. If you're the global currency, that is not as necessary.

• 54:46Anthony Pompliano?

  Okay, fair, very fair. And so when I think of Bitcoin, one of the frameworks that I've used to evaluate it is that it is a automated central bank. Now automated is this kind of word that can be used across a bunch of different things. But it's just the fact that you, I, or nobody else in the world can change the monetary policy. And maybe the monetary policy is good or bad. Maybe it's effective in a certain environment or not effective, but it just can't be changed. And the reason why, in my opinion, that's important is because it has a level of independence that it doesn't matter if there's World War III going on, COVID, a recession, the president is tweeting about it, or anything in between. It's just going to stay the same. And I think that that, at least on one kind of analysis,

• 55:30Anthony Pompliano?

  removes the view that it is not independent.

• 55:35Speaker 02

  See, when you put it that way, it makes it sound like digital gold. And I would also argue that gold is a horrible vehicle for store of value. We've seen that with the Russians. All of their gold is in the country. They can't trade it. It's worth nothing to them now. And so when I see Bitcoin, I mean, yes, it's there behind the scenes, but it's their connections to the real financial sector that allow it to be exchanged. And those can be blocked by a central bank without even needing an executive order. So the degree of vulnerability for the asset overall just seems extreme to me.

• 56:09Anthony Pompliano?

  I actually think, hearing you talk about this, I think you and I are gonna agree on something at the end, but just bear with me for a second. Okay. So, that's the automated component of it. The second is the predictability. And so this idea of a programmatic monetary policy, people aren't sitting around waiting for the press conference of are they gonna raise interest rates 25, 50 basis points or not. Again, you can argue whether, good or bad, that it's fixed, but it is fixed. And therefore, when you have that programmatic ability, I know that it's independent, and I know that I have some degree of certainty as to what's gonna happen in the future. Now, your point, I think, is the best critique of the monetary policy, which is that you do not have anyone with the ability to expand or contract the monetary supply, or manipulate the interest rate, or kind of the issuance rate, in order to respond to world events.

• 56:54Anthony Pompliano?

  And so if we think about, pre-going off the gold standard, it was essentially the world had to cater to the monetary policy. And then we basically broke from that, and we said, no, wait, the monetary policy should cater to the world, right? And that change essentially created the last 50-plus years of economic boom. Now, when I think about Bitcoin, that, like, economic or monetary policy argument is a big piece of the story, but it's not the only piece of the story. And I think your point about gold in Russia is a huge point that many people missed here, right? It's their foreign reserves, and basically, all of their assets that were not held inside of Russia are gone now. And so that brings you back to this idea of, like, okay, if that is true, which it seems

• 57:39Anthony Pompliano?

  to be, that it's gonna be a new playbook that can be levied against countries that fall out of favor with the United States, or NATO allies, etc., then sovereignty becomes really important. And to your point, gold sucks. It's heavy, it's really hard to move around, who's gonna accept it, it's not very divisible, like, all these challenges with using gold. But if you could do that same exact thing with sovereignty in a digital world, this would remove all the problems, because you still need someone to accept it on the other side. But it does at least remove what I would consider like the analog friction. It's not heavy, it's easy to move, you know, with a click of a button, it can settle anywhere, etc. And so I don't know if Bitcoin is the perfect solution, but it feels like whether

• 58:23Anthony Pompliano?

  you evaluate from a monetary policy standpoint around independence and predictability, or you evaluate it from a sovereignty standpoint, it's just better than what we have, right? And so how do you think about that?

• 58:34Speaker 02

  You're basically making the EV argument there.

• 58:37Anthony Pompliano?

  Okay.

• 58:37Speaker 02

  If we rip out the old architecture and put in an architecture that is designed for this new asset, then everything will be fine. Unfortunately, we have to deal with life in between A and B.

• 58:48Anthony Pompliano?

  I agree with that.

• 58:49Speaker 02

  And the only people who can say that B is better are the people who are theorizing. There's no, there's no example of it. And we'd have to, you know, first break down everything.

• 58:56Anthony Pompliano?

  So you're, so basically it's this idea of like, hey, if we transition from A, which is let's call it the legacy or existing financial system to B, which is the new, right now put that in air quotes, if it comes to fruition, there's a transition period that could be painful, inefficient, maybe not even possible, et cetera. That's a

• 59:17Speaker 02

  And you have to get every central bank to surrender their authority to who?

• 59:21Anthony Pompliano?

  So if we look around the world, this is where I think we're going to end up agreeing, is El Salvador, which I think most people would argue, pre the Bitcoin announcement, most people couldn't point to it on a map. They have six and a half million people or so in their population, which is literally less than, you know, New York City, right? As an example, to just see how small of a country it is. They've gone ahead and what I describe as they've plugged their country into the Bitcoin standard. Now, what does that mean in practice? They bought some Bitcoin, again, millions of dollars, not like billions of dollars. They have created an ATM network. They created an app. They paid some of their citizens, about 50% or more of their citizens to buy Bitcoin or use Bitcoin.

• 1:00:06Anthony Pompliano?

  They paid them for it. And now they're setting up this Bitcoin backed volcano bond, et cetera. So they're like all in, right? And again, a small country, six and a half million people. The part that is fascinating to me is not so much what is happening so far with Bitcoin, as much as they're reporting that tourism is up 30% year over year, that GDP has started to grow, that actually they have more than 50% of their population who now hold Bitcoin as a savings technology, etc. And so what I don't yet know, because I don't think we have enough time or data, is when somebody goes ahead and makes Bitcoin legal tender or adopts it, which now we're seeing in many other countries.

• 1:00:49Anthony Pompliano?

  So we just saw Lugano, Switzerland, Malaysia today just described that they want to make Bitcoin and cryptocurrencies legal tender. There's numerous states in the United States that, more marketing, but want to do it as well. Is it actually the technology itself and what economic impact it creates? Or is it more so become a flag in the ground? Hey, we want to be innovative. We want entrepreneurs. We want to be business friendly. We want to be at the forefront of this. And that leads to the positive impact of tourism, GDP growth, etc. How do you think about that almost balance between the technology itself versus the impact?

• 1:01:24Speaker 02

  Well, let me give you a scenario where Bitcoin or things like it might have a role in the future.

• 1:01:30Anthony Pompliano?

  Okay.

• 1:01:31Speaker 02

  The whole globalization thread that has driven everything since 1945, that's what's breaking down right now. And in my second book, Apps and Superpower, I think one of the things I said is it doesn't really matter where the break happens, it's going to cascade. So the Russia-Ukraine war was one of the specific examples I had. There was one in the Persian Gulf, there's one in East Asia. If you move away from the trade environment that we have, it's not that the dollar standard goes away, it probably becomes more important because the United States will be even more emotionally disconnected from other sections of the world and be more of an impartial arbiter and the dollar will be more important and take more market share. But if you break down into a series of disconnected regional trading networks, not all of them

• 1:02:13Speaker 02

  have a country at its core that I would consider an economic power. So when you're looking at certain parts of the world, they're going to lack access to and influence over any sort of Federal Reserve action, having another method of exchange that is not the physical US dollar.

• 1:02:33Speaker 02

  Has a role, you'll have to keep the electricity on, you'll have to keep the web working and some of these places probably aren't going to be able to manage that. But there are other ways to establish a method of exchange in an environment where the US just doesn't care about half the planet.

• 1:02:51Anthony Pompliano?

  So here's a theory that I have. I have increasing confidence that this is going to play out. But I actually think that the US dollar was used as an example and Bitcoin will rise in strength together. And one way to view it is there's a stable coin that is pegged to the dollars, an algorithmic stable coin today, that recently they made the decision, rather than try to use exotic financial mechanisms where people are arbitraging risk to keep it at $1, they simply are going to get rid of that system and move to a Bitcoin backed stable coin. So it's still a dollar pegged asset that is tradable and to your point, has stable value.

• 1:03:36Anthony Pompliano?

  So you've removed the volatility concerns, but the value essentially replicates the gold standard, right? It's paper claims on the gold. Now you have a digital token valued at $1 that's pegged there and it has some sort of underlying asset to it. I actually think that some of the weaker currencies, that is the path in which they essentially either adopt something to drive value to their weak currency or they will fall at the feet of the dollar, right? There's consolidation around the dollar strength. And so we see these weak currencies fail in the face of that. And so, one, I guess just like, what is your reaction to that? And two, have you seen anything that the weaker currencies are doing to try to basically

• 1:04:18Anthony Pompliano?

  survive in the face of a strengthening dollar and kind of this world order that seems to be shifting underneath it?

• 1:04:24Speaker 02

  There were three strategies. One of the strategies used to be to find a regional pool like the euro or the yuan to work with. That has becoming less and less popular as people realize just how much the Chinese manipulate the currency. And especially in the aftermath of this round of sanctions against the Russians, even the euro is not seen as a good role for that. So we're left with two others. One is amalgamation, where you have a number of countries that pool their financial half to make a regional currency like the Caribbean dollar or West Africa had the West African franc. I can't even honestly remember the status of that right now. It's changed so much in the last two years. Or option number three, you just peg it to the dollar.

• 1:05:08Speaker 02

  And that's not just Belize, that's de facto Hong Kong and Taiwan. You find ways to link yourselves into the bond market. So even if the currencies do swing, you have enough exposure so you get brought along for the swing. And that's more or less what the Australians and the Kiwis have been doing for decades. I see a lot more of that moving forward because the parts of the world that the US is going to remain engaged in are the Western Hemisphere plus Southeast Asia and maybe, maybe, maybe Western Europe. But if you're talking about the Brits and the Japanese and the US and Canada, that's already four members of the G7. And if you include the rest of that kind of inner circle zone, you're still talking about 2 billion people. So either you can be associated with that, countries that have broadly positive demographic

• 1:05:53Speaker 02

  growth and consumption led growth moving forward, or you can tie yourself onto something else where security is going to be a bigger concern for you than the finance. And when that is how people are thinking that security is more important than finance, I really have a hard time seeing something like Bitcoin coming in out of the shadows.

• 1:06:12Anthony Pompliano?

  I think Bitcoin is the most secure asset in the world. Right, which is

• 1:06:19Speaker 02

  Hopefully, this isn't the point you wanted to end on.

• 1:06:21Anthony Pompliano?

  No.

• 1:06:21Speaker 02

  We're not going to agree on that.

• 1:06:22Anthony Pompliano?

  No, no, no, no, no, no, no, no. I didn't expect to change your mind on that. Here is the other piece of it, though, is I think there's a humanitarian argument that it's sad to talk about, right, because we're watching it happen in real time. But there are millions of Ukrainians who are saying to themselves, oh, my God, we're being invaded. I need to get out. And where I go, I may not even have an idea, but I have to get to a border. I have to get out of my country. And when they do that, they essentially look around and they say, what assets do I have that I can take with me? Where is my family and friends? And how many of them can I take with me? And everything else gets left behind, businesses, wealth, etc. And we've seen this, unfortunately, many times in history.

• 1:07:06Anthony Pompliano?

  And there's story after story after story that you'll hear of, you know, we got on the train with whatever was in our bag. And that's basically where we went to the new home and survived from there. There is this element of if the world order breaks down and globalization breaks down to some degree, and we see more chaos, more uncertainty, even potentially more violent conflict, the place where you want to have your wealth is actually in a digital asset that you can take with you, that can't be confiscated, that can't be seized, that you can carry as much, you can carry billions and billions of dollars with you. And so what I've been thinking about is there's a trade off. No asset, no market, no anything is perfect. And so, for example, if you're in Ukraine, do you care that an asset swings 10% a day?

• 1:07:50Anthony Pompliano?

  If the opposite or kind of opportunity cost is basically leave it behind, right? And in that situation, you probably say, hey, look, I'll take the 10% swings as long as I can get it out.

• 1:08:01Speaker 02

  Just keep in mind that from a government's point of view, the same things that make that give that a positive spin and make that useful are, oh, so attractive to organized crime.

• 1:08:13Anthony Pompliano?

  Yeah, I think that that is a fair concern.

• 1:08:18Speaker 02

  Because you can't have one without the other. And if governments are faced with that situation, I can tell you how all of them are going to come down.

• 1:08:25Anthony Pompliano?

  They're trying right now. I think the

• 1:08:28Speaker 02

  No, they're not. They're really not yet. Because the liquidity is, liquidity of Bitcoin is not enough to attract organized crime at the moment. As soon as, if that were to change, then OC would go into it very big and governments would come down on it in a very, very big and painful way.

• 1:08:45Anthony Pompliano?

  I think that the law enforcement, CIA and various governments, they love Bitcoin. They love it because it's an open, transparent ledger. And if you're an idiot and you use Bitcoin to conduct crimes, I think they have confidence that they'll be able to figure it out. Like, would you rather conduct the crime with physical cash? Or with, you know, kind of your hands on a keyboard? A law enforcement agent one time told me at the federal level, he said, you know, if somebody commits a crime, we want their hands on a keyboard. Like drastically increases the odds that we catch them. And I always think about that as in terms of Bitcoin, where if you commit a crime using an open immutable ledger that they can analyze forever, they're probably going to catch you.

• 1:09:28Speaker 02

  You know, I just, hmm, from what I know about how the Mexican cartels work, they are more than savvy enough to make that work for them.

• 1:09:36Anthony Pompliano?

  The, I'm not messing with the cartels.

• 1:09:38Speaker 02

  Yeah, exactly. Yeah, it's like, it's just the, the way that you can shove things through a system like that and, and bring in intermediaries who may not even know it, just seems robust.

• 1:09:51Anthony Pompliano?

  I think that that's a, a fair view to take, given the current information. Before I let you go, you have your book, you're coming out in June.

• 1:09:59Speaker 02

  Yes.

• 1:09:59Anthony Pompliano?

  The End of the World is Just the Beginning: Mapping the Collapse of Globalization. Give us kind of a quick 30 second, 60 second overview as to why, why people should go get it.

• 1:10:09Speaker 02

  Sure. So the previous books were all about the rise and fall of nations. And, you know, there's a lot on the Russian, Ukraine wars and all three of them. But the new book is looking at it from the backside of a deglobalized world. What happens when the connections that make everything work stop? What do all the various economic sectors from finance to agriculture to manufacturing, how do they break down? And how do they reform on the other side?

• 1:10:31Anthony Pompliano?

  I, I think that this is like, maybe the book to go read this summer.

• 1:10:36Speaker 02

  Here's hoping.

• 1:10:37Anthony Pompliano?

  May, may be pretty important. So anyone who, who has not read any of Peter's books, I highly suggest them. They're, they're very well written, but also they really just make you think. Everything from a disunited nations, et cetera. So The End of the World is Just the Beginning: Mapping the Collapse of Globalization. It's available for preorder, Amazon, everywhere. Which, by the way, I also, my brothers will find this funny. The book's not even out yet, it's already number one bestseller.

• 1:11:03Speaker 02

  What? Really?

• 1:11:05Anthony Pompliano?

  It is the number one best seller in Middle Eastern politics. It is one of many places.

• 1:11:11Speaker 02

  Yeah, Amazon has so many categories that everyone's a best seller. Okay, I got really excited there for a second.

• 1:11:18Anthony Pompliano?

  After your appearance here today will be the number one best seller in all of Amazon. If that happens, then you know who to credit. Yeah. All right, where can we send?

• 1:11:25Speaker 02

  I'll buy you some Bitcoin.

• 1:11:29Anthony Pompliano?

  Where can we send people to find you on the internet?

• 1:11:31Speaker 02

  Sure. So the website is zehan.com. There's a newsletter you can sign up that is free, that is always free. My Twitter handle is at Peter Zeihan and I am an equal opportunity bubble popper. So just be prepared.

• 1:11:46Anthony Pompliano?

  Awesome. Well, thank Peter so much. This is fantastic. I could literally talk to you for hours about this stuff. You've been all over this and gave us a great breakdown today. So we'll definitely have to do it again in the future.

• 1:11:57Speaker 02

  All right. Sounds great.

• 1:11:58Anthony Pompliano?

  All right. Thank you. Thanks, Peter.

• 1:11:59Speaker 02

  Take care.

• 1:12:00Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three week intensive training program with over 50 events packed into that three week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.