A Ukraine-US Deal?

Volodymyr Zelensky and Donald Trump shaking hands from wikimedia: https://commons.wikimedia.org/wiki/File:Volodymyr_Zelensky_and_Donald_Trump_2019-09-25_01.jpg

Trump and Zelensky recently had a call where they discussed a mega-deal, centered around mutual weapons purchases and military tech sharing.

There is a lot for both countries to gain from a potential deal. The US gets access to all the military tech Ukraine has developed and gets to see it tested on a live battlefield. Ukraine gets the industrial power of the US and, of course, some much needed funding.

These are early days, but when the guy in charge is just after a deal, rather than all the important details…there’s no telling how this will shake out.

Transcript

Hey everybody, Peter Zeihan here. Coming to you from Colorado. A quick one today. 

Today is the 17th of July and supposedly Zelensky, the president of Ukraine, and Trump, the United States just had a phone call and Zelensky said it was all about a drone. Mega-deal the idea that Kiev will buy some weapons from Washington, and Washington will buy some weapons from Kiev. 

Now, if you go back to the Soviet period, the heart of the aerospace and missile systems in the former Soviet Union was in what is today Ukraine. And in the post-Soviet settlement, the Russians got all of the weapons, but the Ukrainians kept all of the scientists. And so once the Ukraine war began about four years ago, the Russians obviously came in big and strong with all the weapons and the Ukraine’s never much. 

But then the Ukrainians started to turn on their old Braintrust trained up their younger population and get into new weapons systems. And they’re standing to offer to any country is if you put troops in Ukraine, we will share all of the technologies that we have developed with you. And those technologies are pretty robust. So just to pick a few. 

You’ve got the Neptune missiles that sank the Russian flagship out in the Black Sea. You’ve got the rocket drones with a range of just under a thousand miles. You’ve got new loitering drones can go further than that. And of course, this wave of first person drones that we’ve seen more and more and more of. But increasingly, we’re seeing jet skis with missiles on them that are automated. 

Basically, they’re taking the automation revolution and marrying it to a new type of warfare and serving as a testbed. Because from the point that they actually finished constructing a prototype, it’s usually used within a week, and then they immediately start to iterate. So the speed at which the Ukrainians have been pushing the envelope is really impressive. Their problem is resources. 

So at the beginning of the Ukraine war, something like 5 to 10% of their weapons systems were actually manufactured in Ukraine. That number is now over 60% and continues to rise. So if the United States were to get access to that technological suite and the development pipeline, and you marry that to the U.S. industrial plant in the US taxpayer base, well, a lot of really interesting stuff could happen very, very quickly. 

We’re still in early days, but we all know that Trump doesn’t like to talk about details. He just wants a deal. So if the Americans are willing to put some money into this, you’re looking at a fairly short turnaround time for a significant overhaul. First of the Ukrainian military is the resources come in and then eventually the American military, as well as these technologies reach the precision, the range and the rugged ization that the US military demands. 

How much? How fast? I mean, that is entirely up to the two presidents. But one of the things that Ukrainians were very successful at doing was building out their industrial plant in order to make these new weapons and design these new weapons and test these new weapons. But probably about half of that industrial plant is sitting empty because of a lack of resources, which is where the United States could plug right in.

What Happens After Trump and Putin Split?

Split Screen of Putin and Trump with a question mark

On Monday, I talked about the impending breakup between Putin and Trump, and the “plan” that Trump has laid out following the split. But the fallout from this relationship isn’t so straightforward.

There’s a 50-day horizon for Russia and Ukraine to sign a peace deal before the tariffs on everything Russian kick in, but that’s just the beginning of the logistical nightmare for Trump.

With a hollowed-out government and a lineup of Witkoff, Gabbard, and Vance to deal with, real policy change is just a distant glimmer that Trump might not ever see. Unless, of course, Trump welcomes experts with open arms, rebuilds his foreign policy team, and let’s someone into the room who is smarter than him…

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. And today we’re gonna talk about Donald Trump and Russia and Ukraine, war and tariffs and sanctions and blah, blah, blah. So in the last couple of days, Donald Trump has gone out publicly and said repeatedly that he’s really pissed off at Vladimir Putin because Vladimir Putin has been saying all the nice things, and then it’s all bullshit. 

And he just continues the war. Now, anyone who has been following the Ukraine war at all, or really Russian relations for the last 35 years, knows that this is not a new thing. The Russians lie a lot. And on the Ukraine war specifically, they feel that this is a strategic issue for them and they will say anything to continue the conflict. 

They will continue not just until they have conquered all of Ukraine, but until they’ve gotten a number of countries further to the west. Donald Trump came in saying that he knows Putin very well and he can negotiate a truce in a day, and obviously things have not worked out that way. And so with every stage, Putin is basically lied to Trump more and more and more, and it has made Trump look like a fool in the eyes of the international community, and not just a few Republicans back at home in the United States. 

And it seems that in the last couple of weeks that has finally reached a critical mass. So the current threat from Donald Trump is if in 50 days, Vladimir Putin has not agreed to some sort of ceasefire and peace deal, details TBD, then there will be a 50 to 100% tariff on everything from Russia and an another 50 to 100% tariff on anyone who buys stuff from Russia. 

Now, the logistics of implementing this would be colorful, because we don’t have an institution in the United States to handle things. Secondary sanctions, especially not at that kind of volume, because it would apply, among other things, to China. But let’s just assume for the moment that Trump is serious about this, for this to happen. Three things have to go down in the Trump cabinet because remember, remember, remember, Donald Trump has the least staffed government in American history, still hasn’t filled out over 90% of the appointed positions. 

He is the least capable and least competent national security team, and the one person on his national security team actually knows what’s what is the Secretary of State, Marco Rubio, who’s been pushed to the side and really has no impact on meaningful policy. So there’s three personalities you need to watch how Trump interacts with them. The first one is a guy named Steve Witkoff who does not belong in government at all. 

He is a real estate developer in New York. He’s an old buddy of Trump, and Trump has been throwing about every international issue the Ukraine, Russian negotiations, the Iranian negotiations, the Israeli guys and corrections of this guy knows nothing about any of it. And it’s obvious because as soon as he gets into the room, whichever group happens to have the best PR basically twists them around their little finger and gets him to spout their propaganda up to and including in Donald Trump’s ear. 

That is absolutely how the Russian situation has evolved, which is the primary reason why Trump looks so dumb when he’s talking about Ukraine and Russia specifically, and in foreign affairs in general. So Witkoff probably has now been edged out because it’s difficult to imagine how Donald Trump would have had a change of heart to this degree if Witkoff were still being allowed in the room. 

Time will tell, but it looks like he’s already gone. That’s number one. Number two, the director of National Intelligence, Tulsi Gabbard. Tulsi Gabbard, has been a Russian plant and a Russian agent long, long before she joined the government. Long, long before she became a Republican. She used to be a Democrat. And part of the presidential debate briefings were about how she was somebody who was probably already on the Russian payroll. 

And even if you don’t believe any of that, look at her foreign policy stances. If it involves the United States. Tulsi Gabbard has been on the opposite side of the United States on all issues regarding China and North Korea and Iran and Syria and Libya and, of course, Russia going back 20 years. And one of the first things that she did when she took over as DNI was to basically fire everyone on the Russian desk who would tell the truth to the president. 

And then she spent most of her time going through whatever had been published and redacting it, to put it in Russian propaganda and Russian propaganda. To this day remains her primary source of information. So if she’s not specifically and directly working for Vladimir Putin, then the Venn diagram that represents their worldviews is almost a perfect circle. It’s probably 99% overlap, with the remaining 1% being hairstyles because Putin is bald. 

And Tulsi Gabbard, I will give this to her. Her hair is fabulous. Number three Vance J.D. Vance is part of a group of people that are directly in the U.S. government, or one foot in, one foot out, like, say, Elon Musk, who are a certain flavor of white, ultra nationalist, Christian, ultra nationalist, based on how you want to phrase that. 

Anyway, they see Russia as the great white hope, as the country that has been suffering and pushing to protect the white race. Now, of course, that is unmitigated bullshit because the Russians are equal opportunity genocides and the Ukrainians are whiter than the Russians. But he’s the vice president, and he can’t just be pushed to the side and set out to pasture like, say, Witkoff. 

And even somebody like, say, Tulsi Gabbard can just be fired on a whim. Vice president is a little different. Even if formerly officially, the president can just fire the VP, which there would be a court case. Congress is going to get involved one way or the other. It’s a big step for Trump to turn on Vance. Now, I’m not saying that any of these are going to happen. I’m saying that this is what has to go down. If we’re going to see a meaningful change in foreign policy out of this administration on the question of Ukraine and Russia, now, does that change need to happen? 

Oh dear God, yes. We’ve had some really disastrous decisions made on national security as regard this topic. But even if all three of those people were suddenly gone, it doesn’t really solve the overall problem. Trump has a real issue with letting people in the room who know more about a topic than he does. That’s one of the reasons why the government is so lightly staffed. 

That’s one of the reasons why Rubio has been banished to the sideline. And so he would have to do one of two things. Number one, he’d have to dedicate his entire presidency to this one question, because this is this is a lot. And just keeping up to date on it would be robust, especially if you don’t have any deputies. 

Or number two, we’d have to see him turn the page back quite a ways to something that more resembled what he did in the first Trump presidency, when he brought in lots of people from the national security establishment and from the Republican Party, and actually stepped up a proper government. Now, that didn’t work very well, because as soon as I said anything that made him feel little or unintelligent, he fired them. 

But the whole point of being a good leader is to know what you don’t know when. Surround yourself with people who do. No, he hasn’t done that. If he starts to do that, then we’re looking at a very different presidency. But there’s a saying about carts and horses, and we are not there yet.

Copper Imports Slapped with 50% Tariff

Copper tubing

I know it feels like we’re all trapped in a Sisyphean nightmare with all the discussions of tariffs, but don’t shoot the messenger. Trump’s latest move is a 50% tariff on copper imports is going to do a lot of harm.

You all know that the US needs to build out its industrial capacity in the face of deglobalization, and copper happens to be an important part of that. Building domestic copper production would take over a decade and all these pesky tariffs are only extending that timeline.

Transcript

Hey, all Peter Zeihan here come from Colorado… hiking season. Unfortunately, I can still get the news, so I know that we now have a 50% tariff courtesy of Donald Trump. That is going to be coming to copper imports beginning on August 1st. Let’s say that you are someone who is really concerned about the US copper industry. 

I am not. I’m really not. But if you are, there are a few things that you do before you get larger volumes of copper from domestic production. Number one, you go out and explore to find the deposit you’re after. Number two, you build physical infrastructure, road and rail to get to that system that can handle heavy freight. 

Third, you build a processing facility to separate the copper ore from the rest of the rock and then an intermediate processing facility to turn it to something called blister copper, which is roughly 98% pure. It gets rid of a lot of the sulfur. You then take that blister copper, and you take it to another facility that you need to build. 

That’s a proper smelter that will turn it into that, you know, the reddish orange shiny stuff that you use in everything. And then copper then goes on to be in almost everything that involves electricity. So it is an important material. But putting a 50% tariff on it on the front end retards that entire process. And from start to finish, the entire process takes somewhere between 10 and 15 years. 

So if your goal was to facilitate copper production, step one, would it be offer, say, tax credits for exploration? Go ahead and build the physical infrastructure and get started on the smelters. All of that is very power intensive. So you all sort of need some more electricity. By putting the tariff on the front end, you’re basically retarding the whole process rather than speeding it. 

That’s a problem. One. Problem two is that the Chinese are literally dying out. And while they are big players in the copper sector, and that will have to be shut out at some point, that’s not my primary concern at this point. My primary concern is we have a limited amount of time in the United States to build out our industrial plant to prepare for the Chinese just not being there, and that means roughly doubling the size of the industrial plant. 

And for that first stage, doubling the size. There are four main inputs that you need. The first one is copper that now costs 50% more than it used to or will on August 1st. The second item is steel, primarily but not exclusively for structure and interior structure support. I think I-beams that, courtesy of an existing a Trump tariff, is now 50% more than it used to be. 

Third is aluminum, primarily, but not exclusively used in cladding and especially Hvac systems. That is now 60% more than it used to be because of Trump tariffs. And the fourth thing you need is a labor force that’s willing to do the construction work. Now in the United States, historically, for the last 40 years, most of that work has been done by immigrants from Mexico. 

And Central America. But as you may have noticed, the Trump administration has basically launched a poll grim against illegal migrants. Now, I don’t want to get into a broad debate of the pros and cons of immigration at this moment, but let’s just talk about where this policy in its current form leads. The Trump administration wants to deport about a million people a year, which carried out for a few years, would basically remove the illegal migrant community in its entirety construction is the industry that they are most involved in. 

Agriculture is number two. And what the Trump administration has discovered is that going after people who have committed crimes, it’s actually kind of hard because it’s a law enforcement issue and you have to do investigations and arrest them one at a time. That’s not going to get you to a million people. So instead, they’re going after people that they know about. 

They’re going to churches. They’re revoking legal status for people who say, I’ve been brought in from Venezuela or Haiti out of economic or political persecution. They’re going to people’s court hearings where they’re going to get ruled on for a, say, a green card and arresting them before they can before the judge, because, you know, these are people where they know where they are. 

So the four inputs that we need to prepare for a post China world are now more expensive. And every time the cost of something goes up, you can do less of it. So if these policies continue for any appreciable amount of time, we can test that economic boom that I’ve been talking about for years. Goodbye. Because we will not have the industrial plant that is necessary to produce the goods. 

We need to continue to lead the lives that we have been leading. It’s almost as if a Russian agent was whispering things in Trump’s ear and trying to convince them to do the things that would be most against our best interests. Oh, wait. 

Trump and Putin Split, Ukraine Gets Aid Again

Split Screen of Putin and Trump

It looks like Trump is going through another breakup, this time with Vladimir Putin. After years of deception and lies, Putin’s most recent reneging of promises to Trump seems to be the final straw; Trump has announced that US arms shipments to Ukraine would resume.

Since the Russians failed to defend any of the “red lines” that they established during the Biden administration, Trump can send pretty much anything to Ukraine without risk of an immediate major escalation. That doesn’t mean Trump shouldn’t be careful, he just has more flexibility in providing aid than the previous administration had.

On the economic side of things, Senator Lindsey Graham has proposed slapping a 500 percent secondary tariff on any country handling Russian crude. This sounds great in theory, but in practice it’s a legal and logistical pandora’s box that’s best left sealed.

Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. Brilliant. Sunny day. We may. May, may, may be on the edge of a significant shift in American relations with Russia and Ukraine. For those of you who have not been in a hole or drowning in conspiracy theories for the last couple of years, you will know that Vladimir Putin has been lying to Donald Trump’s face for quite some time and has gotten him in bit by bit by bit to move away from Ukraine for reasons that are very, very positive for Russia and very, very negative for the United States. 

In the long run. But time and time again, Trump has basically been made a fool of on the international stage and then has covered for Trump and either peeled back sanctions or removed weapons that were being shipped to Ukraine, and to basically take steps that will cause decades of international problems for the United States moving forward. Well, the tide may be turning. 

In the last week, we’ve had three communications between the white House and the Kremlin, all of which Putin basically lied to Trump to his face and then told Trump he wasn’t going to do anything that he didn’t want to do, including signing any sort of meaningful peace deal with Ukrainians up to and including the point where, Trump felt that he publicly needed to declare that he was sending weapons to the Ukrainians again. 

If you guys remember, a couple of weeks ago, the Defense Department basically canceled a lot of weapons shipments for weapons that we have not used in 30 years. Saying that we didn’t have enough supplies, which is exactly something that the Russians have planted into the American system because so few of the old Russians have been allowed to continue working for the Trump administration. 

Most of them have been fired, either from defense, from the Bureau, from the NSA, or from the CIA itself. Anyway, something seems to be breaking in Trump’s mind, and that kind of forces us to consider this from a couple different directions. Number one, I’m sure we all know people who have fallen for conspiracy theories, and we have all know people who have fallen for lies. 

And when you call them out, they take it personal and they blame you instead of the people who have been lying to them. And Trump is no different from any of those. However, when they do finally make the adjustment, they tend to over adjust. We’ll do it in their own way, saying that this was all part of a test and I was playing the long game or whatever it happens to be. 

But when they do finally adjust, they tend to overcompensate because they’ve been made to look really stupid, and now they feel they need to look strong again. And when the person who feels that he’s been made to look stupid and now needs to feel strong again, is the president of the United States can get really real really fast. 

So the question isn’t so much Will Trump eventually change tune? No one can decide that but him. The question is, what will he do in terms of military actions? There’s actually a fair amount of room for ramp up. One of the things that people loved and hated about how the Biden administration treated the Ukraine war is we never knew what the Russian red line was. 

Will it be providing something that’s more advanced than a bullet to the Russians? So we eased in. Will it be mid-range weaponry? Will it be aircraft? Will be the Abrams tank at every step. There was a lot of debate about whether or not this would push us to a nuclear exchange with the world’s largest nuclear arsenal. A lot of people said, no, you need to do what’s right for the right reasons or just do it. 

And I think, I think there’s nukes in play. There needs to be some nuance here. And so the Biden administration may, in retrospect, have gone slower than a lot of proponents for Ukraine would have argued. But considering that if you got it wrong once. Yeah. Anyway, how it left the last year, the Biden administration is that the United States was up to and including allowing mid-range and even long range American missiles to be used by the Ukraine’s launch from Ukraine into Russia proper. 

And the Russians did nothing. So all of the roughly 80 red lines that the Russians had established proved to be false, which means that there’s really no American conventional weapons systems that could be deployed to Ukraine that are in risk of even going another level up, because all the levels that are short of direct American involvement have already been ticked. 

So it really is just a question of what sort of weapons systems the Trump administration decides it wants to share, and that could be a whole lot of things. Keep in mind that roughly 85% of the equipment that we have sent to Ukraine is stuff that the US military hasn’t used in 30 years. So we’re not talking about anything for most of this stuff that generates a shortfall in what the United States has in its reserves. 

That’s that’s for the most part, a falsity of the remaining 15%. About half of that is ammo, mostly artillery. And that is something to be concerned about. And the United States has basically quadrupled its production of artillery ammo over the time of the Ukraine war. It needs to be expanded more. And then the final little bit are things like patriots that we actually do use. 

And those are a legitimate concern. But most of the weapons systems that the Russians are using to attack Ukraine are low tech drones and missiles, that the Patriot really isn’t the appropriate weapon system for. It’s not that it doesn’t have a use, it’s just it’s not a headline issue that really changes the balance of power. So there’s a whole world full of American munitions that have been developed and deployed since 1992, that the United States could throw into this mix. 

But just keep in mind that most of them like, say, the Abrams would require additional training and perhaps technology transfer in a way that the United States really hasn’t considered at this point. And considering that the US Defense Department has been just as gutted as all the other American government agencies the people would handle, these details really aren’t present in volume anymore, making it a very technical conversation that is very much beyond the capacity of the US defense secretary. 

He was arguably the most incompetent person in the government right now. There’s no one to lead this conversation in a meaningful way like we used to have. So even when you take somebody at the top who’s likely to make a knee jerk reaction, we could get some really erratic policies here with some very, very powerful weapon systems and some very, very proprietary technology which could lead us down a lot of roads that in the long term could be more problematic than beneficial. 

That’s number one. Number two, let’s talk about the economics of it. The Trump administration, Trump specifically has started to make positive sounds about a bill going through the US Senate, sponsored by US Senator Graham of South Carolina. 

Anyway, Graham has been a Russia hawk since the beginning of the war. 

Has really been pushing the Trump administration to take a firmer line. Works pretty much hand in glove with the Biden administration on the aid packages that happened under his term, and has been visibly upset with the inclusion of basically pro-Russian and maybe even Russian agent provocateurs within the Trump administration, up to including the white House, with Tulsi Gabbard, of course, being the worst of them all. 

Anyway, this bill, if it was turned into law, would enable the US president to put a 500% secondary tariff on any country that absorbed any Russian crude. Wow, that would be fun. Now, there’s some obvious problems with the bill in its current form, and that’s one of the reasons why the Trump administration has reached out to Senator Graham’s office. 

Number one, there’s not a lot of flexibility for the US administration, which is in part by design. But if the Trump administration is more willing to engage the senator on this topic, and honestly, it would pass through the Senate with flying colors if it was put forward. It’s an issue of enforcement. Okay. Secondary sanctions are something that have yet to be done, and the US does not have the staff in place to do them. 

You basically just have to get a declaration out of what the Commerce Department, the Treasury, the State Department is saying that this country is in violation. And so bam, all of a sudden, imports from that country are going to cost six times as much as they did. It’s a bit of a lower. The boom would get everybody’s attention. But how it being enforced is a bit of a question. Second, it doesn’t necessarily cover things like the Shadow fleet. So right now, about half of Russia’s oil exports are transported by ghost tankers. Things that are either uninsured or UN flagged or unsafe or old or should have been broken down into scrap years ago. It comes out to about 2 million barrels of crude a day. 

And one of the reasons that the Biden administration never really went after the shadow fleet, it was, was unclear again how to do the enforcement. You just grab the ships on the high seas because they’re not going to dock at any Allied port because they’ll be confiscated. And if you decide that you’re going to use your Navy to basically go out and do privateering, what becomes of the ship? 

What becomes of the cargo? Is it now the property of the country that confiscated it? And all of a sudden you have sovereign countries engaging in a degree of piracy in a world where there’s something like 15,000 ships on the high sea at any given time, you’ll never get a legal framework for dealing with it, because there’s not a legal framework for how ships are handled on the high seas. 

Now, it’s just kind of this gentlemen’s agreement and a bunch of winks and nods and handshakes that everyone agrees that they want free commerce, so they let it all flow. If you start interfering with that without a mechanism, then all of a sudden all commerce everywhere to a degree becomes under threat, because the precedent will be set that a state can just go out and grab things. 

The Biden administration couldn’t figure out a mechanism to make that work without breaking down global trade, which is not something they were willing to do. The Trump administration is broadly hostile to global trade, might not think that they need a mechanism, and might just go do it, which could lead to any number of less than satisfactory secondary effects. 

So the Trump administration is entering this era where the knee is about to jerk, and it’s probably going to kick out and do some things that some people might like in the short term, but it will trigger all kinds of problems in the long term. And this is going to fall very, very clearly under the category of things that you wish for. 

Don’t always go the way that you were hoping.

The Highs and Lows of Burgum’s Energy Strategy

Photo of a pumping station at sunset

Trump’s Secretary of the Interior, Doug Burgum, has shifted his energy strategy to focus on oil and gas. He’s doing this because renewables are no longer financially viable in most of the US, but there are some holes in his plan.

Between interest rates and tariffs, solar and wind projects are making less and less sense in fewer and fewer places. So, a fossil fuels-based strategy makes sense; however, using federal lands isn’t going to be the magic solution Burgum makes it out to be.

Given the lack of infrastructure, slow permitting cycles, and limited financial incentives…development will be slow and pricey. We’re talking a decade+ before anything meaningful comes out of it. Burgum’s geopolitical angle is what really interests me, though. He hopes to use US oil to undercut Russia, which doesn’t quite align with the rest of Trump’s inner circle.

Transcript

Hey all Peter Zeihan here. Coming to you from Colorado. Today we’re taking a question from the Patreon page, specifically about Doug Burgum, who is the new Secretary of the interior under the second Trump administration. And the question is basically, Burgum seems to have devolved from an all of the above approach to energy to just fossil fuels, just oil and gas. Why is that? And should we care? I think that’s broadly an accurate assessment, but he’s not doing it for ideological reasons, despite the fact that he’s in the Trump administration’s, Burgum basically is saying that oil and gas is more reliable for the environment that we’re in right now, and we need to unlock the federal lands to get as much of it out as possible. 

So let me talk about why he’s probably right and then why he’s probably wrong. So first the correct. We’ve seen the cost of financing go up by a factor of roughly five, in the last six years. And that means if you are looking to borrow capital, everything just costs more. So, for example, take mortgage. I’ve owned my house since before the transition, so my mortgage rate is 2.5%. 

You know, eat your heart out, Millennials. Today the mortgage rate are above seven, and they’re probably only going to be rising for the remainder of the decade and well into the next one. 

So let’s say just to pick numbers that your mortgage today is 8% compared to my 2.5%. That means your monthly payment on a 30 year mortgage is a little over twice what I pay. 

So whatever the house is you are looking at, suddenly you’re looking at having to pay twice as much and that entire increase is all extra interest. Well, most green tech projects, whether it’s solar or wind or biomass or whatever else, don’t have very high fuel costs. Everything is the upfront, construction, the land siting, the physical construction, the labor for that. 

And that tends to be roughly two thirds of the cost of the entire project. If you compare that to a conventional natural gas or coal system, a thermal system, most of the cost, roughly two thirds is fuel, and only about one fifth of the cost is that upfront construction. Well, the upfront construction is something you have to finance. 

So you’re talking about a project that already had a much higher financing, burden. And now you’re roughly doubling, if not more, the cost of the project over its life. Now, I have solar panels on my roof. They paid for themselves in four years. But part of that is because of where I live. I live at 7500ft. And that means I live above an elevation where 99.5% of other Americans live. 

So there’s very little air, much less moisture, much less cloud between me and the sun. In addition, ambient humidity in my neck of the woods is about 15% versus the national average of over 60. About 90% of Americans live in a place that’s more humid, so I’m closer to the sun. I have less obstacles, the humidity doesn’t get in the way, and so I was able to pay for my panels in four years because the amount of electricity we generate, you drop down to where I lived in Austin, where the humidity is much higher and I was only at about 1000ft. 

And the break even for those panels took closer to I think it was nine years. If you moved to say, New York out of the city, you’re talking about much higher humidity, much lower solar penetration, much lower altitude and your break even time if you’re lucky, is going to be in the 11 to 14 year range. 

That was when interest rates were cheap. Now you need to double that, maybe even triple that. So there really aren’t a lot of places in the country that have a decent economic payback for wind and solar in the current environment. I live in one of them, but like I said, 99.5% of Americans live below me and 90% of Americans live in a place with lower humidity. 

So I am not the norm here. Still works here, still works in Colorado, still works in North Dakota. Burgum should know North Dakota isn’t just a leading oil and gas state. It’s a leading wind state. But you change the rules of finance like we have and that doesn’t help very much. And so most projects in most of the country just aren’t economically viable in today’s capital cost environment. 

And that’s before you consider that the vast, vast, vast majority of the solar panels we use in the United States are imported from China. And so now there’s a tariff, tacked on top of that, that at the moment is 55%. But by the time we see this, I’m sure that number is going to change. Oh, okay. So that’s where it becomes probably right. 

Solar and wind, at least for now, are offline unless there’s a significant change in the environment, whether because of the technology, the manufacturing base or the cost of financing, it’s really not going to be a big part of the picture in the United States for the rest of the decade, and probably throughout the next one where he’s wrong. 

Federal lands. Okay, federal lands by almost default, have very little infrastructure on them. You’re talking natural forests are, for the most part, in addition, because they’re federal lands, they have not been exploited for economic purposes aside from logging here and there. And there’s very, very, very little oil and gas development on them at all except in the offshore, which is a special case, maybe a topic for another time. 

One of the things that we’ve learned about the shale revolution is that the states control most subsoil rights. They can be privately held, but the states control the regulation on federal lands. The subsoil rights are all federally held. They are not controlled by private interest. So step one, there is no one who would get involved in the project who has a personal financial reason to push it. 

If you want to go on to federal land, you have to get a lease that costs money. So already you’ve got that layer of cost built in that does not exist in, say, the Permian in West Texas or the Bakken in North Dakota. Problem number two is infrastructure. One of the reasons that the Permian in the Bakken had been such successful oil plays in the shale revolution is because a lot of the infrastructure was already there from previous oil booms, and for the first roughly decade, they were just putting new oil into old pipes. 

It’s only in the last decade that they’ve actually had to build more physical infrastructure. For takeaway capacity. You want to produce oil or gas in federal lands. You have to build that infrastructure from scratch. And most of these places not only don’t have pipes, they don’t have roads. Third problem information, because the Permian in the back end were preexisting fields, there had been preexisting geological surveys of them. 

There was some place for the shale guys to start. You want to do this in federal lands, you have to start from scratch. Fourth regulation Texas, North Dakota A handful of other states have a relatively encouraging investment climate for oil and gas because they have decades of experience. The federal government doesn’t have that on most federal lands, and so they’re gonna have to make it up as they go. 

Now, could this Trump plan for massive deregulation make a difference? Sure. But consider the scale on the time in Texas. If you want to drill from the point you submit your permit, 99% of permits are approved or denied one way or the other within 48 hours. In the United States, on federal lands, it generally takes 230 days. Now, when Trump won, they got that down to 220 days. 

But the bonfire of regulation that would required would first require the Trump administration staffing up the senior staff of the various departments in order to figure out which regulations to keep and lose. And that process has not yet begun, and we are already in July at five. Oh my God, it’s only been five months. Holy crap. Anyway, if all of these pieces were to magically fall into place today, you build your roads, you start your seismic surveys, you start building the pipeline infrastructure with money you have not yet earned. 

Then you start drilling. You would expect to see first meaningful output of oil and gas from the federal lands. Assuming that the surveys show that there was oil and gas there. Let’s call it 2040. Texas wasn’t made in a day. It took a century to build Texas’s oil platforms and what it is now, you’re not going to wave a magic wand to make it all happen overnight. 

So wind and solar, most places. Yeah, that’s for the past. That’s for the far future. When? When gas on federal lands. I wouldn’t hold my breath on that one, but I don’t think we really need it. The United States already produces more oil and gas in any country in history. In fact, we export an extra 5 million barrels per day of refined product. 

We export more finished product, gasoline, jet fuel, and the rest than any three countries in world history have ever produced. Raw crude. That’s already the best in human history. I really don’t overly feel the need that we need to do more, unless you want to do it for geopolitical reasons. And this is where Bergmann gets kind of interesting from my point of view. 

He has emerged as a voice in the foreign policy establishment on the topic of energy dominance. Now, that is for the most part, just a bunch of bunk that Trump likes to say from time to time that has never actually been put into any meaningful policy. But Bergen’s idea is to deliberately drive specific oil producers and exporters out of the market, and then displace them with American crude. 

And the country that he is most interested in doing that, too, is Russia. He wants to crack down on the Russian shadow fleet, which is using under or uninsured old leaky tankers to send roughly 3 million barrels of crude a day around the world. He wants to break any pipeline connections. The Russians have to the outside world, and then he wants to steadily ratchet up sanctions so that they can’t keep the existing oil fields that they had going. 

That’s really interesting. That could take us a lot of fun places. And since in an American shale context, it only takes 6 to 12 weeks to bring in a new oil well online, it could be done with a relatively limited impact on international markets, all else being equal, which of course, they never are. But it has put him at a crossroads with most of the people that Trump listens to on foreign policy. 

Basically right now, the inner circle doesn’t include the secretary of state, Rubio, who’s basically been banished after Foggy Bottom and isn’t allowed into the meetings. You’ve got some of Trump’s buddies from New York real estate. And we’ve basically been wrapped around the little finger of Vladimir Putin. 

You’ve got the director of National Intelligence, Tulsi Gabbard, who, if she’s not working for Putin, is probably a clone of him. And now we have Laura Loomer, who has basically taken over as de facto national security advisor. Laura Loomer is basically a, a far less competent version of Hillary Clinton. So she’s mean. She wants to kill people, but she doesn’t actually know anything about what she’s talking about. So, you know, you put that together and all of a sudden you’ve got this former governor of North Carolina who walks in like numbers and facts and history and economics matter. It’s an interesting room.

Elon Musk’s America Party

Portrait of Elon Musk from Wikimedia Commons

I know what everyone is thinking. US politics are just too clean and boring, we could really use something to spice ’em up. Well, Elon Musk has the perfect thing for you! Introducing the America Party.

As a direct challenge to Trump, MAGA, and the GOP, Musk is proposing a new party. However, going down this path is a lot messier than it may seem. Musk is hoping to capture the drifting factions, as the traditional Democratic and Republican parties are in flux. But this can only play out two ways. The America Party replaces one of the other major parties or it splits an existing party and weakens it permanently.

Musk will face massive barriers to achieving this. Not only the monetary side of things (which could be the nail in the coffin for Tesla), but also the technical side of getting on ballots and finding candidates. And the most likely outcome would still be a splitting of votes with the GOP and handing the Democrats a victory.

Transcript

Hey all Peter Zeihan here. Coming to you from breezy Colorado. And today we’re gonna talk about third parties in the American political system, because none other than Elon Musk has now declared war on Trump. MAGA and the Republican Party and says he is going to launch his own party, the America Party that is intended to run in the next federal elections In the year 2028, Okay. 

Leaving aside the specific chances of a musk led party deal with that later, let’s talk about how this usually works in the United States framework. So every generation or two, the United States political system goes through a seismic upheaval when the party coalitions of the past generation or two no longer fit for the day. 

So if you go back to the last time we had a reorganization in the aftermath of the Great Depression in World War Two, we saw a lot of political factions jump sides. So, for example, big business used to all be Democrats. They became Republicans. African-Americans used to all be Republicans. Part of that was loyalty to Abraham Lincoln’s party. 

They all became Democrats. Lots of things moved around until we got into the form that were more or less into today, which is, you know, in on the right business conservatives, national security, conservative social conservatives, law and order voters, albeit under kind of the same block, whereas the Democratic bloc has urban educated elites, organized labor and a variety of minorities. 

Those two broad coalitions is where we’ve been for the last several decades. Well, that’s all in flux now. That’s all changing. The Hispanics are very much in play. The Catholics are switching into conservative voters instead of being swing voters. The business community and the national security community have been actively kicked out of the Republican coalition. And organized labor is very much in play. 

We don’t know where this is going to settle. Enter Elon Musk. The idea is if you make a new big tent party, you can attract a lot of these factions that are currently in flux and maybe, maybe temporarily. A third pull in politics, according to Musk. He says it’ll be tech driven, centrist, business friendly that’s nowhere near a big enough coalition to generate a majority party. 

But it’s more than enough to break the chances of a different party. You see, when we go through these transitions and these big tents break, you can really go one of two directions. Number one is you get a viable third party that gets enough of the vote that it eventually drives one of the other two major parties out of existence, or doesn’t do well enough to win, but it draws enough votes away that one of the two major parties then kind of absorbs it in order to get those voting blocs. 

We’ve seen that happen twice in American history. In fact, that is exactly where today’s Republican Party came from. Back in like 1854, the Whig Party was the one that was on the ropes. Then the new Republican Party rose up and basically sucked out all the support of the Whigs, and the Whigs went away. I mean, you don’t really think about the Whigs very much today, do we? 

20 years from now? Probably not going to think of the Republicans and the Democrats the same way either. That’s option number one. Option number two is you get a party that, for whatever reason, becomes bloated and maybe has too many factions for the environment. And it splits down the middle. And that is where today’s Democratic Party came from back in the 1820s, I want to say 1828, but I’m not sure about that. 

Anyway, it’s split from the Democratic Republicans into the Democrats, and the Democrats were the surviving chunk. So both of these are viable options. And what Musk is doing is perfectly capable of triggering either of them. Now, there are still a great many obstacles to come through that have to be dealt with before the America Party becomes a viable political force. 

Until very recently in the United States and actually still elected morally, we don’t have a national Republican Party and a national Democratic Party. We have 50 state parties for each group. So you got your Iowa Republicans and your Ohio Democrats and so on. It’s only under Donald Trump where he’s basically ejected most of the regional party leaders and most of the business voters and national security voters that the Republican Party has coalesced into America’s first true national party. 

But it’s a party under one dude with no line of succession and no one who at the moment seems to have the charisma, the power, or the reach to pick up the baton for when he dies. And keep in mind that Trump is older now than Biden was when Biden became president. We all remember how that ended. Trump has basically become the Castro of American politics. 

When he goes down, he probably is going to take his entire political infrastructure with him. However that happens now. Let’s see, what else do I need to cover in this madness of American politics? 

Right mosque America party. He has to start at one party. He has to start 50 parties. He has to get on local ballots and local elections. He needs to get electors. He needs to get candidates. He needs thousands of candidates. The bare minimum amount of cash that is necessary to do that on a national basis, to have any chance of national power is $100 million. 

Honestly, $1 billion would make more sense now. Musk has already given that much and more to Trump, and he has a lot more to lose if he has a falling out with Trump. So trying to shift the political balance at a national level again makes a lot of sense for him personally. The question is how much of his wealth can survive until the next political cycle? 

We’re going to take this inside. 

Where was I before? Lightning interrupted us. All right. Musk’s money. 

Tesla is the core of Musk’s corporate empire, and it is arguably the most subsidized American company in history as a percentage of its sales revenue. And now all those incentives have gone away. Tesla’s either sold enough cars that it doesn’t qualify for a lot of the startup subsidies and the Trump administration and the most recent legislation that the big beautiful bill, if you will, has basically removed any incentive for anyone to participate in things like carbon trading. 

So some of the economic assets that Tesla has built up over the last half decade are basically worthless now. And the entire Tesla corporate empire is backstopped by loans and stock in Tesla itself. So as Tesla basically goes away because there really is no future for the company in a world where there’s a trade spat with the Chinese, which is where all the batteries come from, the rest of the empire basically falls into a degree of debt that, Musk bailed out. 

And the idea of a government bailout now is probably beyond a possibility. And so we’re looking at things like SpaceX that’s probably being nationalized. Starlink is kind of above in the air, and the rest of it really isn’t worth anything. Once you take the effect that the government will no longer be subsidizing it. So Musk is going to have to draw income and equity out of Tesla before that happens. 

And the question is, in that sort of environment, does he kill his company to start a new political movement, or does he just let the company die and then he’s left with nothing? Nobody can answer that question but Musk. But all of Musk’s investors know that that is the question. I mean, is this guy going to take what capital he can out of his company and destroy it for a political play when they want him to be working full time, trying to save the companies? 

There is no winning position here if you’re an investor in anything that Tesla has touched. And whether or not this is the guy, somebody who has a tendency to be perfectly blunt ly constantly is going to be the kernel of a new political movement is kind of a stretch until you consider that that’s already happened in the last ten years. 

  

So I can’t tell you that the American party has a future. I can’t tell you that it doesn’t. I can just say that it comes with consequences of a very real and personal sort for Elon Musk and of course, for the current form of the Republican Party, because if all of the populists on the right have a choice between two different banners, then you’re looking at the Republican Party splitting and the America Party probably not getting enough support to actually get into office anywhere. 

And the Democrats, no matter how disorganized they happen to be, sweep the field. We’re at a moment where everything is in play, and it’s whoever screws up worst loses. And when I look at today’s political map, how many screw ups?

Tariff Day Is Here, Again!

Scrabble pieces showing the words USA and Tarrifs

Tariff Day is almost here and it’s looking like it might be another series of recycled tariff rates layered with vague threats.

This ongoing series of tariffs has stalled the economy, putting business investment and construction in limbo. And since there is no one to negotiate with on the American side, I’m not sure when or if any real deals/negotiations will take place. The only movement we’ve seen on this front is with the UK, and calling that a trade deal is still a bit of a stretch. Allies like Japan are starting to feel a bit betrayed by this endless cycle of tariffs.

All there is to do now is wait and see if any meaningful strategy appears from this Tariff Day.

Transcript

Peter Zeihan here. Coming to you from Colorado. Today is the 8th of July. We’re going to send this out today and again tomorrow for people who missed it. We’re coming up on another tariff day where Trump says he’s going to reset tariffs for pretty much every country in the world. So far today, he has released about a dozen letters that are basically read exactly the same, except for the header and one number where he’s basically told people what their tariff rates are going to be moving forward. 

Several things from this. First, the spread of countries that are in this first list go from Tunisia and Bosnia on the low end to Korea and Japan on the high end. So countries that are just nothing to countries that are firm allies, all of them got the same letter. There’s no sign of meaningful negotiations with any of them. 

Trump just picked the same number he’d had before. Maybe round it a little bit, put it in there again. Nothing has really changed. And he’s now telling them that they have until August 1st to renegotiate, which means, number two, we are still in this hell limbo. We’ve had over 150 tariff policy since the 20th of January. We now have the threat of a couple hundred. 

And no one really knows what to do. New business, construction spending. The United States has basically gone flat. Nobody wants to start a new project because nobody knows what the rules of the game are, and based by many versions of the tariffs that are in place right now, it actually penalizes people to invest in the North American supply chain system. 

It’s actually cheaper to say, build your entire manufacturing base outside of the United States and just pay the tariff once on its way in. If you want to have an integrated supply chain where countries do what they’re better at. That actually you’re penalized. Okay. What’s number three? Japan. Japan is the country to watch most closely here it is one of the countries that has now gotten the letter. 

It is a country that entered into good faith negotiations and is now a country that it’s kind of talking shit about Trump a little bit. If you remember back to Trump one, there was, about a half a dozen major trade deals that were negotiated or renegotiated, which included NAFTA, which included a trade deal with the Koreans and included a trade deal with Japan. 

And the Japanese came to the conclusion that Trump represented the future of American economic nationalism. And so they needed to figure out a way to get in on Trump’s good side, on my good side, so they could be part of the American future moving forward. And so they made quite a few concessions that had never been made in trade deals before in order to get that agreement. 

And then we get to April 2nd and Trump tears it off, and we get to July 9th and he tears it up again. And so the Japanese are left wondering, like, you know, even if you go out of your way to seek a deal with Donald Trump, even if you offer him everything he has demanded, it still means nothing. 

And that has really colored the other trade negotiations, because if Japan, the country that has bent over backwards to try to make this work by Trump’s own terms can’t get a deal, why should anyone else try? And there’s the fourth thing no one can try. Trump still hasn’t staffed up the Commerce Department or his own office, or much less the U.S. Trade Representative, which is normally responsible for negotiating trade deals. 

So if you are a country out there trying to negotiate with Trump, there’s no one to speak to because the only two people who are handling the talks are Trump himself and the Commerce secretary. And those are both full time jobs that normally are not led by trade talks. We have only ever once gotten a trade deal with anything less than ten months of negotiating. 

And so far from the rhetoric that we saw back in April that people were lining up to talk, maybe they were, maybe they weren’t. There was no one to speak with. And so no meaningful negotiations have really happened. And the only trade deal we actually have right now is with the Brits, who basically just agreed to buy a bunch of planes in order to get a lower number. 

And that was the talks. I mean, there’s a lot of real irritants in the relationship with the UK, and none of them were addressed at all. So that just leaves what the rest of us think about this. Obviously business investment is down sharply. We’re actually seeing new builds drop down to levels we haven’t seen since Covid, which is really bad. 

But the final thing to keep in mind is that this is not the end. Trump has already made it very clear that his new August 1st deadline is very loosey goosey. So August 1st is the new, July 9th is the new April 2nd. And there’s a reason why Wall Street is just kind of ignoring this. I’m sure you’ve heard of the taco trade. 

Trump always chickens out. Well, they’re now calling it Taco Tuesday, which is actually kind of funny and clever. Anyway, but until this is resolved one way or another, until you know what the numbers are. No one knows what they need to do to prepare for what’s next. And so everybody’s stopped.

Can Retaliatory Tariffs on Brazil Save Bolsonaro? + Live Q&A

A photo of the Brazilian Flag

Join the Live Q&A on July 30 and We’ll Donate to MedShare!

We’re excited to announce our next Live Q&A for the Analyst members on Patreon on Wed, July 30! Peter Zeihan will be answering a mix of pre-submitted and live questions.

If you’d like to join in on the fun, get early access to the daily videos, exclusive access to the community Discord, daily news digests, and more, click the link below to sign up for the Analyst Tier on Patreon:

Over the past 6 months, we’ve seen Trump use tariffs for everything under the sun. But the Brazilians just got hit with a 50% tariff for an unorthodox reason…because their former president is being prosecuted.

Jair Bolsonaro is facing legal charges for attempting a coup after losing an election. Trump happens to be fond of Bolsonaro, so he’s attempting to use tariffs to get him off scot-free. And no, there’s not a significant trade deficit or high-value imports that can used to justify this away with.

This is a flat out rule of law issue that will come back to haunt the United States for decades to come.

Transcript

Hey all Peter Zeihan here, coming from Colorado. Hiking season! The world won’t leave me alone. Of course. I need to go someplace with less coverage. Anyway. I want to talk about today is we have another, another, another, another 50% tariff going into place, this one against Brazil. Now, Brazil is one of those countries that kind of site and released back on April 2nd when those big game board sheets came out, when Trump announced what the tariff levels were going to be for everybody. 

We don’t have the goods deficit that’s we’re talking about with Brazil. So Brazil qualified for the low 10% on everybody tariff. And that’s where it was left. But, last week Donald Trump decided, nope. He is starting to expand his idea that tariffs are good to punish countries that are doing things he doesn’t want, even if they have nothing to do with economic issues. 

It is beyond questionable whether this is legal under American law. But until Congress steps up and acts which I don’t anticipate anytime soon, it is what it is. Trump’s reason for putting this 50% tariff on Brazil. We’re going to stop upheld that idea. Trump’s reason for doing a 50% tariff on Brazil, is that the Brazilians are in the process. 

Brazilian government is in the process of prosecuting a guy by the name of Bolsonaro, who’s a former president who attempted a coup after he lost an election. Sound familiar? Anyway, Trump is saying that unless the prosecution stops and Bolsonaro is allowed back into the political system, that this tariff will go into place. Now, we do buy a bunch of things from Brazil, but it’s mostly relatively low value added commodities, some really crappy beef, some agricultural products, things like iron ore. 

Brazil is a very low value added economy. And Trump, on ideological grounds for a mix of reasons, finds himself allied with Bolsonaro and opposed to, Lula, who is the current president who hails from the left side of the political spectrum, whereas Bolsonaro is from the right. It’s, it’s a messy comparison. Brazilian politics are significantly different from the United States, so don’t over, over under those two hoods. 

Anyway, I for a long time have not been a fan of Lula, but not because of rule of law issues. He’s anti-American to the point that’s borderline pathological and is willing to even sell his own country down the river in order to achieve a degree of independence from the United States. Which is just dumb, in my opinion. 

So, for example, when he was president the first time around, he basically invited the Chinese in to form joint ventures with everything that the Brazilians were doing. And throughout the 70s, 80s and 90s, the Brazilians actually made a lot of progress in moving up the value added scale. 

Their oil company, Petrobras, is one of the world’s best, especially a deepwater. They had a construction company that was world class, and they had a really dense concentration of midsized companies that were really pushing the technological envelope in all of their products, and they were globally competitive. Well, the Chinese formed joint ventures with all of these companies, stole all the technology, took it back home, subsidized the crap out of building an alternative industrial plant, and then drove all the Brazilian producers out of business. 

Strategically stupid, economically stupid. But what’s going on with Bolsonaro is something different. This is a rule of law issue. When Trump did his little attempted push back in 2020. Yeah. 2020, he eventually got away with it. And he eventually returned to power and pardoned everyone who was basically a coconspirator. Bolsonaro hasn’t had that kind of advance. 

He was both smarter and dumber, smarter. And that he learned from Trump’s failure back in 2020 and went for a much more direct assault on the Brazilian Congress, trying to basically take it out of the equation. And then when that didn’t work, he fled the country, came coming to Florida, ironically, which was like much better attempt and much better demonstration of actual guilt. 

So no one in Brazil really thinks that this case is going to go anywhere except for with Bolsonaro in jail, unless he’s pardoned in order to say he’ll the political spectrum. Anyway, for Trump, this gets a little bit too close to home. And so he’s now threatening Brazil, with economic retribution for their rule of law commitment. 

Now, for those of you who don’t follow Latin American politics all that much, Latin America overall is new to democracy and is new to rule of law. Most of the countries back in the 60s, 70s and 80s, were military dictatorships. And when those dictatorships fell and in many cases, like in Brazil, actually actively turned over power to the civilian system, it went fairly smooth. 

The problem has been maintaining the center of the state so that law enforcement can work, because when you go from a system that’s pretty corrupt with a bunch of colonels and generals basically calling all the shots and getting whatever they want to a system that’s much more free form, it takes a while for law enforcement to kind of step in the gap when the military steps back and to reassert a degree of security. 

And Brazil in particular, has had a problem with that. And so it has some of the highest crime rates in the world. So most American foreign policy since that transition, which happened in the late 80s and into the 90s, has been focusing on encouraging rule of law across Latin America. Whenever can happen. And you can find a lot of faults in American foreign policy in any region, specifically Latin America. 

But I would argue that it’s been broadly successful on at least this one point. And so to have the American president now trying to go ramshackle the opposite direction and ripping up rule of law, is a horrible idea. Because if your goals are to get Latin American countries to assist with enforcement of U.S. immigration preferences and to assist with limiting the amount of narcotics can can come from Latin America to the United States, you need a relatively strong state and knocking over the rule of law at the top is arguably the dumbest thing that you could do. 

And yet, here we are.

Stop Worrying About the BRICS Alliance

Photo of BRICs summit from earlier years

The BRICS alliance is like a clown at a five-year-old’s birthday party…terrifying when your five, but just kind of weird and sad for all the adults. And if you’re still scared of the BRICS alliance, I hate to break it to you, but you might be the five-year-old in this analogy.

BRICS began as a financial concept of grouping large emerging markets, but it’s evolved into a dull talk shop for the members rather than a real alliance. But of course, lumped right in with the other scared kindergartners, is President Trump. He’s threatened a 10% tariff on all countries that join BRICS. Once again showing his affinity for tariffs, regardless of what the situation is.

Should his power to impose tariffs be limited by the courts or Congress, his entire international strategy could unravel. And the threat on BRICS would be the least of our worries.

Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado, it is the 7th of July. You will be seeing this on July 8th. And the issue is BRICS, the, organization that was supposedly founded to cause a new world order shift away from the Unites States, whatever you want to call it. Anyway, Donald Trump today said that anyone who joins BRICS and forms part of this anti-American axis will be facing an additional 10% tariff on everything that’s done. 

This is both really interesting and kind of hilarious. So, quick Backdrop BRICS was formed. Well, the original idea of BRICS had nothing to do with geopolitics. It was just some guy up in finance in New York who said, hey, here are a bunch of largest emerging markets that have a lot of bonds. We can trade them as a group. 

And so that was Brazil, Russia, India and China. South Africa joined later. It was only in the year since then that BRICs has taken on any sort of a geopolitical hint, but really it’s been really minor. They do have a bank, but it’s run by China for Chinese interests, and nobody else puts money into it in any meaningful way. 

And this last summit that is occurring right now, the Chinese didn’t even show up. In fact, the Russians didn’t show up because there’s an international arrest warrant for the war crimes in, Ukraine. And the Brazilians are a signatory to the war crimes treaty. So they would have felt obliged to, you know, arrest the guy. Anyway, in the last couple of years, BRICs has started to admit new members India, Pakistan, the United Arab Emirates, Iran, Saudi Arabia. 

And that’s how you know, the BRICs means nothing because a lot of these countries are at each other’s throats in any meaningful way. So getting agreement on anything is next to impossible. And that’s certainly how it played out with this most recent issue, because issues between India and China and Saudi Arabia, Iran and Russia and everyone had basically led them to just kind of have this generic statement that doesn’t say anything about anyone or any topic. 

It really is a non organization. And if you go back a couple of years to the Johannesburg summit, in their opening statements, the finance ministers of China and India and South Africa all said we have no interest in forming a a BRICs currency. We have no interest in a non US denominated dollar system. And will people please stop asking us about it? 

So it’s a talk shop or maybe a way to caucus with the Chinese because they’re a bigger economy than everyone else put together. But it’s nothing more than that. It’s never been anything more than that. But it continues to live on in American circles as some sort of big thing. Enter Donald Trump’s threat that if you join BRICs or become part of this axis, that you’re going to be looking at supplementary tariffs. 

So two things here. Number one, it shows that, among the MAGA, right, the idea that BRICs is something really has resonated, an almost allergenic response to anything that is not led with USA, which is obviously coloring policy at the top on any number of levels. But number two, and perhaps more importantly, it’s a direct link of the tariff question to something that has nothing to do with economics whatsoever. 

Tariffs are clearly Donald Trump’s favorite policy tool. And if you go back for everything that he has done internationally since day one, there’s not a single example that I’ve been able to see, except for maybe the bombing of Iran. That is not inextricably woven together with tariff policy. So if for whatever reason, the White House’s ability to enact tariffs is impinged in any way, and keep in mind the Constitution makes it very clear that tariffs are congressional prerogative, not an administrative one. 

Then everything that the Trump administration has done with foreign policy just kind of goes up in smoke overnight. So, the focus is interesting, the vulnerability is interesting, the expansions, new vistas is interesting. There’s no part of this that I’m not paying attention to. It’s going to be really interesting to see I’m using that word too much is gonna be really interesting to see how it evolves in the weeks to come.

Here’s Why Inflation Isn’t a Solution

Photo of dollars behind American flag

Would inflation be good for the US? Sure, it could erode some of the federal debt, but if that’s the best we can come up with…yikes.

Technically inflation does reduce the relative burden of government debt, but only if economic growth and income outpace inflation. While the debt is shrinking, we’d also see all assets be devalued – including stocks, homes, bonds, and real estate. Basically, anywhere American have stored their wealth.

So, while it sounds appealing to reduce the $34 trillion of federal debt, everything else gets steamrolled in the process.

Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. And today we are taking a question from the Patreon page and it’s specifically on finance. The person who’s been hearing that, some government decision makers and some folks, especially in the MAGA world, are talking about how inflation could actually be a good thing because it will inflate away the debt and make the overall level of payments of the US federal government has to make, relatively less compared to what they borrowed in the first place. 

And there is something to that. If you have a high inflationary period, then the relative value of the debt compared to what you actually got when you borrowed it does go down. And it does become easier to pay if, if, if, if growth keeps up. And so that income growth exceeds the level of the inflation. 

So problem number one let’s say that we get 10% inflation for four years. That comes out to a total of about a price increase. If income does not grow faster than that, you’ve actually dug yourself into a little bit of a hole. Some, careful how what you wish for here, because there aren’t a lot of people out there. 

Certainly countries that expand their income by more than 50% in four years. So the problem one, problem two, inflation doesn’t just whittle away at the federal debt, it whittles away at the relative value of everything. So think of a stock market that’s worth 50 trillion. Do you want to reduce that by half. Because that’s more than the US government owns in debt. 

Think about your house. Do you want that to be reduced? You know, that’s another $35 trillion for private single family homes, another 11 trillion for the bond market, not counting federal debt, of course. And another what is it, 15? 15 yeah, 15 trillion for say, commercial real estate, another 5 trillion for farm real estate. 

The point is that inflation doesn’t just hit one thing. So it raises the cost of living. And then if your income doesn’t keep up, life kind of sucks. So hurting all of these asset classes that pretty much all Americans have all of their savings in in order to whittle down the one debt class because, we can’t seem to get anyone in government who can do basic math. 

I would vote against this solution.