If I had a nickel for every time I’ve been asked for investment advice, I could probably retire. Since I’m not going to give out investment advice (or retire), I present the next best thing…a convo with Bill Mann from The Motley Fool.
In this interview, we discussed some guiding principles behind my investment thought process. Specifically, we looked at China’s issues, Apple, de-dollarization, and the demographic problem that the FED is keeping an eye on.
I encourage you to give the following video a listen…
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
There’s a canal that runs from Kherson to the Crimean Peninsula and serves as the area’s sole irrigation water source. And with how dry the region is, this canal is critical to the Crimean Peninsula.
While an assault on Nova Kakhovka might not be in the cards for the Ukrainians, targeting the sluice gate regulating the canal’s flow might still be their priority. That’s because there’s more than just food production on the line. The Zaporizhzia Nuclear Power Plant draws its coolant water from the Kakhova reservoir, and without that, some nuclear…issues could be on the agenda.
With the potential for a Zaporizhzia offensive, the strategic rationale behind targeting this canal is solid. Only time will tell if the Ukrainians capitalize on the opportunity to cut off the Russians and Crimea.
The above map shows the location of the sluice gate
The above map shows the location of the Zaporizhzia Nuclear Power Plant
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
There’s one massive hole we’ll need to fill if the green movement will ever work in the US…mineral resources. Thankfully we just struck a deal with our Aussie allies, who happen to have many of the key minerals and resources we need.
This deal will enable the Australians to contribute mineral resources to the American greentech industry in a way that will allow them to benefit from the incentives and subsidies in the Inflation Reduction Act (IRA).
While Australia is a significant producer of many necessary Greentech resources, it’s not a one-stop shop for everything. They’re also great at producing the raw ore, but the value add component isn’t their thing. Thanks to subsidies from the IRA, there will be an opportunity to bring value-add capabilities to the Outback.
But what about all the other US allies? Will they be able to tap into this deal? We must remember that there is an inner circle and an outer circle of allies…for now, only the inner circle gets to play.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey Peter Zeihan here coming to you from chilly Phoenix, where it’s a balmy 102 at ten in the morning. I don’t know how people do it. It’s only May. Anyway, back on May 20th or 21st, you’re gonna see this a few days later. The Americans strike a deal with the Australians that will allow the Australians to contribute their mineral resources to the American greentech industry in a way that they will benefit from the incentives and the subsidies that are part of the Inflation Reduction Act.
There’s a real hullabaloo of late about which countries can get access and which can’t, and Australia is a tight ally. It’s part of the inner circle and most importantly it has a preexisting free trade agreement with the United States. And so they are the source of roughly half of the world’s lithium. And they are a significant producer of rare earths and zinc and copper as well. So this definitely scratches a lot of it, just not all of them. They don’t do molybdenum, they don’t do silver or they don’t do a huge amount of bauxite, although they have some. No chromium. So, you know, it’s not like this is a one stop shop for everything The United States needs, but it’s a real big step in the right direction.
Kind of two follow on thoughts from here.Number one, while the Australians are great at producing the raw ore. They do very little value add themselves and one of the things that the IRA is attempting to do is to build up a parallel supply chain that’s independent from China for processing of these raw materials into metals and then on into intermediate products. Australia is a logical place for a lot of that. I mean, yes, Labor costs are high relative to other places in the world, but since the minerals are right there and the energy is cheap, especially if you want to do stuff with solar in the freaking outback, there’s a lot of upward potential. They just need the investment and a decision that they want to move up the value added chain and the IRA will probably help with that, now you’ll have some American Australian fusion projects that are located on both sides of the Pacific. The second thing are the countries that may be able to join the Australians in kind of this inner circle. The United States has a handful of free trade agreements. Obviously the most famous one is NAFTA, and obviously they already qualify for these incentives. But the U.S. also has trade deals with the Koreans and the Japanese and in the world to come. These are countries that are involved in manufacturing. They’re going to do one more and more processing in the value add for things like battery chassis themselves. And so it still needs to be negotiated, but it’s starting from a very strong position and we should expect those to join.
Who’s not going to join is the European Union. Getting a free trade deal with the European Union has always been something that on both sides of the Atlantic has been flirted with, but it’s never really gone anywhere. A lot of the European countries, most notably the French, are highly protectionist, and the idea of exposing themselves to the American market at all is just not something they are even willing to consider. But more importantly, Europe is in demographic collapse and they’ve simply run out of people who are under age 40, the folks who normally do the consumption. So the United States no longer has any sort of economic rationale for an economic partnership over the long term with Europe, because it would just mean that Europe would be product dumping on the Americans. Similar situation for Korea and Japan, but there’s a big strategic argument that these are allies that have to be kept close as part of maintaining a presence in the Asian theater. In the case of Europe, in many cases, it’s a little bit more of a problem than it’s worth. And while there are independent European powers like the Brits or maybe the Swedes or in the Poles, that may be worth it. If it’s all part of a network of the EU, then the cost is simply too high. So there’s definitely an inner circle and an outer circle among the allies. And when it comes to greentech, only the inner circle can play. Alright, that’s it. Everyone take care.
A group of ethnic Russians opposed to Putin’s government joined forces with Ukraine and launched an assault across the border into the city of Belgorod. There are three main takeaways from this cross-border attack.
Russia didn’t bother garrisoning its logistical centers along the Ukrainian border. While this assault was quickly put to rest, this will be crucial as Ukraine launches more attacks in the coming weeks and months.
We’re going to hear a lot more about Belgorod in the future. It’s one of the critical points the Russians use to launch assaults into Ukraine. For Ukraine to “win“ this war, Belgorod will need to be neutralized, one way or the other.
The final component is that these are ethnic Russians…fighting against Russia…in Russia. So this little hiccup might throw a wrench into some of those “for the Russian people” propaganda pieces that Putin is pushing.
As I’ve said before, the Russians will continue pushing this war until they can’t, and if Ukraine wants to win, they’ll eventually have to cross the border. These partisans may have just answered how that might be carried out.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan here coming to you from Scottsdale. Today, we’re going to talk about something that went down on the Ukrainian-Russian border, specifically a group of people who consider themselves partisans identifying that they’re ethnic Russians opposed to the government of Vladimir Putin were joining forces with the Ukrainians and they launched an assault across the border into the city of Belgorod in southwestern Russia. Damage was relatively limited. We’re really talking about a couple of buildings like the FSB office that got burned down, but the Russians redistricted some forces and over the course of the next two or three days managed to push them all back into Ukraine. According to Russian propaganda, they were all killed. Who knows? We don’t even know how many men were involved in the first place.
Now, this is important for two reasons. For three reasons. Number one, it shows that the Russians didn’t even bother to garrison any of their logistical centers that are hard on Ukraine’s border. That is something that is definitely going to be relevant moving forward as the Ukrainians get ready to push the Russians out of more land.
Second, in the war of propaganda, the Ukrainians, of course, are saying these people are unaffiliated. The Russians are saying that they’re all Ukrainian. The truth is somewhere between obviously they’re getting supplies and equipment from the Ukrainian forces that are probably specifically managed by the Ukrainian forces.
But the third most important thing is these are ethnic Russians from Ukraine. And even in the Russian response, they admitted that these are ethnic Russians that are fighting Russia in Russia. So whether or not that was a propaganda hiccup or an admission that the single most viable bit of propaganda that the Russians have been pushing, that they are completely in there to save ethnic Russians, that’s going to be a big problem moving forward.
One more thing I forgot. Belgorod is a really important city for any number of reasons, but the most important one is it serves as Russia’s primary logistical point in launching off for assaults against the city of Kharkiv, which, if you remember, was one of the first places that the Russians attacked earlier in the war and were there until they were kicked out in last year’s summer offensive. The Russians are going to push this war until they can’t. And that means that at some point, if Ukraine is going to emerge victorious, they’re going have to cross into Russia proper and neutralize Belgorod. The Partisans indicate one of the ways that that might happen. So we may be seeing the beginning of a multi vectored strategic policy here, and the Russians have proven that they haven’t bothered to even put basic defenses in the city. I’m sure they’re to work on correcting that now, but there’s a lot on the Russians’ plates.
The Saudis have relied upon the US for military protections for years, but as the US reduces its naval presence in the Persian Gulf, Saudi Arabia will have to find those protections elsewhere.
As the world’s largest oil exporter, Saudi Arabia has learned a few tricks to curry favor from different countries. Their most recent endeavor is accepting the Chinese Yuan as payment for a few hundred million barrels of oil…and that’s not an insignificant amount.
This move isn’t happening because the Saudis are worried about de-dollarization; it’s solely a move to win the Chinese over and establish a new external military guarantee. Still, this remains the only meaningful shift away from the USD, even though it’s from one country, for one commodity, and for one reason.
I’ve said it before, and I’ll say it again…the US Dollar ain’t going nowhere.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Alright. So the country that matters here, the only country that, in my opinion, is doing anything meaningful when it comes to moving from the dollar to something else. Is Saudi Arabia. Now Saudi is the world’s largest oil exporter, and they have started to accept payment from a number of Chinese government entities in yuan. And we’re talking here about, you know, a few hundred million dollars of cargo. So it’s hardly an insignificant issue. There’s no sign that they’re changing the reserves. And I wouldn’t expect that to happen because there’s a specific rationale here.
Now, the Saudis military on paper is great. They’ve got a lot of top notch equipment, but they have demonstrated over and over and over in recent decades that the Saudi military is incapable of operating its own equipment at scale, much less in any sort of coordinated manner. I mean, they can fly their planes and bomb things, and that’s about it. They have always, since their independence, relied on an external security guarantor in order to keep them alive. At first that was the Brits. And for the last several decades, especially under globalization, it has been the Americans. Now, the Saudis think a little bit differently. They basically have modeled themselves off of a medieval fiefdom. And so they think that bribes work really well in order to get what you want. This is one of the reasons why they got along so well with former American President Donald Trump. They saw the world through basically the same lens when it came to operating procedures.
So what they’ve done with the United States is they’ve bought a number of refineries on the U.S. Gulf Coast and shipped crude from Saudi Arabia to the U.S. Gulf Coast. And if there’s a time when the Americans look like they might be facing high energy prices or some pressure in the market, they sail additional cargoes and just let them park off coast until they’re called for. Now, it’s not like the United States, you know, thinks this is bad thing, but the United States gets the vast, vast, vast majority of its oil always has from the Western Hemisphere, with traditionally Canada and Mexico being our largest suppliers. Now, of course, with the shale revolution of the last 15 years, the United States is a net exporter. So the Saudi angle here is very, very small from an American point of view. But for the Saudis, this was never about the economics. It was about currying favor with the guy who’s supposed to defend you. Wellll, in the last few years, the United States has moved more and more of its forces out of the Persian Gulf, and we no longer even have a carrier group that’s there on a regular basis. So the Saudis are a little scared. They are concerned that without the Americans guaranteeing their security, that they’re screwed. And, you know, that’s a reasonable position. So they’ve been looking about for a replacement and they’re discovering that there isn’t a really good, clean one.
The French and the Brits could theoretically project power into the Persian Gulf, but definitely not as reliably as the United States. Turkey certainly could, but they would have to conquer Iraq first. And, you know, the Saudis have a lot of opinions on a lot of things going on in Iraq, but they’d really rather not have a regional superpower right on their border. India is probably in the long run the most likely outcome, but they’re not Muslim. So the Indians tendency to meddle in political events in places where they have military forces, especially in like Afghanistan, has really soured the Saudis. Japan’s a possibility, but Iran has other options as well. Most notably, it has gotten in bed with the United States and can access the energy of the Western Hemisphere. That just leaves China. Now, the Saudis aren’t all that hot on China. The Chinese navy really can’t project power, and the Chinese have no experience projecting power and military terms beyond their own neighborhood, much less going the 5000 miles it would take to get to the Persian Gulf. There’s also low confidence in Saudi Arabia that if a fight broke out that the Chinese would side with the Saudis against their primary regional rival, Iran. But if there’s one thing the Saudis have, it’s money to spare. So they have gone into China and bought up a few refineries, entered joint ventures with Chinese state energy firms, and are shipping crude to China like they used to ship it to the United States. Now, from the Saudi point of view, this might actually work better in terms of currying favor than it ever did with the Americans, because the Chinese actually need the crude they import three quarters of their total, of which roughly three quarters comes from Africa and the Persian Gulf. And so they’re paying for that in Yuan and in order specifically in their mindset to bribe the Chinese to come to their aid when the rubber hits the road. This is not an economic decision. This is a political decision being made not because they don’t like the dollar, but because they think the dollar doesn’t give them the military guarantees that they thought it once did. So this is Saudi making the decision because of military strategy as shaped by their own culture, not because they think the U.S. dollar is going anywhere.
But still, this is the only example I’ve seen out there of a meaningful shift away from the dollar. And it’s only for trade with one country for one commodity. Alright. That’s it for me.
The topic of de-dollarization is like the weird cousin no one wants to talk to at parties. They only come around once every year or two, and most of what they say is complete bulls***. But when the day comes that you need to take that weird cousin (aka de-dollarization) seriously, here are the three factors to look out for.
#1 Size – To be a currency of exchange, trade, and reserve, a currency must exist in a massive volume. Only four currencies meet the size requirement: Dollar, Euro, Yen and Yuan.
#2 Access – You need to be able to get ahold of a (nearly) unlimited supply of said currency at the drop of a hat. The Dollar comes out on top in this category, with the Yen and Yuan unable to provide the necessary level of access.
#3 Trust – You must feel secure that the chosen currency is a safe store of value and that the government will not intervene. This makes the currency a subset of trade, and if the country in charge wants to micromanage the value on a daily basis, it won’t work.
Several countries have been shouting from the mountaintops that they want to move away from the Dollar. I don’t take most of these too seriously, but one country is seriously considering de-dollarization, and we’ll talk about that tomorrow…
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan here coming to you from Colorado where the weather can’t decide what it wants to do. Today it’s sunny, so, you know, we’re going to work with it. A lot of you have written in asking me about all this hullabaloo about de-dollarization that comes up every year or two. And so I have to explain it again. Fundamentally, nothing has really changed this time, but let me give you the three things to look for if you do want to take de-dollarization seriously in the future, this is not the time.
Number one size. For a currency to be a currency of exchange, a currency of trade, and especially a currency of reserve. It has to exist in huge volume because that’s a lubricate trillions of dollars of financial transactions and physical transactions every single day, and something in excess of $25 – 30 trillion of annual merchandise trade. That’s a lot. And there are really only four countries in the world, four currencies in the world can even theoretically do that. The U.S. dollar, the European euro, the Japanese yen and the Chinese yuan. Number one.
Number two, access. You have to be able to get a hold of nearly unlimited volumes of that currency whenever you want to. Obviously, the dollar scratches that itch. The Japanese yen, not so much. The Japanese tried to go global back in the 1980s. It turns out their financial system couldn’t handle it and it contributed. It was one of the many factors as to why they have had on average 0% growth since 1993, 94 or something like that. And so they have kind of closed up shop. The currency is available. You can add it to the side, but it’s never going to be a mainline exchange currency. Let’s see, China is eliminated from that category as well. The number one concern that the Chinese have is for control. Absolute, domineering, dictatorial control over their own internal financial sector. That means they don’t want to see large cross-border flows, especially from China to the rest of the world. So every once in a while, the Chinese will do what they’re doing now and talk up the yuan and talk up internationalization. Then as soon as that starts to happen, a flood of currency from the Chinese goes elsewhere because the Chinese are the people who are the least confident in their own economic system. And then the Chinese government slams it shut and we don’t hear about it for a couple years again…like we are now.
Okay. What’s the other big one? Trust. You have to trust that the currency is going to be worth something. You have to trust that the government is not going to intervene. And that means this is kind of a subset of trade. Now, with trade, if you are a major trading country and a large percentage of your GDP is gotten from exports and imports, then you have a vested interest in what the value of your currency is every single day. The U.S. is perfect for that because the U.S. trade to GDP ratio is only about 15%, and about half of that is either energy or NAFTA. And everything else falls into that other like six, 7%. So the United States really doesn’t care what happens to the value of occurrence every day. The Chinese don’t have a freely traded system, so they can micromanage what the value is every single day. There’s also the issue of whether your money’s going to be there the next day. Now, the United States maybe is taking a hit on this with the Russia sanctions and that it’s weaponized the U.S. dollar in a few ways. But compare that to, say, what goes on with monetization. Now, I know I know a lot of you folks out there who are like gold bugs are like, oh, the U.S. monetizes like mad. And, you know, there’s something to be said for that. We do have a large money supply. It’s probably bigger than it needs to be. But a couple of things to keep in mind. It’s been shrinking for the last year as all the stimulus efforts from the last 15 years because of COVID and financial crisis and everything else have finally wound down. It’s going in the right direction. And second, I compare it to everyone else the Japanese, the Europeans, and especially the Chinese print currency in far greater volumes in the U.S. does. So the U.S. currency is the primary finance currency. It’s a primary currency. And everyone’s foreign reserves, the primary trade currency is the primary store of value. The Chinese yuan is none of those things. In fact, 99% of the issued currency of the Chinese yuan is held within the Chinese system. But their money supply is bigger than the United States because they print currency so ridiculously. So if you want to use that as a reason and talk down the dollar, that’s fine. Just make sure you apply the same criteria to everyone else. Because the yen and the U.S., even though the Japanese economy is less than a third of the size of the U.S., it’s about the same currency exchange. And the euro is bigger, too. So the U.S. runs the least bad ship, if that’s the right way to look at it. And then finally, of course, there’s the euro. The Europeans for a long time have been looting the U.S. dollar as a coequal currency, if you will. The European euro should be right there with them, but they confiscated insured bank deposits back when they had the financial crisis in the late 2000, early 20 tens. And as a result, anyone who could move their money out of Europe did. So. It’s a regional currency that’s not nothing, but it’s no longer a serious contender for any sort of broad, dominant international role.
There are a couple of other countries that have started to kind of join the shouting on this topic, but I don’t take those seriously either. One of them is Bangladesh. Bangladesh has recently publicly pledged that the nuclear power plant that they’re planning on buying from the Russians will be paid for with rubles. Yeah, that means nothing because the Bangladeshis don’t have the money to buy a nuclear power plant. So to pledge for something that’s never going to happen in a currency that they don’t have yet, whatever. And then there’s Argentina who says it’s gung ho to join any sort of not-dollar system. The Argentines are trailblazers in many financial matters, but currency adoption is not one of them. They’re basically looking for a currency that can be printed without causing inflation for them and without them having to pay back and foreign currency later. So, you know, I wouldn’t take that too seriously either.
Now, all that said, there is one country out there that is seriously considering and maybe even implementing a degree of de-dollarization because it doesn’t care about these factors. It has something else that is driving its decision making. And we’ll talk about that tomorrow.
We’re talking US politics today, and for those who don’t eat, sleep, and breathe politics (aka having a life), it’s about the debt ceiling. Spoiler Alert: It will probably end the same way it always does…
Anytime the White House and at least one house of Congress are in different hands, that house of Congress will use it as a chance to squeeze in some concessions. This is all just political theater, but it has gone a bit further than usual.
It can be attributed to the state of flux many of the leading political factions have found themselves in. Between the unions, fiscals, and business conservatives all transitioning, there’s no one around to knock some sense into these other groups more willing to push the limits.
So how will all of this end? I would expect a last-minute compromise because no one in the government wants to actually face a default.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey, everybody. Peter Zeihan coming to you from a windy Fort Lauderdale. Sorry about the background noise. It’s unavoidable on this one. But that’s okay because I’m talking about U.S. politics today, specifically the debt ceiling issues.
For those of you who don’t obsess about the ins and outs of what’s going on in Washington, I understand if you don’t understand what’s going on, that’s totally fine. The very short version is, since the United States runs a significant budget deficit that requires approval from Congress to raise the funds that are necessary to run the government. And so every couple of years, whenever the White House and Congress are in different hands, whoever is in Congress tries to use this issue as leverage to get political concessions in one way or the other. Rarely happens at all when the same party controls both houses. But since were in a divided government right now, the Republicans are trying to wring some concessions out of the Biden administration.
Now, if the United States were to not increase the debt ceiling, that would mean that the United States would no longer be able to raise capital in order to fund government activities. And that would hit everything, whether it’s Social Security and Medicare or Medicaid or the military or the food stamp programs. Basically, the government would have to triage and decide what not to spend money on and actually live within its means. Now, there is no one that I know who has two brain cells to rub together in Washington, who thinks that a default on U.S. debt or a collapse of the US government functioning would be a good idea. So usually this is just used for political theater. And in order to generate a pretext for getting some concessions and both parties have played that game.
The reason that this has gotten a lot closer to the wire with us now within a month of the United States actually defaulting or entering into budgetary crunch is because our political system has shifted significantly. Now, for those of you who’ve been following me for a while, you know that I’m of the belief that we’re going through a political transition that we go through every once in every generation or two. And when that happens, the factions that make up the parties move around or they jump ship. Maybe they become swing voters, maybe they switch sides. And while that’s going on, everything is remarkably fluid and very angry. And social media certainly hasn’t helped. The stage that we’re at at the moment is that Donald Trump succeeded in excising the fiscal and the business community’s from the Republican coalition, but he’s also succeeded in bringing the unions in to the Republican Party from the Democratic coalition and Joe Biden, now that he’s president, has been partially successful at breaking up the unions and the Republicans and trying to get the unions back. And what this means is that the unions, the fiscals and the business conservatives are all in flux and all are basically swing voters. Now, those are the three factions that know how to do math for which economics is the core part of why they’re involved in politics. And so when you’ve got the three factions that know the most about things like math and finances and budgeting, no longer part of the political core. Everyone else who’s willing to use the debt ceiling as a political wedge can go a lot farther because there’s no longer a group of sane people in the background saying, No, we’re not going to do that. We’re going to try something else.
We’re seeing something similar with the Greens because we don’t have unions, fiscals, or business voters represented in Washington or really any level. The Greens are able to impress their view of economics on a lot of policies and so we’re getting a few things that maybe that don’t hold up to normal fiscal rules.
I still don’t think we’re going to be facing a default. I think I still think we’re going to have a last minute compromise. Joe Biden has canceled part of his Asia trip in order to come back and hammer out a last minute deal. But this is probably going to go down to the wire and that’s simply because our political system is too much in flux.
So hopefully that brings a little bit of context, a little bit of detail and what has become an unnecessarily problematic development. And I hope, hope, hope, cooler heads will prevail in the long run.
We’re wrapping up our Ukraine War Q&A series with the most depressing question yet…how long can this war last?
There’s the dark, really dark, and truly dark.
The dark answer is that Russia’s current problems can be attributed to mobilization issues and ammo. Russia still has a deep reserve of armored vehicles and supplies they can tap into…Ukraine doesn’t…and the Western logistical chain is not as good as we would hope. Yes, the US has a significant backlog of equipment, but most other countries do not (and in many cases, they are competing with Ukraine to ramp up their own production).
The really dark answer is that Russian wars are rarely quick. If neither side of this conflict can maintain current industrial output levels, this could likely become the status quo of living on the Russian borderlands.
The truly dark answer is that the demographic situation in Ukraine before this war was already terrible and is now likely terminal. No matter how this war shakes out, we could very well be in the final generation of Ukraine.
If Russia continues down this path of denuding its occupied territories of children, in ten years, there won’t be anyone left to fight, let alone reconstruct the country.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Finally, and probably the most depressing question of them all, how long could this war last? I mean, no war lasts forever, does it? Let me give you the dark answer, the really dark answer, and then the truly dark answer.
So first, the dark answer. This at the moment is an issue of mobilization and ammo. The Russian military support system, the military industrial complex, is clearly not doing well. So much money has been stolen from the system that it’s difficult for the Russians to get stuff to the front and their internal logistical system is trash. So between not having as much as they thought they did. Between the government being fleeced blind by their own defense minister, Ukrainians interfering with transport systems via drones and sabotage and artillery strikes and general status of disarray of the Russian transport infrastructure. It’s an open question how long the Russians can go with this. Now they do have 70 years of reserves. And, you know, whenever we see a 1940s or fifties tank brought out, we’re like, ha ha ha, look, they’re pulling their old shit out. Well, couple of things there. Number one, they have shit to pull out. The Ukrainians don’t. And second, we’re seeing this old stuff come out because some of the newer stuff just takes longer to refurbish. If you have a pre optics tank getting that back into condition just requires some refurbishment, some more tubing, maybe running some fresh oil on it. You’re good to go. If you got 1970s and eighties styles, optics, you need to now replace those. And that means a much more expensive and lengthy overhaul. You may get a better tank out of it on the back end, but it does take more time and money. So they’re bringing out their old stuff first. They still have several million more armored vehicles that they can throw into this. Now, it’s a limited quantity. Yes, but, you know, Ukraine is basically limited now to what it captures from the Russians and what the West sends.
Which brings us to the second point. How much durability is the logistical chain on the western side? It’s not as good as you think. When 1992 happened, the Cold War ended. Pretty much every country in Europe started to slim down their defense budgets until we got to the point in 2022, when the Defense Ministry in Germany was actually appointed by a woman whose goal was to shut down the military completely. And that means that what they do have is either old or in need of refurbishment or is from a very thin crust of stuff that has been purchased in the last 30 years. Well, most of that thin crust has already been committed, either to the military’s of these forces themselves, because now the Russians are on the warpath. Nobody wants to completely disarm or the stuff has already gone into Ukraine. So you have to build new stuff if you want to send it. And the Ukrainians have to compete with all of these countries who now want to beef up their own military because, you know, the Russians are on the warpath. Now, in the case of the United States, there’s a lot deeper tranche of things to pull from because we spent 20 years in the war on terror, which means we spent 20 years building out our military for a task it wasn’t designed for, and we were upgrading our actual, quote, real military assets, you know, our jets and our tanks and everything at the same time. So the United States has a significant backlog of all of that stuff that we would have used to fight a war back in the nineties, in the eighties. We don’t use any of it anymore. We actually have to dispose of it. So from a weird point of view, the Ukrainians are doing us a budgetary solid by taking our old stuff off and disposing of it in the Russians mouths. But even here, a limited supply. So we’re trying to spin up artillery creation here. The Europeans are using some of their solidarity funds to buy ammo. But in all cases, you’re talking about needing to triple or quadruple our current manufacturing facility. For a lot of this equipment simply to keep with where we are right now. The process has been started, but it’s expensive and it’s time consuming and we’re not going to see a real impact, especially on the European side this calendar year. We’re really talking about the second half of 2024 before the Western Industrial Complex really becomes a meaningful factor in terms of the supply of equipment…ammo will come a little bit earlier. So that’s the first kind of really dark side.
The second even darker side is if you look at history, the Russian wars are very rarely quick. You know, everyone thinks of World War One and World War Two, which only lasted a few years as being how wars are fought. And that has been how it is in the industrial age. But if the Russians and to a lesser degree the Ukrainians can’t maintain an industrial level of output and this becomes more of a long term slug match, the Russians have been expanding bit by bit over the last four centuries and various groups that they have occupied refer to things like the Russian encroachment as the 200 Years War. Ukraine wasn’t captured in one lightly armed conflict. It was captured in a series of conflicts over a century. The same is true for most of Russia’s frontiers. It ebbs and flows and ebbs and flows. Remember, the Russians here are trying to seek a more defensible perimeter, and that means going through all of the flat, open territories that are near them. And all of Ukraine is open and flat. So history tells us that this is less a discrete conflict and more just the normal status of what it’s like to be on the Russian borderlands.
And then, of course, there’s the dark, dark, dark, truly dark possibility. And that’s the demographics. Ukraine has among the world’s worst demographics. You generally have kids when you feel positive about your future. And there hasn’t been a lot to be positive about in Ukraine for the last 25 years, and especially since the Russians invaded the Donbass and Crimea in 2014. It has one of the world’s lowest birthrates and is an extraordinarily distorted demographic structure, with fewer people in their forties, in their thirties, in their twenties, in their teens than children. And that was before the war. We now have, at any given time, at least a million, probably closer to 3 million Ukrainian men involved in the military conflict or training in addition to one third of the population of Ukraine pre-war. So almost 15 million people are internally displaced or refugees. Finally, most of the refugees you’re talking to in excess of 2 million people here most days. I mean, that number fluctuates a lot. Are women and minor children. Well, folks, birth rates don’t recover unless the men and women are in the same place. And the longer those women and children are in a third country, the less likely they are to ever come back. And then the Russians are doing damage on their own side. Based on whose numbers you believe. Somewhere between several thousand and several hundred thousand Ukrainian minors have been kidnaped, sent through what they call filtration camps on the Russian border and shipped out throughout Russia. The Russians aren’t even denying this has happened because they have a minister who’s responsible for it has done a number of commercials advertising Ukrainian children by the dozen for mass adoption anywhere that’s not close to the Ukrainian border. She specifically wants people in Siberia to pick them up. And the Russians are doing everything they can to destroy any data related. They don’t keep track of the data at the filtration camps. They destroy any documents the kids have. And so getting these kids back, even if the Russians have outsized victory in the battlefield, is going to be a long and maybe impossible slog…because a 14 year old was going to remember enough about Ukraine to maybe with the right access to information and communication, being able to issue a call for help. A three year old can’t. A baby certainly can’t. So what that tells me is, no matter how this war shakes out, we are in the final generation of Ukraine. And if the Russians are able to keep denuding their occupied territories of children, there’s not going to be a lot left to fight ten years from now, much less reconstruct the country over the next generation. And we’re already talking about a reconstruction bill that is in excess of a trillion U.S.
So where to end on a high point with that last question, I’ll see you guys next time.
The fifth question of the Q&A series is…who is the ultimate provocateur in the Ukraine War? And I really hope this answer doesn’t surprise anyone.
If Russian propaganda has led you to believe that nazi-jewish-gay-demons run Ukraine…maybe this isn’t the video for you. Equally as absurd is the idea that NATO and the US are responsible for Ukraine being in this situation.
The US has seen NATO growth since the Cold War’s end; roughly 20 countries have joined, and many of them are former Soviet territories. But joining NATO is no cakewalk. It’s a grueling process and must be unanimously agreed upon by all members.
So the idea that NATO started this war and has been plotting to eliminate Russia is a tad far stretched. Oh, and when you actively send tens of thousands of troops into another country, it’s pretty hard to get the red off your hands.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
All right. Next question is, whose fault is this really? Who really started this? Who is the ultimate provocateur? From my point of view, that’s a pretty straightforward question. But let’s look at it from the other side real quick, because we do have a number of people in the United States who are just parroting blindly and brainlessly Russian propaganda.
The argument that the Ukrainians are led by a bunch of Nazi Jewish gay demons, we’re going to put that to the side because that’s as stupid as it sounds. And hopefully for most people, the fact that that is a leading thread in Russian propaganda is indicative of how much truth is behind the rest of what they say. But let’s focus on something a little bit more substantive. The idea that NATO has been very aggressive with the Russians since the end of the Cold War, and it’s ultimately NATO’s fault and specifically the United States is fault that Ukraine is in the position that it is today, and the Russians have to do this for defensive purposes. The very, very short version is that’s utter bullshit, but let’s pick it apart.
The argument is that the United States has been aggressively expanding NATO. And, you know, you make an argument for that because we have seen roughly 20 countries join NATO since the Cold War ended in 1992. But you have to take a look at the NATO accession process, because it is not just an issue of the United States waving a wand. What happens is the countries in question have either a vote or an act of their parliament where they apply for NATO membership. And then every individual government that is in the alliance already has to sign off on that entrance. And then it’s not like you wave a wand, then starts the accession process, which involves military reforms, civil reform, democratic transitions, moving away from a top down cannon fodder style military strategy like the Russians favor in favor of something with better logistics and a lot more forethought in order to help these countries not just defend themselves, but move along the path towards a democratic transition or if already democracies, to consolidate that transition once all of that is done, once the report card is finished, the countries then formally apply and there again have to have either an act of parliament or a vote of the general population, or more likely both. And then once that is done, NATO gives it a rubber stamp. But that’s not the end of the process either. Then the accession has to be signed off by each individual NATO country with a minimum of an act of parliament and in some cases an actual plebiscite. Only then can the countries join. This is not an issue of the United States just saying, Hey, I want to expand NATO to Hungary and it just magically happens. Everyone has to be on board with every step of the process or there is no accession. Now you also have to consider the list of countries that have joined Nieto since the Cold War ended. Estonia. Latvia. Lithuania. Poland. Romania. Bulgaria. The Slovak Republic. The Czech Republic. Hungary. Macedonia or North Macedonia now, Albania and future accession targets are potentially Ukraine, Georgia and Azerbaijan. With very few exceptions, these countries have all either been at war with or occupied by Russia. Oh, I forgot. Finland. Finland too. Anyway, at war with or occupied by Russia. So from their point of view, the defensive argument that Russia is the one that’s threatened by Latvia is just asinine. So thats kind of piece one.
Piece two is what actually happened in the early days of the war, starting in 2020 and 2021. Vladimir Putin and the Russian government in general started talking about the Ukrainians as not really existing, that they were a made up ethnicity designed by the Nazis or by the Americans simply to put a thorn in Russia’s side. And as such, it was Russia’s manifest destiny to reclaim lands that were once it. And as the time went on, the number of territories that were traditional Russian territory, according to this propaganda, expanded to include most of the countries that have joined NATO since 1992. And then by the time we got to December of 2021, the Russians started moving tens of thousands of troops onto Ukraine’s borders. And by the time we got to January and early February, we had over 100,000. By the time we got to February 22nd, the day that troops crossed the border, we were at about 130,000. On the 22nd, over 70,000 troops crossed from the Russian territories into the occupied Ukrainian territories. And we all of a sudden had a mass mobilization in Belarus as well. And then on the 24th, forces crossed from Belarus south and from those occupied territories in the east, further west into Ukraine proper. And never forget that this is not the first war between Russia and Ukraine since 1992. In 2014, the Russians flat out invaded the Donbass territory in the east and also captured Crimea in the south.
So any time somebody tells you that this war is someone’s fault other than Russia, you can tell them to go screw themselves because you’re smarter than that.
The fourth question of the Q&A series is…why am I so worried about agriculture exports coming out of Ukraine?
Ukraine’s preferred route for its bulk wheat and maize exports has always been water—specifically via the Black Sea. Now you’re probably thinking, “Even with seaborne export routes being blocked by Russia, can’t Ukraine just send stuff by rail to neighboring countries?” Theoretically, yes, but there are a few problems.
There are two sizeable hurdles to overland transit. The first is limited rail capacity and differing infrastructure. Ukraine’s Soviet past means its rail lines are of a different gauge than most of Europe, forcing it to rely on aging legacy connectivity in Romania and Poland. And now there is a new issue on the horizon. As Ukraine started dumping more and more grain into its neighboring EU countries, the local economies took a hit. Resulting in many of these countries refusing Ukrainian grain in support of their local farmers. It can still pass through, but it can’t stop there.
As Ukraine’s exports now need to go further, new infrastructure is required, and profits will get even lower. There isn’t a quick fix for this. To add insult to injury, Russia will soon target Ukrainian agricultural infrastructure. Meaning last year was likely the last time Ukraine would be a significant producer of foodstuffs for the world.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
And why do I care so much about agricultural shipments? I mean, Ukraine only has one water frontage. It’s got Poland through the northwest and Romania to the southwest. Why can’t it ship stuff by land? Well, agricultural products really doesn’t matter what it is, have a very high weight and bulk to value ratio. So transport really is important from a cost point of view. And on average, as you know for me, blah, blah, blah, blahing forever, it costs about 12 times as much to ship anything by truck as it does by water. And so Odessa and Kherson are the big blue water ports in the area, it’s always been easier in the Russian and Ukrainian spaces to get the stuff on water wherever you can and send it out. In this case, there’s another problem.
There are rail connections that go into the countries to Ukraine’s west, and some grain has gone there. But two problems, number one, there’s not nearly enough of them and capacity is limited. So you’re talking about maybe one fifth of Ukraine’s pre-war grain could have made it out through the western zones by rail. But problem number two, the rail gauge is different. So once these carriages get to the border, they either need to be on a special kind of carriage where you can adjust the rail gauge car by car at the border, or you need to switch the cargo to a new carriage in order to go into Europe. And I guess there’s a third problem, too. What has happened for the first years in order to maximize that 20%, they’d be going in Romania or Poland or Hungary, and then they dump their cargo and then the railcars would come back empty to get loaded up again. That is what allows Ukraine to hit that 20% number. The problem is Romania and Hungary and especially Poland are all grain producers and exporters and all this Ukrainian grain getting dumped on the local market was pushing down the cost of local grain and forcing the Poles, the Hungarians, Romanians, to then increase their shipments out. Well, that meant they had to pay the transport costs now as well, and it was starting to drive some local farmers out of business. So what we’ve seen in the last three months is most governments on the entire swath of European countries that border or near Ukraine have stopped accepting Ukrainian cargo as an end destination. You can still trans ship to get it through, can still get to a port, no problem. But that means that the carriages that used to be able to do short back and forth now has to go all the way through these countries to get to another country or to get to the coast. And then it takes up port space. And so that’s taking that 20% and probably cut it at least by a third, maybe as much as half. And the only solution to this that isn’t waterborne is to lay twice as many tracks or get a lot more rail cars. That’s not something you do in a few months. And so we are now looking at an environment where maybe 10% of Ukraine’s grain can get out this year. And once the Russians actually start going after the infrastructure, especially in places like Odessa, those venues close off completely.
So last year was probably the last year that Ukraine is going to be a significant producer of foodstuffs for the world. Next question.
