Peter Zeihan, Author at Zeihan on Geopolitics

The Fire Hose of Chaos: Housing Problems

Does everyone remember that bedtime story about the Three Little Pigs and the Big Bad Wolf? Well, the Trump administration is doing its best wolf impression and trying to blow the entire housing industry down. (We’re running out of metaphors for this administration, so cut us some slack on this one)

There are a lot of things hurting the US housing industry. The labor shortage will only worsen as more undocumented workers are deported. Material costs are on the rise, thanks to tariffs. All the stuff that goes into a home, whether you’re furnishing it or renovating it, is now more expensive due to tariffs. Mortgage rates are at 20-year highs and available capital is shrinking. Insurance companies are taking a hit. Not a fun time…

The pressure is on for the housing market, and it’s only a matter of time before the foundation cracks. What was a relatively healthy market just months ago is now the problem child in the US. And if that doesn’t worry you, we’ll talk about the recession tomorrow.

Hey, all. Peter Zeihan here. Coming to you from New York City, near Rockefeller Park. That’s like new Jersey or something over there. We’re gonna look over here, Trade Center and, Lady Liberty’s over there somewhere. Yeah, there. Anyway, today we’re going to continue our firehose series about how the Trump administration’s domestic and international policies are affecting the American economy.

And today we’re going to tackle housing. Now, there’s a lot of inputs that go into a successful housing industry. But generally you’re looking at the big four. The first one is going to be labor based on where you are in the country, seasonality, all that good stuff, somewhere between 20 and 40% of the cost of a house is just from labor.

And as a rule, somewhere between 25% and 35% of that labor is immigrant labor, with that number going to 40 to 50%. If you’re in California or Texas. So if you do what the Trump administration says it wants to do and deport 5 million illegal laborers, you can imagine what that’s going to do to housing costs, because there simply aren’t enough people in the country to fill those jobs.

And that’s before you consider that immigrants play an outsized role in the trade. So carpenters, electricians, that sort of thing. Plumbers. So you can see that turning housing into a very expensive proposition just right off the bat, the next raw material inputs, which again, 20 to 40% were based on where you are, what kind of structure you’re building.

And these fall into a bunch of different categories. First, most obviously is wood for framing. The second largest source comes from Canada that now has a 25% tariff. Next up are steel and aluminum, which are used for framing, flashings window frames, structural support, nails, that sort of thing. Right now, again, 25% tariff on both of those items.

Next up is one that people don’t think about very much. And that’s copper. But you know, if you don’t have copper, you’re not going to have electricity. Now, most of the world’s copper, or at least mostly copper that comes to the United States, is either from Canada or the United States or Mexico or especially Chile. But that’s the raw copper.

Once you turn it into wires and electrical outlets and all that other assorted stuff, most of that stuff is going to be coming from China. And now there is a 145% tariff, which basically means we stopped shipping stuff from China for this product category. About a month ago. And even if we were to flip the switch back on today, we wouldn’t get new shipments for another two months.

It just takes that long for everything to spin up and cross the ocean. Then there’s things like tile and stone. Most of that comes from the Mediterranean. That’s another 20% tariff. So for all of the things that go into the physicality of the House, we’re looking at significantly higher rates of cost. Assuming you can get the stuff at, oh, the third category is what you put into the house.

Once you buy the house, for anyone who’s a homeowner, you know, you’ve just started to spend your money. You then have to put things into it, whether it’s furniture or washer dryers, refrigerators, or you have to do an overhaul. As a rule, in the United States, for every 3 to $4 we spend on the primary purchase of housing, we spend another dollar or two on add on costs to fill it up with stuff, or to overhaul it, or put in new drywall doing additions, whatever it happens to be.

All of that has gotten more expensive to and then forth finance between the baby boomers retiring and liquidating their savings, and the Trump administration planning to increase the federal budget deficit by $1 trillion a year, the availability of financing for the private sector has shrunk precipitously. And we’re only at the beginning. Now, in, the end of you see, you’ll probably see this May 1st.

We’re only be beginning to see the increases of what that’s going to do. The financing costs. Right now, mortgages are at about a 20 year high. Expect that to get significantly higher. Now if you look back historically, like back to the 70s when mortgage rates were like 15% or more, we’re nowhere close to that yet. But we’re getting there pretty quick because of the problem and the discombobulation between supply and demand.

And that’s before you consider Trump’s tariffs, which and Trump’s financial policies, which are only going to drive financing up more. And then finally, something that’s not technically a housing cost, but we all have to have if we’re gonna get a mortgage insurance, because as much as construction is going to become more expensive, it is nothing compared to what’s going to happen to re construction.

Whenever there is a national disaster, a storm, a hurricane, a forced fire, and you need to rebuild, all of a sudden you need to rebuild lots and lots of things in exactly the same spot, which means that the cost for the repairs and the recovery are significantly higher than what happened before. Which means the insurance guys are getting hit on all sides.

All of the input costs are going up. Insurance guys, basically take your premiums and invest them into the market in order to generate capital that they’re going to need to pay out claims while the markets are tanking because of Trump’s policies. In addition, you have a real problem with foreign access of capital because that money is going away.

Maybe referenced the finance video we did a couple of days ago. I would not want to be the insurance. Right. Because between the level of populism and Trump government and the popularity of populism, the American political scene right now, the normal thing that the company would do would be to raise premiums and to reduce payouts. But populism isn’t going to allow that to happen. So we will have federal action to grind away the insurance companies in a way that is designed to benefit the consumer.

And the only way that insurance companies can deal with that is by stopping to offer coverage. Boy, so this all adds up to a housing sector that all of a sudden, from being an actually pretty good space four months ago, is looking to be the sector that is potentially most damaged by the mid and long term trends that are coming together.

And that’s really just the beginning, because we’re also about to have a recession. We’ll talk about that tomorrow.

The Fire Hose of Chaos: Steel and Aluminum

The Trump administration has given us a masterclass on how to set supply chains ablaze using tariffs. While some supply chains are smoldering, others are raging wildfires. So, let’s look at two that are in the thick of it: steel and aluminum.

Given the industrial growth and manufacturing buildout that the US has set its sights on, these two materials are essential; however, the US does not currently have the domestic capacity to produce the amount of steel and aluminum needed for what is coming.

That means the US will still have to import a good chunk of these materials…but it will cost 25% more than it would have previously. This throws yet another wrench into the US industrial buildout, especially for industries like construction and housing.

Hey all, Peter Zeihan here coming to you from Denver International. Today, we’re going to do the most recent in our host of chaos series about how the domestic and international policies of the Trump administration are affecting the American economy. And today, we’re going to dive into those two base materials on which everything runs. And that’s steel and aluminum.

There are similarities within the markets, but I think it’s best to just kind of break down what you do with these things and how you get those things, and then we’ll go into the broader impact. So let’s start with steel. Roughly 75% of the steel that the United States uses is actually recycled. Steel is one of those wonderful materials that you can recycle at once, or a thousand times, and it’ll still work.

But that doesn’t mean that all steel is equal. Recycled steel tends to be kind of ugly. And so you use it in places where you need strength, car frames, I-beams for construction, that internal skeleton you see in high rises, ships, that sort of thing. But if you’re going to do something where it needs to be pretty or where it needs to regulate electricity, you need something different.

Basically, there’s two kinds of steel you’ve got hot rolled, which is the ugly stuff that is usually recycled, and you’ve got coal, which is virgin steel made from iron ore and coke. And cold rolled steel can be used in more advanced applications, specifically in manufacturing and in the world that we’re in now, where most manufactured steel products aren’t about strength, they’re about regulating electricity.

You have to have something called grain oriented or non grain oriented steel. Different types of those things regulate electricity flows at different speeds and different insulation levels, and that really needs to come from virgin steel. The complication is something called a roller—when you pull the steel out of the molten mix and you’re really hot bars?

You then push that through a roller because the way the steel cools determines the crystalline structure, which determines how well electricity does or does not conduct through it. Now you can take recycled steel and put it through a roller, but rollers are big and expensive, and you only usually put that on a very large foundry. And only the very large foundries are making virgin steel, recycled steel, hot rolled steel typically is made locally because you basically you take down a building in your state and then you’ve got a local facility that can turn it into hot rolled steel.

If you wanted to get it to a roller, you’d have to get a completely different facility that operates on a different scale. Well, the United States needs to roughly double the size of its industrial plant. That means a lot of industrial construction. That means a lot of that ugly, high rolled steel. And while the United States is the world’s greatest steel recycler, there just isn’t enough to double the size of the industrial plant on anything less than a two century time scale, which means we just need more and more, more and more.

And if you’re to get more and more, more and more and more, you’re probably going to be important. And if you want to go into manufacturing, you need a lot more cold rolled steel. And if we’re going to triple the amount of steel products that we put in the manufacturing, we need more and more, more and more and more.

If you want to do this with foundries, you’re talking about a ten year buildup. If you want to do with imported steel, you could do it now. And what the Trump administration has done is put a 25% tariff on anything that is imported, which has brought construction and manufacturing costs up while decreasing the flow through of the input that we need to make any of this work at the base level.

So everything is now moving more slowly, at a higher expense at a time. We just need more. The second metal, of course, is aluminum. There is somewhat similar policy, about 45% of what we use. We produce ourselves. And almost all of that is recycled. But just as with steel, if you want to manufacture something that is pretty, that has the combination of corrosion resistance and light weight and strength and flexibility, then it’s probably going to have to be from virgin materials.

And the United States just doesn’t have the raw material here. The raw materials, bauxite, you basically mined that you dissolve in sodium hydroxide. You get a white powder called alumina, and then you electrocute the crap out of it to turn it into aluminum metal. And just as with steel, you can use recycled steel for construction things like window frames, for example.

But if you’re going to do high end work like, say, I don’t know, airplanes, you’re going to want the Virgin stuff in the US just doesn’t smelt much of the Virgin stuff itself. And again, just as with steel, we need to use 2 or 3 times as much as we have yet to get the smelters on line. And so this is an ongoing problem with all of the Trump administration’s policies.

The CART has been put several steps before the horse. We’ve raised the cost of imported steel and aluminum, but we have not. First built out the capacity of the US economy to smelt or foundry more of the stuff itself, so we get lower supplies at a higher cost when we need huge increases in the volumes that we use to in order to build out the industry, as the Trump administration says it wants to.

And so everything’s just slowed down and got more expensive. But there’s no sector where this is more true, where it’s more of a problem than construction and especially residential real estate. And that’s what we’ll turn to tomorrow.

The Fire Hose of Chaos: Finance

The US has known that a capital crunch was inbound for decades now. With the Baby Boomers retiring and Trump’s trade policies hitting at the same time, these financial woes might sting a bit more than we thought.

The retirement of the Boomers was always going to cause a capital supply crunch; it’s just what happens when people retire and begin shifting their investments to safer things. So, the cost of capital was already on the rise. Now mix in Trump’s rapid-fire tariffs and aggressive foreign policies…and you magically begin losing capital inflows into the US, exacerbating the US capital problem.

Hey all. Peter Zeihan here coming to you from Colorado. We are continuing our Firehose of Chaos series today about how various Trump administration policies are causing negative effects for the American economy. And today we are going to tackle finance. Now there’s a lot that’s going on in finance. On any given day, the bond market, the stock market, corporate bonds, municipals, blah, blah, blah, blah blah.

But the bottom line is that it’s ultimately an issue about the supply of capital. The more supply you have, the cheaper that capital is, the faster the economic growth is. And we even before Donald Trump got into office, we’re already facing an adjustment period. And the issue is retirement. When you retire you liquidate your savings. You go from stocks and bonds into T-bills and cash, because if there’s a market crash or a currency adjustment, you have lost out, you haven’t locked in your savings and you no longer have an income to recover.

So, for example, for those of us who are not retired, we’ve seen the markets drop by somewhere between 10 and 20% over the course of the last three weeks, and we are all feeling that, but we’re all young enough to continue to do contribute to our portfolio. So there’s hope that will emerge on the other side in a better position.

If you’re over 65, there is no hope because there is no income. So if you had not liquidated, you would be looking at a permanent loss in your portfolio. Even as you continue to draw income out of your savings, which would put you in destitution a few years down line. So if you’re a baby boomer and you hadn’t liquidated your savings already, you’re in trouble and you did everything you weren’t supposed to do.

Anyway, the issue for the economy writ large is the balance between the number of people who are turning 65 every year and the rest of us. So in the case of this current situation, the issue is the baby boomers, because the baby boomers, the largest generation we have ever had, are already two thirds moved into retirement and the remaining third are going to retire over the next 4 or 5 years.

As a rule, 70% of total global private capital originates with people who are doing this saving for retirement, people who are over age 55 but have not yet turned 65. Well now the number of people who are over age 65 is rapidly expanding, while the number of people age 55 to 65 is rapidly shrinking.

And that split has caused most of the movements in the credit market in the last few years. So I would argue that we’ve seen roughly a quadrupling of costs of credit writ large. I’m not talking about any specific credit product, but writ large over the last four years. And while there is a little bit of fed in there, there is a little bit of trump.

There is a little bit of Biden. It’s mostly just the baby boomers doing what you do when you retire. We expected this. We’ve anticipated this coming for 30 years. And really, no one got ready for it. Certainly not in government financing. But now we’re here and we’re living through it and we’re having to deal with it. So that’s that’s piece one that has nothing to do with the change of administration at all.

But the second piece does, we have now had 97 official tariff policies in the last 55 days, which is, you know, two orders of magnitude more than we normally get in that sort of time frame. And no one knows what the rules are. In addition, Donald Trump keeps changing his tune every day. It’s either we’re not going to be even going to have a memorandum of understanding with countries that we’re negotiating within six months, or we’re gonna have a finished trade deal in four weeks, both of which are kind of silly.

We’re not going to get any new manufacturers out of the plants for the first two years. Or maybe it’s going to be ten years. We’re going to have new tariffs on agriculture. Or maybe we’re not. We’re on drugs, or maybe we’re not, or in shipping or yes, we did, but then we didn’t. But then we decided to do port fees.

The point is that no one knows what the rules of the game are. So no one is doing anything to prepare for whatever the future is, because we don’t know what the future is going to look like in terms of industrial construction, to build the industrial plant that we’re going to need to live in a high tariff world that actually has gone to zero under Donald Trump, because no one knows what is going on.

On top of that, Trump keeps threatening other countries and not just with tariffs. He’s threatened to invade Canada, make it the 51st state. He’s threatened to invade Greenland, which is a NATO ally. He’s threatened to pull everything back from Ukraine, which is encouraging the Ukrainians, the Romanians, the poles, the Swedes, the Finns and the Germans to all get nuclear arsenals.

The bottom line is he’s shattering everything that worked and has yet to provide a vision or preparation for whatever might be next. And in that sort of environment, no one really trust the United States. Now the US dollar is the global currency. I don’t mean to suggest that that is in danger. And the US Federal Reserve stands ready to step in to save the government bond market, to prevent a run on the bonds, to prevent a financial catastrophe in this country, because that’s part of its job.

I don’t worry about those kind of headline disasters, but there’s a lot on the margin that is measured in trillions of dollars. In any given year. We have about $2 trillion of capital flight from the rest of the world to the United States. Now, that comes for its own reasons. And Europe, it’s because the countries of the eurozone are aging out, and you just can’t get a good return in Europe.

In China, it’s because you have an over financial situation system where capital is considered a political good and you can’t get a good return on it, and the government restricts where you can put your money. So people try to get their money out of these systems and into other systems. And while Canada looks great, it’s not enough. There is only one country that has the liquidity and the depth of capital markets to absorb this sort of capital flows, and that is only the United States.

And so this is where most of that cash goes, $2 trillion a year, and as we move into circumstances that are more problematic, Europe getting closer to its demographic cliff, China facing a trade war with the United States. Those flows can often increase. So, for example, at the height of the subprime crisis, after an initial shock, we were probably seeing three, $3.5 trillion of capital flight into the United States.

Now, this helps out the United States in any number of ways. It puts more strength into the real estate market. It keeps borrowing costs down for everybody, especially the federal government. But when you have the United States as the source of the geopolitical uncertainty, and when you have the white House is the single largest source of regulatory uncertainty in the United States, all of a sudden, putting things into US financial assets doesn’t look nearly as attractive.

And so what we’re seeing is some of that money is no longer coming and some it’s being reversed. So let’s go around the world real quick and see what that looks like. First of all, the Middle East, the Middle East has been desperate to build some sort of alternative financial system that doesn’t work on interest based functionality like the Western system does.

And that requires basically applying a degree of Sharia law to their financial sector and having their own financial systems to, at a minimum, serve as a bulwark and an intermediary between the Middle Eastern savers and the United States. They’ve been somewhat successful at that. And that has made places like Dubai to be pretty robust financial centers. But what we’re seeing now is the limits of that approach.

People are realizing that if you put your money into a middle eastern financial center that doesn’t allow interest, you don’t earn interest, and it’s starting to lose some of its shine. And so people are looking for other alternatives. On top of that, most of the oil Emirates in the Middle East, up to and including Saudi Arabia, have vastly overspent their income and simply don’t have money to send abroad at all.

So, for example, Donald Trump is trying to get Riyadh to invest a few hundred billion dollars in the U.S. and they don’t have the money to do it. They’ve wasted a lot of things on their own white elephant projects. They’re spending a lot more on social programs at home. There’s no money to send to the United States. So what used to be a relatively robust partner is going somewhere else or is shrinking in on itself.

And, you know, that’s several hundred billion dollars a year. Second is East Asia. Japan has been a big source of capital for the US for decades. China more recently, largely because both of these systems treat capital as a political good. I actually don’t think that this is going to change because the Japanese, the Chinese have known for a very long time that if you keep the money at home, it just can’t do very much.

The only reason we should expect countries like China and Japan to send less money to the United States is if they figure out that they can build industrial plant for their export industry somewhere else, and there aren’t a lot of good options. What? There are some options in Southeast Asia, but those are under U.S. tariffs as well. So we might see a little bit of weakening, but nothing compared to say what we’re going to have in the Middle East.

The big movement though is out of Europe. The Europeans have basically started to treat the United States like a security threat, because that’s exactly what the US under Donald Trump has evolved into. They realize they’re going to have to take their militaries in a completely different direction. They realize they’re going to fight on their own. For many of them, that means they have to have nuclear weapons.

And that means why, why, why, why would you ever send capital to the United States? So what? Until recently, and by recently, I mean January. It was about $1 trillion of capital flight from the eurozone to the United States. Every year has probably gone very close to zero, and in fact, is probably going in reverse as people liquidate their holdings.

Yeah, that all up. And we’re looking at capital flight into the US financial markets probably dropping by a little bit more than half. And if you put that on top of what’s happening with the baby boomers, it means capital costs are going up as well. And that’s before you consider that the US currency has dropped by about 10 to 15% in the time since.

All that adds up for significantly more expensive financing, regardless of who you are. If you’re the federal government and you’re issuing T-bills, you now have to pay more money. If you’re looking to buy a car, your car loan is now more expensive. If you want to refinance your mortgage, that goes up as well.

And it all adds up to slow economic growth across the entire American economic space.

The Fire Hose of Chaos: Port Fees

Today we’re discussing the Trump administration’s 96th tariff policy which imposes port fees on Chinese ships.

Chinese ships that enter a US port will be slapped with the higher of a $50/ton (rising to $140/ton overtime) fee or $150/container fee. This policy was initially set to be more extreme, but public comments helped scale the fees back as to avoid crippling US port logistics.

The issue with this tariff is that it increases costs for everyone but fails to offer any solutions. Since the US has no capacity to build cargo ships (as military shipbuilding is the priority right now), shipyards are already overwhelmed and dysfunctional. So, the intention is to reduce reliance on China, but there’s no path to doing it…

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.

Hey all. Peter Zeihan coming to you from Atlantic City and today we’re talking about something that actually happened a little bit back on April 17th. That’s when the U.S. Trade Representative Office announced the 96th tariff policy of the Trump administration in less than two months. Oh my God. And this one is on port fees. Specifically, any Chinese registered Chinese built Chinese operated vessel will now have a $50 charge per ton, ramping up by $30 a year until it hits under $140 a ton.Or, $150 per container, again ramping up over a few years. Whichever one is higher.

This one is unique in that it was actually put out for a degree of public comment. And so people pointed out to the administration that there are no American ships. So, some of the more ridiculous versions of this, were rooted out originally was supposed to be like a million, a million and a half, maybe even 3 million per ship per visit.

Which would have basically taken everything and concentrated it. So, well, China is the source of most of our manufactured goods. It’s not where they’re necessarily manufacturers, where they’re assembled. It, the manufacturer requires basically everyone in East Asia and China is the low man on the totem pole, but the largest one. So it’s where everything’s put together.

And then it sails in finished form from Shanghai or Tianjin to, Los Angeles or Houston or New York or Savannah. If the old system have gone through, all of our secondary ports would have basically been starved and we would’ve just had endless traffic jams at the biggest one. So they decided to go with a weight slash volume version rather than just a flat fee, which make it a little less onerous.

From a logistical point of view, anyway, there’s still some problems here because, it’s starting to interface with other problems the Trump administration experiencing. And that has to do with Defense Secretary Pete Hegseth, who is rapidly showing himself to be up there with RFK Jr to be the most unqualified, and, incompetent cabinet secretary in American political history.

In the last two weeks, he’s basically fired everybody he brought in with him. And so in his office now, it’s just him. It’s wife, his brother, his lawyer, and that’s about it. And then, of course, Trump fired all of the deputy undersecretary, assistant secretaries and everybody and basically hasn’t replace him with anyone who knows what they’re doing.

And so Pete says big breakthrough in the last few days has been to build a studio and an editing platform, within his office. So he can share videos of himself working out in the morning. Because that’s what we need to prepare for military readiness. Yeah. Anyway, bottom line is that one of the things the Trump administration says it wants to do, which I broadly agrees to build more military ships.

Okay. Well, I take shipyards. And so basically, we’ve got an incompetent defense secretary managing a underfunded and unplanned shipbuilding program, which basically takes up every berth drydock that is available at every, shipyard the United States has of it’s being managed just completely incompetently. And so if you want to build a civilian cargo vessel, there’s no room and there won’t be for years.

So step one, if you want to start mucking around with the ports, is to build more ships so that you have options. And just as with steel and aluminum construction and all the other tariffs, the Trump administration has failed to do that. So we if we want stuff at all, we have to now pay more for the stuff because of the tariffs and then pay more at the ports because of these new port fees.

And there is no alternative for building an American equivalent, because the building blocks of what you need to industrialize still haven’t been done. And everything is just going to cost more for everyone. Yep. That’s it.

Will New Zealand Dive or Thrive?

In the past, we’ve chatted through the domestic issues facing New Zealand, so let’s discuss the economic future of the ~5 million Kiwis in the context of the shifting global landscape.

New Zealand has one of the world’s most efficient agricultural systems, specializing in dairy, sheep, and wine. Since these industries are some of the most protected, deglobalization will limit export access. How will they cope?

Well, New Zealand is no stranger to hard work, so let’s breakdown their options. They could lean into the NAFTA system and forge stronger ties with the US. Or they could shift production toward things like wheat and soy, which will be in high-demand. Both options would necessitate giving up something important to Kiwis. A third option, which could prove to be a strategic advantage, would be partnering with industrializing nations in Southeast Asia.

Regardless of that need to adapt, New Zealand is resilient and well-positioned to navigate these broader shifts. And they better figure it out, because where else am I supposed to vacation every year…

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.

Hey, everybody. Peter Zeihan here. Coming to you from, Francis Glacier and Avalanche Peak. That is Middle Peak over there. And East Peak, because they ran out of names. Any who. Since I’m traveling around in New Zealand, naturally, folks here in New Zealand have been asking me about the future of their country.

So, here we go. What is New Zealand need to do to thrive? As globalization kicks in, it’s like, okay, so this is a tough one. New Zealand country of 5 million people, probably the most productive agricultural system in the world in terms of the the value of the outputs versus the cost of the inputs.

And in doing so, they have decided to specialize where they can hit hardest. And that is, dairy sheep and wine. Unfortunately, these are three of the most protected sectors in the world. So, I mean, they outcompete everybody on costs and pretty much everybody on quality. But as any one of the United States knows, trying to import the good wine from a place like France or Italy or Canada or Mexico or New Zealand, is next to impossible because of protection of systems and because we fractured our regulatory system.

So this is definitely a situation where the Kiwis need the Americans more than the other way around. Dairy is, if anything, even worse. That is arguably the most protected sector in the world, largely because you can’t really export liquid milk, because by the time it gets to wherever it needs to go, it’s gone off. So you have to turn it into value added cheese.

And I would argue the Kiwis, rival the French for the quality of their cheese. I mean, give me some key. Cranky. But getting it out of the country is next to impossible. You can only get it in, like, Singapore and Fiji. Cheap. It’s a little bit easier, but, you know, anyone with spare land can raise sheep.

So if you can make it for a little bit cheaper, who really cares? The bottom line is, if the Kiwis produce things at volume that they can’t possibly consume themselves. So they have to sell them abroad. And that requires an open market on a global basis. They got that with globalized fashion, but with globalization going away, that goes away.

And the only way to keep globalization going is to give the Americans enough things that they want, that they think it’s okay to carry the weight that’s necessary to make it all work. But the Americans don’t feel that way, and the Americans certainly don’t have a shortage of wine or sheep or cows. So there’s really not a lot that the Kiwis can bring to the table except security cooperation.

But this is the first of the allies during the Cold War that said that the US Navy had to stop coming because they might be carrying nuclear weapons. New Zealand’s been clean and green for a long time, and it’s now caught up in their political definition of themselves. So for New Zealand to do well in the future, it’s going to have to do one of two things.

Number one, it’s going to have to find some way to get included into the NAFTA system. That’s not as hard as it sounds. Australia has basically done it through a free trade agreement with the United States. But Australia has been arguably America’s most loyal ally going back 50 years. And so when the Bush administration, Bush administration, signed the trade deal with the Australians, it was seen as kind of a reward.

The Kiwis would have a lot of work ahead of them if they wanted to do something similar. Because while they have been an ally, this is a country of 5 million people. There’s only so much they can do, and they certainly don’t want to change their position on things like nukes. The second thing that they can do is change what they produce.

Volcanic soils. A lot of water rains almost every day in most of the country. Not today, thank God. Producing things that are going to be in shortage. The problem here is that the Kiwis will be pissing away a lot of their competitive advantage. You can grow anything here. You can grow anything well, here. But you can’t grow everything well, everywhere in the world.

And if you look at the products agriculturally that are likely to be in shortage on a global basis, at the very, very top of the list is wheat. Wheat is basically a weed. It will grow or nothing else. Does. And so in the world, as we’ve globalized and gotten access to better inputs and tractors and fuels and fertilizers and pesticides, all that wheat has been steadily pushed to the margin so that in most countries, the only places where wheat is now grown are places where only wheat can be grown.

And so if you disrupt globalization, if you disrupt the flow of those inputs a lot of the wheat that is produced in the world goes away. Well, for New Zealand, it’s no problem. But to go from raising dairy cattle and planting vineyards to produce wine, to producing the lowest cost, highest bulk crop that humans have wheat, it would be quite a drop.

So regardless of what happens, the Kiwis need to be prepared for changing agricultural markets. And while I I’ve kind of laid out the the broad spectrum or the broad sketch of how things are going to go, it’s a big world. It’s not I’m going to all going to globalize at the same time. And we will absolutely lose some commodities before others.

So, for example, if Brazil is part of the first tranche of countries to fall apart, we’re gonna have a global soy shortage. The Kiwis could grow that too.

The Kiwis are gonna have to show a degree of adaptability that most agricultural sectors can’t handle, that this is a country that 40 years ago hardly had any dairy cattle anyway, so they’ve done it before. They can do it again. The question is whether they’re doing it alone or with the United States.

We’re going to finish this one up from the tan. Our water waterfront. I have high confidence that the New Zealanders are going to come through this, with flying colors. A couple of reasons. Number one, they’ve done some version of this before. I mean, this isn’t the first economic transformation the country has gone have to go through because of changing geopolitical circumstances.

New Zealand used to be part of the British Empire, and its economy was sculpted to serve the needs of the empire. The Brits needed wool for their troops, and they needed a economic base in the region. And so the New Zealanders grew or raised sheep in the tens of millions. Basically, at one point we had more sheep here than we had in any other particular part of the world.

And when the, empire fell apart and the Commonwealth ceased to meet all that much, the Kiwis moved on and got into things like dairy and wine and the rest. And by the point of getting to like roughly the 2000, it was a fundamentally different place. And it’s a fundamentally different place now because they’ve chosen to specialize in the things that they can export to China in volume.

They can do it again. Second, there is a third option, besides going it alone or, buddying up with the United States, there is a middle ground and it involves southeast Asia. If you look at the countries of Indonesia and Vietnam and Myanmar, you know, you got three major countries there with young populations that are rapidly industrializing, that are partnered with countries like Malaysia and Thailand that are already further along the process with an older demographic.

And Singapore, which is a world leader in technology and finance, the Asean group in the southeast Asian grouping is going to be one of the major nodes of growth in the world. But there as this region, industrialized and urbanized, as it has absolutely no hope in its tropical territories of growing all the food they could possibly need for themselves, they’re going to have to import.

And the United States agricultural community is going to be part of that. But so is the New Zealand, because it’s just so much closer. And to be perfectly blunt, the Kiwis don’t have nearly the degree of state support outside of dairy that American farmers enjoy. And so they have to be much more aware of market trends, especially when they’re closer to home.

So New Zealand is one of the handful of countries that, for a mix of regions, I think is going to do great. It doesn’t mean things don’t need to change, but the Kiwis have shown time and time again that change is something that they can handle.

A Concerning Update to the Russian Reach Series

Well, the Russian Reach series needed an update, and it’s not a pretty one. The infiltration of the US government by Russian interests is growing and I don’t see an end in sight.

We have figures like Tulsi Gabbard with a foot in the White House and the Kremlin. The very institutions which were created to protect the US from these threats are being dismantled under the Trump administration. Don’t even get me started on ‘SignalGate’. Grenell is spewing pro-Russian narratives to whoever will listen. Navarro is echoing Russian propaganda as it relates to economic policy. Trump is still repeating disinformation. Russia is finding more ways to align itself with MAGA through its influencers. Russia wants in on the invasion of Greenland. And to round it out, we have Tucker Carlson as the only media source Trump’s admin is talking to (the guy that features guests like Russian fascist ideologue and genocidal proponent, Alexander Dugin).

I’ll let you sit with that one for a bit…oh, and have a good weekend!

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.

Hey, all. Peter Zeihan here, coming to you from Atlantic City. Today we’re going to update a series that we did last month called The Russian Reached what looked at the logic and the actions of the Russian government and how they were attempting and probably successfully attempting to penetrate deep into the American government right up to and including the white House. So the purpose of this is to give you an idea of how much is involved in just the last 3 or 4 weeks, and it’s unfortunately a very long list.

First off, keep in mind that the Director of National Intelligence, Tulsi Gabbard, is somebody who most of the intelligence community who is has thought of as a Russian agent for quite a few years and one of the first actions that she… well, let me let me put it this way. If she’s not a Russian agent, she’s probably a traitor because the Venn diagram of her worldview and Vladimir Putin’s are pretty much identical. I mean, there might be a little bit of not overlap like a half of 1%, but that’s largely just hairstyles because, you know, Putin is bald and got rich hair is fabulous.

Anyway, she’s pretty much completed gutting the counterintelligence arms of our various intelligence agencies. So most of those staff aren’t even doing the jobs that they once did, allowing the Russians to really plow into American society however they want. Also, the Trump administration has largely dismembered the parts of the intelligence community and the State Department that, were there to protect our election integrity from Russian intervention. Same thing for web hacking. And, the Department of Justice has largely stopped investigating white collar crimes, most notably fraud and cryptography. Cryptography. Wrong word like Bitcoin scams.

Which are another way that the Russians really, really enjoy getting their claws into American society. In the American government. We basically just stopped enforcing those laws. The same goes for white collar crimes in general, which, of course, for a country like Russia that is corrupt and uses US intelligence systems to undermine societal stability all around the world, is something that has made their job a lot easier.

The next big issue is, of course, signal gate. Now, signal gate, happened back in March, mid-March, when the United States was preparing military assaults against the Houthis, which are the militant group in Yemen. And basically the entire top tier of the American national security team, including defense and intelligence. And Gabbard, of course, basically participated in a chat on the signal chat program. Signal is a platform that supposedly secure, but the week that this all went down, the Defense Department’s internal Intel, indicated that the Russians had probably hacked the encryption protocols.

So, basically, the American national security apparatus were all using what had become an unsecured platform to communicate, basically operational intelligence. Tulsi Gabbard, again, testified, about halfway through the revelations to Congress that this really wasn’t a big deal. And no one should be overly concerned about it, because, of course, it’s not.

All right. Let’s see what’s next. Rick Grinnell. He is an on again off again semi diplomat who is, working for the Trump administration. He worked for Trump one, did a really bad job, basically just went around talking to German neo-Nazis the whole time so the Germans wouldn’t deal with him at all. Anyway, he’s back in the administration now, and he’s one of those people that is so unlikable that even Donald Trump doesn’t like to have him around in person.

So he kind of hovers outside of the West Wing and is basically spewing anti Ukrainian Russian propaganda in the ears of Trump Jr because he can’t get the ear of Trump himself. Specifically, he likes talking about the Budapest Agreement, which was something that dates back to the immediate post-Cold War years, when, the Ukrainians gave up their nuclear weapons. Basically, Grenell is a spouting the Russian equivalent of that deal. Their interpretation of it 15 years on, and basically trying to get the Trump administration to disenfranchise Ukraine as a state and suggesting that they’ve never had a claim to anything in the first place, which is, of course, exactly what the Russians would love the Trump administration to believe.

Let’s see. Next up, we’ve got Peter Navarro. Who is the manufacturing advisor to the president. Very protective guy. He started using Russian propaganda that has been recently designed and released into the ecosystem. That’s specifically targeting Canada. So Navarro has always been an anti-free trader. Don’t really have a huge problem with that. But it’s interesting to see Russian propaganda popping up in his statements on TV now that are very, very specifically tailored to a very specific issue that really wasn’t an issue in, the Russian propaganda sphere until just a few weeks ago.

Then we have Donald Trump reporting Russian propaganda on everything from broad strategic issues, to very tactical issues. So, for example, near the end of March, Trump started talking about how Ukrainian troops in Kursk had been encircled by Russian forces. And, you know, this or that should happen. I mean, that never happened.

The Ukrainians were able to withdraw from the Russian province of Kursk fairly, I don’t want to say easily, but without a lot of casualties. And in fact, that withdrawal had been completed more than 48 hours before. Trump is supposedly asking the Russians to modify their operations in Kursk. So this is something that actually came from internal Russian Federation propaganda that was designed to shape attitudes within Russia itself. But somehow it got on Trump’s desk. If I was a guessing man, I would say that that probably happened via gab or directly.

On Greenland, the Russians are trying to convince, the MAGA spear that a joint invasion, Russians in the North and Americans in the South would be a keen idea, something that would obviously shatter NATO overnight and end America’s defense alignments with, the Scandinavian countries that, in my opinion, are going to be the future of the American alliance network in Europe, which, of course, is something that the Russians would love to see destroyed.

You may have heard of Tim Poole. He is a far right influencer that’s very tight in the MAGA space. He has a number of podcast and, video vlogs. Kind of like, you know me a little bit. He’s been basically indicted, I think is the technical term for taking somewhere between $400,000 and $10 million from, the Russian state.

Basically, they’re shoving money into his platform to help spread disinformation throughout the American MAGA sphere. He claims he didn’t realize that it was going on. That’s his official stance on the investigation is impending. But, you know, he has on any given day, somewhere between a number of followers similar to me and twice as many. And I can guarantee you that if $100,000 per video least that I did suddenly showed with my my bank account, I would not need the FBI to tell me to investigate the shit out of that.

So let’s just say I don’t take it very seriously.

But the most important part of this is that Tim Pool is now part of the white House press pool. The Trump administration has brought him into the inside while kicking out, you know, those liberal rags like AP and successful farming.

And then finally, a name that, you may have started to hear bouncing around Alexander Dugan. He is basically a run of the mill Russian fascist who has been advising Vladimir Putin for over a decade now, basically making up the ideology to justify genocide against anyone they feel is necessary. And until a year ago, most of his vitriol was ultimately, reserved for the United States.

So preemptive nuking, death camps, that sort of thing. He’s a real peach. Anyway, he has started making the rounds of MAGA, publications, in the United States recently. And of course, the first one in that role, the first of the big ones that he did was none other than Tucker Carlson. Now, you guys may remember, Tucker Carlson used to be a Fox News host.

Tucker has been fired from every media job he has ever had for lying on air about things on purpose. And since he left Fox, he has now basically migrated directly into the orbit of Russian propaganda. And most of his shows deal with Russian propaganda from it. You know, sharing it with the world point of view. Perhaps the most concerning thing I have in the information space as regards the Trump administration is not this Tim Paul thing, although that’s, you know, not minor.

But this is the American administration throughout history that has had the least contact with the media of any form. It’s not just that they’re not talking to more liberal groups like, say, the New York Times. They’re not really talking to Forbes or Bloomberg or the Wall Street Journal. They basically shut out everybody. But many members of the Trump cabinet have done extensive one on ones with Tucker Carlson.

So we basically have a gutting of the normal means by which an administration would normally interact with the country and focused on a very, very few, avenues, of which the bigger ones are already in the Russians pocket. Anyway, I don’t have a lot of great news on that front, and I will leave everyone to their own recognizance as to what’s going to happen next.

The Fire Hose of Chaos: The Green Transition Is Over

The green transition in the US has made great progress in recent years, but the wheels are falling off. This is largely due to economic pressures, lack of financing, and the new tariffs instituted by Trump.

Wind and solar projects require heavy upfront investment, which isn’t a great combo with capital costs skyrocketing and available capital draining from the system (blame the retiring Boomers). The government support for the green transition has also dried up; the Biden admin had the Inflation Reduction Act and other Greentech subsidies, but the Trump admin has pulled support and funding for these programs and projects. And you can’t forget the new tariffs hitting key components for the green transition, which have made solar prohibitively expensive and wind an uncertain gamble at best.

So, it looks like the green transition in the US will effectively be on pause until the US can build out its own manufacturing base. And that’s at least a decade-long process…

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.

Hey, all. Peter Zeihan here. Coming to you from my parents backyard in Iowa. I’m visiting because I’m a good boy. Anyway, today we’re going to talk about the end of the Green Revolution in its current form, at least in the United States. There are three things that have come together to basically completely destroy the economics of the green transition.

And then a couple of things on the side that are making it more difficult anyway. The first has to do with the baby boomers. Two thirds of them have retired, which means that all of the money that they were saving for retirement has been liquidated. And it’s gone into less exciting financial instruments such as T-bills and cash.

And that means there’s less capital available for everything. So we’ve roughly seen the cost of capital in the United States increased by a factor of four in the last five years, has nothing to do or very little to do with government policy. It’s just that there’s less money available in the system overall. So mortgage rates go up, car loan rates go up, anything it needs to be financed goes up.

And that’s a real problem for green tech. When you’re looking at, say, a conventional thermal power plant, coal, natural gas, that sort of thing, you only have to pay for about one fifth of the cost of the life of the plant at the front end. That’s the upfront construction. And then about two thirds of the expense over the full life of that power plant is the fuel, the coal or natural gas.

And you buy that as you go. That’s not how it works with wind and solar. With wind and solar, about two thirds of the cost has to be paid upfront. And that means it has to be financed. Well, you increase the cost of financing by a factor of four, and all of a sudden you’re talking about a financial commitment.

That’s just huge compared to what it would have been just five years ago. And that is now happening across the entire space. So that alone would have probably ended 70% of the power plants that are in solar and wind. Just just off the top. The second problem, of course, is that you have to finance everything upfront in the first place.

Anyone who wanted to do the green transition really needed a helping hand from government, typically at the federal level. And the Biden administration, through things like the IRA Inflation Reduction Act, was very big in providing that financing. Well, that’s basically gone to zero under the Trump administration. So your financing costs have gone up by a factor of four, and you don’t have any outside help.

But the real killer, especially for solar, has now been the tariffs. Almost all of the photo voltaic cells that are used in solar systems are produced in China, oftentimes with slave labor. And while the green transition folks were willing to overlook the fact that, most of the stuff was ha, I still have a sticker on there.

Well, most of the folks in the green transition were willing to overlook the slave labor thing, in order to get the panels that they needed. You can’t really overlook 145% tariff. So if the PV cells cost you two and a half times as much and your financing cost has quadrupled, that’s just not going to fly.

Now, it’s not quite as bad for wind because there are some non-Chinese providers of wind turbines. Most notably in northern Europe. But those were where we have a tariff of at the moment, 10%. It was 20% a week ago, that just introduces a lot of uncertainty into the system. So both of those things are gone.

Wind a little on the edges. Maybe. Solar’s absolutely out of the question for most people now. The only other remaining piece is batteries. When last year, the Biden administration slapped a lot of tariffs early in the year on Chinese electric vehicle bills to keep them out of the U.S. market. What happened is the Chinese repackaged all of the EV batteries into, container units to be sold as grid storage.

And so in calendar year 2024, adding battery storage, which is actually the cheapest form of power that you could add to your system. So the Texans in particular, you know, just boned up on that hugely. Because if you can have a battery grid system, it’s actually better economics and say having a natural gas peaker plant because they normally speakers or is would only run a few days of the year.

The batteries can take that load, but since you now have them. And since Texas is the number one green energy state, they would use their solar system to generate power during the day, store the extra in the batteries, and then use that during peak demand and evening hours when the sun’s going down.

It worked really well. She was like 48% off of power costs, but now we have 145% tariff on all of those batteries as well. So I don’t want to say that that’s going to stop cold, but the pace of the application is going to slow considerably because the Chinese dominate that space. And we haven’t built the industrial plant here yet.

That isn’t necessarily to fill the gap for ourselves. So for the moment, minimum two years, probably until we have a better battery chemistry, probably until we have better PVS, certainly until we have more diversified manufacturing base, which is a ten year process. We’re looking at the green transition taking a bit.

The Fire Hose of Chaos: Government Debt

With everything that’s going on in the US, it makes sense that foreign investors decided to dump US T-Bills. But what does this mean for the government debt market and the future of the USD?

The selloff of $100 billion in T-Bills caused interest rates to spike and US Treasury yields to jump; however, the US remains the global financial baseline. Other countries simply can’t offer the volume, stability, or scale that the US Market can.

With no real alternatives, the US will remain in the number one spot. If things did heat up, the Fed can always monetize the debt (which is something they’ve never had to do at large scale). And the US has structural advantages and policy tools that will keep the US stable in the long run.

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.

Hey, all, Peter Zeihan here with a home office video. We’re gonna take a question from the Patreon crowd, and that is, do I worry about what’s going on with the government debt market? Specifically, some of Trump’s economic policies have been so erratic that they have been causing foreign investors, most notably the Chinese, to dump a lot of us T-bills on the market.

We’ve had reports that as much as $100 billion has been dumped in a short period of time, and in doing so, the cost of financing that debt has gone up, with the US T-bills briefly hitting about 4.6% before falling back. Basically going up a half a percentage point in a day doesn’t sound like much, but typically if you go up more than like 5/100 of a percent in a day, it’s kind of a big deal from a financing point of view, because in the US, government has issued more debt to pay for the financing.

And since there’s $36 trillion in outstanding debt, you move that needle just a little bit and all of a sudden the US government can get into a lot of financial trouble. And some version of that is what destroyed the Premier ship of Elizabeth Truss in the United Kingdom a couple of years ago. She instituted a policy of tax cuts that were going to be funded by debt, thinking that the growth would then make up for the difference.

And the market absolutely destroyed the pound briefly. And she was out in only a few days. I don’t really worry about that from the American point of view. A few reasons for that. First and most importantly, the US T-bill market is the global standard. Whether or not it is the 80 list standard is not the point.

The point is it’s the baseline that everything else trades around. So you can have governments with tighter fiscal ships like say, the Netherlands or Australia or Germany, whose debt is generally considered higher quality than the US. And it doesn’t matter because with $36 trillion, we are the baseline for pretty much all financial instruments, and that provides a lot of cushion against big shocks.

The bigger problem is whether or not the United States is risking losing its position as the global currency, the global store of value in the currency of first and last resort. After April 2nd, when Trump put in the tariffs, it basically would have generated a global meltdown if they would have stuck around. The concern is that there is a flight to safety, and usually in a flight to safety, people go to gold because they interpret as it being inflation resistant, and they go to U.S. T-bills because they’re the global standard in the US economy.

If something happens to it, the rest of the world has already melted down. Well, since the cause of the problem was the US government, the T-bills didn’t seem to be a particularly viable option and money went elsewhere. But if you look at the other options, they kind of suck. They went to the European Euro, and the euro has risen since the US dollar in the last couple of weeks.

But at the end of the day, the countries in Europe are demographically dead, and they can’t provide this type of baseline activity that isn’t necessary to underwrite a new store of value or a new source of exchange. And the euro is bigger than all the other options put together. The British pound still hasn’t recovered from the Truss episode, and without the Empire behind them, they’re just a mid-sized country.

They could never provide the volume. Canada, Australia. They run a tight ship. But you’re talking about countries with under 40 million people. In the case of Canada, under 30 million people. In the case of Australia, they just can’t compare to 330 million that are in the United States. Not to mention, the United States is a larger economy per capita than any of the others.

And that just leaves Japan, which until recently had one of the most manipulated currencies in the world. People like to talk about the yuan, but the one is not internationally traded. It’s not even an option. There’s just nowhere else to go. But even in the worst case scenario where everyone, everyone decides they just have to go somewhere else.

Which, by the way, does indicate a complete financial meltdown of all countries. Even in that scenario, the United States has an ace up its sleeve that has been used as a matter of course, by pretty much every other central bank for the last 30 years. You see, as countries have been demographically declining, their debt has become less and less attractive.

And so the central banks have had to step in and monetize that debt bit by bit by bit, basically printing currency to buy up the government debt. It’s not that the US doesn’t do this, but the US has never done this on the scales. Everyone else has done it. And since the Covid crisis ended, the federal Reserve has basically been cleaning up its balance sheet month by month by month.

And so there’s a lot of wiggle room for the fed to do just that. Now, that would still have consequences. But we’re talking here about an end of the world scenario, which is kind of my specialty. And in that scenario, you basically would have the Federal Reserve monetize large portions of the debt and become the buyer of government debt, a first and last resort.

In that scenario, the existence of the US t-bill as the baseline for everyone else would be a little bit different, but it wouldn’t stop. So having that in your back pocket gives you a lot of options that nobody else has. Don’t feel great about it. We’ll be okay on this measure.

The Fire Hose of Chaos: What Is Hegseth Doing?

Official government photo of Pete Hegseth

Pete Hegseth, the current Secretary of Defense, has been doing his best to completely dismantle the United States’ ability to fight a war now or in the future. Let’s look at why this is happening…

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.

Peter Zeihan here. It’s Easter Monday. You’ll see this on Easter Tuesday. And today we have to talk about the Department of Defense and in particular, the Secretary of Defense. A guy by the name of Pete Hegseth. Pete Hegseth is the least qualified, most incompetent secretary of defense the United States has had. And over the couple of months that he has been in the office, he has done more to destroy the United States’ capacity to fight a current war, much less a future war, than really anyone in American history.

And it’s worth exploring why. The big news that came out over Easter weekend that has prompted me to talk about this topic is that if you remember back a few weeks ago, we had the SignalGate issue where the Secretary of Defense, Hegseth, set up a chat room with a bunch of other top national security folks, as well as the Treasury Secretary.

And somehow a reporter got invited onto it, and on an unsecured platform that the Russians had cracked the security on, started discussing active war plans and operational intelligence—something that under normal circumstances would have gotten everyone involved fired. But this is the Trump administration, and decisions are made differently these days. Anyway, turns out that around the same time that he did that, Hegseth had another single chat—again unsecured—but this time with personal friends, his personal lawyer, his wife, no one who had a security clearance.

And to be clear, this is a felony that would get anyone in the armed forces put away forever and dishonorably discharged in a matter of seconds. The Trump administration has already said they see nothing wrong with this, and Hegseth will continue in his position. I think it’s worth understanding why the United States military is the most powerful military force in human history, and how Hegseth is looking to rip that up, root and branch.

The first issue is education. When you have a force that spans the globe, you will need dozens of different skill sets, especially in your officer corps. So the United States maintains the most advanced staffed college system in human history to train up their mid-career officers for any possible outcome, as well as to teach them things like history, economics, trade, technology, electricity, energy, and all the rest.

One of the things that Hegseth has said is that anything that does not directly encourage activities for an active war fighter should be cut. That includes all of the staff colleges, which is where we get all of our officers. Basically, it’s a return—or an attempt to return—the training system to something that was much more reminiscent of what we had in the Civil War, where you just threw bodies at everything.

Gone would be the efforts of leveraging technology or anything else. The second issue is these educational institutions that we have to keep in mind: globe-spanning military force. So we do two things. Number one, we fly the troops to the educators. We try to fly the educators to the troops based on the circumstances. In addition, there’s the little issue of allies. Because the United States has the best training system in the world, we kind of lend it out, if you will. We invite other war fighters from allied countries to come to our training institutions to basically get a doctorate in the American way of warfighting, as well as seal up alliances and potential alliances with countries that are not, yes, treaty allies. Well, that requires people moving about.

And one of the things that Hegseth has done is a blanket travel ban on all the educators so that they can’t travel. So if you want a war fighter to get trained, he now absolutely has to come to where the university happens to be, whether that’s in Annapolis or in Monterey. And everyone else is just shit out of luck.

So we’ve seen what is arguably, in my opinion, the single biggest advantage we have long-term whittled down to just a weak spot. Then there’s technology. You may have noticed, but since the age of computers, the type of hardware that we are using in the world has been evolving, especially in the last few years with the Ukraine war.

So, for example, the military gets a lot of crap, I think, fairly or unfairly, for being kind of stodgy because the technologies that they have used really haven’t evolved or mutated a lot in the last hundred years. I mean, yeah, yeah, yeah, we got jets after World War Two or at the end of World War Two. We got tanks at the end of World War One. We developed missiles during the Cold War. But guns, artillery, missiles, jets, helicopters, ships—you know, the general playbook hasn’t evolved all that much. The same basic platforms haven’t evolved. We just upgrade specific technologies and put them together in different packages and throw them at different problems in different ways.

But the pieces really haven’t changed all that much. Well, starting about five, ten years ago, that really started to shift because we got breakthroughs in things like information technology and energy transfer and digitization, and they’re all happening at the same time, and they’re combining into new weapons systems that we’re only now starting to game out and design. And the Ukraine war is famous, of course, for drones.

And drones are absolutely the leading edge of this revolution. But we don’t know what this is going to look like in five years or ten years or 15 years or 30 years. And keep in mind that we have a lot of weapon platforms that we designed back in the ’50s that we’re still using. So you have to have an institution within the military that games out the future.

This takes two forms. First, you get the best and the brightest from the Intel systems within the military. You put them together in a room and get them to imagine the sort of thing that the president is going to be demanding of the military forces in ten, twenty, forty, eighty years. Then you need a technical team that can design a weapons system that will not just be useful ten and twenty years from now but can be upgraded and still be used a generation or two from now.

Well, Hegseth is firing all of those people. The Office of Net Assessment—whose job it is to do the first part of that, imagine the future—has already been disbanded, and we’re seeing massive cutbacks in excess of 70% for all the officers that do the technical work. So basically, the United States is taking a giant technological step backward in its warfighting under Hegseth.

And then the third issue is recruitment. Remember, we don’t know what the weapons of the future are going to be. So why in the world would you put any restrictions on how someone might choose to serve their country? We need everyone of every background. And if you look back at the history of the U.S. military going all the way back to before the Civil War, it’s not just that the military has always been a social ladder for underprivileged groups to attain status within a society.

It’s a way they can attain leadership. They can get the skills that they need to remake their own futures. And from the American point of view, from the military point of view, from the tactical point of view, from the warfighter point of view—we need everyone we can get. Newsflash, folks: straight white dudes are less than one third of the population.

And if you put restrictions on how the other two thirds of the population can choose to serve the country, you will never meet your recruitment goals. So in the last two months, we’ve seen a series of things go down. Most notably, Hegseth recently changed the physical requirements for what you have to match in order to serve in the military.

Gold review phraseology—a policy that almost seems like it was custom-designed to kick all women out of the U.S. military. And then, of course, recruitment for any place that is not totally stocked with white dudes has basically been cut to zero. Even Black engineering universities are no longer being visited. And I know, I know, some people are going to say, well, if you’ve got a standard and everyone can’t meet it, it doesn’t work.

No, no, no, no, no. The Israelis broke the seal on women in the military over 50 years ago. And today, every first-world military has a substantial proportion of women in the field. So if you can’t adjust for that, you’re going back to the 1840s. Moreover, there are some jobs—like, say, fighter pilots—where women are better because they can handle the G-forces better.

So is Hegseth going to change the policy so only chicks are fighting in the jets? I don’t think so. What we’re seeing is it’s all adding up to the greatest degradation of American warfighting potential that we have ever seen. And this is only two months in. I also don’t think this is the end of it. Yes, Hegseth has now committed multiple felonies.

Yes, Hegseth is an unmitigated disaster in his leadership. And yes, his entire inner office has now been fired. Oh, this is rich—he fired everybody in his office saying that they were all leaking information. I have no idea if that is true, but Hegseth has a history—especially in the SignalGate stuff—of saying something that is just a bald-faced lie, knowing that the information is out there to prove him wrong.

And it’s usually released in the next couple of days. So by the time we see this video, we will probably have multiple lawsuits against Hegseth personally, for people firing, quitting, etc. So by the time you see this video, it’s entirely possible that the office that was fired—they will have all issued wrongful termination lawsuits and provided the information that will prove this guy is just an absolute moron.

Okay. Do I think he’s going to go? No. Remember, the Trump administration did not build its cabinet because it thought these people were capable or change agents. He chose them because they were incompetent. The first time around, when Donald Trump became president, he really didn’t expect it. He thought he was going to lose to Hillary Clinton. And so he didn’t have a cadre of people around him because he had never been in government.

Well, he reached into the Republican Party, pulled their policy experts, and—especially on security affairs—relied very heavily on generals and admirals to fill out the billets. Well, what he discovered in that environment is when you have generals and admirals who have been through the staff training program and they know how the world works intimately, they have opinions about how things should be done, and they can point out consequences if you do things the wrong way.

Well, whenever that happened, Trump fired them. And so he went through more cabinet members than any American president in history. Just a huge number of generals rotated through the White House in positions like, say, Secretary of Defense or CIA Director. Fast forward to this most recent race.

Trump had decided while he was out of power that rather than build a team of competent people who could push an agenda through, he wanted to make sure that there was never anyone in the room who would tell him no. So he reached out and hired people like Pete Hegseth, who I would argue three months before he became Secretary of Defense, had no idea that that was in his future.

Well, because Trump values incompetence near him, there is no reason to expect Hegseth to be dismissed. I mean, of course he should be dismissed. But of course, in a normal administration, he would have never been nominated, much less confirmed. And that brings us to the next problem: Hegseth and people who are at his level of general incompetence—that includes the Director of National Intelligence, who is Tulsi Gabbard, or the Health and Human Services Secretary, who is Robert Kennedy Jr.

All of these people should not be in their spots, but they’re going to stay because Trump values their lack of expertise. He values their yes-man mentality. He values the fact that they’re not keeping him informed because it allows him to live in his hermetically sealed, Obama-esque bubble. The only way that these people can go away is if they are impeached.

And since the Trump team has basically gutted the Senate of anyone who is willing to stand out, that’s a really tall order. As Senator Murkowski of Alaska pointed out, retaliation against Trump is real. And so she’s considering leaving the party and being an independent in her home state of Alaska. That would still leave us with 52 Republican senators who are either unwilling or unable to stand against the president on issues of national security.

And if you’re going to impeach someone, you have to get two thirds of both houses of Congress. So now you’re talking about roughly 20 Republican senators having to flip. In this political environment, I just don’t see that as feasible. So we are looking into the long, painful, drawn-out crash of the United States’ ability to manage its national security concerns under a leadership that is thin, that is broken, that is incompetent—and unfortunately, that we are stuck with for the foreseeable future.

The Fire Hose of Chaos: Corruption

Photo of a bronze trump doll on stacks of 0 bills

The Trump administration has introduced a level of chaos that can only result in one thing: corruption. I’m not talking about starting a cryptocurrency or manipulating the stock market, this is deeper.

Trump’s arbitrary tariff policies are destabilizing the US economy and eroding the rule of law. The ever-changing nature of these policies makes it impossible for importers to plan for or comply with. And in a broken system, corruption is bound to seep in. And since the US relies on self-reporting tariff obligations and has very few guide rails in place, businesses will likely turn to bribery to keep their goods flowing smoothly.

This is reminiscent of 1990s Russia, or even what happened in Argentina, which aren’t the best examples to be compared to…

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.

Hey all, Peter Zeihan coming to you from Colorado. Today we’re going to do the most recent in our Firehose of Chaos series, looking at the economic impacts on the US from corruption that is being imposed upon the system by the Trump administration. And we’re not talking about here corruption at the top, like when Donald Trump forces foreign dignitaries to stay at his hotels, or when he starts a Bitcoin program to basically scam people, or when he does pump and dump systems with the entire stock market.

That’s a separate topic. And we’re not talking about a more traditional corruption that happens in a federal bureaucratic environment when bureaucrats basically pad things like invoices and take a cut themselves, not the Chinese style. We’re talking here about corruption that is being imposed by the Trump administration on the broader economy, where it can have a much bigger, deeper impact and really start eating away at the cultural advantages that we have of the United States, including rule of law and all has to do with the rapid, rapid, rapid changes in economic policy, most notably tariff policy.

I’m recording this on tax day, April 15th, and we have now had 94 tariff policies in 44 days, all coming from Trump himself. This is not counting the policy suggestions that are coming from cabinet secretaries or the back and forth that’s happening within the administration is they’re trying to come to grips with whatever. The most recent thing to come out of Trump’s mouth is.

This is just hard. Trump tariffs. And in that sort of environment, it is impossible for companies who are doing importing to really know what to do because there’s a process for collecting terrorist. I mean, think about the volume here. It’s roughly $3.8 trillion in goods imports every year. That’s over 62 million container units. And we have no none, zero staff at US ports to collate those things, to understand what the value is of the product.

And so therefore what the terror should be, the way tariffs are collected in this country is the importer self-reports what is coming as it crosses the border and into the port of entry, and then pays the taxes electronically. And in that sort of environment, clarity is absolutely critical. And having 94 tariff policies in 44 days and knowing that much, much, much more is coming down the pipe means that no one’s really sure what to do.

Because oftentimes we get multiple tariff policies in a single day. We’ve had two days already where we got six tariff policies within an eight hour period. And so even if you are attempting to follow the rules to the letter, you can’t because you never know what is going to come out of Trump’s mouth. These tariffs happen instantly, or maybe with a 48 hour lead in.

And then it’s just a question of enforcement and there is no enforcement. So take for example auto tariffs on May 2nd. We’re supposed to get a new tariff that’s 25% on all auto parts. If you have a container of auto parts coming in on a truck from, say, Ontario, when that hits the border, you need to know each an individual part that is in there and then report it.

But what if it’s something that is dual use, like say, wiring? Is it an auto part? Is an electronic part, is it a welding part? Is it something else. So the administrative cost of that goes through the roof and probably is going to be higher than the part is in the first place. The other problem, let me give you another example is what’s going to happen with electronics, over a two week period starting on April 2nd. We had tariffs going up on China. We start with 20%. We went to, I think 54%. Then we went to 80 something percent, down 104%, then 125% and finally 145%.

So everything coming in from China had that kind of scale going up, and the importers didn’t know what to do. Now think about electronics, a specific subset over $100 billion of electronics coming from China every year. Well, what we did originally was 145% tariff. That’s why I bought my extra phones and my extra computer.

And then about April 11th, Trump said, just kidding, they’re in abeyance. In fact, we’re not even going to charge our 10% base tariff on electronics products. So it used to be relatively simple, relatively, where every container in just had a flat 145% tariff. Now they had to do a carve out for electronics the next day. Coward, like the Commerce secretary said, this is temporary.

Don’t get used to it. So they started putting it back on again the next day, Trump said, no, it really is off. And so they started peeling it off again. And then the next day Donald Trump said, actually, no one is going to get an exemption. We’re just going to have a different bucket for computing and electronics products.

It’s going to be part of our semiconductor tariff. So what now? We’re going to have an additional tariff on every thing that has a computer chip in it. Well, that includes everything from backyard grills to white goods to your fridge. No one knows what the system is, so no one can choose to follow it dutifully because the rules keep changing, they’re not clear.

And instead of being built up by the bureaucracy who puts this all into the public register where anyone can follow it, it is literally, often nothing more than a Trump tweet. So where does that leave us? Well, it’s a question of how do you administer these things? There’s two problems there, too. Number one, Donald Trump fired all those, fired all of the temporary workers in the federal system.

Imports and exports don’t flow in the same, scale on for the same products every single day. So we have a lot of temporary workers who work in the ports to help out with the work, as it needs to be done specifically for border Patrol. Those people have either been fired or directed to other tasks, and so they’re no longer is a staff to do it.

So, for example, on April 11th, when the software for this entire system failed, we just didn’t collect tariffs that day. Oh, there’s also the issue at the upper levels. There’s no one to interpret what Trump says. Remember that the top 1400 positions across the federal bureaucracy were basically cut when Trump cleared out everyone, including the people who are typically not fired between administrations because they have the all the organizational knowledge and technical skills, they’re all gone.

So there isn’t a cadre of people at the top that are loyal to Trump that also have the ability to design these programs. And even if there was, you know, they’d have to do it hour by hour. Well, we have seen this before. This reminds me a lot of Argentina, where the Peronist government, through the 2000 to the 20 tens, kept changing the rules over and over and over and over and over again for personal, political or ideological reasons.

And it became easier for everyone to just find ways to avoid them. See, the problem is, is when you make the rules impossible to follow, the only way that business people can function. Is to have a personal relationship with the people who are enforcing the rules. The way tariffs work, you self-report and then there are spot checks. We have set up the perfect system that will, for force American importers and businesses to bribe the people who do the spot checks, and that is something that will corrode out through the broader system.

This is very Russian 1990s right now. We’re setting up the stage where we’re telling our business community that they have no choice but to violate the rules if they’re going to function, because the rules are almost designed to not be valuable. Is that even a word? Anyway, it would be nice if this all settled down in the near future, but Trump has promised us in the next few weeks we’re going to have tariffs on sector products.

So agriculture, car parts, semiconductors, medications and so on. As with everything, there is no one in the upper echelons of his administration who knows much of anything about these economic sectors. So it’s all going to be arbitrary, it’ll all be based on the ideas that Donald Trump is having at the time, based on whatever data point he happens to find egregious. And there will not be a rules creation system.

It’ll simply be imposed by tweet. No one will know how to follow it, and it will set us up for an erosion of rule of law throughout our corporate world. Bye.

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

Transcript

Transcript

Transcript

Transcript

Transcript

Transcript

Transcript

Transcript

Transcript

Transcript

Join 200,000+ other subscribers

Stay Social

GEOPOLITICAL INSIGHT STRAIGHT TO YOUR INBOX