Myanmar Is More Important Than You Think

Flag of Myanmar waving in the wind

For a country that doesn’t get much attention, Myanmar matters much more than most realize.

While caught in a civil war for decades, Myanmar has a whole lot going for it. It sits between India and Thailand, it’s a low-cost labor center, and it has a navigable river. Add all that up, and you’ve got the perfect replacement for low-end global supply chains when China goes belly up. And if the election goes well in December, things might get even better.

Myanmar is also punching above its weight class in geopolitical importance. In the eyes of Beijing, they are an attractive land outlet to the Indian Ocean and access to Middle Eastern energy. With the military juntas in Myanmar favoring China and elected governments favoring the West, the coming election could tip the scales and shake up logistics for Beijing.

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Transcript

Hey all. Peter Zeihan here coming to you from Wren chair, a creek in Yosemite where I have my own personal beach and pool resort. Quite refreshing and a little chilly. Anyway, today we’re going to talk about Myanmar, which, of course, makes some of you say, what the hell is a Myanmar? And why would I care? Well, let me tell you, Myanmar is a country in Southeast Asia, sandwiched between the part of India that India doesn’t like to talk about. 

And Thailand. It is well, it’s having a really nasty civil war again. Has been for decades, honestly. And we now have news that on the 28th of December, the ruling junta, a military group, has decided that they’re going to hold elections again. And this is important for the three reasons that you should care. Number one, if we are going to move into a world beyond China, the Chinese are dying. 

So we need to. But if we still want stuff, we need to build out as robust of manufacturing supply chains outside of mainland China as we possibly can. Myanmar can be a huge part of that. It’s already part of the Association of Southeast Asian Nations. But 

Unlike Malaysia or Thailand or Singapore, it’s not particularly advanced in Vietnam, long since left it in the dust. However, all types of manufacturing that are going to be economically viable require a multi-step manufacturing supply chain step, something that some policymakers sometimes forget. And that means you need someone on the low end to do things like assembly in Myanmar is perfectly set up for that. 

So if we’re going to have a reasonable chance of still having manufactured goods in a post China world, Myanmar, it would really help if they were part of the solution. That’s one. Number two. Like I said, there’s a civil war going on. And because of that, you’ve got lots of secondary groups, minorities that are basically massively funding their operations through the heroin trade. 

Well, in the past, when the military’s giving up power to central control, the war has died down and some of the heroin production and smuggling has died down with it. So yes, yes, yes, Americans love their meth. They love their fentanyl. The cocaine. But we like heroin too. And anything that constrains the supply, I would say, is a good thing. 

And then the third reason why it matters is China directly. If China is ever going to escape parts of its geography, it really needs another outlet to the world. Right now, its entire population is basically on the eastern coast. And just off the coast is something called the first island chain. Japan. Taiwan, the Philippines, Indonesia. 

Countries that are, for all practical purposes, Informal if not formal U.S. allies. And so China has never, ever been able to punch through the chain in any meaningful way. They would take a Navy as powerful as the US Navy, which they are nowhere close to even try. So what about an alternative on land? 

Now, going through Russia sucks because it’s you know, Russia and they can’t be trusted by anyone. But Myanmar provides an opportunity to not only bypass the Strait of Malacca, but get closer to, say, the oil fields of the Middle East. So in the past, when the military has been in control, relations with the Chinese have been pretty good, even though the civil war boils right up to China’s border. 

But when the military gives up power and the civilian authorities take over, then it’s a little bit different. And generally China gets shafted, loses all its investments, and Myanmar opens to the west. That’s what happened about 12, 13 years ago when I was writing The Accidental Superpower. So there’s a section on Myanmar in that book. If, if, if, if in December, real elections actually happen. 

I see no reason why that shouldn’t happen again. So having a military dictatorship in Myanmar is something that the Chinese actually like, because they know who to talk to you. They know that, you know, you don’t have to change policy every election. Now, I don’t want you to get overexcited here. Democracy in Myanmar looks different than it does anywhere else. 

This is a country where the Burman people are largely in the center of the country, along the Irrawaddy River. To be perfectly blunt, the military is all Burman and they’re wildly racist. And that’s one of the reasons why the Civil War is going. And the last time we had elections and this woman by the name of Onion Suu Kyi, one who had been a dissident for quite some time, policy towards the minorities didn’t change at all. 

The Burman are pretty nasty with all of the minorities in the country. So I don’t want to suggest this is a once and done and not part of a process, but it would definitely be a step in the right direction. One more thing to keep in mind. Almost unique in Asia. Certainly in Southeast Asia.  

There is a river, that goes right through the Burma territory, called the Irrawaddy. And it is one of only a handful of navigable waterways in the, in the Asian landmass. So not only would the skill set for manufacturing be kind of like a 1980s Mexico, you know, relatively low skilled, relatively low education, but really, really cheap. You also have the possibility, because of the navigable waterway, of moving cargo back and forth really, really cheaply. 

So from an infrastructure point of view, would be really easy to build out Myanmar if the politics align. We’ll find out in December.

The Semiconductor Frontier

Semiconductor being made

We’ve discussed how essential semiconductors are in our increasingly technological world, so here’s an update on ASML’s new High-NA EUV lithography machines.

ASML already builds the most advanced chipmaking tools, but these new models could enable chip designs at 1 nanometer or even smaller. Intel is betting on this new technology and could have mass manufacturing by the end of the decade, which would change the competitive landscape with TSMC. SK Hynix is similarly prepping new tech for these memory chips, which could give it the leg up on Samsung.

If it works, that is.

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Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado, today we are taking a question from the Patreon crowd. Specifically, if I could give an update on what’s going on with the new EUV machines that are coming out of the Dutch from ASML. Background, for those of you who don’t follow this, ASML is the company that makes the lithography machines that make high end semiconductors possible. 

Very, very, very short version. It’s basically a machine about the size of a bus that makes a tiny little laser that operates at an accuracy that is smaller than a DNA strand and allows you to etch semiconductors at the nanometer level. EUV in its current form can go down to about three nanometers below that. It basically loses coherence. And so there’s a new machine called a high numerical aperture that, in theory, can take you down to one nanometer and even below. 

And the idea is that the smaller you can edge your transistors, the more processing power you can cram onto a piece of silicon. And the more powerful the semiconductor on the other side can be. So EUV is a technology that’s been around since 2012, 2014 somewhere in there. And it was grabbed by what was then the industry underdog, which was TSMC in Taiwan. 

And over the course of the next several years, they leaped ahead of who the old industry leader had been. And that was America’s Intel. Now we’ve got the flip side. TSMC is reserving the right to maybe buy one of these new machines, the high end machines. But it is Intel that’s now betting their future on the new technology, hoping that they can repeat the feat that TSMC did and once again become the world leader. 

They have two of those machines are at their Hillsboro facility. They’re currently cranking out about. Well, their goal is to crank out about 10,000 chips a month, which is very, very, very small scale. They’re very much still in the testing phase. And it is just simply too soon to know if a this technology will work and be what its effects will be, and the be what its effects will be is really the question here. 

When we went from duv. Deep ultraviolet, which was the old technology, this is what the Chinese have still to EUV, which is now the standard for premium chips. 

The nature of semiconductor has changed because it wasn’t just about cramming more into less space, it was making them more energy efficient, was doing things with the architecture eventually leading to stacked chips. 

And so it wasn’t just a linear jump. And there’s possibility that with high end A, we will have another linear jump that will leave all the chips that that we make today behind, but we don’t know that until we have our first mass manufacturing run, that at the soonest will be at the end of calendar year 2026, and that will just be with a couple machines. 

Then we will have to have the industrial build out to build more of these machines. And these machines cost significantly more than a commercial aircraft. And then you’ll have to put them into the facilities and you have to start designing chips with the new hardware in mind. 

So we probably wouldn’t have enough chips to matter in a way that would really move the needle technologically before 2029 or 2030. That’d be more than enough to revive Intel’s fortune. But, you know, if, if, if, if then, there is one other company in the world that is trying out this new technology. 

It’s out of South Korea. It’s, SK Hynix, which is the company that makes the best, Dram chips. Those are memory chips. So what Intel does what TSMC does, those are GPUs. Those are processors. And those are important. But you have to pair it with a memory chip. And the Koreans excel at that. So as to the Dram side, SK Hynix is an industry leader, along with Samsung. They recently overtook Samsung in terms of total output, but in terms of quality, they’re pretty much neck and neck. And so now one of them has DNA and one of them doesn’t, if Na fails, I don’t think it’s going to be a disaster for this case. 

SK Hynix are already a fantastic company. But Samsung does have more capital coming up behind them. But really, what’s going on in Korea is nothing compared to the drama between Intel and TSMC. 

So let me give you a worst case. Best case for Intel. Worst case, this doesn’t work, in which case Intel is merely the second best chip manufacturer in the world. Americans get really pouty when they’re not number one, but this is still a solid company. And honestly, there are a lot more pieces of a supply chain under the hood of Intel than there are, in TSMC. The TSMC folks are great at what they do, but they basically follow the instructions that the designers gave them, and then they do the construction and everything in order to make the fabs function. 

But the real high value added work is done somewhere else. Intel does more of these steps, more like a traditional conglomerate, which means that they’re probably not as efficient at any individual one of them. But of the 100,000 supply chain steps that go into making a high and semiconductor, they have a higher proportion of them under their roof, probably as many as a quarter. 

So if this doesn’t work, Intel is fine. If it does work, TSMC doesn’t slip. They’re still making the chips that make today’s, silicon revolution possible. But then we also get a new frontier. The only caution I have is that currently, it takes a 100,000 supply chain steps to make a high end semiconductor with the high end American Aperture technology. 

We really don’t know what that supply chain is going to look like, but it would be very strange if it was simpler. So this is already the industry that is the most overextended and dependent on globalization and threatened by Trump’s tariffs threatened by the fall of globalization and threatened by the demographic crash. The idea it’s going to be with us from ten years from now is a stretch. 

But there is a little sliver of hope that, based on what the supply chains for high end are, maybe, maybe unlikely, but maybe it’ll be a little bit simpler. The first that we will have a good grip on, what that will look like will be in about a year.

New Strategies in the Ukraine War

Photos of military vehicles in Ukraine at night

The strategies implemented by Russia and Ukraine are shifting once again.

Russia has shifted away from targeting Ukraine’s power grid and is now striking rail infrastructure instead. These mobile targets are harder to defend, and the fallout is much worse for Ukraine’s energy and logistics networks. The Russians are also closing in on Pokrovsk; this city has been a key transport hub for Ukraine, and losing it will be a major setback.

The Ukrainians are strategizing as well. Strikes are penetrating deeper into Russian territory, hitting oil infrastructure and ports. The shadow fleet tankers are included in the target list, which could open a new can of worms for the Russians and countries backing their oil trade.

These shifts have the potential to reshape not only the war in Ukraine but also global energy markets.

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Transcript

Hey everybody, Peter Zeihan here. Coming to you from Colorado, today we’re taking a look at some of the new things that are happening on the Ukraine front. Three big. Number one. The Russians have changed their strategy when it comes to bombing civilian targets across Ukraine. For the last three years, they’ve been going after power plants, capacitors, transformers, that sort of thing. 

Natural gas transport infrastructure, substations, all all that. What they’ve discovered is that when you’re willing to do things that are not OSHA approved, there’s only so much you can do. So yes, they can knock off the power over and over and over and over again. But the Ukrainians get a little cheap equipment. It’s been imported. 

They, tie some wires together, and the power comes back on. So I don’t mean to suggest for a second that the Russians have. It inflicted a great deal of pain on the Ukrainian population, but it hasn’t had nearly the impact. I thought that it was going to have. And while, the Ukrainians have power that’s off every day, it hasn’t been able to shut the country down in the way that the Russians thought they were going to be able to. 

Also, whenever you go after a power plant, it’s a known location. And while that means it can’t dodge, it also means you can in place, anti-missile and anti-drone defenses and the Ukrainians have gotten incrementally better at that. Bit by bit by bit over the last four years as well. So they’re changing strategy. The Russians are now going after the rail network and specifically the rolling stock, because you can’t have a fixed offense on a train that’s moving. 

So the Russians basically figure out what the train schedules are and then send a fleet of drones and specifically go after, the engines. These are a lot harder to replace. They’re a lot more expensive. And a lot of Ukraine’s power grid now, because of damage to the natural gas transport system, has been coming from coal, the coal shipped by rail. 

And so it’s having actually probably a bigger impact in a shorter time period of time, than anything that the Russians have done in the last 3 or 4 years. So having a much bigger impacts, much harder to defend against. Once you have enough drones that you can expend them on moving targets, that’s one. Number two, we seem to be nearing the end for the city of Procrustes. 

Procrustes is a rail and road hub in southeastern Ukraine that the Russians have had under assault for over a year, and now they’re actually Russian forces in the city. They’re nowhere near to have clearing it and securing it, but it is no longer able to be used by the Ukrainians for transport at all. So they’re having to fall back through eight major transport arteries that combined and Procrustes, where the Russians have been after it for so long because as long as the crossing was in Ukrainian hands, the Ukrainians have been able to shuttle troops to wherever the hotspots happen to be. 

You move across, even if it’s just destroyed, it doesn’t become a Russian rail hub. The Ukrainians have to fall back quite a bit and then deal with much longer routes, in order to get at things wherever they need to go. The Russians have surged more and more troops into the area, and they are on the offensive pretty much across the entire front. 

They’re only making incremental gains. Like I said, they’ve been after Procrustes for over a year. But this is going to slow the Ukrainians reaction time significantly. Whether that will spell more advances for the Russians in the future remains to be seen of course, because the rules of this war change every six months. Which brings us to the third point. 

The Ukrainians are targeting differently as well. They’ve been using their rocket drones and the longer range drones to go deeper and deeper into Russian territory, going after more and more sensitive energy infrastructure. And we’re now in a situation where roughly 60% of the Russian transport system for oil that matters is under the gun in some way. 

The Russians, are taking hits not just in the refineries anymore, but also their ports. And on the first and 2nd of November, overnight, we had a number of Ukrainian drone strike out at a place called Tusa, which is one of the two major ports on the Black Sea. To ops is important because it serves as an outlet not just for Russian, but Kazakh crude. 

And the Ukrainians didn’t simply hit the pipe control system, didn’t simply hit the loading burst. They also hit at least two, perhaps as many as four of the tankers that were there. Now, we don’t have damage reports because the Russians don’t talk. And the tankers that carry Black Sea crude at this point are pretty much all shadow vessels. 

So they’re not registered with normal, law enforcement internationally. So they’re not talking either. But a couple things to keep in mind. Number one, to observe one of the four largest offloading facilities in the Russian system, even partially offline. That’s kind of a big economic hit. And it’s a lot closer than some of the targets in, say bus Korea Center. 

Tatar said that the Ukrainians have already proven that they can hit. So they actually have the possibility of taking this one off line if they hit it hard enough and repeatedly enough. And the Ukrainians are showing a penchant for hitting the same target over and over and over until it’s just not in the equation anymore. This would be the first major port that the Russians would have lost to, and more importantly, is the shadow fleet vessels. 

Now, part of what makes them a shadow fleet is that they are under insured or not insured at all. And in that sort of scenario, the financial risk is not borne by the international community. So if you dial back to the beginning of this war, one of the things I was really concerned about was that if a single ship went down, because it was targeted by a sovereign state like Ukraine, that we would see an unraveling of global maritime law. 

The way it works is companies purchase insurance for their vessels. And if something happens to that vessel, the payout is massive. Well, part of the way the sanctions work, especially as designed by the Europeans, is that they’re no longer providing maritime insurance for the vessels that dock at Russian ports. So they have to be off the ledger. They get insurance from, say, the Russian government, the Chinese government, the Indian government, instead of normal things like, say, Lloyd’s or Swiss wheat or whatever else. 

And that means that the financial risk is not assumed by the international community, but instead by these specific governments. Now, we have not had a shadow tanker sunk yet. We’ve had some confiscated. That was exciting. That happened in the Baltic Sea a few weeks ago. But we not actually had one sunk. But now we have the Ukrainians deliberately targeting multiple shadow tankers. 

And sooner or later, one of them is going to go down. And when that happens, it’s going to be really interesting to see how the payout happens, because if, the Russians or the Indians or the Chinese don’t pay up and all this insurance is null and void, and then the shadow tankers are basically a free for all. 

If you happen to be anyone else who doesn’t like the Russians and will probably see mass confiscations if the Ukrainians, the Indians or the Russians do payout, then the Ukrainians have every interest in hitting as many tankers as possible, because as large as a financial loss to the supporters of the Russian system, as possible. So one way or another, we have just kind of passed an interesting Rubicon, and we’re going to know in the next month or two how this is going to play out, because for the Ukrainians, there’s absolutely no downside to hitting the tanker. 

There may have been a year or two ago because back then the concern of the white House was that high oil prices were going to impact the Democrats chances of elections. I thought that was really bad math. From an economic point of view, you draw your own conclusions politically. But now two things have changed. Number one, Trump really doesn’t care about economic damage with any of his policies. 

So why would this one be any different? Second, and arguably a lot more importantly, we’re now in a massive oversupply situation for crude on a global basis. We’re probably somewhere in the realms of 2 to 4 million barrels a day. Too much crude. Which means that if it wasn’t for all the risk premiums out there, political, geopolitical, military or otherwise, we’d probably already have an oil price crash, which means that the world can get by with substantially less Russian crude than it thinks that it needs. It’s all adding up for a lot more direct action from the Ukrainians on all Russian energy targets. And I think the shadow fleet is where we need to watch the most closely.

The Last Generation to Protest

A large protest made up of thousands of people

Staging a meaningful protest requires several things, and a large young population is one of the key components. So, what happens when there aren’t enough young people left?

Youth movements have been a driver for massive change across the globe, from politics to war and everything in between. Demographic trends show us that populations are growing older and taking the wind out of the sails of the youth. Countries like the US, Mexico, India, and much of Europe have already eclipsed the “youth protest” phase. We can still listen to For What It’s Worth by Buffalo Springfield…but those days are over.

Sure, there are countries with the youth to protest, but we’re talking about places like Nepal, Madagascar, and Nigeria, which simply don’t move the needle on a global scale.

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Transcript

Peter Zeihan here. Coming to you from Colorado. Today we’re gonna talk about these Gen Z protests that are bringing down governments, most notably in Nepal and in, Madagascar. And if these are two places that you don’t know much about. You’re not alone. What to keep in mind. Young people protest. Young people bring down governments. 

That’s just part of the math. They have less of a stake in the system. They have less experience, and they don’t see the cost to them as a society, and certainly not personally. Now, once you have kids, once you have a mortgage, once you have something to lose, then you have more of a vested interest in, say, reforming the system rather than overthrowing it. 

And so when you look at youth protests, you have to make sure that there is a youth to protest. So if you dial back to, say, the 1970s, in the 1980s, the most active student protest movements in the world were in, say, South Korea, where there was a large chunk of the population that was under age 30. If you look around the world today, there aren’t a lot of those places left. 

As you industrialize, as you would urbanize, birth rates drop. And so here in the United States, we’re now below replacement levels, while in Europe they’ve been 

below replacement levels for 50 years. Places like India and Mexico and Indonesia, Turkey, they all fell below replacement levels even before the United States did. So when you think of a place that matters because they’re economically large or strategically viable, all of these places have kind of aged out of the protest stage. 

And what’s left are much younger countries where the birthrate is still falling, but there’s still a substantial percentage of the population that’s below age 25. So we see Nepal and Madagascar. We’re seeing Yemen. We will see places like, Nigeria and maybe even Pakistan fall into that category. But for the most of the world, this youth bulge is long gone. 

And so the places where you can or might see youth protests actually change in government structure. They’re becoming fewer and fewer and fewer and places that are less and less important to the wider world.

How Was Trump’s Trip to Asia?

Donald Trump and Xi Jinping at the G20 Summit

President Trump has wrapped up a whirlwind trip to Asia; he met with several key regional leaders—including Japan’s new prime minister Sanae Takaichi and Chinese president Xi Jinping, participated in summits, and crafted some new deals (at least he said he did).

The United States is pivoting away from China and focusing on younger, faster-growing countries in Southeast Asia. This transition has been anything but smooth; wild tariff policies and inconsistent messaging are keeping things…interesting. The Trump administration has made a temporary truce with China, but let’s not expect that to hold very long. Deals with other countries will be nice if they happen, but until I see someone other than President Trump confirm them, I won’t get my hopes up. South Korea is the only tangible progress I’ve seen so far, with $150 billion in US investment in exchange for lower tariffs.

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Transcript

Hey all. Peter Zeihan here coming to you from Colorado. Today, I gonna give you a quick breakdown of what happened in Asia last week. Donald Trump had multiple summits in Southeast Asia and Northeast Asia, up to and including a one on one with, the chairman of the Chinese system, Jinping. So. We’re in the midst of a major transition in the United States in terms of trading partners. 

And whether you think it’s for strategic reasons like the, the micro group and Trump seems to think or you think it’s for demographics reasons, which is kind of my general feel, there’s not a lot of disagreement, as to what’s happening as opposed to why it’s happening. So what’s happening from my point of view, is that the northeastern Asian countries, most notably China, are aging into not just obsolescence but national dissolution. 

And so the trade relationships with countries like China, have to go to zero more or less. Anyway. Now, if you want to do that earlier for political reasons, there’s some complications there. But, we’re going to get to the same places. It’s a question of time frame. On the opposite side of the ledger is Southeast Asia, where the demographics are broadly healthy and the relations with the United States are broadly positive. 

So it makes sense. You want these relationships to grow over time because they can. And if you choose to, denigrate those relationships, you’re making a political choice to punish yourself economically. So the relationships from a tariff point of view under Trump have been, in a word, erratic, with multiple times threats on the Chinese going up to 100% tariffs, and sometimes actually being there, but at the same time, in Southeast Asia, some of the codified tariffs that the Trump administration has put in place, not negotiation tactics, actually codified tariffs are some of the highest in the world, which is directly been penalizing American companies that have been working to move their trade exposure, away from China, since Covid. Anyway, Trump was known in Southeast Asia, met with a lot of the Asean leaders and hammered out a series of deals, most notably with Indonesia, Malaysia, Vietnam and Cambodia. And really across all of them, the the core issue is that these really were only deals as declared by, Donald Trump himself. 

And none of the four countries are really talking about them in the same way. Most of these deals never even had a text released or even a press statement from the hosting government. So it’s all very much in progress. Basically, the approach that Trump seems to be taking is that our trade deficit in goods has been imposed on us. 

And his unfair, but our trade surplus in digital goods has been earned. And so therefore it is fair. If you don’t accept that, you can have tariffs. And needless to say, there’s a lot of countries who find that general negotiating position to be unfair. And so there hasn’t really been any meaningful progress made on the talks. A lot of little details have been popped up like, say, rare earths exports from Malaysia as being a big deal. 

But, you know, Malaysia already exported rare earths to the United States. They just put a limit on the exports to the world, not just the United States. So they would have enough of themselves. None of this has really been changed. And the country that is probably, from my point of view, the most important to the United States mid term as a trade partner would be a Vietnam and more technically technologically advanced than the Chinese are. 

They have over a, you know, workforce. It’s almost 100 million people. If you’re looking to plug gaps, it’s a country you want to plug them with. And we really didn’t get a meaningful deal out of these agreements. Moving up to Northeast Asia, there does seem to be more progress with the Japanese and the Koreans. The Koreans are in a desperate position because the demographics are so bad, and they realize that if they can’t maintain a working relationship with the United States of the kind of screwed as a country. 

So they were willing to give a lot more and we actually got our most detailed deal yet. Out of all the trade negotiations between the Trump administration and the rest of the planet just came out of Korea just a few days ago. That doesn’t mean it’s done. Basically promises that the North Koreans are going to dump, over $150 billion of investment to the United States, which I would argue they were going to do anyway. 

But now it’s codified. And then in exchange, they got a lower tariff rate. This is really the first deal we’ve seen out of the white House that actually has numbers to it. Now, it remains to be seen whether it can be done, because some of the numbers involved are pretty big for a country the size of South Korea, which has under 50 million people, but still progress. 

And then the final deal, with the Chinese will come back to that. Now, before you think that I’m just like, Trump’s an idiot and he doesn’t know how to negotiate, he certainly doesn’t understand trade. Let’s look at this from the Chinese side, because Chairman XI Jinping went to Asean almost immediately after Trump was there and talked about multilateralism and unicorns and chocolate and how we’re all one big happy family and signed a trade deal with the Asean countries, a face three day trade deal. 

So while the Southeast Asians and to a lesser degree, the Koreans and the Japanese are looking at Trump like God, when will this end? They’re not looking at gee and think, oh, thank God she was there. No, no. They’re like, you expect us to believe us that you’re the nice guy, the one who’s been bullying us on every issue for the last 30 years, that suddenly we’re going to love you. 

So you look at Trump and they say he doesn’t understand economics or trade and the right and then they look at gee and like he doesn’t understand diplomacy or trade. And the right one of the things to keep in mind about both leaders is both of them have actively circumscribed the type of people that they allow in the early circle to be people who will never even appear to know more about any topic than they do, because they don’t want to be told that they might be wrong. 

So we have these completely ossified Jared autocracies running the two largest countries in the world right now, and it’s showing up and how they’re dealing with every other country. So really all that leaves for today’s topic is how they dealt with one another because she and Trump met directly in Korea. We have a temporary defuzing of the trade tensions. 

There’s no reason on any side to think that this is going to last. But the Americans agreed to reduce the tariff rate. They were charging the Chinese. They removed their threat of an additional 100% tariff. So based on what the product is, the tariff rate from products coming from China, somewhere between 20 and 50%, again, in exchange, the Chinese agreed to limit fentanyl precursor exports to the United States and to start buying some soy. 

So from my point of view, on the outside looking in, the Chinese agreed to do some of the things that they have agreed to do over and over and over these last 15 years in exchange for actual concessions. And if the Chinese actually do what they say they’re going to do this time, it will be the first time that has ever happened. 

Part of the problem that the United States always has in trade relations with the Chinese is there’s rarely any follow up, and there won’t be this time, because that requires a team that is actually staffed out to enforce the trade deals. And even under normal circumstances, where the United States has the Commerce and the Treasury Department of the U.S. Trade Representative’s office dealing with trade issues, that’s a lot to do. 

And this time around, Commerce and Treasury in the USTR aren’t even staffed out. And Trump is handling the negotiations personally. So just as what happened in phase one trade deals between the Chinese and the Trump administration in the first Trump presidency, the Chinese aren’t going to do any of this. And we’ll be right back where we started six months from now. 

And one more thing. One thing that doesn’t change. You know, the more the things change, the more they stay the same. With these adjustments. This last week, we are now in our 540th tariff policy since January 20th. So the ambient chaos that is confusing American traders and manufacturers and consumers. Showing no sign of letting up. There’s no reason to expect that any of these deals are the final version. And until we get, well, maybe, maybe, maybe Korea. So maybe we have one. Until we have a whole raft of those, the back and forth and the ebb and flow continues.

Imminent US Strikes Against Venezuelan Government

A US Fighter jet conducting a barrel roll

It appears that US military strikes against the Venezuelan government are imminent. Let’s take a look at what passes for a military in Venezuela.

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Transcript

Hey, all. Peter Zeihan here coming to you from Colorado. And today we’re talking about Venezuela because it looks like the United States is getting ready to overthrow the Venezuelan government. We now have the USS Ford, which is the largest and newest of the American super carriers in the region, by far the most important and powerful battle platform that humanity has ever created. 

A along with roping in certain countries in the region like, say, Trinidad and Tobago, which are directly off the coast of Venezuela. And then, of course, the US facilities in Puerto Rico being used very aggressively to push troops and ships into the regions. 

Let’s talk about what the other side looks like. Okay. That’s about it. One of the fun things about Latin American militaries is back in the 1970s and 1980s, they were involved in coups. And so when democracy kicked back in in the 90s and 2000, the military’s were deliberately gutted. 

And so as a result, they’re really not capable of much. 

Venezuela was a partial exemption to that because in Venezuela, you actually had a relatively robust democracy throughout this entire period until a guy by the name of Hugo Chavez, who was a military dude, through his own coup and overthrew the democratically elected government and basically imposed an authoritarian system that has since, under his successor, become flat out dictatorial. Chavez. Maduro and their click have basically robbed the country blind, ripping up everything that wasn’t bolted down and even a lot of things that were bolted down and basically destroying the entire, non-oil economy of the country. And they haven’t exactly done a great job with the oil economy either. So what used to be the most technically, educationally, and industrially advanced country in all of Latin America is now a laggard. 

What that means for the military. Well, Chavez, when he came in, was not a general. I think he was a colonel. Was even that? No, I don’t think he was even that. I’m not a big dude. So his coup wasn’t really military in the traditional sense, and the military had been a pillar of support for the old government. 

So Chavez started by buying off the leadership of the military directly, but no longer really purchased a lot of equipment. Then when it became apparent that he was going to be opposed to the United States and he realized the military hardware would be useful. He started buying hardware from the Russians. But the Russians, not having a lot of respect for Chavez, sold him a lot of crap. 

That didn’t even operate when it was purchased in the 2000. Well, it’s now 2025. And for the last several years, the leader of Venezuela has been a bus driver. So the military has not been given a priority. It’s been gutted of all of its leadership. It’s basically been turned into a corruption sieve. And they haven’t gotten really good equipment since the 1990s. 

So if it came up to a straight up fight between the United States embassy guards in Caracas and the Venezuelan military, I would bet on the embassy guards. Even those are only a couple dozen of them, because they’re Marines and dirt. In a straight up fight between the military of Venezuela and the military, the United States. There’s no math here. 

If the United States decides that it wants to knock off the government of Nicolas Maduro, this is an operation that will be measured in hours, days if they get really lucky. That doesn’t mean that this is a great idea, because there’s always the question of what happens the next day. Knocking the government off is the easy part, especially in a place like Venezuela. 

Putting a government back together on the other side. Well, the United States tried to do that in Iraq and Afghanistan, and we saw how much fun that was. Venezuela is in better shape than Afghanistan, but I’d say worse shape than Iraq was under Saddam. 

Oh, and one more thing. Under the previous government, Chavez, the Venezuelan government 

imported a huge number of AK 47. Not for the military, but for the population. And then built an AK 47 facility to make more. By a very, very, very, very conservative assessment. There’s 100,000 AK 47 in public circulation with the approach of eastern gangs. 

And a probably a more realistic number is upwards of a half a million. So no matter who the next political authority is who tries to run Venezuela, there are literally hundreds of thousands of assault rifles in the hands of a population that has literally been paid for the last 25 years to be on the side of the government that will now be deposed. 

So whatever comes next to Venezuela, Lord, it’s going to be messy.

Markets Drop After Fed Rate Cut

Stock market chart declining

The Fed just cut interest rates by 0.25%. Instead of the desired boost to a slowing US economy, we ended up with a market drop.

The economy is losing steam, and there’s no one at the helm to correct course. Job market stress is on the rise, manufacturing is shrinking, constant tariff changes have stalled investments, and there’s no relief in sight. With capital from the baby boomers leaving the system, foreign capital is the next place to turn; however, strained trade relations make this risky.

Unless the Fed wants to go full Venezuela and start printing money, we’re going to be heading into uncharted economic territory. And with the current administration, who knows what that could mean.

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Transcript

Hey, everybody. Peter Zeihan here coming to you from Colorado. And the news is the Federal Reserve has just dropped interest rates by one quarter of 1%. 

That means it’s a little bit cheaper now to borrow money. And the idea is it’s supposed to, like, boost the economy. But instead the markets have dropped, because the, well, we’re in shutdown, so most government statistics are offline. 

The Federal Reserve has its own system that is self-funded. Totally different topic there. And they seem concerned enough that they’ve decided to do a what’s, historically speaking, a relatively large cut. So what’s going on? What is it the fed sees? How is it going to impact all that good stuff? So number one, the economy is absolutely slowing. 

We’ve got a lot of stress in the job market. And most importantly, manufacturing has been dropping. One of the many impacts of the Trump’s tariffs is kind of generated, this, background of ambient chaos. We’ve had over 540 policy changes on tariffs since January 20th, and they keep stacking up. And so businesses don’t know what the rules are going to be tomorrow, much less a year from now. 

And that tends to discourage investment decisions. And we’ve certainly seen that in the data until the point that the, the shut down, shut off the data. We also have an administration in the Congress that really seems in no hurry to get things back on line. And so we’re going to have to wait until we have something very bad that happens, whether that is for example, many, many, many people stranded, during the Thanksgiving holidays or a general problem with, health care, because we have, announcements on the 1st of November as to what everyone’s premiums are going to be. 

Lots of things are going to get worse before there’s any chance of them getting better. And that is now reflecting in the general ambient chaos that is policymaking out of Washington and specifically out of this administration. So that’s kind of baked in. The bigger problem, much bigger than that, is what’s going on with capital supplies. You see, as a rule, most private capital is generated by people who are in their 50s and early 60s, when their kids have moved out and they’re preparing for retirement or the height of their earnings, but their expenses have gone down and that surplus is put into the retirement accounts. 

It’s about 70% of total private capital. And for the American baby boomer cadre, that’s about trillion, a lot of cash. Well, when you retire, you go into a more conservative portfolio with more cash and more property and more T-bills and less stocks and bonds. 

There’s a thousand ways that’s wrong. But all collectively, they’re like very, very small. 

That’s just the general trend. This is what people do as they get older and retire. 80% of America’s baby boomers have now retired, so about 80% of those finances have been turned into more conservative investments. And we’re moving into an environment where things like goosing interest rates down in order to increase lending doesn’t work because the money just isn’t available. 

And the only other sources of money that are available are, number one, foreign money. Where other countries have been dealing with this faster than the United States has. So it’s seeking someplace it’s more productive. You can only take that so far, especially in a high tariff environment where your economy is actively discouraging the mobilization of capital. And the second issue is if the Federal Reserve just massively expands the money supply, which is massively inflationary. 

So the concern in the mid-term is we might get the worst of all worlds, you might get lower interest rates, you might get a little bit more consumption from that. But in an environment where supply is being constrained because of a lack of business investment, very inflationary, which would force the fed to go the other direction. Now, I don’t mean that as a specific forecast, because we’re entering in kind of the unknown here. 

We’ve never had a demographic transformation like we’re seeing on a global basis or an American basis in modern history, certainly not in the digital age. And so we’re going to be living through this in real time for the first time. But what we understand of macroeconomic laws is that seems to be where we’re headed right now. And barring a significant change in capital availability or government policy, that’s kind of hard wired in at this moment. 

So the fed is in a bit of a box. The white House is part of the problem, and the baby boomers are no longer part of the solution. And that leaves the rest of us in an environment where investment is difficult, where consumption is expensive, and where inflation is rising.

Why I’m Bullish on Southeast Asia

Busy night in Hanoi, Veitnam

The world as we know it is going away. The large, interconnected systems that span the globe are breaking down, so those smaller, regional blocs are growing in importance. That’s why I’m bullish on Southeast Asia.

There’s a massive checklist of things that will be key in a deglobalized world, but let’s highlight a few that Southeast Asia exhibits. Strong trade networks (especially with the US). Solid demographics (thanks to Vietnam and Indonesia). A full production ecosystem, meaning low-skill to high-tech capabilities. Limited historical conflict thanks to strong geographic barriers between countries.

We’re going to be dealing with a fractured global economy, and Southeast Asia will weather this storm better than most.

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Transcript

Hey all Peter Zeihan here comes to you from Barney Lake in the Hoover wilderness. That is the juggernaut behind me. I am not going to claim that from this side. Maybe the other side to walk up. Anyway, I’m, I’m out on me. Is somebody trip? And I downloaded all of the questions that everybody at Patreon had. And so the first one we’re going to do today is about Southeast Asia. 

It’s an area that I’ve been relatively bullish on. And the question was basically asking for clarification, whatever details I can provide. So let me kind of give you the rundown. Globalization in its current form is trade among a medium sized number of countries that are relatively large or a part of blocs. So you’re China’s, you’re Japan’s, you’re Korea’s, your European Union’s, you’re United States, Canada, Mexico, countries like that. 

It’s not that smaller countries can’t play, but smaller countries have a harder time carving out a niche in this sort of world, unless they can cohere into something bigger. That’s problem one for smaller countries. Number two, when you break down the ties of globalization, all of a sudden these countries have to be reevaluated on different merits. 

So, for example, I talk about demographics in China being a deal. Enter, for the most part, and so you have to look at the demographic picture of what countries will be like five, ten, 15, 20 years from now and whether or not they’re going to have enough people to have a workforce to have a consumption base. 

And as these two things shift, Southeast Asia is well positioned to take advantage of both of them. First of all, the the overall globalization angle, if you remove big globalization, we’re going to have a series of little globalization, things like NAFTA, maybe the European Union, if they get really lucky, where a number of smaller countries can band together and form a smaller network. 

Well, the Southeast Asians have already done that. It’s called Asean. The Association of Southeast Asian Nations and Asean negotiates trade deals with bigger countries already. So here we’ve got a number of countries that already have trade deals with Japan, with Korea, with China, with the United States, with Australia. And if you remove the big globalization and go to a more regional format, they’re already halfway there. 

Second, on the demographic situation, these are some of the youngest countries in the world, and they’re all industrializing very quickly. Vietnam and Indonesia specifically are two of the best structures we have, having a balance of people who are more mature, generating more capital, doing more value added skills. And then people in the lower end who do more of the lower value added skills. 

In addition, within Southeast Asia, there’s a third factor. Not all the countries are the same. You actually have, in many cases, the full production suite just within this network. At the top you have Singapore, which may be small but is one of the world’s most advanced manufacturing countries as well as a financial hub in the middle. You’ve got countries like Malaysia and especially Thailand who have been high up in things like automotive and computing since the industry started and already are fairly wealthy. 

And then coming up from below, you’ve got the big countries, Vietnam and Indonesia, each which have over 100 million people, who are filling out the lower skill set. And in the case of Vietnam specifically, it is rapidly moving up the value added chain. And it if it keeps going at its current pace, 

It will actually have a more sophisticated economy than China. Probably within five years. And if, if, if, if the politics work out and who knows. You have countries like Myanmar, who are much poorer, but have an excellent internal transport network and a lot of people who could do the very low end things like assembly, you partner this sort of region with, say, Australia and New Zealand for food and resources, or the United States for technology and and markets. 

You have a really powerful combination. But my favorite thing about Southeast Asia is this isn’t like the North European Plain or the Eurasian Steppe or northern China, where their history is defined by not just centuries, but millennia of war and genocide. These are countries that really haven’t fought one another for over a thousand years. They are peninsulas. They are mountainous. 

They are islands. They have got jungle. Normally, these are not the sort of things that you want in your backyard. If you want to economically develop easily, they’re more expensive geographies that are harder to integrate, but it also means that these countries have never really duked it out, certainly not in the modern age. And if you take away big globalization with its big ships, all of a sudden little globalization with smaller ships in Southeast Asia looks really, really hot. 

And based on what happens with India, they’re right next door. So it doesn’t really matter what the future of the post globalized world looks like. these countries, look good on their own. They look good with their nearby partners. They look good with the United States.

South Korean and Japanese Alliance?

Hands shaking with South Korean and Japan flags over them

We’ve all heard the saying “the enemy of my enemy is my friend,” but I’m not sure if that applies to South Korea and Japan forming an alliance against China.

The animosity cuts deep between South Korea and Japan, so we’re not off to a great start. South Korea’s defense efforts are almost solely focused on deterring North Korea. On the other hand, Japan has built up a capable blue-water navy. However, both powers are heavily dependent upon imported raw materials and exported goods.

That means Japan will likely be able to adapt, but the South Koreans are going to be digging themselves out of a much deeper hole as globalization collapses. So, an alliance between these two is unlikely…but the Japanese may have to reevaluate their options if the current US administration continues to undermine the relationship.

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Transcript

Hey, all. Peter Zeihan here. Cody from Tower Pass in the boundary between the Hoover National Forest and Yosemite. Going the other way. Hey, I’m out of shape. Anyway, I’m obviously backpacking, and today we’re gonna take a question from the Patreon crowd specifically. Do I think that the best option for the Koreans and the Japanese is to form a bilateral alliance against China? 

Looking at a map. You got something there? You’ve got an island and peninsula that are off the coast. And if they decided to band together, there’s a lot that they could achieve strategically. However, I don’t see it as very likely. The Koreans. Oh, my God, they hate the Japanese so much. The Japanese have carried out a few genocides in the Korean Peninsula, the most recently during World War two, and they actually forced everyone to change their names. 

And if there’s one country in the world that the Koreans would not want to deal with, it would be Japan. There’s also the problem of longevity of any sort of alliance, and Complementary factors. 

The Koreans spend a lot on defense. Some of the most. If anyone in the world has a percent of GDP, but it’s solely focused on the North Korean threat. And so their navy is very small for a country of their size, very small for a country with their sort of defense spending. And it’s not blue water at all, as opposed to Japan, which doesn’t have to worry about a land invasion at all. 

And so basically, all of their investments in defense, which are significantly lower, have gone into having a blue water navy. In fact, are only four super carriers in the world that are not American flagged. Two of them are Japanese, and they fly American jets. So, the real problem, though, that makes it problematic for the two countries to form a meaningful alliance, is that they’re kind of in the same boat. 

They both are utterly dependent on imports for raw materials, especially energy. They’re both dependent on exports of finished goods. Korea far more in terms of that latter factor than Japan. 

And so when globalization kicks in. They’re both going to need the same things. And only one of them has a navy to go get it. The thing to remember about Japan is Japan has agency. So as relations change economically and strategically and politically around the world, it’s one of the countries that actually has things it can do. So if there’s one country that the United States should go out of its way to try to have a positive relationship in the Asian theater, it would be Japan. 

Unfortunately, we’re moving in the other direction. If you remember back to Trump one, the Japanese very cognizant of their war history with the Americans. Sought out, Trump won to cut a trade deal. That was humiliating. Their goal was to never be on the wrong side of the United States. And they figured if they could cut a deal with Trump Representative MAGA, then they would be good. 

That lasted until Trump two and Trump started to abrogate trade deals, even ones that he negotiated. And while negotiations with the NAFTA countries really have some major economic impact for the United States, the one with Japan has always been more strategic. And so the Japanese found that if they did everything that they thought they needed to do to play, say, Trump, it still doesn’t mean anything. 

And that means we have a country with agency that is evaluating options, and that takes global politics and Asian politics in a very different direction.

Slavery Can’t Fix China’s Demography

Young Chinese children

To be thorough in our discussion of China’s demographic collapse, we must explore as many potential solutions as possible…even if one of those is a UAE-style model of imported workers (aka slavery).

China is already implementing quasi-slavery to help feed their solar industry, but this barely dents the demographic problem. The scale needed to flip the demographic script just isn’t feasible; we’re talking about importing at least 100 million workers. Any idea where that would come from?

The reality of the Chinese demographic situation is that their traditional system cannot withstand it, but that goes for capitalism and socialism as much as communism. So, new economic models will be ushered in, we just don’t what those will look like yet.

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Transcript

Everybody car video today, running errands, and they don’t have time. Anyway, I’ve got a question here that’s come in from the Patreon crowd. And it’s about experimenting with new economic models. So the world that we’re moving into is facing population collapse among people who are under age 55, having places like China, Japan, Korea and Germany and Italy first, and then moving on from there to other places. 

So the question is, how about some models that we generally look down upon because they’re, you know, gauche, like slavery, specifically, could China replicate something like, the United Arab Emirates has done where the population, is basically sustained by a huge imported workforce that does all the serious work. Could you do something like that while the Chinese agent of mass retirement. 

Two problems with that strategy. Number one, they’re already doing it to a degree. Keep in mind that while 90% of the population of China is Han Chinese, there are a number of minorities that haven’t been completely genocidal into nonexistence. And one of them, the Uyghurs of western China in the Zhejiang region are already existing in a degree of slavery. 

They they stationed Chinese Communist loyalists within the homes of people to make sure that people don’t have kids. And anyone who shows any sort of religious inclination, like wearing headgear, for example, or maybe saying a prayer in private is sent off to a reeducation camp, which is basically a work camp. And so almost everyone who has installed a solar panel in the last four years is benefiting from that system on a global basis because the silicon is processed and turned into solar lakes, in Zhejiang. 

And that really hasn’t moved the needle very much. Now, of course, there are only so many viewers versus, you know, ¥1 billion. Which brings us to the second problem is scale, when you’re in the United Arab Emirates and you only have a single digit number of million of Arabs that need to be supported with imported workforce, that’s one thing, especially when you’re drawing people from, say, Palestine or Pakistan or India. 

But there are a lot more Han. And so you would need to import bare minimum cheese. At least 100 million people in order to make a system like that work. And the scale of that just is not possible. And if you look at the countries that border, 

China, there’s no easy source. Russian Siberia is largely unpopulated. 

Everything east of the Urals is under 15 million people. Kazakhstan has of more people than that, but most of them aren’t in the border region. Most of them are further north. You get to Duke of standing Kyrgyzstan again. The eastern reaches are completely uninhabitable. And if you go south, you’re hitting Vietnam. And if the Vietnamese hate the Chinese more than anyone else. 

Myanmar is jungle and mountain, and most of their people are again on the other side of the mountains. And and of course, India is on the other side of the Himalayas, and that is everyone. So, you’d be having to bring in literally tens of millions of people from at least a couple thousand miles away. So the feasibility of that is not great. 

But keep questions like this coming, because we’re gonna have to figure out something as the world the populates the relationships among supply and demand and labor and capital are all breaking down. And the models that we have now, whether it’s fascism or socialism or communism or capitalism, simply aren’t going to work much longer for a lot of countries. 

And the sooner we come up with some other ideas, the better.