While in Helsinki, Secretary of State Blinken got some chuckles from the crowd (and me) when he said, “The Kremlin often claimed it had the second strongest military in the world, and many believed it. Today, many see Russia’s military as the second strongest in Ukraine.”
I’m all for some dark humor and ill-timed comedic relief (especially when it’s used to garner more aid and support for Ukraine), but I don’t want us to lose sight of who we’re talking about. A glance at the history books will show you a myriad of crushing defeats for the Russians, yet they persist.
Russia is both incredibly weak and resilient. While I’m confident that this is the beginning of the end of the Russian system, belittling them in this conflict isn’t going to speed up that process. On the other side of this war, we will be left with a resurgent Russia or a very bitter Russia (who happens to have 1,000+ nuclear warheads at their disposal).
Just a word of warning. You can still giggle at Russia’s incompetence or silly Putin memes, but don’t forget who we’re dealing with…
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
Metawealth Professional Training has contracted with Zeihan on Geopolitics for some geopolitical and demographic work. They have chosen to share this piece of that work with all takers. So thanks much to the folks at Metawealth, and enjoy the listen while you sharpen those pitchforks!
It’s been a scary year. The Fed seems determined to crash the economy. The reality for some is going to be far worse than a “mere” four banks collapsing. Not only have four banks collapsed, another 185 banks are hanging on by a thin thread. Plus, the war in Russia and geopolitical tensions are escalating with no end in sight, and we’re starting to witness vast economic and political consequences.
If you’re like most people, you’re worried about what it all means… and unsure about what to do to best protect yourself from what’s unfolding.
That’s why I’ll be speaking on a special livestream, where I’ll share what my latest research unveils about the future and a startling new set of predictions…
Join me on Wednesday, June 7th at 8pm EST
I believe the era of prosperity we’ve enjoyed since World War II is ending and Russia’s invasion of Ukraine has speeded up the process. The world is entering a new phase of “de-globalization.” The 2020s will see a collapse of consumption, production, investment, and trade…almost everywhere. Instead of a cheaper, better and faster world, it will be pricier, worse and slower.
There is a global disorder coming, in which countries will have to make their own goods, grow their own food, secure their own energy, and do it all with dwindling and aging populations.
In short, we will remember the last 75 years since the end of World War II as a golden age and no economic system can work in the future we’re about to face.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
What if I told you that Brazil’s new tropical strain of wheat could cause the most significant shift to the technological power balance the world has seen in the past five centuries? I know it’s hard to believe that wheat could have the same impact as industrialization, but hear me out.
Wheat has been the world’s go-to crop because it’s easy to grow and calorie-dense. Brazil is tropical, and much of the soil isn’t conducive to growing much of anything. Supporting a growing population becomes difficult without food security, which inhibits economic and technological growth.
Within the next few years, we will know if this new strain of wheat is successful. And if it is…food security will rise, populations will grow, and the core reason for the world’s regional power imbalances will begin to dissipate. This isn’t going to be a fast process, but a new strain of wheat might change the world.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
In mid-May, the US Trade Representative established a trade initiative with Taiwan. While this isn’t a full-blown trade deal, it represents the shift in US policy towards recognizing Taiwan as an independent country.
Taiwan is already an important trade partner for the US, so the economic rationale is there. You can also throw a check next to strategic reasoning, as keeping Taiwan out of Beijing’s grasp means access to critical military positioning for the US.
You can probably guess how the mainland feels about all this…but does that mean an invasion will happen? Unfortunately, I could see this going either way. It would be hard to imagine a world where Xi considers an attack a good idea, but who knows what will happen if everyone keeps drinking the CCP-Propaganda-Kool-Aid?
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
If I had a nickel for every time I’ve been asked for investment advice, I could probably retire. Since I’m not going to give out investment advice (or retire), I present the next best thing…a convo with Bill Mann from The Motley Fool.
In this interview, we discussed some guiding principles behind my investment thought process. Specifically, we looked at China’s issues, Apple, de-dollarization, and the demographic problem that the FED is keeping an eye on.
I encourage you to give the following video a listen…
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
There’s a canal that runs from Kherson to the Crimean Peninsula and serves as the area’s sole irrigation water source. And with how dry the region is, this canal is critical to the Crimean Peninsula.
While an assault on Nova Kakhovka might not be in the cards for the Ukrainians, targeting the sluice gate regulating the canal’s flow might still be their priority. That’s because there’s more than just food production on the line. The Zaporizhzia Nuclear Power Plant draws its coolant water from the Kakhova reservoir, and without that, some nuclear…issues could be on the agenda.
With the potential for a Zaporizhzia offensive, the strategic rationale behind targeting this canal is solid. Only time will tell if the Ukrainians capitalize on the opportunity to cut off the Russians and Crimea.
The above map shows the location of the sluice gate
The above map shows the location of the Zaporizhzia Nuclear Power Plant
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
There’s one massive hole we’ll need to fill if the green movement will ever work in the US…mineral resources. Thankfully we just struck a deal with our Aussie allies, who happen to have many of the key minerals and resources we need.
This deal will enable the Australians to contribute mineral resources to the American greentech industry in a way that will allow them to benefit from the incentives and subsidies in the Inflation Reduction Act (IRA).
While Australia is a significant producer of many necessary Greentech resources, it’s not a one-stop shop for everything. They’re also great at producing the raw ore, but the value add component isn’t their thing. Thanks to subsidies from the IRA, there will be an opportunity to bring value-add capabilities to the Outback.
But what about all the other US allies? Will they be able to tap into this deal? We must remember that there is an inner circle and an outer circle of allies…for now, only the inner circle gets to play.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
Hey Peter Zeihan here coming to you from chilly Phoenix, where it’s a balmy 102 at ten in the morning. I don’t know how people do it. It’s only May. Anyway, back on May 20th or 21st, you’re gonna see this a few days later. The Americans strike a deal with the Australians that will allow the Australians to contribute their mineral resources to the American greentech industry in a way that they will benefit from the incentives and the subsidies that are part of the Inflation Reduction Act.
There’s a real hullabaloo of late about which countries can get access and which can’t, and Australia is a tight ally. It’s part of the inner circle and most importantly it has a preexisting free trade agreement with the United States. And so they are the source of roughly half of the world’s lithium. And they are a significant producer of rare earths and zinc and copper as well. So this definitely scratches a lot of it, just not all of them. They don’t do molybdenum, they don’t do silver or they don’t do a huge amount of bauxite, although they have some. No chromium. So, you know, it’s not like this is a one stop shop for everything The United States needs, but it’s a real big step in the right direction.
Kind of two follow on thoughts from here.Number one, while the Australians are great at producing the raw ore. They do very little value add themselves and one of the things that the IRA is attempting to do is to build up a parallel supply chain that’s independent from China for processing of these raw materials into metals and then on into intermediate products. Australia is a logical place for a lot of that. I mean, yes, Labor costs are high relative to other places in the world, but since the minerals are right there and the energy is cheap, especially if you want to do stuff with solar in the freaking outback, there’s a lot of upward potential. They just need the investment and a decision that they want to move up the value added chain and the IRA will probably help with that, now you’ll have some American Australian fusion projects that are located on both sides of the Pacific. The second thing are the countries that may be able to join the Australians in kind of this inner circle. The United States has a handful of free trade agreements. Obviously the most famous one is NAFTA, and obviously they already qualify for these incentives. But the U.S. also has trade deals with the Koreans and the Japanese and in the world to come. These are countries that are involved in manufacturing. They’re going to do one more and more processing in the value add for things like battery chassis themselves. And so it still needs to be negotiated, but it’s starting from a very strong position and we should expect those to join.
Who’s not going to join is the European Union. Getting a free trade deal with the European Union has always been something that on both sides of the Atlantic has been flirted with, but it’s never really gone anywhere. A lot of the European countries, most notably the French, are highly protectionist, and the idea of exposing themselves to the American market at all is just not something they are even willing to consider. But more importantly, Europe is in demographic collapse and they’ve simply run out of people who are under age 40, the folks who normally do the consumption. So the United States no longer has any sort of economic rationale for an economic partnership over the long term with Europe, because it would just mean that Europe would be product dumping on the Americans. Similar situation for Korea and Japan, but there’s a big strategic argument that these are allies that have to be kept close as part of maintaining a presence in the Asian theater. In the case of Europe, in many cases, it’s a little bit more of a problem than it’s worth. And while there are independent European powers like the Brits or maybe the Swedes or in the Poles, that may be worth it. If it’s all part of a network of the EU, then the cost is simply too high. So there’s definitely an inner circle and an outer circle among the allies. And when it comes to greentech, only the inner circle can play. Alright, that’s it. Everyone take care.
A group of ethnic Russians opposed to Putin’s government joined forces with Ukraine and launched an assault across the border into the city of Belgorod. There are three main takeaways from this cross-border attack.
Russia didn’t bother garrisoning its logistical centers along the Ukrainian border. While this assault was quickly put to rest, this will be crucial as Ukraine launches more attacks in the coming weeks and months.
We’re going to hear a lot more about Belgorod in the future. It’s one of the critical points the Russians use to launch assaults into Ukraine. For Ukraine to “win“ this war, Belgorod will need to be neutralized, one way or the other.
The final component is that these are ethnic Russians…fighting against Russia…in Russia. So this little hiccup might throw a wrench into some of those “for the Russian people” propaganda pieces that Putin is pushing.
As I’ve said before, the Russians will continue pushing this war until they can’t, and if Ukraine wants to win, they’ll eventually have to cross the border. These partisans may have just answered how that might be carried out.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
Hey everybody. Peter Zeihan here coming to you from Scottsdale. Today, we’re going to talk about something that went down on the Ukrainian-Russian border, specifically a group of people who consider themselves partisans identifying that they’re ethnic Russians opposed to the government of Vladimir Putin were joining forces with the Ukrainians and they launched an assault across the border into the city of Belgorod in southwestern Russia. Damage was relatively limited. We’re really talking about a couple of buildings like the FSB office that got burned down, but the Russians redistricted some forces and over the course of the next two or three days managed to push them all back into Ukraine. According to Russian propaganda, they were all killed. Who knows? We don’t even know how many men were involved in the first place.
Now, this is important for two reasons. For three reasons. Number one, it shows that the Russians didn’t even bother to garrison any of their logistical centers that are hard on Ukraine’s border. That is something that is definitely going to be relevant moving forward as the Ukrainians get ready to push the Russians out of more land.
Second, in the war of propaganda, the Ukrainians, of course, are saying these people are unaffiliated. The Russians are saying that they’re all Ukrainian. The truth is somewhere between obviously they’re getting supplies and equipment from the Ukrainian forces that are probably specifically managed by the Ukrainian forces.
But the third most important thing is these are ethnic Russians from Ukraine. And even in the Russian response, they admitted that these are ethnic Russians that are fighting Russia in Russia. So whether or not that was a propaganda hiccup or an admission that the single most viable bit of propaganda that the Russians have been pushing, that they are completely in there to save ethnic Russians, that’s going to be a big problem moving forward.
One more thing I forgot. Belgorod is a really important city for any number of reasons, but the most important one is it serves as Russia’s primary logistical point in launching off for assaults against the city of Kharkiv, which, if you remember, was one of the first places that the Russians attacked earlier in the war and were there until they were kicked out in last year’s summer offensive. The Russians are going to push this war until they can’t. And that means that at some point, if Ukraine is going to emerge victorious, they’re going have to cross into Russia proper and neutralize Belgorod. The Partisans indicate one of the ways that that might happen. So we may be seeing the beginning of a multi vectored strategic policy here, and the Russians have proven that they haven’t bothered to even put basic defenses in the city. I’m sure they’re to work on correcting that now, but there’s a lot on the Russians’ plates.
The Saudis have relied upon the US for military protections for years, but as the US reduces its naval presence in the Persian Gulf, Saudi Arabia will have to find those protections elsewhere.
As the world’s largest oil exporter, Saudi Arabia has learned a few tricks to curry favor from different countries. Their most recent endeavor is accepting the Chinese Yuan as payment for a few hundred million barrels of oil…and that’s not an insignificant amount.
This move isn’t happening because the Saudis are worried about de-dollarization; it’s solely a move to win the Chinese over and establish a new external military guarantee. Still, this remains the only meaningful shift away from the USD, even though it’s from one country, for one commodity, and for one reason.
I’ve said it before, and I’ll say it again…the US Dollar ain’t going nowhere.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
Alright. So the country that matters here, the only country that, in my opinion, is doing anything meaningful when it comes to moving from the dollar to something else. Is Saudi Arabia. Now Saudi is the world’s largest oil exporter, and they have started to accept payment from a number of Chinese government entities in yuan. And we’re talking here about, you know, a few hundred million dollars of cargo. So it’s hardly an insignificant issue. There’s no sign that they’re changing the reserves. And I wouldn’t expect that to happen because there’s a specific rationale here.
Now, the Saudis military on paper is great. They’ve got a lot of top notch equipment, but they have demonstrated over and over and over in recent decades that the Saudi military is incapable of operating its own equipment at scale, much less in any sort of coordinated manner. I mean, they can fly their planes and bomb things, and that’s about it. They have always, since their independence, relied on an external security guarantor in order to keep them alive. At first that was the Brits. And for the last several decades, especially under globalization, it has been the Americans. Now, the Saudis think a little bit differently. They basically have modeled themselves off of a medieval fiefdom. And so they think that bribes work really well in order to get what you want. This is one of the reasons why they got along so well with former American President Donald Trump. They saw the world through basically the same lens when it came to operating procedures.
So what they’ve done with the United States is they’ve bought a number of refineries on the U.S. Gulf Coast and shipped crude from Saudi Arabia to the U.S. Gulf Coast. And if there’s a time when the Americans look like they might be facing high energy prices or some pressure in the market, they sail additional cargoes and just let them park off coast until they’re called for. Now, it’s not like the United States, you know, thinks this is bad thing, but the United States gets the vast, vast, vast majority of its oil always has from the Western Hemisphere, with traditionally Canada and Mexico being our largest suppliers. Now, of course, with the shale revolution of the last 15 years, the United States is a net exporter. So the Saudi angle here is very, very small from an American point of view. But for the Saudis, this was never about the economics. It was about currying favor with the guy who’s supposed to defend you. Wellll, in the last few years, the United States has moved more and more of its forces out of the Persian Gulf, and we no longer even have a carrier group that’s there on a regular basis. So the Saudis are a little scared. They are concerned that without the Americans guaranteeing their security, that they’re screwed. And, you know, that’s a reasonable position. So they’ve been looking about for a replacement and they’re discovering that there isn’t a really good, clean one.
The French and the Brits could theoretically project power into the Persian Gulf, but definitely not as reliably as the United States. Turkey certainly could, but they would have to conquer Iraq first. And, you know, the Saudis have a lot of opinions on a lot of things going on in Iraq, but they’d really rather not have a regional superpower right on their border. India is probably in the long run the most likely outcome, but they’re not Muslim. So the Indians tendency to meddle in political events in places where they have military forces, especially in like Afghanistan, has really soured the Saudis. Japan’s a possibility, but Iran has other options as well. Most notably, it has gotten in bed with the United States and can access the energy of the Western Hemisphere. That just leaves China. Now, the Saudis aren’t all that hot on China. The Chinese navy really can’t project power, and the Chinese have no experience projecting power and military terms beyond their own neighborhood, much less going the 5000 miles it would take to get to the Persian Gulf. There’s also low confidence in Saudi Arabia that if a fight broke out that the Chinese would side with the Saudis against their primary regional rival, Iran. But if there’s one thing the Saudis have, it’s money to spare. So they have gone into China and bought up a few refineries, entered joint ventures with Chinese state energy firms, and are shipping crude to China like they used to ship it to the United States. Now, from the Saudi point of view, this might actually work better in terms of currying favor than it ever did with the Americans, because the Chinese actually need the crude they import three quarters of their total, of which roughly three quarters comes from Africa and the Persian Gulf. And so they’re paying for that in Yuan and in order specifically in their mindset to bribe the Chinese to come to their aid when the rubber hits the road. This is not an economic decision. This is a political decision being made not because they don’t like the dollar, but because they think the dollar doesn’t give them the military guarantees that they thought it once did. So this is Saudi making the decision because of military strategy as shaped by their own culture, not because they think the U.S. dollar is going anywhere.
But still, this is the only example I’ve seen out there of a meaningful shift away from the dollar. And it’s only for trade with one country for one commodity. Alright. That’s it for me.
The topic of de-dollarization is like the weird cousin no one wants to talk to at parties. They only come around once every year or two, and most of what they say is complete bulls***. But when the day comes that you need to take that weird cousin (aka de-dollarization) seriously, here are the three factors to look out for.
#1 Size – To be a currency of exchange, trade, and reserve, a currency must exist in a massive volume. Only four currencies meet the size requirement: Dollar, Euro, Yen and Yuan.
#2 Access – You need to be able to get ahold of a (nearly) unlimited supply of said currency at the drop of a hat. The Dollar comes out on top in this category, with the Yen and Yuan unable to provide the necessary level of access.
#3 Trust – You must feel secure that the chosen currency is a safe store of value and that the government will not intervene. This makes the currency a subset of trade, and if the country in charge wants to micromanage the value on a daily basis, it won’t work.
Several countries have been shouting from the mountaintops that they want to move away from the Dollar. I don’t take most of these too seriously, but one country is seriously considering de-dollarization, and we’ll talk about that tomorrow…
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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.
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Hey everybody. Peter Zeihan here coming to you from Colorado where the weather can’t decide what it wants to do. Today it’s sunny, so, you know, we’re going to work with it. A lot of you have written in asking me about all this hullabaloo about de-dollarization that comes up every year or two. And so I have to explain it again. Fundamentally, nothing has really changed this time, but let me give you the three things to look for if you do want to take de-dollarization seriously in the future, this is not the time.
Number one size. For a currency to be a currency of exchange, a currency of trade, and especially a currency of reserve. It has to exist in huge volume because that’s a lubricate trillions of dollars of financial transactions and physical transactions every single day, and something in excess of $25 – 30 trillion of annual merchandise trade. That’s a lot. And there are really only four countries in the world, four currencies in the world can even theoretically do that. The U.S. dollar, the European euro, the Japanese yen and the Chinese yuan. Number one.
Number two, access. You have to be able to get a hold of nearly unlimited volumes of that currency whenever you want to. Obviously, the dollar scratches that itch. The Japanese yen, not so much. The Japanese tried to go global back in the 1980s. It turns out their financial system couldn’t handle it and it contributed. It was one of the many factors as to why they have had on average 0% growth since 1993, 94 or something like that. And so they have kind of closed up shop. The currency is available. You can add it to the side, but it’s never going to be a mainline exchange currency. Let’s see, China is eliminated from that category as well. The number one concern that the Chinese have is for control. Absolute, domineering, dictatorial control over their own internal financial sector. That means they don’t want to see large cross-border flows, especially from China to the rest of the world. So every once in a while, the Chinese will do what they’re doing now and talk up the yuan and talk up internationalization. Then as soon as that starts to happen, a flood of currency from the Chinese goes elsewhere because the Chinese are the people who are the least confident in their own economic system. And then the Chinese government slams it shut and we don’t hear about it for a couple years again…like we are now.
Okay. What’s the other big one? Trust. You have to trust that the currency is going to be worth something. You have to trust that the government is not going to intervene. And that means this is kind of a subset of trade. Now, with trade, if you are a major trading country and a large percentage of your GDP is gotten from exports and imports, then you have a vested interest in what the value of your currency is every single day. The U.S. is perfect for that because the U.S. trade to GDP ratio is only about 15%, and about half of that is either energy or NAFTA. And everything else falls into that other like six, 7%. So the United States really doesn’t care what happens to the value of occurrence every day. The Chinese don’t have a freely traded system, so they can micromanage what the value is every single day. There’s also the issue of whether your money’s going to be there the next day. Now, the United States maybe is taking a hit on this with the Russia sanctions and that it’s weaponized the U.S. dollar in a few ways. But compare that to, say, what goes on with monetization. Now, I know I know a lot of you folks out there who are like gold bugs are like, oh, the U.S. monetizes like mad. And, you know, there’s something to be said for that. We do have a large money supply. It’s probably bigger than it needs to be. But a couple of things to keep in mind. It’s been shrinking for the last year as all the stimulus efforts from the last 15 years because of COVID and financial crisis and everything else have finally wound down. It’s going in the right direction. And second, I compare it to everyone else the Japanese, the Europeans, and especially the Chinese print currency in far greater volumes in the U.S. does. So the U.S. currency is the primary finance currency. It’s a primary currency. And everyone’s foreign reserves, the primary trade currency is the primary store of value. The Chinese yuan is none of those things. In fact, 99% of the issued currency of the Chinese yuan is held within the Chinese system. But their money supply is bigger than the United States because they print currency so ridiculously. So if you want to use that as a reason and talk down the dollar, that’s fine. Just make sure you apply the same criteria to everyone else. Because the yen and the U.S., even though the Japanese economy is less than a third of the size of the U.S., it’s about the same currency exchange. And the euro is bigger, too. So the U.S. runs the least bad ship, if that’s the right way to look at it. And then finally, of course, there’s the euro. The Europeans for a long time have been looting the U.S. dollar as a coequal currency, if you will. The European euro should be right there with them, but they confiscated insured bank deposits back when they had the financial crisis in the late 2000, early 20 tens. And as a result, anyone who could move their money out of Europe did. So. It’s a regional currency that’s not nothing, but it’s no longer a serious contender for any sort of broad, dominant international role.
There are a couple of other countries that have started to kind of join the shouting on this topic, but I don’t take those seriously either. One of them is Bangladesh. Bangladesh has recently publicly pledged that the nuclear power plant that they’re planning on buying from the Russians will be paid for with rubles. Yeah, that means nothing because the Bangladeshis don’t have the money to buy a nuclear power plant. So to pledge for something that’s never going to happen in a currency that they don’t have yet, whatever. And then there’s Argentina who says it’s gung ho to join any sort of not-dollar system. The Argentines are trailblazers in many financial matters, but currency adoption is not one of them. They’re basically looking for a currency that can be printed without causing inflation for them and without them having to pay back and foreign currency later. So, you know, I wouldn’t take that too seriously either.
Now, all that said, there is one country out there that is seriously considering and maybe even implementing a degree of de-dollarization because it doesn’t care about these factors. It has something else that is driving its decision making. And we’ll talk about that tomorrow.
