Senator Lindsey Graham captured the essence of what today’s video is all about – “If you jump on the Putin train now, you’re dumber than dirt.”
Between President Biden’s visit to Ukraine and VP Harris’ comment on Russia’s crimes against humanity, it’s clear that the US has drawn a line in the sand, and Russia is on the other side. This means that Russia (or at least Putin’s government) is on the blacklist of world affairs.
According to Secretary of State Antony Blinken, the Chinese are considering providing lethal aid to the Russians, so that blacklist might be getting a little bigger. Unfortunately for the Chinese, any disruption to the already crumbling relations between the US and China could prove catastrophic.
The breaking point has been on the horizon for years now, and we all should have seen this coming. The ramifications will be huge, and a complete reordering of the global economic system is just the tip of the iceberg.
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 are very few instances when a prisoner would refuse a chance to get out of jail… In Russia, convicts have the opportunity to join the Wagner Group in exchange for a get-out-of-jail card.
If you’re not familiar with the Wagner Group, they’re the militant group that commits war crimes on behalf of the Russian government. Or, if you ask the Russian government, they’re an independent mercenary group that just so happens to support Russian national interests while having zero ties to the government. I’ll let you choose your preferred narrative.
Regardless of who is pulling the strings, the Wagner Group is working against the clock. They’ve depleted their supply of new recruits (ex-military and convicts being the two sources), and if they continue to incur such high casualties, they won’t be around for much longer.
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 Palm Beach. Today I wanted to take a minute to talk about Wagner. Now, Wagner is the Russian paramilitary group that is controlled by a guy named Prigozhin, and it has served the Russians in any number of ways in doing military things that they would rather not be officially associated with. And that has been the appeal from the Russian government’s point of view that this is not a state company, this is not a branch of the military. This is a dude who honestly was just a caterer who decided that he was going to form a militant group to serve Russian national interests. And in doing so, the Russians have had a lot of pseudo plausible deniability and its involved in a lot of war crime activities in Africa and in the Ukraine war. It’s been heavily involved in the battle of Bakhmut, which is where they’ve been basically throwing people after people after people into the grinder. Minimum of 10,000 deaths there, perhaps as many as 30 or 40,000, just obscene numbers of casualties.
Now, the Russians have used things like Wagner starting in the last Ukraine war in 2014. They said that Wagner, because it is not a Russian government, was actually acting on the interest of the local Russians in eastern Ukraine and therefore they were part of a rebellion against Ukraine as opposed to some sort of imperialistic war. Well, now, several years on, it’s obvious that Wagner is just an arm of the Russian state, but that doesn’t mean that we need to get used to it. And I’m not advocating for any sort of strike against Wagner. Wagner is taking care of this itself. You see, Wagner recruits its forces from two groups. The first are former military officers in Russia. But now that Russia is in an active war, there’s no such thing as a former military officer. Everyone is being re-upped and kept within the system because the Russians are going from having a hundred thousand men in Ukraine to 700,000 in the not too distant future and probably more they’re on. So there is no longer a pool of skilled military recruits for Prigozhin and Wagner to pull from because they’re all going to be in the military.
But the second big source of troops that they’ve had during Ukraine is prisons. You go to prison, say, for a six month stint, you will get out. But then they proceed to use the people like cannon fodder, and very few of them survive the next six months. So number one, Wagner has almost emptied the prisons of the people who might qualify. And two, the people who haven’t left are like, holy crap, six months serving Wagner as cannon fodder. I’ve got. I’ll take my chances in prison. Thank you very much.
So one way or another, this is probably the final campaign. Forget the final war or final campaign that Wagner will be part of. They’re just not going to be able to maintain their numbers. And so any talk of a palace coup with Prigozhin trying to get some official position within the government. Honestly, I think it’s kind of pointless because he’s not going to be able to replicate what he’s done.
Moving forward, the implications for the Ukraine War are limited because, you know, it’s still a war. The Russian military is fully engaged, but elsewhere in the world the implications are significant because the Kremlin has been using Wagner to send forces to do unsavory things and generate influence all around the world, most notably in Africa. And if Wagner cannot maintain its current staffing levels, much less expand in the future, it’s only a matter of time before one country somewhere decides that Wagner is more trouble than it’s worth and either sends it home or starts shooting at it. And when that happens, we’ll have a cascade of effects around the world as basically Wagner gets rolled up because they no longer have any recruitment capacity. They no longer have staff in reserve. They can’t surge anywhere, and they’re not an official arm of the Russian government. So they can be cleared out with minimal diplomatic fallout. So it’s been fun while it’s lasted. But this is Wagner’s last year. Until next time.
Today is the day! Join me at 2:00 pm CST for the Webinar – Global Outlook: One Year Into the Ukraine War. You don’t want to miss this one!
The people have spoken, and apparently 17 hours of my voice is exactly what they want…
The audio version of my 4th book – The End of the World Is Just the Beginning: Mapping the Collapse of Globalization – is back on the NYT Best Seller List.
For the entire month of February, all sales of all of my books in all formats will be donated to MedShare. You can learn more about MedShare and their efforts at the link below.
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.
Good morning, everyone. Peter Zeihan here coming to you from Colorado. And the news that you can use today is that my fourth book, The End of the World Is Just the Beginning: Mapping the Collapse of Globalization – is back on the New York Times bestseller list. Specifically, the audio version, which is 17 hours of this.
Anyway, for the month of February, all sales of all books in all formats are going to MedShare, which is a charity that provides medical assistance to communities who lack the ability at the moment to provide it themselves. So, for example, if your neighbor is Russia and it’s throwing missiles into your electrical grid and the power goes out your hospital, MedShare helps with diesel and generators and medical equipment, all that. So buy a book and all the proceeds will be going to Medicare. Or you can just go directly to the link at the end of this email. And that goes directly to the Ukraine fund.
That’s it for me. Thanks for all the support and looking forward to doing more of these over the course of the next couple of months. Take care.
Before we jump into the newsletter, I wanted to remind you that tomorrow is the big day! Join the webinar and learn how the Ukraine War has affected global supply chains, agriculture and much more. Click the link below for more info, and I look forward to seeing you there!
Federal Reserve Chairman Jerome Powell wants to shrink the balance sheet to zero over the next few years. And while this may be good for the economy and the US overall, not everyone will like the outcome…especially our vest-wearing friends down on Wall Street.
So how did we get here? Well, the Fed is in the business of preventing economic crises, and one function of that is having the “tools” to do so. The typical “tools” we see are using interest rates and other money operations to manipulate the financial system, but what happens when that’s not enough?
Since the 2008 financial crisis, the US economy has seen all the unorthodox tools in the toolbox. One of those is purchasing bonds on the secondary markets…to the tune of $9 trillion. That’s not an easy pill to swallow for everyone, but it goes down a bit easier when the alternative is a depression.
Now that the economy has seen a few years of growth and unemployment is at an all-time low, the Fed is ready to pack up its unorthodox “toolbox” to be better prepared for a future economic downturn. So what does this all mean?
Lots of money is coming off the table very soon. With the Fed pulling back and the Baby Boomers aging into retirement, we’re about to see almost a third of all available capital leave the system. Hopefully, your financial advisor is really, really good.
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.
Good morning from still chilly Colorado. Peter Zeihan coming to you to talk about what’s going on in the world of finance. For those of you who have not been watching, the US Federal Reserve chairman Jerome Powell has indicated he plans to shrink the balance sheet down to zero over the course of the next couple of years. So, you know, real quick, what’s the balance sheet and why does it exist?
The Federal Reserve prefers to use interest rates and money operations in order to manipulate the financial system to regulate the flow of capital, the cost of capital, and in general, what happens in the wider world. But from time to time, that is not enough. You can only push interest rates so low. I mean, once you hit zero, there’s really no further to go. And you can only shove so much money into the banking system to encourage lending. If people aren’t borrowing, people are not borrowing.
So from time to time, certainly at the end of the or in the middle of the financial crisis and into COVID, the Federal Reserve dipped into a series of relatively unorthodox tools that use the balance sheet. And what they did is they would expand the money supply to print currency and then use that money to purchase bonds on the secondary market. And they could be car loans or college loans or credit card debt, mortgages, whatever happened to be. And from 2008 until the peak, which was about about two years ago now, they did $9 trillion that way. So, you know, the U.S. federal budget deficit is about a trillion. So you get an idea of just how stimulatory that was. And there are a lot of people who thought that this was irresponsible and that it was inflationary, and it was another unorthodox. You know, they have a point. But from the Federal Reserve’s point of view, the alternative was to fall into a deep recession or maybe even depression, and didn’t feel they had much of a choice.
What’s going on now is the economy is on sounder footing. We are at record low unemployment levels and growth has been moderate to strong for three years in a row. So the Federal Reserve feels it’s time to kind of get out of that business and get back to normal. And if from the point that they really started this process a year ago to two years being done. 3 year process, you know, that’s like three or four times as fast as they built the thing up. So really quick, actually, when you’re thinking about the size of this $9 trillion, that’s a lot.
Now, what will that mean? It should, under normal circumstances, typically mean slower economic growth, because when you reduce the cost of capital, less stuff gets funded and the stuff that does get funded tends to be more viable. So more industrial plant, more infrastructure, more education, less on things that are like emerging technologies that haven’t made it to the prototype stage yet. Less on technologies that don’t seem to be working out in terms of cost benefit analysis. Overall, from an economic efficiency point of view, this is a really good step because shaking out some of the dead weight that has evolved in this environment we’ve had for the last 15 years of nearly free capital. You know, we’ve seen a lot of crazy shit go down and we’re finally going to see a lot of that get shaken out. Interest rates are getting back to a more normal posture. The Fed is not done raising. He’s got at least another full percentage point to go. I would argue probably closer to three. And we’re finally seeing all this surplus liquidity go out of the system and return us to a more balanced system, which means when we get to the next financial crisis or the next recession, the Fed will have a lot more tools, a lot more wiggle room, and the overall economy will be a lot healthier. These are all good things, but what is good for the system as a whole is not necessarily good for each individual piece.
So think of all the things that we have seen bubble up over the last 15 years because of cheap capital. In part, this is the Green Revolution, the technologies that on a cost benefit basis, once you include things like intermittency and geography, you know, are not really ready for prime time. EVs which are very materials intensive and tap supply chains that are not secure that we want to produce at scale, even though their carbon footprint in a lot of the country is heavier than ICEs internal combustion engines for at least several years. And then you’ve got your more traditional crap, your subprime, your Beanie Babies, your Bitcoin things that probably should have never existed in the first place. All of that is going to be in a much more difficult capital environment, and we should expect that to adjust appropriately. But perhaps where we’re going to see the most pain is in finance.
When the amount of money to be managed shrinks, the number of money managers that you need goes down. And it’s not like the Federal Reserve is the only player here. There are other things going on in the overall economic system that are also pushing us in the direction of less capital. I’d say the single biggest one, maybe even more significant than the Federal Reserve in the long term, is what’s happening with the baby boomers.
As you get older, you get better at your job, you earn more money, and after age 50 to 55, your kids have moved out of your house has been paid down. So from 55 to 65, that’s the most money you will ever have in your life. And then you retire. And when you retire, you take your money out of more prospective investments with higher velocity of capital, things like stocks and bonds. And you put them into T-bills and cash because the next time there’s a market crash, if you haven’t done that, you lose your shirt and you’re no longer working and you can’t buy a new one.
So the baby boomers, for the last 15 years have kind of been in that magical era between 55 and 65, where they’ve been saving money and investing it. And that has happened at the same time that the Federal Reserve has maintained an ultra loose monetary policy. Well, on average, the baby boomers retired last year, which means that their money is rapidly draining away from the system. At the same time that the Federal Reserve is tightening policy. So over the course of the next 2 to 3 years, we’re looking at a global reduction in available capital of at least a third and we will probably see the number of people employed in the financial sector in the United States drop by a similar number.
Good luck, folks. It’s going to be all about quality moving forward. Alright. Until next time.
Moldova is one of those places that most people couldn’t find on a map, but what it lacks in size, it makes up for in strategic significance.
Moldova is one of the access points between the European space and the region Russia seeks to control. Unfortunately for the Moldovans, this comes at the cost of a steady presence by the Russians – both militarily and meddling in government affairs.
As the Ukraine War rages on, Moldova’s importance continues to grow. Should the Ukrainians fall…Moldova will surely be in the crosshairs next.
Prefer to read the transcript of the video?Click here
This Friday, Feb. 17th, join me for the webinar – Global Outlook: One Year into the Ukraine War.
We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.
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 everyone. Peter Zeihan here coming to you from a hotel with absolutely spectacular wallpaper. There’s been a lot of news on the Ukraine war on a front that most people haven’t been following, and that is actually in a different country called Moldova. So the point of this video is to tell you what a Moldova is and why it matters.
It is a small sliver of a country that’s kind of a debris of empire. So when countries rise into empires, they tend to absorb a lot of territories around them as they expand. That generates a lot of people within the imperial borders that, as a rule, are not all that happy to be where they are. And Moldova today was at the boundary for what was once on one side the Austrian Empire. Another side, the Ottoman Empire. And on the third side, the Russian Empire. It’s situated in a chunk of territory between the Carpathian Mountains and the Black Sea, and whoever controls it has been able to determine which way the armies can flow.
Now, as the story goes, the Russians have been using their political influence in the country to engineer the fall of the government, which is something I consider completely realistic, because they’ve done that at least a dozen times since 1992. The Ukrainians warned the Moldovans about a week ago that the coup was imminent and now here we are. So whether or not I believe any of the specifics is kind of irrelevant. The Russians have always treated Moldova’s politics as a bit of a training ground for their intelligence agency before they go into like, you know, real countries like Germany for general manipulation.
So for those of you who have been following me for a while now, you know that I view the Russian view of their own space as insecure because there are these nine major access points. And the Russians feel that unless they can secure all of them militarily and put some troops as a military footprint to dissuade attacks in each and every one of them, that they will never feel secure. And unfortunately for Ukraine, Ukraine’s on the road to two of them. One of those is today’s Moldova. It’s called the Bessarabian Gap in history. And it has been the site of any number of conflicts between European powers and Turkish powers and Russian powers. Now, this was all part of the Soviet Union proper, not the empire of the Union itself until the break up in 1992. And in that year, Russia launched one of its first post-Soviet military missions in order to break up Moldova. So there’s a thin sliver called Transnistria, which is the eastern edge of Moldova that has basically declared independence and with Russian sponsorship, has been able to maintain that independence ever since 1992. And there is a military garrison of Russian troops actually stationed in Transnistria to make sure it doesn’t get doesn’t fall to Moldova in general.
Now, the Russians have always maintained a strong presence in the country and not just in terms of troops. They have worked repeatedly to make sure that the government of Moldova is as nonfunctional as possible because they would much rather have a Russian influenced, weak statelet between them and the European space than anyone with any sort of independent opinions.
What we have seen during the Ukraine war is that the Russians have basically tried to use Moldova as a wedge, either to manipulate the refugees coming out of Ukraine to launch missiles over Moldovan airspace into Ukrainian targets or in general just to cause headaches. And this is not something that is particularly well loved by the authorities in Moldova or the population in general. And from the Russian point of view, this is all non-negotiable, just as they would never accept anything less than a full Ukrainian surrender so they can get on to get to those physical gaps. Moldova is one of those physical gaps. And so if we do get into a situation where Ukraine falls, Moldova is absolutely going to be the next target because it’s not in the EU. It’s not in NATO. It’s a country of only 4 million people. And the Russians have deliberately kept it economically and politically nonfunctional for 13 years.
The only other scenario, of course, that’s worthy of consideration is what happens if the Ukrainians win, in which case you should expect Ukrainian and maybe even NATO’s a military action against those Russian troops in Transnistria to eject them and to formally fold Moldova into the European in the NATO family of countries. You would probably expect to see Moldova be able to qualify for membership on both organizations a lot sooner because the territorial dispute they have is internal as opposed to with the Russians. And this is a country that is an order of magnitude smaller in population and like 1/20 the physical size of Ukraine. In addition, the Moldovans are a derivation of Romanians, both in terms of ethnicity and language. So relations between those two countries could actually push in the direction of integration into a single country. And since Romania is already in the EU and NATO. That would allow NATO’s in the EU to expand with not actually expanding anyway.
So two wildly different forecasts based on what happens with Ukraine. And that’s where we are. Alright. See you guys next time.
The big news from the weekend is that Russia announced a plan to cut 500,000 b/d (barrels per day) of oil production. This accounts for about .5% of global supply and roughly 10% of Russian oil exports.
This alone isn’t a huge deal, but when you stack up all the factors working against the Russian oil industry, some concern over its stability is warranted. Struggling to break even, the potential of wells freezing and bursting due to crude flow disruptions, the Ukraine War…that’s a hefty list and it wouldn’t take much to throw everything into a tailspin.
I’m not sounding the alarm bells quite yet, but it’s a good reminder as to just how fragile this whole system really is.
Prefer to read the transcript of the video?Click here
This Friday, Feb. 17th, join me for the webinar – Global Outlook: One Year into the Ukraine War.
We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.
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 everyone. Peter Zeihan here coming to you from my home away from home, the Denver Airport. It is the 13th of February. And the news over the weekend is that the Russians have announced a near imminent plan to cut 500,000 barrels a day of oil production, which comes out to about one half of 1% of global production. And roughly 10% of Russian exports.
Now, for those of you who’ve been watching me for a while, you know that I’m really concerned about the stability of Russian production, not just because of the war, but because of their geology. Most oil production comes from the permafrost. And if there’s a situation where the crude can’t flow, whether because people are taking the crude away at their export points or because they shut it themselves, the crude in the wellhead freezes into gel and the water that comes up as a byproduct freezes into ice and it pops the wells from the inside and repairing that damage. The last time around took 30 years and last time most of the oil services firms were part of the process. This time they’re gone. So if we do lose Russian oil production for any reason, it’s not just gone. It’s gone for a very, very, very long time. And that is not priced into the market at all.
Now, the 500,000 is probably, probably, probably not a problem. The Russians have about a million barrels per day from the western fields that are not in the permafrost. And so they can shut those in and bring that back on and shut it in again and bring it back online. In fact, they did this in the early weeks of the war last time when people weren’t taking their crude. Well, now we have a couple more things in play. The European oil ban is in place. The European refined products period is in place. It’s not technically illegal to buy or ship these products, but you have to do it without European insurance or vessels if it’s under a certain price point. And that is reducing demand for Russian product around the world because they’re having a hard time getting the stuff out. Also, the break even price for a lot of Russian crude is between 40 and $60 a barrel. And now that the prices that the Russians can charge are under that threshold, the Russians don’t have an economic incentive to pump the stuff in many cases. So 500,000 has taken away half of the buffer. We’re not to the point where we’re going to see permanent shut ins, but we are not all that far away.
Unfortunately for the Chinese, their balloon didn’t make it in time for the Macy’s Thanksgiving Day Parade…however, it’s made a much bigger splash than the rest of this year’s balloons.
Now I’m no balloon expert, but it seems to me that a “spy balloon” is a little outdated for 2023; especially when an open-source satellite could have given them the same intel.
The effect of this balloon is two-fold. First, it’s shown the world that the disconnect within the Chinese government has reached an all-time high. Second, diplomatic relations between the US and China have grown colder than ever and will likely be strained even further.
Prefer to read the transcript of the video?Click here
This Friday, Feb. 17th, join me for the webinar – Global Outlook: One Year into the Ukraine War.
We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.
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 coming to you from another exciting hotel room today. Today’s Balloon Day. Now, I realize it’s been quite a while since the balloon was first sighted and brought down. But, you know, part of being a generalist is knowing when to keep your mouth shut because you don’t want to just talk about things you don’t know much about. And balloons have never made my top, you know, thousand list of things I consider myself a semi expert in. So I had to go out and speak to a few people.
Let’s start with what the Chinese were technically trying to do. They were doing overflight of a lot of our military bases, specifically our ICBM launch facilities, because the Chinese are new to having a nuclear deterrent and the idea of having reinforced bunkers and silos. And so everything from the type of fuel – solid versus liquid to the type of reinforcements to the type of launch to capabilities to the staging of the rockets. They’re all relatively new to all of this, certainly to doing it at scale. Remember that as early as the 1970s, the United States had over 30,000 nuclear weapons, about one third of which would have been deployed by missile. Now, with arms control treaties and the post-Cold War environment, we have slimmed that down to just a few hundred. But the United States has a deep bench of experience in building and maintaining these things, and the Chinese simply don’t. Until very recently, their entire deterrent was just about 100 or so missiles. And they’re trying to beef it up. Part of the general effort to get into great power competition, and they have a very long way to go. So any little peek that they can get would be great from their point of view. Obviously, from the American point of view, we have a slightly different view of that.
Now, when it first came out, like, a lot of people didn’t really know what was going on. And so my first thought was like, you know, why would the Chinese, I mean, the balloons are big, they’re slow moving. You can’t maneuver them very well. They’re obvious. And so it’s like, you know, I haven’t thought very much of the leadership of Xi Jinping of late or making mistakes in energy and agriculture and finance and economic development and trade. I mean, manufacturing, you name it. We’re seeing catastrophic failures across the Chinese system in decision making because Xi has basically gotten rid of anyone who might tell him no or might tell him yes…but. He’s surrounded himself with yes men. And so we’re just seeing a general breakdown of the bureaucracy and the decision making apparatus. But even with that in mind, it was like, you know, Xi isn’t just stupid. Why would he throw a surveillance platform that would just gently float across the United States? Want to be obvious. It would be seen that obviously would torpedo relations. I just never occurred to me that they could be that dumb. Well, turns out the rampant stupidity that is taking over decision making and Chinese policy has now reached a bit of a break point.
We now know from the responses to the crisis that the Chinese have lost the ability to coordinate within their own system. So normally if you can do something that’s a little provocative, you’re going to coordinate with your diplomatic personnel and your executives in order that nothing else that you’re working on gets ruined. But the day that the balloon, like, floated into northern Idaho, Blinken was supposed to be on a plane going to China, and he had to cancel.
And then over the course of the next week, the Americans were reaching out to the Chinese, and the Chinese refused to take the call because they didn’t know what to say because they couldn’t get direction. And then once it was shot down over the waters of South Carolina, they refused to pick up the phone because they said, oh, no, you don’t understand.
You’re using military force, take out a civilian aircraft. I mean, the just the abject refusal to deal with the situation is the only you only see that when the bureaucracy is seized up, she has so intimidated and purged the bureaucracy that there’s really only two types of people left, those who will do nothing unless they are explicitly instructed to do something, or those who are true believers, the zealots, and those are the folks who will go out on the runways and sterilize them for COVID, or apparently will try to get a balloon over the United States, not even thinking that it might have a problem for relations, which U.S. Chinese relations are the coldest they
have ever been. And with incidents like this, any effort to warm them is not working. So that’s kind of the diplomatic and the political side. This is this is really bad for China and really exposes just a big, hollow emptiness in their policymaking capacity, which I’m sure no one’s going to take advantage of at all. So let’s talk about what the Chinese might have gotten and what the United States might have lost or gotten, because there’s a clear winner here and it’s not probably who you think it is now, the missile silos that the Chinese are so interested in, you know, news flash, you don’t leave those open to the elements.
And so once it was obvious that a balloon was going over them, they just button up, they get their emissions under control. And all the doors are closed. So there was nothing that the balloons could gather that could not also be gathered by satellite. So they basically floated all over the United States and got nothing better than typical open source information.
The whole time U.S. Hardware was tracking that balloon, tracking its emissions, taking digital renderings of the entirety of the structure and. Oh, yeah, yeah. Just just so we’re clear, this was not a weather balloon. This thing was 300 feet wide. That’s a big ass balloon. That’s like an order of magnitude bigger than weather balloons. And I don’t know if you guys know what an embassy airplane is, though.
Those little Barbie dream jets that sometimes you’re on a connecting flight for, they only take about 70, 80 people. The equipment that was hanging from the bottom of the balloon, the payload was bigger than an embassy air and there were long range antennas and listening devices and computing capacity and solar panels on this thing, along with some propellers.
So, you know, the idea that this was a weather balloon was like only if it was planning on monitoring the weather on Venus because it had that sort of range. So the Chinese position, again, and the diplomatic system seized up because the truth was so obvious. But the Chinese diplomatic corps had no idea that this was going on.
It’s part of that whole disconnect anyway. They got very little, if any, information from this effort. But the whole time the Americans were trapped in what was a fairly sophisticated spy platform, and then we shot it down on it over South Carolina, we started fishing for the parts. Now, I like a lot of people, apparently like President Biden, my first instinct was to shoot it down the second across the border.
But as it was explained to me, if you shoot down something of that size, when it’s ten miles up, the debris field is going to cover a couple of square miles in a line. That’s something like six or seven miles long who nobody wants. £200 of Chinese spyware falling through the roof. You people probably would have died even over like the vast empties of Montana.
So they waited for it to be over water. Also, they did detect it when it was over Alaska. But if they had shot it down over Alaskan waters, some of those waters are three miles deep and they wanted to recover it. So the waters over or off the shelf of South Carolina are 30 to 60 feet deep, something you can just do as a commercial dove.
So pieces that are being recovered and we’re getting a better look at spy equipment out of China and their capabilities and their emissions and how they handle information and what they’re looking for as a result of this incident. Then normally you would have gotten after a one or two year probing effort with using more traditional methods. So it’s kind of like the Chinese flew a canary into our cage and we just quietly locked the door behind it.
And this is turning into the intelligence bonanza of the decade. So that’s what happened after a couple of weeks of me poking into this. It’s a really intriguing story. But the bottom line is just the sheer level of stupidity and dysfunction of the Chinese national security experts, if that’s the right word, really has reached a foreign, mentally new low.
And, you know, Congress is going to be stirred up like a band of hornets. And I have no problem with that because this is going to have consequences for the relationship. There’s no way there’s nothing out of this that the Chinese are walking out of smelling. Good. All right. That’s it for me. I’ll see you guys next time.
Before we dive into today’s newsletter, I wanted to remind everyone that we are only 1 WEEK AWAY from the Webinar – Global Outlook: 1 Year Into the Ukraine War. So if you haven’t already signed up, click the link below for more info.
Now back to the eggs…
It’s time we get to the bottom of the question on everyone’s mind…why are my eggs so damn expensive?
Inflation takes no prisoners, but we may have another source to thank for this…avian influenza, aka bird flu. This resulted in a massive loss of chickens and the culling of herds to prevent further infection. And can you guess how you get more chickens?
You have to hold back some of your eggs, and then you have to wait…and then raise the chickens (for 2-6 months) to the point where they can start producing eggs. Unfortunately for us, this is how almost everything works in agriculture. You can’t just build a facility and start producing wheat overnight, you have to account for an entire production cycle.
Now take this framework and apply it to the Ukraine War. What happens when the fifth-largest exporter of wheat, the fourth-largest exporter of corn and the largest exporter of seed oils goes offline? The world’s going to have bigger problems than egg prices…
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.
Still in San Diego, just had breakfast. And it occurred to me that, well, we’ve all been struggling with inflation for the last several months. But if you’ve noticed, eggs are by far the highest priced thing out there right now, based on where you are in the country, a dozen is now between $5 and $9.
The reason is not because there’s been a failure of the supply chain. The reason is not because there’s a shortage of imports. The reason, quite simply, is flu. The problem with maintaining chicken populations is that chickens are birds, and birds can fly…not the chickens that we raise for eating or for raising eggs, but other birds. And since birds are mobile, they carry their bugs with them and they crap. And the crap falls out of the sky. And sometimes it hits a domesticated bird.
Anyway, we had an outbreak of avian flu about a year ago, and as it roared through the Midwest and took out a lot of chickens, a lot of chicken farmers had to go through and cull their herds to prevent it from infecting anymore.
Now, from the point that you decide you want more chickens, you have to do two things. Number one, you have to hold some of the eggs back. So you’re talking about a reduction in output between a quarter and a half. Based on how fast you’re trying to recalculate. And then you got to wait because you got to raise these things. And it takes about I mean, it really varies greatly on the species, but somewhere between two and six months to raise an adult chicken to the point that it can be laying its eggs itself.
So this process started about three or four months ago. I mean, we have another 2 to 3 months to go before we really get that first huge additional generation assisting, and then we can start dealing with the backlog. So we are still looking at high egg prices for another 3 to 4 months.
Now, this sort of thing is pretty common in agriculture. People forget that, you know, when we have a shortage in something like a car because we can’t get a spark plug or a semiconductor, once you get the new facility on line, all of the other parts can be in place. And then you just go through the semi-finished cars. You plug in this last piece and you’re good to go. Well, that doesn’t work with food. If you have a food shortage, doesn’t matter what it is. You’ve got to wait for an entire production cycle to go through. And if you’re talking about plant based agriculture, sometimes that’s another year. Everything has to be in place. The pesticide at the right time, the seeds at the right time, the irrigation at the right time, the fertilizers at the right time, the harvest at the right time. And if you miss any one of those pieces, if you have a yield at all, it’s going to be paltry compared to what you’re used to. And you simply have to wait for the next growing season for things to begin.
One of the things that we’re seeing in Ukraine more right now is that the Ukrainians have been favoring corn and seed oils in this food evacuation program that they basically have with the United Nations. Ships can come in and dock at Ukrainian ports. The Russians have promised not to bomb them. And so the Ukrainians have to choose what goes in. And as a rule, corn and oilseeds generate more income for them, then wheat. So that’s what they’ve been favoring. Wheat output from Ukraine has basically stopped whereas corn is more or less where it was before the war, maybe a touch higher replacing it that requires some other producer someplace else. Crop switching to wheat in order to plug the gap or bringing new land on line. Regardless, it takes a year. And remember, we haven’t yet seen the real disruptions to the Ukraine war because the Russians haven’t specifically targeted the ports in mass enough to disrupt large scale exports or really in totality. But we’re probably going to see that really soon.
By the time we get to spring, it’s going to be a different kind of war. The Russians are going to be very clearly going for the throat instead of targeting civilian electrical infrastructure, they’re likely to go after food production and transport. And if they do achieve a breakthrough in the southern front, they’re absolutely coming for Odesa because that’s where most of the commerce in and out of Ukraine transits.
We’re about to lose the world’s fifth largest exporter of wheat, fourth largest exporter of corn and top oilseeds exporter. And there’s no one in the world who has the scale or the spare capacity to replace that. And even if they did, you’re talking a year out. This is going to get a lot worse before it gets better, even if the Ukrainians actually win the spring offensive to come.
Perhaps the scariest takeaway from the Ukraine War is that it’s just beginning. To fully understand what is at stake here, we must look at Russia’s motivators and the possible outcomes.
Russia is looking to reclaim enough land for them to reach the geographical strong points that were once part of the Soviet Union. Beyond that, Russia is essentially fighting for its existence. So the only viable option for them is…winning…at whatever cost. That is a terrifying reality.
If the Ukrainians hold Russia off, we’ll see a long, drawn-out war over disputed land until Russia makes enough progress to launch another large-scale assault. For Ukraine to prevail, they would have to destroy sufficient Russian industrial and logistical capacity WITHIN RUSSIA to render another assault impossible.
If the Russians get past Ukraine, they won’t stop there. Poland and Romania will be next, but the Russians know that facing off with NATO isn’t going to end well. And that’s when the nuclear question comes up.
Regardless of how this plays out, we know Russia doesn’t give in lightly. What we’ve seen so far is just a warm-up and the real war is only now starting.
Prefer to read the transcript of the video?Click here
Join me on Feb. 17th for the webinar – Global Outlook: One Year into the Ukraine War.
We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.
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. Hello from Colorado. I thought today would be a great day to underline for everyone what’s at stake with the Ukraine war and why the war to this point really is just the very beginning of what’s going to be a long, protracted conflict that is going to stretch well beyond Ukraine’s borders. Alright. With that in your back pocket, let’s launch in.
This is a map of the Russian space, and that green area is the Russian wheat belt. That is the part of Russia that is worth having where the weather is not so awful. It’s still awful…That you can’t grow crops can’t grow much. You get one crop of relatively low quality wheat because the growing season is very short. Summers are very hot and dry and windy and winters are very cold and dry and windy. If you move to the right, you’re in Tundra and Taiga. That’s the blue. If you go to the left, you’re in the desert. So north to tundra, south to desert.
But what really drives the Russians to drink is the beige territory. Territories that even by Russian standards are useless. But they’re flat and they’re open and you can totally run a mongol horde through those. So what the Russians have always done is reached out past the green, tried to expand, get buffer space, get past that beige, that area that’s useless, and reach a series of geographic barriers where you can’t run a Panzer division through it and then forward position. They’re relatively slow moving, relatively low tech forces in the access points between during the Soviet period, the Russians controlled all of those access points. It was the safest that the Russians have ever been, and then they lost it all. And what they’ve been trying to do under Putin and Yeltsin both has been to re-expand back to those footprints so that they can plug the gaps, plug the places where the invaders would come, get static footprints, lots of troops right on the border where you can’t avoid them, you can’t outmaneuver them.
And this has been what they’ve been trying to do. This is the Kazakh intervention in the Karabakh war and the Georgian war and the Donbas war and the Crimean War. This is what it’s all been about. Ukraine, unfortunately for the Ukrainians, is not one of these access points. It’s on the way to the two most important ones in Romania and Poland.
So this war was always going to happen and this was never going to be the end of it. The Russians have launched eight military expansions since 1992. This is the ninth and it wasn’t going to be the last one. Eventually they would come for Poland and they would come for Romania. But we now know that the Russians are militarily incompetent at fighting a conventional war. So we know if they succeed in Ukraine and they reach the Polish border, they know that there will be a 1000 to 1 casualty ratio if they face off against NATO forces. So we know that when they do eventually come, if they make it past Ukraine, they will use every tool that they have. And that includes nukes. The Russians feel that they are fighting for their existential existence and because of the demographic collapse they are. If they fail to capture Warsaw and northeastern Romania in the vaults, they will shrivel in an open zone wracked by internal disruptions and interfered with from outside powers. And over the next decade or three, they will cease to exist as a functional country. Winning here is their only option, and since its death or winning every possible tool that they have will come into play. And that includes the nuclear question when it becomes their only option. If the Russians win in Ukraine, we will have a nuclear exchange.
But if you’re Ukrainian, obviously you have a different view on how this should go. What we’re looking at here is an old industrial map of industrial assets in the former Soviet system box there indicates approximately the Ukrainian borders. And you’ll notice that there’s a whole cluster of these little industrial circles just beyond Ukrainian space. We know if the Russians win in Ukraine, where they come in.
But think about what it means if the Ukrainians win, if they succeed in ejecting Russian forces from their entire territory, the Russians aren’t going to stop. Remember, this is for them an existential fight for their survival. They will continue doing cross-border raids until they feel they have an advantage. They can make another try of it. So the only way that Ukrainians can win and then live in peace afterwards is to disrupt the logistics that prevent industrial plant in those circles from contributing to a war effort on the Ukrainian border zone. And that means the Ukrainians have to cross the border into Russia proper. Whether they do this with planes and missiles or artillery and rockets or general army that will determined by the facts on the ground when this finally happens. But we’re talking about deep strikes in excess of 100 to 200 miles into the Russian space to deliberately destroy industrial plants and especially connecting infrastructure.
So we know now that if the Russians win, we’re going to have a nuclear crisis. And if the Ukrainians win, it’s the beginning of a long slog that will take years to resolve one way or the other until either Ukraine loses the capacity to function or Russia loses the capacity to function. Russia’s never backed down from a war without a series of mass casualty events that were so severe that they’ve lost the ability to maintain a military position at all. They fight until they can’t, especially now considering what is at stake.
This is going to get a lot more intense before it gets resolved. And 2022 was honestly just the warm up in the skirmishes. Fighting in 2023 is going to be a lot more severe because the Ukrainians are finally getting some real heavy equipment and tanks and the Russians are doing a second mobilization and they’re going to have three quarters of a million troops in Ukraine by the end of May.
Meet Michael Nayebi. He has been an integral part of the sausage-making process at Zeihan On Geopolitics for years and was core at my old world, Stratfor, before that. If my videos seem a little more scatterbrained than normal in recent days, it is because he has been physically unable to keep me out of trouble. Here is why…
On Tuesday, Jan. 31, arctic-like conditions swept across much of central Texas, including the Austin area. The ice storm left the roads impassable and caused trees and limbs to come crashing down, leaving residents across the city without power for days.
As you’ll see/hear in the video, Michael was stuck in the same predicament as countless others – a street riddled with trees, nowhere to go, no power and (the real gen-z deathblow) no internet.
When natural disasters like this occur, it’s essential to consider what/how supply chains and industries are impacted. So from our “boots on the ground,” here’s a look at the geopolitical fallout caused by this ice storm.
*Michael’s power was restored late on Friday, and his internet returned Monday morning. So the videos should be back to their normal levels of scatterbrainedness.
Prefer to read the transcript of the video?Click here
Join me on Feb. 17th for the webinar – Global Outlook: One Year into the Ukraine War.
We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.
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.
Howdy. For those of you who don’t know me, I’m Michael Nayebi-Oskoui and I am director of analysis here at Zeihan on Geopolitics. And unlike Peter, I am based out of Austin, Texas, where if you haven’t heard the news, we have been dealing with some cold weather. Not to be flip, but we’ve had one of the most significant ice storms in recent memory, at least since, you know, I’ve lived in Austin since the early 1980s. And with it, we’ve had a, if you can tell behind me, a pretty bad case of tree limbs falling down all around the city, which means that I’ve been without power since at least Wednesday morning, except for 5 minutes today, barely 5 minutes, at which point we heard the noise that no consumer or utility manager wants to hear, which was a cascade of transformers blowing up, which I thought was a good time as any, to discuss our national power grid and where these components come from.
Now, various elements of the grid, depending on where they are and how they’re used, come from various sources. But by and large, utility poles that are wooden are domestically grown. If you’re in the Pacific Northwest, they’re Douglas Fir here along the Atlantic Coast and parts of the southeast. It’s usually southern pine, cedar, rest of the country, but the cables, the coatings, the transformers, the other components are all part of a global supply chain and one that continues to face headwinds and one that potentially could see a shift back to domestic production within the U.S., or at least North America.
When it comes to the cables. Wire, copper and copper ore – predominantly produced out of Chile. But the wires that transfer power are made in a handful of countries. Very technical or high voltage wire typically comes out of the U.S. Germany or Japan, less so China and South Korea. But the coatings on the cables that we see are primarily products of the Gulf Coast refining sector.
So when we have very cold events in Texas, like we did in February of 2021, we see that the chemicals industry can face delays of months or up to a year when it comes to the more technical components of transmission. Let’s say the transformers that I heard blew up today. The steel, the insides again come from a complex, interconnected, global supply chain of advanced components and some that aren’t as high tech as you might expect. So a lot of insulating glass and ceramics.
The largest exporter globally is China, but the US makes a lot of these components domestically, as do the Japanese, the South Koreans, the Germans and to some extent Mexico, where they are interconnected with US manufacturing supply chains. But it’s not a wholly U.S. based supply chain. Up to 50% in transformers or components, at least in any given year, come from international sources, which means that supply chain managers domestically are facing the same challenges as suppliers in industries across the U.S. of finding reliable, affordable components, especially when it comes to transformers. Heading into the end of 2022, we saw that new development across the U.S., aging infrastructure, etc. sourcing managers were facing lead times of up to a year or, you know, triple, quadruple cost for industrial substation oriented transformers. And this is trickling down to the kinds of residential style, smaller capacity transformers like the ones that blew up outside of my neighborhood earlier this morning.
If you are an urban utility manager or a supplier looking for these components, you’re facing higher costs, longer lead times, greater delays. And it’s a combination of not just the COVID related supply chain issues that a lot of industries are still grappling with, you know, two or three years into the pandemic, but also some of the recent upheaval we’re seeing within EU and China.
The solution is not going to be a fast one. A lot of the specialized classic ceramics industries that are based in Germany are going to take expertise and capital to move elsewhere. The sheer capacity that’s represented by the Chinese industrial system is going to take time and cost to reshore elsewhere. But, you know, a lot of these components have analogs or related industries that are already operating in North America. So this is definitely the industry that I would like to see greater investment come online for within North America and manufacturing in coming years, as we look to eliminate risk and supply chain challenges that come from working with places that are increasingly as unreliable as China.
