Nvidia Purchases $5 Billion of Intel Stock

Photo of an INtel microchip

Nvidia announced a $5 billion purchase of Intel stock, but it’s not the game-changer that the headlines are making it out to be.

While Intel is America’s biggest chipmaker, it lags behind TSMC’s cutting-edge nodes. Nvidia is just a design firm, so they don’t possess the necessary manufacturing know-how to improve Intel’s capabilities. So, Intel’s need for the right ecosystem and advanced lithography to create the upper echelon of chips remains.

This is just another case of political appeasement. Nvidia has been in hot water with Washington and Beijing, so they’ll do just about anything to cool things down a bit. But hey, $5 billion is $5 billion.

Prefer to read the transcript? Click here

Transcript

Hey, all Peter Zeihan here come from Colorado. And today we’re taking a look at the 18th of September, purchased by Nvidia of roughly $5 billion of stock in American semiconductor manufacturing firm Intel. Now, Intel is by far the largest of the American fab companies. But it gets a bad rap because it’s not TSMC. TSMC, of course, is a Taiwanese based company that is the world’s premier. That makes all the leading processing nodes, especially if it’s below four nanometers. 

Intel is trying to catch up with mixed results. And, in the market, it generally is discounted significantly because it’s not TSMC. And every time they fail to catch up, they get punished. That doesn’t mean it’s not a good company. That doesn’t mean it doesn’t produce a lot of product. 

But if your goal is to make the best of the best, Intel doesn’t do it. 

This is not going to change that. Now, a few weeks ago, the US government under Donald Trump took a 10% share. This will give Nvidia roughly a 4% share. But let’s talk about how semiconductors happen. And then you’ll see that this is not nearly as big of a deal as it might appear at first glance. 

What typically happens is a large consumer of microchips, a Google and Apple, something like that comes to a company like Intel or TSMC, and says that we want to make a new chip that does X, Y, and Z. Here are the parameters we want in terms of performance. And Intel slash TSMC says you’re at the wrong place. You need to go talk to a design firm. 

And so you find a design firm and you jointly put this thing together. All the strategic architecture and then you take that back to your TSMC or your Intel, and then you redesign it again, and you build an instruction booklet that is a few thousand pages of all the steps that are necessary to craft each and every tiny little bit of what goes into each and every aspect of a semiconductor that is then farmed out to an ecosystem that is around the semiconductor fabrication firm, all the companies that build all the individual pieces, all the companies that do all the testing in the incorporation of those pieces into larger chips, motherboards and products. Hundreds of companies involved. And you then get this very thick instruction book, probably several thousand pages. Now, which you hand to TSMC or you hand to Intel. And they use that to follow the instructions to the letter to make the chips. 

Which means a design company like Nvidia partnering with a fab company like Intel. It’s not that it’s a negative, but it kind of misses all the steps in between. Now, Nvidia has been beat around the heads and shoulders first by the American government and most recently by the Chinese government, primarily over its seeming inability and unwillingness to apply technological sanctions and limit their sales to China. 

Nvidia is willing to bend the rules. There’s no argument there, and it seems that in order to placate the Trump administration, they’re putting a what sounds like a big investment, $5 billion into Intel. But this really doesn’t move the needle for anyone. It doesn’t speed up the process. All it does is perhaps give Nvidia an inside track to communicating with Intel in the circumstances, when they decide to build chips that are not cutting edge. 

So it makes a lot of people smile. It makes a lot of people think that, ooh, Intel is going to get better. Nvidia doesn’t have what Intel needs to get better. That would be TSMC. That would be ASML, the company that makes the high end lithography systems. That would be this constellations of dozens, hundreds of mid-tier companies that contribute individual pieces, a lot of which don’t exist in Intel’s network because they’re in Taiwan. 

So it looks nice. And having a few extra billion dollars is never a bad idea if you’re trying to expand your output. But if you’re thinking that this partnership is what is necessary for Intel to turn the page and all of a sudden move up to, say, 2 or 1 nanometer. No, because Nvidia doesn’t have that technology. Nvidia does design, not manufacturing. 

Don’t get the two confused.

The Swiss Are Screwed

Swiss flag over snow capped mpuntains

The Matterhorn, Nestlé Chocolate, and a long-standing history of neutrality, Switzerland has it all. However, the Swiss were too busy enjoying all those comforts and fell asleep at the wheel for the past few decades…

Since the Cold War, Switzerland has assumed that its stockpile of weapons and insulation provided by the EU would protect them. With the Ukraine War creeping closer, the Swiss are realizing much of what they’ve relied upon has been eroding. Their military is weak, banking secrecy has collapsed, trade competitiveness has suffered, and now Trump tariffs are crippling industry.

The Swiss have a couple paths forward, but all options require them to abandon some core component of their belief system (or face economic decline).

Prefer to read the transcript? Click here

Transcript

Hey, all Peter Zeihan here come to you from the Lost Canyon in the Lost Creek Wilderness in Colorado. And today we’re going to talk about Switzerland. Switzerland has some really tough decisions ahead of it in the next few months. Very, very short history of Switzerland, has been a neutral country for quite some time. Has been armed to the teeth quite some time. 

But in the period, especially after World War two and especially after the Cold War system ended, Swiss defense has kind of withered away. You can basically buy an exemption to the draft. Their military recruitment has basically fallen off, and they’ve shut down most of the bunkers that they used to be once famous for. They’ve done this because in the post-Cold War world, we all got along in the European Union, literally surrounds them completely. 

And they fear no invasion from their near neighbors. The Ukraine war was a rude awakening to them, just like all the other Europeans. And now they’re part of the coalition that’s supporting the Ukrainians. But they don’t have enough national defense right now to really be worthy of the name in the traditional sense. It’s number one. Number two, because they’re neutral. 

They have always followed laws their own way. And this made them an offshore banking center. You wanted to launder money, you’d put it there. You were tin dictator. You put it there. No one would ask you questions until a little guy by the name of Barack Obama said, no, we’re not going to do that anymore. We want to tax that money. 

So the Obama administration leaned very, very heavily on the Swiss government and played a part in something called the Financial Action Task Force. And basically, Zurich shut down as international money laundering center. So financial center, but if you want to do something illegal, you probably need to go to Cyprus or Dubai or something like that. So that’s another major industry gone third. 

Now, if you guys have been paying attention the last 30 years, but the eurozone hasn’t had the best time versus the other major economic blocs in the world and Switzerland, their number one trading partner is the collective European Union. And so we saw the Swiss currency gradually go up and up and up and up and up versus the euro, which in trade weighted terms has gone down, down, down, down, down until very recently. 

That means that Swiss industry is broadly uncompetitive, especially in things like agriculture. So that leaves the Swiss with two choices. Number one, subsidize the crap out of it, which is what they do say for their dairy industry. 

It’s beautiful. The farms are amazing, but they’re definitely subsidized and, not cost conscious. Let’s just say that, and then second, the manufacturing has had to get better and better and better, in order to move up the value chain so they can swallow the higher currency. 

So their products are a luxury goods that people will pay for regardless of what the prices. So Swiss watches basically became a national strategy. This led them in the last 30 years to really go into biotech, especially drugs and medications. And that brings us to the current day. Donald Trump has put tariffs on countries that are not based on trade practices, but are based on how much you sell to the United States versus how much the United States sells to you. 

That’s the only fact. Well, that’s one of two factors. The other factor is whether Donald Trump likes you or not. He doesn’t like Switzerland, and the Swiss sell a lot medications and things to the United States. They also sell gold. But Trump loves gold, so he made gold. Carve out. There’s no tax on Swiss gold. 

Anyway, what this means is we now have a 39% tariff. It’s one of the highest out there. And Swiss industry is scrambling and in some cases shutting down because it’s just not viable for them anymore. So the Swiss basically need to do one of three things. Number one, they need to find a way to make Donald Trump like them. 

They couldn’t find a way to make a Barack Obama like them. So I don’t think that’s going to work. Number two, they have to relocate all of their drug manufacturing somewhere else. Trump would obviously like to come to the United States. He has said that we are going to have tariffs on medications coming soon. 

No idea what those numbers are going to be for sure. But the numbers that have been leaked out of the white House suggest somewhere in the 30 to 100% range. So, It’s not clear that the Swiss have an interest of putting in the United States, because that’s only one of their markets, and the sales for each individual market don’t really justify putting it all there. And it you’d lose all your economies of scale if they put some in the EU and some in Japan and some of the United States. 

They’re not sure what to do there, and I blame them. Or third. Shift the political alignments. single largest chunk of Swiss trade is with the European Union. The European Union is a larger entity and can stand up to Trump’s Berlin a little bit better, can get it negotiated a better trade deal. So if, if, if, if the Swiss were to join the EU, that would solve some of their problems. 

Now the Swiss really do not want to do that. They value their neutrality. They value their independence and the independence as not just Switzerland is a state. It goes down at the local level, like the United States has states. They have something called cantons and almost all major decisions in foreign policy and trade and immigration, everything have to pass through approval of each individual canton. 

I mean, this is a country that did not make it legal for women to vote until 1991 because one German canton was holding out. And so for them to join the EU, they would first need to amend their constitutional structure so that this is not how decision making happens in Switzerland, because the EU will never let them in. 

If the Swiss just gum up everything just by being Swiss. So either the Swiss are going to have a catastrophic reduction in their standard of living is industries basically can no longer function in the new environment, or they have to get in bed with the monster that is at the door. And that’s the European Union. Not a great position to be in, but that’s where they are.

Ukraine (And Everyone Else) Develops Glide Bombs

A Russian FAB-3000 with a UMPK guidance kit attached, converting the unguided bomb into a glide bomb | Wikimedia: https://en.wikipedia.org/wiki/Glide_bomb#/media/File:FAB-3000_with_UMPK_kit.png

Ukraine has added glide bombs to its list of military ordnance, enabling Ukraine to send modified dumb bombs up to 100km away. This likely won’t alter the outcome of the war in Ukraine, but the democratization of this technology is setting off alarm bells in the US.

Joint Direct Attack Munitions were the bread-and-butter for the US military, maintaining a multi-decade monopoly on the precision strike technology…but all of that is changing. Now that Ukraine and Russia both have this tech in their hands, it’s only a matter of time before it appears everywhere else.

This is yet another sign of the US stepping back from its role as global protector; meaning American strategic primacy is coming to an end.

You can find more info about glide bomb technology appearing in Russia’s arsenal and the beginning of the proliferation of this tech in the linked video released on March 12, 2024:

Russian Bombs Get an Upgrade
Prefer to read the transcript? Click here

Transcript

Hey, all Peter Zeihan here coming to you from Colorado. And today we’re going to talk about a change in military tech that just happened in Ukraine. Specifically, there are factions of the Ukrainian military industrial complex that are now putting together glide bombs. Glide bomb is basically when you’ve got an old dumb bomb that you put a guidance kit on. 

It has kind of wings on it. And so instead of dropping it, it kind of glides to the target and the Ukrainian prototypes that are being tested right now indicate that they can go upwards of 100km, about 60 miles, which is well beyond the front lines. 

Why this matters, the Ukrainians have been on the receiving end of glide bombs these last couple of years. The Russians have converted several of their old Soviet bombs, which are typically a much larger than the ones the US uses. We use, 500 pound bombs. Sometimes they use either kilo bombs. Sometimes there’s even a thousand kilo bombs. 

Anyway, they drop them from outside of air defense capability. They drop them from within their air superiority envelope. So they just have basically modified dump bombs coming in that can’t be intercepted. And some of the bigger ones, when they hit, have a blast radius that’s more than a quarter of a mile. 

And so you drop a dozen or so of these in the general vicinity of a fortification, and then Russian forces can then move in. That’s how they’ve been used to this point. The Ukrainians probably won’t be using them the same way because they don’t have the manpower. That’s necessary to penetrate the Russian lines. And there’s multiple layers of minefields as well, making that more difficult. 

So we use it against things like supply depots and, convoys. But the Ukrainians are already doing that with first person drones. So the ability to change the battlefield in Ukraine, by Ukraine, having some of these is probably pretty limited. The targeting sequences are probably just not going to be as robust as it might be for the other side. 

For a country that is more likely to be on the attack, the Ukrainians are typically on the defense. So it’s not that there’s no utility. It’s not. It’s just not a game changer. Also, there’s just the amount of effort that it takes to build one and test it because every prototype is destroyed as opposed to like a first person drone, where you can fly it back and forth without actually having it blow up to make sure it works. 

And you can get new iterations every month. This one will probably take a little bit longer, but it still has a huge impact, just not in Ukraine and everywhere else. The issue here is that the United States has had a de facto monopoly on this sort of technology for decades. We hear we call them Jay Dams, Joint Direct Attack Munitions. 

We took our old Cold War bombs. We put a kit and some things on it and do precision targeting. And through the 1990s, the US had a total monopoly. These were first debuted during the first Iraq War. 

Desert Storm back in 1982 and then have been incrementally upgraded since then. But really, it wasn’t until as recently as five years ago that any other country in the world had their own. 

Well, the Russians developed their own last year, and now Ukraine, a country that is much smaller, with a much smaller technical base and industrial base, has them as well. And if Russia and Ukraine can have them, you know that it’s just a matter of choice before countries like Korea, both of them, Japan, Taiwan, China, Thailand, Vietnam, Singapore, Malaysia, Australia, Canada, pretty much every country in NATO, Brazil, Argentina, Algeria, Israel, obviously, I don’t know if Iran could do it, but the United Arab Emirates could. 

Anyway. The point is, there is a long list of countries where this is no longer a technical barrier. And the technology that the United States has had a complete monopoly on this last generation, which has allowed it to shape strategic environments around the world, is now gone. And it’s only a matter of time, probably months, not even years, before we see copycat versions of the Russian and other Ukrainian versions popping up in a half a dozen different countries, and within five years they will be everywhere. 

Which means if the United States is going to maintain its military posture of having a global position without really any meaningful pushback, it’s going to need new technological tricks to do that. Most likely, combined with the Trump administration’s backing away from every alliance we have, this means that the United States is going to vacate militarily large portions of the planet and just let the chips fall where they may. 

Now, for those of you who’ve been following my work for the last decade, you will know that this was in some version probably going to happen because of American political considerations anyway. But we’re now set up a technological U.S. cannot just leave because it wants to. It’s going to be technologically pushed out from certain areas. And the question now is where first. 

And we just it’s too soon to have an answer to that question. There’s too many decisions that have to be made up at the white House, that color where the map is going to go blue and where it’s going to go red. But bottom line, the era of American strategic primacy with global reach that is now over. 

And it’s now a question about managing the withdrawal and dealing with the consequences of that.

Everybody Wants to Bomb Qatar

Hands holding the flag of qatar in front of a building in the middle east

Israeli airstrikes on Hamas targets in Qatar mark a significant shift in Israel’s positioning in the region. Israel has made it clear that they are willing to strike anywhere, regardless of alliances or presence of US bases…bad news bears.

Qatar may be filthy, filthy rich, but all that money couldn’t buy military aptitude. These strikes caught Qatar with its pants around its ankles, something that rival Arab states weren’t upset about.

However, the bigger story here is that Qatar hosts america’s regional military headquarters, and Israel only gave the US a ten-minute heads up before the missiles started flying. Whatever influence the United States had over Israel military actions has quite simply dissolved. And THAT will be noticed globally.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here comes to you from Colorado. And today we’re going to talk about what went down on September 9th in the Middle East. Specifically, the Israelis dropped a few bombs and missiles on sites in the country of Qatar. That’s a little thumb like thing in the Persian Gulf. Small country, less than a million population going after some Hamas targets. 

Hamas, of course, is the military slash political group that used to run Gaza and is now on the receiving end of the Israeli occupation campaign of Gaza. Three big things. Oh my God, so many things, but three big things that come from this. First of all, let’s talk about Israel. Israel has never, ever, ever bombed anyone in the Persian Gulf. 

I mean, they’ve gone after Lebanon because it’s right there. They go after Syria, especially as it’s fallen apart. And, they’ve gone after Iran most recently in a big way. But the last time they bombed anyone else was like in the 1980s, they took out a nuclear reactor in Iraq. And before that, you’re talking about the Arab-Israeli wars of the 1970s and 1960s. And 1950s. 

This is a significant escalation. There’s been an expansion of their capabilities as they’ve gotten the Joint Strike fighter. They’ve gotten better weapons from the United States that have better range. Looks like what happened is they flew down into the Red sea and launched missiles over Saudi Arabia to hit Qatar. They didn’t do a direct overflight. 

Probably. 

And this level of aggression, this willingness to ramp up this newborn policy of taking action wherever and why ever, is immense. Because, you know, Qatar is a U.S. ally. Saudi Arabia is a U.S. ally. And for the Israelis to be so brazen, this is something that is going to continue until and unless a significant series of countries that includes up to in the United, including the United States, levy some sort of massive economic or military penalty on Israel for acting like this way, at the moment doesn’t seem like that is in the cards. 

And honestly, if you’re in the Persian Gulf, the Arab states of the Persian Gulf, like Qatar or the United Arab Emirates or Saudi Arabia or Kuwait, there’s really nothing you can do. So this is the new norm of Israel just dropping bombs wherever in the region it wants to. And that will cause any number of political complications and strategic complications, because at the moment they’re going after Hamas. 

But there are other militant groups that the Israelis are not big fans of. And should a government in the region become more hostile, the Israelis have now demonstrated that really doesn’t matter what your air defense systems are, the Arab states of the Persian Gulf, Kuwait, Saudi Arabia, United Arab Emirates and Qatar, they have some shiny hardware, but it’s clear they don’t know how to use it very well. 

And as the Israelis discovered with Iran, even if you’ve got stuff that you’ve integrated over decades, it really can’t stand up to the technology the Israelis can bring to bear. So all the royal houses of this region are now on notice. And if they do things that the Israelis don’t like, they can expect visits by explosives. 

The one thing that was really holding back the Israelis before, from doing things like this is the idea if you knock off the government, you could have Sunni jihadists boil up and turn the area into a scarred wasteland that would eventually cause problems for Israel. 

Well, some version of that has happened in Syria and Israel looks just fine. So if the nightmare situation is not something to be avoided, then destabilizing the neighborhood is something they don’t have a problem with. So that not all of that is number one. The Israeli side, number two is the Qatari side. Qatar is a small country. 

doesn’t have a lot going forward except for a big natural gas field, a little bit of oil. And in doing so, it’s become one of the richest countries in the world in per capita terms, because there’s very few people, the locals are the fattest humans in history because the national security program has run by Doha, the capital is to get everybody, heart disease and obesity so that they can’t protest. 

So, I mean, these are a whole country of taboos, that basically do nothing but eat all day, and they’re serviced by a couple to maybe 4 million today, expats who basically take care of their every whim. 

As a result, no shock that they don’t know how to use their own military equipment. But they do have, however, is ambition and arrogance and just supreme levels. The ruling government of the of the ruling family, is convinced that they were ordained by Allah himself to be a major power. And since they were late to the game, they basically went out and cut deals with everyone that nobody else would deal with. 

So the deal with the Muslim Brotherhood, they deal with Hamas, they deal with everybody, in order to prove how important they are. And then they throw a lot of cash at whatever the issue happens to be. So they are on the opposite side of a lot of the other Sunni governments in the region. And so while no one in the region is thrilled that the Israelis have gone and basically proven how powerless that they are in the face of a superior military force, there are a lot of countries, most notably, Saudi Arabia, the United Arab Emirates, that are pointing at and kind of going, because they are not loved at all. 

And seeing them taken down by such a big notch and made to look so incompetent and so impotent, is honestly very rewarding to a great number of people. What impact this will have on Qatari foreign policy moving forward is unclear, but certainly Israel is indicating to them that there’s certain lines they just can’t cross or bombs will fall. 

The government was not targeted. This was all targeted against Hamas groups and the Hamas groups were only kind of sort of taken out because they use longer range weaponry. But we now know with refueling that the Israelis could easily get there and back with more precise weapons. So something to watch for the future. In the meantime, Qatars on notice. 

Third, and perhaps most importantly, is how the United States fits into this, Qatar is the location of Centcom headquarters. This is where the United States coordinates everything throughout the entire region, including the recently closed down wars in Iraq and Afghanistan and a lot of countries in the region and up to and including Israel until very recently and until last week, thought that having Centcom headquarters in Qatar made Qatar bulletproof because the Americans offered an express security guarantee to the country. 

Well, that has proven to be wrong. And we now have a really interesting situation shaping up. Yes, the United States is willing to allow countries to bomb places where it has bases and not do anything that makes the United States look toothless. And for Israel, specifically, Donald Trump is now in a position where he can’t get the Israeli government to do or to not do anything. 

The Americans were notified of the attack less than ten minutes before the missiles flew. No. No way, no way. Enough time to get through the chain of command for Trump to say, call up Benjamin Netanyahu is the prime minister of Israel. Say, don’t do this. So the United States is now being actively ignored by the country, in the region that is supposedly its closest religious demographic and strategic ally in the region. 

That is not a good look for an administration who thinks that it’s tough, and that will have consequences here, there, and a lot of places in between.

The Federal Reserve’s Dilemma

Photo of the building of the US Federal Reserve

The Fed is facing a catch-22. While they would typically lower rates when consumption and growth begin to slow, there are also competing policies that are shrinking the labor force and driving up costs via tariffs. Other countries have faced similar dilemmas due to demographic issues, but the US is in this pickle largely due to policy decisions.

With record deficits and no political will to cut entitlements, cooperation between Trump and the Fed isn’t going to happen. So, the Fed is stuck between a rock and a hard place…

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here. Coming to you from a breezy Colorado. This week we have a Federal Reserve meeting in D.C. where they’re going to decide what to do with interest rates. The idea is, if you lower interest rates, you reduce the cost of capital, which spurs economic growth, whereas if you raise interest rates, you dampen demand, which tends to get inflation under control and balancing growth versus inflation. 

That is basically why the Federal Reserve exists and why we have monetary policy in the first place. The real problem the Federal Reserve is facing right now is policy out of the white House. The combination of high and rising tariffs are increasing the cost of operation for American businesses and increasing purchasing costs for American consumers, which is reducing economic growth. 

At the same time, anti migration policies the Trump administration has implemented is shrinking the labor pool to the point that the American population is actually expected to shrink this year for the first time in American history. And that is triggering inflationary pressures throughout the supply chain that are complemented by the tariffs. So tariffs like 50% tariffs on steel, aluminum, copper drastically increase the cost of building for, among other things. 

And so the fed is kind of in a catch 22. The slower growth caused by the tariffs on the consumption side would seem to indicate that it wants to lower interest rates to spark growth, but the higher inflation, because of the tariffs and the immigration policies are raising the cost of everything or raising inflation, suggesting that the Federal Reserve should, if anything, raise rates in order to keep inflation under control. 

And there is no way to win this, there’s no way to make everybody happy and there is no balance to be found. So the Federal Reserve is in a catch 22. Now, this is not a unique situation. If you go back to the last 20 years in Europe and Japan, we’ve had somewhat similar situation, but largely caused by demographic issues as populations age out of the 2030s and 40s and into their 50s, 60s and 70s, consumption naturally goes down and eventually you lose people from the workforce on the tax base altogether. 

And when that happens, monetary policy is not nearly as useful tool. And you’re dealing with exactly these same issues, chronically lower demand and consumption because the population is getting poorer and older and ongoing inflationary pressures as the labor force shrinks. The difference between the European and the Japanese experience and the American experience is in the European. In the Japanese experience, it was primarily a demographic issue, whereas in the American experience, at least so far this year, it’s primarily a policy issue. 

Now, what has happened in the United States in the past is the Federal Reserve chair has sat down with the American president to discuss priorities and what it takes to get what you want. This was most famously done by Federal Reserve chair, former Federal Reserve Chair Alan Greenspan and former American President Bill Clinton back in the 90s, where the discussion was, if you can keep the budget under control, if you don’t do a lot of deficit spending, then I, the Federal Reserve chair, can keep interest rates low and generate a boom which lasted for the better part of a decade. 

Unfortunately, that is not possible this time around, and not just because the president doesn’t like the Federal Reserve chair. The other problem is simply that the fiscal deficit we have today is bigger than we have had at any time in American history, with the exception of a couple of hiccups during war time and getting that deficit under control would require basically eliminating Medicaid and cutting Medicare and Social Security by half. 

That’s how overextended we are. So it leaves the fed in a no win situation. Governance is hard, especially when you’re a quasi independent institution like the Federal Reserve.

Why Trump’s Stance on Canada Makes Sense

Canadian flag flying over Parliament

The Trump administration’s tough stance on Canada isn’t as novel (or as arbitrary) as it may seem.

The US has always been cautious with neighbors on the northern border, from Britain in the past to modern Canada. This view follows the long-standing US strategic view that an independent power on the northern border could pose a security risk.

That caution is wise and should be applied to any potential economic integration as well. Merging the US and Canada might sound nice, but when you lift the hood…not so much. The US would be stuck with the financial burden of caring for Canada’s rapidly aging population.

Prefer to read the transcript? Click here

Transcript

Hey everybody. Hello. From Rock Island Pass at the border between the Hoover Wilderness and Yosemite National Park. Today we’re taking a question from the Patreon crowd as we’re doing this whole trip. What what what what why? Why is the Trump administration hit Canada so much? Is there anything to it or or should we just whinge? That’s actually the specific text of the question. 

Let’s start by saying that there is is something to it and it goes beyond her. The Canadians burning our Capitol, back in the War of 1812. And you Canadians, you cannot pledge innocence from this. You know you did it. Yes. The Brits drove the car pool, but it was Ontarian Abrines that brought the torches to the party and actually burned the white House down. 

Now bigger picture. The United States is a large country that basically has the best parts of the continent. But that doesn’t mean that the United States is alone on the continent. Obviously, Canada is the entire northern frontier and throughout American history. If you go back to before reconstruction, the United States was always concerned that an extra hemispheric power would establish a beachhead somewhere in the vicinity of the North American continent and potentially use it to interrupt American power or maybe even launch an invasion. 

And of course, most recently and from the beginning, actually, Great Britain was the power of concern. Now, I don’t mean to suggest that there was a British invasion imminent or anything like that. Don’t put words in my mouth. I’m going to piss off enough people with this video as it is. But the idea that you can have an independent power right on America’s borders that doesn’t bear some degree of security risk is just silly. 

That doesn’t mean that I think that there’s a war around the corner, that it’s even inevitable. Certainly not imminent, but it’s not a blind policy decision to decide that you actually want all of the continent under a single flag. And both it for those of you to the south of us in Mexico, this applies to you as well. 

Now, that said, I think that the borders between the United States and its neighbors are fine. I’m not worried about an invasion. There’s good buffers, whether it’s, lakes and force in the north or deserts and mountains in the south. The population density of Canada certainly couldn’t do it by itself. Mexico maybe a little bit better. But northern Mexico is such a logistical snarl because of a lack of infrastructure. 

That too, I’m not concerned about. But the bottom line is, is that this didn’t come out of nowhere. This has been part of the American strategic view for 200 years, and to pretend otherwise is being a little bit windy. Now. That said, do I think we should do it? I think candidate even if they ask. No, because it’s bad math. 

When industrialization really got going roughly a century ago, people started moving from the farms and into the cities and they started having fewer kids. And that process was much more intense in Canada than it was in the United States, because I don’t know if you knew this, but can it gets cold in the winter. And so the Canadians basically huddled together in their cities for warmth, and there’s a much higher dense urbanization rate. 

Oh, got a message dense urbanization rate for Canadians than there is for Americans, which means that the Canadians of age are much slower. They’ve also probably played the immigration card as hard as they can. It’s starting to generate social disruption. And so the old Trudeau government and the new government have cracked down on immigration. Quite a bit, basically slowed it to a trickle. 

Oh, Mr. Popular, all of a sudden, which means that Canada is aging much, much, much quicker than the United States. And remember, in the United States, the baby boomers are already two thirds retired. So we know we face an explosion in social welfare payments over the next decade. Canada is ahead of us, and Canada lacks a millennial generation of size comparable to what we have south of the border. 

Which means if we were to do a merger of the Canadian provinces and the American states, it would be up to the United States to pay for the retirement of most Canadian citizens, most notably in Ontario, Quebec, and in the maritime provinces where the demographic decline is most advanced. So from a purely financial point of view, merging the two countries would be economic suicide for the United States. 

Let Canada pay for this. And if that means Canada pays for other things too, great.

Syria and the Return of the March

Woman holding a Syrian flag over a vehicle

Syria has been riddled with problems for ages, but will all that chaos boil up and spill over? The short answer is that it’s unlikely, but let’s unpack it.

The reason for this is due to a mostly forgotten concept of a “march” or a stateless zone on the edge of organized states. Given Syria’s fragmented and distinct regions, the country has never been fully cohesive; having marches prevents that chaos from spreading further. These areas would typically remain lawless, getting periodically raided to keep anything from festering up, until a neighboring power intervenes. Since Israel, Turkey, and Iraq are managing Syria’s borders, chaos can’t breakout too far.

On a larger scale, marches might be making a comeback. As deglobalization sets in and demographics become more strained, many regions could begin to resemble these lawless, stateless zones.

Prefer to read the transcript? Click here

Transcript

Hey, all. Peter Zeihan here coming to you from Yosemite. For the obligatory I’m backpacking video, but I hurt myself, so I’m in the tent for a few hours, but, my feet are messed up. Anyway, we’re going to take a question from the Patreon crowd. And specifically, do I expect the chaos in Syria to spill over to other countries? 

Yes and no. Just not in a traditional sense. Keep in mind that there’s basically seven series. You’ve got the coastal zone, which is the Alawites, a mountain zone, which is Christians. You’ve got the interior cities of harm, Hama and Aleppo, which are, Sunni Muslim. You’ve got Damascus, which is basically a fortress city. You’ve got this thin line of people that live along the Euphrates, and then you’ve got the desert. 

Right now, ISIS or Islamic State, whatever you want to call it, has been banished to the desert. But in the past they have conquered large chunks of the territory. Anyway, the Alawites out on the coast were the ones who ruled Syria until recently. They were pretty much hated by everybody. And now they have been overthrown. 

There is now a Sunni group that is attempting to cobble this country together. But, the Assads, those are the Alawites who were in charge, had the advantage of Hezbollah backing them up and Iran backing them up and Russia backing them up. And this new government doesn’t have any of that. And so it’s already descended into basically the second phase of the Civil War. 

This one will probably in time be much, much, much, much worse than the first one. And remember, the first one generated millions of refugees and hundreds of thousands of dead. 

Okay, what you have to remember about Syria is until we got to the after World War one, decolonization effort, this was never really a country. This was a zone where, because of all the differences in geography, was basically a bunch of mini states at best, or was amalgamated into some other governments, like, say, the Ottoman Empire or one of the caliphates of the past, which means you should never expect Syria to be a stable place, like it was under the Assad dynasty. 

Instead, what we’re seeing is a return of a concept that we in the West have pretty much forgotten about, called marches. A march is a zone outside of civilization. You have your cities, you have your infrastructure, you have your military and economy. But there’s a zone beyond you that is not owned by another country. It’s stateless. 

And in zones like that, chaos reigns unless and until a superior power comes in and imposes their will on it. And if you look at this region back through history, it has been a march for most of history. 

Marchers basically take two forms. First form is this stateless zone. When you can get some crazy group like the Islamic State that comes in. But that only works when no one who has a country who is bordering the march has the ability to interfere. Alternatively, if anyone who is born in the region does have the ability to interfere, they basically come in from time to time, burn everything down, and then go home because they know there’s nothing here that is worth, building up themselves. 

So for serious specifically, you have Israel, you have Turkey, you have Mesopotamia. And if you look back ten years ago, when Israel was occupied with domestic issues and the Turks had taken a vacation from history and Iraq was in civil war, well, then the Islamic State does pretty well. But that’s not the situation we’re in now. The Turks are on the roll. 

The Israelis are being very aggressive against any potential challenger and Iraq has managed to consolidate itself into a new nation state. We should get used to this sort of concept in lots of areas as demographics decline, as globalization really kicks in and wrecks economies, there’s going to be a lot of states that just the center won’t hold, and we’re going to see a lot more of the world looking like Syria, looking like a march than we’ve become used to in the last 75 years.

REPOST: Jets, Drones & Refineries: Europe Remembers Geopolitics

Based on our discussion yesterday, we’re looking back at this post from April of last year to see how things have evolved.

It looks like the Europeans may have figured out that Russia’s war plans don’t end in Ukraine, so more and more countries are beginning to send aid to the Ukrainians. The Americans, however, are still working through flawed economics and political considerations.

The Norwegian government has decided to send some F-16s to Ukraine, joining Denmark, the Netherlands, and others in providing military support. The most important shift we’re seeing in aid sent to Ukraine is that it is intended to be used on Russian infrastructure and military units…within the Russian border.

The Biden administration’s caution regarding Ukrainian targeting is based on flawed economic analysis and pointless political considerations. This has led us to a strange intersection of this war, where Europe is done limiting Ukraine’s actions in fighting, but the more commonly aggressive American stance is still lagging behind.

Click to enlarge the image
Prefer to read the transcript? Click here

TranscripT

Hey, everybody. Peter Zeihan here, coming to you from a very windy Colorado. It is the 16th of April, and the news today is that the Norwegian government has announced that they are joining the coalition of growing countries that is setting F-16 jets to Ukraine, specifically the foreign minister, a guy by the name of Aspen Barth, I’d, probably has said specifically he hopes and encourages the Ukrainians to use the jets that at the moment are being provided by a coalition of Norway, Denmark and the Netherlands, to stark to target infrastructure and military units actually in Russia proper.

In fact, his phrase was the deeper the better lot going on here to impact. So number one, to this point, the NATO countries have tried to limit the direct attacks by the Ukrainians with their equipment or with equipment that is donated, in order to prevent an escalation. But a few people’s minds have been tripped in recent days because the Ukrainians are now using one and two tonne bombs to completely obliterate civilian infrastructure and are going after aid workers, including, things like E-m-s services.

And this is really tripped the minds of a lot of people in northern Europe in particular, that this war is now gotten way too serious to have any sort of guardrails on what the Ukrainians can target. The French. Well, they have not weighed in on this topic specifically. They’re now openly discussing when, not whether when French troops are going to be deployed to Ukraine to assist the Ukrainians in a rearguard action.

And we have a number of other countries, especially in the Baltics and in Central Europe, that are also wanting to amp up the European commitment to the war. In part, this is just the recognition that if Ukraine falls, they’re all next, and in part is that the United States has abdicated a degree of leadership, both because of targeting restrictions and because there’s a faction within the House of Representatives that is preventing aid from flowing to Ukraine.

So the Europeans are stepping up. In fact, they’ve been stepping up now for nine months. They provided more military and financial aid to the Ukrainians each and every month for nine months now. And this is just kind of the next logical step in that process, which puts the United States in this weird position of being the large country that is arguing the most vociferously for a dialing back of targeting, by Ukraine, of Russian assets in Russia.

If you guys remember, back about three weeks ago, there was a report from the Financial Times that the Biden administration had alerted the Ukrainians that they did not want the Ukrainians to target, for example, oil refineries in Russia because of the impact that could have on global energy prices. And I refrained from commenting at that time because it wasn’t clear to me from how far up the chain it has come.

That warning. But in the last week we have heard national Security adviser Jake Sullivan and the vice president, Kamala Harris, both specifically on and on record, warn the Ukrainians that the United States did not want them targeting this sort of infrastructure because of the impact it would have on policy, and on inflation. Now that we know it’s coming from the White House itself, I feel kind of released to comment.

And I don’t really have a very positive comment here. There’s two things going on. Number one, it’s based on some really, really faulty logic and some bad economic analysis. So step one is the concern in the United States that higher energy prices are going to restrict the ability of the Europeans to rally to the cause and support Ukraine.

Nothing could be further from the truth. Most of the Europeans realize that if Ukraine falls they’re next and most of the countries with an activist foreign policy are already firmly on the side of an expanded targeting regime. The biggest holdout would be Germany, where we have an unstable and unconfident leader and coalition that wants to lead from the back, not the front, which I can understand, but most of the Europeans have realized that if we’re actually getting ready for an actual war between Europe and Russia, that’s not going to be free.

And higher energy costs are just kind of baked into that pie. So almost all of the Europeans have basically cut almost all Russian energy out of their fuel mixes already in anticipation for that fight. So argument number one, gone. number two, the idea that this is going to cause the war to expand in a way that will damage Ukraine more.

Well, one of the first things that the Russians did back in 2022, in the war, was target all Ukrainian oil processing facilities. They don’t have much left. So, yes, there’s more things that the Russians can do, but this is basically turned into a semi genocidal war. So it’s really hard to restrain the Ukrainians and doing things that are going to hurt the Russian bottom line that allows them to fund the war.

So that kind of falls apart. specifically, the Ukrainians have proven with home grown weaponry they don’t even need Western weapons for this. They can do precision attacks on Russian refineries, going after some of the really sensitive bits. Now, refineries are huge facilities with a lot of internal distance and a lot of standoff distance. So if you have an explosion in one section, it doesn’t make the whole thing go up like it might in Hollywood.

As a result, there are very specific places that you have to hit, and that requires a degree of precision and accuracy that most countries can’t demonstrate. But the Ukrainians have a specifically go after something called a distillation tower, which is where you basically take heated crude and you put into a giant fractionated column, if you remember high school chemistry, and if you can poke a hole in that, it’s hot and it’s pressurized.

So you get something that spurts out and based where on the verticality you hit. The products that hit are either flammable or explosive. So we’re including a nice little graphic here to show you what that looks like. the Ukrainians have shown that they can hit this in a dozen different facilities, and the Russians have proven that it’s difficult for them to get this stuff back online, because most of the equipment, especially for his distillation tower, is not produced in Russia.

And a lot of it’s not even produced in China. It’s mostly Western tech. So as of April 2nd, which was the last day we had an attack on energy infrastructure in Russia, about 15% of Russian refining capacity had been taken offline. In the two weeks since then, they’ve gotten about a third of that back on using parts they were able to cobble together.

But it gives you an idea that this is a real drain, because we’re talking about 600,000 barrels a day of refined product that just isn’t being made right now. That affects domestic stability in Russia, that affects the capacity of the Russians to operate in the front. And yes, it does impact global energy prices, but that leads me to the third thing that I have a problem with the Biden administration here, and that the impact on the United States is pretty limited.

the United States is not simply the world’s largest producer of crude oil. It’s also the world’s largest producer of refined product to the degree that it is also the world’s largest exporter of refined product. So not only will the United States feel the least pinch in terms of energy inflation from anything in Russia going offline, we also have the issue that the US president, without having to go through Congress, can put restrictions of whatever form he wants on United States export of product.

Doesn’t require a lot of regulatory creativity to come up with a plan that would allow to a limiting of the impact to prices, for energy products in the United States. And I got to say, it is weird to see the United States playing the role of dove when it comes to NATO issues with Ukraine. Usually the U.S. is the hawk.

Now, I don’t think this is going to last. the Biden administration’s logic and analysis on this is just flat out wrong. geopolitically, there’s already a coalition of European countries that wants to take the fight across the border into Russia proper, because they know that now, that’s really the only way that the Ukrainians can win this war.

Second, economically, you take let’s say you take half of Russia’s refined product exports offline. Will that have an impact? Yeah, but it will be relatively moderate because most countries have been moving away from that already. And the Russian product is going to over halfway around the world before it makes it to an end client. So it’s already been stretched.

Removing it will have an impact. But we’ve had two years to adapt, so it’s going to be moderate, though not to mention in the United States, as the world’s largest refined product exporter, we’re already in a glut here, and it doesn’t take much bureaucratic minutia in order to keep some of that glut from going abroad. So mitigating any price impact here for political reasons.

And third, the political context is wrong to the Biden administration is thinking about inflation and how that can be a voter issue, and it is a voter issue. But if you keep the gasoline and the refined product bottle up in the United States, the only people are going to be pissed off are the refiners. And I don’t think any of those people are going to ever vote for the Biden administration in the first place.

There is no need to restrict Ukrainians room to maneuver in order to fight this war. in order to get everything that the Biden administration says that it wants to be.

Ukraine Hammers Russian Oil Infrastructure

photo of oil barrels

The Ukrainians have ramped up strikes on Russian energy infrastructure, sending ripples through Russia’s refining capacity and triggering fuel shortages. But what changes enabled this to occur?

Three big things have shifted, giving Ukraine political cover and better tools to disrupt Russian oil flows. These include opposition from the US diminishing, Europe cutting off Russian oil and gas (besides Hungary and Slovakia), and longer-range weapons to strike deeper into Russia.

This is allowing Kyiv to strike Russia’s most critical oil hubs; think the pipeline nexus Samara, or pumping stations that will force Novorossiysk to collapse, or even northern hubs serving the Baltic. Since oil remains the largest revenue source for the Russians, sustained attacks on this infrastructure threatens Moscow’s ability to fight this war.

Prefer to read the transcript? Click here

Transcript

Hey all Peter Zeihan here coming from Colorado on a foggy day. Today we’re gonna talk about what’s going on in Russia, specifically. Ukraine has severely ramped up its attacks on Russian energy infrastructure. This is something that the Ukrainians have been doing in bits and pieces for about a year and a half now, but it’s now taken on a whole new level, and we have somewhere between 15 and 20% of Russia’s oil processing capacity offline. 

And it’s generating localized gasoline shortages throughout the Russian system, including in the capital, and certainly in the provinces that are closer to the actual front in the Ukraine war. So what has changed? Three things. First of all, Biden’s gone. Biden had this idea that attacks on energy infrastructure in, the Russian space would raise energy prices globally to a point that would be politically unpalatable for Americans. 

Now, I was always on the other side of that equation, as a rule, gasoline markets, not to be confused with oil markets, trade differently. And so a disruption in one hemisphere does not automatically trigger a broad scale energy price increase in the other. But regardless, Biden has now gone. That argument is no longer being made in Washington. 

And from Ukraine’s point of view, the gloves are off a little bit. Number two Europe, the Europeans are no longer taking any piped oil or natural gas from the Russians at all, aside from a small volumes that come into places like Hungary, which are basically operating as Russian parties. Which means that from Ukraine’s point of view, there’s no longer diplomatic or economic complication in Europe. 

The deals to transit oil and natural gas across Ukrainian space expired at the beginning of the year. Everyone who was smart and saw the writing on the wall, moved away from the Russian sources completely again, Hungary being the standout exception. And now going after the infrastructure in any way, shape or form basically has the unofficial blessing of the European Union. 

So the Hungarians and to the lesser degree the Slovaks, are screaming bloody murder. But Ukraine isn’t giving transit fees. They’re not taking any Russian energy. No one else in the EU is taking any of it either. So it’s okay to go after the infrastructure. We’ve actually seen a couple pumping stations get hit already. Third, the Ukrainians are much better at this. 

They’ve been developing bit by bit heavier payloads and longer range weaponry that can strike further and further and harder and harder at Russian targets. And so now reliably, it’s to a range of about 1200 kilometers. The Ukrainians can be striking, and that’s about 700 miles. And that puts a lot in range of these potential weapons, including the entire Moscow region. 

But Moscow is not the most important zone here when you’re talking about oil. There are a few pipeline hubs in the Russian system where several pipeline networks from different zones come together for focusing and refining, and then go on to export points. And in my opinion, the single most important of them is the city of Samara in southwestern Russia. 

It’s basically roughly north of the Caspian Sea, maybe northwest a little bit. Anyway, something around 3 million barrels a day flows through there at any given time. Pipelines, of course, can be redirected to a degree. But we now have the Ukrainians targeting refineries in the Samara area. And when they do that, the crude can’t be refined. It needs to be kept in the pipeline and sent on, and the pipelines flow on can only take so much traffic. 

So it’s put a real crimp in what the Russians can produce. And we’re already starting to see some reports, a few reports of shut in production because the pipelines can’t handle the flows to the volumes that are necessary because the refineries are offline. If and when the Ukrainians decide to go after the pumping stations on the pipelines themselves, then this whole part of the network breaks, and that will probably be the end of meaningful exports from Russian crude to the Black Sea port of Novorossiysk. 

And as the Ukrainians continue to get better and better weapons, some of the distribution systems of the hubs in northern Russia will probably start getting hit as well. And that could really impinge upon the Baltic Pipeline system, which is where the Russians export crude from the Baltic Sea, from, near Saint Petersburg. The specific port escapes me at the moment. 

Anyway, so with the politics changed and the economic dependencies shifted, and the Ukrainians all of a sudden a lot better at what they were doing, we should expect a lot more Russian crude going offline. So regardless of what happens with the Trump administration and sanctions and its effort to peel, say, the Indians and or the Chinese away from the Russians, if the crude can’t flow, the crude can’t flow, and the Russian economic situation with then become a lot more difficult because oil sales remain what they have always been for Moscow, their single biggest source of income, going all the way back to Soviet times.

While I Was Gone, Part 4: US Security

Shield of the Federal Bureau of Investigation

To wrap up this short series on things that went down while I was away, we’ll be looking at some alarming developments in US security.

The FBI raided former National Security Adviser John Bolton’s home and office, under accusations of mishandling classified documents; that’s a bit rich coming from the current administration, but I digress. The bigger issue is that using federal law enforcement as a political weapon mirrors authoritarian states like Russia and China. This relates to the other big news, where Trump has ordered the US military to form specialized units for patrolling American cities; this is just all-around bad policy.

If there was a time for Congress to assert itself as the adults in the room, it would be now.

Prefer to read the transcript? Click here

Transcript

Hey all. Peter Zeihan here coming to you from the Lake of the Ozarks. This is the last in our series of. What the hell were you thinking while I was gone? Was I backpacking for two weeks? And the world kind of fell apart. This time we’re going to talk about security in the United States borders. There are two big things that went down when I was gone, both of which concern me greatly. 

The first involves a gentleman by the name of John Bolton. John Bolton was a national security adviser, which is kind of America’s top foreign policy coordinator during the first Trump administration. But after seeing how the sausage was made inside, he left the administration and basically became a critic and has now been one of the more reliable voices for saying when Donald Trump is doing something that perhaps isn’t the brightest. 

Well, while I was gone, the FBI was ordered to raid his business and raid his personal residence. And he has now been accused of improperly handling classified materials. The hypocrisy of this is pretty rich. Anyone who is, like, independently minded will be able to tell in a second that the Trump administration is the least information secure administration we’ve ever had. 

We’ve already had a number of cabinet ministers, up to including the vice president, included in signal checks, which is a Russian penetrated not particularly secure platform in which they shared operational data. We’ve had situations most recently in the, the Alaska summit where informations and the personal information of security and diplomatic personnel, including their contact information, was just left on a printer. 

And we’re seeing a general disregard for all the counselor generals, assuming they haven’t been fired already, which are the people who are supposed to maintain information security within the administration. So this administration is leaking classified information massively. We even have our DNI who’s in charge of the intelligence system. Outing covert covert agents around the world on Twitter. 

And so to accuse Bolton of doing something inappropriate with documents is is really rich, especially since he has been in government service in this sort of role for over 20 years and has never even had a hint of that concern brought up, ever. I mean, there’s a lot of reasons to not like John Bolton. Mostly political or personal. 

He’s not a particularly nice gentleman, but no one has ever accused him of not being competent. So that’s number one. Using the FBI as a hit squad for political opponents, is something the United States has never done. This is right out of modern China or 2000s. Russia, or maybe a Latin American democracy. This is not a great thing. 

The second thing which actually concerns me even more is what’s being done with the military. The US military is designed to do military operations overseas. They’re designed to kill people and detect threats. But Trump has given the order for the military to form specialized units designed to specifically patrol and pacify American urban centers. Now, the US military is not good at law enforcement, and it has never been trained to be good at law enforcement. 

Third thing is to get in a tank or getting a jet and go overseas and do things there. When you put them into a law enforcement role, like we saw, say, in the Iraq occupation, things go to hell really quickly. Their equipment’s not right for the training is not right for it. It’s a mismatch. And so a lot of people died that probably didn’t need to. 

You take those same people and you put them on American soil and tell them to do law enforcement. And we’re in a very different situation. The only governments in modern history that use their military for urban pacification are those countries where occupying their own people is a national security issue. This is Iran. This is, to a degree, Russia. 

This is to a degree, North Korea. This is not something we want to see. Not only would it be violent, not only will there be a lot of political degradation because of it, not only will this erode the US military’s capacity to function. It is by far the most expensive way that you could possibly do it, because you’re taking people that you’d like to say trained to work on an Abrams tank. 

It’s people that you probably cost at least a quarter of $1 million just to do their training and then beaten them. Beat cops? No. So we have this cascading list of economic and social and political and health and national security military issues that just in the last two weeks have taken an absolute nosedive. 

I’m not a call to action guy, but we’re nearing the point pretty quickly where if Congress cannot find a backbone to re inject some sanity into American policy, we’re going to be having some severe degradations in our economic, social, and military models that are literally going to take us decades to unfuck. This is getting very real.