The Future of Politics and Peace in West Africa

We’ve got another question for our Ask Peter series today: What are the long-term impacts to Western interests of the recent political upheaval in West Africa/the Sahel, especially given the break in security partnerships with the United States and Paris?

There’s a few ways this could play out, but this situation could lead to increased jihadist activity, some non-state actor proliferation, and further destabilization in the region. Russia might even start poking around by backing certain factions and disrupt these regions further.

Nigeria has an opportunity to step up and play a stabilizing role throughout the region, but addressing these security challenges throughout West Africa will be essential moving forward.

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Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

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TranscripT

Thanks for joining us today. My name is Michael, and I’m director of analysis here at Zeihan on Geopolitics. And it’s my pleasure today to have a conversation with Peter Simon about some of the questions you send to us about what’s going on in the world. With that, we’ve seen a series of political shifts in West Africa, especially in the Sahel region. 

I think the one that has gotten the most attention is the rise of the winter in Niger and the cessation of security, particularly counterterrorism cooperation between many of these governments and Western powers, US and France being another major one. Are there any long term security implications for Western interests? If these breaks in security cooperation lead to what most people think is the inevitable outcome, a further rise, jihadist activity, non-state actor proliferation area and further destabilization in a place that can ill afford it. 

Well, there’s basically three big things. The first is exactly what you’re suggesting there. the states of the Sahel are very weak. They have borders, they can’t patrol. They have territories. They can’t patrol. You’ve got isolated population centers and a whole lot of nothing in between. Agriculture is weak. Energy is almost unheard of in most of these countries. 

They are barely states, even with robust American and especially French assistance. And so you remove the French and the American assistance in their capacity to even function as states. And these are becoming stateless areas. That doesn’t mean there aren’t powers there. And this is called the belt for a reason. And the Russians looking for a way to throw problems into the Western world, has basically worked with specific factions within each of these countries to overthrow the governance systems. 

And so we now have a stateless system with a gang backed by the Russians on top. And that is unfortunately the future of the region. Unless someone decides to get more directly involved, that will not be the United States. It looks like it’s not going to be the French. The biggest power that may may be interested would be Nigeria. 

And if they do, who look the fuck out because they’ve got capacity and they don’t take shit from anybody. so that’s number one. Number two, there are security outcomes from this that go well beyond this region. the Russians have, in essence, decided to throw sand in the gears and a lot of weak places, thinking that it gets them a lot of influence. 

And, and from a Wagner esque gold mining point of view, maybe it does, but they are losing influence in places that matter a lot more to them. Basically, we’ve seen Russian power expunged from the Caucasus in Central Asia, and at the end of the day, areas of the Russian border are much more important to Moscow long term than anything that’s happened in the Sahel and West Africa. 

It’s also getting the Americans and the French in particular, to stop mucking around in an area that is of tangential interest to them, and focusing on something that is much greater interest. So you might have French troops in Ukraine by the end of the year. We might have Turkish forces in places like in Nagorno-Karabakh, in, this in the Caucasus. 

Within a year or two, we might have Armenia slipping over to be part of more of a Western orientation than it has ever been. pieces are moving. And by putting their hand in the West Africa, basically, the Russians are daring the world to chop off their hand, and they’re probably going to get what they wish before long. 

And it’s come at the cost of something that actually matters to them. So I don’t think this was a good long term play for the Russians because it refocused attention. Now, if you happen to live in this area, this is all very bad because if you become a stateless area, groups like Al-Qaeda, ISIS and the like can operate there with relative impunity, which is what brings me back to Nigeria, the country with the biggest interest in this region not descending into anarchy is a low country that has a military that out staffs all of the crew belt combined by a factor of four five. 

If Nigeria is moved to action, it will do so with at least implicit support from the Western world. And we get our first ever African superpower. So yeah, this matters. The online system Nigeria will love to hear this. 

The US Places Huge Tariffs on Chinese Imports

An AI generated image of connex boxes with American and Chinese flags on them

Some hefty tariffs have just been placed on many Chinese imports, including electric vehicles, semiconductors, solar panels, and more. This is an attempt to prevent China from dominating industries that the US wants to develop.

China will probably slap some more subsidies on these goods, which will lead to more tariffs and so on and so forth. These Chinese goods might also be hit with some European tariffs, but they’ll likely be smaller and easier to offset with subsidies. The developing world might be in the crosshairs as the next Chinese import market, but some infrastructure buildout will have to happen first.

As China continues along its downward spiral, impacts like these tariffs will have more outsized effects on the Chinese economy.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know 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. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hello from Poznan. Peter Zeihan here. Still in Poland. Today is the 14th of May. You’ll see this on the 15th. And the news is that the American administration under Joe Biden has just announced a series of very robust tariffs on Chinese imports, roughly 100% on electric vehicles, about 50% on semiconductors and solar panels on similar levels on a raft of other things. 

the goal, very simply, is to prevent the Chinese from swamping industries that the Biden administration is attempting to develop. this is something that has extraordinarily high bipartisan support. In fact, Donald Trump has already come out in favor because of his style, saying, I would have done even more. and that’s actually kind of on the point. 

the Chinese will respond to this by increasing their subsidies even more, which will force this administration or the next one to again up the tariff levels. Basically, the Chinese government will not be allowed to swamp products of these types and an increasingly wider variety of types into the American market at all. Now, that will, of course, trigger its own counter effects, because the Chinese will then try to put it into any market they can. 

Here in Europe, the question like in the United States isn’t will there be tariffs on Chinese products? But how high? Now, under policies currently under consideration by the European Commission, who kind of the executive arm of the European Union. tariffs are coming, but they’re going to be somewhere between 10 and 40% most likely. And that’s just not enough. 

the Chinese subsidizing of these industries is so extreme that anything less than 100% that the Biden administration has done is really not going to do more than slow things. And if you think Ford and GM have a lot of political pull in the United States, that’s nothing compared to Mercedes and Fiat. And, and Volkswagen. So high, high, high tariffs are coming to Europe on these topics as well. 

The only other place these products can then go is the developing world. But the developing world for the most part, doesn’t have the electrical system that’s necessary to use light electric vehicles. So the Chinese will be able to swamp some of these markets, but not enough to move the needle on where the Europeans versus the American versus the Chinese feel they need to be. 

Now, keep in mind that part of the reason why the Chinese are doing this is in the five years since the Covid started, the Chinese are now realizing that their population has shrunk a lot more than they originally thought. So they no longer have enough people under age 45 to mount any sort of consumption led economic recovery. And with the exception of industrial demand in China the last two years, we’ve really seen no increase in consumption at all. 

the population is simply aged out. So export led growth is all they have, and they’re no longer being allowed access to the American market. And very soon they won’t be allowed sufficient access to the European market as well. 

Putin Removes Sergei Shoigu as Russian Defense Minister

At the time of recording, Sergei Shoigu still held the title of Defense Minister in Russia. Shortly after this video was recorded, Putin confirmed my suspicions and removed Sergei Shoigu from office.

Well, I hate to say it, but Putin might actually be making a solid strategic move by removing Defense Minister Sergei Shoigu from office.

Like most things in Russia, getting a seat at the table is all about who you know; that’s exactly what happened with Putin’s ole buddy Shoigu. Since he became Defense Minister, he’s been widely criticized as a significant hindrance to Russia’s success in the Ukraine War – you know, mostly because he didn’t have any military experience and was shelling out defense budget to his cronies.

It appears that removing Shoigu from office is part of a broader trend of Russia becoming a more conventional power, so maybe they’ll even learn their lesson and put someone with experience in office.

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Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

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TranscripT

Hey everyone. Peter Zeihan here. Coming to you from Poland. the news today is that Russian President Vladimir Putin is apparently publicly musing about the idea of right to flee. Seen the defense minister, Sergei Shoigu. Somebody else. I can’t emphasize enough that this would be the single biggest shift in the Ukraine war to date, because Shoigu is arguably be the least competent public servant in the world at the moment. 

The only reason he got the job as defense minister is because he’s a buddy of Putin’s going back to his days in East Germany. he doesn’t know what he’s doing. He has no military experience. the only he’s good at is stealing maybe one third of the appropriation budgets for the years of he’s been defense minister had gone to him personally, and a third have gone to his cronies. 

so he is probably the single biggest factor in clay right now. Why the Russians have not been doing well in Ukraine war. And if he were to be sacked and replaced with, like an average third grader who doesn’t even speak Russian, there would probably be a significant increase in Russia’s capacity to prosecute this war. So it’s Russian cronyism in many ways, has been helping the Ukrainians consistently. 

And we’re now at the beginnings of seeing the Russians kind of turn the page and become more of a normal power. every, every, every Russian war in history starts is a disaster, just as the corruption is endemic to the Russian system, crushes a system. There’s no morale. There’s no sense of camaraderie. And the logistics are awful. And then, bit by bit by bit, the Russians tend to rally slowly, sloppily, never even reaching what you would consider to be the global average, but improving nonetheless. 

And we’ve seen that in tactics. We’ve seen that in logistics. We’re seeing that in weapons systems, that it’s very possible that we will now see that in leadership first tonight. 

WEBINAR – Peter Zeihan’s Risk List: What Keeps a Geopolitical Strategist Up at Night

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Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Adventures in Gun Running: Iran

We’ve got some new players in the global weapons trade, and let’s just say that I prefer the old gun runners.

Traditional suppliers like France and the UK are still providing weapons to their allies, but Russia is now seeking out weapons for its conflict in Ukraine. This has enabled countries like Iran to emerge as sellers of advanced drones and leverage test data from a real war.

The impact of weapons like this on weaker states could be devastating. From destroying infrastructure to disrupting government functions, we could very well see the dynamics of low-level conflicts completely shift.

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Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

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TranscripT

Hey everybody. Peter Zeihan here coming to you from Colorado. And today we’re going to talk about recent changes to the global weapons trade. Now, there are some usual suspects that are still in play. Notwithstanding this, France, United Kingdom, still providing weapons to their allies as well as their, actually, we call quasi allies. And most of this stuff tends to be pretty standoff weapons free.

that links you into a supply chain network that is much political and strategic as it is technical. So, for example, when the United Arab Emirates buys things like F-16s, it’s not because they’re necessarily planning on flying them. They buy the best available because they want to make a big splash in the checkbook of American arms manufacturers for political reasons.

They’re they’re purchasing a relationship with the United States. And so the more advanced stuff like, say, the F-35, they will probably never fly. Anyway, that is continuing apace. and the Chinese, of course, are involved too. The problem with the Chinese is nobody trusts the supply chain in times of conflict. because the Chinese have proven that they’re willing to extend or withdraw technical support based on other concerns.

And so if you want some cheap stuff, that’s unlikely to, be too useful in the long run. The Chinese are definitely there for you. But the more advanced stuff, the Chinese really don’t like to share the good stuff. So, you know, I would suggest they’re not a player, but not a huge one. when you consider the size of their manufacturing base, the two, the three countries, however, who have really changed in the last couple of years.

the first one, of course, is Russia, who is now involved in its own hot war. And instead of selling weapons to the wider world, it’s buying weapons from the wider world, specifically from the countries that it once sold to its opponents all the equipment back because they know they can’t absorb too much technology, and they know they need more bullets and artillery rounds and everything else.

the other two players who have changed, the first one has also slipped down the rankings, and that’s North Korea. I hear it’s a technical issue. North Korea is many, many things, but a technological superpower does not. And while it in the past has produced a large number of weapons for export, the quality of them hasn’t really improved over the last 20, 25 years.

So they are seen in the face of more advanced systems, a little bit of competition. I don’t mean to suggest they’re not a proliferation risk. things like intercontinental ballistic missiles or nuclear programs. Those are still things where they are in the top ten in the world. but it’s not like they’re this gaping source like they used to be.

And one more thing about the North Korean military, you know, it’s huge. And they spend a lot of their efforts simply keeping up with what they’ve already built, just keeping it updated. So you miss the Ukraine war has been a godsend because the Russians came in and bought something like 10 million artillery shells from them that were half century old.

And so the North Koreans are spinning up their industrial process to keep their own system supplied. They don’t have a lot of spare capacity for mass exports. and that leaves the new kid on the block country that usually we think of as a weapons purchaser rather than a seller. And that is Iran. Iran, starting about seven years ago, started to get into the world of drones when it launched an attack across, Iraqi airspace to target, the Gwadar oil fields in Saudi Arabia.

And since then, they’ve been using the Yemen war as cover to basically test out all their new kit. And now, with the Ukraine war, they are selling stuff for the Russians. And the Russians are replying with a, a lot of real time weapons information and are starting to mesh it into their satellite network. So the Iranians are getting much better test data than they’ve ever had before.

And this is allowing the Iranians to produce these things at scale, knowing there is a long term consumer in the Russian space, and it’s also allowing them to expand their industrial plant that’s necessary to sell these things on a wider market. So we’re seeing things like the shaheed drones that have become famous in Ukraine for attacking power systems, popping up in wars throughout the Middle East and in Africa.

And in this, we’re seeing kind of the curl of the wave of a new wave of weapons technology that it’s not so much that it’s super accurate, although compared to, say, the ballistic missiles of a too long ago, it is it’s you can attack a specific target with precision at a significant standoff distance. the shaheed can easily go 1000km, and some of the better versions can even go further.

And while the warheads may not be massive against an unarmored target, it’s pretty much a guaranteed kill. And you use them to target buildings rather than, say, moving cars or something like that. As we are discovering throughout the Ukraine war, it is much cheaper to launch these attacks than it is to defend against them. And when you look at places that have limited infrastructure where the power of the state isn’t great, those are the places where these sorts of weapon systems are going to have an outsized impact.

So, for example, just to pick one out of the box, the Civil War that’s currently going down in Sudan, there aren’t a lot of fixed places that are worth something. And those that are in existence can get hit by drones very, very easily. So for weaker states, this evolution and technology is almost the kiss of death. If you get into an armed conflict, because there’s no way you can afford to defend your fixed sites.

So the only solution is to buy a bunch of these weapons and hit the other guy first. So the conflicts that we’ve been seeing that have been steadily more involved and bloodier since about 1990. In this part of the world, sub-Saharan Africa, North Africa and the Middle East, and maybe to a lesser degree, Central Asia, you should expect to see a lot more activity like this, and you should expect it to do some real damage, not necessarily in a military sense, but to the ability of a government to function.

Because if you can start taking out things like power centers, and every once in a while, drop a drone on the presidential palace, the disruption that’s going to have to a system that is already pretty weak is fairly extreme. Today, Iran is the primary purveyor of things like this. But, you know, no offense to the Persian scientists.

They’re not top notch. And it’s not going to be too long before other countries get in on that particular action. As these weapons become the new normal for low level conflicts around the world.

Much Higher Interest Rates for Much, Much Longer

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Who doesn’t love spending their morning trying to understand what the Federal Reserve is doing? Oh, no takers? Well, let’s at least look at inflation trends and where I expect interest rates to go.

Thanks to COVID-related supply chain disruptions, inflation has stabilized around 3% (instead of the Fed’s magic 2%). Those baby boomers are also part of the problem. As they age into retirement, capital availability is going to decline and the Fed’s going to have rethink their strategy.

I doubt we’ll see interest rates drop for the next few years, so if you’re planning on borrowing some money…you might want to get on that ASAP.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know 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. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody, Peter Zeihan here coming to you from Colorado. And today we’re going to talk about the Federal Reserve and monetary policy, specifically on the 26th of April, the personal Consumption Expenditures Index, which is the Fed’s preferred measure of inflation, ticked up to 2.7% when everyone’s been hoping that’s going to tick down. the folks on Wall Street are starting to get very thoughtful because they had all bet in the fourth quarter of last year.

In the first quarter of this year, that by now we would have had a half a dozen rate cuts to stimulate the economy. And the Federal Reserve does not seem interested at all. And playing to their preferred narrative. So I thought it was worth going back to understand why we are where we are, and why you should not expect rate cuts probably at all.

If anything, rate increases for the remainder of the next 2 to 5 years. So step one, most of the inflation story that we’ve been experience of late has been Covid related. Every time that we saw a shift in consumption because of an opening or closing or new variant or new vaccine, whatever it was, we changed what we consume in terms of goods.

And every time we changed our consumption patterns, we had to, retool the supply chains to match the new demand. And it’s going to vary wildly by product and by region. But on average, you’re looking at an 18 to 24 month adjustment period before supply chains can catch up to what we want. Well, most of us reopened more than two years ago in California, the last American state to reopen for good, did so just under two years ago.

So for the last two years, we’ve been seeing inflation steadily tick down as supply chains catch up and the goods mismatch and the supply chain mismatch becomes a smaller and smaller feature in the system. unfortunately for the people who want lower rates, well, this has brought inflation down from 9%. We’re roughly ahead of the peak to something closer to three.

we’ve leveled off at three. And while we might have a little bit more to shake out as California fully comes back into the the system, I doubt we’re going to get down to the 2%, which is the ceiling that the Federal Reserve prefers. So we’re probably at what is our new normal, for inflation low. So not new, not our new average.

And unless we have a change in the Fed’s mandate, you shouldn’t expect interest rates to go down below where they are. If anything, you should expect them to go up. now, that requires understanding a couple other things that are in play. one of them is a little petty, and one of them is definitely not. First, the petty one.

The Federal Reserve looks at Wall Street and it says you have been dealing with capital inflows, of a huge volume, and you’ve been fairly irresponsible with them. you’re responsible for the.com crash. You’re responsible for the subprime crash. and we needed ten years to rebuild the financial sector after each of those catastrophes. So if there’s something that people in Wall Street in the financial community think, oh, well, this has to happen.

Well, it has to happen for their business plans. It doesn’t have to happen for the United States. Economy certainly doesn’t have to happen for the real economy. And it certainly doesn’t have to happen from the Fed’s point of view. So there’s probably a certain amount of wry revenge in play when the Federal Reserve looks at what Wall Street wants and then chooses to do something completely different for independent reasons.

The second issue is that there there really are independent reasons. And for that we have to look at demographics. So when you’re 45 to 65, that is when you’re the most capital rich that you will ever be in your life because your kids are moving out, your house is being paid down and you are saving your money for retirement

Also, if you’ve been at your job for decades, you’re pretty good at it. You’re income’s the highest it will ever be. So from 45 to 65 and especially 55 to 65. That is where all private capital comes from. The savings, all of that capital rich group. Well, the largest generation we’ve had in human history are the baby boomers, not just here in the United States, around the world.

The oldest baby boomers hit 45 in 1990, and the youngest baby boomers will hit 65 and retire and liquidate all their money or all their savings at the low velocity investments they’ll retire in 2030. So from Roth early 2000 to 2020, almost all of the baby boomers were in that capital rich portion of their lives. And as a result, capital availability on a on an American basis, on a global basis was the highest had ever been.

Capital costs were the lowest it was ever been. And in that environment, the fed will be the first to tell you that that made American finance really matter, because there is no way the United States could metabolize all of the baby boomer capital. So an entire financial class rose up to take advantage of the trough and to come up with new financial products, to metabolize it and send a great amount of it abroad.

At the same time, the Chinese were going through something similar from 2000 to 2. 2020 is roughly when their economy was firing on all cylinders. And while it’s not based on private savings to the same degree that ours is, they do a lot more monetization, which is a fancy way of saying printing currency, all the gold bugs in the crypto guys, to a certain degree are right that that’s not great, that it puts everything on a sugar high.

But the Chinese central bank is the one that’s guilty of that, not the US Federal Reserve. Anyway, for 20 years we had all this capital just spamming out of the United States and out of China. And Wall Street was necessary. The financial sector was necessary. A wave above bottomless wave of financial professionals was necessary to use all that capital.

And did they get it all right? No, none of us do. Anyway. That wave’s gone. The vast majority of baby boomers are now retired, and the rest of them will leak out of the system over the next five six years, which means their capital is gone. It’s been turned into low velocity investments like T-bills and cash. The next generation down Gen X is small and the next large generation, the millennials won’t be entering that capital rich period for another 10 to 12 years.

And that assumes they do everything on time. And to this point, whether it’s having a kid buying a house or getting married, the millennials have been doing everything about six years late anyway. Bottom line is there’s not nearly as much free capital available, which means we don’t need nearly as large of a financial sector. And so the Federal Reserve is looking at all this.

And they like there’s less capital demand is falling. Our tools are designed to regulate capital on demand. That means we need to find a new model. And in this new model, the financial sector is no longer all knowing, all seen and omnipresent. So the Federal Reserve rightly is concerned about inflation. And now that we’re in a period of deja globalization, we’re seeing demand for American employment.

And American capital in American materials skyrocket as the U.S. steadily and with increasing speed, disentangle itself from global supply chains. And that means building a lot more industrial plant. And it absorbs all of the things that the private sector has always absorbed. But now, to build a fundamentally new infrastructure that’s expensive, that’s a lot of demand, that’s a lot of inflation.

Now, I’d argue that it’s productive inflation because it’s building the industrial plant that we’ll need for the next generation or two. But until and unless the Federal Reserve mandates changes, they’re not going to be able to get to a world of 2% inflation. Certainly not if they lower interest rates. So when people say higher for a longer, they may be thinking about another quarter or two before interest rates drop.

But I say that until this industrial plant is built out and until we have another large capital generating class in their 50s, why higher for longer means another decade before we see any appreciable relief in capital costs. So bottom line, if you’re going to borrow, do it now. Because even today, with capital costs that have increased by a factor of four in the last five years, this is still the cheapest capital you’re going to be able to access until the mid 2030s.

US Birth Rates Plummet To 40-Year Low

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Well, it looks like there’s something in the water in the US and it ain’t little blue pills. The recent US Census data shows a 40-year low in the birth rate – about 1.6 per woman.

With the birth rate well below the replacement level, there could be huge economic implications that follow. There are plenty of other countries facing similar demographic issues, so the US has plenty of case studies to read up on.

This isn’t the kiss of death quite yet, but it won’t be easy path forward. Between meaningful immigration reform and policies supporting young families to have more children, the US has to make some big changes if they want to stop that demographic timebomb.

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TranscripT

Hey everybody. Peter Zeihan here. Coming to you from Colorado in between the snows. it is April 25th. And the news. You’re not gonna get this for, like, a week. I know, I’m sorry. the news today is that, the United States Census has come out with the most recent information on population structure for the United States, and it indicates that our birth rate has dropped to a 40 year low of about 1.6 per woman. 

2.1 is generally considered to be replacement level. And if you add in increases in the death rate in the United States from things like Covid, which killed about a million, 4 million, 3,000,004 people, as well as the rapidly aging and therefore passing the baby boomers. And then on top of that, the opiate opioid epidemic. We really need to be closer to 2.3 or 2.4. 

It’s just too cold. The population where it is. the only other way that you can plug that gap was with immigration. Let’s just say that that is a topic that is somewhat hot at the moment. what does this mean? Well, in the short term, from a demographic point of view, short term is 20 years. From a short term point of view, this is actually pause div for economic growth, because if you have a lot of people aged roughly 20 to 45, which is where the millennials are right now and they don’t have a lot of kids, then the money that they would spend on schooling and buying a bigger house, they can use 

for more furnishings and more travel and more restaurants, and more high octane growth that feeds through the system and has a multiplier effect. this is something that we saw in China in the 2000. This is something we saw in Europe in the 1990s. and you can get some really high quality growth out of it. The problem is that you only do that once. 

And if your birth rate never recovers, then after 20 years, you start eating into your working age population, and after 50 years, you start eating into your skilled worker population as well as your tax base. Then eventually you’ll get to a place like where the Germans and the Koreans are now, where this has now been going on for 60 years. 

And so this is the last ten year period that we basically have a modern Korean or German economy, unless something radical shifts more traditionally, having a low birth rate just means that you’re going to have fewer people available to work in the future and fewer people to maintain the system in the future. Now, for the United States, we have a very atypical demographic history compared to really everyone else in the rest of the world. 

compared to the rest of the industrialized world, most of the other industrialized countries are far more urbanized than we are. So they started this collapse below replacement levels not just 20 years ago, but 30, 40, 50, 60, 70, in some cases 80. And so it has a lot of steam built up for us. The decline really below, replacement is only about a 10 to 15 year process, and it’s been very slow even then. 

In addition, because the United States was part of the second cadre of countries to industrialize, we have seen our birth rates go down. But because the United States is such a big place with so many small towns and such huge options for suburbs, it’s declined a lot more slowly than everywhere else. So if you look at the data and we’ll throw a chart up here, you’ll see that the United States has been kind of hugging around that two, 2.1, area for the last 40 years, whereas a lot of other countries that are kind of in are pure class, plunged below it long ago. 

that doesn’t mean that we are doomed to follow them if Americans keep aging at their current rate. If the birth rate keeps dropping at its current rate, we’re not going to be facing a Korean or a German style problem within the next 40 years, and probably closer to 50. so while this isn’t a great sign, it’s not like we’re about to jump off a cliff. 

the other group of countries, the developing countries, are very different. these are the countries that, for the most part, did not develop the technologies of industrialization. It was thrust upon them. So you took a century, a century, a half of technical development in the West and in Japan, and in the course of under 30 years implemented it throughout most of what we now think of as the developing world. 

And so they went directly from the farms to condos and in, in doing so saw their birth rates just plunge horrendously. And you can see that on the chart. China, of course, is the country that industrialized the most quickly got the growth boom from that, from not having a young generation. and now is well past the point of no return and is very close to having one of the lowest birth rates in the world. 

So is there anything we can do about this? Well, there’s two things. The first is you can have meaningful immigration reform in order to bring in more people, but to bring in the scale of people that were required to tilt this, it would be pretty extreme. the second thing you can do is encourage policies that make it easier for younger families to have more kids. 

Part of the economic growth story of places like Texas the last 30 years is that the land is cheap, the electricity is cheap, the food is cheap, and taxes are low. So if you’re a young family starting out, it’s easier to have a house with a yard and raise children. If you’re going to do that in San Francisco, whoo hoo hoo! 

Or New York. Yeah, that’s not going to happen. Raising kids in a condo is no fun at all. one other little thing that I just kind of throw in there so that people understand that everything has a consequence over the same time that US birth rates have dropped since 1990. We’ve also seen the teen pregnancy rate drop by roughly half, and there is a direct correlation between those two things. 

So saying you need more kids makes a lot of sense how you get more kids. That’s what really matters. 

Why Japan Needs a US Alliance

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The Japanese have looked into their crystal ball and figured out that a close relationship with the Americans is the only way forward. Before Japan is welcomed in with open arms, they’ll have to prove their worth…

Between trade issues, economic challenges, and demographic crisis, it makes sense that Japan wants to join the AUKUS group (a defense focused coalition made up of the US, the UK, and Australia).

Japan has some big changes to make. While their naval capabilities are solid, they have to make the cultural and political shift toward taking a more active role for themselves and their region. They also lack real world combat experience and have plenty of cybersecurity concerns to overcome. I wouldn’t expect to see the green light anytime soon, but eventual collaboration looks to be in the cards.

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Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

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TranscripT

Hey everybody. Peter zeihan here coming to you from Colorado. Today we’re going to talk about the recent batch of up to up meetings between the Japanese and the Americans. In mid-April, we had a very large number of contacts up to and including Japanese Prime Minister Kushida, as well as, US President Biden. at issue is the Japanese are angling for a much closer relationship. 

So the back story Japan in the 80s up until the 80s was a huge trade country, but then they had a demographic bomb and a debt crisis at the same time. And over the next 30 years, their competitiveness basically tanked. And so they spent the next 30 years. I don’t want to say gutting, but changing the way their industrial processes worked with as much of the manufacturing as possible. 

Closer to the end, consumers in countries that didn’t face a demographic bomb. And in doing so, they went from one of the most trade weighted heavy countries in the world to one of the least involved with today, only about 10 to 15% of GDP based on where you draw the line. comes from international trade in any meaningful way. 

Toyota says, you know, we build where we sell, and that has basically become the national motto. Now, that requires a degree of openness in the country that you’re trying to sell it. And so when the Japanese over the last 20 years saw the United States becoming more and more isolationist when it came to its economic issues, they’re like, wow, we need to we need to get ahead of this. 

So they reached out to none other than Donald Trump and cut a trade deal from the Japanese point of view, was borderline humiliating. But they knew that that was the price to pay for a long term strategic and economic relationship. And in the aftermath of Trump’s fall, the leadership of Japan has been to the United States to make it clear to Joe Biden that unlike a lot of the other countries that signed trade deals with the Trump administration, Japan wasn’t looking for any changes. 

Something that the Biden administration greatly appreciated anyway. So with that in your back pocket, we can now talk about the relationship moving forward. specifically, the Japanese are angling for membership in a group called Aukus, which is Australia, the United Kingdom and the United States, countries that are now pooling parts of the defense budget. And a lot of the defense technology to build a new generation of weapons. 

the Australian specifically will get out of this nuclear attack subs and medium range air launch cruise missiles, which are, you know, very blimey. And it will tighten what is basically already one of the the tightest security relationships among any three countries in the world. the Japanese would like to get into that. and if you look at what the primary concerns of the anchor steel is China, you can see how that would be a really, really nice fit. 

  

but it’s not going to happen in the near term. Three problems. Number one, culture after World War two, when the Japanese were recovering from those twin atomic blasts. The Japanese made the very serious and probably very correct decision that we never want to be in a position again where we might even theoretically, be on the wrong side of the United States. 

So we have to have a Navy. We’re an island country. We don’t have a good land network because it’s so mountainous. We have to have a navy just for, normal commerce, maritime for us anyway. And so we’re going to have a naval force. And even today, the Japanese are the second most powerful navy in the world. 

But we have to make sure that that’s cast in a way that will never make the Americans ever blink, that we might be anything other than an ally that does as it’s told. that worked during the Cold War, that worked in the post-Cold War era. But it’s not going to work now, because if the Japanese are going to be part of an alliance with the Australians, the Brits and the Americans, then they need to take some initiative on themselves. 

They need to patrol their own zones. They need to contribute to the greater whole. And that requires a lot more aggressiveness, and especially a culture of having a military that is not looked down on. Basically, in Japan until recently, if you went into the military because people thought that you couldn’t do anything else. that needs to change, because the Japanese do have one of the most technologically advanced systems in the world. 

So, number one, culture cringe. number two. Experience. Part of being a pacifist. No matter what your equipment looks load looks like means that you don’t shoot. And so, since 1945, the Japanese functionally have had no combat experience. And this is going to sound really weird. The war on terror for a lot of countries was an opportunity to get experience interfacing with the United States and get limited combat experience on an issue that, for them was not really top tier. 

So, you know, if something went disastrous, there might be some political fallout, especially with the Americans. But it’s not like Japan would face a threat to the home islands from Al-Qaeda. Well, now that the Americans have wrapped up the war on terror, that opportunity, if that’s the right word, is gone. And the Japanese, if they want to look around and get some practice, you know, you got the Russians and the Chinese, but if there’s a fight with them that is not small scale, that does not have a low risk. 

so it’s not clear how. Aside from drilling, drilling, drilling, drilling with your own forces, with the Americans, with Australia, it’s not clear how they can get that experience before they get to a real fight. The third problem, luckily, is something that is a little bit more short term and a little easier to fix, and that’s cybersecurity. If you are a pacifist and if you believe that military activity is passé. 

Well, you don’t really worry about your information control. And I would argue that aside from the Chinese, where a lot of cryptography is functionally illegal, so the government can hack its own population. The Japanese people are probably the most hacked people on the planet. That’s got to change if they’re going to be part of any sort of deep information and technical sharing, because nobody wants to develop a new nuclear submarine. 

Share the plans with the Japanese and you see it on TikTok the next day. Luckily, there’s plenty of ways to get experience combating that, and I have no doubt that the Japanese are already working on multiple cylinders in order to get that experience built up. But still, that’s not something you do in three months or six months, or nine months or 12 months. 

It’s also your process. So will this happen in some version? I think almost guaranteed. But the question is how fast can the Japanese make? The changes are going to be necessary so that the rest of their would be allies are willing to trust them? That’s not the case here. 

America’s Nuclear Supply Chain

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We’re finally seeing signs of life in Congress with the recent progress made on the establishment of a domestic uranium supply chain. This move aims to cut dependence on the Russians – who dominate global uranium processing.

This will be easier said than done though. Much of the nuclear infrastructure in the US is outdated and will need to be modernized in order to ensure a steady fuel supply. We’ll likely have to call in some favors from others who are already in the process of developing their own domestic supply system, like Canada and Australia.

This new development coming out of Congress is a step in the right direction and begins to address two major concerns facing the US: energy and national security.

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Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

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TranscripT

Hey, everybody. Peter Zeihan coming to you from Colorado. the news at the moment is that late last week, we finally got the first functional laws through committee. and actually getting action on the congressional floors for building out a domestic uranium supply chain system. the idea is that if we can refine enough fuel to enrich enough fuel, being the technical term, we will be able to cut the Russians out of the mix. 

It’s all together. the Russians are the world’s single largest producer of enriched uranium. and they are responsible for nearly half of the global market in about one quarter of ours. the process is you take raw uranium from somewhere with Kazakhstan being the single biggest player and the Australians being the biggest up and comers. You then spin it up so that the fissile component makes up somewhere between 3 and 5.5% of the mix. 

You take that enriched uranium and build it into a fuel rod that eventually ends up in a nuclear power reactor. the issue that we have is peace. Ironically, at the end of the Cold War, the Americans and the Russians were left with literally tens of thousands of nuclear weapons. And we collectively decided that we were going to get rid of them. 

So the question was, what do you do with all the enriched uranium that is in a bomb? Now, the enriched uranium that’s at a bomb is at 3 to 6% enriched. It’s like 90 to 95% enriched because you want it to go kaboom. And so we basically spend that stuff down instead of up and used it to make fuel rods going from the other direction. 

Well, you do that for 25 years, which is what it took to get rid of all those weapons. And there really wasn’t much of an economic impetus for any company in the United States to do the more normal type of and other enrichment, up from uranium ore. So we basically stopped doing it altogether in the United States. It was only in places like Russia or China where was a national security issue. 

to build the stuff up, where they kept producing it. And so now we have to rebuild an enrichment system, at the civilian level. And that’s what these new laws are about now. right now, nuclear power provides about 20% of the American electricity mix. I think we’ve got 95 reactors out right there right now. the issue is we there’s only so much flexibility in that system because with a couple of exceptions, all of this reactors are more than 40 years old. 

Most of them are 50 years old. Actually, Three Mile Island was that 1973 or 1970 that I can’t remember anyway. They all predate Three Mile Island, except with two exceptions. so the idea that you can really update these things to more modern technology, and there’s not a lot of modern technology to do. So we have to go back to the old system to keep these online. 

  

on the upside. everyone has seen this coming, and they’ve been stockpiling for some time, so we probably have about two years of fuel supply here in the United States for a reactor system. And that should be plenty of time to basically replicate technology that dates back to the 50s. in order to build a domestic supply system. 

And we’ll also be getting some help from the Canadians and the Australians who are in the process of building out their own system for very similar reasons. So this Congress, while it has been difficult for it to do anything, has seemingly found an issue that is both energy related and national security related and seems to be actually progressing forward. 

So, you know, one miracle at a time. But I take my good news where I can’t these days take care. 

The State of Global Energy Webinar & The New Chinese Carriers

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The newest Chinese aircraft carrier, the Fujian, has officially hit the seas. This a major development for the Chinese Navy, but still falls short when compared to with advanced counterparts (i.e. the US).

The Fujian is intended to be a test bed, meaning the Chinese will throw all of their tech onto it and see what works. Which means we’re still a ways out from seeing an actual combat vessel hit the water.

Despite all the “advancements” we’re seeing on the Fujian, the Chinese still opted out of the nuclear power option. So with a limited range and no intention of ever seeing combat, the Fujian doesn’t drastically alter my forecast for China’s naval capabilities.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know 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. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey, everybody. Peter Zeihan here, coming to you from Colorado. for those of you been watching me for a while, you know that every once in a while I do a webinar on a topic of the moment, and we’re going to be doing that again this coming Friday, May 10th, at noon eastern, which, of course, if I get the timezones right would be 11 a.m. central, 10 a.m. mountain and 9 a.m. Pacific. 

That’d be about 45 minutes of going through all the crazy that we’ve seen in the energy markets going back to the end of Covid, explaining why we are where we are now and what to expect over the next 12 to 24 months. I’ll be going for about 45 minutes, and then we’ll have ample time for Q&A at the end, so you can sign up via the link that is attached to this email or this Twitter feed. 

And I hope to see everyone there. Morning, everybody. Peter, I’m here coming to you from Phenix, Arizona. taking an entry from the Ask Peter series today. specifically, the Chinese have just floated their third aircraft carrier, the Fujian. And does this change my general assessment that the Chinese navy is kind of a joke? maybe a little, let’s give you the backdrop. 

Okay. So the United States has been engaged in carrier aviation for over a century at this point, and we have ten ships of the Nimitz class, which are the super carriers, which are typically considered the gold standard in terms of their operational capability, their nuclear powered, the carrier of dozens of fighters and fighter bombers each and their capacity, to operate around the world is unlimited and unparalleled. 

in addition, these are now the old ships. The United States is in the process of floating a new type of carrier called the Ford class, which is bigger, has more speed, has more carrying capacity and can strike faster and maintain more sorties at the same time and get them out faster. In comparison, most of the world’s other carriers are very limited. 

the Brits are in the process of trying to get two super carriers very, very loosely modeled after of the American. Nimitz is in operation right now. The Japanese have converted two things that we call helicopter destroyers into medium sized carriers. And then there’s a huge drop to everybody else. So, for example, the French do have the Charles de Gaulle, which is technically a super carrier, but it has a hard time generating enough power to get up to speed to launch fighters unless the weather is absolutely perfect. 

And then there’s another huge drop to everybody else, like, say, the ties with the Indians. The Chinese are kind of in the middle, well below the Japanese, well below the Brits. they have three carriers now. The first one is actually an old Soviet carrier that was built in the 80s, but it was never completed. And then it rusted in a Ukrainian port for a decade, where the Ukrainians basically stripped it for metals, and then it got towed to China and sold and eventually rechristened as the. 

 sorry, I can’t remember the name. it was originally the patriotic, and no one in China, who is in the military, especially who’s in the Navy, will ever consider that that vessel’s anything other than a test of China’s ability to just comprehend what carrier aviation is. It is never, never, never, never intended to see combat in any form. 

The second Chinese carrier is a clone of that first one. That’s the on, and it, again, isn’t all that great. it is just a clone of an old Soviet model. And it was the Chinese attempt to see if they could take 1970s technology that did not work very well and bring it into the modern age a little bit. 

Most of the parts are the same, but they have put in some things like new avionics and sensors. And again, no one in the Chinese Navy would consider it a combat vessel. It’s a test vessel. The new one that we have, the Fujian, is their first domestically designed one. and that means that it’s certainly better and uses more current technology. 

But again, the Chinese navy is not talking about this thing as a combat vessel. It is a test bed. Think of it like for those of you who like the Navy stuff, think of it like the enterprise, not the USS enterprise of the United Federation plan, as in Star Trek. No to know the American carrier enterprise, which was designed as a test bed for a whole host of new technologies. 

This is China’s first attempt to build something that actually floats and theoretically down the road could see combat. But this isn’t the one that would do it. This would be in theory, if everything works out perfectly, which will take them years to figure out, this would be the model that other carriers would then be built on. So yes, the Chinese have three carriers. 

Yes, they are taking steps forward in their operations constructions, but they’re coming from a century behind and they still very honest with themselves here, are not claiming that any of these are combat vehicles. one more thing to keep in mind. The Fujian, the new one is a nuclear powered. So you’ve got an 80,000 ton vehicle that still has to burn fuel, which means that its range is sharply limited, and it can’t go much further than most of the rest of the Chinese navy, which is largely limited to operating within a thousand miles of the Chinese coast. 

So is this significant? Sure. And if they keep up their current pace, they will be able to have a carrier that can stand up to an American carrier that’s 50 years old in the next decade or two. Not something that changes my forecast all that much.