![Peter Zeihan says globalization and China are to blame for inflation.](https://san.com/wp-content/uploads/2021/12/ZeihanOnInflationThumbnail.png?w=1200)
Commentary
-
Our commentary partners will help you reach your own conclusions on complex topics.
Hey everyone Peter Zeihan here and hello from Colorado where we are edging into December and it is still 60 degrees, because you know, mountains.
Now a lot of people in a lot of places been blah blah blah about how inflation is getting out of control, and I thought it would be good to put things into a little perspective both from a good and a bad point of view.
So first, we kind of need to get a grip. People are talking about how inflation is the highest it’s been in 30, 40 years and that is true.
What people are not talking about is why inflation has been so abnormally low for so long. In most of these years, inflation never touched three percent. We’ve only gone above five percent a couple of times, and so having six percent inflation seems like a disaster. But if you remember back to the early 80s and before this was the norm, so it’s not so much what changed now, but what changed 30 40 years ago.
Well there’s three things that are going on.
First, food production. Since the 1980s, total agricultural output in the United States has increased by over half, and in the 1980s, the United States was already the world’s largest producer and exporter of food stuffs. So what for most countries is the single most important aspect of inflation, food prices, has never really been an issue here.
Second, the shale revolution. It started in 2004. We applied a new series of technologies to energy reproduction. And now the United States has the lowest energy prices in the world. Not just in absolute terms but per unit of economic output.
That’s all because of technological advances and production that is local, kind of like with food production. So the second biggest aspect of inflation that has caused problems for countries since the dawn of time is also not a major concern here.
So what’s the third one? Well in a word, globalization.
Two words: globalization and China.
The global order did a lot of things, but in making this safe… making the world’s oceans safe for everyone, it allowed an economic player to interface with any raw materials in any end market, and the Chinese could do so at scale.
So they had a demographic moment. They had a financial system that encouraged overproduction. They had global and regional and national economies of scale, and they had access to every consumer market in the world, most notably the biggest one, in the United States.
That meant that the cost of manufactured goods steadily went down for 40 years and things like electronics and computing in terms of their productivity are less than one-fifth the price of what they were 30 and 40 years ago.
Well the first two trends, energy and food, those aren’t changing. So for the United States, what is traditionally the biggest problem everywhere else in the world is just not a problem… except for maybe in the short term with some hiccups.
But the consumer goods action issue, the manufactured goods issue, that’s all going away.
The Chinese financial system is breaking apart. Chinese demographic movement which gave them oodles of low-cost labor for decades is now over, and they have the fastest appreciating labor costs in the world.
And the Americans are backing away from globalization, meaning that the Chinese have to take care of their own material inputs, their own energy inputs, and find their own markets. And there just isn’t that possibility anywhere in the world at the scale that they need, which means that global supply chains for every manufactured product needs to change.
Now here in the United States we can already produce all of these products at a lower price point.
Our labor is more productive, our food and energy inputs are lower; transport to end consumers is negligible, but you have to build the industrial plant first and you don’t do that in a year.
Which means that the biggest dis-inflationary aspect of the global system that we have seen for the last 30 years, the reason why inflation has been so low for so long, the participation of China is coming to an end.
And the adjustment to our new normal will take a few years, and we’ll see inflation inflation inflation as we build out that plant and as every supply chain that we’ve become dependent upon, requires complete rethreading.
That is the future of inflation and that is the story for the next five years.
-
Is the US looking for a war?
With conflicts, skirmishes and tensions simmering around the globe, and with the United States playing supporting roles in several of them, the question of whether the country getting involved directly is legitimate. The war in Ukraine, for example, has forced several European countries to reintroduce mandatory military service to confront the growing threat from Moscow.…
-
How future generations could shift US support for Israel
Israeli Prime Minister Benjamin Netanyahu addressed a joint meeting of Congress on July 24, calling for increased bipartisan support for Israel amid its 10-month war with Hamas. He praised President Biden’s “half century of friendship to Israel” and referred to Hamas as “sheer evil.” In the video above, Straight Arrow News contributor Peter Zeihan analyzes…
-
Why election of European Commission president is so important
Ursula von der Leyen has been reelected to another five-year term as president of the European Commission after a vote by EU lawmakers. Von der Leyen will now preside over a coalition that shifted to the right after recent European elections, where ultra-conservative parties won a record number of seats. In July, von der Leyen…
-
Protests in Bangladesh signal more trouble ahead
Public protests in Bangladesh against government hiring practices — and against the government’s military response to those protests — have left at least 174 dead and 2,500 jailed. Bangladesh’s people face an acute jobs and unemployment crisis, so public disagreements over hiring practices carry significant weight. The regime recently enforced a nationwide internet blackout as…
-
In US election, early polling doesn’t tell us anything yet
From President Joe Biden’s declining health to the attempted assassination of Donald Trump, there’s been a series of major political developments in the United States that might impact the results of the November election. These developments have led to renewed confusion, concern and debate regarding which candidate might win, and in the Democrats’ case, which…
Latest Stories
-
U.S. Department of Defense
Congress still trying to figure out how to reduce wasteful military spending
-
DVIDS
US Navy, Air Force making waves with new weapons at RIMPAC
-
Getty Images
Israeli PM Netanyahu meets with Trump at Mar-a-Lago
-
Getty Images
Growing US nuclear power resurgence reaches the nation’s heartland
-
Getty Images
Beer from the sun, other solar thermal projects get government funding
Popular Opinions
-
In addition to the facts, we believe it’s vital to hear perspectives from all sides of the political spectrum.
Latest Opinions
In addition to the facts, we believe it’s vital to hear perspectives from all sides of the political spectrum. We hope these different voices will help you reach your own conclusions.
The opinions published in this section are solely those of the contributors and do not reflect the views of Straight Arrow News.
Latest Commentary
We know it is important to hear from a diverse range of observers on the complex topics we face and believe our commentary partners will help you reach your own conclusions.
The commentaries published in this section are solely those of the contributors and do not reflect the views of Straight Arrow News.
Peter Zeihan
Geopolitical StrategistHow future generations could shift US support for Israel
Why election of European Commission president is so important
Protests in Bangladesh signal more trouble ahead
Dr. Frank Luntz
Pollster and Political Analyst‘I don’t know’: Swing voters debate who best to replace Biden
‘Mad as hell’: Americans vent anger, frustration over politics
‘On death’s door’: Undecided voters react to first debate