TITLE: Are we in a recession? It’s hard to tell because the world is changing

Hey everybody, Peter Zeihan here coming to you from Colorado. By the time you see this, I will be long gone and I will be on a month-long backpacking trip in the Sierra National Forest, Yosemite and the Hoover wilderness. I’ll be returning the first week of September and I’m probably going to be recording a few things along the way. So I’ll come back with some content for you guys. But I wanted to send you off with a little talk about this idea that we’re in recession or about to be in recession. My first…the bottom line, I don’t think we’re there yet. There’s definitely some things to be concerned about. Obviously, inflation is a big issue but we’re getting in a weird, weird, weird place. Consumer spending is high, nearly at record levels. Employment is high, nearly at record levels. Unemployment is low, nearly at record levels. Business investment is high, almost at record levels. Consumer activity, industrial activity…it all looks great.

Most of the negative activity we’re seeing is in the financial sector. And if you guys remember back to Alan Greenspan, he was famous for making policy that deliberately ignored the financial sector because it’s volatile by nature. It wasn’t until we got to Ben Bernanke and Federal Reserve chairs since that it became a little bit more of an issue. Now, that doesn’t mean that that’s good or bad or otherwise, but Greenspan did preside over the longest stretch of growth in American history. Cue the hate mail. I can just see it already.

Anyway, my point isn’t that we are or are not in recession, although I don’t think we are at this moment. The point is that the relationships between all of the tools that we use to regulate the economy and the economy, might not apply anymore. For the bulk of human history, well, modern human history, the last 500 years, it’s all about figuring out how you can maximize your share of a pie that is steadily growing. For 500 years, we’ve had steadily growing population growth, turning to explosive population growth in the industrial – excuse me – in the industrial era that postdates World War II. And as long as there are more people, as long as there is more technology, growth is easy. And regulating inflation and growth and employment, all the rest in that environment is something we have a lot of experience in. But that’s not the case anymore. 

The global population is in the process of peaking. The advanced world’s population has long since peaked. China’s population probably peaked over a decade ago. The average American by old stats became younger than the average Chinese back in 2017 or 2018, with the new data out of China suggesting it was several years before that. If the pie is no longer getting bigger, then it’s not clear that any of our measures, whether it’s for inflation or growth or investment or otherwise, are even relevant anymore…much less tools like interest rates. 

So I’m not saying this to specifically scare you, although that is a perfectly reasonable takeaway. My point is to give policymakers a little bit of a break. They are literally making this up as we go along, because we are making this up as we go along. Does that mean I’m putting my finger in any particular asset? No, I’m not a CFA, so take that for what it is. Okay. That’s it for me. That’s a sunset, not a volcano in the background. I don’t live in Iceland. Okay. Take care. Bye. See you in a month.