The Future of US Monetary Policy + The Live Q&A Starts Soon!

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When a country’s monetary policy begins to resemble the likes of Venezuela and Turkey, it might be a good time to pump the brakes.

Trump and his Treasury Secretary have called for reform in the Federal Reserve, claiming the Fed has failed. The conversation is a good one to have, but the monetary policies suggested by Trump are just foolish. He has called for the firing of the Fed Chair and wants to force interest rates down to 1%…all for the sake of political gain. If we wanted inflation, asset erosion, and to damage our economy in the long-term, that would be a good way to get there.

The US has long prioritized keeping inflation low, even if that meant slower growth, because it would protect economic stability in the long run. But the global economy is shifting. Deglobalization and the demographic crunch are going to wreck traditional economic models. So, a conversation around what’s coming and how to handle it is worth being had. We just need people who are chasing meaningful change, instead of cheap credit for political gain.

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Transcript

Hey, all Peter Zeihan here, coming to you from Colorado on a bright, sunny, hot morning. Going to hit 80 today. Weird. Anyway, today we’re going to talk about the newest thing out of the American Treasury secretary guy by the name of percent. And he says that it is time to reevaluate the Federal Reserve as an institution, specifically noting that it has failed in many of its mandates. 

And he doesn’t know what they’re doing over there. A lot of this is just normal Trumpian exaggeration and putting the fault on other people when there is a lack of policy in the white House. There’s two sides to this one that is really, really dumb, and one of them that actually merits evaluation. So let’s start with the one that’s dumb, because that’s what everybody is talking about already. 

The Federal Reserve is the monetary authority for the United States. It determines the cost of capital within the American system at the government level, determining what interest rates are going to be in. And the market takes its cues from that. Folding its own stuff into the situation. Donald Trump is now on record multiple times saying that he wants to dismiss the Federal Reserve chair and put somebody who’s more pliable for his policy preferences in place. 

And he says he wants interest rates to go down to 1%. This is a very Turkish Argentine in Venezuelan, Zimbabwe, an approach to monetary policy. The idea that the government wants to spike growth in the short term in order to generate more political support, and to hell with the long term, because that’s somebody else’s problem. Every country that has ever done anything like this will get growth. 

And then you will artificially spike inflation, and you will lead to a decade or more of Mali’s and either high inflation, low growth, or both. And considering the stage of the United States in this part of the cycle, it would probably be both. But by the time we get to the other side of that, Trump is no longer president. 

And that is literally somebody else’s problem. One of the reasons why the United States is the global superpower is going back to the formation of the Federal Reserve back in 1913, is we’ve treated inflation as something that is a bigger threat than a lack of growth. And so as the Federal Reserve Charter is established by Congress, as built, it basically says that you try to keep inflation low. 

And if that means growth is lower, that’s fine. But that way you don’t inflate away the value of everyone’s assets, because if you have a long period of inflation, not only does that kill purchasing power, it erodes the value of all of your assets, whether they’re financial, physical or otherwise, and generates a lot more long term problems that are a lot more difficult to solve. 

So most of what the world Bank and International Monetary Fund have done over the last 50 years is try to convince the countries that they’re helping out, that you have to keep the cost of capital relatively high. So it’s treated as an economic good, because if you keep it low and treat it as a political good, people will splash it onto everything. 

It throws everything out of whack. And this, at its core, is one of the like 17 reasons why China is going to collapse in the next few years. They’ve treated capital as something that can be politically dictated instead of driven by supply and demand mechanics. So overall, really bad idea why I think we should talk about it anyway. 

The world is changing, the model shifting. We’re moving into a globalized world where the globalized world of, say, manufacturers are energy or agriculture are breaking down. And we’re moving into a world where it’s more regional, even more national, and in that sort of environment, we need to build a lot of things physical infrastructure, industrial plant processing capacity. Those are the big three power grid, if you want a fourth one. 

All of this costs money. And if we follow a normal model that is responsible, it is not clear to me we will be able to get there. That’s problem one. Problem two is demographic. for the first time in human history, in the advanced world, and I’m actually lumping in a lot of the advanced industrialized world like China. And with us, we now have more people in their 60s, in their 50s and their 40s and their 30s in the 20s, in their teens and children. And that is changing the balance of what is possible financially. 

Most financial strength, most private capital comes from people as they’re approaching retirement. Their expenses have gone down because their house has been paid for, and their kids have moved out, and they’re preparing for retirement, and they’re at the height of their earning experience. So high incomes, low expenses tends to generate a lot of fiscal wherewithal. And that one decade of your life is when you generate the most capital. 

Well, in the period from 2025 to 2035, it was always, always we’ve known this for decade. It’s going to be the period where the bulk of the people who were in that last ten year group go into mass retirement, and birth rates have been so low for so long. The replacement generation has come in at that ten year block is insufficient. 

So we’ve always known that this was about the window when the rules of the game are going to change and we enter a period of prolonged capital shortage. What we’ve seen with capital cost in the United States, roughly the quadrupling to quintuple in since 2000. It’s not because of things that the Federal Reserve has done. It’s not been because of the spendthrift policies of the Trump administration or the Biden administration. 

It’s simply America’s boomers, our largest generation ever, aging out of that 55 to 65 year block and into mass retirement, already two thirds are retired. And when you retire, you tend to shift your holdings into more conservative assets. So your stock and your bond markets tend to get liquidated. And you go into things like T-bills and cash and property that’s now happening on a global basis, which means that the balance among supply and demand and capital and labor is in the process of going through the greatest shift since at least the Columbus expeditions. 

And the idea that the economic models that we know and understand capitalism, fascism, European style socialism, the idea that those are still going to work on the other side when the balance of inputs has all changed, it’s kind of silly. So we need to try something new. And that means that the mandate for our monetary authorities, such as the Federal Reserve, are going to have to evolve. 

So having this conversation before we hit a crunch point, I think is a great idea. But the people who seem to want to lead that conversation are only interested in cheap credit for political reasons. And that’s a really bad starting place for all of this down, right? Chavista from Venezuela. 

So the question is, is whether or not there are enough people left in Congress, which is where this change would have to be adapted to lead a conversation. That is more talking about the future and the mechanics of how the world is going to be, rather than just worried about the two year election cycle. Color me dubious.

The Live Q&A Is Tomorrow + China’s Stance on Iran

The flags of China and Iran
The Live Q&A is tomorrow! Our next Patreon Live Q&A for our Analyst members is on Wed, July 30 at 12 PM (ET)!

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Iran was once a breeding ground of strategic importance. Well, they at least had the right stuff in the right place…or there was enough chaos to convince people to watch them. But times are changing, and the Chinese are no longer interested in Iran.

Iran has had no shortage of setbacks in recent times: battles with Israel, US hitting nuclear sites, and a diminishing influence over Hezbollah, the Houthis, and Iraq. And the amount of oil coming out of Iran pales in comparison to that of Saudi Arabia (and others). The Iranians are also losing their “control” over the Strait of Hormuz.

Iran is losing everything that has defined the country for decades, and the Chinese are taking notice.

Prefer to read the transcript? Click here

Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. And today we’re gonna talk about how the Chinese view the Persian Gulf, specifically Iran. 

In the last month, the Israelis have launched an air war that’s basically destroyed Iran’s capacity for air defense. And the United States then went in and dropped a few bunker busting bombs on their nuclear program. 

Too soon to know if that actually worked. But, you know, the point is, Iran is not having a great time of it. They’ve lost control of Hezbollah functionally in Lebanon, the Houthis aren’t doing the best. They’ve lost control of Iraq. It’s been a really bad few years for them, and it’s the type of thing that’s going to take decades to kind of fix. 

So a lot of folks have assumed that for the last 20 years that the Chinese have considered Iran a strategic pull of any of their multipolar policy. And that’s that’s just not true. It’s not that the Chinese don’t see things that they can cooperate with Iranians on. Far from it. But Iran’s just not that important. A couple things to keep in mind at their peak. 

Back in the 1970s, before the Shah fell, before the clerics took over and it became the Islamic Republic of Iran, that has been hostile to really everyone. Iran was a major oil producer, about 4 million barrels per day, of which about 3 million barrels per day would be exported. But at their height, three more 3 million barrels per day exported. 

They were only exporting half of what Saudi Arabia exported at their absolute lowest. Saudi traditionally, produces something like 9 to 12 million barrels per day, with like 80 to 90% of that being exported. Iran has a much larger population, much more domestic demand, and can’t produce nearly as much. So if you are going to care about the Persian Gulf, Saudi Arabia is far more important than Iran, and Kuwait and the UAE together are more important than Iran. 

And the Chinese know they can do math. So that’s problem one with a theory that Iran’s really important. Number two, reason that Iran would be important is because it shares a long border with Iraq. And if you care about Iraq for whatever reason, then the Iranians can cause no end of problems there. Well, under the Biden administration, we withdrew from Iraq completely. 

And all of a sudden the strategic interest just isn’t there. So Iran can no longer use Iraq as a launching point into other parts of the Persian Gulf unless it wants to invade it first. And that would be, you know, noticed, the third issue was the Strait of Hormuz. The idea is that Iran will use jets and missiles and speedboats to basically block the Strait of Hormuz and prevent oil from getting in and out. 

Two problems here. Number one, the U.S. doesn’t care for the United States purposes because we are now a significant net exporter of crude, and we just don’t take a lot of crude from the Persian Gulf at all. Our interest in the Persian Gulf has always been to keep oil flowing to the Bretton Woods allies, so that they would be on our side versus the Soviets. 

But the Soviet Union is long gone. And now the long largest consumer of Persian Gulf crude is China. So the idea that the United States will get involved in a war with Iran to protect oil flows to China, that’s some very bad strategic math. And the Iranians know that and the Chinese know that. So what’s left? Well, shit. 

That’s everything. So bottom line is that Iran is not nearly as important to the Chinese or the Americans as it used to be. Strategically. It’s only falling off the map, especially now that doesn’t have production ability. And economically, ever since the American shale revolution really kicked up around 2012, that’s when we got into oil shale in a big way, with the United States really doesn’t care economically. 

And that’s before you consider the recent changes in the administration, with the Trump administration being broadly hostile to all of the old allies, whether it’s France and Germany or Korea and Japan, countries that use Persian Gulf crude. So we need to start thinking about this in a different way. The country that is likely to close the Persian Gulf isn’t Iran anymore. 

It’s probably Saudi Arabia and maybe even the United States, because those are the countries that would have strategic alternatives. Saudi Arabia can ship a huge amount of crude out of its western coast, and just avoid Iran and the Gulf completely. And if you shut down the Persian Gulf, the countries that suffer, the one that really goes down the most is China. 

And so from the Chinese point of view, Iran is no longer a potential strategic asset. It’s a vulnerability. And it’s sooner or later the Americans are going to realize that.

Key Economic Indicators to Watch: Retail Sales

Photo of a economic chart trending downward

The last time we discussed numbers to watch, we talked about first-time unemployment claims as a recession indicator. This time, we’re talking about retail sales as a key economic indicator.

Consumer activity accounts for some 65-70% of the US economy, so it is probably worth paying attention to. Retail sales give us a slice of the pie, covering purchases of goods and services. Sure, it doesn’t include housing, healthcare, and B2B transactions and it comes with a 6-week delay, but hey, beggars can’t be choosers.

Below is a link to the website where you can look at retail sales in the US.

Link: https://www.census.gov/retail/sales.html

Prefer to read the transcript? Click here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. And today we’re going to take another question from the Patreon crowd. Specifically, how do I do what I do? And we’re going to talk about one of the economic statistics that I use to figure out where the world is going and what’s going on in the country at the moment. 

And that statistic is retail sales roughly 65 to 70% of the American economy is based on consumer activity. So anything that gives me some insight into that is something I’m all about. Retail sales is arguably the single largest chunk of that, but it’s nowhere near all of it. Retail sales is everything that you purchase, whether a goods or a service, up to and including vehicles. 

But it does not include things like health care and most importantly, housing, which for most people is their single largest expense. What it does is it gives us a relatively accurate picture in a sectoral breakdown on what Americans are spending their money on over a long period of time. So from a positive point of view, retail sales tells us what is up and how people are operating. 

But there are a couple really big drawbacks on the statistic. That means that you have to look at as one of a constellation of factors, rather than just the one thing that you look at. The first problem, in addition to, of course, the fact that it doesn’t include all spending like housing is it doesn’t include any sort of business activity. 

If it’s a business selling a service or good to another business that’s not in retail sales, it only covers business activities that go to consumers. So if you’re like me and you’re very concerned about an industrial and a manufacturing slowdown because of the Trump administration’s tariff policies, it’s not going to get you anything in retail sales. For that, you have to look for industrial construction spending. 

Second issue. It’s not a hard number. It’s an estimate based on surveys of thousands of companies. Which means that not only are you not getting a hard data point like you would with, say, first time unemployment benefits, which is another video we’ve done recently. 

It also means that it takes time to put it all together, because you have to wait for the month to complete, and then you do your surveys and your survey data back, and then you compile that into the overall number of retail sales. And so from the point that you start the process at the end of the month to the point that you have your final data point, it’s about six, almost seven weeks. 

So in just this last week, we got data finally about what went down in June and the June data was pretty good. It was a pretty strong expansion of retail activity, and after two months of negative growth, it was kind of a relief to see some activity with that probably meant is that we were on the backside of Trump’s just kidding. 

Tariffs where he originally had US high tariffs in April, which suppressed activity that continued into May, which suppressed activity. And then in May, he said, you know what, we’re going to give everybody a couple months to adapt to this, and we will revisit this in August. And so in June, the tariffs came off, people started spending again, and we got back to some version of normal, although I’m not sure what that word even means anymore. 

Anyway, June numbers came in looking pretty good, but we didn’t find that out until halfway through July. And again, it’s an estimate. So by the time we get to the other side of Trump’s tariff break in August, it’s not going to be until September that we have some idea of what’s going on. So it’s a great data point. 

It’s an estimate, it’s somewhat backward looking and it doesn’t give you the whole picture, but it’s better than nothing. So I watch it. And now with this QR code you can watch it to.

The Revolution in Military Affairs: Wars Without People

Image of a drone firing missiles

Unless we figure out how to make wights from Game of Thrones or find the Dead Men of Hunharrow from The Lord of the Rings, we’re going to have to figure out how to fight wars without (living) people.

As populations shrink and demographic structures grow top-heavy, military strategies will have to shift. We’re seeing drone tech control the battlefields in the Ukraine War, but defensive tools are limited to jamming or hoping someone makes a lucky shot on the damn things.

This has created huge swaths of uninhabitable marches; areas too dangerous to live in, but too contested to control. As drone tech proliferates and new wars breakout, these marches will likely become the new standard. Wars will be less about holding ground and more about denying function. That is, until the tech evolves again.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here. Coming to you from an aspen glade in Colorado where it’s definitely hiking season. So I’m out and about. Today we are taking a question from the Patreon crowd that’s also going to apply to our drone series, A Future of Warfare series. The question is, in an age of terminal demographics, how does that shape military strategies and tactics? 

That goes perfect with the military? Revolution? We’re experienced with drone technology as new technologies, information transfer, energy transfer and digitization and material science combined to enter a completely new world of warfare. But before we talk about where we’re going, let’s talk about where we’ve been, because it’s really instructive. So if you dial back the clock like, really dial back the clock to the late dark ages, early Middle Ages, when the Mongols were starting to boil out of the eastern Eurasian steppe and sweep across the world, the new technology of the day massed cavalry charges and cavalry, information transport and cavalry driven trade, gave the Mongols a degree of speed, lethality that no one had experience in the human condition to that point. And over the course of a few decades, they just absolutely rampaged across, China and eastern Russia and eventually knocked off the Russian government in Moscow itself, as well as all of the areas in the step to the south. The issue was pretty simple. A bunch of dudes on horse, if they know what they’re doing, can go fast and free over the plains, come in, raid, kill a bunch of people and take what they want, and then gallop away and be over the horizon before any sort of interpretive infantry or archer force can ever do anything. 

So they do this over and over again, through over government, after government, after government, and eventually discovered that they could pack a little water with them and actually cross short periods of desert and attack from directions that no one had seen before. And there just weren’t any good defensive technologies to counter them. Well, eventually, after they killed enough people and destroyed enough governments, including what was the Russian government of the day, people started to develop counters, by hook or by crook? 

By accident. The first one was developed by the Russians, and that was basically just going to hide in the forest, because if you’re in a forest, it’s really hard to get a good straight line for a cavalry charge. The people would have to dismount. And since there were never more than a few tens of thousands of Mongols in the entire space of the former Mongol Empire, any time they did dismount to pursue people into the woods, they were always wildly outnumbered and wildly hated. 

And they didn’t last. So we got this zone where the Russians had retreated. Some of the Russians, the true Russians, if you want to use that term, had retreated north of Moscow into the Tay guy, where they were basically living off of lichen for three generations, and the Mongols, who controlled the open flats by the time the Mongols got to Europe proper, a different strategy, had been developed. And that was to be perfectly blunt. Fortifications. Doesn’t matter how fast your horses, doesn’t matter how good you are with a boar or a lance, if someone is behind a stone wall, you’re kind of out of luck and they’re just raining arrows down on you. So Europe entered their fortification era initially in Poland because of the Mongols or other reasons to have fortifications. 

But in this sort of system, you basically developed feudalism where everyone would run into the fortification when the Mongols or some dudes on horseback or bandits would show up, you’d wait them out, and then you’d go out, back out to your house and tend to the fields. And so everyone tried to store about a year of grain within the fortification so they could wait out a siege. 

That was the technology, the offensive versus defensive development of the day enter a world of demographic decline. And we are literally running out of people aged 50 and under who can say, pick up a rifle or a base plate in a mortar and march out into the field and do things. One of the problems when it comes to military technology is what happens the next day after the battle. 

And if you have a long, grinding conflict like most conflicts are, you have to be able to hold the ground and protect the civilian infrastructure that is necessary for the civilian population to exist. Otherwise, there’s no point in having a military in the first place. So back in the day, people would live in the forests. Not a great option, but the Russians have lower standards. 

Or you would run into the fortifications. In today’s world, the new horses of the plains are drones which can, on a tether, go ten kilometers out from launch point or without a tether can go maybe a thousand, even 1500. Those numbers will only go up. And if you have an opposing force that is in range of you, that has a lot of drones, they can basically make your terrain completely unlivable. 

So we’re probably going to see a resurrection of an old term that dates back to Roman terms, the march, areas that are on the edge of your terrain that you cannot reliably protect. But the opposing force coming in cannot reliably occupy. They’ll become a no man’s zone. 

We already have extensive territories like this in eastern and northeastern Ukraine, where the Russians have basically made it impossible for people to live or farm or maintain basic civic services. 

And the Ukrainians lack the manpower that’s necessary to reoccupy these lands to provide a buffer for the civilians. And so we’re getting an ever widening band that is becoming unlivable. Some version of that is in our future, unless and until we develop a better defensive technologies. Now, at the moment, if you want to take down a drone, your only option is a really good rifle shot, good luck or jamming, which generally only has a range of a few hundred meters if that. 

So we are very early into this transition, and the combination of less manpower to establish that buffer, combined with an insufficient defensive envelope to provide passive cover for that buffer, means that more and more territory across the planet is simply going to be unlivable because of conflict. You think that’s not going to come to a town near you? 

I hope you’re right. But keep in mind, we’re already seeing the echoes of the Ukraine war technology percolating throughout the European militaries across Africa. And really, the laggards here are everyone in the Western Hemisphere, where we haven’t had a meaningful war in well over a century. And honestly, we’re a little out of practice when it comes to actually protecting terrain. 

All of the conflicts that the United States has been involved in since World War One have been on a different continent, and that means we have prepared for different sorts of things. We have been the functional Mongols. We have been the ones that been writing fast but not really bothering to protect very much, with the exception of nuclear cover during the Cold War, which is a very important exception. 

But what it does suggest is that the state, the power of the state, is going to become significantly more potent as the ability to man an army becomes less capable. It’s going to be more about denying the other side the ability to function. Then it’s going to be about protecting your own until the technologies change again.

A Ukraine-US Deal?

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

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

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

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

Prefer to read the transcript? Click here

Transcript

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

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

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

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

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

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

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

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

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

What Happens After Trump and Putin Split?

Split Screen of Putin and Trump with a question mark

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

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

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

Prefer to read the transcript? Click here

Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Copper Imports Slapped with 50% Tariff

Copper tubing

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

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

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Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

Trump and Putin Split, Ukraine Gets Aid Again

Split Screen of Putin and Trump

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

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

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

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Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Highs and Lows of Burgum’s Energy Strategy

Photo of a pumping station at sunset

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

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

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

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Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Elon Musk’s America Party

Portrait of Elon Musk from Wikimedia Commons

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

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

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

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Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We’re going to take this inside. 

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

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

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

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

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

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

  

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

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