Dealing With Chinese Drones

Imagine of a drone firing missiles

Drones are all the rage right now and China is jumping on the bandwagon. With Chinese plans to create over 1 million combat-ready drones within two years, should the US be worried?

Drones may seem like a foolproof option, but that’s not the case. There are range, payload, and speed issues to consider, as well as ensuring an accurate guidance and targeting system is in place. The Chinese haven’t quite figured out all of those pieces. You must also factor in the US space and tech capabilities, which could render Chinese drones useless if it came to that.

If you want to make the argument that these drones open new doors for the Chinese, consider these factors. China’s drones would likely limit US naval operations near the mainland, but the Chinese air force already does that. Sure, there might be opportunities to make a little cash by offloading these drones in foreign markets, but not enough to move the needle. The only way I see these drones really impacting much would be if a drone-mothership was created and deployed (which the US is working on, not the Chinese).

All this to say, China’s drone production is impressive in scale, but their effectiveness in naval combat will be limited.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from the air in slow burn. And a glacier in New Zealand just to the north of the town of Glenorchy. Today we are taking a question from the Patreon page. And it is how is the United States going to deal with the absolute scads of drones that the Chinese say that they’re going to build? 

The Chinese official plan, which I have no reason to doubt that they cannot achieve it, is to have over 1 million combat ready drones within two years. First, let’s talk about the nature of that sort of threat. And then second, what the US Navy has to do differently from what it’s uphill, might have to do differently. 

I’m just climbing the marine here. 

First of all, a million is a lot. But keep in mind, as we are learning from the Ukraine war, whenever you’re going to have a weapons platform, you have to choose, largely between payload and range. So the farther you’re going to go, the less of a warhead you can carry. And there’s always detection issues too. So even the new rocket drones that the Ukrainians have been using, which have more weaponry and more kinetic force, really only have a range of, low number of hundreds of kilometers. 

So if you got a million weaponized systems and you can only throw them, a couple hundred kilometers or less, it’s, never going to even enter the defensive envelope. Of an American destroyer, much less an aircraft carrier. Second, in addition to the balance between range and warhead, there’s also the issue of speed. 

For example, the Iranian Shaheed drones, which have been causing a lot of havoc in the Ukraine war, only fly had about 150km a hour. It’s roughly 9100 miles an hour. So, you know, I don’t if you knew this, but naval ships, they move, so move pretty fast. So as in the words of the great man, Mr. Miyagi, best way to avoid a punch is no be there. 

Which brings us to guidance. Something we have discovered over and over in the Ukraine war is it doesn’t matter how many drones you have and how fast they are and how big their warheads are. If they can’t see the target. Most drones today require eyes on. They require a controller. And so if you don’t have a controller with a constant telemetry link to the weapon system, the weapon is just going to spin out of control and crash harmlessly. 

And you know, when you’re talking about naval combat, that, harmlessly means in the ocean, you might like you can have a lot of collateral damage. Now, there are two ways around this. The first is a problem that the Chinese are struggling with, with all of their other weapons systems. The Chinese have a number of long range systems, especially when it comes to, ballistic missiles. 

The problem is targeting. So the United States is really good with its missile forces. If we’re doing something like a ballistic against a land target, you know, you have coordinates. It’s really hard to do anything about that. And if you’re going to use something like a cruise missile, the United States basically loads in geographic information into the brain of the cruise missile. 

And the follow is a programed route to hit its target. When you’re dealing with moving targets, it’s a lot harder. You have to have eyes on. And the problem that the Chinese have is while they do have a whole lot of weapons systems and people and manufacturing capacity, it’s really hard to have eyes on something that’s over the horizon that is moving. 

So everything is dependent upon maintaining that telemetry link and having eyes in the sky, probably in the form of a reconnaissance satellite. And while the Chinese do have the ability to launch and maintain their own satellite fleet, their space weapons systems are woefully nascent. They’re new. And if we were to have a conflict with any of the technologies that the Chinese currently have in place or deployed, you basically have the United States who’s been playing this game for 60 years, take out every Chinese satellite in the sky in a matter of a few days, if not even a few hours. 

And then all of a sudden, all of these longer range weapons systems that the Chinese have are blind and can’t hit anything that can move. And again, that’s way to avoid a punch movie there. Okay. With drones, this is even more problematic. The only way that we have technology today where a drone can reliably get around jamming is to have a fiber optic spool where you literally have a physical cable connecting the drone back several kilometers to the operator. 

But several kilometers is like, you know, the range of seeing the horizon when you’re at sea level. You put it on a boat, you might be able to go a little bit further, but nothing weighs nothing. And you’re going to have a spool that goes out 50 K. You know, that’s already beyond the technology that we have today. 

So like everything the Chinese do, they do it at scale. But that doesn’t necessarily mean it’s a game changer. It may limit what the US Navy can do within sight of the mainland. But I would argue that all this talk about Chinese drones when it comes to naval combat, does not do anything for them at all. That their air force doesn’t do better already. 

So it’s a lot of talk and, it’s interesting because it is a new technology. It will keep evolving, but I think the field where it’s going to be more of an issue is arms exports, because of the Chinese can make lots and lots of these things. They may not be useful, in a sea fight or even in a land fight. 

Although if they decided to invade Russia, I could get curious. But they might be useful as an export product. If the Chinese started sending all kinds of stuff in to say, just to pick something out of random, the African theater and arming groups to achieve this or that, that could go some interesting directions. But make no mistake, the places where the Chinese are going to find customers here are not places that are. 

How should I put this civilization strong? It’s more likely to be in semi stateless areas, which is going to limit the amount of income that they can get from them. And if they start deciding to supply weapons to quote unquote countries. Who’s it going to be? I mean, no one in Latin America has a territorial dispute. We haven’t seen a war in Latin American, not counting the soccer world worth a bunch of people got lost in the jungle. 

I think you have to go back to, like, the 1880s. 

 They get involved in Europe. The Russians, you know, might buy this stuff in scale. But if the Chinese start supplying hundreds of thousands of weapons systems that are finished to the Russians, we’re in a very different world already. Southeast Asia could be fun, but drones with today’s technology really don’t do well in heavy forest or jungles. 

I mean, I tried it. That was an expensive experiment. That just leaves Africa and the opens of places like, say, the Sahel. A booming arms market for a country the size of China. That is not so with today’s technology, with the likely evolution of this technology over the next several years. This is not something I worry about too much. 

What would make this change is not just a general improvement in the range and the payload and the accuracy and all that good stuff, but being able to make, a drone mothership, that has all the normal aspects of a military vessel, but also has the ability to manufacture drones at scale, with its own facilities. 

And that’s something that at the moment, the Chinese are not working on because they haven’t figured out the tech. That is, however, something that the United States is working on with the replicator initiative, which should be operational by the end of 2026.

AI Drama: DeepSeek, Nvidia, and China

A Chinese firm, DeepSeek, claimed to develop an AI model at a fraction of the cost used to develop competing models. This has caused quite the stir, but what is actually going on?

China’s domestic chip manufacturing is dated and their attempts to catch up have fallen short. I’m always skeptical when approaching topics involving Chinese tech claims, but if the DeepSeek breakthrough is true, it would mean a massive AI leap has occurred. This would reduce the reliance on high-end chips and drastically mitigate supply chain vulnerabilities.

Nvidia had designed downgraded chips for China, but even those were banned by the Biden administration in late 2023. So, even if DeepSeek’s breakthrough turns out to be real, the Chinese will struggle to fully capitalize on the opportunity due to hardware restrictions and access. And Trump could make those restrictions even tighter.

But again, I’m doubtful that we’re getting the full picture out of DeepSeek and I suspect we’ll know what actually happened very soon.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here. Coming from Colorado. Lots of people have asked me to comment about recent things that are going on with artificial intelligence from a market point of view. Let me begin by saying I never comment on market movements, and this is not going to change today. What is going on is we’ve had a bit of a rout in the United States for a company called Nvidia, which designs the ultra high end GPUs, as are graphics processing units, which are the advanced chips that are used in almost all artificial intelligence training and applications. 

Specifically, a Chinese company called Deep Seek says that it managed to generate an artificial intelligence model, at 1/20 of the cost of what Nvidia has been able to do or what companies had been able to do with Nvidia chips. And in doing so, we basically saw more market value, bleed off of Nvidia in about eight hours than most countries have economies. 

It was ridiculous. It’s also probably completely fabricated. Keep in mind that almost anything that comes out of U.S. high tech is proprietary. So the information is circumspect, and almost anything that comes out of China has a degree of fraud involved. And if you’re using either of these two things to color your trading decisions, I can’t help you at all. 

But what I can do is talk about where this leaves the industry and what it would mean one way or another. So let’s assume for the moment that this is all fraud, in which case this just all blows away really quickly. And a lot of people who have been trading money and trading stocks feel really stupid in the not too distant future. 

I think that’s the most likely outcome. But let’s assume for the moment that it’s real. And this Chinese firm working with subpar chips has been able to make superior, large language model trained AI systems to what the American bigwigs like OpenAI can do. 1/20 of the cost with dumber chips. That would be significant. One of the big problems that we have with the chips right now is the supply chain is so grossly vulnerable that it doesn’t take much of a disruption anywhere in the world to break the ability of the world to make these high end chips at all. And if that happens, then we’re going to have to decide how to ration our chip usage. If you can drop the cost of training these new models by 95%, obviously, that makes, that concern a little bit less of a problem. 

But even within that, there’s going to be some very clear breaks geopolitically. So again, assuming that this is for real, let’s look at the chips that were used. The high end chips that are basically three, four and five nanometers that provide the backbone of most AI operations. The ones that we think could be used for training AI models are all under sanctions as of 2022, and the chips that were used by deep seek to do their operation were custom built chips, basically. 

Nvidia looked at the sanctions, said that they still wanted a market in China. So they worked with the Chinese company Deep Seek to design a chip that would comply with sanctions, and they dumbed it down, if Deep Six announcements are true. Clearly Nvidia did not dumb it down enough, but the Biden administration, in one of its last actions, decided a couple months ago that, Nvidia has not been playing in good faith and basically banned all of these chips as well. 

So if deep secret was able to do this with the dumb down chips, those dumb down chips are no longer accessible to the Chinese economy writ large anyway. Moreover, the most advanced GPU that the Chinese system is capable of manufacturing is about a 14 nanometer. So you’re talking about a dozen generations behind where we are right now? 

It’s worse than it sounds, because even to make those 14 nanometers, they have to use imported equipment and a lot of imported labor to do the quality checks. Yes. Yes, yes. We have had a couple Chinese firms make something in the seven nanometer range, but it’s been really clunky. It’s been a massive power hog. They get something only like a 20% success rate. 

And most commercial chips, if they’d have anything less than 90%, are considered failures. So if they push and push and push and push and push and throw in an exorbitant amount of resources into it, they can make a chip that is still half a dozen generations behind what would be necessary to do an AI model. So if if Deep Seek is not lying, then we would have a breakthrough in AI that the Chinese would be utterly unable to participate in, and that would generate a very interesting world. 

But we’re going to know how this is going to go either way in the not too distant future, because everything that Deep Six says that it did is open source. And we’re going to be able to try to recreate it, in any number of companies, in any number of countries in the not too distant future. One other reason that I’m really doubtful the DPC actually did this. 

There are basically two ways you train AI. You basically you teach it like in school, like, you know, x plus two equals y three plus four equals seven. And once you’ve done that and built this kind of catalog of basic information, and you then let it loose on bigger problems, what deep seek is saying is they just skipped the first step, saying that you don’t need to teach basic math to the computers. 

You can just set them loose on calculus, if that’s true, which I find exceedingly unlikely. This can be replicated in a matter of weeks to months, not years. So we’re going to know, in the not too distant future, just what actually happened and how many people in the financial world jumped the gun. In a really silly way or not? And even in the, you know, worst case scenarios, the right term, even in the situation where deep secret really, really did generate a bit of a revolution, everyone’s going to be able to play except for the countries that can’t get the chips. And if there’s one thing that we understand about the Trump administration versus the Biden administration, is they have no problem taking sledgehammers to specific companies. 

So if it is the understanding of the Trump administration that Nvidia has been playing fast and loose with sanctions, you can count on Nvidia having much bigger problems than simply a Chinese company coming up with an a more efficient model.

Trump’s Political Capital Bonfire

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Trump has used up a lot of paper in his first 10 days in office, but he hasn’t spent much time working with Congress to make his executive orders stick.

Since President Trump doesn’t have the power to raise or reallocate funds, his executive orders are mostly symbolic. He’s also using his available resources on things that might not be the best place to put them, but without an inner circle that would warn him of these mistakes…it will continue to happen.

Many of these executive orders are questionable anyway; like an “Iron Dome” system that doesn’t make sense or freezing federal grants without clear guidelines. Oh, and these aren’t just impacting us domestically, a freeze on foreign aid has disrupted diplomatic and strategic influence abroad.

The main point of all this is that Trump is burning through his political capital at an alarming rate, and it risks the long-term effectiveness of his administration. But hey, no one said that this presidency wasn’t going to be chaotic.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hi it’s Michael. I’m in for Peter, who unfortunately, is feeling a little under the weather and has lost the use of his voice. You all were about to watch a video of that Peter recorded earlier today about the executive orders that the Trump administration is issuing. The order in question that is the main focus of this video has in those two hours since been rescinded. 

But we are going to continue to share this video because we think that the analysis and conclusions in it ultimately stirring. True. And, the the potential for chaos and confusion that Peter highlights obviously was shared by enough stakeholders, both inside and outside of the government, that the white House, has decided to reevaluate their approach. So if that feel better, Peter, and, we hope you enjoyed the video. 

Hey, everybody. Peter zine here, coming to you from Colorado, where I am rapidly losing my voice. We’re about ten days into the new Trump administration, and, well, it’s been. Shall we? But it’s not clear to me that anything has really changed. Donald Trump has issued, dozens are we have to hundreds. Now, I’ve kind of lost track of short executive orders, claiming a lot of stuff, asserting a lot of stuff. 

But not once. He’s actually asked for anything from Congress. And keep in mind that the US presidency cannot raise funds or really even transfer funds, from one agency to another so he can squeeze the blob a little bit. But without congressional action, not a lot can happen. But in doing so, Donald Trump has picked a lot of fights that didn’t need to be picked. 

And he’s really gone after the core of what a lot of people to consider to their political identity, to be, without a lot of immediate payback. So let me give you an example of this. Donald Trump’s made a very big deal about going after illegal migrants, especially those with criminal records, which I don’t think, especially in the criminal records thing anyone has a real problem with. 

But from talking with agents that are within, Immigration and Customs Enforcement, there’s no one who money that comes with these directives. What has happened is other law enforcement branches of the federal government have been to redirect to assist, Ice in whatever they’re doing and going after these people. So you get folks from, like the Bureau of Tobacco and Firearms or the FBI or whatever. 

Now collaborating, cooperating with Ice in their roundup operations. And that’s all well and good, but keep in mind that anyone who’s helping Immigration and Customs Enforcement is going after illegals is not doing what they were doing before. So they’re not investigating financial fraud. They’re not investigating smuggling. So the blob has been squeezed and we have more resources going to a specific task, and it has generated a few thousand requests, but it’s come at the cost of everything else just kind of flying by the wayside. 

Now, any any middle school adviser to Donald Trump would have been able to warn him that this is exactly what was going to happen. But over the last four years, rather than build up a legislative block that he wants to push through in order to generate a real durable change in the American system, he has since instead purged himself of anyone who might not just tell him no, but yes, but, and as a result, he’s got this shell of dense incompetence around him now where no one will tell him anything other than exactly what he wants to hear. 

And so we get these scads of just very, very brief, executive orders that really don’t move anything. Another example is recently Donald Trump signed another brief executive order, to establish an iron Dome system around the United States. Now, Iron Dome is the missile defense system that the Israelis used to protect themselves from mortars and rockets. 

Keep in mind that, Israel’s about the size of new Jersey, and the weapon systems that are being launched at them are very, very, very short range ballistic, nothing like what the United States has to deal with in the mainland. So if we were to spend the approximately $40 trillion that it would take to build up a nation wide Iron Dome system, all it would do is protect Detroit from Hamilton, Canada, and San Diego from, Tijuana. 

Everything else is too far away. It’s the wrong weapon system. But of course, there’s no money behind this because it’s an executive order, so it just looks really silly to anyone who knows anything about missile defense at the border. 

And Trump’s picking a lot of fights with a lot of people that don’t need to be picked. We had a we had a two page executive order from Trump a few days ago that shut down the distribution of all grants, about $3 trillion of funds, most of which are distributed through the states or through private organization or nonprofit organizations. 

And this is everything from the small small Business Administration to Meals on Wheels. And according to the directive, until such time as everyone can indicate that they’re complying with the new regulations and attitude, was the right word. 

 Orientation, I think, is the word, that Donald Trump is trying to establish. The money can’t be distributed. But it’s a temporary hold of three months. Well, there was no guidance in that. Two pages to basically regulate $3 trillion of distribution. And so it’s all been shut down, which means in the not too distant future, you’re looking at like, you know, dead old people because Meals on Wheels isn’t working. I mean, these are unpicked fights. 

These are unforced errors. But Donald Trump is making a lot of them and burning a lot of capital to do it very, very quickly. There could also be damage on an international scale because he’s done basically the same thing with an executive order. Very short, very brief, very few details, shutting down any foreign aid that requires dollar transfers, which is, with the exception of some military assistance, almost all of it. 

So we’ve seen the US global position diplomatically and strategically basically frozen. And we’ve seen the U.S. domestic position when it comes to the interface between the population and the government in anything except for entitlements basically frozen, with no clear guidelines as to what’s next or what the parameters might be. And Congress has yet to be involved at all. 

These are not the sort of mistakes that a second term president should be making, but they are being made by the dozens. And it’s unclear on the other side of this how much Donald Trump’s political capital will remain, because he’s going through it at a pace that I have never seen by any leader in any country in modern history. 

But I got to admit, there’s a show and it’s entertaining.

What’s the US Housing Market Doing?

Photo of a home in the United States

The US housing market has been through a lot, so what does this current chapter look like? We’re going to be looking at several factors impacting the trajectory of the US housing market.

The road to recovery from the subprime crisis, coupled with limited new housing construction during the pandemic, led to record-high housing prices. People shuffled about during COVID, driving down available stock.

Years later there’s a surplus of homes on the market, but sales have tanked. Mortgage rates are through the roof, thanks to massive federal deficits under recent administrations. The capital shriveling from the Baby Boomers retiring has begun, and more and more homes are being put back on the market as this older generation passes away.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey everyone coming to you from Wanganui Inlet in the northwest coast of the South Island. I am on a big low tide beach that has dramatic walls. It needs a name and we call it Peter Beach because you never know it’s going to be here the next day. Anyway, folks at Patreon have been asking me about the housing market of late, so let me give you the quick rundown. 

We have emerged from Covid, we have emerged for the subprime crisis. And so for several years, we had record low numbers of new builds, both because we were recovering from oversupply and because, Covid, we thought was going to last longer than it did. So nobody built anything because they thought nobody was going to move. And that drove prices through the roof. 

And turns out with Covid, people wanted to move someplace where they could have quality of life outside of a city. So we saw actually record housing sales and a huge drop in available housing units. You put those together, prices go through the roof, people get a little egg road. And if you’re in your 20s, it’s really hard to get started because you can’t afford anything that is now behind us. 

We’ve seen, well, new house builds hasn’t actually changed really at all in the last several years, but the amount of stock on the market has increased almost by a, a factor of two. At the same time, that house sales have dropped by about 40%. So we’ve kind of got two things going on here. One political, one economic. 

Let’s deal with the political first, because there’s something for everyone to hate on this one. The mortgage rate in the United States, the 30 year mortgage rate is largely subsidiary of the cost that it takes the government to borrow money, specifically the ten year Treasury note. So the tighter the fiscal control that the federal government shows, the more money there is available for other things like housing. 

Conversely, if the government spends money like it’s going out of style, spends money it doesn’t have, the opposite happens in borrowing costs for everybody. Rise. What we’ve seen is we had Barack Obama, who ran the most prolific good fiscal situation we have had in peacetime in modern American history, Donald Trump, refusing to be outdone, doubled the fiscal deficit under his first term. 

Joe Biden did it again. And if Trump 2.0 decides he’s going to follow through with his campaign promises, we will once again have the biggest federal deficit in American history. We’re talking Argentinean, Venezuelan, Greek style budget deficits here. Just absolutely massive amounts of red ink that will drive up the costs of everything for everyone. And so we have seen mortgage rates since the first day of the first Trump term already, roughly double. 

You should expect, based on the fiscal situation the federal government that to increased. Again, if Trump does what he says he’s going to do. Second issue has nothing to do at all with politics. It’s all about demographics. You see, when you are roughly age 20 to 45 and you’re raising your kids and you’re building your home, you’re a net absorber on a customer of credit because you’re borrowing to do all these things. 

Your income isn’t very high. And then later on, as you get older and your kids move out, you pay down your house from 45 to say, 65. You become a net contributor to the credit market because you’re not borrowing anymore. Your income is high and actually you’re saving for retirement and some of the money that you save eventually works back into out into the system through investments to be left. 

Let other people. Well, the baby boomers have gone through both of those phases. So when they were all young adults back in the 60s through the early 80s, we saw credit rise, credit costs rise because they were gobbling it all up. And when they were mature adults, late 80s through roughly 2010, 2020, you saw the opposite happen. 

And all of a sudden they’re providing credit to the system. And so credit costs collapse. You put all that together and it shapes how we have seen the credit market, especially for housing. Well, once again, the baby boomers are the primary culprit for the changes in the market. Two things. Number one, two thirds of Marty retired. So they’re liquidating their savings. 

And that capital is no longer available to the degree that it was. So the entire capital market, regardless of what the sector is housing including, is getting a little starved. Second, while two thirds of them are retired, the leading edge of Boomer, the oldest boomers, the ones who were born in the late 1940s, have already started to die, which means that their houses are becoming available to the boomers did something that no one else in American history had done is they retired. 

They didn’t move out. They didn’t move in with her family. They didn’t, consolidate. They didn’t go into nursing homes if they could help it. They just stayed in place. And in doing so, they shrank the volume of housing that was available for the rest of us. Well, that is finally, finally, finally starting to loosen up a little bit. 

And that housing is now coming back into the market, but it’s coming back into the market at a time when credit is getting progressively more expensive. So we have seen, as you would expect, credit costs go up, mortgage rates go up at the same time that available housing stock has gone up as well. So it’s more expensive to get a house because of the credit costs. 

But there’s also more houses available which are pushing down the cost of housing writ large, including purchase prices. So a lot of crosscurrents and never, never, never, never, never, never forget that. What I’m saying here is true on average, more than all other markets out there, real estate is a local industry. So what is true in Las Vegas is not true in Nebraska. 

In the rural zones. It’s certainly not true in Boston. So this is kind of a broad guide. What’s going on in your own backyard is probably just as relevant, because if there isn’t housing in the zip code that you’re interested in, you’re going to follow a different set of market guides. Okay. That’s it. Until next time, everyone.

Wind Energy Deserves Some Love

Photo of multiple wind turbines

I’ve bad mouthed solar power enough times for people to know where I stand, but why am I taking it easier on wind power?

Solar power has a few glaring issues. There are high energy and carbon costs associated with solar panels, it’s intermittent, and it’s often installed in suboptimal locations (thanks to tax credits from the Inflation Reduction Act). Combine all those and you have an energy source that’s just not very reliable. Sure, there are ways to improve upon some of these pieces, but wind energy is a much more reliable alternative.

Wind turbines can generate baseload power thanks to new tech giving access to more stable air currents. They also use more widely available materials and have a simpler production process, which contributes to cheaper energy generation. And these turbines are only put where the wind blows…I know, what a crazy concept.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey all, Peter Zeihan here coming to you from just outside of Kingston, New Zealand. This is Lake Wakatipu. Today we’re going to take an entry from the Patreon page, specifically. Let’s see if I can get this quote right. You’ve talked a lot of shit about solar power and the green transition. That’s a quote. But you’ve never really talked badly about wind. 

Why is it something we should be worried about? This is something that we should be aware of. Short version of why the green transition is problematic. And my point of view is that most of the equipment that has been put down to this point hasn’t been in the right places. Most advanced countries tend to be in temperate zones with big swings between summer and winter. 

Which means that things like solar are always going to be a disadvantage because they can’t provide baseload. You know, sun goes down. Yes. Problem number. Number two, winter is a problem. And places that are very, very sunny, like, say, Sicily, are either too mountainous or too far from population centers. So if you’re going to put solar panels up and say Berlin, you will never pay down the carbon cost, much less the economic cost that it took to install the things in the first place. 

There’s also a problem with raw materials. The processed silicon that goes into PV cells is one of the most energy intensive things that can be done by humans in the town. Per pound, it’s something like 35, 40 times as carbon intensive of making steel. And a lot of that is done by slave labor in Zhejiang, in China, on top of that. 

So, you know, fun. Wind doesn’t have most of these problems. I mean, yes, there are obviously places in the world that are windier than others. And the geography of green power still matters. But in terms of raw materials, they do require a lot. But they require copper, which it’s difficult for me to envision a world where there’s a huge copper shortage. 

Zinc, which is spread around the world in terms of production and processing. So that doesn’t go away. And then chromium, which is not something that is particularly rare either. It’s not that there aren’t some sticking points, but there’s nothing like you would have when you’re looking at, say, electric vehicles or battery technology where just so much of the core material is relatively rare and in geographically concentrated positions. 

Second, there’s the issue of improvement in the technology. Yes, solar has gotten incrementally better. Year on year for the last 30 years, and that is great. But wind who, when they’ve discovered that if you make a turbine tall enough, it doesn’t even matter if it’s windy on the ground. So we now have turbines going in that are 800ft high and higher, and with that sort of range, you can actually tap into currents that are much stronger and far more reliable than what you would get closer to the ground. And so in places like West Texas and Iowa, we have for a couple of years now, already seen significant baseload power coming from wind. Baseload versus intermittent. Let me explain that real quick. So baseload is, you have it pretty much all day and, you know, the wind blows at night, whereas intermittent means that when the wind stops, you don’t get power anymore. 

Wind used to be a primarily intermittent power source, although you could get some at night. Solar will always be intermittent because you can only get it when the sun’s out, and you can only get it when it’s not cloudy. So whether it’s a geography issue, a materials issue, or just the mechanics of what greentech is, wind looks a lot more stable. 

And then finally there’s a labor issue. Solar panels and all of the attendant things that go with it require fingers and eyes for their manufacturing, especially assembly. Wind is oversimplifying here. A big turbine and a bunch of big blades. And then you’re done. And those blades are typically some sort of carbon fiber, which is something that’s not particularly difficult to manufacture. 

So no matter what happens with the green transition, no matter what happens with the world of electricity moving forward, wind is a far more durable component of our future. And that’s before you consider that it also generates a lot more electricity per dollar. So for every dollar that you put into generating, say, solar power, you’d actually get twice as much electricity coming from wind. 

And that means in places such as the wind belt in the United States, the Great Plains wind has long been the cheapest source of power and has been driving other sources of power out of business, especially once they started to address the intermittency issue. So wind looks good no matter where it happens to be. Some places are better than others. Try to move there if you can, or at least get a wire that takes the power to you. 

Oh, one more quick thing. Why you haven’t heard this before is simply due to a combination of the Inflation Reduction Act and personal preferences. You see, the IRA provided cash for anyone who credits tax credits for anyone who could put up green tech. And while not everyone can have, say, a wind turbine at their house, anyone can put up solar panels. 

So wind turbines very rarely go to places that are not windy, whereas solar panels often go to places that are not sunny because individuals could do it. So, for example, the state in the United States was the highest penetration per capita of solar panels is Vermont our least sunny state. And so just like Berlin, they will never generate enough electricity to pay down the carbon cost, much less the economic cost of installation. 

With wind, you don’t have that problem because, you know, you’re not going to put one of these turbines that’s 800ft tall on your roof.

The End of Bipartisan Foreign Policy

After four consecutive presidents adopting a neo-isolationist mentality, the era of bipartisan globalization is coming to an end. So, what will the future of US foreign policy look like?

US foreign policy once sought to prevent any Eastern Hemisphere power from becoming too strong, but all semblance of strategic coherence has gone out the window. This is reminiscent of the pre-WWII era, where each administration adopted a new foreign policy. This is likely leading us down a path where a dollar diplomacy-esque system will return.

Along with all these changes, the US military’s global influence is declining, and foreign policy is in a state of flux. I suspect we’ll see more erratic and reactive policies in the coming years, as the US military is used to play checkers instead of chess. Hopefully all those alliances and infrastructure that have been developed will stick around for future iterations of US foreign policy.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Peter Zeihan here coming to you from the urns. Lord Glacier. Today we are taking a question from the Patreon page. Specifically, what do I think is going to happen with U.S. foreign policy as this age of bipartisan policy comes to an end? The bipartisan policy is loosely referred to as globalization. The alliance structure, the Bretton Woods system. 

However you want to put the specifics on it. The idea is the United States has some very core national interests that are involved in the wider world, specifically, if unsaid, making sure that no single power in the Eastern Hemisphere ever becomes powerful enough and united enough across the territory to then float a navy that can challenge the United States. 

In the Western Hemisphere, it’s seen as an interventionist system in order to prevent an attack in the long term. And to that end, the U.S. tries to dominate security arrangements in the Eastern Hemisphere and prevent singular large countries from ever forming. This was the basis of the entire Cold War structure, and in bits and pieces. We’ve been moving away from it ever since the Berlin Wall fell. 

Now, with the election of four neo isolationist presidents in a row Obama, Trump, Biden, Trump. Again, we’ve largely moved away from that system. And the argument now is what pieces of this should we bring with us into the future and why? And since the Democratic Party basically imploded in the last election, and since Trump kicked the entire national security conservative group out of the Republican Party, the discussions are happening that what I would call a preschool level on both sides. 

So have we been here before? Oh my God, yes. If you look at the entirety of American foreign policy from the end of the War of 1812, right up until the Second World War, every time we got a new president, we had a new foreign policy. And because of that, the interests of the coalition that surrounded each incoming president basically made up stuff on the fly. 

There was very little institutional knowledge, and what was there tended to be denigrated by the other side. Sound familiar? And so we moved into a system where we had roving military and interventions that matched the political and economic ideologies of the ruling clique at that time, and then four years later, or eight years later, it would change more or less completely. 

It generated a foreign policy that was far more interventionist than anything that we had during the Cold War, because there was no agreement across the country as to what the overall broad, reaching strategic goals for the country happened to be. I think the most aggressive period that I can point to, and the one that I think is going to be most accurately reflected in this next phase of the United States is something called dollar diplomacy. 

In the aftermath of reconstruction, the United States had finally pulled itself together, but it was an ongoing process to achieve full economic and political integration. During that time, the U.S. largely decommissioned its military, and its foreign policy became a subset of powerful individuals, whether they were driven by ideology, religion, economics, corporate greed, you name it, they would go out and interface with the world. 

And when they saw an opportunity or when they got into trouble, they would call their friends in Washington who would then deploy troops or maybe naval forces. And we saw any number of interventions throughout the world, most aggressively in Latin America, but also throughout the entire East Asian rim, participating, for example, in some of the civil wars before the formation of modern China. 

That version of events is likely to be where we go now. I wrote about this in The Absolute Superpower to give you a lot of specifics. If you want to dive into it. What has changed in the ten years since I wrote Absent is that the view in the United States of the military has evolved. During the war on terror, the military was generally portrayed as the most positively received arm of government by the citizenry. 

But with the rise of Donald Trump, we have seen the new conservative coalition that is the Republican Party pushed that entire wing out of power. And so now, as a rule, the further to the right you are on the American political spectrum, the more hostile you are to the US military, which is one of the reasons that the Donald Trump administration is in the process of nominating a guy to run the Defense Department who has minimal defense experience, and he’s just designed to go in there and rip up woke policies, which is not a great national security strategy. 

But it doesn’t mean that the Democrats are much better. Yes, Joe Biden used the military as an arm of the US government. He’s much more trusting of government power than Donald Trump is. But there was no recalibration of strategy from the Biden administration, aside from supporting Ukraine in the broader conflict with the Russians, which I happen to think is a great idea, because it’s definitely the cheap way to fight someone who points nuclear weapons at you. 

But that’s not a normal alliance structure. That’s not a grand strategy. And it is difficult for me to see, with the evolution on both sides of the American political aisle, us coming up with anyone anytime soon, because the people who have the skills and the knowledge in this, the folks who are in the military, the national security community, the intelligence community, they are now completely on the outside. 

And we’re probably going to have to start this over from scratch. I just hope that unlike the last eight times we did this, we don’t decommission the military before we then start the work. Hopefully some of the work we’ve done in the past 80 years will still be relevant, along with the personnel, the equipment, the alliances and the bases that are necessary to implement whatever we come up with next. 

But between now and then, expect a lot more erratic and kinetic American foreign policy as the military becomes the tool of the moment rather than the tool of strategy.

The Two-Sided Coin of Russian Sanctions

Image of Russian flag with a lock on it

*This video was recorded before Peter left on his New Zealand trip*

Western sanctions against Russia aim to restrict revenue flows by barring access to Western shipping, banking and insurance…but there’s one more step that could be taken to put the final sanction nail in the Russian coffin.

Russia has been operating in the shadows, using old, unsafe ships and creating state-owned insurance to bypass these sanctions. If Western forces began targeting the “Shadow Fleet” and cutting off access to the Black Sea and Baltic Sea, Russian exports would fall by two-thirds. Should the West choose to do that, we’d be looking at a slew of new issues that would pop up: the global market for oil, wheat, fertilizer, and more would all be disrupted. And then there’s the issue of how ships are registered, which no one is quite prepared to take on.

So, while there could be some more measures taken to ensure the sanctions against the Russians are being optimized, there would be some significant fallout to deal with.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here coming to you from Chihuahua City in Chihuahua, Mexico. Today we’re gonna take another entry from the Ask Computer forum on the Patreon page. And that specifically, if I was to redesign Russian sanctions, would you need to do in order to make them hit harder? And the answer to that is very simple. 

You go after the Shadow Fleet. The Western sanctions against Russia are designed, or at least the intent is to limit, the Russian ability to generate income from their sales of natural gas and oil and fertilizer and everything else, but without actually impinging on supply. And that’s the problem. If you really want to hurt the Russians, you have to actually go after the supply itself. 

Now the western areas are trying to have their cake and eat it too. By saying that you can’t use Western ships, you can’t use western banks, you can’t use Western insurance. And so what the Russians have done is to build up an alternative supply system and an alternative transport system using ships that were about to be decommissioned or already had been, as well as generating their own state owned insurance. 

So the ships tend to be old, they tend to be leaky. And we’re just kind of lucky that there hasn’t been some sort of catastrophic accident thus far. 

But if you were to, say, use Western naval assets to say, limit the ability of the Russians to leave the Black Sea or the Baltic Sea, then all of a sudden, roughly two thirds of what the, Russians send out would be shut off within a day. 

Now, that has consequences. Obviously, you can’t just remove a few million barrels per day of crude from the market, can’t remove one of the largest supplies of wheat from the market, largest splitter, fertilizer and bauxite and all the other things from the market without massive outcomes. And that is the reason why the Europeans have chosen to not take that step. 

Also, it is if you were going to go that route, you’re going to change the way the ship registries work in the world right now, there is absolutely no link between what is the owner of the vessel, what is the cargo of the vessel, what is the origin or the destination of the vessel and how it’s registered? 

And so as a result, most ships are registered in places like Panama, Guinea-Bissau or something like that. Because it’s cheaper if you’re going to start going after shipping for whatever reason, you need to start linking where the ships are registered. The countries have actually have naval forces so that they can actually protect those ships. 

 

And at this point in time in the world, there is no country, even the United States, that has the naval firepower and reach that is necessary to protect a substantial percentage of the world’s shipping. The world’s shipping has evolved over the last 80 years from the concept that the seas are free and anyone can use them at any time, for any reason. 

If you start to impinge upon that, we go back to a system that predates World War Two, where all of a sudden military force is necessary to keep the your sea lanes open. And since the United States has a super carrier heavy fleet, we don’t have enough to protect the tens of thousands of ships that ply the world’s waters every day, or even the proportion that is going to or from American shores. 

So if you pull the trigger on this, we are on a new world overnight, and most countries are not ready for that.