Can China Save Itself From the Mounting Debt Crisis?

Photo of woman holding Chinese Yuan

Beijing has announced a hefty plan to help local Chinese governments refinance their debt. But is this enough to ward off the mounting debt crisis?

Local Chinese governments don’t have many revenue sources, so they’re SOL when there’s no more land to sell. Many have issued local government financing vehicles (LGFVs), but they’re essentially hiding the debt…which is over $8 trillion now….about half of China’s GDP. So, the issuance by the national government will help (maybe for 2 years), but it’s not going to solve the problem long-term.

Once the rest of the world understands what China’s debt load actually looks like, I would expect foreign investors to run for the hills. And with all the other issues China is facing, this will be another notch along the journey towards economic decline.

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The Geopolitics of…Gaming

Photo of a gamer in front of a personal computer

PC or console? Yes, I’m talking about gaming preferences…and if you answered PC, then we all owe you a big thank you. Today’s episode is all about the geopolitics of gaming (specifically, the advancements its caused in computing capabilities).

If the terms ping or lag mean anything to you, then you have likely experienced the frustration that has plagued gamers for ages. That very frustration is what helped to advance processing power and high performance chips (GPUs, aka graphics processing units) when most others’ computer needs were satiated. Since gamers needed top-tier graphics and a very responsive system, GPUs were developed to handle multiple processes simultaneously. And guess what those chips were also pretty damn good at? Running AI models.

Without those gamers pushing the boundaries and driving technological progress in this sphere, we would be at a loss for how to handle the AI buildout. Which require being able to handle massive amounts of data simultaneously. So, a tip of the hat and raise of the glass to all the nerds out there.

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Transcript

Hey, everybody. Peter Zeihan here coming to you from snowy Colorado, where we just got our first nine inches, and there’s another 13 inches on the way. Boy howdy. Today, we are going to take an entry from the Patreon page’s Ask Peter Forum. The question is the GOP politics of video games, which I know, I know, I know some of you are like, “What?” Now, this is actually quite planned to become one of the most important economic sectors in the world in the last five years.

I’m not sure whether or not it’s going to continue, but let me kind of lay it out for you. For the period of roughly 2010 to 2021—roughly that window—we had everything we needed for computing power. I mean, yeah, yeah, yeah, you’d upgrade your laptop every 2 or 3 years to get the newest chip.

But we had digitized most things that could be digitized. We’d moved into logistics and communication and information, and all the low-hanging fruit had already been computerized. The question was, “Why do you need ever faster processors and ever more memory if you really don’t have a need for it?” And yeah, yeah, we got Starlink coming up and running, so satellite communications can be an issue. We wanted to build a smart grid. You know, these are all reasonable things, but you only need so good of a chip for that.

As chips got better and better and better and better and better, the number of people who were willing to cash for them got lower and lower and lower and lower and lower. Then the gamers came in because they were solid demand. They always wanted the fastest possible chips with the best graphics processing capacity so they could join larger and larger multiplayer forums and never have drag or lag. It got to the point that they basically kicked off people who didn’t have good enough hardware because they would slow down the process for everybody.

The chip that is at the heart of that, where you had the largest drag and so the highest demand among the gamers for improvement, is something called a GPU—a graphics processing unit.

And they are definitely the most advanced chips in the world today. But a bunch of gamers sitting at home are not exactly what you would call the bellwether of global economic patterns, even in technology. So there was only so much money that could go behind this sort of effort. And then we developed this little thing called large language models and artificial intelligence.

It turns out that the function of the GPU, which is designed to run multiple processes at the same time so that graphics don’t lag, is exactly what you need to run an efficient large language model. And if you put 10,000 or 20,000 of these things running at the same time in the same place, all of a sudden, AI applications become a very real thing.

We would not have AI applications if not for those people who sit at home in the basement and play role-playing games all day. So thanks to the geeks and the nerds and the dorks because it wouldn’t have happened without you. The question is, What happens now? You see, GPUs, because they were designed by dorks for dorks, have some very dork restrictions.

Normally, you only have one GPU in a gamer console, and you have several fans blowing on it because when it runs in parallel, it’s going to generate a lot more heat and use a lot more energy than any other chip within your rig. Well, you put 10,000 of those in the same room, and everything will catch on fire.

So the primary source of electricity demand for data centers isn’t so much running the chips themselves. It’s running the coolant system to keep these banks of GPUs from burning the whole place down.

Now for artificial intelligence, it’s not that the GPUs are perfect—they’re just the best hardware we have. There are a number of companies, including Nvidia, of course, that are now generating designs for an AI-specific sort of chip.

Instead of a GPU, which is like the size of a postage stamp, you would instead have something where there are multiple nodes on the chip. So basically, it’s the size of a dinner plate or even bigger so that you can run billions, trillions—lots of processes simultaneously.

Because the chip is going to be bigger and designed specifically for AI, cooling technologies will be included. It won’t be the power suck per computation—or at least that’s the theory. The problem is the timing. Assuming for the moment that the first designs are perfect (they never are), we don’t get our first prototype until the end of calendar year 2025. It will then be 18 to 24 months before the first fab facility can be retrofitted to run and build these new chips, and we get our first batch.

Now we’re talking about the end of 2027. And if all of that goes off without a hitch (it won’t), we’re not talking about having enough to outfit sufficient server farms to feel the difference until probably 2029 or 2030.

So the gamers have taken it this far. The question is whether the rest of us can take it the rest of the way in an industry with a supply chain that, just to say, has some complications.

So gamers, salute to you. We wouldn’t be in this pickle without you, but we also wouldn’t be able to imagine the future without you.

Election Postmortem…

Well, that didn’t go the way I expected. Here’s what happened…

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Transcript

Hey everybody. Peter Zeihan here, coming to you from a hotel room. I forgot my microphone today. I was planning on doing this from the beach, but there’s a hurricane out there anyway, so it wouldn’t have worked. So, the federal elections did not go the way I was anticipating, so I thought it was worth doing a postmortem. I’m going to remind you how I got to my conclusion, and then we can pick apart what changed.

In the last 30 years, most elections, especially at the presidential level, have been decided by a group of Americans who self-identify as independents. It’s a much smaller set than the people who self-identify, though roughly 30% of the American population self-identifies as Democrats, roughly 30% as Republicans, and the 40% in the middle call themselves independents.

But over three-quarters of that group will vote for one party or the other almost all the time, more than 90% of the time. So it’s really only a thin little sliver of 5 to 10% that has been the balance of power within the American political system for decades. They put in Obama twice, they put in Trump twice, they put in Biden, and they kicked Trump out.

When I looked at what was happening with the American political system, I thought, okay, this is the nut. This is what matters. Watch that group. Focus your predictions on that group.

When we got to the 2022 midterms, Donald Trump had spent the last two years telling independents that their votes didn’t matter and that everything should be decided at the primary level rather than the general election level. The collective response of America’s true independents was, “Hold my beer.” All but one of the races that Donald Trump put his finger on, the Democrats won. What was supposed to be a red wave in the midterms turned into, at best, a red fizzle.

My thinking was: independents are fickle. They tend to switch sides every two or three elections. They get buyer’s remorse, and it took Donald Trump really pissing them off to their core to show up twice and vote the same way twice in a row. Since he didn’t change his rhetoric, my anticipation was that the independents would do what they had done in 2020 and 2022 again in 2024.

Look at these two maps.

This first one shows what happens if the independents split 50/50. You can see how, while it is an advantage to the Democrats, there are plenty of possible ways that the Republicans can pull it out of the fire. But if you get something like what happened in 2022 when the independents break very, very strongly, the second map shows a very different scenario—one that is very, very difficult for the Republicans to have any chance of success.

Some version of the second map is what I anticipated happening in 2024.

Now, we are not going to have final, comprehensive exit polling or political identification polling data until the Pew Research Group finishes their assessment. They started the day the election ended, and I doubt we’re going to get the full results of that study until probably the end of the first quarter of 2025.

But we do have expert-polled data, and we now have the final results from pretty much all of the states. Arizona and Nevada just reported, so we have some pretty good data to work with. At the onset, it appears that my prediction for the independents basically proved true. For three elections in a row, they broke very strongly against Trump.

The problem was that everyone else voted differently.

It’s like we’ve been in this lockstep for, especially the last 12 years, where you’ve got a hard-core group that’s MAGA leading a hard-core group that’s more elite-led. There hasn’t been a lot of movement in those groups. But what we saw in this federal election is a lot of bleed-over as the elite-led group just lost support over to Trump.

To give you an idea of how extreme it was:

The Democratic Alliance, as we understand it today, is based on three pillars of support. You’ve got coastal, primarily white, primarily college-educated elites; you’ve got minorities of all flavors; and then you have organized labor. What happened this time is that a lot of those pillars broke.

Women, especially unmarried women, are a big part of that alliance, but they switched to Trump by five points. Eighteen- to twenty-nine-year-olds—the youth, which almost always work for the Democrats—broke toward Trump by 6%. Black men went to Trump by 7% more than before. Nonwhite college graduates shifted by 9%. Asians shifted by 11%.

People who are in the lower income bracket, ages 30 to 49—people who you’d like to think of as “welfare queens” or whatever—broke 12% for Trump. But Latinos? Latinos shifted by 17%, with Latino men shifting 22%.

So, we saw a lot of these groups that we’ve always associated with being fairly tightly linked to the Democratic grouping break. That changes a lot.

For those of you who are on the left and are going through a lot of kicking yourself and soul-searching, I’ve seen a lot of hot takes in the last week. Just keep in mind that the voters are always right, especially when they don’t show up.

We’ve got three things going on here now that we need to keep an eye on.

Number One

We are in a period of political realignment, and party loyalties are obviously shifting. It’s very much in play. How much in play, unfortunately, is still unclear. The biggest difference we had—aside from the demographic breakdowns between 2020 and 2024—is that voter participation dropped by over 10%. Trump just doesn’t have the pull, for or against, that he once did. That makes drawing any conclusion a little fuzzy.

Number Two

With political factions in motion, a new party is being born. I can’t say right now if the current alignment that brought Trump to power for his second term is a permanent feature of MAGA—it is MAGA. This is not the Republican Alliance; it’s something new. But what I can say is that it is the end of what we think of as the Democratic Party.

Remember the Democratic pillars: minorities, organized labor, and educated white coastal elites. Well, organized labor is now, at best, a swing vote. Over half of them voted for Trump. But minorities are really where it’s at.

The fastest-growing demographic in the country, largely due to immigration, is Hispanics. People always seem to forget this: Hispanics are the group in the United States most opposed to migration in really any form. When Donald Trump made a lot of his pitch about the southern border, that really resonated with the people who, at one point, crossed. Losing those two legs—Hispanics and organized labor—out of the Democratic Alliance means that any places where those two pieces matter for local politics are, at best, up for grabs.

Without some significant soul-searching—and, more importantly, some significant alignment shifts—white, coastal, educated elites? That’s not a party. That’s a book club. It can’t win federal elections.

Number Three

We’re going to have a constitutional crisis in the next couple of years.

If you can put your personal political preferences and passions to the side for a moment and go back and look at pretty much any interview or rally speech that Donald Trump gave in the last three months, I think if you’re honest with yourself, you will see that the guy is failing.

Even if you can’t be honest with yourself, you have to admit that he is older now than Joe Biden was when Joe Biden became president four years ago. The chance of Donald Trump serving an entire term without losing his mind is vanishingly small.

Unlike Joe Biden, who has a group of peers, friends, and confidants who can tell him the truth and nudge him to make decisions—Donald Trump has no one like that. Donald Trump’s MAGA party is a cult of personality. He has purged it completely of anyone who might be able to challenge him.

What we know so far about his new cabinet is that there are going to be no members of his old cabinet who ever told him “no” or “yes, but.” That includes people like Mike Pompeo or Nikki Haley.

So, how do you get rid of a president who has lost his mind? Do you have to wait for him to die?

This is a constitutional crisis for the country because we’ve never been in this situation before. It’s also a leadership crisis for MAGA because Trump is MAGA.

How we shake out of these general trends—a little degree of voter apathy, the demise of the Democratic coalition with no clear replacement, and the coming demise of Donald Trump with no clear replacement—it’s going to be a lively time.

I’m sure I’m going to have a lot to say in the next four years. So, stay tuned.

Can Immigration Solve China’s People Problem?

Photo of Chinese men and women in a town square

China is facing a demographic crisis, but can immigration be used to counter it?

Countries like Canada and Germany have used immigration to bolster their shrinking workforces…with mixed success. China’s demographic problem is a degree of magnitude worse; the rapid industrialization, urban migration and one-child policy all led them down this path (and that birthrate is getting scary low). Immigration isn’t going to save the Chinese…unless they find a way to bring in 30 million young people annually.

So, China can expect a collapse in their workforce and societal coherence within a decade. Everyone else should get out their pen and paper and take notes on how this plays out, and start to prepare for what is to come.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

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

Learn about medshare here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from a snowy Colorado where we’re in the calm between the storms. Two feet behind us, one foot in front of us. Lots of shoveling yet to be done. Today we’re taking an entry from the Patreon forum. The question specifically is: can China use immigration to solve some of its problems?

The scale of the challenge, of course, is huge. And what China has done isn’t really technically immigration. They send their people out to attend universities and pick up technical skills that they can’t get within China, and then they try to bring them back. That has been at least moderately successful. I’d say probably a third to half of the students they send abroad come back. And considering that’s better than zero, you know, take the win where you can get it.

But moving the demographic pendulum is really hard and takes decades, even with immigration. So let me give you a quick three examples.

Canada decided about 15–17 years ago that they were facing a European-style demographic collapse. And so they opened up the doors and, over the course of the next 15 or 17 years, brought in about 4 million people, mostly under age 40. That did stabilize their tax base and their workforce, but it generated 4 million people who needed a place to live. And if you need a place to live, you’re not very price-sensitive. So it caused a housing shortage across the system in the places where there was actually work.

They’re now dealing with the political outcomes of that, which is part of the reason why the Justin Trudeau government is likely to fall in elections next year.

The second example would be Germany, where the birth rate has been dropping for 130 years, ever since industrialization began. But it really fell off the cliff after reunification in 1990.

Now, you would think that you’d have a big optimistic moment like reunification, and the birth rate would go up. The problem is that the East German territories, former East Germany, were economic basket cases, and the Germans collectively spent over €1 trillion trying to rehabilitate the industrial plant and infrastructure. And it was just a waste of money.

So if you’re in the East German system, you saw all this money coming in to try to make your system better, and it all failed. In the meantime, all your young people left, and so your birth rate almost went to zero.

In the West German system, you were paying and paying and paying and paying and paying, and you basically had a 12-year period with negligible economic growth because you were shoveling money into the furnace. So the birth rate dropped there, too.

Of course, it’s a heavily industrialized, urbanized country. When you live in condos, there’s no room for the kids, as opposed to when you live on a farm where there’s all kinds of room for them—not to mention their free labor. So the economic case went away, the emotional case went away, and the birth rate in Germany kept falling.

Probably within the next 7–8 years, we’re looking at about a one-third reduction in the size of the German workforce, and it will only shrink thereafter, with all the implications it has for consumption, tax base, and state coherence.

A few years ago, the Germans let in about a million people from Syria—refugees. And people are like, oh, sorry, demographics? No, they just did that because they were trying to do the morally correct thing. Of the million people, something like 850,000 of them were men. That really doesn’t help the demographic situation in the long run, and that’s before you consider things like language, cultural, and skills barriers.

If the Germans really wanted to solve their demographic problem with immigration, they would need to bring in about 2 million people a year under age 25, every year from now on, just to hold the line. After 20 years, it’s not Germany anymore.

If you’re going to use immigration to stave off a demographic problem, you need to do two things. One, you need to start early before you have much of a problem. And two, you have to have some assimilative capacity so you don’t generate big culture clashes. You want it to be a trickle, not a flood.

Which brings us to China.

Chinese data is getting updated bit by bit by bit. They’re trying to get a grip on their demographic problem. With a population of what they thought was 1.3 billion now looking like it’s closer to 1.1 billion, it may even be less than 1 billion. The scale of what they would need to do is immense.

Also, the trajectory of the Chinese is far worse than the Germans. The Germans industrialized over 130 years. The Chinese did it in about 45.

If you just go back to like 1960, the Chinese birth rate was so high that each woman was having 4–6 kids. Mao was concerned that the young generation was going to eat the country alive—perhaps literally.

So they instituted a two-child policy, which shortly thereafter became a one-child policy. Then the country went through the fastest industrialization process ever. So everyone moved off the farm and into condos and stopped having kids.

We’re now in a situation where officially the birth rate is about 1.2 children per woman. The reality is probably below 1. We already know by official data that in most of the major cities, places like Shanghai or Beijing, it’s already below 0.4 or 0.5.

So you’re talking about one-fourth or one-fifth replacement levels. That means we’re looking at a complete demographic collapse of the Chinese system within ten years. The Germans are practically a slow fade-out compared to what’s happening in China.

Numerically, if you wanted to use immigration, you’d probably be talking about needing to get 30 million people under age 25 every year just to sustain the numbers where they are today. I’m not sure there are that many potential migrants in the world at any given time.

We’re looking at a workforce collapse, a financial collapse, and a state coherence collapse in the not-too-distant future.

The real challenge isn’t how do you save China? It’s gone. We’re just basically marking time.

The challenge in the short term is preparing for its fall because when that industrial plant goes away, we’re going to feel it.

The second challenge, a few years from now, is how do you manage a post-China Asia, where China is in degradation and civilization is in chaos?

Then the longer-term challenge for the latter half of this century will be: what do you do when what was the world’s largest ethnic group vanishes from this world?

When you break down the industrial base—and we’re already in a country where there’s more people over age 50 than under age 50—and they age out to the point that they can’t even maintain their infrastructure, we have a sort of international crisis that we have never seen before.

The Chinese are leading the way. Hopefully, in their fall and dissolution, we can find some lessons that will help us manage other parts of the world that are experiencing extreme demographic decline because they’re not alone.

Remember When…

I’m sure this isn’t a shock, but a lot of folks have asked what I think of the incoming trump administrations cabinet nominations. Before I delve in Monday’s video into the simple and forgiving world of American domestic politics, I think it would be best to review where this all began. In this special weekend edition we reach into the way-back machine and go back to New Year’s 2021 when the world seemed so different, and so similar.

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The Future of Naval Tech & War on the Seas

Photo of a US aircraft carrier on the water

The nature of naval warfare is evolving – with advancing drone tech leading the charge – but not all of the world’s navies and regions will be impacted the same.

Drones are all the rage right now, and they come in all shapes, types, payloads, and ranges. But which countries will struggle with these drones the most? The isolated nature of Russia’s fleets leaves them open to attacks, while the US Navy tends to operate away from coastlines and can unite its fleets if needed. The Persian Gulf and parts of the Mediterranean might be hotter than others, but the US has enough regional allies to keep a strategic advantage. The Chinese navy will face geographical bottlenecks (like the first island chain) that will limit their naval reach and projection power.

The US is stuffing another ace up their sleeve with its Replicator Initiative, which would allow US ships to be converted into drone manufacturing platforms. So again, drones are changing the way in which naval battles are fought, but there will be some obvious winners and losers.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

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

Learn about medshare here

Transcript

Hey everyone. Good morning from Colorful Colorado. Today, we’re going to take an entry from the Ask Peter forum. Specifically, do I worry about the primacy of the U.S. Navy in a situation where the drone technology being developed for the Ukraine war becomes more widespread? Well, let’s start by saying they’re going to become widespread. We’re only seeing something that’s barely out of the prototype stage right now.

And it is proven that in close quarters, relatively speaking, it is already more than capable of defeating an old-style surface navy. Now, I don’t want to overplay this because the Russian Navy is not great under normal circumstances, and that’s if they could all sail together into a single mailed fist. And they can’t—look at the Black Sea, the Baltic Sea, the Arctic Sea, and the Pacific Fleet—all of them independent, all of them having to operate under constrained circumstances.

Now, something to keep in mind about the drones. You’ve got two types: air and naval. Your air-launched drones, at the moment, can’t really carry warheads that are more than 100 pounds. And while that can certainly ruin your day or take out a tank or a building, against a ship, it’s going to be more limited in its ability to be successful.

Keep in mind that ships can move, and if you don’t have over-the-horizon visual capability, just getting the drones to where they need to go is going to be a bit of a problem. So most of the assaults that Ukraine has been launching against Russia’s Black Sea Fleet have been naval. Naval drones don’t have as much range, typically, but they can carry a lot bigger payload.

And since they’re in the water, once they get closer, there’s not a lot that the ships can do about it because they’re used to shooting up at air assets, not down at sea-level assets that are well below the angle that they can fire. So the Russians have to basically counter with small arms. And that would be true for any naval asset.

But keep in mind, there’s this geography issue. Not only are Russia’s navies sequestered from one another, but they’re also in relatively limited bodies of water that are highly contested. So, the Black Sea is obviously the issue of the moment, where the Ukrainians obviously have an outlet on the ocean that is adjacent to where the Russians would like their ships to operate.

But you also have NATO members—Turkey, Bulgaria, and Romania—which have significantly more frontage on that body of water than the Russians. So if you marry these new technologies to the assets of NATO and the industrial plants of a country like, say, Turkey, then the Russians simply can’t have anything floating on that body of water at all.

The same holds true to an even greater degree for the Baltic Sea Fleet, where you’ve got NATO members Estonia, Latvia, Lithuania, Germany, Denmark, Sweden, and Finland, basically countering potential naval power. So if we ever get into a situation where there is a fight on the Baltic Sea, every ship that the Russians have will be sunk, probably within the first 72 hours.

It’s a little bit better on the Arctic, but then you’ve got the ice pack. So for a submarine, if you get below the ice pack, you’re probably okay. But Norway’s right there, and anything that’s going to stay on the North Atlantic has to go right by it, and it’s going to get sunk. And then, probably almost as bad as the Baltic, is the Pacific Fleet, which is completely bracketed by Japan.

Anything that’s going to leave from the Vladivostok area—that just leaves one base at a place called Petropavlovsk—but still, in here, which is a sub base where the subs can kind of go off and drop into a trench and hopefully evade detection. That base, which has no road and no rail connection to it whatsoever, could still operate, but that’s just one spot.

And everything basically has to be flown in to support it. So maybe, like, Russia’s—it’s just absolutely hosed. Compare that to the extreme on the other side with the U.S. Navy. We’ve got an Atlantic and Pacific Fleet that can sail through either the canal or around the Americas to unite into a single force if they want to. It tends to also be long-range-based: supercarriers, missile frigates, that sort of thing.

And so they very, very rarely engage a foe that they can see. You’re talking over-the-horizon hundreds of miles away. Well, that pretty much obviates any capability of the air- or sea-based drones in our current imagination of hitting them. Also, they tend to operate in the deep sea. They never go within sight of the coast if they don’t have to.

So there might be some bodies of water that are constrained, where operating there would be heavily restricted, where there are potential foes who could field a drone force. Places that are probably going to be a bit of a problem include, of course, the Persian Gulf. The days of having a carrier there without, you know, having to worry about it are probably gone now.

The Mediterranean could be a little constrained. But keep in mind, the entire northern coast of the Mediterranean are NATO countries, and the entire southern coast are countries that, for the most part, are favorable to the United States: Egypt, Algeria, Morocco, Tunisia. The one holdout is Libya, and it’s not that Libya’s hostile; it’s that Libya has basically fallen into civil war and is falling apart as a government. Everywhere else that I can already see as a possibility.

Not necessarily because there’s a lot of governments there that are hostile, but it’s becoming a stateless zone in its own way. And the Houthis are probably the best example of that. Just keep in mind that the Houthis of Yemen don’t have an industrial plant. So any weapons they fire are something they’ve brought in from somewhere else. Closer to home, the only thing to really worry about would be the Gulf of Mexico and the Caribbean.

And because there are hostile countries there, most notably Venezuela and Cuba. But if, if, if, if, if we ever get to the situation where that is a problem, a couple of things to keep in mind: Number one, most U.S. naval assets aren’t in the Gulf of Mexico, so you don’t have to worry about a base getting closed in.

And second, in the very, very unlikely situation where we have a military conflict in that area, there will be a land invasion of Cuba in a very short period of time. This is not me recommending—let me make this very clear—I think there are much easier ways to get Cuba on our side, if that’s the goal.

But a country with the population and the industrial plant of Cuba could not survive in the face of an American onslaught should it come to it. And really, that’s the only other spot where there’s a constraint. Between geography and allies, the U.S. looks pretty good. That just begs the question of what is the situation for maybe some other countries that have navies.

In the case of the United Kingdom, yes, it’s close to other land borders—the North Sea, the English Channel—they’re not that big of a barrier. But again, Norway, Denmark, France—you know, these are friendly countries, not hostile ones. And in the case of East Asia, things get really dicey. Japan’s okay because all of its ports are on the east side of the island, so they sail out and then come back to wherever they want to.

So they’re pretty much immune to this. But China—China’s got the first island chain, and any vessel that leaves China has to get by Japan or Taiwan or the Philippines or Indonesia or Singapore. Assuming the United States isn’t playing at all, that’s going to be really hard. And one of the things that the U.S. Navy is working on right now is something called the Replicator Initiative, which will turn its ships into not just combat platforms, but manufacturing platforms to produce exactly the sorts of drones that would be needed to sink everything that the Chinese have in a short period of time.

In the case of a war. Hopefully it’ll never come to that, but Replicator is supposed to be operational by the end of calendar year 2027. That’s not that far away.

The One Road Propping Up US-Mexico Trade

image of Interstate 35 running through Austin, Texas at night

Everyone grab your favorite road trip snack and pick out some good tunes, because today we’re talking about the increasingly important I-35 corridor.

Since mountainous terrain restricts rail transport through Mexico and the Jones Act makes water transport expensive and complicated, I-35 acts as a key US-Mexico trade route. This runs from Mexico City, through Texas (hitting lots of the big cities along the way), then up through Kansas City, and even connecting to other regions from there.

With Mexico’s growing role in North American trade, the I-35 corridor has become one of the most significant trade arteries in the US. While investments in rail infrastructure and reforms to the Jones Act would make transport between the US and Mexico more efficient, the I-35 and its trucks will continue to play a major role until that happens.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

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

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here, coming to you from Austin’s hiking bike trail around Ladybird Lake, or Town Lake for those of you who haven’t been here in a while. Today, we’re going to talk about the Interstate 35 corridor, which I would argue is the most important transport corridor in the United States. The issue is one of geography.

It’s not so much that the U.S. and Mexico are each other’s largest trading partners; it’s how you connect the two. Mexico is a very, very rugged area, so doing large-scale rail transport isn’t really economically viable. If you have a one-quarter of one degree increase in the slope of your rail line, you can only handle about half the cargo, and the spine of Mexico, basically the northern middle half, is all mountainous. Most of the population, within Mexico City for instance, lives over a mile and a half above sea level. So, getting the sort of rail capacity you’d find in the American Great Plains or Midwest just isn’t possible in Mexico. That leaves us with truck transport.

In the United States, we have a similar constraint, but it’s due to policy rather than geography. The U.S. has the largest natural navigable waterway system in the world, but because of the Jones Act, we don’t fully use it. We’ve basically made it nearly impossible, quadrupling or more the cost of water transport by saying that anything connecting two American ports has to be on a vessel that’s American-owned, -built, -captained, and -crewed. This policy again pushes us toward using trucks.

And that’s where I-35 comes in. I-35 is basically the transport artery that begins in Mexico City, runs up to the Texas border, hits three cities in the Texas Triangle—San Antonio, Austin, and Fort Worth—and then goes up to Kansas City, with offshoots along the way toward the east and west coasts. Eventually, once you get up to Kansas City, there are also routes going north to places like Des Moines, Duluth on the Great Lakes, and further west toward the Canadian prairie provinces.

So, everything is essentially shipped by 20-foot container units, rather than by rail or water, which would be far more efficient. Until we figure out a solution for a road system that, in most places, is six lanes or less, we’re constrained on how much we can do within the North American system. The smart play would be to invest $1 trillion in rail infrastructure in Mexico and to amend the Jones Act so that the Mexicans could ship stuff to Veracruz and then up through the American waterway system. But until then, we’re stuck with this system—ergo, traffic at all hours.

Oh, and one more thing: I-35 is just around the bend of the river here. The second biggest, most important trade artery in North America is on the opposite side of the country, where Ontario meets Michigan. The Ambassador Bridge between Windsor, Ontario, and Detroit, Michigan, was until very recently the most important trade way, primarily because of the automotive trade, and it remains incredibly important today.

I’m not suggesting that it’s gotten any smaller—it hasn’t. But Mexico has overtaken it by a significant margin in the last ten years.

Which BRIC’s Member Will Survive?

The future for most of the BRIC countries is not – as Rihanna so eloquently put it – “shining bright like a diamond.” If I had to choose between Brazil, Russia, India and China, my money is on India outlasting the others.

Most of you know where I stand on China, and its collapse is inevitable. Russia has been shooting itself in the foot for ages, and its recent war on Ukraine is only going to bring them closer to that final bell. Brazil has a better demographic outlook than China and Russia, but geographic constraints and dependence on China will catch up to the Brazilians sooner or later.

Thanks to a stable demographic picture and growing need for self-sufficiency, India stands out as the most resilient. As long as these factors remain, India is set to do very well…even if they have to do everything on their own.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

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

Learn about medshare here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Maine. That’s New Hampshire over there. Because, you know, what? You state. Today I’m taking an entry from the Ask Peter Forum, specifically of the original BRIC countries: which one do I think is going to do the best and stand the test of time and why? And it’s always… there’s no boat.

The waves can’t be good anyway. Well, let’s do a process of elimination. First and foremost, China — let’s dispose of that. Demographically, China is facing national dissolution. The birth rate has now been lower than the United States since the early 1990s, and it’s already at a point where it has about the same number of people over age 50 as under.

So, we are looking at ethnic dissolution of the Han ethnicity before the end of this century. To think that there can be a country that comes out of a place with no people? No. It’s just a question of how China dies. And that’s before you consider that this is a country that imports almost all of its energy, imports almost all the components that allow it to grow its own food, imports almost all of its raw materials, and is completely dependent upon exports to the wider world in order to absorb all of its manufacturing capacity.

It is the country on the planet that is most dependent in absolute terms on globalization, and that means on the U.S. military to make sure that its ships can travel without being molested, no matter where in the world they go. That is a bad business strategy. And we’re going to be seeing the end of the Chinese system and probably of the Chinese state within ten years. So, not them.

Russia second. Very exposed geography: 5,000 miles of external border that really doesn’t have an anchor in any sort of geographic barrier. They have to defend the whole thing. Part of the logic of the Ukraine war is to get closer to the old exterior crustal defense they had during the Soviet period, where they could rely on things like the Tension Mountains or the Carpathians to shorten that external barrier.

So, they’re in a weird situation that if they don’t expand, they can’t actually shorten their external borders. Russia today actually has longer external borders, even just by drawing on a map, than the Soviet system did, despite losing all 14 of the constituent republics. So, geographically, that’s a bad situation. Demographically, we don’t have nearly as good of a picture of Russian demography as we do of the Chinese because the Russians stopped collecting census data 17 years ago and just started making up the data.

But at the time, they had one of the worst demographic structures in the world, and even by their official fabricated data, they’re in the bottom ten. So yes, Russia is not long for this world. The question is whether it dies this decade, next decade, or the decade after. There are some things they can do to buy themselves more time. They’re not nearly in as poor of a situation as the Chinese are, but they’re certainly not an economic power, and they can’t even maintain their raw materials exports without external help.

Third up: Brazil. Demographic situation is much better. Brazil didn’t really begin industrializing and urbanizing in fervor until the 1990s. Now the birth rate has dropped by almost three-quarters since then. But even if they keep aging at their current rate, they’re not going to face a Chinese or a Russian situation before at least 2070. So there’s still a demographic dividend to be had.

Their problem is more geographic. Think of Brazil as a table that has lost two of its legs, but the two legs that fell off are the ones to the interior. So if you want to start from the coast and get into interior Brazil, you first have to go up an escarpment and then gradually down into the interior. That means it has very, very high infrastructure costs because everything requires going massively uphill from these tiny little flat plains in the cities that are on the coast.

That makes Brazilian cities dramatic and beautiful, but it also means that everyone’s living on a postage stamp in a slum, and the only real city that they have that you would recognize anywhere else in the world is Sao Paulo. Up on top of that escarpment, which is a normal city, and so the economic hub. But it makes its interaction with the rest of the world very, very difficult and expensive.

So it’s not that Brazil is flirting with failed state status like China or Russia, but it’s very difficult for it to operate unless somebody is going to underwrite its development. Now, since roughly 1990, that country has mostly been China because the Chinese are not price-sensitive when it comes to getting raw materials, and so they will basically fund the development of infrastructure in Brazil in order to get to the farms and the mines that are in the interior and bring it out.

But in doing so, they also built joint ventures with a lot of Brazilian companies — joint ventures, which was Chinese for stealing all the technology that the Brazilians had so painstakingly developed over the last 40 years, taking those technologies back to China, mass-producing them, and forcing all the Brazilian companies out of business. So Brazil is actually less advanced now than it was 30 years ago. And that’s a really tough road to hoe.

The final country, of course, is India, and that is the default winner. But they probably would have won on their own anyway. Like Brazil, they had a demographic moment, and they’re now aging. And like Brazil, they didn’t really start to industrialize until after 1990 because they were basically pro-Soviet and didn’t want to participate in something that was U.S.-led, like globalization.

And so they are aging very quickly. But again, like Brazil, this isn’t going to be a real problem till at least 2070. In addition, India has never had a manufacturing pulse like, say, Brazil did. So there’s no place to fall. There was no place for the Chinese really to cannibalize these. What they need to do now, what the Indians need to do now, is more or less the same thing we need to do here in North America.

If they still want stuff in a post-China world, they’re going to have to build up their own industrial plant. And that is a growth story, but it’s going to be a more complicated one than it is here in the United States because the United States has partners in this. We’ve got Mexico and Canada and trade deals with Japan and Colombia and Korea, a solid relationship with Taiwan. And if the Brits can ever figure out what the hell Brexit means, I’m sure the Brits will be brought along for the ride as well.

That means that we have help in building out our supply chains, and we can all specialize in the things that are the best. India doesn’t have that. Every country that India borders hates India, and India hates every country it borders. So India is going to have to do all of this by itself, and that will make it more expensive. And that means it can’t get any help. And that means it has to build up the infrastructure with its own system in a way that we just don’t have to do in the United States.

There’s a pro and a con for that. The con is obvious. The pro is that this is an Indian story. With India doing this for its own reasons, on its own time schedule, in its own way, for its own needs. Yes, it will take longer. Yes, it’ll be a little ugly. Yes, it’ll be a little dirtier than it could have been otherwise. But it means that India will be globally significant even if it’s not globally involved.

And in a globalizing world, that’s just fine.

Counting (Lithium) Chickens Before They Hatch

Photo showing trucks at a lithium mine

Some new advancements in AI and geology have revealed a massive lithium deposit in Arkansas’s Smackover Formation (great name by the way). While this is good news, we still have a lot of work to do before this lithium sees the light of day.

Traditional methods of lithium extraction aren’t going to work in Arkansas, so Exxon is pioneering a chemical extraction process, which is showing promise. Again, we’re early stages in what this will look like, but it has solid potential.

This deposit might not solve the demand EV’s are bringing about, but there is huge potential to improve grid storage. This would allow excess renewable energy to be stored, addressing rising energy demands in the US. Again, this is still early on, but energy storage could be transformed by 2030.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

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

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here, coming to you from Portsmouth, New Hampshire, which is not only disturbingly pleasant—I mean, it’s kind of surreal—but there are more good food options within a two-block radius than in the entire Denver metro, which kind of pisses me off anywho. I’m here near Market Square, and today we’re going to talk about the new…

Well, it’s not all that new, but the popularization of the lithium deposit that was found in Arkansas. Now, like I said, it’s not new. This is called the Smackover formation, which is a great name. I want to buy a drink for whoever named it. Anyway, it’s been producing bromide for the better part of a century, so the geology is reasonably well known.

What has happened is one of the breakthroughs with AI is being able to look at the geology from new angles, and correlate it with updates in understanding for mining and geology that have come in the decades since. And they think that there’s more than enough lithium there to supply global supplies for like a factor of nine or something. Ridiculous.

Now, I don’t want to overstate this, because just because the lithium is there doesn’t mean it can be harvested. For example, 90% of the oil in the world that we are aware of will never be able to produce. It’s too deep, it’s too technically challenging, the bits are too small—whatever it happens to be. But in the case of the Smackover, in specifically the Arkansas part of it, there’s already production in this zone, and it has been for decades.

Just not for lithium. Quick review of lithium production. There are two types: you’ve got rock formations and rock mining, which is what dominates in Australia. It’s a little bit more expensive than the other method, because you actually have to pull the ore out of the ground and grind it up and process it to extract the lithium from everything else.

But it is a relatively quick way of doing it, even if it is involved. It’s rock mining, so, you know, you’re going to have all the tailings, you’re going to have all the processing issues, and all the at-long costs. It’s energy-intensive—all that good stuff. Second, you have brine mining, which is what they have in Chile.

There, there’s a subsurface water source that is rich in dissolved lithium. You pull the liquid out, you pour it into an evaporation pond, and over the next 18 months, you, you know, basically wait for it to concentrate. So it’s cheaper than rock mining in Australia, but there’s a really long lag time, and you need a specific sort of surface.

Up on top, in order to do the extraction.

So the Atacama Desert in Chile is one of the driest parts of the world, and the mines are about 7,500 ft. So you have a lot of sun, you’ve got a desert, you’ve got low vapor pressure, and it still takes 18 months to concentrate the brine down to something that can actually use. In the case of all, in case of Arkansas, it is a brine formation.

The Smackover. But you’re talking about a state where the highest point in the entire state is like 2,500 ft, and where the mines would be, they’re significantly lower. And you don’t have the large, flat, dry areas. Arkansas is pretty humid, so doing traditional evaporation is just completely a no-go. And if that was the only technology in play, this wouldn’t work at all.

But it’s not the only technology in play. There is a relatively new method for lithium extraction from brine, which is basically a direct extraction that uses chemical catalysts and similar things to extract the lithium from the water. Now, the concentration in Arkansas is about 300 mg/L versus 400 mg/L in Chile.

So the Arkansas deposit isn’t as good in terms of quality as a Chilean one, but there’s a lot of infrastructure in place already, and Exxon is the primary company that is involved. And, you know, Exxon doesn’t pull things out of the ground unless it thinks it can make money. And so it has pioneered this direct extraction technology in a number of test wells already on site in Arkansas.

So the only thing that has really changed is that we’ve had this new AI model saying that there’s a lot, a lot, a lot, lot more than we originally thought. And in the next three years, Exxon expects to have first commercial volumes. Now, they’re not telling us what “commercial volumes” are, so we’re going to have to wait and see.

But, one of the things that has been a limiting factor on a lot of the green transition is batteries, and I have not made any secret of my general opposition to lithium use in transport, because it’s a horrible battery chemistry. It charges too slowly. It discharges too slowly. It heats up and swells. It’s just a bad idea to put on something that moves.

But if you were to make a lot of small- to medium-sized batteries, put them in series, and just put them in a building where the heat and the swelling could be maintained or even harvested, you could use it for grid storage very, very, very easily. So this isn’t going to revolutionize the world of EVs, but it might, if it works, revolutionize the world of electricity.

One of the problems we’re going to have in the United States over the next ten years is as the Chinese system vanishes from the world, we’re going to have to expand our industrial plant. That means we need at least 50% more electricity generation than we currently have. And until and unless we can build the infrastructure to link the entire country together so that anyone can generate power anywhere and send it anywhere else—which is a tall order.

The easier patch is to put a lot of batteries in a lot of places, so that during periods of high supply and low demand—for example, solar shining during the day—you capture the extra and then use it at night. Everyone’s asleep at night. You burn your natural gas at night, when normally you would cycle. Now you just pour that energy into a power, into a battery pack, and then you use it during the day.

You know, you could use this in any possible grid if we can produce enough lithium at a low enough cost. And I have to say, between the engineering, the technology, and the geology, this does look promising. Just keep in mind: first commercial production, 2027, which means first large-scale batteries, 2030. This isn’t going to solve everything overnight, but it’s a very promising step in the right direction.

My Favorite US President of All Time Is…

Many of you have asked who my favorite US President is, so I figured I would do a video covering that. And we don’t have to go too far back, just to number 41 – George H.W. Bush.

He had the right skills for the job (thanks to experience as a congressman, ambassador, CIA director, and VP) and he navigated a changing (and globalizing) world in a way that sustained American dominance, improved the human condition, and helped manage the dissolution of the Soviet Union.

Since “Poppy” lost his re-election, we’ve seen a series of narcissistic presidents, leading the US down a more isolationist and protectionist path. The window to reshape the global order is closing for now, and it will be a few decades before the US and the wider world is ready to try it again.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

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

Learn about medshare here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from D.C. That’s obviously the Washington Monument behind me, one of the handful of things not covered in scaffolding at the moment. Considering that the election is almost upon us, I decided to take a question from the Ask Peter forum on the Patreon page and answer: who is my favorite president and why?

And that’s a no-brainer. That’s George Herbert Walker Bush. If you consider he was president at the end of the Cold War and helped manage the decline of the Soviet Union without a shot being fired in our direction, isn’t that enough to make him a great president? But think about what it was he tried to get us to do.

He wanted us to have a conversation with ourselves about how we take the Cold War alliance, the globalized system, and play it forward for another generation of American preeminence, while also aiming to improve the human condition. And if you think about what he inherited, that was pretty bold, because the whole idea of globalization was that we needed a world full of allies to be on our side against the Soviet Union. To do that, we created the global structure and used our Navy to patrol the global ocean so anyone could trade with anyone else without even a military escort.

Basically, it would be like every single country won World War II all by themselves and could dictate the terms. Free commerce, and the U.S. allowed everyone to do that. Having those assets in play when the Soviet Union finally fell presented the ability to create a new human condition on a global basis, and he was the right person to do it. Not only had he just come from the White House—not just for two years as president, but eight years as vice president—he had served in Congress as an elected representative.

He’d been an ambassador to China, run the CIA, and was on a first-name basis with everyone in the world who mattered. He was the right person in the right place at the right time with the right Rolodex, asking the right question. So, of course, we voted against him, threw him out of office, and started down a parade of relatively or increasingly narcissistic leaders.

The six we’ve had since then include definitely four of the worst presidents we’ve ever had in American history. I’ll let you guys debate among yourselves who the two exceptions are. But it was a missed opportunity. And now, today, that opportunity has probably expired. The United States has not just simply turned sharply isolationist and protectionist on both sides of the political aisle, but the nature of the world has now changed to the point that doing any sort of broad reboot is not possible.

Thirty years on, we’re all 30 years older. Most countries have terminal demographics, and the moment we had to reshape everything has passed. So we’re going to have to wait another 20 or 30 years for all of this to shake out. Hopefully, at the end of that period, we will have another president similar to Herbert Walker Bush who is willing to ask us that question again.

And maybe this next time, we’ll choose to answer.