Russia has long operated under the guise of “strategic partnerships” to keep its enemies within striking distance. Putin and Xi’s partnership is no different. However, only time will tell who will end up with the knife in their back.
For both sides, this is an alliance of convenience enabling them to get around some sanctions brought on by the war in Ukraine. But the Chinese might be looking to gain a little more from this relationship. Xi’s recent meeting with the leaders from Uzbekistan, Tajikistan, Kyrgyzstan, and Kazakhstan is indicative that a move on the Russian space could be in the cards.
One of Putin’s motivations for the war in Ukraine is to take control of the geographic access points used to launch assaults against the Russians. Can you guess where one of those access points just so happens to be? The Altai Gap…which connects Russia, Kazakhstan, and you guessed it, China.
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.
We’re starting the day off with a bit of optimism thanks to the demographic outlook of Southeast Asia. This region of the world is primed and ready to boom; all it needs is a bit of money and tech to get the party started.
Why am I so bullish on SE Asia? It’s one thing to have a single country with solid demographics, but throw a whole bunch together, and their strength amplifies. Myanmar, Cambodia, and Laos are child-heavy and can handle the low-skill jobs for years to come. Vietnam and Indonesia are a bit older, have fewer kids, and have the time and ability for the medium-skill jobs. Singapore and Thailand are the oldest of the bunch but have developed the technical skills to handle the high-skill jobs.
Southeast Asia is like the neighborhood we all want to live in. No animosity between neighbors (since geographical barriers prevent wars). Everyone brings something unique and valuable to the table (differentiated workforces). What more could you ask for?
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 Ojai, California. And as promised today, I wanted to talk about demographics in Southeast Asia. A portion of the world that I think is going to do very well in the decades to come.
Now, if you remember correctly, when I did the first issue of this series, we talked about how different population structures make for different economic structures. So if you have a lot of people age 20 to 40, you tend to have a really strong workforce and a good consumption base because those are the people who are building their homes and raising kids. If you have a lot of people aged roughly 45 to 65, you tend to have a very productive worker base because these are people with decades of experience behind them. And if they don’t have a lot of kids, all the income of the society, all the taxes generated can be focused on infrastructure and on the job training making for a very, very, very skilled workforce. One of the reasons I’m so bullish on Southeast Asia is because it’s got both of these in balance.
So on the bottom you’ve got countries like Myanmar and Cambodia and Loas who are very child heavy and they can be a workforce not just now but decades into the future. So if the money is made available, if the regional demand for the services is there, you have a very large, low skilled workforce. In the middle you’ve got a lot of countries like say Vietnam particularly, but also Indonesia and to a lesser degree Malaysia, who are a little bit older, don’t have a lot of kids relative to the overall population structure, but a lot of people who are age 20 to 45. And these are countries that, as a rule, are kind of having their day right now. The more problems that the Chinese have with keeping investment, the more diversified folks are looking to make their supply chains globally, the better these countries look. Vietnam in particular, is getting in on this in a very big way with education. And about 40% of their college graduates are in STEM. You know, that’s like four times the global average. And then at the top, you’ve got a number of societies like Singapore and Thailand, which are aging pretty quickly. They had their day as a low cost wage destination a couple decades ago. And now you’ve got a lot of people who are in their forties, fifties and even early sixties. They’re aging quickly. Looks a lot more like Northeast Asia than the rest of their neighborhood. But the accrued technical skills in these populations is huge. And plus, especially in a place like Singapore and Thailand, punches well above its weight as a mid-range destination. And having these all in the same neighborhood really helps with manufacturing.
So one of the things you want to do for the more complex manufacturing products, whether it’s cell phones or electronics or computing, is not everything requires the same skill set. The person who does the injection molding is not the person who does the wiring harness, is not the person who does the chips, is not the person who does the assembly. Each of these has a different wage structure, and in that sort of environment, variety is everything. And proximity is everything. And this is the world’s most differentiated workforce, all within the same region. So you throw a little bit of Japanese or American technology in there, maybe some Chinese assembly on the back end. And this area is set to boom.
Best part yet because this region is made up of mountains and peninsula shores and islands and jungles. They’ve never had a history of going to war with one another because they can’t get to one another. So they don’t have the history of animosity that we see in, say, Europe or Northeast Asia. Add it all up. And this is the part of the world that I expect to grow the most rapidly in the 30 years to come with demography at its heart.
I may have ditched the “howdys” and “y’alls” for the high mountains of Colorado, but Austin remains part of one of the fastest-growing economic and urban zones in the western hemisphere. However, Austin can’t credit all of its success to the “Keep Austin Weird” bumper stickers…
The key here is in the neighborhood. It’s a blue city in a red state, so they get low taxes and a high level of city services. More importantly, Austin falls right in the middle of the Texas Triangle – a zone comprised of San Antonio, Houston, and Dallas.
Houston is an energy hub and heavy into manufacturing. Dallas is an auto and aerospace hub. Both of those are financial centers in their own way. San Antonio offers a low cost of living and low labor costs. Austin happens to be the missing piece in the Texas Triangle, high-end tech. Austin can operationalize the research the other cities need and disseminate the plans from there.
It doesn’t look like Austin’s growth will be slowing down anytime soon. As the world faces deglobalization, Texas (the triangle specifically) will play a critical role for the US.
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 the Lamar Passenger Bridge in downtown Austin. As some of you remember, this was my home for 20 odd years. And I am proud to say that the city is still doing strong.
Austin is at the middle of what is called the Texas Triangle, which has been the fastest growing economics and urban zone in the Western Hemisphere for about 25 years now. And the story is in the neighborhood. So Texas is a red state. So the taxes are low. In fact, in the state of Texas, there is no income tax at all. But this is a relatively blue city, so it has a reasonably high level of city services. That sort of combination has really helped urban areas in a similar match, places like Lexington, Kentucky or Atlanta, Georgia.
But there’s more than that. The Texas Triangle, as you might expect, has three major urban zones of which Austin is not technically one. The big three are San Antonio, Houston and Dallas. Houston is obviously an energy and heavy manufacturing hub. Dallas is an automotive and aerospace hub. Both of them are financial centers in their own way. And then San Antonio has lower cost of living and lower labor costs, and so is great at mass manufacturing, especially in automotive.
Where Austin plugs in is on the higher end. There’s an area to the northwest of town called Silicon Hills, which, as you might guess, is kind of an echo of Silicon Valley, but where Silicon Valley focuses on the base research and being a hotbed of core tech innovation. Austin takes a lot of that research and then turns it into operationalized development plans, which are then applied throughout the rest of the Texas Triangle. So it’s not that Austin could do this by itself, but Austin, plugged into the triangle, makes it the perfect interlocutor for everything, for turning modern manufacturing into reality. And if you see kind of behind me, you know, there’s quite a skyline here. This is a city that as recently as 1985 only had about 600,000 people, and now they’re over two and a half million in the entire metro. And all of the buildings in the immediate background were not there when I moved to Austin back in 2000. And the ones a little bit further back now, maybe two thirds of those are new in the last 20 years. So Austin has been one of the top ten fastest growing urban centers in the Western Hemisphere now for almost 30 years straight. And even though it is the most expensive city in Texas, and even though the cost of living has now risen above the national average, it has a long way to grow because it can physically grow to the northwest, the north, the northeast, the east, the southeast, the south and the southwest very easily. And the land just to the west where I used to live is called the Hill Country and as you might guess, it’s hilly but not mountainous. This is an advantage that a lot of the Texas cities have. They can just physically expand with reasonably few restrictions.
The changing situation with the Ukraine Grain Deal has given me plenty to ponder while tromping through Fjordland in New Zealand. Due to the war, Ukrainian agricultural exports were reduced to a fraction of their pre-war numbers. The grain deal brokered by the UN was a glimmer of hope that perhaps exports wouldn’t entirely fall off the map…
With winter on the way out and summer just around the corner, the Russians are revaluating their strategy. Targeting power infrastructure may have worked during the winter, but it doesn’t make much sense for the warmer months…it appears the new target will likely be Ukrainian agriculture.
We’ve already seen the Russians change the renegotiation period of the grain deal from 120 days to 60 days, and I wouldn’t be surprised if March is the last time the Russians resign. So Ukrainian exports might fall off very soon, but can the rest of the world’s (already struggling) agriculture industry pick up the slack?
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 coming to you from Ruby Baby in Fjordland in New Zealand. The big news that I’ve noticed is that the Russians are throwing a bit of a fit about the grain deal they have with the Ukrainians. Now Ukraine until very recently was one of the world’s five biggest agricultural exporters for wheat, number four in corn, number one in sunflower you know all important things that help prevent a lot of countries from starving to death. Well, the problem is that most of the stuff that comes out of Ukraine is shipped by water. It’s far easier to ship things by water than it is by land. In terms of rail versus water, about a 3 to 1 cost difference. And Ukraine is perfectly set up for that because they’ve got the Dnieper River that cuts right south to north through the middle of the country. And so everything just gets on a barge, goes out, eventually hits the sea cities Kherson and Odessa, then are put on the big altars and then taken out through the Black Sea, the Turkish Straits and the rest of the world. What has happened, however, is with the Russians first capturing Kherson and then putting Odessa under assault, this is all been disrupted. So the only way to move things out of Ukraine at present is by rail. And not only does Ukraine not have a well-developed rail system. It doesn’t use the same gauge as the European ports. So it’s been very, very difficult, to get much out. Really less than about one out of six vehicles that they used to ship, they can ship now.
Now, the Turks in league with the United Nations have convinced the Russians to sign on to a grain deal. And this grain deal allows ships to come into Odessa, get searched by the Russians on the way in to make sure they’re not carrying weapons and then load up with grain and they get searched on the way out to make sure that they’re not carrying anything that the Russians don’t want to get out. This has increased the volume to about 20 to 25% of the volume that the Ukrainians could do before the war. So still not great.
Now, if you’ve been following the war, you know that throughout the winter the Russians have been bombing the power grid with drones and missiles to try to kill as many Ukrainians as possible. They’ve been doing this in the winter, thinking that if you can freeze the country to death, many tens of thousands, if not hundreds of thousands of people will be injured or killed. And that might weaken the war effort. Once we get to summer that’s going to change. So what the Russians are facing here is the grain deal is normally renegotiated every 120 days they are now insisting they only want a 60 day renewal. Well, if you fast forward from late March, 60 days, we’re getting into the beginning of summer. In the beginning of summer, the Russians won’t have a vested interest in destroying the power grid because no one’s going to freeze to death. So they’re going to go after the agricultural system, everything from fertilizer on the front end to the silos and the rail stations on the back end to try to kill as many people as possible that way.
So last year was probably the last year that Ukraine will be a significant agricultural exporter at all, and we should not expect to see the Green Deal renewed come late May. That’s just the situation we’re at. And if you throw in the problems with natural gas and nitrogen processing in Europe hitting the fertilizer market, the problems getting potash out of Belarus hitting the fertilizer market, the problems getting phosphate out of China, hitting the fertilizer market later this year is going to be really raw for a lot of places. Aright. That’s it for me. I’ll see you guys at the next spot. Take care.
I recently had the opportunity to sit down with Jordan Harbinger on “The Jordan Harbinger Show” (for the loyal followers, you’ll know this is my second appearance).
We discussed how the globalized world came to be, the factors contributing to its instability, and how the process of deglobalization is well underway. The chaos the world is about to face is nearly impossible to consolidate into an hour long podcast, but this is a good start!
Links to the podcasts, YouTube videos, and more can all be found below.
Geopolitical Strategist on China’s Upcoming Collapse JHS Ep. 781
Confronting a Geopolitical Strategist on Putin’s Big Plan Peter Zeihan Ep. 640
*This video is from my first appearance on The Jordan Harbinger Show
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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.
Despite some food scares coming out of the former Soviet space, Mother Nature helped 2022 crop production look pretty solid in most of the great agriculture basins of the world. However, this could be the world’s last food-secure year for quite a while.
As Argentina transitions from summer to the harvest season, we’re getting our first glimpse at the yields…and it’s not looking promising. Between floods, droughts, pestilence, and a dash of government incompetence, it’s shaping up to be the worst year on record for Argentinian corn, soy, and wheat.
We’re not off to an auspicious start, but Argentina’s shortages were weather-induced…we haven’t even seen the impacts of fertilizer shortages yet. Additionally, the Ukrainians face a completely different set of disruptions to their agricultural industry.
As Ukraine transitions out of winter, the Russians will likely shift their strategy from targeting power infrastructure to the agricultural system. I expect Ukrainian corn, soy, wheat, and seed oil exports to drop significantly in the coming year. With the agriculture disruptions in Argentina and Ukraine, this is only the beginning of worldwide food insecurity.
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. Still Peter, still Colorado, still snowy, still foggy. Yesterday we talked about the African swine fever problem in China and how it’s turning into an issue for fertilizer. I want to talk now about the weather. We’ve got a number of major agricultural basins in the world. And last year, for most of them, greater Midwest, the Brazil and Argentina systems. South Africa. Australia. New Zealand. The Eurasian Wheat Belt and Northern Europe. We had a pretty good year, pretty much everywhere and even in secondary markets that aren’t export oriented, like India and China, things were pretty good. That helped us a great deal, despite the fact that we were having a lot of scares and supplies coming out of the former Soviet space. But there’s two issues that we have already seen are going to be boiling up. The first one involves Argentina.
Now, as a southern hemispheric country,they’re exiting summer and going into harvest right now. And between floods and droughts and pestilence and basically all the horsemen playing a role here and a general dollop of government incompetence. It’s shaping up to be one of the worst records for corn, soy and wheat that we have seen in years with on average, about a 30% reduction in the foodstuffs. Now 30%, that is a weather induced reduction, not a fertilizer induced reduction. So it could have been a lot worse. But we’re already seen at the beginning of the 2023 harvest season that we’re getting off to a really bad start. Australia so far looks (mehhhh) and then of course India is harvesting things all the time. Now in the northern hemisphere we don’t get our first crops in for a couple more months and harvest will continue throughout the late spring for things like winter wheat and going into the summer and into the fall. So we have a lot of potential crops ahead of us, but to kind of kick off with Argentina, which is traditionally in the big six for wheat exports and typically in the big three for soy exports, this is not a particularly auspicious start.
The next major disruption I expect to see will be in Ukraine. Now, we’ve all been seen through the winter that the Ukrainians have been suffering missile and drone attacks from the Russians who are trying to take out the power system, working from the theory that if you can knock out the electricity across Ukraine in the winter, you’re going to kill as many Ukrainians as possible and damage the morale of the war effort in general. Because if you find out that your wife and kids back in Kyiv don’t have power, it’s really hard to stay on the front. You feel like you should go and do something. Well, as we get into May and especially June, when it becomes apparent that knocking out the power doesn’t make anyone freeze to death anymore, the Russians are going to switch targets to go after the agricultural system, especially fertilizer plants, grain silos, grain transshipment locations and rail centers, ports and the rest. Already we’re seeing the Russians backing away from a United Nations brokered deal that allows grain and corn and wheat and sunflower to get out of the system. Basically, ships can come in, the Russians will search them on the way to make sure that they’re not carrying weapons. The Ukrainians will load them up with whatever foodstuffs they can export and then they’ll be inspected by the Russians again on the way out. It used to be that this deal was being renegotiated every 120, 250 days, and the Russians want to shrink it down to 60 days, meaning that if this is renegotiated in March, it’s probably the last time it’s going to be renegotiated, because the Russian goal here is to wipe out as many of Ukrainians as possible to make sure that they can’t fight. And that means taking the war to the civilian population. Electricity doesn’t work in the summer. So you go after the food supplies, which means that calendar year 2022 was probably the final year that Ukraine will be a significant agricultural exporter. Pre-War, roughly 85 in some cases, 90% of their ag products were shipped out by water, with the rest going by rail. The problem is that the rail system in Ukraine doesn’t interface well with the rail system in Europe because they use different gauges and you can only replace that an upgrade it over the course of years and it’s really hard to do when bombs are raining down. So we’re going to get little trickles that go out of western Ukraine that can take advantage of the rail. And that’s about it. And that’s, of course, assuming that the Russians don’t achieve a breakthrough once they throw an extra 400,000 men into the fight come June.
So we know we’ve already had a bad Argentina harvest and we know that the Ukrainians are probably going to fall off the map in terms of food supply. And honestly, that’s just the beginning. More on this in later issues.
If you’ve read my latest book, The End of the World Is Just the Beginning, you know what question keeps me up at night: how long will we be able to feed the world’s population? With threats to food security increasing daily, China is a scary example of how quickly this situation could go from critical to catastrophic.
Four years ago, China faced the worst case of African Swine Fever (ASF) ever recorded. It spread through their pig population like wildfire, resulting in the killing of massive amounts of livestock. Since then, the CCP has limited reporting of outbreaks and testing for ASF. Some brave CCP reps are now reporting the actual numbers and I wouldn’t be suprised if this outbreak becomes worse than the last. So what does that mean for China’s food security?
The only other relevant foodstuff that China produces is rice. Unfortunately for them, the phosphate fertilizer that rice needs to grow is already facing massive shortages. China was once the largest exporter of phosphate, but they’ve started hoarding the stuff as the potential for food shortages increases.
Thanks to stockpiles of fertilizers (and some help from mother nature), the world was able to wiggle by last year. With increasing disruptions to the nutrients used in fertilizers and food security overall, the world is going to face severe problems in the years to come.
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 Everyone. Peter Zeihan here coming to you from foggy, snowy Colorado. It is the 16th of March on Thursday, and it’s time to start talking about food shortages. We’re going to start with this part on China.
So the Chinese, as you may have heard me discuss in the past, have a cult of personality, which means things like test for animal diseases that the government finds inconvenient tend to not just happen because the CCP reps get in the way. So there’s something called African Swine Fever, which is something that the poor community is terrified of because it’s basically Ebola for pigs. Highly communicable always ends in the death of the pig. And if one hog in your herd gets, you basically have to cull the entire thing. Now, about four years ago, China suffered through the biggest ASF epidemic in history and over the course of about 6 to 8 months killed more of its own hogs commercially than the rest of the world has commercial hogs. And that triggered a lot of paranoia within the CCP about food security for obvious reasons. This is maybe happening again.
Now the way it works in a normal place, if you’re a pig rancher or farmer and you want to find out if your hog has a disease, you get a test kit, you take certain swabs and samples, and then you send that test kit with the swabs and samples into a lab. And when the lab gets the results, they call you. That’s not how it works in China. In China, there’s an intermediate step where the lab calls the local CCP rep and then the CCP rep calls you to let you know if you’ve got a case or not. And since it’s a cult of personality and no one has been given an approval to trigger a food crisis, they just kind of let it go on in the background. Well, in the last few weeks there have been some very brave CCP reps who have decided to report the truth. And as of the news of this week, we now have more cases of ASF being reported in China in just the month to date than the entirety of the previous year. You see, ASF is not something you just get rid of. It’s not once in done. It gets into the wild boar and wild pig population and then it takes decades to get rid of. According to the Chinese, they got rid of it in six months and they haven’t had a case until recently. But all of a sudden now it’s boiling up again. There are different strains. Some are more lethal and more dangerous and more communicable than others. And officially it’s some of those less dangerous ones that are out there. But the fact that you’ve got brave officials choosing to go against the party line to report them at all, suggests that we have a much, much, much, much larger problem in store. And we should expect some significant issues throughout the food supply chain for pork throughout the Chinese system. Will it be as bad as it was four years ago? Kind of believe it will, if not worse, because they’ve been allowing this to burn in the background in order to achieve political placidity.
Now, how does that matter to you? Well, if the Chinese can’t guarantee pork supply, then the only other culturally significant food that they can produce in mass is rice. Now, rice is the most phosphate fertilizer hungry crop that humans are capable of growing. And because of that, China has historically been the world’s largest producer and exporter of phosphate, until four years ago. Starting with that epidemic, the Chinese started hoarding phosphate because they were concerned about food security and they knew they needed rice because it’s the only other socially and politically important crop that the Chinese have.
Well, since then, in the last four years, phosphate exports have been down 20 to 80% based on the season, very erratic, based on where the Chinese level fear is now that we actually have official cases of African Swine Fever, again, we should expect phosphate exports to more or less go to zero, meaning that the single largest source of one of the three main fertilizer nutrients is suddenly in dire condition. And that is going to have implications throughout the entire agricultural system of the world.
We were very fortunate in calendar year 2022 and that despite disruptions from China, from Russia and from the energy space, we had enough reserve built up in the system for all the types of fertilizers in order to kind of wiggle by. And we also had excellent weather for most of the world’s farmers. The chances of that happening twice in a row, especially when you have disruptions like ASF in China right now are almost nonexistent, which means that the next one tomorrow we’re going to talk about the weather and where in the world we are seeing, already, disruptions to the food supply system. Alright. That’s it. See you guys tomorrow.
A world caught in deep demographic decline, faced with the loss of consumption and the complications that come with all that…can automation help pull us out of this nose dive?
Here’s the quick and dirty on how we got here….back in the industrial era, birth rates started to decline, then got even worse when globalization came around, and then went to the sh***er once the countries that were a bit behind joined the industrial world.
Now onto how automation fits in. Spoiler alert: automation is not the holy grail it’s been made out to be. Sure, it can be part of the solution in systems that aren’t on their last leg, but we must remember that these are still machines. They take time to build, require lots of upfront capital, and don’t get me started on the consumption piece of this puzzle.
Automation isn’t going to magically reverse the effects of demographic collapse, but for countries with the time and money, it’s not a bad place to start.
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 a few reasons the cartels love their cocaine, mainly because it’s easy to smuggle and cheap to make. But what happens when you sell it? You’re left with a boatload of “dirty cash” you can’t do anything with.
The solution is what has enabled the cartels to put down roots in the Mexican and American economies. And yes, we’re talking about everyone’s favorite pastime: money laundering!
So the cartels get involved with high cash flow businesses, think agriculture, real estate, bars, legalized weed, etc. And now we’re not just talking about a disorganized group of dudes carrying backpacks full of blow; we’re talking about multi-million dollar businesses with deep pockets and lots of connections.
Unfortunately, I can’t offer any quick fixes to this problem…other than STOP DOING COCAINE.
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.
No, we’re not headed for another financial crisis…although, to those with more than 250k in one of the three failing banks, it may seem like we are. Silicon Valley Bank is the largest of the three, but it’s still only the 16th largest in the nation.
The problem for Silicon Valley Bank and the smaller Silvergate and Signature Bank is that they all took on a questionable amount of exposure to illiquid assets. For SVB, it was a variety of long-term bonds and securities with long durations. Then interest rates started to go up–way up. And SVB was not left with many tools to manage interest rate risk it had not hedged for. When its primary customers–the tech industry–found out, they sounded the alarm. Being the tech world, they’re all relatively well-connected and active on social media, triggering a stampede of customers wanting to pull their cash out more or less simultaneously, or what we’d call a good old-fashioned bank run.
The real thread connecting all of these banking mishaps, however, is one that’s not going to go away anytime soon. Rising capital costs. Many of these banks and their customers have been operating in a world where money has been as close to free as it has ever been in human history. Over the past year, we’ve seen interest rates rise–sharply–and there’s little reason to believe that we’re anywhere near done yet. The fundamental operating paradigm for banks and the financial paradigm of the past decade and a half is shifting, and we’re going to see which financial institutions are able to deal with the change and which ones won’t be able to keep up.
The Biden administration has now stated that the FDIC will make all depositors whole. That’s great for ending any potential bank runs, but those CFOs who thought it was a good idea to put all of their company’s capital into one bank won’t be learning their lesson this time around.
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 Bloomington, Illinois. Sorry, I forgot where I was there for a second. It is the 14th of March. Tuesday. And for those of you that have been following the news, you, of course, know that the United States is facing a little bit of a banking hiccup right now. Over the course of the last few days, three banks of note Silvergate Signature and Silicon Valley have either been closed by regulators or just simply collapsed. And this is something that honestly, I don’t think anyone should really overly worry about. The biggest of them, Silicon Valley, is like number 16 in the country. So this is nothing like the financial crisis of 2007 when all of our Big Ten banks were in trouble all at the same time. Now, normally when you have a financial crisis, it’s because of a problem with loans. Whenever the business cycle turns, the cost of capital goes up and loans that may have made sense in the past don’t anymore. So in the 2007, the issue was subprime. We had, based on how you measure the math, somewhere between a half trillion and two and a half trillion dollars of questionable loans in the real estate market. And that meant that touched almost every single bank within the entire system. So when the real estate market turned and we realized that a lot of these people were baristas who had no incomes and had qualified for 100% mortgages on million dollar homes, and those loans went bad. We had problems across the entire space. Nothing like that is going on this time. We’ve had a very strong expansion and certainly capital has probably been overly cheap and there is some rot in the system that does need to be worked out. And what basically what’s going on is the financial system is going through the process of taking out the trash right now. You would expect some banks to go down. That’s not necessarily a signal of a broader contagion, systemic risk sort of thing.
In addition, the United States has something called the FDIC, the Federal Deposit Insurance Corporation, which is a system by where all banks pay a monthly fee into the system in order to get insurance for their depositors. So as long as your deposit is under a quarter of $1,000,000, you are federally guaranteed to get your money back without the federal government having to do anything. That system has kicked in and depositors will be made whole. It makes sense that these three banks are the ones that went under first. They won’t be the last, probably. Although that doesn’t mean I’m concerned about something like eating through the entire system like a cancer. It’s just that they’re all related to tech and tech tends to be a capital intensive industry, and especially when you’re talking about newer firms and startup firms and research firms, which are what these banks cater to. You’re talking about institutions and companies that don’t make money today. They’re hoping to make money next year or the year after, the year after that, or invest in the next big thing. So they tend to be more perspective. They don’t have to have any income. And so when capital costs go up, they face problems. And so these banks are the ones that are facing the issues. So there’s nothing about this that is any more than a run of the mill bank failure, that matches most of our understandings about macroeconomic trends. I don’t want to say it’s nothing to worry about, but I’m really not concerned about an overall national bank contagion or broad bank run. And I think what the stock markets have done in discounting all things financial is a gross overreaction. So there’s that.
Now, there are three reasons why this time it is a little bit different. First of all, tech has been on a tear for the last several years and not just because capital has been cheap, but because of COVID. When we all found ourselves living and working at home, we needed better cameras, we needed ring lights, we needed computers. We need to update our phones. And so in the year 2020 and 2021, and to a lesser degree in 2022, we were all buying all kinds of tech related products, generating a bit of a boom. Well, once you buy the newest and greatest computer and phone, you probably are going to wait before you get the next one. And so we were always going to have a little bit of a tech bust independent of what was happening with the overall economy. So that’s one. Number two, this is a little atypical for a bank run or a bank crash because normally the problem is on the loan side. It really isn’t this time. It’s not that there hasn’t been a capital crunch, but in the tech start up space, these companies usually don’t go to like the Small Business Administration to get a business loan. They get their capital directly from a venture capitalist. And it’s the venture capitalists who are finding themselves with less capital to throw at situations. So they’re not as able as they have been to throw money at these small startups. And so the startups have been drawing down on their cash, which means the problem from the bank point of view hasn’t been with the money that they’ve lent out. They don’t lend out very much. It’s been with the money that they thought they had. So as deposits have been drawn down, they haven’t had enough operating capital to continue normal operations.
Now, this is mostly good news because it means the overall exposure to the financial sector, which is normally what happens when you sell loans among banks, just isn’t there. But it is a very big problem for the tech sector.
And then we get to our third problem, which is how the Biden administration has chosen to deal with it. Now, if you are dealing with a deposit that’s under a quarter of $1,000,000, the federal government doesn’t have to lift a finger because the FDIC will take care of it. But a lot of these small startups, they put all of their money into individual banks, most notably Silicon Valley Bank. So it was a lot more than a quarter of a million now more than a quarter million is not insured. So what the federal government has done under the Biden administration is step in and say that all depositors will be made whole by the FDIC.
What will happen is banks will have to pay a little bit higher. All banks. Into the FDIC system in order to ultimately make up for this so that taxpayers don’t have to pay for the actual bailout. Now, this does put a hard stop on any risk of a bank run. So it’s definitely the right tool for the job there. But what it does is, is it encourages companies that have done stupid things like this to continue doing them, because now all of us have to pay through lower bank interest or more difficult loan conditions for a handful of startup companies who had CFOs who were just too dumb to realize that there is a limited limit to the deposit insurance system. And so this has injected a permanent level of stupidity into the financial system that was really not necessary. And by backing all depositors, the federal government, the Biden administration specifically has chosen to introduce what we call moral hazard into the system at the base level, which in my opinion, was really not a great idea, although it definitely does put a bit of a backstop on the financial maybe kind of sort of itty bitty crisis.
Okay. I’d like to give a little shout out here to Marci Rossell, who is an economist that I actually just saw on stage, who is fantastic. So if you ever have a chance to see her in person, she is definitely an entertaining show and will constantly give you new things to challenge your assumptions and think in new directions. Alright. That’s it for me. See you guys next time.
